SSP Group Profits Suffer Amid Geopolitical Tensions and Reduced Passenger Traffic

SSP Group, the company behind food and beverage outlets like Upper Crust and Millie's Cookies, has warned that its annual profits are expected to fall short of initial projections. The decline is attributed to a sharp decrease in passenger numbers, primarily influenced by the ongoing conflict in the Middle East and its impact on travel.

The company informed investors that it anticipates operating profits of £230 million for the current year, a figure lower than previously forecast, citing a "backdrop of subdued passengers." The conflict in Iran, in particular, has continued to affect sales in regions surrounding the Middle East as well as in the United States. Despite these challenges, like-for-like sales in the U.S. saw a modest increase of 2 percent in the three months leading up to the end of September.

Shares in SSP experienced a 3 percent decline, settling at 182.3, marking an 11 percent loss for the year. The current share price is down 70 percent from its pre-pandemic peak.

SSP's Chief Executive Patrick Coveney described the group's performance as "resilient" despite operating within a "challenging environment." Overall, like-for-like sales across the group rose by 4 percent in the three months ending September, contributing to full-year revenues of £3.8 billion, a 5 percent increase compared to the previous year.

While passenger numbers in SSP's Gulf markets have recovered to 90 percent of pre-conflict levels, traffic in the eastern Mediterranean, Asia-Pacific, and Indian regions continues to be impacted by lower volumes of local and connecting passengers.

Coveney expressed optimism about the company's position, stating, "Despite the significant impact of the Middle East conflict on passenger volumes in APAC & EEME, the strength and diversification of our portfolio leaves us well-positioned to deliver group earnings per share for the year in line with current market expectations."

The UK and Ireland region saw a 9 percent increase in sales, bolstered by strong summer trading and improvements to various outlets, including M&S Simply Food stores. SSP operates franchised stores for well-known brands such as M&S, Starbucks, Burger King, and The Breakfast Club.

Recently, SSP has faced pressure from investors, including Irenic Capital Management, concerning its financial performance. Last September, the New York-based hedge fund reportedly urged private equity firms to consider acquiring SSP, suggesting the company could be valued at a 50 percent premium to its market value.