The Investment Column: Compass beats expectations after sports hospitality boost

IT'S CHRISTMAS time, and investors are taking an interest in Compass, the caterer that can legitimately claim to feed the world. Compass's results habitually deliver fatter sales, profits and margins year-in, year-out. Still, contracts worth pounds 8m to provide corporate hospitality at golf's Ryder Cup and Rugby World Cup helped it to beat even the highest City forecasts yesterday.

Last year is unlikely to prove an exceptional one. Compass is already signed up to feed the Sydney Olympics and can list a raft of new contract wins, including deals with Ford, for whom it is supplying vending machines in its UK factories.

But chairman Francis Mackay has his sights set much higher. Compass has but 2.5 per cent of the pounds 200bn global catering market, and he's greedy for more. The overall market is growing at just 1 per cent, but particular sectors - such as universities and hospitals - are growing particularly strongly, Mr Mackay says. Still, these are small, so Compass's attack must be based either on acquisition or straightforward competitiveness.

Yesterday's results showed it powering ahead on both fronts. Organic growth was a healthy 8 per cent. Compass spent pounds 184m on acquisitions, and another pounds 19m since year end, on catering and vending machine businesses in Germany, Brazil and Australia. Margins rose from 5.1 to 5.3 per cent.

It adds up to a business set to deliver compound earnings growth of about 17 per cent in coming years on current forecasts. With the market as a whole expected to deliver mid-teens earnings growth next year, falling to 10 per cent growth thereafter, Compass's earnings potential alone would justify a rating about 70 per cent ahead of the market's.

Analysts expect pre-tax profits of pounds 229m and earnings of 24p this year, which suggests that the shares, when put on a 70 per cent premium to the market's multiple, are worth just a little more than their 797.5p close.

But Compass also merits a premium for its sheer predictability - most forecasts of two years ago of 1999 profits were just a few points amiss. Given the benign outlook for the global economy in 2000, the shares are good value.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Sport
Two christmas trees ,Moonbeam (2L), Moonchester (2R) and Santa Claus outside the Etihad Stadium
footballAll the action from today's games
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
News
i100
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas