Goldman Sachs downgrades SSP to 'sell'

The bank said SSP trades at a premium to leisure peers, concessions and contract caterers, and while the company’s historical execution has been strong, it does not expect growth rates to pick up to levels that would justify this premium valuation.

It said the current valuation implies an acceleration in earnings growth to over 30%, which it does not think is likely given an inflationary cost environment and headwinds to profit, as SSP starts refurbishments at Chicago airport.

“Together, we expect these headwinds to limit the company’s ability to deliver margin expansion in line with history,” GS said.

The new target price of 575p implies 10% downside potential, hence the rating downgrade.

“Should the company outperform our expectations on cost efficiency (and hence profitability), we would need to revisit the outlook and our view. Additionally, and aside from company-specific factors, stronger travel trends or a faster pace of outsourcing would encourage us to take a more positive view on the broader sector, and SSP as a result.”

At 1300 GMT, the shares were down 2.6% to 604p.