SSP Group plc (LSE:SSPG) shares fell 2% in early trading on Tuesday after RBC Capital Markets downgraded the stock from “outperform” to “sector perform,” citing concerns over cash flow recovery and valuation.
RBC acknowledges that the the travel food and beverage operator is making progress, particularly with efforts to improve profitability in Continental Europe.
However, analysts believe it will take several years for these changes to deliver significant results. Heavy investment in expansion is also weighing on free cash flow (FCF), with RBC estimating that a meaningful recovery will not materialise until 2026.
At 14 times its forecast 2025 earnings, SSP is trading at a premium to travel retail peers such as Avolta (13x) and WH Smith (12x). While this is below SSP’s pre-pandemic average, RBC sees limited upside at this level.
On the positive side, travel trends remain robust, particularly in North America, a key growth market for SSP.
However, RBC warns that delays in Boeing aircraft deliveries could constrain airline capacity later in the year. Emerging market currency fluctuations are another risk, as SSP generates significant profits in markets such as Egypt and India.
In early trading, the stock was off 3.3p at 176.1p.