Compass Group (LON: CPG ) on Tuesday reported in-line results but flagged concerns over exceptional charges and cautious forward guidance.
Compass reported fiscal 2024 revenues of $42.2 billion, reflecting organic growth of 10.6%, slightly above the consensus of 10.5%. EBITA matched expectations at $2.998 billion, with underlying margins in line at 7.1%.
The company also posted an EPS of 119.5 cents, underpinned by a 13.7% increase in its proposed dividend per share to 59.8 cents.
Free cash flow rose 15% year-over-year to $1.74 billion, and net debt stood at $5.39 billion, maintaining leverage at 1.3x.
A point of concern was the $160 million charge related to Compass’s discontinued European ERP program.
This included a $146 million non-cash impairment of head-office software assets, which RBC Capital Markets noted could distort future comparisons by reducing IT depreciation and amortization charges.
Despite this, Compass expressed optimism about sustaining mid-to-high single-digit organic revenue growth and ongoing margin improvements in the coming years.
Outlook for fiscal 2025 includes high single-digit growth in underlying operating profit, supported by over 7.5% organic revenue growth and continued margin progression.
However, analysts at Morgan Stanley (NYSE: MS ) echoed concerns about near-term headwinds, including elevated costs, subdued non-North American margin recovery, and the absence of a new share buyback program.
While Morgan Stanley maintains an "overweight" rating, RBC Capital Markets is less bullish, with "sector perform" rating with a price target of 2,400 pence, below the current share price of 2,653 pence.
Geographically, North America remained the growth driver with 10.5% organic growth, supported by robust performance in the Business and Industry segment.
Europe and the rest of the world also contributed, but at slower growth rates of 11.9% and 8.5%, respectively.
Analysts underscored the company's dominant position in the North American market, which constitutes nearly 50% of the outsourced foodservice sector, while cautioning about the challenges posed by tough comparables and evolving macroeconomic conditions.
Shares of the company were up 1.6% at 5:30 ET (1030 GMT).