SSP: sandwiched between creditors and recovery

SSP depends upon time-poor, cash-rich travellers dashing through airports and stations. A near cessation of travel meant that the purveyor of food-on-the-go almost went under, saved only by government loans and friendly creditors. A well-flagged £475m rights issue should put this former UK stock market darling back on its feet.

The capital raising gives the sandwich specialist some much-needed filling between its assets and liabilities. Lenders have agreed to extend the maturities of a collection of loans and credit facilities worth £523m to January 2024 and to ease debt covenants. With an estimated £300m of unrestricted cash by June, SSP should have the leeway to survive a slow resumption of travel.

Reflecting that, the previously rangebound shares fell just 6 per cent mid-morning — far less than the 37 per cent implied by the theoretical ex-rights price.

All this matters when some of SSP’s debts come due next year, including a Covid Corporate Funding Facility of £300m in February. The group is burning up to £30m monthly, that will improve as travel returns. SSP may not get to break-even free cash flow until summer 2022, according to Berenberg.

Raising a meaty sum from shareholders makes sense. The new funds should do wonders for leverage ratios. SSP’s net debt to forward ebitda ratio should ease to 1.3 times in the year to September 2022, down from at least quadruple that.

Most travellers who have caught the last flight out of a trouble zone would sit back and relax. Not SSP. Instead, it is talking up opportunities. The group operates worldwide — the UK provides only about 30 per cent of its top line. Already it sees opportunities to catch up to its bigger rival Autogrill of Italy. SSP is bidding for the previously highly priced sales space other competitors have given up on in airports and stations. It is a fragmented market, of which two-thirds belongs to smaller peers.

This rights issue will neutralise a hefty slice of risk. That gives SSP upside if travel resumes faster than gloomy forecasts say it will.

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