Ladies and gentlemen, thank you, welcome to the SSP 2022 preliminary results call. My name is Nina, I will be the operator for your call this morning. On the call today, we have Patrick Coveney, CEO, and Jonathan Davies, Deputy CEO and Group CFO. If you would like to ask a question during the Q&A session on today's call, you can do so by pressing star followed by one on your telephone keypad. I will now hand you over to Patrick Coveney.
Thank you. Good morning, everybody. Thank you for joining us for our preliminary results presentation for the year ending September 30, 2022. I'm Patrick Coveney, I'm the Group CEO, and I'm here today with Jonathan Davies and Sarah John. This presentation builds on the preliminary results on our next that we released at 7:00 A.M. in London this morning. Turning now to the agenda for this morning. I will start by briefly touching on the highlights from the year. Jonathan will then talk through the detailed financial review, and then I'll come back in to cover my impressions of SSP, having been here now for 8 months, the global travel industry context and our strategy to deliver growth and return, and our financial planning assumptions and near-term outlook.
We'll conclude with a Q&A session for those of you on the call. Now to our results. The key message from these results is that SSP has both performed strongly, particularly in the H2 of the year, and it's set up to access structural growth opportunities for the global travel sector, thereby driving strong growth and returns. Jonathan will set out our financial performance for FY22, let me point to the GBP 127 million of EBITDA that we delivered in H2, and the further strengthening of revenues in the first 2 months of FY23. Our business is in good shape to drive excellent growth and returns in the years ahead, I would describe the context and strategy that underpins that assertion after Jonathan now explains our financial performance. Over to you, Jonathan.
Thank you, Patrick. We've seen a strong recovery in the H2, and more importantly, we've seen return to profit for the year. Looking at the financial highlights, full year sales were GBP 2.18 billion, slightly ahead of the guidance in our pre-close update in September. This represented a recovery to about 78% of 2019 sale levels. EBITDA was GBP 142 million pre-IFRS 16. Again, slightly better than the pre-close. This compared with losses of GBP 108 million last year. This left us with an operating profit of GBP 30 million compared with a loss of GBP 209 million last year.
Generated cash of GBP 52 million, helped by the ongoing recovery of sales across the period and after capital investment of about GBP 150 million, leaving Net Debt at GBP 297 million at the end of September. Over the next couple of slides, I'm gonna run through the reported numbers and highlight the impact of IFRS 16 and the exceptional items. Thereafter, I'll focus on the pre-IFRS 16 numbers. Looking at the overall P&L, you can see that the impact of IFRS 16 is to increase EBITDA by around GBP 170 million, mainly reflecting lower concession fees. It is offset by a higher depreciation charge, leaving operating profit broadly similar under both accounting treatments. Worth noting that the IFRS 16 concession fees don't include the benefits of short-term waivers of fixed rents of around GBP 23 million, which have been treated as exceptional profits.
I'll come back to that. Looking further down the P&L. The IFRS 16, the net financing cost was around GBP 44 million, compared to GBP 82 million under IFRS 16, which includes the unwind of the discount on the fixed lease liabilities. The minority share of profit was GBP 24 million, back to nearly 2019 levels, reflecting the more rapid return to profitability of the countries where we have joint ventures, including across North America, India, Thailand, and the Middle East. This left a pre-IFRS 16 underlying net loss of GBP 35 million and a loss per share of four and a half pence. Under IFRS 16, there was a GBP 60 million exceptional operating profit. As a result, the reported operating profit was GBP 92 million.
The exceptional profits included the benefit of GBP 23 million of temporary minimum guarantee waivers and a further GBP 62 million from the derecognition of lease liabilities as we've removed minimum guarantees. This was booked in the H1 and included the impact of the new government legislation in Spain. In aggregate, our IFRS 16 lease liabilities have reduced materially over the last couple of years from approximately one and a half billion to around GBP 850 million, reflecting the successful renegotiation of many contracts during the pandemic. We linking minimum guarantees to passenger numbers so they now fall outside the scope of IFRS 16. This is commercially significant as in the event of future volatility in sales, it gives us greater downside protection. We've also made asset impairments of around GBP 18 million, mainly relating to outlets which we've chosen to exit as a consequence of COVID.
There's also an exceptional adjustment to financing costs of GBP 9 million, simply reflecting an effective interest gain on IFRS 9 debt modifications booked in the year. Left a net loss of GBP 10 million or 1.3 pence a share. Now we're going to move on to the business performance, and firstly have a look at sales. Sales recovered very strongly as soon as the COVID restrictions were lifted in the Q2. We've had a very good summer with sales at 90% of 2019 levels in the H2. Since September, we've seen sales strengthen further, averaging 104% of 2019 levels in the first 8 weeks of the new year. The pace of recovery has been pretty consistent across our major markets.
The best indicator of the trend is to look at the run rate compared with early 2020. That is still of course pre-COVID. This was at 97% over the first 8 weeks, with North America, Continental Europe and the rest of the world all above or very close to 2020 levels. Of course, all well ahead of 2019 sales. The strongest performance is in North America, boosted by buoyant domestic air travel. North America is at 109% of 2020 sales and 131% of 2019. This also includes the benefit of new openings and the recent strengthening of the dollar.
In the rest of the world, we've seen a particularly strong recovery over the summer and into the autumn, with continuing improvements in passenger numbers in Thailand, India and Australia, all led by domestic air travel. This is despite the travel sector in China remaining largely closed, which of course, has a knock-on effect to the rest of the Asian markets. In the U.K., the recovery has been impacted by the rail strikes over the late summer and into the autumn. However, the U.K. air business continues to perform well and very much in line with the rest of Europe. Across all our regions, the strong recovery in air has been led by leisure travel, suggesting a real pent-up demand for holidays which has continued well into the autumn. The shift in mix towards leisure passengers has also helped to drive sales growth ahead of passenger numbers.
Leisure travelers typically have longer dwell times and therefore spend more than business travelers or commuters. Turning to profit. Overall, EBITDA margin for the year recovered to 6.5%, in line with our previous guidance and reflecting the strong recovery in sales. Looking down the P&L, gross profit margin improved by 40 basis points in the H2 compared with the H1, despite the increasing inflationary pressures in many food commodities. Profit margin were up by 1% versus pre-COVID levels over the year. This was a really strong performance given the backdrop of inflation and demonstrated the effectiveness of our ongoing program of menu and range engineering, as well as our ability to mitigate inflation with pricing.
Labor issues were down to 30% in the H2, which was only 2% above 2019 levels, despite the lower volumes and the inflationary pressures on pay rates. Of course, there was no further government furlough support in the H2. Concession fees you can see were only 1% above 2019 levels despite the much lower sales, again reflecting all the work we've done on renegotiating minimum guarantees, as I described earlier. Turning to the cash flow.
We generated underlying free cash flow of GBP 52 million in the year, helped by the positive EBITDA and the inflow of working capital of GBP 117 million, which has mainly been driven by the recovery in sales over the year, which have moved from around 50% to pre-COVID levels last September to around 95% this September. That has rebuilt our negative working capital back towards more normal levels. We've also benefited from our success in maintaining similar levels of deferred payments. We estimate that the value of these deferred payments, mainly rents, is currently in the region of GBP 120 million, expects no more than 2/3 of these to unwind during the coming financial year, indeed, as we said previously.
Steps up our capital program in the H2 to GBP 100 million, leading overall investment to GBP 149 million for the full year, which was in line with our guidance at the interims. Looking to 2023, we expect capital investment to increase to nearer GBP 250 million, so at the higher end of our previous guidance. This reflects the growing pipeline of secured contracts, which Patrick will cover later, also our greater confidence in the timing of the build program this year. Cash interest was GBP 41 million. The cash tax was a very small outflow. This left Net Debt very slightly lower at GBP 297 million. Once the non-cash adjustments and FX movements have been eliminated.
Looking at the overall liquidity on our balance sheet, you can see that we had cash of nearly GBP 550 million at the year-end, which added to our undrawn committed facilities of GBP 150 million, gave us access to liquidity of over GBP 700 million. Excluding the non-cash accounting adjustments to our reported net debt, our leverage as it would be calculated for financing purposes at 2 times Net Debt-to-EBITDA, back within our historical target range. There are a couple of points worth drawing out here. You can see that our term debt is split broadly 50/50 between floating bank rate debt and fixed coupon debt, that is U.S. private placement notes. The cash balances are reasonably well matched with our floating rate debt facilities, therefore acts as a natural hedge against any movements in interest rates.
It's also worth pointing out that we hold these cash deposits in multiple currencies, broadly matched to our gross debt exposure, which means that they provide a natural hedge against the impact of any FX movements on our leverage. Looking at our capital allocation strategy, our priorities for the use of cash remain unchanged. Our first priority is capital investment for organic growth, given our ability to deliver high returns on investment in new contracts and renewals, typically with discounted paybacks of 3 to 4 years. Very importantly, we've got a long track record of delivering returns in line with or ahead of our target hurdle rates.
Our second priority is for M&A, and we believe that opportunities will arise in the near term, mainly as a consequence of the financial pressures on some of our competitors and the smaller players in the market. We'll actively pursue infill acquisitions, but as ever, with the disciplined approach that we've demonstrated historically. Based on our current expectations, which we'll set out later, we would anticipate reinstating the ordinary dividend for 2023. We still believe that medium-term leverage range of between 1.5 and 2 times Net Debt-to-EBITDA will be appropriate for the business, and we would expect to return any surplus cash to shareholders, either through a share buyback or special dividend as we did prior to COVID. This has been a very effective financial model for a number of years.
The next chart, looking at our track record from the IPO in 2014 to 2019, see that our capital investment rose from around GBP 70 million-GBP 80 million in 2014, 2015, up to around GBP 200 million by 2019. All of this investment was internally funded from operating cash flow, which had risen from around GBP 160 million to around GBP 280 million across this period. Importantly, we would, of course, have been able to sustain a higher level of growth from new business had the opportunities presented themselves. In fact, we elected to return surplus cash to shareholders through special dividends in 2018 and 2019, and indeed were planning for a share buyback in 2020 prior to COVID. All, of course, whilst maintaining leverage within that target range.
The cash-generative nature of our business is very much at the heart of our financial model, and it's all underpinned by delivering high returns on each individual project. There's no reason why this model shouldn't work in exactly the same way in the future once we've delevered further, especially as the market becomes arguably more challenging for our competitors, and we strengthen our own competitive position. Now let me pass back to Patrick to cover the business review and strategy.
Thank you, Jonathan. For those of you listening to this by way of recording, I'm now on slide 16. In this review, I will cover 3 areas. 1, my impressions of SSP and our priorities going forward. 2, the travel industry context and our strategy within it. 3, our financial planning assumptions for future performance and our current outlook. Since joining SSP in late March, I dived into the business, visiting 20 of our 35 countries some multiple times. You see, I needed to dig deeper beyond the corporate office perspective to understand the essence of SSP. In doing so, I've engaged with our teams, our clients, our brand partners, our suppliers, and with multiple local joint venture partners. Throughout, I felt welcomed.
I'm very conscious, I've learned that we're a winning business with in-market teams who skillfully restarted our business post the COVID shutdown and are now building share growth and returns in each of our geographies. I've learned that we're a global business extending way beyond our roots in the U.K. Also I'm learning to understand the wide network of stakeholders and relationships that we pull together to enable delivery of brilliant food and beverage solutions to travelers. From these engagements I formed and tested with our board and with our executive committee a clear view on our foundation and priorities. My impressions of SSP are positive, of course we have improvement opportunities as well. We have strong foundations on which to build. We've got these positions in large, fragmented and growing markets. Our skilled teams combine relevant local expertise with central group process and capability.
In particular, our teams did an awesome job of reopening our outlets and our wider estate as the travel market bounced back post-COVID. We operate with 5 distinct concepts, sit-down restaurants, bars, quick service restaurants, coffee shops, and food-focused convenience stores. We deploy these concepts expertly but selectively through the air and rail channels across the world. Our strong partnerships with brands, clients and local joint venture partners have, if anything, been strengthened through the challenges of COVID. We have a track record of winning new business, profitable new business against a rigorous investment review process. All of this is integrated into an economic model which drives our growth and returns and is deeply embedded, both formally and informally across our business.
Our priorities then as I see them, are firstly to remobilize as effectively as we can, using the competitive opportunities that are emerging through COVID to strengthen further our in-market positions. We've got significant potential for accelerated but targeted growth in some of our geographies, I'll come back to say more on this later. We can do more to strengthen our customer proposition and in particular to drive like-for-like revenue growth. In a challenging macro environment context, we need to do all of this with a revitalized efficiency program and by carefully managing our cash and leverage. We need to build on some capabilities to drive growth, returns and resilience. Lastly, we've got scope to leverage our scale and scope across the world more effectively. Let me transition now from these impressions to some actual data.
Critically, you see here SSP operates and competes in a structurally growing travel market. Here are a set of recent third-party estimates on the traveler recovery and forecast growth rates for traveler numbers out to 2030. You can see that there is a pronounced build back everywhere. At some point through 2024, passenger numbers are expected to return to pre-COVID levels. Geographically, the strongest growth in the air channel is expected to be in North America and parts of Asia. You can also see, importantly, a steady build back in the rail channel as well as the growth that you're seeing in air. This growth is underpinned by a set of tailwinds that we highlight on the right of this slide. A long-term trend of rising incomes in emerging markets and that correlates for travel.
A huge level of investment that I've seen and discussed firsthand with clients now who are traveling around the world, this investment is building out the quality and quantity of the travel infrastructure. There's a shift in this infrastructure from retail to more space dedicated to on-site traveler experiences, especially food and beverage. You're seeing a relatively stronger growth profile for low cost carriers, which typically offer fewer onboard food solutions. All of this is happening in a fragmented travel food and beverage market, where we are the second largest global player with a share of only 10%. Clearly, at the moment, consumers and businesses are facing multiple headwinds. However, and this is important, we believe that our markets are fundamentally more resilient to the pressures on consumer spending than many other consumer sectors. Why?
Well, the post-COVID recovery in travel is being principally driven by leisure missions, which underpin 75% of our revenues. We anticipate that the profile of these leisure travelers will be even less impacted to these pressures than the wider population. We recently commissioned some research into the behaviors, the spending patterns, and the food and beverage expectations of leisure travelers, which demonstrates this resilience. These travelers are affluent, with 70%-80% of flights now being taken by people earning above median income. Looking ahead, travel is the number 1 priority for spend of discretionary income, with a pent-up demand for holidays still very much there. Importantly for our business, food and drink experiences are an important part of the overall travel journey.
50% of travelers buy and consume food and beverage before flying, 45% of travelers buy food to bring on the plane with them. The macro data supports this. Air passengers are recovering strongly in nearly all of our markets and are now back at over 85% of pre-COVID levels in every region except Asia, which is still held back by China. Critically, spend per passenger is up from 2019. Standing back from this data, while of course we cannot be immune to macro headwinds and to potential external events, no consumer-facing business can be. What we're learning is that our business model is more resilient to the current macro headwinds and the current narrative that many appreciate, both in terms of likely traveler behavior and our operational flexibility to meet that traveler behavior.
On slide 21, we highlight 3 macro headwinds and how we are mitigating each of them. In aggregate, these pressures are most pronounced in Europe and particularly in the U.K. We have had a labor availability and rate challenge in North America all year that now they're seeing the easing as we transition into the winter. I'm not going to go into each of these elements, but to pull out several examples. With regard to the economic slowdown, SSP is geographically diversified with more than 70% of our business now sitting outside the U.K. Our cost base, and in particular our rentals, are now largely variable. On the super normal levels of inflation that we're all experiencing and seeing in fees, we have procurement scale and expertise.
Every week, through the trade calls that Jonathan and I host with our regional CEOs and with their teams, we track against inflationary pressures and ensure and manage against the mitigation of these impacts fully in cash terms through pricing initiatives and other menu design initiatives. We're also conscious, though, that some consumers are under real pressure here, and we're building a range of offers at different price points, including entry-level value, to ensure that we can find a way to have our opposition in so far as we can be on the side of our consumers. On labor and energy, we're restructuring the way we work to reduce our reliance on labor through use of digital solutions. Importantly, and versus other in the sector, our energy costs are low, representing only 1%-2% of sales.
Without being complacent, we feel comfortable in the ability of our business model to mitigate these impacts. SSP has a deeply embedded economic model which underpins our performance and has helped us to deliver a track record that Jonathan outlined earlier of shareholder value creation prior to COVID-19. Hopefully, you will see and have seen in our results today that as volumes have come back, which of course were most pronounced in the H2 of FY22, this model is enabling us to deliver strong results, strong profits, strong cash flows. Turning now to our strategic priorities. Here's how we think about the drivers of longer-term growth and returns. It's a combination of a targeted geographic focus where we are choosing to compete and enhanced capability and operational efficiency, how we are competing. Starting now with geographic focus.
SSP is on a very important journey from our largest market being in the U.K. to our largest market being in North America. Our U.S. business has a brilliant track record with a revenue compound growth rate of 26% and building returns in each year across the 5 years pre-COVID-19. We have a locally tailored strategy delivering formats and brands that create a sense of place and a sense of localness at each airport and a strong, well-regarded U.S. leadership team. Importantly, we build very long-term relationships with clients. These are typically local or state government-owned, and we also build relationships with joint venture partners, many of whom are Airport Disadvantaged Business Enterprise, which is a prerequisite for operating many airport contracts in North America. As you can see on this map, though, we are under-penetrated.
Today, we are only in 30 of the 80 largest airports in North America with a market share of approximately 10%. We have a significant ability to grow share strongly from here, and we've got a fourfold plan to do that. Firstly, we're gonna increase our share in the existing 30 airports, large airports in which we operate. We're then going to steadily, and we're doing this, further penetrate the 50 of the 80 top airports that we're not currently in. We built a flexible model that enables us to deliver good return across smaller airports. Those are airports which typically have between 1 million and 2 million passengers per year. We're gonna by value creating in but done with the discipline and the returns focus that Jonathan highlighted earlier. Our strategy will also build significant presence and scale in selected Asia Pacific markets.
We have an exciting footprint already with building momentum. You can see from the charts that we've got a broad set of businesses in these markets, but our real jewel is India. We are now approaching as many outlets in India as we have in North America. We've got close to 300 outlets in India now and a fabulous joint venture partner in TFS. Across Asia Pacific, the breadth of our concepts, including access to international brands, is particularly important, and we complement that capability with local joint venture partners in almost all of these markets to provide us with deep on-the-ground know-how and relationships.
You can see from the middle of the table we are expecting significant growth across this region, particularly in India, with increasing numbers of travelers and increased demand for food and beverage and more use of air travel. With a forecast for more than a doubling in the number of Indian citizens that will use air travel between 2019 and 2030. Our new business agenda is tightly aligned with these geographic priorities. As you can see from the middle pie chart, 2/3 of our new contract pipeline is located in North America and rest of world, with the rest of world principally the Asia Pacific.
We continue to build on that pipeline, in the H2, we added a further GBP 50 million, which take the total anticipated net gains made in revenue since 2019 to approximately GBP 550 million of annualized sales by 2025. As you can see on the left-hand pie chart, about GBP 325 million of that will come from units that we have yet to open. On the chart on the right, you can see the expected phasing of net gains in revenue terms by year through 2025. As I said earlier, our group is on a journey, a journey that is materially shifting our portfolio to higher growth channels and geographies.
You can see on this slide how the pipeline will contribute to a pretty marked shift in the mix of our business over the decade since our IPO. We're moving from a business that was about half air to one that's more than 2/3 air. We're moving from a business where North America and rest of world represented 16% of our business to almost 40% of our business in 2025. In truth, and this is important, as we build more and more momentum behind our strategy, pursuing further organic business wins and selecting for lemonade, we would hope that the relative share of North America and rest of world will actually be greater than 40% in and beyond 2025. Moving now briefly to some of the detail behind this pipeline.
You can see across the top some examples of our success in North American airports, in Dallas, in Houston, and in Santa Russell. We've also had further success in Australia and in India. For example, in India, in Goa, where we've had a retail tender win at Mopa International Airport. To note, our entry into Iceland, which was also announced this morning and which will become our 36th geographic market, where we have now secured 2 major restaurant spaces. In terms of contract renewals, again, we've had good success in North America, particularly in Toronto, Seattle and Phoenix. In Norway, where we've retained 11 units across 4 airports and gained an additional 6 units, all with our Point convenience store brand.
In the U.K., where we're doing a very nice job working through renewals across multiple airports and where we've retained 6 units at Terminal 1 in Manchester and secured our Marks and Spencer franchise business across several terminals in Manchester. Turning now to how we compete, the executional elements of our strategy. As we move on from COVID-19, we have diagnosed a significant opportunity, dare I say, an imperative, to fully get after driving the performance of our large bars and big restaurants across the world. Getting our big outlets really firing, to trade harder, especially from a like-for-like perspective. We developed a full set of performance levers and tailored them by format, by brand, and by region. We are also deepening our insights into consumer behavior and engaging with our clients on the implications of these insights for the formats and brands that we develop together.
Leveraging these perspectives, we've created new formats and brands such as the Koh Hop Bar concept in Thailand, Athenian bar concept in the U.K. called Juniper, as you know, most visibly and most successfully in Gatwick. Soul + Grain, health and sustainability-focused coffee format. Importantly, we also need to refresh and revitalize and recharge some of our original U.K. brands, such as Upper Crust and Mattisson. We started this journey and introduced new ranges with an encouraging customer response. Embracing digital is an essential part of our strategy, and we're well advanced in this area. There are 2 key business benefits to our digital strategy. First, digital ordering improves the customer experience. When we do it well, the average ticket per customer goes up, and we're now rolling out these digital solutions rapidly.
The second key benefit of the strategy is that it allows us to drive the efficiency and structural productivity of our units. You can see that in the case study on the next slide. Here's a case example of a couple of units that I've come to know well, Vine and Ballard Brew Hall, both in Seattle-Tacoma International Airport, where we've rolled out Order-at-table. Customer take-up is high. Approximately 2/3 of customers are now using Order-at-table to place their orders. Because these customers have more time to browse and consider their orders, we've seen an increase in how much they're spending as well.
Critically, Order-at-table has also allowed us to operate these two units with fewer people, servers in this case, which in a world of labor challenges on both rates and availability is important to our business and economic model. What Adam and Peter, who lead our team in Seattle-Tacoma, and Princess, the lead server in Vyne, are achieving with digital is very encouraging in so many respects. SSP has been on an extraordinary people journey through COVID. I have nothing but admiration for our teams and how they have worked and how they have led for the past 3 years. We've gone from having 39,000 colleagues in 2019 down to 20,000 at the height of COVID and now back up to 35,000. In that context, the capability that we're building in attraction, retention, inclusion, engagement, skill building, and safety have been very encouraging.
While doing all of this, we have improved engagement levels as measured by the aggregate positivity score in our comprehensive annual colleague survey for 2022 by 1.5 percentage points to 76%. Last year, we launched our new sustainability strategy, setting clear and measurable targets. We have already made significant progress against this, for example, in increasing our plant-based menu offerings and eliminating unnecessary single-use plastic from about 80% of our brand packaging. We've now fully mapped our carbon footprint, a massive piece of work that we've undertaken, and are developing the roadmap to achieve net 0 emissions by 2040. This matters to me personally. It is in this area that I want SSP to take a leadership position.
With the greatest share of our emissions coming from the food and beverages we serve, we have a real opportunity to get ahead in the development of climate-smart food, which is the right thing to do and will make us more competitive in client tenders. We appeal to the climate-conscious consumer and will positively reinforce SSP's employment brand. In January, we will publish our inaugural sustainability report, which evidences our commitments in this area. As we emerge from COVID-19, we need to revitalize our multi-year program of efficiency initiatives to support profit conversion. This slide shows some of the initiatives we already have in training, many of which I've already spoken about this morning. An example again is commercial deep dives. Here we take our strongest contributing outlets and look at each of the performance leaders available to them to step on profitability.
In the U.S., we launched this program, Phoenix 2. 0 . We have similar programs across the U.K., Spain, the Nordics, and Australia, all coordinated and shaped by a tight but experienced central value creation plan team. In an uncertain and challenging environment, this rigorous focus on profit conversion and embedding it into our weekly, monthly, and annual performance management routines is a central part of our model. Now I want to pull what all of this means together into a set of financial planning assumptions for SSP. We do this conscious of the fact that a lot has changed in our industry and that our business and ourselves operate in an uncertain environment. Notwithstanding these understandable caveats, let's start with our judgment on future revenues.
We're assuming that passengers recover to between 85% and 90% of pre-COVID levels by 2023 and increase by a further 5 percentage points in 2024. As I described earlier, this is based on a fairly full recovery in air and leisure travel and a slower recovery in rail and business travel. On top of this, there's the impact of accumulated inflation since 2019 and very importantly, the higher level of super inflation this year, as we assume that we increase pricing by an additional 5% to offset the cash impact of super normal cost inflation on the P&L.
If we then add in the benefits of the net new contracts that we discussed earlier, you can see that sales should be in the region of GBP 2.9 billion-GBP 3 billion for 2023 and GBP 3.2 billion-GBP 3.4 billion for 2024. At the bottom of the chart, you can see our high-level assumptions on profitability, which are essentially that EBITDA margin on the like-for-like business should be back to approximately 11.5% by 2024. In other words, back to broadly 2019 levels. By 2023, the like-for-like business should be at an EBITDA margin of approximately 9.5%, which is consistent with our previous guidance on the rebuilding of margins as sales strengthen.
You can also see that we're assuming the net contract gains deliver an approximate 7%-8% EBITDA margin contribution over this time period, reflecting the phasing of openings and the pre-opening and ramp-up costs that we typically incur. Our current planning assumptions are as follows: sales of GBP 2.9 billion-GBP 3 billion this year, assuming a recovery in passengers to 85%-90% of 2019 levels and EBITDA in the region of GBP 250 million-GBP 280 million. Looking a year further out, we're assuming a passenger recovery to 90%-95% and with a further improvement in margin and EBITDA of between GBP 325 million and GBP 375 million for FY2024.
This assumes the sales contribution of GBP 350 million-GBP 400 million from net new business, which comes from the already secured pipeline. We would hope to be able to win net new business on top of this. I should also stress that the timing of new contract openings always carries some uncertainty, and we're assuming that contract retention remains at historic levels. We face high levels of macro uncertainty, both in the different paces of recovery from COVID in the travel sector in different parts of the world and from the broader geopolitical and macroeconomic environment, both in terms of the impact on the travel sector and the inflationary and consumer spend pressures that we are currently seeing. Based on what we know today, these outcomes represent our best planning assumptions.
To finish, we're seeing a strong rebound in travel and our economic model is working well as that happens. We've got off to a good start to FY23 with good revenue momentum in the early part of the year. We are dealing with the cost headwinds, and we're anticipating a further recovery in sales and profitability in 2023 and 2024. By 2024, we expect to be above pre-COVID levels of revenue and EBITDA. We're confident to accelerate the mobilization of our pipeline, investing GBP 250 million of CapEx in 2023 to build that out. We have high levels of available liquidity, and our balance sheet is strengthening. As Jonathan said earlier, our net debt is now below GBP 300 million, and our Net Debt-to-EBITDA is already at approximately 2 times.
We anticipate a resumption of ordinary dividend payments starting in respect of this financial year. As we look further forward, we're well placed to deliver strong and sustainable growth and returns. On a personal level, and before opening the call up to questions and answers, let me say that I'm sorry we couldn't be with you in person for this presentation today. That's because for medical reasons, following a recent surgery that I had, and thankfully a successful one, I'm unable to travel to the U.K. for another couple of weeks. Now I'm gonna hand back to the operator to moderate the questions and answers.
If you wish to ask a question, please press Star followed by one on your telephone keypad. If you change your mind and wish to remove your question, please press Star followed by 2. When preparing to ask a question, please ensure that your phone is unmuted locally. To confirm that, Star followed by one to ask a question. Your first question today is from Jamie Rollo with Morgan Stanley. Please go ahead.
Thanks. Morning, everyone. 3 questions, please. Just starting with some really helpful bridges you've given on slide 36. Could you just clarify for us what you've got in there for currency versus 19, if anything? Also, if I do the simple math, it looks like you're only assuming this year's sales at about 105% of 19. You're running at 104% of Q1 19 already. That seems quite conservative given the recovery still to come in the rest of Asia and maybe some resolution in U.K. rail. Secondly, just on the margins, again, really helpful guidance for this year and next year. That 100 basis point headwind from the contract ramp and sort of super normal inflation, do you expect that to go eventually?
Therefore, what year should we be looking to get back to 11.5%? Indeed, is there anything to stop you getting above the 2019 levels, given your examples on tech and so on? Finally, just on the refinancing plans, I'm wondering, given you've explained, you know, how big the liquidity is and the cash on the balance sheet, how much of a facility do you actually need? I'm just wondering, you know, in terms of M&A and dividends, what we should be thinking about there. Because it looks like you've got plenty of headroom, but quite a big interest cost at the moment. Thank you.
Thanks, Jamie. I may pick up the, I think you gave 4 questions, actually the middle 2 on kind of current run rates and what that means for the rest of FY23 and your question on margin. I'll let Jonathan jump in on currency and refinancing plans, if that's okay. I mean, undoubtedly we're off to a decent start relative to 2019. We're also conscious of the profile of 2019 and the timing at which both contract wins and M&A, for example, that, you know, the business that we bought in Holland and what that means for the comp as we roll through.
We're, you know, I would acknowledge that we're off to a decent start, but I think our guidance reflects the, you know, potentially, you know, some version of conservatism, but also what we think the comp period in 2019 looks like as we go through as we go through the rest of the year. On your point on margins, you know, the, you know, it's worth just reinforcing that, you know, right now we have this elevated level of net gains that we're commissioning. Of course, we're also restarting along the base estate as well. The combination of those 2 factors, which plays out differently by geography, you know, does put some sort of near-term margin pressure on us.
You know, without getting into the specific sort of, exact timing or guidance, I think you do point to the fact that, you know, in some of our more established units, which we are increasingly digitally enabling, there is the potential to kind of continue to build margin, in those units, and that ultimately will roll out across the estate. The, you know, the kind of planning assumptions we've given are what they are. Do please recognize the mix effect between, you know, brand new outlets, reopening outlets and the performance of, you know, the ones that are larger and more stable and increasingly more digitally enabled. Jonathan, will you pick up the other points for Jamie then?
Sure. Thanks. Hi, Jamie. I think with regard to FX, essentially the plans are all on a sort of consistent currency basis, which is current FX. There will be reference to sort of pre-periods, a couple of points of FX in there, but thereafter, there's no assumptions around FX as would be normal. In terms of your comment about the liquidity in the business, I think, you know, it's a fair comment. You know, just north of GBP 700 million is a lot of liquidity. It means that we haven't got any firepower for M&A or accelerated new contract growth.
Equally, if we're as we look forward, I think we'd return to the, you know, the approach that we've adopted over a number of years pre-COVID, which is to say, if we're looking forward at the pipeline and don't foresee the opportunity to deploy that cash, you know, with the right returns on new business or M&A, we'll start to think about returning it to shareholders. Clearly that would be somewhat premature right now. Clearly what we'd like to do is, you know, focus it on growing the business, quite frankly.
Right. Just to clarify this on that revenue bridge is constant currency, but the figures you've given for the last 8 weeks are including currency, are they?
Yeah, that's right. That's correct, yes.
It's a couple of points versus the 19 base.
Exactly.
From mark-to-market on the slide.
Exactly.
Yeah.
Exactly right.
Yeah. That clarifies it. Thanks.
Okay. Thanks, Jamie.
The next question is from the line of Leo Carrington with Citi. Please go ahead.
Dig into the drivers behind the increase of GBP 50 million to the run rate revenues from new contracts figure. How much of this is new signings, or have you also begun to incorporate the impacts from inflation into the overall role of Contracts One? Secondly, with a few different parts, could you elaborate on Jamie question, please? Can you give an indication of where the recovery in passenger numbers was at in the first 8 weeks of this financial year? When it comes to the accumulated inflation of 12%, I think that implies inflation of only, say, 4% in 2022 and 5% in 2023 or similar numbers, which strikes me as lagging somewhat the broader inflation metrics we see.
Can you give your views on the price versus inflation and how that might unfold for 2023? Thank you.
Yeah. Thank you. Look, Jonathan, I'll take both of those, if it's okay. Listen, a simple answer on the first question, it's all new wins. The level of difference from inflation, that is, would be de minimis. We have been more successful in securing incremental business in the H2 than we had probably guided we were going to be when we did our interim results in May. Let me go to the second question. If I do this relative to 2020, and you see Jonathan introduced the comparison for the first 8 weeks, both to 19 and 20.
These are approximate numbers, and bear in mind that they reflect the slower recovery in rail, as well as, you know, the faster pace of recovery in air. Our volume relative to 2020 is about 80%. Inflation relative to 2020 cumulative through the period is about 10%. Net gain constitutes about 5%, and there's a little bit of FX and that brings you to the 97% that you see in the slide that Jonathan introduced earlier. If you dig into that a bit further, you know, you see it highlighted in the slide that Jonathan went through.
What you see here is that in continental Europe, rest of world, and in particular in North America, the performance is ahead of 2020, most pronounced in North America. That's reflected in higher volume levels, some now approximately 80%, decently higher actually across those 3 regions, which compensate for the fact that the U.K. is less than 80, reflecting the much greater weight towards rail and some of the near-term impacts of rail strikes.
Okay, thank you. On the inflation versus price?
Yeah. Well, you know, I'm gonna be just a little coy in my response here. I mean, we are not a business. Our cost of goods would be a much smaller percentage of our sales than you might see in other retail or food service businesses. For us to have, you know, 10 percentage points of price increases in the period from, you know, 2022-2023, with the first 2 of those years having very low levels of inflation, is quite significant inflation recovery when if you factor in, you know, where our gross profits are or where our cost of goods would be.
Just for the avoidance of any doubt whatsoever, that represents full cash recovery of the supernormal inflation that we're receiving now, both in raw materials and ingredients and also, where necessary, in labor.
Okay. That's very clear. Thank you.
The next question is from the line of Jason Molins with Goodbody. Please go ahead.
Hi, good morning. Just in terms of contracts, Patrick, you alluded to some contract wins tracking ahead. Maybe I think you've mentioned before that you've seen, I guess, a bit of a backlog in tenders post-COVID and during COVID. Maybe if you can elaborate a bit further on where you see those opportunities coming in the next 6-12 months and perhaps a bit of detail on what the competitive backdrop is like, has necessarily changed. Just a question around CapEx. Appreciate you've given guidance for 2023, but given the pipeline, how should we think about that in 2024 as well? Final question, if you don't mind. You flagged India as an exciting market and opportunity.
What's your market position in that region, and could you also look at it in terms of M&A as well in India? Thanks.
Okay. Let me, I'll go with the first question. Jonathan, will you pick up India as well? Because you're a master of all things India, including our joint venture relationship there as well as the CapEx question. Just on contract, Jason, first of all. Yeah, I mean, we have seen, you know, there was in many instances, there was a suspension of tendering activity and contracting activity through COVID. Everyone was focused on, you know, downsizing business. Actually in the vast majority of cases, as I indicated earlier, the relationship between clients and food and beverage providers was very collaborative and partnership-focused in helping the industry, the whole travel sector, survive and manage through COVID.
You are now seeing a restart of some of that contracting activity, having had that pause. We are reassured that the competitive dynamic is quite rational in terms of how that's happening, and the competitive set is also somewhat narrower than it might have been, 3 or 4 years ago. In particular with, you know, I think some smaller and more local players have, you know, seen some of the challenges of operating in the travel sector, and it's somewhat less attractive to them in aggregate across the world than it is to the, you know, the sort of broader specialists, like ourselves and the tier followers that you would know.
You know, I think you can expect the, you know, the real areas of focus for us in terms of targeting incremental gains, being in the geographic priorities that we set out earlier, particularly in North America, where, you know, we see an opportunity across each of the levers that I described, winning more business in the 30 big airports we're already in, gaining entry into the 50 large airports that we're not in, and constructing and operating, which is we're well underway with, a somewhat different go-to-market model in North America for smaller airports, those with 1 to 2 million passengers. Complementing what we do organically with a very strong team in those areas. Apologies, guys. There's a fire alarm in the background. Jonathan, I'm gonna transition to you.
Thanks, Patrick. Hi, Jason. I think the first point on CapEx, reasonably straightforward. There is a bit of particularly around investment in renewed contracts that we see coming up this year, and that's one of the reasons with the pipeline we've talked about that we're mobilizing is why that's one of the reasons we guided to the CapEx being sort of in the GBP 250 million region for the coming year. I think that, as we look forward, you know, clearly, this is based on the pipeline as we see it today. You know, notwithstanding new news, we think that CapEx will probably drop.
I think if you were to look at consensus, it's probably in the region of GBP 200 million for the following year, and that would feel about the right sort of killing ground. Otherwise we would have probably tackled that head on this morning. I think that's the, you know, the basic steer for 2024 in terms of CapEx. Regard to India, I mean, we have a very, very strong business in India. In 2016, we acquired a controlling stake that was already the leading player in the travel market in India, TFS.
You know, I have to say, it's been a tremendous partnership that's really worked very well and one that we would look to, you know, continue indefinitely, where we have access to a partner, you know, which is a privately owned business with, you know, great reach into the food sector generally, and great expertise in the airport sector, you know, knowledge of the market, knowledge of the clients. Clearly, we are bringing to that our own expertise, technology, brands, and know-how. It's worked exceptionally well. But we have a pretty significant position there. We are the largest operator in many of the big international airports. You know, those would include Delhi, Mumbai, Goa, Kolkata, Chennai, to name a few. I don't think we are proactively looking to M&A as a way of securing greater share there.
I think we're already in a very strong position to win new business. I think the risk of consolidation would be to potentially sort of risk too much concentration in many situations. Worth saying as well that the, you know, our big portfolio of international competitors are either not present there or are, you know, very, very limited representation. Really the competitive market is all about local players. Again, it's not unforeseeable that we could find M&A opportunities. Not something we're really focusing on proactively. We think we're very well placed to win business organically there. Hope that answers the.
Thanks very much.
Question, Jason.
Yeah. Perfect. Yeah. Indeed. Thank you.
Thank you.
The next question is from the line of Tim Barrett with Numis Securities. Please go ahead.
Hi. Morning, both of you. Could I ask a short-term question and then a longer term one? Shorter term, you've been very, very restrained in not blaming rail strikes. If airports are up over 100%, or at over 100% in the U.K., rail materially below 84%, I just wondered if you could split out what's going on there. The second question on the labor side, your H2 labor sales ratio is very impressive. I'm guessing you're braced for 10% labor inflation in the U.K. or around. What's happening in the rest of the world around labor? Thanks very much.
Jonathan, if I pick up labor and you might just give a breakdown of the U.K. as far as we can between the 2 channels and what it means in the context of strikes. Yeah, I mean, it's worth recognizing that the pressures on labor availability and rates are not confined to the U.K. You know, we would have multiple markets where if you take our labor rates in October, November 2022 and compare it to our labor rates in October, November 2021, you know, We would have multiple markets where at that kind of hourly rate, entry-level rates, vast majority of our people would have double digits increases in labor rates, reflecting both base pay and various shift premium and rate of pay differences and so forth.
That level of labor inflation is pronounced everywhere. The U.K. is towards the higher end of that, but it's not actually the highest. We have 1 or 2 markets in continental Europe that are higher. North America is in a similar sort of place to U.K. on rates, although even taking North American aggregates really misses just the level of local variation you've got around, you know, availability and rate movements across the business. You know, what I would say right now is that we have been able to move away from, unlike some other industries, from labor availability challenges. We have all the people that we need to run our output.
We have a pronounced step up in the, you know, in the level of pay that we're putting in that reflects the examples I've just given. Now, how does that feed into the H2, falling labor % ratio that you're describing? I think that's the benefit of operating leverage, right? Where when we, you know, when we start to get our units really firing, even with higher rates, we're able to, you know, we're able to see our labor % move back.
As we, as I said in the presentation earlier, as we progress our digital agenda and other productivity agenda, we think we're gonna be able to, you know, we're gonna be able to deliver, in line with those kind of ratios as we go forward. We gotta work hard to do that. That's the kind of SSP capability or what Jonathan and Miles would describe as the real focus on the middle part of the P&L, which is a big part of what we talk with our regional CEOs and key country team leaders about, you know, on weekly trade calls, monthly performance reviews and so forth, and that's, you know, it's critical that we really stay on that.
John, can you, will you pick up the U.K. question on channel mix?
Sure. Hi, Tim. I mean, first thing I should say is that it is, of course, unhelpful and the sort of stop-start nature of these strikes is doubly unhelpful because, you know, clearly shutting up significant portions of the estate in rail stations for a day at a time is not straightforward. Having said all of that, we shouldn't be sighted the fact that, you know, it's short term. It is only in U.K. rail stations. It's not even, you know, across the entire country or certainly hasn't been to date. It's only one part of a business in 36 countries. Looking at the specifics, again, you know, you referred to the, sort of the sales trends that we presented earlier.
First of all, as I say, is that undoubtedly, you know, it's a contributing factor to the sort of clearly flatter trajectory for U.K. rail compared to other markets. The impact is not huge. It's certainly, it's low single digit % on the U.K. in terms of, you know, what's the impact on the sort of growth trajectory as we look at the early part of this financial year. Principally looking at October and November. Worth saying as well that a bigger factor in the sorts of trends that we're looking at on that chart is just about the different channel mix across the different countries. If you look at the U.K. and you think that, you know, historically it's been broadly sort of 2/3 rail and a third air.
Particularly in the summer, of course, that mix almost flips around, you get the benefit of the holiday traffic over the summer. As we, you know, we're now at a part of the year where, you know, holidays are over. In normal times, we'd be much more dependent on the, well, the business travel in air, but notably the rail business and commuter traffic. stating the obvious, the, you know, those are the sectors of travel that are recovering more slowly.
We always anticipated that if you looked at that, trajectory with reference to 2019 or indeed 2020, you'd always expect the U.K. business to flatten off a bit just because it is exposed to the areas, it's more weighted to the areas that are growing less rapidly, from COVID than the other parts of the business. That, and it's important to note that is a more material impact on the run rate differential, than the strikes themselves.
Did I understand that correctly? You're saying a low single digit number of percentage points?
Yeah, exactly right.
Referenced H4. Okay, brilliant. Thanks very much.
Exactly right. It's an impact of 2% or 3% in the first couple of periods. Yeah.
Okay, many thanks.
Okay, thanks.
The next question comes from the line of Harry Gowers with J.P. Morgan. Please go ahead.
Hey, morning. Thanks for taking the time. Just the first one would be on kind of the disciplined M&A that you've referenced in the presentation. I mean, where and what could you look to potentially acquire? Is there actually a list of assets out there which are of a high enough quality for you to actually be interested in? Just second one on the U.K. business. I mean, pre-COVID, probably fair to say the U.K. was less of a focus relative to some of the other regions from a top line perspective.
Given some of the brand initiatives and the refreshment going on in the U.K. right now, should we maybe factor in a bit of a step change in growth going forward above the kind of 3% or low single-digit % that we used to see in the U.K.? Thanks.
Yeah. Let me try to quickly answer. I'm conscious that we wanted to finish at 10:15. I wanna just, sorry, I'll just answer them briefly if that's okay. Yeah, I mean, we are I think the best way to think about where we're looking for to target our M&A is to match it against the geographic priorities that we've discussed. To recognize there may be value creating opportunities in some of the other markets as well. You know, we use language of infill M&A, which will give you a sense for, you know, kind of size and how we're thinking about it. I think that's the right way, you know, for our business to proceed from here.
Clearly, you know, we signaled that North America is a focus area for us in that respect. On the U.K., I mean, I think the guidance is the guidance that, you know, is reflected in the planning assumptions that we've given. I would like us to be able to take up our growth rate in the U.K. We are, you know, we are conscious of some of the starting point of our channel mix that Jonathan's just described, and probably the tougher macro environment in all sorts of ways in the U.K. right now than in other parts of the world. You know, hence the, you know, the revenue and EBITDA guidance we've given. You know, while. Just to finish on that.
You know, while we are undoubtedly on a path of North America becoming our largest market, the U.K. is always gonna be a very important market for us. It's our home market. It's large in size. Our share position is very good. Our relationships are good. It just so happens that we've obviously got a much higher level of share there than we do in some other markets.
Great. All very clear. Thank you.
The next question is from the line of Ali Naqvi with HSBC. Please go ahead.
Hi, good morning. I'll ask 2 if I can. In terms of the new initiatives that you're talking about, is there anything you can say in terms of the payback or incremental margins or anything like that you might be able to hint at? How much of those can be applied to your estate versus where they're currently deployed?
Yeah, I mean, we've got many initiatives, Charlie, that we flag. I think the 2 that I would highlight are this focus on driving Like-for-Like, particularly in large outlets, where we're encouraged by the progress and momentum in some of these outlets. You saw that through the H2, and it's a big part of what we think will underpin our performance for FY22. The second is digital, where, you know, if you include the new outlets, you know, we've got 2,500-ish outlets that over the next number of years that we need to put further digital enablements into. Now we need to test that as we go.
There's sort of encouraging case examples, some of which I've mentioned are replicated at greater scale. Undoubtedly, if you go forward 2 or 3 years, the traveler experience in terms of digital enablement and also what that means for, you know, how we staff and set up and design our outlets will look a little different. They'd be the 2. Again, beyond the financial guidance that we've given, you know, we're not gonna say any more on the impact of that until we've delivered it and be able to talk about it.
Great. Thank you.
The next question is from the line of James Rowland Clark with Barclays. Please go ahead.
Hi. Morning. I realize you haven't got an awful lot of time left, so I'll just ask one. Patrick, I think. Well, we roll back 3 years, your predecessor was very keen on the growth opportunity and accelerating the growth opportunity in North America in particular. I wonder if you wouldn't mind briefly outlining how your strategy is notably different or better than his might have been at this point 3 years ago. Thank you.
Yeah. James, I'll give a very quick answer. I haven't a clue. Actually, I say that and I don't mean to be trite, our focus is determining what the right strategy is now, based on the market conditions now, working with the experience of a really, really good group executive who know these markets really well, and a central team that have a track record of successfully deploying capital across multiple different opportunities. You know, frankly, if you wanted to know what Kate thought or what Simon thought, you'd wanna ask them, but it's just not appropriate for me to form any public judgment on a strategy of a business two and a half to three and a half years before I joined.
Okay. Thank you.
Sure. I think we might just take one last question if it's there and then finish up.
The next question is from the line of Greg Johnson with Shore Capital. Please go ahead.
Good morning. I'll just keep this one brief then. Just thinking of sort of step up in minority payments, or charges in the H2, given sort of the strength in the balance sheet and liquidity and the macro backdrop, is there a chance of maybe bringing some of these JVs in-house?
Jonathan, do you wanna pick that up?
Yep. I mean, interesting question, Greg. I mean, the answer is that in most cases, those joint venture arrangements are there for a purpose. I sort of referenced this to the earlier question, Jason, about India. You know, often, I mean, we have a number of very long-established partnerships, which we think serve us very well because we get the benefit of some of SSP's expertise, global scale, allied with real local knowledge. That doesn't mean to say, however, that there may not be 1 or 2 opportunities. And I'm thinking more in the associates group, where there are still opportunities potentially to take bigger controlling stakes. Generally, they're there for a purpose, I think is the, it would be my broad answer, Greg.
Interesting thought. Okay. Thank you.
This concludes our Q&A session. I would like to turn the conference back over to Patrick Coveney for any closing remarks.
Yeah. Thank you. Thank you for moderating the call for us. I'm conscious of a very good turnout today. Thank you for spending the time with us. In part, I think because of, you know, the fact that I'm whatever, 8 or 9 months into the business, we had a lot of content here on this call, both in terms of performance, through FY22, kind of impressions and key elements of our forward-looking strategy, and then the introduction of the financial planning assumptions of 2023 and 2024. We hope that's been helpful to you in setting out the investment case for our business more effectively than it had been during the COVID period.
You know, we look forward to, you know, taking further comments and questions after we finish off this call. Thank you for spending the time with us. Stay well. When you break for Christmas or the holiday, I hope you've got a really good break. Bye then, and be good.
Thank you.
Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect. Goodbye.