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The NMW went from £8.72 to £8.91 in April, which is 2.2% (though there will be a pension/NI hit in addition). Granted wage increase is a big hitter for the industry, and I'm sure they will use the recent mass redundancies to reduce staffing levels by not rehiring fully when revenue is back on track. Prepare to wait a while to be served a bad product ;)
The point about low quality brands is true but consider they franchise big names like Starbucks, Burger King, Leon, M&S. Also the growth between 2013 - 2018 shows their profit margins and internal efficiency savings have been great.
I'd say the big risk is pricing themselves too high for locations (a big strength was captive markets), and that travel volumes will be hit long-term by blended/hybrid/home working. Their recent expansion into motorway service areas and the international undertakings are likely to flourish, whilst the UK rail/airport sectors fall behind. Let's hope they balance out and the share price recovers a bit!
This was an incredibly low margin business at the best of times. Add in lower travel volumes and an inability to recruit and you have a long term structural nightmare. Wages are rising 10 % per annum and even then staff are impossible to recruit. Hard to be optimisitic for a company with low quality brands.
210 if dire summer/autumn and maybe more funds needed.
370 probably eventually, sometime :)
Idiots, others have it at 370!
Target price of 210p
Credit Suisse ... reiterates underperfom
Long-term opportunity at SSP, says Shore Capital
SSP (SSPG) may have to wait until 2024 for sales to return to pre-pandemic levels but Shore Capital says in the long term the food-on-the-go sector will boom.
Analyst Greg Johnson reiterated his ‘buy’ recommendation on the stock after the owner of Upper Crust and Ritazza reported a dramatic rise in losses to £300m in the six months to 31 March, from £34m a year earlier. The shares closed down 1.9%, or 5.8p, at 302p on Wednesday.
‘Based on a recovery of pre-Covid-19 passenger volumes and a return to historic growth trends, the global travel foodservice market could be worth some £30-35bn by the end of the decade,’ said Johnson.
‘Were the group to increase its market share towards 20% it could equate to annual revenues of £6bn, sharply above our long-term modelling assumptions but not necessarily out of kilter with its historic track record.’
seems to be decent buying before tomorrows update
Thanks, good info, i am still puzzled about the constant weakness within the travel sector which has been recently well supported despite the uk govt extreme wariness.
Peel Hunt upgrades SSP after weakness
Broker Peel Hunt has upgraded food-on-the-go group SSP (SSPG) due to its ‘long-term attractions’.
In a note ahead of interim results on 9 June, analyst Douglas Jack upgraded his recommendation from ‘hold’ to ‘add’ with a target price of 350p on the owner of Upper Crust, which closed up 3%, or 8.9p, at 303p on Tuesday.
‘In the first half, the profit drop-through from lower sales should have been 22%, whereas our full year forecasts assume 26%,’ he said.
‘This is supportive of forecasts but, with units requiring sales to be 50-60% of pre-pandemic levels to generate positive EBITDA, much depends on UK and continental Europe travel in the second half.’
Jack said there were ‘growing long-term attractions’ and upgraded following a recent decline in the shares.
‘We believe recent weakness should be used by long-term buyers noting that SSP should benefit from enhanced expansion opportunities and the long-term retention of recent cost savings,’ he said.
Thanks for your response. Good info.
Tends to follow the leisure market. Expect this to ramp up as travel restrictions reduce internationally and the virus comes under control. It’s exposure globally is why it’s recovered slower than other travel operators
Hi all. Been watching for a while. Why this drop to near £3? Is this a good buying opportunity or are we going to see sub £3 pretty soon? Any thoughts very welcome. Good luck all.
Just a great stock to trade with outsized daily moves and so much s-t upside before profit taking sets in.
Webba, you say " spend is materially lower for business traveller than the leisure brigade." - do you have any sources for that?
I'm still going over whether I want to stick with SPG long term (I'm expecting more of a bounce as things continue to open up short term). There is going to be less business travel in the future, and I'm not convinced that this won't have a meaningful impact on SPG's numbers.
I used to fly semi-regularly with work. We would fly economy / premium-economy, but be able to expense any spend on food/drink at the airport (with a limit high enough that effectively we could have whatever we wanted). I was happy because I could eat / drink whatever I wanted on the company's dime - rather than being stuck with whatever the lounge was offering - and the company saved money by not paying for business class. I have no idea now common this model is, but it seems pretty reasonable to me.
Your point on the rights issue is interesting. I understand the airport food business is highly framented, and some of those smaller businesses will have been struggling, giving a good oppurtunity for SPG to make some aquisitions. However, when we're talking about a bigger piece of a smaller pie, it's hard to know if it ends up being an improvement overall!
Just to illustrate the scale of UK mobilisation coming up as restrictions lift, the SSP jobs site:
https://www.sspcareers.com/uk/job-search/
Filter by Store Operations - as of this post 205 vacancies compared to barely anything last month.
I won't invest in WHSmith personally but definitely a great comparison to make, and SSP have a lot more business to recapture moving forward as they tend to operate multiple stores per location. I would say SSP SP is similarly undervalued - although their full estate will not reopen they will keep the high revenue sites and potential is massive. From next week UK train station stores will be opening again and revenue will climb rapidly.
Not a plug for WH Smith, post the article because there are similarities with SSPG in terms of its exposure to the travel market:
Peel Hunt: WH Smith is ‘undervalued’
Peel Hunt is not that interested in interim numbers from WH Smith (SMWH) but the broker is excited by the outlook and says the post-lockdown restart of travel will boost the undervalued newsagent.
Analyst Jonathan Pritchard retained his ‘buy’ recommendation and increased his target price from £20.00 to £25.00 on the stock, which closed down 0.3%, or 5p, at £18.10 on Friday.
He said interim numbers were ‘of limited interest but the outlook is very exciting’ as the newsagent embarks on a major store opening programme. The company is planning 100 new stores, two thirds of which will be in the US.
‘It is clear that WH Smith sees the prospects for its travel business in a much more rosy light than its competitors do,’ said Pritchard.
‘Short-term fluctuations are out of its hands but long-term, this is a strong business that is getting stronger. The shares are undervalued, as WH Smith continues to take global market share and grows earnings beyond previous group highs.’
Pritchard added that WH Smith will continue to ‘get stronger and is a must for growth funds’.
I would add that the rights issue has given them a war chest, they are in a much stronger position with landlords who are now left with empty units and they have been able to exit from loss making stores. Yes business travel and commuting will be lower the pre covid but leisure travel will bounce back strongly.
17 May- Friends and family will see big domestic market (relatively) when boris announces the RAG list for July expect a stampede particularly if the Green countries are our european cousins with a lat flow test as the barometer (free) i expected the price dip today as shares flipped from the placing.
tommy15 - yes totally agree with you about the recovery....we need a bit more clarity or the return of some sort of airport use as well....see how the next few weeks pan out with more news etc...
So to answer the various queries- Air travel- most of the income in UK and Europe is driven by leisure travel. Most business and long haul has the advantage of lounge business and spend is materially lower for business traveller than the leisure brigade. Dont discount airlines who have the holy trinity of lots of capactity (all added to the fleet in 2019) hedged low fuel and aggressive deals with airports to guarantee passenger volumes. This will inevitably lead to a price bonanza for consumers as they offer lots of cheap deals to get people confident in travel again and ultimately to maintain load factors.
Growth in rail is going to be leisure driven and put bluntly there are lots of brand casualties in the market who will simply withdraw from the travel channel as the traditional high st landlord entices them back with great property deals ( no base rents, rent free periods, capital contribution and longer leases than the travel market has offered.)
This year will be unique in the UK which is SSPs core market - rail will be huge as we have no where to travel so whilst i agree the reduction in commuters will hurt certain stations, others will be buoyant. im sure you saw the pictures in the height of the pandemic of over crowded trains on SWT taking "commuters" to Bournemouth.
I'm bullish on this as the rights issue gives the company cash to grow at a time when there will be market opportunities in existing and new markets. structurally growth will return and that's without the US market that SSP were just starting to gain traction in.
schjmh you're absolutely right, apologies. But the crux of my point still stands - I'm still not sure it's reasonoable to expect that degree of recovery for quite some time.
tommy15, I don't know where you are looking or where you get the figure of "a little under 600p before the pandemic" but the share price above 700p in August 2019s andfloating around the 680p in January 2020 and then dropped sharply once the pandemic hit?
Mary out of interest where does 700p come from?
This share was a little under 600p before the pandemic; since then it's been through a year of basically no rervenue, significant dilution, and the prospect of real long-term changes in commuter patterns meaning less footfall and, ultimately, less revenue.
I'm curious whether I've missed something that could take this share to a new all-time-high despite all of the above?
Shore Capital: SSP recovery could surprise
The recovery of food-on-the-go group SSP (SSP) could come later in the year than expected, but Shore Capital says there is reason to think that it will be strong.
Analyst Greg Johnson retained his ‘buy’ recommendation and a ‘fair value’ price target of 390p on the owner of Upper Crust, which closed down 2.6%, or 9.1p, at 336p on Monday.
The analyst said the business’s recovery is now expected to begin ‘from the summer rather than the spring’ but this is ‘more than offset by a greater than previously expected contribution from net new contracts over the medium term’.
‘Our…fair value…stands at 390p per share, a c.15% upside opportunity,’ said Johnson.
‘With just a 12% share of the estimated £23bn travel food service market, potentially some £400m of debt headroom, and a highly fragmented but dislocated competitor base to target, such assumptions could prove highly conservative.’