Shares in outsourcing giant Compass Group rose after the company raised its profits forecasts for the second time in as many months.
At £22.97 per share, Compass shares increased 4.8% in Tuesday’s session, making it the biggest gainer on the FTSE 100.
Organic revenues rose 10.3% between April and June, a period which the firm — a provider of food and support services in 35 countries — described as “another strong quarter.”
Compass said that “all regions continue to perform well, and industry trends remain strong, providing [us] with an exciting pipeline of new business opportunities.”
In North America — a region responsible for around two-thirds of group sales — organic revenues increased 9.9% from the same 2023 period.
Corresponding turnover in Europe rose 12%, while across the rest of the world sales increased 8.5%.
Second Upgrade
Compass said that “as expected, net new business growth accelerated [last quarter], whilst pricing moderated in line with inflation.”
It added that “volumes continued to benefit from the quality of our offer and the value gap compared to the high street.”
The business now expects to underlying operating profit growth “to be above 15% on a constant-currency basis” for the full financial year. Organic revenue growth, meanwhile, is tipped to exceed 10%.
This is the second upward revision to forecasts since mid-May. In its half-year report, Compass predicted underlying operating profit growth of “towards 15%.”
Elsewhere, the business said that net spending on mergers and acquisitions stood at $836 million in the financial year to date.
Compass said that “we are continuing to invest in our portfolio, as we replicate our North America blueprint elsewhere, to support our existing capabilities, increase operational flexibility and further strengthen our unique sectorised approach to the market.”
“Compelling Snapshot”
Fraser Thorne, analyst and chief executive at Edison Group, said that Compass’ update “presents a compelling snapshot of its robust financial health and agility in the current market landscape,” adding that it “shows the company’s effective market penetration and customer retention strategies.”
He added that “Compass’s diversified portfolio continues to be a significant advantage, mitigating risks associated with regional or sector-specific downturns.”
Analyst Derren Nathan of Hargreaves Lansdown said that “there are underlying structural drivers feeding demand for outsourcing and that’s playing into the Group’s hands. Regulation, and the value that bulk procurement offers are but a few.”
Nathan added that “today’s guidance sets a minimum expectation just above consensus forecasts. Should current momentum continue into the final quarter, the full year outcome is likely to do a little better than the baseline.”
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