Compass: annual results in line, but unexpected charge

(CercleFinance.com) - On Tuesday, Compass reported annual results in line with market expectations, but the announcement of a surprise provision linked to the discontinuation of an in-house technology project seemed to unsettle investors.


The British catering group reported this morning that it had had to book a $160 million charge in its annual accounts due to the discontinuation of the deployment of a new enterprise resource planning (ERP) software.

While this provision should have little impact on cash flow, RBC analysts are concerned about its potential effect on the company's margins and earnings.

Otherwise, sales for the full 2024/2025 financial year came to $42.2 billion, with organic growth of 10.6%, in line with market expectations.

Its recurring operating profit rose by 16.4% to almost three billion dollars, again in line with analysts' forecasts.

"The 2023/2024 financial year delivered a solid operating and financial performance, with an acceleration in the signing of new contracts in net terms in the second half of the year, as expected", enthused Dominic Blakemore, the company's CEO.

For the new financial year 2024/2025, Compass says it is targeting growth in recurring operating profit of close to 10%, based on expected organic business growth of over 7.5%, accompanied by a further improvement in its operating margin.

Following this unsurprising publication, the share was subject to profit-taking on Tuesday morning on the London Stock Exchange, posting the second biggest drop on the FTSE 100 index, with a decline of 2.2%.

At last night's closing price, the share showed gains of over 25% since the start of the year.

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