SSP reinstates dividend as it hits recovery path

Travel food supplier SSP (SSPG) looks as though it can finally draw a line under the most troubled period in its history as the company left the impact of the pandemic behind it with another round of recovering profits. The return of travel towards historic norms in its core markets meant more customers for airport and train station-based brands such as Upper Crust and Ritazza. Management seems relatively confident that growth will continue next year, with the company planning for like-for-like sales growth of between 6 per cent and 10 per cent for 2024, which corresponds roughly to revenues of £3.5bn.

It has backed up this forecast with renewed spending on capital investment, which had been largely dormant during the pandemic and its aftermath. For 2024, management expects this to be £280mn, with £30mn deferred from these results. Despite this deferral, cash moved from a net inflow of £52mn last year to an outflow of £125mn in the year as capital expenditure hit £220mn.     

SSP’s other salient feature – its enormous debt pile, which includes over £1bn in lease liabilities – weighed slightly less on the company as SSP was able to refinance £600mn of senior bank debt in July, which pushed the maturity out by two years to 2027. As a result, the group’s net finance charge was credited by £7.4mn, with the IFRS 16 charge at £79.2mn for the year.  

Broker Peel Hunt left its basic forecasts unchanged, with the business valued at an enterprise value to cash profits ratio of 6.1 with return on invested capital of 18 per cent. However, you only need look at the leverage to understand the reason for the lowly valuation, and the shares have little attraction despite the return of dividends. Hold.

Last IC view: Hold, 221p, 6 Dec 2022