Map of Australia
The transaction will see SSP add a number of high-quality assets and brands to its portfolio / Image source: Adobe
  • ARE is a privately-owned firm
  • Regional sales of roughly £100 million
  • SSP shares down 14% over one year

Shares in SSP (SSPG) were up nearly 2% to 226p as the travel food outlet operator said it had bought Australia’s Airport Retail Enterprises (ARE) for an undisclosed sum.

ARE was founded in 1971 and is privately owned with 62 outlets consisting mainly of bars, casual dining restaurants and cafes across seven Australian airports: Sydney, Melbourne, Brisbane, Gold Coast, Canberra, Townsville, and Mount Isa.

SSP said: ‘The acquisition of ARE is aligned to our strategy of accelerating growth in the Asia Pacific region and will see the group enhance its presence in Australia.

‘The transaction will see SSP add a number of high-quality assets and brands to its portfolio and will further rebalance the group’s weighting towards the high-growth Asia Pacific Air channel.’

UPBEAT FIRST QUARTER

The company recently posted a strong trading update for the three months from October to December as it benefited from a ‘further recovery of passenger numbers.’

Group sales in the quarter were up 21% to £788 million while like-for-like sales growth was 14%.

However, the shares however haven’t performed well over the past year and are down 14%.Like other companies in the travel industry, SSP was impacted severely by the Covid pandemic and its post-pandemic recovery has been steady but gradual.

SSP soars with losses at mid-point range and cash burn narrowing

The company noted continuing headwinds its first quarter results including ‘macroeconomic and political uncertainty’ but maintained ‘travel will remain resilient, and the industry is well set for both short-term and long-term structural growth.’

EXPERT VIEW

Analysts at Shore Capital commented on the deal: ‘We see this as a highly attractive move for SSP,  adding  circa 3% to the annual revenue base, strengthening its position in the attractive Australian market, where international passengers are expected to grow at an annual rate of circa 10% and domestic travel at 3-4% per annum by 2030, and increasing the proportion of revenues focused on the fast-growing Asia Pacific region towards 20% of group revenue.

‘Importantly, within the Asia Pacific region, the mix continues to migrate southwards, and is becoming increasingly skewed towards attractive markets such as Australia, Thailand, Malaysia and the Philippines.’

They added: ‘No price was disclosed, although we would anticipate the acquisition multiple being consistent with SSP’s historical M&A activity of between 0.7-0.8 times revenue (circa £75 million), with costs to be funded out of existing cash and credit facilities.’

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Issue Date: 12 Feb 2024