23rd Jul 2024 11:58
(Alliance News) - Compass Group PLC raised its guidance for the second time in recent months, and annual results could end up being better than expected if momentum continues.
In response, shares in Compass rose 5.0% to 2,299.77 pence in London on Tuesday afternoon.
"All regions continue to perform well, and industry trends remain strong, providing Compass with an exciting pipeline of new business opportunities," the Chertsey, England-based contract caterer said in a trading statement.
In the financial third quarter to June 30, Compass said organic revenue rose 10%.
"As expected, net new business growth accelerated in [the third quarter], whilst pricing moderated in line with inflation. Volumes continued to benefit from the quality of our offer and the value gap compared to the high street," Compass said.
In North America, organic revenue rose 9.9%, while in Europe, it increased 12%. In the Rest of the World segment, organic revenue climbed 8.5%.
Compass added: "We are pleased with our third quarter performance. The group delivered good growth across all regions and benefited from improved net new business in line with our expectations."
For the full year, Compass now expects underlying operating profit growth to be above 15% on a constant-currency basis, with organic revenue growth above 10%.
It had previously expected underlying operating profit growth "towards 15%" and an organic revenue rise "towards 10%".
Compass had raised guidance in May. It upgraded guidance for underlying operating profit growth from 13%.
"Today's guidance sets a minimum expectation just above consensus forecasts. Should current momentum continue into the final quarter, the full year outcome is likely to do a little better than the baseline. Net new business growth, which is a more forward indicator, has also accelerated, painting an encouraging picture for the longer-term," Hargreaves Lansdown analyst Derren Nathan commented.
Barclays analysts noted Compass registered third-quarter organic sales growth ahead of consensus, which the investment bank put at 9.5%. Barclays itself had predicted 9% growth.
"More broadly we continue to like Compass as a compounder that has been held back recently as net new [business] slowed, so we see the inflection here as key for the investment case," Barclays analysts added.
Compass did sound one note of caution, noting foreign exchange translation would negatively impact 2023 revenue by USD106 million and operating profit by USD17 million if current spot rates continue.
By Eric Cunha, Alliance News news editor
Comments and questions to newsroom@alliancenews.com
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Compass Group