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Compass Group (LSE: CPG) posted its full-year earnings report for 2024 this morning (26 November), leading to an preliminary 2.5% dip earlier than the worth recovered 6%.
Because the day involves an finish, it appears to be like like the worth will shut up by round 4%.
The corporate is a world meals and help companies provider that operates largely in North America and Europe. Headquartered within the UK and listed on the London Inventory Trade, it began with modest roots as a catering agency within the Midlands in 1941. Since then, it’s grown to turn out to be the biggest contract meals service firm in Europe, serving every little thing from faculties to army amenities.
Full-year 2024 outcomes
At the moment’s outcomes coated the 12 months to 30 September 2024, with income coming in at $42.2bn — a ten.6% enchancment on 2023. Working revenue grew by 16.4% to virtually $3m, pushed by new enterprise and renewed contracts.
Earnings per share (EPS) made a very spectacular bounce to 119.5c, up 14.6% from final yr. The ultimate dividend for the yr has been confirmed at 59.8c per share, up 13.7% from 2023.
General, it’s a formidable set of outcomes that shows the corporate’s potential to carry out properly inside a quickly shifting financial panorama.
Chief Govt Dominic Blakemore hailed 2024 as a yr of “robust operational and monetary efficiency”. He went on to focus on the group’s exit from 9 non-core nations, together with Argentina, Brazil, and the UAE.
That is aimed toward serving to it give attention to areas with the best development potential.
Particularly, the corporate is keen about North America the place it holds 20% of the market share. It views the area as extremely helpful for mergers and acquisitions, describing it as a “dynamic market ripe with alternatives.”
Different notable acquisitions this yr embrace HOFMANN in Germany and CH&CO within the UK, which companies Kew Gardens and the Royal Opera Home.
Threat components
In right this moment’s outcomes, Compass Group famous the consequences of international alternate charges on the sale of companies, which led to a ten% drop in statutory (fundamental) EPS. As a world firm, its efficiency is especially delicate to macroeconomic circumstances, regulatory modifications, and forex fluctuations.
Within the UK, rising labour prices following the October Price range might additionally squeeze margins, to not point out any improve in inflation. It operates in a reasonably aggressive business, with self-operators and regional gamers vying for market share. To retain its aggressive edge, it might probably’t afford to danger dropping purchasers by passing on these prices to the patron.
All these components can restrict earnings and harm the share value.
Ultimate ideas
I not too long ago purchased Compass Group shares after noting its robust and constant development over the previous 4 years. After falling 38% throughout Covid, it started a speedy restoration and is up 141% since.
It doesn’t have a very spectacular yield (1.67%) and its price-to-earnings (P/E) ratio is sort of excessive, at 29.73. As such, I wouldn’t say it qualifies as the kind of low-cost earnings share I’m usually drawn to.
Nonetheless, I imagine it provides a stage of development and defensiveness to my in any other case income-focused portfolio. I anticipate the shares to ship regular development over the approaching years.
If I had the spare capital, I’d fortunately purchase extra shares — particularly after right this moment’s spectacular outcomes.
