Compass Group Plc Ord New

Good morning and welcome to our 2025 half year results. We've delivered another strong first half performance. A double digit increase in profit was driven by 8.5% organic revenue growth and further margin progress. And in line with our algorithm, we're continuing to achieve profit growth ahead of revenue growth. Importantly, net new business was 4.4%, within our 4-5% target range for the fourth year running now. Our client retention rate continues to be strong, at above 96%, and the outsourcing market remains buoyant, with 45% of new business wins now coming from first-time outsourcing. We are investing for growth and have acquired attractive businesses to help expand our addressable market through further subsectorization. Following the reshaping of our portfolio, we're now an even more focused business. Our diverse sector portfolio, wide-ranging client base, flexible operating models, and significant local purchasing scale all provide the business with significant resilience. We have flexibility to mitigate macroeconomic challenges, and we're well-placed to capitalize on any increased outsourcing opportunities that may arise. I'll come back with more details on how we're successfully executing our strategy later. But first, over to Petros to give you more details on the financials.

Thanks, Dominic. Good morning, everyone. We've made great progress across our key metrics in the first half, delivering another strong financial performance. We were pleased to deliver double-digit growth in operating profit and earnings per share. Let's start by looking at the components of revenue growth. Mobilized net new business continues to be excellent and in the middle of our 4-5% target range. Like for likes remains strong at around 4%, with pricing and volumes normalizing as expected. We continue to expect positive volume growth driven by our attractive value proposition, increased use of technology, and additional events. And whilst we are not immune to micro-pressure, our significant value gap to the high street drives higher participation in our restaurants, helping to mitigate any potential volatility. As you know, following our portfolio reshaping, we combined the rest of the world with Europe to form a new international region. Both North America and international delivered strong organic revenue growth and margin progression with double-digit growth in operating profit. Operating profit was up by nearly 12% to over $1.6 billion. Interest increased to around $150 million, mainly due to higher debt. We continue to expect our interest charge to be around $300 million for the full year. As anticipated, our effective tax rate was 25.5%. This is also expected to be the rate for the full year. Earnings per share were up by nearly 11% in constant currency. Turning to cash now, CAPEX was 3% of revenue and we continue to expect CAPEX to be around 3.5% of revenue for the full year. The working capital outflow reflects the usual seasonality of our business and the timing of events in sports and leisure. We expect our working capital position to improve in the second half and be broadly flat for the full year. Our strong cash generation and balance sheet gives us the most capacity in the industry to invest in growth. In the first six months, we invested $1.7 billion in CapEx and M&A. During the period, we acquired Depor in France and Forest Service in Norway, which accounted for most of our M&A spend. Leverage ended the period at 1.5 times net debt to EBITDA, as we expected. We anticipate leverage to reduce at the full year, depending on the M&A activity. M&A is integral to our strategy of unlocking further growth opportunities in our core markets. Targets are normally sourced locally, having been known to us for several years. We've already established relationships with them, and they are a good cultural fit to Compass. We look for quality brands with complementary capabilities and entrepreneurial management teams. They typically come with strong revenue growth, synergy benefits, and attractive cash flows. As you know, in recent years we've increased our M&A focus on Europe. Recent acquisitions such as CH&Co in the UK and Hoffmans in Germany are performing well and are delivering their investment cases all better. Our capital allocation model is consistent and well-known. As a growth business, our priority is to continue to invest in the business through CAPEX and M&A. After paying an ordinary dividend, we then distribute any further surplus capital to shareholders, whilst maintaining a strong balance sheet. Our fiscal year 2025 guidance is unchanged. We continue to expect high single-digit operating profit growth, driven by organic revenue growth above 7.5%, with continued margin improvement. Now, back to Dominic.

Thanks, Petros. We operate in an attractive market where changing consumer trends and increasing complexities help us unlock first-time opportunities. Many organizations that are facing cost pressures are looking for efficiencies, and as experience has shown, this can trigger further outsourcing. The market opportunity plus our unique competitive advantages such as sectorization, procurement scale and operational expertise give us the best combination to continue gaining market share. Looking ahead, emerging megatrends are offering further growth opportunities in all sectors. Whether it's personalized integrated nutrition, aging populations, lifetime learning, or the global reach of major sports and events franchises, these trends are creating growth pathways for us in the future. For some time now, we've been expanding our market in North America through the organic creation of 14 mini sub-sectors with niche expertise. They capture parts of the market we couldn't reach before. Our sectorisation is being further enhanced through strategic M&A, which supplements or supports our existing capabilities within core markets. Recently, we've added DuPont and 4Service to our portfolio in Europe, following our blueprint of buying best-in-class businesses with exciting growth potential. Over time, we've proven M&A creates value by accelerating growth, increasing procurement scale and removing overhead costs. It's a key part of our business model as value compounds year after year. We have a resilient business mix with many different clients across multiple industries. Our diverse portfolio of sectors benefits from mostly captive audiences and limited exposure to discretionary spend. History has shown us that pressures in the short term often leads to more outsourcing and higher win rates. as clients and consumers look for help navigating cost pressures. Our value gap to the high street continues to grow, from procurement scale and operational expertise, providing an even more attractive offer to consumers. North America has a resilient operating model. With the vast majority of procurement sourced locally, the market is well insulated from import tariffs. Our chefs have full autonomy over the menu and work together with our procurement experts to find alternative ingredients or to price it accordingly. In healthcare and education, the majority of our clients are privately funded and therefore mostly insulated from potential federal spending cuts. Technology and data are transforming the client and consumer experience, reducing friction and increasing personalization. There's even greater potential in our back of house processes. Advanced digital tools are optimizing performance by integrating processes such as fully costing meals, on-demand labor scheduling, and real-time management information. Some of you may be familiar with the Intuit dome, home to the LA Clippers. Facial recognition technology powers the entire fan experience. Through our partnership with the stadium, we leverage camera technology for all food and drink purchases, offering a seamless experience with no need for a device. Positive market trends and ongoing investments in growth will continue to drive strong new business wins. The annualized new signings stands at $3.6 billion, and the pipeline is attractive with a blend of first-time outsourcing and market share gain opportunity. With our focus on pre-empting initiatives and the improvements in Europe, retention is trending above 96%. It's the combined strength of these factors which underpins our expectation for net new business growth to remain within the 4-5% range. We've said before, margin growth is incremental and continues to rebuild back to our peak and beyond. The improvement is driven by scale, retention, overhead leverage and unit performance. There's potential everywhere to leverage fixed costs and back-of-house tech solutions. Europe will continue to benefit from expanding scale, retention gains and growth maturity. In summary, our resilient business model and favourable market dynamics give us confidence in our medium-term growth algorithm. We expect mid to high single-digit organic revenue growth, with margin progression back to our peak and beyond, leading to profit growth ahead of revenue growth, as we continue to deliver long-term, compounding shareholder returns. Our strong half-year results highlight the resilience of our business model. Our competitive advantages, enhanced by our world-class talent, create a powerful circle of growth and value creation. With significant growth opportunities, clear priorities, and energized teams, we're excited for the future. Now over to Q&A. The operator will share instructions on how to ask questions. Please remember that you must be connected by phone to ask a question. Operator, over to you.

Thank you. Ladies and gentlemen, this call is being recorded. If you would like to ask a question, please press star one on your telephone keypad. Again, to ask a question, please press star one. And our first question today comes from Jamie Rollo from Morgan Stanley. Please go ahead, your line is open.

Thanks. Good morning. Three questions, please. Just digging a bit into North America, obviously a very good second quarter organic sales growth of 7.5%. But it did slow quite sharply from the first quarter, which I think was 9.7. And you saw a much, much smaller, only, I think, 20 basis points slowdown in the international division. So why the bigger slowdown in the U.S.? And are you seeing any underlying weakness or any change in behavior there? Secondly... Just a more technical question. On the revenue line, it looks like the impact of disposals and M&A were actually a positive 70 basis points in the half, and the full year guidance is still minus 100 basis points. Are you still sticking to that? Should we still expect something like negative 3% in the second half to get to that number? And then finally, just on the cash flow, the working capital saw an outflow in all three lines, which is a bit unusual. It looks like some of that could be contingent consideration on past M&A, but if you could please talk about that and your expectation for full-year working capital. Thank you.

Thanks, Jamie. Good morning. I'll take the first question, then let Petros take the second and third. Look, we're not seeing any underlying weakness or any change of behavior at all in North America. The second quarter was very solid, as has P7 trading been. So we're very pleased with what we're seeing there. Net new in North America is strongly within the range of 4% to 5%. Remember, we are lapping a leap year last year. And we're also, we've had a few sort of weather-related and other events in the U.S. in that quarter in particular. So we think the underlying is a continuation of the trends that we saw in Q1 and is our expectation as we go into the second half. With regard to international, we've just seen a slight acceleration in net new in the second quarter, which effectively we've seen a continuation of the net new trends in North America. So very positive in net new for international. And it's slightly strong in that new quarter for us as a group.

Petros. Morning, Jamie. On the disposals, no change to what we discussed in Q1. It's a bit of a timing in there. Remember, we closed all of the Latam disposal and some other markets January, February. There will be a drag in the second half, so consistent to what we discussed before. On cash flow, what you see in working capital, you see a seasonal outflow we have. You see a bit of a timing of events, sports and leisure, calendar change between half one and half two. We remain confident. We know this trend will reverse the second half and we remain on track on a broadly flat working capital for the full year.

Very clear. Thank you very much. Thank you, Jamie.

Thank you. And we're moving on to a question from Simona Sarli from Bank of America. Please go ahead. Your line is open.

Yes, good morning, and thanks for taking my question. So first of all, something on client retention that was at 96.2%. Can you provide a little bit more color if that was effectively stable in Q1 and Q2, and is there any scope for further improvement in the second half of the year? And then if you can give a little bit more color again, going back to the international in trends between EMEA and rest of the world. And lastly, on share buyback, in case there should be no further M&A until the year end, is there still any scope for potentially announcing a share buyback? Thank you.

Hi, Simona. Thank you for the questions. Again, I'll take the first question and then give the second and third to Petros. Look, on retention, we're really pleased. We continue to trend above 96%, as you rightly say. It's, again, a continuation of the trends we saw in the first quarter. We're hopeful that we can continue to do better from here. Retention in our international region is at record levels. Our forward-looking retention based on our retention performance in the first six months of the new financial year, as it were, is tracking above our best levels in North America as well. So, you know, we feel good about that. That gives us the confidence that we can sustain the 4% to 5% net new business run rate. not just in the balance of this year, but into 2026. You know, as we said in the statement today, that's the fourth year that we've been sustaining those net new contract win rates in our reported results and not just in the forward-looking indicators, which we feel it really is the underpin of the quality of this business. Thank you, Simone.

Over to Petros. On international, both EMEA and the rest of the world perform strongly. within the range of net new with good, you know, pricing and good volumes. And actually, on retention, we're sustaining, you know, an improved level of retention to historic levels in mid-'90s consistently. When it goes to the buybacks, I think you heard us talking about us prioritizing CapEx and M&A. I think the same goes true. There might be a couple of opportunities for the second half. If they mature, we'll take them. If not, we're going to rebalance between buybacks and M&A as we go forward.

Thank you. Thank you. And from Jefferies, we now have Simon Le Schiepple with our next question. Please go ahead. Your line is open.

Good morning. I have three, please. First of all, on the U.S. retention, it improved nicely in H1. Could you perhaps comment on the performance across the different sectors? I mean, any particular sectors driving this uptick? And are you confident to maintain this 97% in the second half? Secondly, on volumes, it was up 1% in H1. Are you confident to still have positive volume in the second half? And lastly, any update on inflation and how does it track compared with your expectation and what does it mean for your kind of guidance of 2% to 3% pricing for the year? Thank you.

Thank you, Simon. Yeah, look, on retention, the retention performance is strong across all of our sectors in the US. We're really pleased with that. It's a nice, balanced picture. We focus very, very much on, you know, you've heard us talk about our SAG process, the Strategic Alliance Group, which focuses on the key or larger accounts. That covers about 70% of our business. We continue to deploy our processes with discipline there. In fact, we are at record levels of preempt, which underpins those SAC processes and gives us great confidence on our retention rates. What we're also doing now differently in the US is we focus on the tail of other accounts and we deployed a number of new processes which allow our operators to focus even more using effectively a satellite process and we're seeing improved retention from that. We've always been at industry-leading levels of retention in North America and they've led the way in the Compass business. We're never complacent, but we'd like to think that we can continue to make marginal improvements from here through greater focus. Yeah, volumes were positive in the first half, 1%. We expect that positive trend to continue into the second half. You know, we have talked to you previously that in like for like, there is a degree of normalization of the sporting calendar, a normalization of return to office. And also, as Petros, I'm sure, will come on to say, you know, we are pricing slightly lower as we see inflation fall. That's all within like for like. But specifically within volumes, we continue to anticipate a positive outlook for the half year, the second half year.

Morning, Simone. On inflation, very consistent to what we have guided and what we took, you know, in the forecast. Remember, Q1 was a normal three. In Q2, a big touchdown. We do expect this to be within the range of 2% to 3% in the second half. Two realities there. You know, Europe, you have a bit of lower inflation. In the U.S., we see more volatility. And if you look at the 10-year Treasury bonds, net-net 2% to 3% is the right range for us.

Thank you.

Thank you. And up next, we have Ivor Vilfakelli from UBS. Please go ahead. Your line is open.

Thank you. Good morning, everyone. You mentioned that uncertainty could be beneficial for first-time outsourcing. Given that we have had a couple of months of uncertainty, have you actually seen any uptick in tendering? And if not, from your historic experience, when might we actually expect, after what sort of period of time, might we expect tendering levels to increase? Secondly, you mentioned vending as a potential area of growth. And my understanding is that it should be a higher margin business, potentially even significantly higher margin. So it'd be great if you could touch on a little bit on how the growth from a top line and a margin perspective is trending in that, both in the half and looking forward, and then maybe slightly longer term. I mean, you do have the ambition to grow at mid to high single digit revenue growth in the future. But given the bigger you're going to get, the harder it's going to be to maintain. So given that that opportunity is still there, why not grow your new business at a higher rate? What are the obstacles for that? And why not go at 10% rather than maybe the 8% that you're doing?

Thank you. Thank you, Eva, for those questions. Yeah, look, first of all, on the question of the sort of lead time of the global macro, the uncertainty, as you call it, feeding into an acceleration in that. It's an art, not a science. It creates more opportunity for us to have conversations with our existing clients and gives us an opportunity for greater preempts. So that's something that we are working on at the moment. It creates the opportunity to have more conversations about there being a tipping point in the environment for clients to bring their particularly self-operated business to market for the first time. But that's not going to happen in a matter of weeks or even months. That is going to be over a couple of quarters. That's certainly what we saw last time in the global financial crisis. It was probably about a half year before we started to see that pick up in the win rates and the scale of business being brought to market. So that would be broadly our expectation again. I have to say at the moment I don't think this level of uncertainty is as much of a trigger as we've previously seen. So we think the environment is absolutely fine. We've got super pipelines in all of our regions. Our win rates are improving. We're very, very excited about the growth opportunity ahead of us. And, yeah, look, if we can use this to our advantage in those conversations and use it as a bit of an accelerant, that would be super too. So, look, we're positive on the outlook for growth. With regard to your point on vending, yeah, look, parts of our business portfolio of services and countries do have different margin profiles, you know, and therefore we seek to grow where we've got the greatest opportunity. but it is part of a portfolio. And yes, you are right, vending has been a good contributor to our margin progression. As we've always said, we try and create margin wherever we can, and we reinvest it for growth whilst growing profit ahead of revenue growth. And I think that formula works really well for us, and vending would be one of the contributors of that margin that we can reinvest across the business. And I think that's why you see the consistency of net new delivery in our business because we have that sort of tried and trusted formula of reinvestment and deploying margin where we can create it. But it is also why we're very interested in micro markets and vending across other regions and countries. We've got a great blueprint in North America. We've now entered the UK. We've made a number of acquisitions which have brought us both the technology and the regional and national reach so that we can provide a vending and micro-market solution to our clients. We're going to continue to build that capability first in the UK, and then we'll look where else we can deploy it. And with that, hopefully, will come margin opportunity and, again, the ability to sustain our broader growth. And then finally, look, great question on the growth opportunity. We are very confident that we can sustain this growth algorithm. Look, we can see the pipeline ahead for many years. We know the size of the market. We know the huge opportunity in first-time outsourcing. We know the fantastic opportunity that we've got from taking share. What we're super focused on at the moment is continuing to build that total addressable market in all of our country sectors and regions so that there's always headroom for growth. We talk about that all of the time with the U.S. business, how to answer your question, how we can grow at scale as the absolute numbers get bigger, how can we sustain this algorithm. But the point I would make is there is a balance to all of this, right? And, you know, if we get ahead of our skis and we rush for growth, we risk mobilizing badly. We risk not having the overhead structures to support that. We'd need to invest one-off to do that, and we'd rather grow incrementally and sustainably and have a consistent profile. And that's why we feel that this, you know, 4% to 5% range plus two to three on um on like for like and a point or so ahead of that from from from profit growth and margin expansion consistently delivered is a much more sustainable predictable and reliable model uh and the one that we feel is right for us that's great thank you very much thank you and our next question now comes from andre juliard from deutsche bank please go ahead your line is open

Congratulations for this and thank you for taking the question. Two follow-up questions, if I may. First one is about labor in the U.S. particularly. Do you see any tension coming up with the actual environment in the U.S.? And do you have any fear about potential inflation coming on that or potential tension to find some people? Second question about the balance sheets. You are guiding to remain around 1.5 times net debt on EBITDA. Could you consider to go a little bit higher on that side or not? Thank you very much.

Thank you, Andrea, for those questions. I'll take the first and then Petros on the balance sheet. Yeah, look, you're right, but I think that on labour in the US, it's a positive for us, right? if if labor's tight if it's costly costly it makes self-operation harder it makes being a smaller player harder we believe that we can address those challenges better than anyone um i'm delighted that our retention rates have improved month over month now for nearly two years across all of our regions and that really tells me we're getting something right in terms of um quality of employment conditions we offer, pay rewards, benefits, the environment that we're offering to our colleagues and the opportunities they have to grow their careers for the longer term. Our labor turnover rates sit at around 30 to 35% in most parts of our business, which is extremely low relative to other hospitality businesses and particularly relative to the QSR and high street restaurantation industry. That level of retention gives us greater quality of service, and it means we have more opportunity to work with our colleagues on how we can build their careers for the longer term. So, you know, look, you know, we've often said a bit of inflation is good for us. A bit of tension in the labor pool is good for us because it's how we can differentiate and prove to our clients and to our colleagues that we're the best partner for each of them.

On balance sheet, I think you have seen the first half will have been 1.5. We expect this to reduce in the second half as we go subject to M&A. Our range is appropriate. It gives us the capacity to continue to invest in the business, and I think the 1.5 is the right range. Okay, thank you.

Thank you. And we're now moving on to a question from Jafar Mestari from BNP Paribas. Please go ahead. Your line is open.

Hi, good morning. I have three questions, if that's all right. Firstly, on the full year guidance, at least 7.5% for the full year after which you delivered in this H1, it means at least 6.5 in the second half. And I appreciate this is a floor. Can you talk maybe about some of the ranges in your assumptions that could make 6.5 the right number? You need to be at the very, very low end of your net new and pricing ranges and no contribution of volume. So just curious, what's the scenario in which H2 is only 6.5 for the group? And then just slightly on margins, you expected to make year-on-year and sequential progress. This half at the group level, you have achieved that. In international, there was no sequential progress. Is there a marked seasonal margin pattern in the new international division that we should be aware of? There was some of that in the rest of the world previously. I don't think in Europe there was any marked seasonality. So is it just... new reporting or is there any ramp up there, synergy delivery, any other reasons for H1 to be sequentially down? And just on U.S. client retention, you gave some more forward-looking color than usual, which is very helpful. So I just wanted to clarify those figures. I think you said forward-looking retention based on the first six months is at historical highs. Does that mean your success rate in the first six? six months of the year was higher than usual. Is that comparable to the metric that some peers use where they say first day of the fiscal year retention is 100% and then we work down? Or do you mean you could be at 97% and stay there over the next six months as well? Thank you.

Thank you, Jafar. Look, I'll answer the first and third and then ask Petros to speak to margins. Actually, taking the US client retention first, The answer to your question is yes. We are trending on a six-month basis at historical highs, which means that we are retaining all contracts over that six-month period that have either been preempted or gone out to bid at levels above anything we've experienced before. We don't normally talk to that. We prefer to talk to the actual in-the-year retention impact. But I think that gives you a good indication that if we can sustain those levels, then we should be improving, we should be performing strongly in retention in North America on the go-forward basis. In terms of four-year guidance, we're really, really pleased with the first half. We're talking about retaining net new in the 4% to 5% range. We'll continue to price, and we see some positive volume. So look, 7.5% on a four-year basis is a flaw we would expect to see better. But look, as we all know, the world's in a certain place at the moment, and we'd rather have a touch of conservatism at this point and see how we go in the second half.

Good morning. On your Martin question, you see good progress both in USA and international, very consistent to showing more progress in international. You do see progress versus last year, you see progress versus the second half of last year, and we would expect to continue to see progress as we talk in half two.

On international Is that the 5.8% margin for H1 this year?

Yeah, that's exactly right. It's 5.8, 5.8 and last year was 5.6. Exactly. It's going to be the basis point for last year.

Yeah, correct. H1 and then H2. Yeah, my question was H2 last year was higher. In the rest of the world, there was this seasonal pattern where H2 was always higher. Just asking if in the new international division, there's also going to be a marked seasonal pattern where...

I think it's immaterial. I'm not sure there's anything in there.

Geoff, after the disposal of the markets, the rest of the region is less than fighting a sense of our total portfolio. It's going to have very little impact on the profile of the international region, with Europe included.

Okay, sir. Thank you.

Thank you. Our final question for today comes from Neil Tyler from Redburn Atlantic. Please go ahead. Your line is open.

Good morning. Thank you. And it will be just one. Business and industry, please. You mentioned in the release the strength of net new continues in that business, which has obviously been a theme for some time in a market that's already very well penetrated. Can you help us understand the contributors to that net new, whether that's equally coming from first-time outsourcing or perhaps from competitors or whether you know really the i suppose the tan the rate at which the you know the adjustable market there is is growing faster than you know certainly i had anticipated historically thank you

Yeah, thank you, Neil. That's a great question. Yeah, look, BNI is a super sector. It really is. It's been the core of our business and continues to perform really strongly. You know, why is that? We see new institutions, we see clients expanding their sites, we see first-time outsourcing opportunity, we see share gain opportunity. And we also see an expansion of services, right? So, you know, the ability to sell in micro markets and vending, to sell in the fine dining and catering and hospitality solutions. So I think what we've learned with BNI is, you know, once you're anchored with a client, you continue to expand on their estate with other service offers within food, as well as having all of the TAM market opportunity that you describe as well. So, you know, I think, you know, one of the things we've learned is, well, certainly we never complacent, but never be complacent about the call because there's so much opportunity that continues. And, you know, we see that not just in the near term, but we see it in our pipelines and the opportunity over time as well. And that's what makes us so excited about the business.

Thank you. That's very helpful. Thanks a lot.

Thank you. And that concludes today's Q&A session. So I'd like to hand back over to Dominic Blakemore for any additional or closing remarks.

Yeah, thank you very much. And thank you all for your questions this morning. Before we conclude, I'd like to share a few final thoughts. We operate in a highly attractive market where emerging trends and new capabilities we've acquired continue to unlock significant growth opportunities, as you've heard us say this morning. And our business is resilient, supported by a flexible operating model. It helps us mitigate any volatility we might see. And our experience has shown us that macro pressures can lead to increased outsourcing and accelerated growth in the medium to long term. Thank you very much. Enjoy the rest of spring and summer, and we'll speak to you again in July.