Compass hikes dividend after solid growth across the board

(Sharecast News) - Catering giant Compass has hiked its final dividend by 27% after annual profits surged on the back of strong sales growth and margin improvement - though it predicts a substantial slowdown in organic growth in the coming year. Revenues totalled £31.3bn in the year ended 30 September, up 18.8% year-on-year on an organic basis. The company said net new business growth was 5%, ahead of the historic average of 3%.

North America, which accounts for two thirds of group underlying revenues, delivered organic growth of 17.4%, while Europe grew by 21.6% and Rest of World increased 21.8%.

The company did highlight that comparators with last year were affected by pandemic restrictions, and so volume growth had started to normalise towards the back end of the year. For the current financial year, organic revenue growth is expected in the "high single-digit" range.

The operating margin rose by 60 basis points year-on-year to 6.8%, which was a result of operating leverage, operational efficiencies and pricing to offset inflation headwinds.

As a result, underlying operating profits jumped by 29.6% to £2.1bn, with earnings per share rising 32.5% to 86.1p. Free cash flow over the period was up 39.4% at £1.2bn.

The company declared a final dividend of 28.1p, up from 22.1p last year, taking the annual payout to 43.1p, up 36.8%.

"Going forward, we expect to sustain mid to high single-digit organic revenue growth and ongoing margin progression leading to profit growth ahead of revenue growth and increased cash generation," said chief executive Dominic Blakemore.

"We are investing in capex and strategic M&A to support future growth, returning any surplus cash through the share buyback programme, and delivering long-term, compounding shareholder returns."