SSP's outlook looks uncertain

SSP (SSPG) has had a turbulent ride during the pandemic. Over 60 per cent of the food and beverage outlet operator’s units are in airports, making it particularly vulnerable to the on-again, off-again restrictions that have buffeted the travel industry.

This was clearly apparent in the full-year results with top-line revenue down by almost half. However, there were some positives. The development pipeline looks strong enough to support future growth, with around 200 new units planned, which management expects to contribute a 15 per cent revenue boost by 2024. Meanwhile, the balance sheet was shored up by April's £451m rights issue, alongside the renegotiation of bank facilities and debt covenants.  

Management stuck to its forecast that like-for-like sales and cash profit margins will return to pre-Covid levels by 2024. In the meantime, autumn and post-period trading, helped by the relaxation of restrictions and improved customer numbers, suggested things have been moving in the right direction. For example, in the first nine weeks of this fiscal year, revenue was at 66 per cent of 2019 levels.

But the emergence of the new Omicron coronavirus variant can’t be said to be helping prospects and this stymies the group’s immediate outlook. Broker Peel Hunt forecasts adjusted profit before tax of £167m for 2023, rising to £207m the following year, giving EPS of 14p and 18p, respectively. That means a forward price/earnings ratio of 17, falling to 13, which suggests any recovery is already baked into the price. Hold. 

Last IC View: Buy, 279p, 29 Sep 2021