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On Thursday, SSP Group Plc (SSPG:LN) (OTC: SSPPF) shares saw its price target reduced from GBP3.20 to GBP3.00 by HSBC, though the firm maintained a Buy rating on the stock. The adjustment comes in the wake of SSP Group's fourth-quarter results, which, according to HSBC, aligned with expectations, particularly after a challenging first half of the year. The UK operations exhibited improved like-for-like sales growth, rising from 8% in the third quarter to 9% in the final quarter.
Despite the positive performance in the UK, Continental Europe's results were less encouraging due to one-time factors that prompted the company to reduce the upper end of its guidance range by 4% on a constant-currency basis. The unfavorable foreign exchange rates were cited as a significant obstacle.
SSP Group anticipates ending the year with sales of GBP3.4 billion, adjusted EBITDA between GBP335 million and GBP345 million, and EBIT ranging from GBP200 million to GBP210 million. The expected earnings per share stand at 10p, aligning with the consensus estimates for the fiscal year 2024.
The company's management has set its sights on sales and margin improvement for the fiscal year 2025. They aim to enhance the current estate and achieve sustainable growth and returns in the forthcoming years. SSP Group plans to halt infill M&A activities and foresees a decrease in capital expenditures for FY25.
However, the main concern remains the impact of foreign exchange rates, which are expected to affect sales, EBITDA, and EBIT by -2.6%, -3.8%, and -4.5% respectively. These projections have been incorporated into HSBC's fiscal year 2025 estimates.
The group's strategy focuses on integrating the core estate to boost the company's capacity to drive contract returns. This approach underscores the potential for returns within SSP Group, as highlighted by HSBC. Despite the setbacks, particularly in Continental Europe following the Paris 2024 Olympics and the underwhelming summer performance of the German motorway service business, SSP Group is implementing a turnaround plan for the region.
InvestingPro Insights
To complement the analysis of SSP Group Plc's recent performance and outlook, InvestingPro data provides additional context for investors. Despite the challenges highlighted in the article, SSP Group's revenue growth remains strong, with a 18.81% increase over the last twelve months as of Q2 2024. This aligns with the company's reported sales expectations and demonstrates resilience in a challenging environment.
InvestingPro Tips suggest that SSP Group's net income is expected to grow this year, which could support the company's strategy for sales and margin improvement in fiscal year 2025. However, investors should note that the stock is trading at a high earnings multiple, with a P/E ratio of 155.72, indicating that the market may be pricing in significant future growth.
The company's volatile stock price movements, as mentioned in another InvestingPro Tip, are reflected in the recent price target reduction by HSBC and the stock's performance over the past six months. This volatility underscores the importance of monitoring the company's progress in implementing its turnaround plan, particularly in Continental Europe.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into SSP Group's financial health and market position.
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