Compass delivers solid results but remains a ‘hold’ due to full valuation

As Compass reports full year results Ian Forrest, investment research analyst at The Share Centre, explains what it means for investors.

“Global catering group Compass delivered a solid set of full year results this morning which were in line with market expectations. Underlying revenues rose 4.1% to £17.1bn, while pre-tax profits increased by 5.4% to £1.16bn. The dividend was up more than expected, raised by 10.5%, and the company said efficiencies had boosted profit margins by 10 basis points. Investors have enjoyed a healthy return this year with the shares outperforming and £1bn returned in dividend payments and share buybacks.

“Compass saw strong organic sales growth in North America, which accelerated in the second half of the year, and good growth in emerging markets where there is a gradual move to outsourcing. However, Japan and Europe remain difficult with sales continuing to fall. We continue to recommend investors ‘hold’ Compass. The company has a good pipeline of new contracts and expects to see progress in all its regions, however much of this is already factored into the share price and the valuation looks relatively full.”