SSP Group shares rise 4% as travel food operator shrugs off Middle East disruption

Shares in SSP Group plc (LSE:SSPG), the station and airport food and beverage concessions operator, climbed 4% to 161p after interim results showed the company trading in line with expectations despite the chaos caused by the Iran war.

The group reported first-half revenue up 6.2%, including 5% like-for-like sales growth sustained across both the first and second quarters, with pre-IFRS 16 operating profit rising 18% at constant currency to £50 million.

Margins improved by 30 basis points (a measure of profitability relative to sales), with 80% of revenues now coming from the UK, Europe and North America.

Group like-for-like sales have moderated to 3% in early trading for the second half as a result, though the core UK, North American and Continental European operations remain largely unaffected.

Management upgraded earnings guidance from the upper end of its previous 12.9p to 13.9p range to a new band of 13.6p to 14.8p on a pre-IFRS 16 basis, incorporating the benefit of the company's ongoing £100 million share buyback programme, which is now 60% complete.

Peel Hunt, which rates the stock a 'buy' with a 275p target, said the shares looked oversold after falling more than 20% during the conflict, noting the stock now trades on 11 times earnings with a 4.2% dividend yield and 10% free cash flow yield.

Panmure Liberum, which also has a 'buy' rating and 300p target, said it remained confident SSP could deliver more than £100 million of free cash flow in the current financial year, supported by profit growth, capital expenditure below £200 million and a second-half working capital inflow.

The broker added that the Continental European recovery plan remained on track, while a strategic review of the rail business should reduce capital intensity, and a potential partial sell-down of its TFS duty-free joint venture could provide a further catalyst.