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Transport hub operator benefits from having a captive audience
Thursday 13 Oct 2016 Author: Daniel Coatsworth

Ever been shocked at how much airports and train stations charge for food and drink? Well you can profit from these sky-high prices by investing in the company running many of these outlets.

SSP (SSPG) is one of the two market leaders. It has franchise or licence agreements to use many well-known brands including M&S Food, Starbucks, Burger King and Yo! Sushi. Its own brands include Upper Crust and Caffe Ritazza.

SSPG - Comparison Line Chart (Rebased to first)

Nearly two thirds (62%) of revenue is generated outside of the UK, providing geographical diversification and helping to soften the impact of any temporary weakness in a specific travel market.

It has outlets in more than 30 countries and serves in excess of one million people every day. The company is forecast to generate £2.18bn of sales in the year to September 2017 and make a £122.5m profit.

An estimated half of its forecast earnings growth is expected to come from making the business run more efficiently, says stockbroker Numis.


SSP is very interesting from an investment perspective as it serves a captive audience.

The alternatives are a) go hungry and have nothing; b) tuck into a cheese sandwich that you made earlier at home; or c) go out of your way to buy something before you get to the train station or airport.

We presume a large proportion of people would just hand over the cash at an SSP outlet and stomach the high cost as there may not be time to seek cheaper alternatives or, in the case of airports, you are stuck in a specific area.

Dwell times are increasing at airports as security procedures require longer check-in times, thereby increasing exposure to SSP’s cafes and restaurants. Many airlines are scrapping free food and so passengers may feel they want to tuck into a decent meal before boarding a flight – another driver in SSP’s favour.

Numis believes SSP should benefit from sterling weakness because of its large overseas presence. It believes revenue growth will be enhanced by 3.5% in 2016 and by 7% in 2017 purely because of currency translation effects.

The broker also estimates that SSP has generated £170m in free cash flow since it floated on the stock market in 2014, equivalent to 17% of its market value at the IPO (initial public offering). That is money left over after reinvesting in the business which can be used for debt reduction and dividends. (DC)


SSP (SSPG) 323p

Stop loss: 258p

Market value: £1.5bn

Prospective PE Sept 2017: 18.6

Prospective PE Sept 2018: 16.6

Dividend yield : 1.8%

Analyst price target: 390p (Numis)

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