FTSE 100-listed Compass results point north as revenue and profits rise

 
Joe Curtis
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Compass was described as 'brilliantly boring' as it raised its 2019 revenue guidance (Source: Getty)

Food services business Compass bolstered its top and bottom lines in the first half of its financial year as one analyst dubbed the company’s reliable growth as “brilliantly boring”.


Read more: Compass shares near all-time high after strong revenue growth

The figures

Operating profit rose almost seven per cent to £913m year on year for the six months to the end of March, Compass said today.

Meanwhile revenue climbed 8.8 per cent to £12.3bn as Compass boosted earnings per share by 7.4 per cent to 40.7p, up from 37.9p in the same period last year.

Free cashflow jumped 14 per cent to £530m and Compass told investors to expect an interim dividend per share of 13.1p, higher than last year’s 12.3p per share.


However, net debt rose marginally to £3.6bn after £302m spend on acquisitions.

Why it’s interesting

Shares climbed 2.8 per cent to 1,777p in early morning trading on the back of the results, despite a slightly slower rate of profit growth at 5.8 per cent due to cost pressures in Europe.

US growth fuelled Compass’ success in its first half while UK defence sales also helped it hit its targets as it spend £370m on bolt-on purchases.

Hargreaves Lansdown called Compass a “brilliantly boring business”, with equity analyst Nicholas Hyett adding: “The above GDP growth rate reflects the fact that, in a fragmented sector, Compass is able to snap up smaller rivals in regular bolt-on deals and leverage its buying power across an ever larger number of venues.”

“Steady revenue growth and a tight grip on margins have allowed Compass to deliver an impressive returns to shareholders through a growing dividend, and these results are no exception,” Hyett said.

“With a prospective yield of two per cent next year, it’s easy to think Compass’ dividend is nothing special. Look a little deeper though and you find the dividend has grown every year since 2001. Not so boring after all.”

The firm also raised its revenue guidance for the full-year as it expects to achieve similar growth to 2018’s 1.7 per cent, which would put 2019 underlying sales at £23.6bn with an operating margin of 7.4 per cent.

What Compass said

Chief executive Dominic Blakemore welcomed a “strong” first half, saying a focus on finding efficiencies has offset inflation and volume weakness in the UK and EU.

Read more: Concerns of ‘overboarding’ at Compass spark investor backlash

“Following the very strong first half performance we now increase our organic revenue growth guidance for the full year and expect to deliver organic revenue growth and margin progression similar to 2018,” he added. “We remain mindful of the macro uncertainty in parts of Europe and its impact on the business.

“In the longer term, we continue to be excited about the significant structural growth opportunities globally, the potential for further revenue, profit and margin growth, combined with further returns to shareholders.”