Leisure travel key for SSP

SSP’s (SSPG) fortunes are inextricably linked to the travel sector's fortunes. With the food and drink outlet operator’s units being focused in travel locations such as airports and train stations, it has had a rough time of things over the course of the pandemic. But while Omicron hit passenger numbers in December and January, things are starting to look up. The shares were up by around 8 per cent as the company revealed revenues which are “recovering strongly” and a return to operating profit.

Revenue came in at 64 per cent of 2019 levels for SSP, which owns brands such as Upper Crust and operates international brands like Burger King and Starbucks in certain travel hubs. This was a vast improvement on the prior year, which demonstrates the severe impact that Covid-19 has had on the business. Over 80 per cent of the estate is now open, with an improvement in passenger numbers driven by leisure travellers as business travel relatively struggled. 

It remains to be seen to what extent the cost of living crisis will impact the travel recovery, but recent trading is encouraging. Revenue was at 83 per cent of 2019 levels in the first six weeks of the second half. Chief executive Patrick Coveney said that “we anticipate a full recovery in leisure travel, which drives the majority of our business, and are confident that we are well positioned for the months and years ahead”.

Peel Hunt has upgraded its financial year 2022 forecasts, “with expansion and improving passenger volumes more than offsetting the impact of higher costs”. The shares are trading at 20 times the broker’s financial year 2023 earnings forecast, with SSP expecting revenue in the second half to come in at around 80-85 per cent of pre-pandemic levels. Hold.

Last IC View: Hold, 238p, 8 Dec 2021