ii view: Compass improves profit but guidance disappoints
Offering exposure to the provision of food in uncertain economic times and with continued acquisitions bolstering growth. Buy, sell, or hold?
25th November 2025 11:31
by Keith Bowman from interactive investor
Full-year results to 30 September
- Revenue up 9.7% to $46.1 billion (£35 billion)
- Currency adjusted operating profit up 11.7% to $3.34 billion (£2.54 billion)
- Final dividend of 43.3 US cents
- Total dividend for the year up 10.2% to 65.9 US cents
- Net debt up 19% to $6.42 billion
Guidance:
- Expects revenues stripped of acquisitions to grow by 7% in 2026
- Expects growth adjusted operating profit of around 10% in 2026
Chief executive Dominic Blakemore said:
“This year's strong trading performance, combined with the significant market opportunity, which keeps expanding as we add new capabilities through M&A, reinforces our confidence in the sustainability of our long-term growth algorithm.”
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ii round-up:
Compass Group (LSE:CPG) today detailed sales and profit that beat City forecasts, with the canteen provider achieving net new business growth of between 4% and 5% for the fourth year in row.
Previous acquisitions and existing client retention of 96.3% helped annual revenue climb 9.7% to $46.1 billion (£35 billion), pushing adjusted operating profit up 11.7% to $3.34 billion. Analysts had expected outcomes of $45.4 billion and $3.3 billion respectively.
The Surrey headquartered company now expects revenues stripped of acquisitions for the year ahead of 7%, fuelling potential profit growth of around 10%. Analysts had forecast revenue growth of over 7%.
Shares in the FTSE 100 company fell 3% in UK trading having come into these latest results down by close to a tenth so far in 2025. The FTSE 100 is up around 15% year-to-date. and rival caterer Sodexo (EURONEXT:SW) is down by more than a third.
Compass serves over 5 billion meals per year to the staff of thousands of businesses and organisations, largely across North America and Europe.
A final dividend of 43.3 US cents per share is payable to eligible shareholders on 26 February, meaning the total payment for the year rises 10.2% to 65.9 US cents.
Group net debt of $6.42 billion, driven by acquisitions, is up by close to a fifth from a year ago. An adjusted profit to debt ratio of 1.4 times is up from 1.3 times a year ago, but still within management’s target range of 1 to 1.5 times.
Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, flagging Compass as a ‘top pick.’
A first-quarter trading update and the AGM are scheduled for 5 February.
ii view:
Started in 1941, Compass today employs over 550,000 people. North America generated by far its biggest slug of profits over this latest financial year at almost three-quarters, with the combined international region making up the rest. Group clients do or have included the likes of Microsoft, Shell, HSBC and Nike, as well as others such as schools, hospitals, sports stadiums and even oil rigs.
For investors, exposure to costs such as food and staff taxes like national insurance is not to be overlooked. Acquisitions such as the previously announced €1.5 billion purchase of Dutch food services group Vermaat have reduced potential for share buybacks. An adjusted profit-to-net debt ratio of 1.4 times is towards the upper end of management’s target range, while previous exits from countries such as China and Mexico have reduced geographical diversity.
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To the upside, a more focused geographical approach is being pursed, with attention on Europe where the addressable market is estimated to be at least €115 billion and where around half of that is still operated by businesses and organisations themselves. Estimated fourth-quarter revenue growth of 9.2% is up from an increase of 8.6% in Q3. A diversity of underlying customers exists, while a forecast dividend yield of around 2% is not to be ignored.
In all, and despite ongoing risks, a consensus analyst fair value estimate above £28 per share appears to indicate continued long-term optimism in the City.
Positives:
- Diversity of both customer and geographical location
- Client retention rate above 96%
Negatives:
- Food costs can be volatile
- Currency movements can impact
The average rating of stock market analysts:
Buy
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