Compass announces new buy-back programme for 2013

As expected, contract caterer Compass Group saw profits break through the billion-pound barrier in the 12 months to the end of September, prompting the board to push up its full-year dividend and announce a new share buy-back programme.

Underlying pre-tax profit jumped 7% year-on-year on a constant currency basis to £1,093m, slightly ahead of the £1,074 consensus estimate. Earnings per share came in at 42.6p, up 10%.

Meanwhile, underlying revenue rose by 8% to £16.9bn, broadly in line with forecasts, even if some commentators are talking of a slight disappointment. The company put its top line growth down to strong performances in North American and Fast Growing & Emerging geographies which were driven by good levels of net new business.

Like-for-like revenues gained 2.1% year-on-year, primarily as a result of price increases "reflecting the ongoing impact of food cost inflation", the company said. In spite of rising costs, the underlying operating profit margin was flat at 6.9%.

The board said that is has pushed up its full-year dividend by 10% to 21.3p per share.

Buy-back

The company said it had another year of strong cash flow generation, "which has enabled us to invest in the business and acquisitions, and reward shareholders". Free cash flow increased by 10% to £760m.

As a result of the strong results, the company announced a further £400m share buy-back programme for the 2013 calendar year, following on from the £500m of repurchases for 2012.

Chief Executive Richard Cousins said: "We've continued to generate significant cost efficiencies across the group, which are enabling us to reinvest for growth and manage the difficult economic conditions in Europe.

"Overall, the prospects for the business around the world are good and I remain confident that we will continue to drive revenue and margin growth."

Analyst Kevin Lapwood from Seymour Pierce said this morning that Capco's outlook is positive and it expects Compass to "continue to improve organic growth and margin".

He added: "Acquisitions will continue to feature in the coming months and the company continues its attention to the efficiency of the balance sheet. The further return of cash is very positive."

Net debt at the end of the period was £973m, much lower than the £1,020m that Seymour Pierce had expected.