Thursday 26 September 2013

Compass Group trading statement

Compass Group

Provides contract food, catering and support services to a wide range of commercial businesses and government departments operating in over 50 countries.  I have a holding in my income portfolio (epic code: CPG).



Compass issued a trading statement today ahead of its year-end.  For the full year, they expect organic revenue growth at constant currency to be just over 4%.  If you Include the contribution from acquisitions, revenue growth is expected to be towards 4.5%.
 
The underlying operating profit margin for the full year is expected to be over 7% for the first time, and 20 basis points higher than last year's 6.9%.  They also mention that free cash flow conversion remains strong.
 
By territory North America's organic revenue growth will be around 7.5% and the operating margin is expected to improve by 10 basis points.  Europe & Japan's organic revenue growth for the full year will decline by around 3% but the operating margins to improve by 50 basis points.  Fast growing & emerging markets' organic revenue growth for the full year is expected to be around 10%, but the margin is expected to decline by around 20 basis points compared to last year.
 
Looking ahead to next year, management state that the pipeline of new contracts in North America and Fast Growing & Emerging is encouraging and they expect to see further good performances, but economic conditions in Europe to remain challenging.
 
Another good performance from a well run business that has delivered sustainable dividend growth.  It's just a pity they persevere with a £400m share buy-back programme at a P/BV that makes it unattractive to investors.

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