SSP Group, the travel-food operator behind Upper Crust and Millie’s Cookies, has warned that conflict in the Middle East is weighing on passenger numbers across key international travel markets, tempering stronger UK trading and forcing the company to trim its full-year operating profit expectations.
The FTSE 100-listed group, which runs food and drink outlets in airports and railway stations, said trading had remained “resilient” despite a “challenging environment”. But the disruption to international travel has exposed the vulnerability of businesses whose fortunes depend on the movement of passengers through major transport hubs.
SSP reported revenue of £3.8bn for the year to the end of September, an increase of 5 per cent on the previous year. In the fourth quarter, sales in the UK and Ireland rose by 9 per cent on a like-for-like basis, supported by strong summer demand and improvements to outlets, including refurbished Marks & Spencer shops.
The performance offered a measure of support for the group as domestic trading benefited from the peak holiday season. SSP operates franchised outlets for brands including M&S, Starbucks, Burger King and The Breakfast Club, giving it exposure to spending by commuters, holidaymakers and other travellers.
Yet the stronger UK figures have been offset by weaker passenger flows in regions affected by the Middle East conflict. SSP said a sharp contraction in traffic through the Gulf and major travel hubs across the region had affected trading, with knock-on effects across the Eastern Mediterranean, Asia-Pacific and Indian markets.
Across its Asia-Pacific, Eastern Europe and Middle East division, sales increased by just 1 per cent in the fourth quarter. Passenger volumes recovered to 90 per cent of their level a year earlier, but the company said lower numbers of local and connecting travellers continued to weigh on activity in surrounding markets.
The figures underline the importance of connecting passengers to SSP’s business model. A disruption concentrated in one region can spread through international aviation networks, reducing footfall at airports well beyond the immediate area of conflict.
North America also proved less buoyant than anticipated, with SSP reporting more subdued passenger numbers over the summer. Nevertheless, fourth-quarter sales in the region rose by 2 per cent year on year.
The cumulative pressure has led the group to lower its operating profit outlook. SSP now expects full-year operating profit of about £230mn, slightly below previous expectations. Its shares fell by around 5 per cent in early trading on Friday following the update.
The revision highlights the difficulty of converting higher headline revenue into earnings growth when trading conditions vary sharply between markets. Stronger UK sales have provided a cushion, but they have not fully offset the impact of weaker travel volumes elsewhere.
Patrick Coveney, SSP’s chief executive, said the company had delivered a resilient performance despite the difficult backdrop.
“We have delivered a resilient Q4 (fourth quarter) trading performance in a challenging environment,” he said.
“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 comments reflect SSP’s argument that its geographic spread and portfolio of brands can help absorb regional shocks. But diversification does not eliminate the risks created when conflict disrupts aviation routes, connecting traffic and passenger confidence.
For investors, the immediate question is whether strength in Britain and Ireland can continue to compensate for weaker international markets, or whether prolonged disruption will place further pressure on profitability.
SSP’s latest update offers evidence of a business still growing in aggregate, but with an increasingly uneven performance beneath the headline figures. The company’s challenge is to sustain that growth while geopolitical instability continues to reshape passenger flows across some of the world’s busiest travel corridors.
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