SSP Group Shares (LON:SSP) Dip As Barclays Downgrade

SSP Group shares (LON:SSP) are under pressure today, continuing to pull back from recent highs following a downgrade from Barclays, raising concerns about the company's free cash flow generation. The downgrade has triggered a sell-off, reflecting investor apprehension regarding the company's near-term financial performance.

The share price experienced a sharp decline this morning, falling 4.31% to trade at 193.30p. This negative reaction follows Barclays' decision to lower its rating on SSP Group from ‘Overweight' to ‘Equal Weight,' while maintaining a price target of 220p.

Barclays' analysts highlighted the need for improved free cash flow as a prerequisite for further share price appreciation. The move has seemingly amplified existing reservations within the market regarding SSP's financial robustness.

Adding to the downward pressure, UBS had previously downgraded SSP Group to ‘Sell' back in November, citing concerns over declining airline capacity growth and the potential impact of a stronger British pound on earnings. UBS set a price target of 170p, slightly increased from 165p. JPMorgan also lowered its price target for SSP Group to 170p in December, reaffirming a ‘Neutral' rating.

Despite these downgrades, SSP Group has demonstrated some financial resilience. The company reported a 6% increase in revenue to £3.64 billion for the fiscal year ending September 30, 2025. Underlying operating profit also rose by 8.4% to £223 million, with earnings per share increasing by 19% to 11.9p. Furthermore, the company reported an improvement in free cash flow to £80 million, a notable turnaround from the previous year's negative position. Early trading in the new financial year indicated an acceleration, leading to an upgraded outlook for fiscal 2026.

In an effort to bolster investor confidence, SSP Group initiated a £100 million share buyback program in October, scheduled to run until October 9, 2026. This program aims to reduce the company's issued share capital, signaling management's belief in the intrinsic value of the stock. Additionally, the company is pursuing strategic expansion opportunities, including plans for an initial public offering (IPO) of its Indian joint venture, Travel Food Services Limited (TFS), in collaboration with K Hospitality Corp.

Following the IPO, SSP intends to increase its stake in TFS to 50.01%, reinforcing its presence in the rapidly growing Indian aviation sector. SSP Group also completed the refinancing of its syndicated banking facilities in July 2023, replacing previous term loans with a £300 million four-year term loan and an undrawn £300 million revolving credit facility, aimed at strengthening its financial position.

The series of analyst downgrades, particularly Barclays' emphasis on free cash flow improvement, are currently overshadowing the company's positive financial results and strategic initiatives. Markets will be closely watching SSP Group's ability to enhance its cash flow generation in the coming quarters, as this will likely be a key factor in determining what happens from here.