Compass reports profit decline but raises dividend

Compass Group PLC announced on Tuesday that strong revenue growth and operational improvements were offset in its recent financial year by rising finance costs and charges related to business closures, reflecting its efforts to streamline its portfolio and focus on long-term growth.

Compass reports profit decline but raises dividend

The Chertsey, England-based contract caterer reported a 3.8% drop in pretax profit for the year ending September 30. The decrease was due to higher finance costs and losses from business closures, with pretax profit falling to USD 2.01 billion from USD 2.14 billion the previous year. Revenue, however, increased by 11% to USD 42.0 billion from USD 37.91 billion in 2023, driven by strong demand in core markets and a 4.2% rise in net new business. Organic revenue growth reached 11%, surpassing the company's forecast of 10%. The profit decline was primarily attributed to a 63% rise in finance costs to USD 325 million and a USD 203 million net loss from business sales and closures, reversing the USD 24 million gain reported the previous year.

Raising dividend

Despite the decline in profit, Compass noted a 30-basis-point improvement in its operating margin, which rose to 7.1%, and a 16% increase in underlying operating profit to USD 2.99 billion, up from USD 2.02 billion. The company raised its annual dividend by 14%, increasing it to 59.8 cents per share from 52.6 cents in 2023, including a final dividend of 39.1 cents, up from 34.7 cents. Compass also returned a total of USD 1.5 billion to shareholders through dividends and buybacks, completing USD 476 million of its ongoing USD 500 million share repurchase program.

CEO's comment

Chief Executive Dominic Blakemore commented, "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 capitalize on dynamic market trends, leveraging its competitive advantages to drive higher revenue and profit growth." Looking ahead, Compass expects high single-digit underlying operating profit growth in 2025, supported by organic revenue growth above 7.5% and further margin improvements. The company also emphasized that its strategic initiatives, including USD 2.6 billion in acquisitions and infrastructure investments, as well as its exit from nine non-core markets, have positioned it for sustainable long-term growth.