SSP Group's shares tumbled over 6% on Tuesday following a reassessment by UBS that lowered the recommendation to "neutral" from "buy" and cut the 12-month price target to 180 pence from 245 pence. The move came against a prevailing share price of 179 pence. The stock has also declined by around 15% since the onset of the conflict in the Middle East.
UBS attributed the downgrade to a combination of worsening forward aviation capacity readings across SSP's principal markets and adjustments to the discount rate used to value the business. The broker raised its weighted average cost of capital (WACC) to 10.6% from 9.5%, reflecting a 150 basis-point increase to the assumed equity risk premium to 8% from 6.5%, which UBS said was driven by "the significantly higher degree of uncertainty."
As a result of the updated traffic assumptions and valuation inputs, UBS trimmed its full-year FY2026 like-for-like revenue growth forecast by 1.5 percentage points. The UK division was the most affected, with its like-for-like growth projection reduced by 2.8 percentage points to 4.7%.
The broker's revised FY2026 EBIT estimate for SSP now stands at 241 million, below the company-compiled consensus figure of 249 million. Earnings per share, including the effects of the ongoing buyback programme, are forecast at 13.8 pence, falling short of consensus at 14.1 pence and slipping below the upper end of the company's guidance range of towards the upper end of 12.9-13.9 pence provided in the Q1 2026 trading update.
UBS also cut its free cash flow projection for FY2026 to 88 million, which is underneath the group's stated target of above 100 million.
Forward airline capacity readings from Cirium informed much of UBS's reassessment. The data showed near-term deterioration across major regions: in North America, planned capacity growth for April 2026 decreased to 1% from 2% two months earlier; Europe (excluding the UK) slowed markedly to 0.6% for April from 5.6% two months prior; India "turned negative at 3.4% from 0.2%" in UBS's phrasing; and Australia eased to 0.7% from 5.5%.
Despite the more cautious near-term outlook, UBS pointed to several longer-term potential value drivers within SSP's portfolio. The broker highlighted the ongoing review of the group's European rail operations, the potential crystallisation of value from the group's listed Indian operations, and the continued share buyback programme as offsetting factors that could support value over time.
Operationally, SSP reported 5% like-for-like revenue growth in Q1 FY2026, the quarter ended December 2025, an acceleration from 3% in Q4 FY2025. UBS noted data showing that Indian air passenger volumes were negative in February and March 2026, reinforcing its more cautious near-term traffic assumptions.
In valuation terms, UBS's discounted cash flow model implies an enterprise value of 3.70 billion for SSP Group, which incorporates 1.26 billion of lease liabilities and 634 million of net debt excluding leases.
Looking further ahead, UBS expects group revenue to increase from 3.75 billion in fiscal 2026 to 4.51 billion by 2030, with the EBIT margin improving to 9% from 8.4% over the same period. The broker also projects the EV/EBITDA multiple to compress to 4.2 times from 5.3 times by 2030.
UBS outlined scenario analyses to frame potential valuation outcomes. Its upside case assumes like-for-like revenue growth of 4.5% annually between 2027 and 2030 and an EBIT margin of 7.9% by 2030, which would equate to a 265 pence valuation. Conversely, a downside scenario that assumes no like-for-like growth and a 6.6% margin yields a 115 pence valuation.
Market reaction and immediate implications
The UBS downgrade and lower price target triggered the initial share price move, with the broker's adjustments to discounting and traffic assumptions central to the reassessment. While UBS retains some longer-term positives for SSP, its nearer-term cash flow and earnings revisions sit below both consensus forecasts and the company's stated cash target for FY2026.
What remains uncertain
- Near-term air travel capacity trends across SSP's major markets, which UBS notes have deteriorated according to Cirium data.
- The pace and extent to which value from the group's listed Indian operations and the European rail review may be realised.
- Whether the group can meet or exceed its free cash flow target of above 100 million in FY2026 given UBS's revised 88 million estimate.