Compass Group, the catering giant that provides food to offices, schools, and sports venues, has posted robust annual results after securing new contracts and raising prices to reflect higher costs.
The British firm saw its revenues climb 21.6% to £31.0bn in the year to 30 September, with operating profit up 26.1% to £1.89bn despite inflation pressures.
Organic revenue growth was 18.8%, reflecting new business growth of approximately 5%, above its historical levels of roughly 3%, with like-for-like volume growth and pricing both contributing around 7%.
The European arm of Compass delivered organic growth of 21.6%, whilst the larger North America division saw growth of 17.4%.
Looking ahead, Compass stated that it was targeting 13% underlying profit growth in the current financial year, with high single-digit organic revenue growth as businesses continue to outsource their catering requirements to deal with macroeconomic pressures.
Chief Executive Dominic Blakemore commented: “2023 was a strong year for Compass. North America continued its long track record of excellent growth whilst Europe delivered a second year of net new growth in the 4-5% range.
“During the year, we continued to successfully capitalise on the dynamic outsourcing trends, resulting in another record year of new business wins and continued strong client retention.
“The business is in great shape operationally and financially and well positioned for a more focused growth phase.”
Despite the upbeat statement, shares in Compass fell around 5% this morning after the City gave a downbeat assessment of the company’s “conservative” profit guidance for its next financial year. Some analysts also predicted headwinds from the company’s expected rise in finance costs to £225m and higher tax rates.
NAM Implications:
- Still a lot of inflation built into increased revenues…
- …and no reflection of the trend in work from home in terms of diminished desk population.
- Hence the stock market reaction…
