Compass Group reports strong 2023 full-year financial results

Compass Group reported its full-year financial results for the year ending September 30, 2023.

Dominic Blakemore, group chief executive, said in the announcement: “2023 was a strong year for Compass. North America continued its long track record of excellent growth whilst Europe delivered a second year of net new growth in the 4-5% range. During the year, we continued to successfully capitalize on the dynamic outsourcing trends, resulting in another record year of new business wins and continued strong client retention.

We have a strong, balanced, and sustainable growth model across the Group. Our size, strength and scale enable us to continue investing in our operating model, further enhancing our competitive advantages. We have exited nine tail countries to focus on markets with the greatest growth opportunities and our strong cash generation continues to fuel investment in our business through capex and attractive M&A.

The business is in great shape operationally and financially and well positioned for a more focused growth phase. Despite some macroeconomic uncertainty, favorable market dynamics continue and, with a global market share of less than 15% and around 50% of the market still self-operated, we have an exciting structural growth opportunity. We are confident that the focus on our core markets, the ongoing investment in our market-leading offer and our proven processes will support high single-digit organic revenue growth in 2024.

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

2023 full-year financial highlights

Underlying operating profit growth of 30% delivered through:

• Organic revenue growth of 19%, balanced across all regions and sectors.
• Operating margin of 6.8%, up 60 bps year on year.

Capitalizing on significant market opportunities with strong focus on growth:

• Signed £2.7bn of new business, with first-time outsourcing accounting for c.50%.
• Mobilized net new business of 4.6%, with strong client retention rate of 96.5%.

Underlying operating cash generation of £1.8bn supports strong balance sheet and flexibility for capital allocation:

• Invested £1.2bn in the business in capex (2.9% of underlying revenue) and M&A (net spend c.£300m). 
• Returning surplus cash through a further share buyback of up to $500m, to complete in 2024 subject to M&A activity.

Statutory results

• Revenue increased by 21.6% reflecting the strong trading performance and favorable exchange rates.
• Operating profit, including charges relating to business acquisitions and reshaping its portfolio, which are excluded from underlying operating profit, increased by 26.1% to £1,891m.

2024 outlook

Underlying operating profit growth toward 13% delivered through high single-digit organic revenue growth and ongoing margin progression.