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Compass points upwards as it upgrades full year growth forecasts following tasty first half

Chief executive Dominic Blakemore said the FTSE 100 caterer now expected growth and margins “similar to 2018” when it reported organic revenue growth of 5.5% and operating margins of 7.4%
Catering
Compass reported underlying operating profit growth of 5.8% for its first half ended 31 March 2019

Compass Group PLC (LON:CPG) shares turned upwards on Wednesday after the contract caterer raised its growth forecasts for the full year on the back of a tasty set of first half figures.

The group’s chief executive, Dominic Blakemore, said that following a “very strong first half” the FTSE 100-listed company had increased its growth guidance for 2019 and now expected organic revenue growth and margins “similar to 2018” when it reported organic revenue growth of 5.5% and operating margins of 7.4%.

READ: Compass heads south as Barclays downgrades for first time in a decade

The bullish outlook came with the firm’s results for the six months ended 31 March, which showed underlying operating profit rise by 5.8% to £951mln while revenues jumped 6.6% to £12.5bn.

That revenue growth was slightly above consensus forecasts, which had predicted organic revenue growth of 6.2%.

The performance was boosted by “excellent growth” from the firm’s North American division of 7.9% as well as 5.5% growth in Europe driven by its UK Defence arm which provides catering for the British armed forces.

Compass also reported 3.2% sales growth in the rest of the world, with a “continuing good performance” in developing markets.

As a result of the improved performance, the company hiked its interim dividend by 6.5% to 13.1p per share.

Looking further ahead, CEO Blakemore said the firm remained “excited” about “significant structural growth opportunities globally”.

Investors reacted positively to the strong numbers, with the shares jumping 3.4% to 1,787p in early morning deals.

Analyst hails “brilliantly boring business”

Commenting on the results, Nicholas Hyett, equity analyst at Hargreaves Lansdown, said while Compass was “a brilliantly boring business”, the group’s “steady mid-single digit revenue growth” converted well into profit and cash because facilities were usually provided by its customers, keeping capital requirements low.

Hyatt noted that the company’s steady growth and a “tight grip” on margins had allowed the company to grow its dividend every year since 2001.

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