12th Feb 2024 11:00
(Alliance News) - SSP Group PLC on Monday announced an acquisition in Australia, which investment bank Jefferies viewed "favourably".
Jefferies also talked up the travel food outlet operator's prospects, believing its potential is not baked in to its valuation.
SSP has entered into an agreement to acquire 100% of Airport Retail Enterprises Pty Ltd, a Brisbane-based food services company with annual sales of around AUD200 million, about GBP103 million. Financial details of the transaction were not provided by SSP.
Airport Retail Enterprises has 62 outlets across seven Australian airports, and SSP said that acquiring its "highly complementary portfolio" would boost the company's growth in Australia and the wider Asia Pacific region.
Following the acquisition's expected completion in June, SSP will operate around 100 outlets across 11 airports in Australia.
Commenting on the deal, Chief Executive Officer Patrick Coveney said: "We are very pleased to have signed an agreement to acquire a high quality and highly complementary business in Australia. The acquisition will increase our portfolio of brands and concepts, give us entry into new prime air locations, enhance our position as a leading airport food and beverage operator in the country and create significant value for shareholders."
The company noted that international passenger air traffic in Australia is expected to grow by 10% per year between 2023 and 2030.
Analysts at Jefferies commented: "The acquisition is consistent with SSP's strategy, and we believe investors will view the deal favourably.
"Strong underlying trading and M&A upside gives us further confidence in SSP's investment case - we expect an inflection in consensus EPS estimates to trigger a re-rating in due course."
Jefferies noted SSP trades at around a 20% discount to its pre-virus price-to-earnings multiple, something the investment bank does not believe properly reflects the firm's "enlarged opportunities and a higher revenue growth rate".
SSP shares rose 1.9% to 228.40 pence each in London on Monday morning. It has a GBP1.82 billion market capitalisation.
By Eric Cunha, Alliance News news editor
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