9th Feb 2023 14:39
(Alliance News) - Compass Group PLC on Thursday reported revenue growth in its first financial quarter to December 31, as it cited employees returning to offices as a helpful tailwind for the business.
The Chertsey, England-based contract food service company noted "particularly strong" like for like volumes in Business & Industry amid continuously high participation rates for Sports & Leisure.
The company on Thursday said organic revenue climbed 24% from a year ago, as it cited a boost from "strong outsourcing trends with net new business growth of 5.5%, significantly above our historical rate of around 3%, and in line with financial year 2022".
It said all regions outperformed, with the "Rest of World" segment seeing the best growth with a 27% revenue rise. It was followed by 26% delivered in Europe and 23% from North America. Compass noted double-digit like-for-like volume increases in all regions.
The company added that net expenditure on bolt-on acquisitions was GBP55 million in the first quarter, expanding its brand portfolio and digital and procurement capabilities.
Compass said: "We remain positive for financial 2023 and reiterate our guidance. We expect operating profit growth above 20% on a constant currency basis, organic revenue growth of around 15%, weighted towards the first half of the year, and an underlying operating margin above 6.5%.
"Looking further ahead, we remain excited about the significant structural growth opportunities globally, leading to the potential for revenue and profit growth above historical rates, returning margin to pre-pandemic levels and rewarding shareholders with further returns."
The company added that it has completed GBP163 million of a GBP250 million share buyback programme announced in November.
"We are particularly pleased with the continued strong net new business performance in Europe which is benefiting from the increased focus on growth and retention, supported by investments in people, brands and processes," it added.
In financial year 2022 to September 30, pretax profit had recovered to GBP1.47 billion from GBP464 million in financial year 2021. Compared to pre-Covid pandemic financial year 2019, the profit was flat. Adjusted pretax profit in the most recent financial year was GBP1.49 billion, compared to GBP698 million a year before.
Shore Capital expects Compass's revenue and profit to grow continuously in financial years 2023 to 2025.
For financial years 2023, 2024 and 2025, Shore Capital expects an adjusted pretax profit of GBP1.83 billion, GBP2.02 billion and GBP2.26 billion, climbing between 12% and 23% annually. The strongest growth will come in the current financial 2023, Shore predicts, climbing from GBP1.49 billion in financial 2022.
Revenue for the three financial years is estimated by Shore at GBP29.82 billion, GBP32.00 billion and GBP34.3 billion, a growth of between 7.2% and 16% every year. Revenue in the previous financial year amounted to GBP25.77 billion.
Greg Johnson, research analyst at Shore Capital, commented: "Our positive investment thesis is based on the potential to emerge from the pandemic with a larger revenue base, margins recovered and stronger than historic growth rates for a sustained period. Our historic blue-sky scenario for at least GBP25 per share, based on over GBP35 billion of revenues, over 7% operating margins and material cash returns, is now more of a medium-term forecast. We continue with our BUY stance, with upside to at least GBP20 per share."
Compass shares were 0.9% lower at 1,871.50 pence each in London on Thursday afternoon.
Compass will release its interim results for the six months to March 31 on May 10 and full-year results to September 30 on November 20.
By Tom Budszus, Alliance News reporter
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