First Read: SSP Group PLC "1H26 broadly in-line with expectations. Cash..."

Research evidence excerpt

First Read: SSP Group PLC "1H26 broadly in-line with expectations. Cash..."

Forecast returns

Forecast price appreciation 16.6%

Forecast dividend yield 3.8%

Forecast stock return 20.4%

Market return assumption 9.3%

Forecast excess return 11.0%

Company Description

SSP is the second-largest concessions caterer globally, operating food and beverage outlets

across a number of travel locations, primarily in airports and railways, which are typically

viewed as more attractive segments than motorways. SSP has leading market positions in all

of its key markets, notably number one market share in UK air and rail, and German rail. The

company was sold by Compass in 2006 to EQT before the IPO in 2014 took the company

public.

Valuation Method and Risk Statement

The concessions industry is exposed to travel trends and therefore sensitive to macro-

economic conditions. It is a fragmented market with low barriers to entry, hence increased

competition could lead to pressure on revenues and margins. As with contract catering, food

safety represents a potential reputational and financial risk if not managed appropriately. The

group operates across the world and currency fluctuations could have positive or negative

impacts on reported revenues and earnings depending.

We see potential upside from a faster than forecast recovery in volumes, particularly in the UK

and Europe could drive a faster revenue growth and margin expansion while a slower, while

stronger net new business wins than we forecast could drive a higher revenue and earnings

base. Conversely, a slower pace of net new business wins, higher than forecast capex

requirements and slower volume growth than forecast could all lead to pressure on revenue,

earnings and cash flows.