November 22, 2017 / 7:27 AM / in a year

SSP beats profit estimates, boosts dividend

(Reuters) - SSP Group (SSPG.L), an operator of restaurants and bars in airports and railway stations, reported a better-than-expected profit, raised its dividend and unveiled a 100 million pound special payout for shareholders, sending its shares up as much as 8 percent.

The latest full-year results were driven by increased air travel that more than offset weakness in sales at rail stations. The rail business has been hurt due to recent attacks, rail workers’ strikes and disruptions due to station redevelopments in London, the company said.

Like-for-like sales increased 3.1 percent in the year ended Sept. 30, while underlying profit jumped 27 percent to 162.9 million pounds.

Revenue rose 11.7 percent to 2.38 billion pounds, excluding the effects of currency change.

Liberum analyst Anna Barnfather said SSP’s results were 3-4 percent ahead of her expectations.

“At 29x PE for a food services business, SSP needed a positive surprise. A 3% FY17 beat and £100m special dividend qualifies as that,” Numis analyst Mark Irvine-Fortescue said.

“A very strong update today, the only caveat being that “beat and raise” expectations are escalating,” the analyst said.

SSP, however, said it expects revenue growth to slow to 2-3 percent in its 2018 financial year, citing economic and geopolitical uncertainties.

The company, which has tie-ups with celebrity chefs Gordon Ramsay and Jamie Olivier, hiked its capital expenditure by about 20 percent to 115 million pounds in 2017.

SSP would look to win contracts in North America and continental Europe, while continuing to invest in Asia, CEO Kate Swann told Reuters in a call.

She added that the lower revenue guidance was the company being cautious with its estimates at the beginning of the year. The special dividend, if approved by shareholders, would be paid out in spring, she said.

Barclays analysts estimated revenue growth of 2.5 percent for full year 2018, retained their “overweight” rating on the stock and raised price target by 4 percent to 650 pence.

SSP declared a final dividend of 4.9 pence per share, up from 2.9 pence per share a year earlier.

The company's shares were up 39 pence at 646 pence at 0952 GMT, providing the biggest boost to the FTSE Mid Cap .FTMC index.

Reporting by Sanjeeban Sarkar in Bengaluru; Editing by Sunil Nair and Saumyadeb Chakrabarty

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