Upper Crust owner gets travel recovery boost, but inflation a worry

By Muhammed Husain

(Reuters) -British snack chain firm SSP said on Thursday a rapid recovery in travel meant annual sales and profit margins would be at the upper end of its forecasts, though it warned cost pressures and supply chain snags would persist into next year.

Shares in the owner of the Upper Crust chain found mainly in airports and train stations fell over 5% in early trade.

There has been pent-up demand for summer travel since pandemic restrictions were lifted in many countries, leading to disruptions at airports and longer wait times for passengers.

But SSP is also facing sky high costs and inflationary pressures as well as lower consumer spending amid a cost-of-living crunch.

"We are well-positioned to benefit from the continued recovery of the travel sector, notwithstanding the current challenges of airport disruption, labour shortages and industrial action across certain air and rail markets," SSP said in a statement.

SSP expects annual sales to be at the upper end of its 2 billion to 2.1 billion pounds ($2.5 billion) forecast range, and core profit margins of around 6%.

"We see travel concession operators as a way to play the recovery in travel without the capital risk or ESG challenges of investing directly in transport assets like airlines," Stifel analyst said, referring to environmental, social and governance issues.

SSP said strong recovery in air travel had boosted its UK sales, but rail operations were dented by strikes that brought the network close to a standstill over several days last month.

British rail and transport workers this week voted for strike action in a dispute over pay, threatening more disruption.

SSP said group revenues averaged 72% of its 2019 pre-COVID-19 levels for the nine months to June 30.

The London-listed firm, which operates in 36 countries, said it was confident it could mitigate the impact of the pressures by increasing prices and productivity.

($1 = 0.8435 pounds)

(Reporting by Muhammed Husain in BengaluruEditing by Sherry Jacob-Phillips and Mark Potter)