Interactive Investor

Shares round-up: Avon Rubber, SSP

17th December 2020 14:09

Graeme Evans from interactive investor

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Contrast between the stocks has been stark in 2020, but both have now seen big falls in their share price.

Investors hoping to jump aboard railway caterer SSP (LSE:SSPG) or high-flying Avon Rubber (LSE:AVON) were given some food for thought today after big falls in their respective FTSE 250 share prices.

The contrast in fortunes between the two stocks has been stark in 2020.

Respiratory and ballistics protection systems specialist Avon Rubber more than doubled in value, while Upper Crust owner SSP was one of the stocks worst hit by the pandemic.

Avon Rubber

Both were sharply lower today, with Avon Rubber down 14% or 525p to 3,215p after a delay in the approval process for some US ballistics protection contracts within its military business.  

As shares started this month at more than 4,600p and are now back where they were in July, investors will be wondering if the sell-off presents a buying opportunity. Analysts at Jefferies said the update would not change “our stance on the group, or view of its equity story”.

They have a price target of 4,700p and predicted little change to 2022 forecasts despite the meaningful downgrades required to next year's estimates due to about $50 million (£36.7 million) of contracts, such as for US Army body armour plates, not being approved in time for inclusion.

Avon's CEO Paul McDonald said:

“These contracts remain an important part of the ballistic protection portfolio and will be a significant contributor to the group over the medium term.”

He added that Avon continued to perform strongly, with its first responder business still seeing strong demand related to Covid-19 across its respiratory protection range. Its Team Wendy head protection business has also performed in line with hopes during its first month of ownership.

Jefferies said: “We continue to be positive on the group, its outlook and the strategic evolution it is pursuing. There is a strong pipeline that underpins an attractive organic medium-term outlook, and there is a strong balance sheet to play with.”

SSP

SSP, meanwhile, fell back 2% or 5.4p to 320.8p after it revealed a loss for the year to 30 September of £425.8 million. Passenger numbers are expected to remain subdued over the winter but CEO Simon Smith is hopeful for a significant upturn in both domestic and international travel from the second half of the company's new financial year.

He said: “We are ready to respond quickly. The actions we are taking to rebuild the business will put us in a strong position to capitalise on the recovery as well as future new business opportunities.”

SSP has responded to the crisis by re-negotiating rents, rationalising menus and reducing overheads, meaning it has been better able to match changes in passenger demand after re-opening more than a third of its 2,700 units by the end of September.

Its liquidity position also remains strong, with cash and undrawn available facilities of around £520 million at the end of the financial year.

SSP shares rose by as much 97% on the back of November's vaccine breakthroughs, although they've fallen back in recent weeks due to a fresh surge in Covid-19 cases worldwide. Shares had been changing hands at 644p prior to the pandemic.

Cairn Energy

Elsewhere in the FTSE 250 index, Cairn Energy (LSE:CNE) shareholders were given some early Christmas cheer when the oil and gas exploration company announced it would pay a special dividend of 32p a share equivalent to about $250 million on 25 January.

The move follows progress towards completion of Cairn's $525 million sale of all its interests in Senegal to Woodside. A further payment of up to $100 million will be made if certain conditions are met.

The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this data may not be suitable for all investors and, if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website.

Related Categories

    UK shares
    Consumer goods and services
    Industrials

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