- Stronger than expected Q2 trading
- Raised growth outlook to 11%
- Acquires Vermaat for €1.5 billion
Global catering firm Compass (CPG) jumped 5% to top the FTSE 100 leaderboard after revealing better than expected second quarter trading and raising full year profit guidance.
The world’s largest catering company also announced the acquisition of premium food services firm Vermaat Groep for approximately €1.5 billion including debt.
The gain takes the shares roughly back to breakeven year-to-date and up 21% over the last 12-months, more than doubling the 10% advance in the FTSE 100 index.
STRONG ORGANIC REVENUE GROWTH
Group organic revenue grew 8.6% in the third quarter to 30 June and 8.5% for the first nine months with both the US and International divisions performing well, the former delivering strong 9.6% growth, reflecting ‘favourable’ hospitality events.
For context, management had previously guided for ‘at least’ 7.5% organic revenue growth.
Net new business growth continued to track in the middle of the company’s 4% to 5% guided range and retention was strong at over 96%. The group’s net expenditure on mergers and acquisitions was largely unchanged from the $1.1 billion at the half year stage.
Encouragingly, Compass said the integration of recent acquisitions was progressing ahead of expectations.
RAISED OUTLOOK
Consequently, management expects full year constant currency underlying operating profit growth to be towards 11%, from a high single-digit previously, driven by organic revenue growth above 8% and ongoing margin expansion.
Shore Capital’s Greg Johnson said he anticipates making a ‘modest’ low to mid-single-digit EPS (earnings per share) revision to his full year forecast.
‘Our FY25F operating profit estimate of $3.24 billion (EPS: $1.29) is predicated on organic revenue growth of 8% and a 10-basis point improvement in the operating margin to 7.2% (in line with H1),’ explained Johnson.
Commenting on the acquisition, Johnson noted Vermaat Groep’s impressive track record of growing revenue at an annualised 20% over the last 15-years accompanied by double-digit margins.
Compass said it will share a virtual deep dive in September showing how it sectorises the market, operating in distinct sectors through a unique portfolio of brands.
