Compass Group Boosts 2024 Forecasts for Second Time, Cites Growth and Expansion

Compass Group, the world's largest caterer, has increased its 2024 profit and revenue forecast for the second time, citing new businesses and price easing. The company now expects an underlying operating profit growth of over 15% and organic revenue growth above 10%. Previous estimates were for profit growth towards 15% and revenue growth towards 10%.

Compass Group, the world's leading catering company, has raised its profit and revenue growth forecasts for 2024, attributing the upward revision to new business acquisitions and easing price pressures. The London-listed firm now anticipates an underlying operating profit growth of over 15% and organic revenue growth above 10% [1].

In the previous forecast, Compass expected profit growth towards 15% and revenue growth towards 10% [1]. The latest estimates are supported by the company's strong financial performance in the 2023 fiscal year, which ended on September 30th. Compass reported a 30% jump in adjusted operating profit to £2.12 billion ($2.64 billion), surpassing market expectations [1].

CEO Dominic Blakemore commented, "We expect to sustain mid to high single digit organic revenue growth and ongoing margin progression leading to profit growth ahead of revenue growth and increased cash generation" [1]. The company, which provides food catering services to offices, universities, and sports stadiums in about 35 countries, has benefited from new business and high prices. In the 12 months leading up to September 2023, Compass signed £2.7 billion of new business, with first-time outsourcing accounting for about 50% [1].

However, despite these positive developments, Compass faces challenges from rising finance costs and an expected increase in the effective tax rate. The company anticipates finance costs to reach £225 million and an underlying effective tax rate of 25.5% [1]. Despite these headwinds, Compass remains optimistic about its future prospects.

The company recently announced a $500 million share buyback for 2024, subject to merger and acquisition activity [1]. Additionally, after its year-end, Compass acquired German cook and freeze meal producer Hofmann Menü-Manufaktur GmbH and exited its small operations in Argentina and Angola [1].

Compass's focus on deeper penetration in its larger markets, combined with its resilient business model and strategic acquisitions, positions the company well for continued growth and success in the evolving global catering market.

Sources:
[1] Reuters. Compass Group forecast higher 2024 profit. 2023-11-20. https://www.reuters.com/business/retail-consumer/catering-group-compass-forecast-higher-2024-profit-2023-11-20/