SSP says it's evaluating funding options, shares slump

SSP shares slumped on Thursday after the Upper Crust and Ritazza owner said it is considering debt and equity funding options.

The company - which operates outlets mostly at train stations and airports - said it is confident in the medium-term recovery of the travel market, but there remains significant uncertainty over the Covid-19 pandemic and related travel restrictions.

"In that context, the group continues to evaluate the merits of a range of funding options, both debt and equity, that would further strengthen its balance sheet," it said.

Responding to press speculation about a possible £500m equity raise, SSP insisted it is "strongly placed" to capitalise on the recovery of the travel sector and that its liquidity position is "strong", with cash and undrawn available facilities of around £520m as at 30 September 2020.

Included within this amount is £300m from the Bank of England Covid Corporate Financing Facility, which has been drawn down in full in February.

SSP had said in its preliminary results that its current monthly cash burn rate was about £25m to £30m, and it is expected to remain in this range during the second quarter, which ends 31 March 2021.

Broker Liberum noted that a rights issue would be the second time SSP has raised new equity due to the pandemic following its £216m share placing last March.

"We estimate current liquidity headroom of circa £430m and monthly cash burn whilst majority of units remain closed is £25-30m, meaning there is more than sufficient liquidity to manage further disruption," it said.

"However, on our current estimates, this will leave the group with net debt/EBITDA of 4x in FY22E when profits return, compared to 1.5x in FY19. Additionally, c£830m of its total c£1.2bn debt facilities mature in FY22E (CCF,RCF and bank loans), when we estimate net debt of c£900m.

"The share price remains 50% below pre-Covid levels but are now back to similar multiples - 10.6x EV/EBITDA and 20.2x PE for CY22E. The removal of travel restrictions have come slower than originally through but SSP is a well management company with market share opportunities. We retain 'buy' for the compelling long term recovery and growth opportunity."

At 1205 GMT, the shares were down 6.3% at 297.14p.