SSP (SSPG) has raised £216m through a share placing as the airport food and beverage concession operator battles the coronavirus-driven slump in passenger travel. It has also reined in its generous shareholder reward policy, suspending a £100m share buyback programme and asking shareholders to forgo their final dividends.
SSP, which derives most of its income from airports and railway stations, said that coronavirus had forced down its like-for-like revenues in the UK and Europe by around 80-85 per cent against last year. North American income is down 80 per cent while revenues are 60 per cent lower in the rest of its markets. Coronavirus has been particularly harmful to its airport business.
The collapse in SSP’s business has forced the group to enact swift cost-cutting measures, including staff layoffs and a £10m reduction in its planned second half capital expenditure. Having announced a 12-month share buyback initiative at its full-year results November 2019, this programme has now been suspended with SSP having only purchased around £2m in shares so far.
SSP has also delayed the payment date of its 6p final dividend from 27 March to 4 June, deferring a maximum payment of £26.7m. It will ask shareholders to waive their right to this dividend in a bid to preserve cash, and has also ruled out paying an interim dividend this year. In a further bid to harden its balance sheet, SSP agreed a new bank facility with HSBC, Lloyds and Natwest, adding to its existing debt arrangements with a £112.5m 18 month facility.
Its grandest measure in response to the coronavirus outbreak was concluded on the afternoon of 25 March, when SSP announced the placing and subscription of 86.5m new ordinary shares at a price of 250p per share, representing 19.3 per cent of SSP’s existing share capital prior to the placing.
Asset managers BlackRock and Merian Global Investors purchased 21m and 7.7m shares respectively, with their positions in SSP now standing at 12.65 per cent and 8.1 per cent. A host of executives also invested £760,000 in buying 304,000 shares between them, led by chief executive Simon Smith who subscribed for 60,000 shares.
The coming months for SSP will be bleak. It has considered the impact of a near-total shutdown of the travel market for the second half of its financial year, which would bring revenue down by 80-85 per cent against last year’s comparable period. SSP believes that its actions in response to the crisis “would result in a ‘drop through’ to operating profit from the reduced sales of 25 per cent to 30 per cent”. SSP’s March revenues are expected to fall by £125m to £135m, hitting operating profits by £50m to £60m.
SSP’s planned acquisition of German competitor Station Food, announced at a January trading update, looks set to go ahead, with the deal evading mention in the group’s latest update. The transaction will add 28 new food and beverage outlets at German railway stations in 2021, contributing around £20m to SSP’s 2020 turnover. SSP has not disclosed the value of the acquisition.
