Compass Group income surge as working from dwelling wanes

Compass Group is rewarding shareholders with a major dividend boost after revealing bumper profit growth for the last year. 

Compass’ underlying operating profits jumped by 16.4 per cent at constant currency levels to $3billion in the year ending September, with the firm citing a sustained recovery in workers returning to offices as a key market trend, 

The world’s biggest catering business has proposed a final dividend of 39.1 cents per share, giving it a full-year dividend of 59.1 cents per share, a 13.7 per cent increase on the previous year.

Compass achieved growth across all regions, especially its largest territory by sales, North America, where underlying revenues rose by 10.9 per cent to $28.6billion.

The London-based firm also told shareholders on Tuesday that it had benefited from higher attendance and consumer spending within its education and sports-focused operations. 

European sales expanded significantly, surging by 15 per cent to nearly $10billion on an underlying basis thanks to double-digit percentage growth from industries such as education, and defence, offshore and remote.

Bumper result: Catering giant Compass Group saw its underlying operating profits jump by 16.4 per cent at constant currency levels to $3billion in the year ending September

Compass has this year bolstered its presence across the continent with two big acquisitions: Hoffmann in Germany, and Reading-based CH&CO, whose clients include Kew Gardens and the Royal Opera House.

It pulled out of five countries 0 Argentina, Angola, Brazil, China and the United Arab Emirates – and agreed to leave another four, mostly in Latin America.

Dominic Blakemore, chief executive of Compass, said: ‘2024 has been a year of strong operational and financial performance, with net new business growth accelerating in the second half as expected.

‘The business continues to successfully capitalise on the dynamic market trends, using its proven competitive advantages to drive higher revenue and profit growth.’

However, Compass expects underlying operating profits to increase by only a ‘high single-digit’ percentage figure in 2025, driven by ‘ongoing margin progression’ and organic revenue rising by over 7.5 per cent.

Compass Group shares declined by 2.5 per cent to £25.88 on Tuesday morning, making them one of the FTSE 100 Index’s top five fallers.

Adam Vettese, a market analyst at eToro, said the company’s outlook was ‘perhaps simply getting ahead of the narrative due to the high bar set’.

‘The shares have dipped this morning but still sit at almost 20 per cent up for the year and might well represent a buying opportunity if they are to continue their longer-term trajectory.’

Compass operates many corporate workplace canteens and provides hospitality services to prominent sporting venues like Wimbledon and Chelsea Football Club.

It experienced a significant downturn in trade during the early part of the Covid-19 pandemic when employers encouraged their staff to work from home if possible, and sports teams often played matches behind closed doors.

Vettese added: ‘Hybrid or remote workers being asked to come back to the office is clearly a hot topic at the moment with many not wanting to relinquish their flexibility. 

‘Compass Group, however, is a beneficiary of this movement – as the world’s largest caterer, they operate many workplace canteens and welcome the volume back through the doors.’