SSP pleads with investors to reinvest final dividend

Two-thirds of global passenger fleets were grounded in April, according to the International Air Transport Association. SSP estimates that Covid-19 reduced its first-half sales by between £145m and £150m, while May sales post-period ran 95 per cent below last year, which is worse than the “very pessimistic” scenario of an 80 to 85 per cent second-half decline outlined in March. It does, however, anticipate shielding its operating profits from this reduced sales level through cuts to operating costs, and maintained its guidance for a second-half operating loss of between £180 and £250m. SSP has, for example, been highly successful in securing rent concessions from landlords.

SSP has taken action to strengthen its balance sheet, having registered a free cash outflow of £177m driven by the collapse in operating profit along with higher capital expenditure and a £23.5m rise in its outlay on acquisitions, having bought subsidiaries in Australia and Germany. The group raised £209m via an equity issue in March and has secured access to financing from a number of governments, which has taken its available liquidity up to £750m, from £413m at the end of March. It is also offering shareholders, who are entitled to their 2019 final dividend, the opportunity to instead reinvest in a share placing. The £26.8m it owes to shareholders has been approved, but not yet paid, as the group fights to preserve its liquidity.

SSP’s lenders have been cooperative thus far, although more support may be required. While it has secured covenant waivers for its September and March 2021 testing periods, it warned that the sustained disruption to travel meant there are scenarios in which it “could breach its interest cover and leverage covenants at the end of September 2021 when these tests are reinstated”.

Stifel forecasts full-year 2020 adjusted pre-tax losses and losses per share of £183m and 32.5p, rising to pre-tax profits and earnings per share of £157m and 18.3p in 2021.