21st Nov 2022 15:44
(Alliance News) - Despite Compass Group PLC's annual profit tripling on Monday, the contract caterer languished near the bottom of the blue-chip index as investors looked to slowing underlying profit growth for the firm.
Compass said pretax profit jumped to GBP1.47 billion in the financial year that ended September 30 from GBP464 million the year before.
Revenue rose 43% to GBP25.51 billion from GBP17.91 billion, topping company-compiled consensus of GBP25.1 billion.
However, the firm said operating profit growth will be slower in the year ahead as it has regained pre-pandemic business levels.
"On all metrics, this was a very strong year for Compass," said Derren Nathan at Hargreaves Lansdown. "Growth isn't just coming from price increases, but also from new customers which the group said exceeded its own expectations."
Despite the strong figures, Compass shares were down 1.9% at 1,816.00 pence on Monday afternoon in London, with the stock hitting an intraday low of 1,769.00p.
"The numbers themselves were worthy of a silver platter but guidance for the first half of the current financial year to do the heavy lifting on annual growth gave the market some indigestion," explained Russ Mould at AJ Bell.
For financial year 2023, which began in October, Compass expects constant-currency underlying operating profit growth of above 20%, slowing from 88% in the pandemic-recovery boosted year just completed.
It will be heavily weighted towards the current first financial half, the firm added.
Interactive investor's Victoria Scholar eyed Compass's coming financial year with caution.
"Although it has been dealing with the pressures of cost inflation, an increasing number of companies are cutting costs, resulting in increased demand for outsourced caterers like Compass Group to plug the gap... Whether this positive momentum can continue into next year as the macroeconomic pressures intensify is yet to be seen," Scholar said.
Though the firm said its operating profit would likely be slower in the year ahead, it nonetheless announced a new share buyback and more than doubled its dividend on Monday.
Compass lifted its total dividend to 31.5 pence per share from 14.0p and announced a further GBP250 million share buyback, taking the current programme to GBP750 million.
"This [buyback] is all a far cry from 2020 when Covid struck and companies battened down the hatches to preserve cash, cancelling buybacks and cutting dividends as they went," said Russ Mould at AJ Bell.
"Aggregate FTSE 100 buybacks are scheduled to reach GBP55.5 billion in 2022 and firms have already committed to a further GBP3.5 billion in 2023, although their plans could yet change if the economy really tanks or something else unexpected happens," Mould continued.
By Heather Rydings; heatherrydings@alliancenews.com
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