E was a telling comment last week during a session held at the Royal Institution of Great Britain examining initial public offerings.
“We’re going to go through a rather different period now,” EY’s Richard Hall, a veteran of last year’s bumper Royal Mail float, told an audience of private equity investors. “There are still some good businesses but it’s just sorting the wheat from the chaff.”
SSP – the Danish-founded, UK-headquartered, Swedish-owned railway fast food operator – is the latest consumer hotshot eyeing a spot on the FTSE.
Despite some concerns, it has a good shot at keeping its head above water as one of Hall’s “good” businesses.
Rolling out an IPO today looks very different from the fanfare that greeted the initial crop of floats – Pets at Home, Poundland, Just Eat, AO World – that fizzed in the frothy days of the first quarter.
But how times have changed. Fingers have been burnt, and fund managers are now more cautious than ever about where they put the cash they invest for savers.
SSP is known well by most of those savers – it operates railway stalwarts like Millie’s Cookies, Upper Crust, Cafe Ritazza, Camden Food Co, the go-to-place for hungry train travellers at Euston or Paddington or Kings Cross.
It also runs railway franchises for firms like Burger King, Starbucks, M&S Simply Food and WH Smith. The last one of those is important.
SSP is run by former WH Smith boss Kate Swann, the veteran consumer executive who had been long admired by company analysts and investors in the City for her days running the shop at WH Smith.
Her role at the helm will help SSP enormously. City fund managers know Swann, they have probably met her before. Having a reputation for competency is vital and is likely to benefit the company’s search to raise cash.
The company’s performance will also help. Last week SSP reported a 4.6 per cent rise in sales on a constant currency basis, with like-for like up 3.2 per cent and net income also rising 12.6 per cent for the six months ending March.
Net income margins have also been rising over the past four years, and stood at 8.4 per cent at the end of last year.
There are concerns. Lots of debt (£1.1bn at the last count), an unwillingness to break out sales by brand (it currently only offers regional breakdown) and the fear banks (Goldman Sachs and Morgan Stanley) and independent advisers (Lazard) may pull in different directions.
But this one looks promising. A good CEO and strong market position: more wheat than chaff.