Airport food and beverage concession operator SSP (SSPG) has flown above global economic worries to post full-year earnings increases, while shareholders are in line for a £100m buyback. The return to shareholders, not insubstantial relative to total equity, could be viewed as a 'sweetener' given the September warning that the grounding of the Boeing 737 Max had hit its North American revenue, as passengers were diverted to non-SSP terminals.
In the event, like-for-like sales growth slowed by 0.9 percentage points from FY2018 to 1.9 per cent, but SSP continued to expand. In North America, it had net gains – the revenue impact of new outlets against closures – of 13 per cent, and the region’s operating margin climbed from 6.3 per cent to 7.9 per cent in FY2019. New chief executive Simon Smith said the expansion would continue, but underlined the “lumpy” nature of the operations business, as SSP relies on tenders coming up for growth. He forecast net gains of 4-5 per cent this year, down on the FY2019 figure of 5.6 per cent.
The buyback decision may raise eyebrows given net debt is up from 1.1 times cash profits at the end of the 2018 financial year to 1.5 times. Admittedly, this is at the bottom end of its target range of 1.5 to two times, but the increase came largely from £201m in dividend payments in a year, which also saw a 25 per cent fall in operating cash flow and a 34 per cent contraction in free cash flow. This was partly explicable in terms of a 22 per cent increase in capital expenditure to £185m. And this is forecast to come down to between £160m and £170m in FY2020.
Consensus estimates compiled by Bloomberg sees revenue climbing 5 per cent to £2.9bn in FY2020, and adjusted EPS up 9 per cent to 31p.
| SSP (SSPG) | ||||
| ORD PRICE: | 635p | MARKET VALUE: | £2.82bn | |
| TOUCH: | 634-636p | 12-MONTH HIGH: | 731p | LOW: 602p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 93p* | NET DEBT: | 116% | |
| Year to Sept 30 | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 † | 1.83 | 76.8 | 11.8 | 4.5 |
| 2016 † | 1.99 | 106 | 16.0 | 5.7 |
| 2017 † | 2.38 | 145 | 20.5 | 8.5 |
| 2018 | 2.56 | 183 | 24.9 | 10.2 |
| 2019 | 2.79 | 197 | 28.1 | 11.8 |
| % change | +9 | +8 | +13 | +16 |
| Ex-div: | 05 Mar | |||
| Payment: | 27 Mar | |||
| *Includes intangible assets of £747m, or 168p a share † Per share figures adjusted for 20-for-21 share consolidation. | ||||
