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Like a panic-stricken shopper SSP is filling its trolley with fresh financing while it can. As train stations and airports grind to a halt, sales at the travel food retailer have dropped 80 per cent. SSP has shelved dividends and buybacks to save cash. Instead it has bagged a new bank credit line and launched an accelerated equity raise on Wednesday.
Chief executive Simon Smith gets points for the speed and scale of the remedy. In reality he had few choices. SSP now expects an operating loss of up to £200m this year, down from that much profit last year. SSP is cutting overheads and thinks its monthly cash burn will come down to £20m a month. It expects little change in operating conditions for the rest of the year. SSP is planning for the worst. The new funds ensure survival for at least the next six months.
SSP chose to issue new shares equivalent to 19.99 per cent of outstanding. That keeps it below the 20 per cent threshold requiring a prospectus, enabling fast fundraising. Existing institutional investors and management will both participate. On top of £200m in new equity it has also arranged a new bank facility of £113m. Combined with its existing liquidity, that should more than cover a funding gap estimated at £250m until the end of the calendar year.
Keeping net debt to a prudent 1.5 times ebitda at the end of last year now looks very sensible. This year’s disruption will push up its leverage ratio to 2.4 times by the end of March but still within its debt covenants. Access to government funding is expected to be approved.
SSP shares have behaved as you would expect for a company almost entirely exposed to travel, falling as much as 80 per cent from the start of the year. Hoarding may have bad social connotations these days, but for SSP doing so is a matter of survival.
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