SSP's sales hit by train strikes

SSP's (SSPG) shares were marked up by 3 per cent on results day after the Upper Crust owner, whose sites are based at travel hotspots such as airports and railway stations, bounced back to pre-tax profitability with the aid of strong summer and autumn leisure travel demand. The market was also keen on the company’s post-period-end trading performance – sales outstripped 2019 levels by 4 per cent with price increases and contract gains having an impact.

The demand picture improved as the year went on and Covid restrictions moved further away in the rear-view mirror. Annual revenues came in at 78 per cent of pre-pandemic levels but jumped from 64 per cent in the first half to 90 per cent in the second. SSP forecasts that passenger numbers will hit 85 to 90 per cent of 2019 levels next year.

But would-be customers won’t access the company’s sites if they aren’t able to travel due to strikes. Management said that this is having an impact on performance in the UK, which was a geographic outlier in recent trading, with revenues at 84 per cent of pre-pandemic levels. With more railway strikes to come over December and January, this is a domestic headwind the company could do without. North America, Continental Europe, and Rest of World revenues were all ahead of 2019 postings in the new financial year.

Peel Hunt analysts said “forward leverage multiples will soon support a return of dividend payments”. The broker forecasts an 11 per cent equity free cash flow yield in financial year 2024 and argued this represents “an attractive buying level for a global recovery story”. But while progress is being made, the UK situation is a concern given the market is the company’s main revenue driver. Hold.

Last IC view: Hold, 255p, 24 May 2022