Compass Group’s half-year results for the six months ended 31 March 2023 reveal the company delivered a strong performance, with balanced revenue across all of its regions and sectors.
Organic revenue grew by 25% with excellent net new business of 5.2%. The Group also reported operating profit over £1bn and operating profit margin of 6.6%, up 80bps.
Compass’ largest region – North America- contributed 67% of Group revenues and achieved organic revenue growth of 23%, with the highest growth in its Business & Industry and Sports & Leisure sectors, while growth in Europe was even stronger, thanks to its ongoing focus on growth initiatives and strong outsourcing momentum.
Inflation, increased operational complexities, and changing client and consumer expectations continue to drive more clients to outsource their food offering, with first-time outsourcing accounting for c.45% of new business wins. The Group also maintained a strong client retention rate.
The Group has also announced that it will report in US dollars from 1 October 2023, to reduce earnings volatility due to foreign exchange translation while improving transparency and aligning reporting with its business structure (given over ¾ of Group profit is now sourced from North America).
Dominic Blakemore, Group Chief Executive, said: “The Group performed strongly in the first half of the year, benefiting from balanced growth across all regions. Net new business continued to be excellent, and significantly higher than our historical rate. We are particularly pleased with the step change in our Europe performance which has benefited from growth initiatives as well as favourable outsourcing conditions.
“Despite pockets of macroeconomic weakness, the outsourcing market remains very attractive. We believe that many of the complexities that drive outsourcing, such as increased regulation, changing client and consumer expectations, and inflation, are here to stay. With our strong cash generation, we continue to invest in our business and evolve our operating model, further enhancing our scale and competitive advantage.
“Following our strong first-half performance, we now expect operating profit growth towards 30% on a constant-currency basis, to be delivered through organic revenue growth of around 18% and an underlying operating margin in the range of 6.7% to 6.8%. The strength of our balance sheet, along with our confidence in the prospects for the business, give us the platform for further returns to shareholders. In addition to our ordinary dividend, we are announcing a further share buyback of up to £750m in 2023, taking the total programme announced since May 2022 to £1.5bn.
“Longer term, we expect the growth opportunities in the market to sustain mid-to-high single-digit organic growth and a path back to our historical margin, leading to profit growth above revenue growth. With our established value creation model intact, we will continue rewarding shareholders with compounding returns over the long term.”
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To register for the webinar click here.