SSP shares fall 4% as N. America weighs on profit, cash flow below expectation

Shares in SSP Group, a leading global travel food and beverage operator, experienced a decline of over 4% on Friday due to the company's projection of a slightly lower full-year operating profit at around £230 million. The Pacific region's subdued passenger numbers during the summer contributed to this shortfall. However, lower-than-planned minority interests and reduced tax charges partially offset the decline, maintaining the full-year earnings per share on track, up about 18% from the previous year.

SSP announced a share buyback of up to £50 million, with debt-to-earnings ratios expected to approach the lower end of their medium-term target range of 1.5-2.0x. While Citi attributed the minor miss to the USA passenger flows, which were well understood within the industry, the free cash flow shortfall necessitates further clarification.

The company expects free cash flow after interest of about £70 million, slightly below their initial expectations, without utilizing supply chain financing. Group sales in the quarter ending September 30 increased by 4% at constant currency, while like-for-like sales, which account for outlets open in both periods, also rose by 4%.

Full-year revenue amounted to approximately £3.8 billion, a growth of about 5%. Like-for-like sales in the UK & Ireland increased by 9% due to strong summer trading. North America saw a 2% growth in sales despite the subdued passenger numbers. Continental Europe registered a 3% increase, but total sales remained flat due to the phased exit from the German motorway services business.

Asia Pacific, Eastern Mediterranean, and Gulf regions experienced a 1% rise in like-for-like sales, including the impact of lower passenger numbers resulting from the Middle East conflict that began at the end of February. Gulf passenger numbers rebounded strongly to 90% of previous year levels, although Gulf like-for-like sales still declined by 10%.

The company expects capital investment amounting to about £170 million, with some projects rescheduled into FY27. SSP anticipates its Continental Europe operating profit margin to rise to approximately 3% from 2.2% the previous year. The company's full-year results are scheduled for release on December 8.