Sunday, 17 May 2015

Compass Group interims

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 Group released their interims on 13 May and reported sales increased by 4.7% to £9,062m, while organic revenue grew 5.7%, boosted by 8.2% growth in North America and Fast and Emerging growth of 7.7%, with Europe & Japan increasing 0.9%.  Total organic growth was in line with their first quarter, commented on here.
Underlying operating profit was £688m, an increase of 6.3% and reported operating profit was £674m up 6.5%.  It was also positive to see operating margins improving by 10bps to 7.6% and management feel there is more to come here.  Underlying EPS at 28.4p was up 12.3% and reported EPS increased by 11.7% to 27.6p.
Free cash flow at £302m was similar to last year, but insufficient to cover dividends (£295m) and the high priced buy-back of their own shares (£139m) - the main reason for the increase in net debt from £2,414m to £2,699m.
An interim dividend of 9.8p was declared, a healthy increase of 11.4% on last year. 
Management have stated that "...expectations for the full year remain positive and unchanged. However, the economic environment in some of our emerging markets is uncertain, and lower commodity prices are impacting our Offshore & Remote business..."  A similar statement to February's first quarter IMS, that prompted me to state that I would expect that organic growth might pull back to a 3-4% range for the year.  Obviously with a second quarter in a row of 5.7% organic growth there is a lower risk of this, but I am still expecting some pull back.

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