Compass serves up bigger dividend and profit guidance as outsourcing trend increases – UPDATE Proactive uses images sourced from Shutterstock
Compass Group PLC (LSE:CPG) shares steamed higher on Monday after the catering giant raised its full-year profit guidance after reporting double-digit growth in the first half.
The FTSE 100 group increased underlying operating profit 12% to $1.84 billion in the six months to March, as revenue swelled 9% to $25 billion on a constant-currency basis.
Statutory profit before tax rose almost 15% to $1.5 billion. Underlying operating margin improved by 20 basis points to 7.4%, with earnings per share up 12% to 72.8 cents.
Free cash flow rose 11% to $825 million, supporting a 13% increase in the interim dividend to 25.5 cents a share as well as helping fund acquisitions in the Netherlands and Germany.
Compass, which provides catering and support services to businesses, schools and hospitals, said organic revenue growth was 7.2%, supported by client retention of 96%. Organic growth was down from 7.3% in the first quarter and 8.7% in its past full year.
But new business wins increased 14% year-on-year to $4.1 billion, with half of that coming from organisations outsourcing services for the first time.
Chief executive Dominic Blakemore said the company is operating in “a highly attractive market, with sectors that are expected to benefit from continued structural growth”, and a total addressable market that has historically grown at around 5% per year.
“Clients face increasing complexity, such as regulation, allergens and data-led insights, and these factors are driving demand for outsourcing across all sectors.”
The company said it now expects underlying operating profit growth of above 11% for the year to September, up from previous guidance of around 10%.
Shares rose 3.9% to $30.65 in early trading, continuing the recovery from the two-year lows seen in recent months.
Analysts at Jefferies said the results came with a slight beat to the City consensus forecast, despite some softer metrics.
“Importantly, new wins momentum remains strong (…) and the company is confident in net new accelerating in 2H.
“FY profit growth guidance is upgraded, reflecting better margin progression. We think results are solid across the board, and should be taken well on the back of cautious expectations.”
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