SSP Group (LSE:SSPG) expects Earnings Per Share to rise by about 18%, but a lower free Cash Flow figure and weak North American passenger numbers unsettled investors.

SSP Group's fourth-quarter trading update on 9 October delivered a broadly positive earnings message that was overshadowed by a reduction in expected cash generation. The operator of food and drink outlets in airports and railway stations said that Revenue for the year to 30 September would be about £3.8 billion, up about 5% at constant currency, with earnings per share of about 14.0p, an increase of about 18% and in line with market expectations.

The shares fell about 4.4% on the day as softer profit and cash flow guidance outweighed sales growth and a new share buyback.

Free cash flow after interest is now expected to be about £70 million, compared with previous guidance of £100 million. Management attributed the shortfall to a decision not to draw additional Supply chain financing during the year, and said that underlying cash generation had improved by about £150 million year on year. The chief financial officer said the lower figure was by no means a signal of weaker cash flow in 2027.

Operating profit is expected to be about £230 million, slightly below plan, primarily because of weak North American passenger numbers over the summer. Lower than planned minority interest and tax charges helped to preserve the earnings figure.

About the company

SSP Group is an international operator of food and drink outlets in travel locations, mainly airports and railway stations. It runs hundreds of brands, including its own concepts and franchised or licensed names, in dozens of countries across the UK and Ireland, North America, Continental Europe, Asia Pacific and the Middle East. Customers are travellers, who tend to have limited time and a captive environment, which shapes the menu, layout and speed of service.

Most of the group's revenue comes from sales in these outlets. It generally operates under concession agreements with airport and station owners, paying a rent that is typically linked to sales, which helps to share risk if passenger numbers fall. Profit depends on passenger volumes, spend per head, the cost of food and labour, and how efficiently units are run. Contract length and renewal are also key, as winning and retaining sites underpins long-term growth.

The article shows revenue for the year to 30 September of about £3.8 billion, up about 5% at constant currency, and earnings per share of about 14.0p, up about 18%. Strategy centres on expanding the network, improving margins through cost efficiency and technology, and using cash to reduce Leverage and return capital, including a new buyback of up to £50 million.

Regional performance varied

Group like-for-like sales grew 4% in the fourth quarter, the same as for the year as a whole. The UK and Ireland stood out, with like-for-like growth of 9% and total sales up 5%, assisted by solid summer trading. North America posted like-for-like growth of 2% and total growth of 4% at constant currency.

Continental Europe recorded like-for-like growth of 3%, although overall sales were flat. The final German motorway services unit has closed, and the regional operating Margin is expected to rise from 2.2% to about 3% for the year. Asia Pacific and Eastern Europe and the Middle East posted like-for-like growth of 1%, with total sales up 8%. Like-for-like sales in the Gulf fell by 10%, although passenger volumes there have recovered to about 90% of prior-year levels.

Chief executive Patrick Coveney described a resilient fourth-quarter performance in a challenging environment. He said the Middle East conflict had hit passenger volumes in part of the portfolio, but that the breadth of the group (LSE:SSPG) kept earnings on track, and he highlighted progress on the turnaround of France and Germany.

Buyback and leverage

The FTSE 250 company launched a new share buyback of up to £50 million following completion of its previous programme. Leverage is expected to move towards the lower end of its medium-term target range of 1.5 to 2.0 times. Capital investment for the year is about £170 million, partly because some projects have been rescheduled into the 2027 financial year, and management expects Capital Expenditure of about 5% of sales in the coming years. The company's Dividend policy is to pay out 30% to 40% of net income.

Why passenger traffic and cash conversion matter

For a concession business, passenger numbers are the starting point for revenue, so events that disrupt travel, such as geopolitical conflict, are felt quickly. Different regions can move in opposite directions in the same period, as the contrast between the UK and Ireland and the Gulf in the update shows.

Cash flow is a separate matter from reported profit. Working capital, capital spending on new and refurbished units and decisions on supply chain financing can move free cash flow without changing the underlying earnings trend, which explains why a lower cash figure drew attention even as earnings growth was in line with expectations.

What to look for in the full results

The December results should add detail on the points management has raised. Guidance for the 2027 financial year will show expectations for sales, margin and cash, including the effect of currency movements flagged in the update.

Observers will also follow progress in the turnaround of France and Germany, the pace of capital investment, leverage against the stated range, and any commentary on North American traffic. Together, these will indicate whether the cash shortfall proves temporary and how the balance between expansion, Debt reduction and Shareholder returns is being managed.

December results in view

Full-year results are due on 8 December, when SSP (LSE:SSPG) is scheduled to provide guidance for the 2027 financial year. Group return on capital employed is expected to have improved materially from the 18.7% recorded a year earlier. Currency movements are forecast to add about 0.3% to revenue next year, while reducing operating profit by about 1.6%.