Compass confident after strong quarter

published 26 July 2012

Shares in catering firm Compass rose after the firm said that following a good performance in its third quarter its expectations for the full year remain positive.

In particular, North America and the Fast Growing & Emerging regions grew strongly, boosted by the commencement of several large new contracts, while conditions in Europe were difficult.

Constant currency revenue for the group increased by 7.8% in the April to June quarter compared to the same period last year, with organic revenue growth of 5.7% (5.3% for the nine months to June 30th).

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In a statement the company said: "Our ongoing focus on driving efficiencies in food and labour costs delivered further benefits. These were partly reinvested in growth opportunities, in particular in the Fast Growing & Emerging markets, and they also helped us to manage the difficult economic conditions and negative like-for-like volume trends in parts of Europe. Overall, the operating profit margin in the third quarter was slightly above the same period last year. Free cash flow conversion was strong."

In North America, the firm saw organic revenue growth of 9.0%, while in Europe and Japan organic revenue declined 0.9%, as the impact of the tougher economic environment in Europe was partially offset by a stronger performance in Japan relative to last year.

In Fast Growing & Emerging markets, organic revenue growth remained high at 12.2% with good levels of new business and robust like-for-like revenue growth across the region.

In the financial year to date the firm has invested £189m in acquisitions.

"As we look out to the remainder of the year, we expect to see continued good performances in these regions and the pipeline looks encouraging. However, the challenging economic conditions in Europe will continue to put pressure on like for like volume and we are working hard to identify more efficiencies to manage this," the firm added.

"Overall, we believe Compass is very well placed to capitalise on the significant structural growth opportunities in both food and support services around the world. We have an excellent business in North America and we are expanding our presence in the Fast Growing & Emerging markets, which will remain a focus for future growth. We will drive further cost efficiencies and this underpins our expectation of delivering margin growth over the medium term."

The share price rose 1.99% to 665.50p by 09:03.