Questor: Kate Swann a golden egg for sandwich supremo SSP

My memory of visiting Kate Swann for a chat when she ran WH Smith is dominated not by what she said, but what I saw.

The retailer’s old office just off Oxford Street was one of the tattiest headquarters I’ve ever been in. It was like being led through a store cupboard, with merchandise strewn everywhere, as if I was picking my way around one of its most chaotic high street outlets.

Swann has long since departed, swapping WH Smith’s books and stationery for SSP’s sandwiches in 2013. I can only imagine its head office at Euston resembles some sort of food fight.

Whatever goes on behind the scenes, Swann has a knack of running businesses hard and delivering for shareholders. WH Smith was a cert to become a casualty when she arrived, but it has outlived the likes of Woolworths and BHS because of tight cost control and demand cultivated at airports and railway stations.

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That formula is familiar at SSP, whose brands Upper Crust and Le Grand Comptoir will be familiar to weary travellers. The company also runs outlets on behalf of Starbucks, Burger King and Yo! Sushi – among 400 brands in 30 countries that cater for one million customers a day – without having to wrestle with a plateauing high street division.

SSP was once part of catering giant Compass and among its antecedents is a business responsible for the infamous British Rail sandwich. Now it has the appetite to move upmarket. Swann is salivating at the prospect of a network of Knead bakeries that SSP will begin opening shortly in partnership with Great British Bake Off judge Paul Hollywood. On the menu are chocolate tarts and sausage rolls sold by the inch. Greggs this is not.

The group’s annual top-line growth has been accelerating and underlying operating profit has grown on average 19pc for the past three years. SSP is one of three leading players in the travel food market that together only account for about a third of the sector globally. It has an eye on geographic expansion, as seen by a recently struck Indian joint venture. Greg Johnson at Shore Capital singles out the US as a big opportunity, making the case for SSP to triple revenues to about $1bn within a decade.

The first quarter began well, with sales 4.3pc ahead on a constant currency basis. If spot rates stay as they are for the year, the company expects a positive impact of 7pc on revenue.

Investors gather tomorrow at the annual general meeting to praise Swann for progress made so far. SSP floated at 210p in July 2014 and the shares have virtually doubled to give it a market value just shy of £2bn. The chief executive has been handsomely paid for her efforts, pocketing the best part of £10m in three years. But the big money begins to arrive at the end of this year, when Swann’s long-term incentive starts to pay out. Just like WH Smith, it is a familiar story.

Incidentally, so too is the presence of John Barton, a low-key boardroom veteran. The outgoing Next chairman is chair of SSP’s remuneration committee and something of a mentor to Swann. He signed off the pay report for several years at her last employer and also waved through the golden hello to lure her from Argos that some WH Smith investors took issue with.

Nevertheless, shareholders who follow Swann have fared well. SSP shares are not cheap, trading on 24 times forecast earnings for the current financial year ending in September, which suggests a lot of good news is already in the price. Morgan Stanley has pencilled in 3.9pc annual organic sales growth including 1.9pc from net contract gains that could surprise on the upside. Margins are widening. This type of business will always be exposed to geopolitical risk and numerous recent terror incidents have kept passengers at home, albeit briefly.

After a strong run, Questor advised locking in profits in January. The broader trend for increased global travel still makes SSP a long-term buy.

Questor says: buy

Read previous Questor columns at telegraph.co.uk/questor

Contact us at questor@telegraph.co.uk