Berenberg upgrades Upper Crust owner SSP, shares rally

The bank, which initiated coverage last December with a ‘hold’ rating, conceded that the travel food group continued to face "significant headwinds in the near term". SSP, which owns Upper Crust and Ritazza, among other brands, operates food and drink outlets in airports and other travel hubs worldwide.

Berenberg said: "In the period between our last note and now, the near-term outlook has deteriorated further, with multiple variant strains of the Covid-19 virus prompting governments, including the UK, to consider implementing tighter border control alongside further lockdown restrictions."

It also said an equity raise remained feasible. "It is possible that SSP may conduct an equity raise, absent a significant pick-up in demand.

"That the September 2021 covenant test has now been waived until March 2022 may relieve some pressure, but the expected increase in restrictions association with the Covid-19 corporate financial facility could still spur the company into seeking fresh equity."

But despite the near-term risks, the bank concluded: "This does not change the fact that it remains a well-run company with compelling growth opportunities.

"With the shares now trading close to 300p, and at a discount to historical PE, we believe the recent weakness provides an opportunity to own what is ultimately a quality company with strong medium-term growth characteristics."

As at 0900 GMT, shares in the firm were ahead 6% at 324.0p. Berenberg has a price target of 335p on the stock.