SSP shares fall over 7% as UBS downgrades to "sell" on air travel weakness

Published 11/07/2025, 10:46
© Reuters

Investing.com -- Shares of SSP Group PLC (LON:SSPG) dropped more than 7% on Friday after UBS cut its rating on the company to “sell” from “neutral,” citing weaker airline capacity growth and downside risks to earnings forecasts. 

The downgrade follows a 12% rally in SSP shares since May, partly driven by market optimism around the company’s Indian IPO pricing. UBS, however, sees limited near-term benefit from that event.

UBS reduced its fiscal 2026 EBIT and EPS estimates to 7% and 10% below consensus, respectively. 

The brokerage also lowered its FY26 revenue forecast to £3.648 billion, slightly below the lower end of SSP’s guided range of £3.65–£3.75 billion. 

UBS expects full-year like-for-like revenue growth to hit the bottom of the group’s 4–5% guidance range, beneath the Visible Alpha consensus of 4.4%.

UBS Evidence Lab data showed a marked deceleration in air travel capacity. In the U.S., capacity growth for the summer is forecast at just 1%, down from 3% two months ago. 

Indian capacity growth is now expected at 2% in Q4, compared to earlier forecasts of 8%. UBS highlighted that North America and India together account for about 50% of SSP’s EBIT, making the slowdown in these regions particularly material.

U.K. rail volumes remained strong, growing at high single digits each month in 2025. However, given rail comprises only about 15% of total group revenues, this strength is not expected to offset aviation weakness.

Currency movements are also a headwind. UBS noted the British pound has strengthened approximately 3% against the U.S. dollar and Indian rupee since May, which impacts over half of SSP’s EBIT given its geographic exposure. 

The FX impact contributed to the lowered estimates, with UBS noting that adjusting for historic rates would bring forecasts closer to guidance.

Despite forecasting that net leverage will fall to 1.7x EBITDA by year-end, within SSP’s 1.5x–2x range, UBS sees limited EPS upside from a potential share buyback. 

A £50 million repurchase, assumed in UBS’s model, would reduce share count by about 7%, but after accounting for a 4% cost of debt, the EPS benefit is estimated at just 2%.

UBS raised its 12-month price target slightly to 170p from 165p, driven by lower capex forecasts. 

The next potential catalyst is SSP’s Q3 trading update, scheduled for July 29. UBS flagged this event as a likely negative trigger, citing the continued decline in U.S. aviation volumes and the reduced forward-looking capacity in key markets.

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