UBS lifts SSP Group (LON: SSPG) to Neutral after nearly 20% slide, keeps 170p price target

UBS has moved its stance on SSP Group Plc (LON:SSPG) from "sell" to "neutral", saying the recent slide in the stock has already baked in much of the short-term weakness that worried the market.

SSP's shares fell almost 20% from their highs ahead of the third-quarter trading update, after questions surfaced about whether the company can hit a 4-5% like-for-like sales target. UBS still thinks downside to sell-side consensus exists, but reckons most of the risk is reflected in the current price - so the rating gets bumped while the price target stays at 170p.

Some quick numbers UBS flagged: SSP reported roughly 4% like-for-like growth across the nine months to June, but aviation volumes cooled in July and August. Passenger traffic was about +1% in the U.S. and the U.K. during the summer - a touch above U.S. levels seen earlier in the year but below the U.K.'s stronger growth earlier in the fiscal year. India was a weak spot, down roughly 3.5% in July-August after nearly 8.5% growth over the prior nine months. Early September data put U.S. volumes near 2.5%, though forward capacity doesn't point to a big jump.

UBS put the spotlight on FY26 assumptions. Management's medium-term guide calls for about 3% annual like-for-like growth and 20-30 basis points of margin expansion. Consensus models in the street are pencilling in roughly 2.9% and closer to 40 basis points of margin gain, so there's a gap on margin expectations. UBS also noted Q1 FY26 capacity looks higher than Q4 FY25, which leaves room for downside revisions if travel demand softens or UK consumer spending weakens.

On recent trading dynamics, like-for-like revenue growth slipped to 3% in Q3 from 5% in H1. TSA and other mobility data show only modest growth in U.S. volumes; U.K. airport traffic was roughly +1% over the summer, while U.K. rail - a smaller slice of the business at about 15% of revenues - delivered mid-single-digit growth. Forward capacity signals are muted across North America, the U.K. and India, with Europe the relatively stronger region.

The valuation math stayed intact in UBS's view. The 170p target is derived from a DCF using a 9.5% WACC and a 3% terminal growth rate. UBS's numbers imply about a 12.5x PE for FY26 and a 4.5% free-cash-flow yield - under the peer free-cash-flow yield of roughly 7% - and, on a stub basis excluding the listed Indian asset, an implied ~8x PE and ~7.5% FCF yield. UBS also flagged a potential share buyback near £70m that could cut the share count by around 5%, although higher borrowing costs limit any EPS upside.

Operational forecasts sit on the cautious side: UBS pegs FY25 EBIT at about £231m, near the low end of SSP's £225-255m guidance. Its revenue estimates for FY25-27 are 1-3% below consensus; EBIT is nudged 1% below consensus in FY26 and 5-6% lower across FY26/27.

UBS still thinks SSP is positioned to capture passenger-volume tailwinds via existing sites and new contracts, but the bank warns that near-term weakness in the U.S. and India - together accounting for roughly half of consolidated EBIT - could cap earnings momentum.

UBS left the price target at 170p.