Ssp Share Discussion Threads

[oldham45] 01/5/2019 11:40

Think this is a hacked entry. It appears on other share BBs also

[oldham45] 01/5/2019 09:21

Reasonable question, incorrect choice of language perhaps?

[philanderer] 27/4/2019 07:27

Good article, thanks 😀👍🏼

[sogoesit] 27/4/2019 07:09

Sorry, tabulation not pasting....

"Can SSP's shares climb much higher?

A few weeks ago I wrote about WH Smith’s (SMWH) travel retail business and liked a lot about it. Compared with the challenges of the UK high street, having captive customers in places such as railway stations and airports tends to lead to higher sales per store and higher profits. I think the business model has a lot of attractions for investors.

The business

SSP (SSPG) is a play on a similar theme to WH Smith’s travel business, with a similar business model. The big difference is that it gets its sales from a different mix of customers and products. In 2018, 64 per cent of its sales came from airports and 31 per cent from railway stations. Unlike WH Smith, it has a limited presence in motorway service stations and hospitals.

The other difference is that it makes its money from just selling food and drink. It manages a portfolio of 500 different brands, which are tailored to each individual travel location. It operates concessions for leading brands such as Starbucks, Burger King, Yo Sushi and Leon, as well as having its own brands, including Upper Crust – which sells baguette sandwiches – and Ritazza coffee.

The UK remains the biggest source of operating profits (£89.5m), just ahead of Europe (£79.5m). In recent years the company has expanded in North America, Asia and South America through a combination of winning new contracts and acquisitions. The company currently has a presence in 33 countries.

The airport business is based in 140 airports. It has higher gross profit margins – more on this later – than railway concessions, but has to pay higher concession fees as well. The concession contracts tend to last five to eight years in Europe, but are generally longer in North America at 10-16 years.

Railway concessions typically last 10 years before they need to be renegotiated. They also tend to be less profitable than airport concessions. Even though railway stations tend to have a lot more passengers, they don’t tend to stay there very long before catching a train and therefore tend to spend less money. SSP’s key rail markets are in the UK, France and Germany.

In return for being granted a concession, SSP pays a concession fee to the station or airport owner, which is usually based on a percentage of sales subject to a minimum fee. The company also has to spend money fitting out the retail outlet with fixtures and fittings and equipment.

Competition for sites is understandably fierce given the profits that can be made. However, barriers to competition do exist. This is a business where good long-term relationships with landlords count for a lot, as the landlord is unlikely to throw a tenant out if they have been a good and reliable source of income. SSP has been good at renewing its concession contracts when they expire.

The business has performed well over the past five years and has more than doubled its operating profits. However, the numbers throw up some interesting issues, which I will look at further.

Tabulation not pasted.

A positive sign is that sales growth has been pretty good. The company has been able to eke out sales growth from its existing concessions in the 3 per cent range. During the past couple of years there has been a significant boost from new contract wins – particularly in the US and emerging markets – and this trend has continued into 2019. Acquisitions have also helped. What’s good is that most of the growth is coming from organic sources – like-for-like (LFL) sales and new units.

The other big driver of profit growth has been a significant improvement in profit margins. Investors probably don’t spend enough time looking at gross profit margins in my opinion, but calculated correctly and simply – revenue less the cost of inventories expensed – they can tell you a great deal about the strength of a business.

SSP’s gross profit margin is very high at over 70 per cent and has been improving. However, concession fees have been taking a bigger chunk of revenues as the business has moved more towards airport locations over railway stations. Labour costs and overheads have been well controlled in order to offset this.

As a result, operating margins have increased. Bear in mind that depreciation has been helpful to margins in 2018 as SSP has been operating some units in the US before they have been redeveloped and so benefiting from the absence of closure costs and higher depreciation costs.

The one possible area of perceived weakness is in the generation of free cash flow (FCF), but I don’t think this is anything to worry about. As the business has grown, it has become more capital intensive due to the costs of opening new stores.

It is good at converting its operating profit into operating cash flow due to generally good working capital management (selling its stock before it has to pay for it) but a growing chunk of that cash flow has been ploughed back into new assets. This is a good thing as it fuels future sales, profits and cash flow growth. I do not think that rising capex is a sign of underdepreciation and overstated profits.

Return on capital employed (ROCE) looks good at19.4 per cent, but this excludes the impact of rented stores where the assets are still off balance sheet – this will change in 2019. Adjusting for these assets is not straightforward due to the temporary length of concessions. However, if investors are valuing the profits on the basis of concessions being retained – as many will – then valuing the concession assets on that basis would bring down ROCE considerably and perhaps halve the number.

My estimates of rent-adjusted ROCE based on multiplying the annual rent bill by seven and adding interest on that number at 7 per cent to operating profits is shown below. I appreciate, though, that in this instance the calculation is complicated and should be seen as a rough-and-ready estimate.

Can it keep on growing?

Rail and air travel passenger numbers are not immune to economic downturns, but have proved to be reasonably resilient to the ups and downs of the world business cycle. UK rail has seen quite soft passenger numbers over the past year or so and might not grow that much in the short term, but in the longer term increased congestion and the growth in high-speed rail across Europe should be helpful to growing sales and profits.

The long-term outlook for air travel remains fairly bullish, especially in Asia and Africa where people’s disposable incomes are expected to keep increasing. In more developed markets the continued growth of low-cost carriers is supportive.

A more general trend is the increased check-in times now commonplace at airports across the world. This tends to mean that passengers are spending more time in the airport, which could lead them to spend more while there and to buy food and drink to consume on the plane. That said, operating concessions airside – the other side of security – is more complicated for SSP due to checks on staff and the absence of nearby storage and kitchen facilities in some locations.

SSP – and WH Smith – still have a very small slice of the global travel retail market and SSP’s reputation as a trusted operator augurs well for it winning new contracts across the world. Acquisitions should not be ruled out. The company should therefore have a decent chance of growing its sales and profits over the next few years."

[philanderer] 26/4/2019 17:46

Many thanks 👍🏼

Special dividend into the account today 😀

[sogoesit] 25/4/2019 15:28

I think Phil Oakley is comparing SSPG to WH Smith in the IC.
Will try to copy & paste at the weekend.

[philanderer] 23/4/2019 17:34

Looks like a few didn't take that advice today. Worst one of my lot 🙄

[newtothisgame3] 22/4/2019 08:26

Questor share tip: #SSP, the station and airport caterer, may be losing its star boss in Kate Swann but shareholders should hold on

[philanderer] 16/4/2019 11:38

SSP secures deal to run seven F&B outlets, including its first BrewDog bar, at Alicante-Elche Airport

[philanderer] 15/4/2019 17:20

Hats-off to Selftrade , they've updated my portfolio before the market closed to take account of the consolidation :-)

[philanderer] 15/4/2019 13:44

:-)

Heathrow airport has announced increased passenger numbers for the 29th month in a row – but traffic to and from Asia dropped by 2 per cent, and to the Middle East by 11 per cent.

[sogoesit] 15/4/2019 13:15

Yep, modern technology not upto the mark on these kind of processes.
My broker values my holdings as zero so the portfolio shows a big loss!!!

[philanderer] 15/4/2019 10:29

Best one of my lot so far today. Selftrade haven't adjusted my holding yet.

[sogoesit] 15/4/2019 08:41

The company used the following share price data to base its consolidation ratio (per 22 January RNS):
"The ratio used for the Share Consolidation has been set by reference to the closing middle-market price of 689.4 pence per Existing Ordinary Share and the number of Existing Ordinary Shares in issue on 21 January 2019 (being the latest practicable date prior to the publication of the Circular)."

Based on the above price the theoretical price would be 690.165p

But the Closing Price on 12 April was 704.60p (UT 702.6p).
Using 702.6p with the consolidation ratio of 20 for 21 gives a market theoretical price of 704p.
Early trading this morning went below 685p but now 695p.

Market still offering a discount for no apparent reason with overall markets about even.
(Maybe they thought it was an ordinary dividend of 32.1p so marked it down? Lol!)

[ripley94] 13/4/2019 14:44

Has anyone worked out the equivalent price on Monday EX div and consolidation .

[philanderer] 11/4/2019 12:43

Thanks Sogoesit. I got in a muddle with this last year. Sorted now thanks :-)

[sogoesit] 11/4/2019 12:01

Yes, the last time of dealing in existing shares is 4.30pm tomorrow 12/04.
The consolidation takes place over the weekend and new shares start trading at 8.00am on Monday 15/04.

[philanderer] 11/4/2019 10:24

Read across from SMWH today

[philanderer] 11/4/2019 09:41

Have I messed up ? Have we not gone xd for the special today ?

edit:

Hang on , we get the new consolidated lower number from monday and that'll be the equivalent dividend adjustment date :-)

[sogoesit] 10/4/2019 09:23

Possibly but 700'ish has been a sticky barrier for a while now.
Anyway, my final top-up pre-consolidation today.

[philanderer] 09/4/2019 10:36

Looks as though a few are selling this week before thursday morning's xd for the special dividend.

[philanderer] 08/4/2019 11:38

Eight of the 10 busiest international routes from European airports are from Heathrow, new figures have revealed.

[philanderer] 05/4/2019 18:37

SSP Group’s division SSP America has opened Shōjō restaurant location at Terminal C of Boston International Airport (BOS) in the US.

The restaurant is the first of three to be opened by SSP at the gateway over the next year. The two other locations include Temazcal Tequila Cantina and Tasty Burger.

SSP America will open Temazcal Tequila Cantina in spring this year, and Tasty Burger during next year.