Shares in SSP Group PLC jumped on Tuesday after it reported double-digit profit growth and said trading in the early weeks of the new year has been ‘encouraging’.

The operator of food outlets at travel locations reported pretax profit of £118.6 million in the year to September 30, an increase of 35% from £88.1 million. Revenue improved 14% to £3.43 billion from £3.01 billion, including like-for-like growth of 9%. Earnings per share multiplied to 3.4 pence per share from 1.0p.

The Upper Crust owner hailed ‘good performances’ in the North America, UK and the Asia Pacific & Eastern Europe & Middle East groupings, benefiting from strong sales growth and operating margin improvements year-on-year.

However, it suffered a ‘disappointing performance in Continental Europe’. Here, operating profit was impacted by slow recovery and strikes in the rail sector, weak Motorway Service Area trading in Germany, the scale of the renewal programme and operational execution, including related to the Olympics.

Chief Executive Patrick Coveney said the firm was accelerating its profit recovery plan in Continental Europe, in particular by building returns from the significant number of recently renewed and extended contracts.

So far in financial 2025, ‘trading has been encouraging’, he added. Revenue during the first eight weeks to November 25 is up 13% at constant currency.

SSP forecast financial 2025 revenue of £3.7 billion to £3.8 billion, operating profit of £230 million to £260 million - both on a constant currency basis, and EPS of between 11p to 13p at today’s forex rates, or 11.5p to 13.5p at constant currency.

In response, shares in SSP soared 12% to 181.40p each in London. It was among the best-performing stocks in the FTSE 250, which was up 0.5%.

The firm said its profit recovery plan is underway for Continental Europe, and it plans to build regional operating profit margin from 1.5% to around 3% in financial 2025, rising to around 5% in medium-term.

CEO Coveney said: ‘As we reach the next phase of our evolution post-Covid and with strong underlying growth across the group, our focus now is on driving greater value from a strengthened base.’

SSP plans for a year-on-year reduction in capital investment to £230 to £240 million in financial 2025. It has ploughed £690 million in an investment programme over the last two years.

‘Our capital investment programme is expected to deliver in-year organic net contract gains of around 4% and we do not anticipate investment in further acquisitions in the year. We expect to deliver a significant improvement in free cash flow generation through [financial 2025] and are focused on creating the conditions to return capital to shareholders in the near-term whilst maintaining leverage in our target range of 1.5 to 2.0x net debt to [earnings before interest, tax, depreciation and amortisation],’ SSP said.

In the medium-term SSP is aiming for LFL sales growth in the region of 3% on-year, principally in higher growth markets of North America, APAC & EEME.

It looks for a sustainable operating margin enhancement of 20 to 30 basis points and a recovery in its Continental European operating margin to around 5%.

SSP aims for sustainable double-digit medium-term earnings growth and progression on return on capital employed from the current level of 17.7%.

SSP trimmed its final dividend by 8.0% to 2.3p per share from 2.5p. It upped its total dividend to 3.5p from 2.5p, however. Looking ahead, SSP has set a target payout ratio of 30% to 40%.

The integration of recent acquisitions progressing in line with expectations, SSP added.

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