26th Mar 2019 14:17
LONDON (Alliance News) - Moody's Investors Service on Tuesday praised Compass Group PLC's finances as it issued a Prime-2 short-term rating to the catering firm.
Moody's has also reaffirmed Compass' A3 long-term debt ratings and the (P) A3 rating of its GBP4 billion euro medium-term note programme.
The ratings reflect, Moody's said, Compass strong market positions, its diversified industry mix and solid performance, high organic revenue growth, limited customer concentration, "robust" free cash flow, and "solid" liquidity.
Other considerations were its high returns to shareholders, a reliance in North America for profit growth in the next two to there years, as well as cyclical pressure in commodity segments.
"Compass is the market leader in contract food service in the US, with its scale and efficiency advantages enabling the company to gain share in a market which is increasingly shifting towards outsourced solutions," said Moody's.
"It also has strong positions outside the US, benefiting from recent operational improvements to deliver growth in Europe, and with an expanding market in emerging economies," continued the agency.
"These factors have delivered strong trading performance over a sustained period with organic revenue growth rates averaging 4.4% since 2008, strong results over the economic cycle, and improving profitability."
Compass also has a "conservative" financial policy, with its shareholder returns delivered whilst maintaining leverage at its targeted levels, and Moody's expects this to continue in future.
The ratings have a stable outlook, which Moody's said reflects a belief Compass will continue solid organic revenue growth and also potentially expand margins.
"It also reflects Moody's expectation the company will maintain a consistent financial policy, which will maintain its strong financial metrics at broadly stable levels," added Moody's.
An upward revision to the ratings could come from a lowering of debt levels alongside positive organic growth, while a downward rating could come its net debt rising against earnings and cash flow levels.
Compass shares were 0.6% higher in London on Tuesday afternoon at 1,752.70 pence each.
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