SSP (SSPG) 203.7p

Loss to date: 23.4%

We initially recommended shares in travel retail firm SSP (SSPG) back in May as a way to play the rebound in travel both in the UK and around the world as businesses and consumers returned to their pre-pandemic routines.

We argued that, at half their price from three years ago, the shares looked good value with plenty of recovery potential.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

A month after our recommendation, the group, which principally operates food concessions in stations and airports, posted a strong start to the second half with revenue 10% above the same period of 2019 driven by North America where domestic air travel and market share gains saw revenue almost 25% above pre-pandemic levels.

Only the UK and Ireland revenues were below 2019 levels, and that was mainly due to ongoing industrial action on the rail network.

The firm revealed the acquisition of most of the Midfield Concession airport units had completed earlier than scheduled meaning ‘a modest level of sales benefit’ with operating profit expected to be flat after purchase and integration costs.

In its full-year trading statement earlier this month, the group said strong underlying trading momentum had continued and it expected to deliver revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) ‘at the upper end of the ranges previously indicated’.

Yet despite these positive updates, the shares have continued to drift, and the market reaction to the potential impact of a strong pound on 2024 earnings was to push the shares down a further 8% to a new nine-month low.

WHAT SHOULD INVESTORS DO NOW?

In fairness, the company has done exactly what we hoped by improving revenue and returns and it has an enviable pipeline of opportunities.

Travel is back, and passenger numbers are almost up to pre-Covid levels, yet the shares are nearly 25% cheaper than when we picked them, so our inclination is to stick with our recommendation.

If investors don’t rate the company, there’s a good chance private equity will take it off the market and reap the upside instead.

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