UBS has moved to a more constructive view on SSP Group Plc, upgrading the airport and rail food-and-beverage operator to "buy" from "neutral" and raising its 12-month price objective to 245p from 180p. The bank attributes the change to what it describes as a turning point in the company's cash conversion as aviation capacity recovers across many of SSP’s core markets.
The firm’s revised forecasts show a marked improvement in free cash flow generation over the medium term. UBS projects free cash flow of £102 million in FY26, rising to £154 million by FY30. UBS also notes FY25 as the first post-COVID year without significant catch-up capital expenditure requirements, which supports cash conversion improvement.
On the capital expenditure front, UBS estimates capex as a percentage of sales declined to 5.8% in FY25 from 8.1% in FY24 based on company figures. The bank describes the evolving capex profile as a critical contributor to the shift in free cash flow dynamics.
Analysts at UBS characterise the current setup as increasingly asymmetric to the upside. Their modelling implies a three-year earnings-per-share compound annual growth rate of 14% and a forecast free cash flow yield of 7.5% in FY26. Based on these inputs, UBS increased its discounted cash flow-derived price target using an unchanged weighted average cost of capital of 9.5% and a long-term growth rate of 3.0%.
Aviation capacity trends form the basis of the near-term revenue outlook in UBS’s view. Using Cirium DIIO data, UBS said planned capacity across SSP’s European footprint was tracking roughly 5% growth for the April-to-June quarter. The UK was expected to expand 4%-5% over the same period after a flat February. North American capacity is described as growing in low single digits, while Australia and Thailand show stronger momentum. For India, where SSP holds a 50% stake in the listed TFS business, capacity growth had been revised downwards in recent months but returned to growth in January 2026 according to UBS.
Company-reported metrics also support the short-term revenue trajectory. SSP disclosed like-for-like revenue growth of 5% in the first quarter of FY26, an increase from 3% in the preceding quarter, a detail referenced by UBS in its note.
Turning to balance-sheet metrics, UBS forecasts SSP’s net debt to EBITDA leverage will fall to 1.5x by the end of FY26 - the lower boundary of the group’s stated 1.5x-2.0x target range. At that leverage level, UBS calculates potential buyback capacity of roughly £190 million if management were prepared to revert pro forma leverage toward 2.0x. That theoretical capacity equates to more than 10% of the current market capitalisation in UBS’s view. The group is already executing a separate £100 million buyback announced with its FY25 results.
UBS also highlights potential upside tied to SSP’s Indian operations. The bank values the market capitalisation of TFS at about £1.2 billion; SSP’s 50% holding therefore represents a sizeable asset. SSP has indicated its board will explore options for shareholder liquidity to meet a free float requirement of 25% by mid-2028. UBS notes that a partial sale of half the stake could produce proceeds of approximately £300 million at current market values, while a full disposal could yield about £600 million, both figures assuming no discount to prevailing market prices.
On profitability forecasts, UBS sets diluted EPS for FY26 at 14.29p, above the Visible Alpha consensus of 13.58p cited in the note. The bank presents an upside scenario with a 295p valuation that assumes like-for-like revenue growth of 5.5% through FY30 and a terminal EBIT margin of 7.8%. Conversely, a downside scenario of 140p assumes growth largely in line with inflation and no margin improvement beyond FY26 levels.
Implications for markets and sectors
- Travel and aviation: capacity recovery underpins SSP’s revenue visibility and is a central driver of the upgrade.
- Consumer foodservice and retail at transport hubs: improved cash conversion and lower capex intensity affect investor views on the sector’s unit economics.
- Capital allocation and shareholder returns: potential buyback capacity and optionality around the TFS stake could influence market valuation.
This analysis reflects UBS’s published forecasts and the company figures cited in the bank’s note. It does not include additional forecasts or assumptions beyond those presented by UBS in its upgrade and valuation work.