30th Jul 2014 07:23
LONDON (Alliance News) - Foodservice and support services company Compass Group PLC Wednesday said its outlook for the current financial year remains unchanged and positive after it booked 4.0% comparable organic revenue growth in its fiscal third quarter and 3.9% for the first nine months of the year.
Its growth was driven by North America, while its emerging and fast growing markets suffered from the weakening economy in Australia. The rate of decline in Europe and Japan slowed further.
However, it also warned of the hit it is taking from the strength of sterling on its results, which are denominated in the currency. It said that if current currency rates were to continue through its fiscal fourth quarter, then it would have wiped GBP92 million, or 7.3%, off its fiscal 2013 underlying operating profit and GBP1.20 billion, or 6.9%, of its fiscal 2013 revenue.
In a trading update for its fiscal 2014 third quarter to end-June, the company said it had continued to drive efficiencies across its business, reinvesting them in growth opportunities and in helping to manage volume declines in parts of Europe.
"They are also enabling us to deliver further improvement in the operating profit margin, which has increased by 10 basis points in the quarter and for the nine months to 30 June 2014," it said.
Regionally, it said organic revenue growth was 6.5% on a comparable working day basis in the third quarter in North America, boosted by new business and high retention rates. The figure for the first nine months of the year was 6.4% growth, although like-for-like volumes were broadly flat.
It said the rate of organic revenue growth decline in Europe and Japan had continued to slow in the third quarter, falling 1.2% compared with a 1.8% decline for the first nine months of the year.
The company was hit hard by the economic downturn in Europe as companies went out of business or tried to reduce spending on outsourced services like catering.
"The contract exits related to the 2012 cost reduction programme were largely completed during the third quarter and volumes, although still negative overall, are showing signs of improving. The investments we have made in sales and retention teams are being reflected in an encouraging pipeline of new business," Compass said in its statement.
It said its operating profit margin increased a further 10 basis points in the Europe and Japan division in the third quarter, meaning the margin is up 20 basis points in the first nine months of the financial year.
Its fast growing and emerging markets were hit by a slowdown in the Australian offshore and remote sector. Organic revenue growth for all the markets was 6.5% in the third quarter, compared with 8.4% growth for the nine-months as a whole.
However, it reiterated that it is pushing up margins in the region.
"As stated in our interim results in May, the benefit from the investments made in the region has started to flow through to the operating profit margin, which increased by 30 basis points in the third quarter," it said.
Excluding the hit from sterling, it said it remains positive about its outlook for the financial year to end-September as a whole.
"As we look out to the fourth quarter, our overall expectations for the full year remain positive and unchanged, notwithstanding the translation of ongoing movements in foreign currencies. The pipeline of new contracts is encouraging and our continued focus on efficiencies gives us confidence in another period of delivery," it said.
"Compass has had a good third quarter. We have delivered healthy levels of organic revenue growth and our ongoing focus on driving efficiencies has resulted in a further increase in the operating profit margin in all three regions," it added.
Compass Group shares were down 0.3% at 1,005.00 pence early Wednesday.
By Steve McGrath; [email protected]; @stevemcgrath1
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