Compass Group's fiscal 2021 profit soars; organic revenue growth expected in year ahead

Foodservice and vending giant Compass Group plc this week reported that its fiscal 2021 profit before tax climbed to £464 million ($620 million) from £210 million ($281 million) last year. Compass's earnings per share grew 150% to 20 pence (27¢)  from 8 pence (11¢) a year ago.

Additionally, the company reinstated its dividend with a payout policy of about 50% of underlying earnings. The Compass board has proposed a final dividend of 14 pence per share for FY21, payable in February,

“Our strong financial recovery in 2021, including record new business wins and client retention, is a credit to our teams’ exceptional resilience, dedication and expertise in extraordinary circumstances," said group chief executive Dominic Blakemore. "We are pleased to be reinstating the dividend reflecting our strong cash flow and increasing confidence in the group’s performance."

The catering giant, which is parent to Compass USA and U.S.vending operator Canteen, is headquartered in Chertsey, England, and operates in 45 countries. Almost 60% of its revenue is generated in the United States.

Compass Group 2021 performance summary

• Underlying revenue recovered to 88% of 2019 revenue by Q4. FY underlying revenue 77% of 2019.
• Underlying margin improved to 5.8% in Q4. FY underlying margin of 4.5%.
• Strong FY operating cash flow of £1 billion while maintaining gross capex at 3.6% of underlying revenue.
• Reinstating the dividend with a payout policy of c.50% of underlying earnings.

Operational highlights

• Healthcare and senior living segment, along with and the defense, offshore and remote sectors performed well above pre-pandemic volumes, with strong recovery in education, sports and leisure by the fourth quarter.
• Record new business wins of £2.1 billion, with around half from first time outsourcing and client retention of 95.4%.
• Announced a global commitment to deliver net zero by 2050, including validated science-based targets to 2030.

Compass Group's 2022 outlook

• FY22 organic revenue growth expected to be 20%-25%
• FY22 underlying operating margin anticipated to be over 6%, with an exit rate of c.7%
• Progress expected to be weighted towards the second half of the year due to mobilization costs and inflationary pressures during first half.

Statutory results

• Statutory revenue decreased by 10.2% due to the pandemic’s continuing impact on company's operations.
• Statutory operating profit increased by 85.4% to £545 million reflecting actions taken to control the controllable, including resizing the cost base and improved cost control.