Numis initiates SSP at 'buy'

The broker expects the owner of food and beverage franchises at airports and train stations will achieve a 60 basis point (bp) increase in margins in fiscal year 2016 followed by a 30bp rise in 2017.

“SSP operates in a structurally growing market exposed to rising air and rail passenger traffic and increased food and beverage space in terminals given customer propensity to eat on the move,” Numis said.

Numis added that SSP is a market leader in a fragmented market where there are high barriers to entry in airports and stations.

The company’s historic growth in net new space of just 0.5% reflected a period of contract rationalisation and improved to 1.9% year-to-date, Numis said.

“We expect a larger contribution in the future as it has built a strong pipeline in North America, China etc. Fracturing of contracts by the North American market leader (HMS Host) presents a particular opportunity for market share gains.”

SSP benefits from the recent weakness in the pound as 62% of revenues are generated outside the UK. Numis said its forecasts for earnings per share (EPS) in fiscal years 2016 and 2017 are 7% above consensus and suggest “healthy EPS momentum ahead”.

“Similarly the group has a good track record of beating forecasts and we outline a bluesky EPS scenario of 24p (22% upside). “

Shares rose 0.66% to 318.50p at 0935 BST.