29th Sep 2014 08:27
LONDON (Alliance News) - Food and support-services company Compass Group PLC Monday said strong growth in its fourth quarter was again driven by North America and its emerging and fast growing markets, but said that while its full-year expectations remains "positive and unchanged", it has suffered a big hit from sterling strength.
Compass said that for the full financial year ending September 30, it expects its North America and Fast Growing & Emerging regions to deliver "healthy levels" of organic growth, while it said it also has seen improvements through the year in Europe and Japan.
It said it expects full-year organic revenue growth at constant currency to be 4%, while posting a 10 basis points increase in its operating profit margin.
"Organic revenue growth in the year has been driven by strong levels of new business wins, good retention rates and inflationary price increases," the company said in a statement.
However, Compass said the persistent strength of sterling throughout the year hit its overseas operations. It said at current rates, it expects a GBP1.18 billion negative currency hit versus its 2013 full-year revenue, and a GBP89 million hit versus its 2013 underlying operating profit.
"Compass has had a good year, delivering solid organic revenue growth and further margin progression. Our expectations for the full year therefore remain positive and unchanged, notwithstanding the translation impact of ongoing movements in foreign currencies," the company said in a statement.
The company said strong revenue growth in North America in the first half picked up further pace in the second half with particularly high levels of new business wins and excellent retention rates, buoyed by good growth in healthcare and sports and leisure. Compass said it expects organic revenue growth in North America to be around 6.5% for the full year, with a five basis points improvement in its operating margin.
In Europe and Japan, where the company has begun to see slowing rates of decline, the company said investments in the region are benefiting from increasing rates of net new business and a healthy sales pipeline. As a result, it said it expects its full-year operating profit margin to increased by 20 basis points on last year.
The company said that while its emerging and fast growing markets suffered from the weakening economy in Australia and softening volumes in various other markets, it has delivered a good organic revenue performance throughout the year, boosted by strong levels of new business in the second half.
"Growth in the region has been moderated by the second half slowdown in the Australian offshore and remote sector and, as a result, organic revenue growth in the region overall is expected to be around 8.0% for the full year," the company said.
Compass said its free cash flow conversion remains strong, and it intends to continue its share buyback programme during its close period between October 1 and November 25.
"Looking to the longer term, we remain excited about the significant structural growth opportunities in our markets globally and the potential for further revenue and margin growth," it said.
Back in May, Compass raised its interim dividend by 10% to 8.8 pence, and proposed capital return of GBP1 billion to shareholders via a special dividend and ongoing GBP500 million share buyback.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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