6th Feb 2020 08:33
(Alliance News) - Contract caterer Compass Group PLC on Thursday said it delivered first-quarter revenue growth helped by progress in North America.
Ahead of its annual general meeting on Thursday, Compass reported that organic revenue climbed 5.3% in the three months to December 31.
In North America, where the company reported "strong levels of new business wins and good retention rates", organic revenue was 7.5% higher.
In Europe, organic revenue was flat year-on-year, as anticipated. Compass said volumes softened during the quarter in the Business & Industry unit. It also cited a "less favourable" events calendar in Sports & Leisure.
"These headwinds were offset by a good performance from Turkey and our Central and Eastern European region," Compass explained.
The company added: "The cost action programme, which was announced in November, is progressing as expected and the benefits are offsetting the anticipated impact of lower Business & Industry volumes in Europe."
The company told AFP in November that it will axe up to 4,000 jobs over the next two years, as it looked to stem costs following an annual profit drop.
Compass held its guidance of organic growth in the mid-point of its 4% and 6% range, following an "encouraging" start to its financial year.
Compass however warned that revenue and operating profit in financial 2020 could take hits of GBP745 million and GBP61 million, respectively, if current currency rates continue, based on the effect those rates would have had on 2019 results.
"Currency movements, compared to the same quarter last year, had a negative translation impact on revenues and profit in the quarter of GBP71 million and GBP6 million respectively. If current spot rates were to continue for the remainder of the year, foreign exchange translation would negatively impact 2019 revenue by GBP745 million and operating profit by GBP61 million," the company explained.
It was also a busy quarter as far as M&A activity goes. Compass spent EUR40 million on acquisitions during the three months.
They said: "Our strategy is to make targeted and disciplined bolt-on acquisitions, focused on our core food offering, which strengthen our capabilities. There continues to be a pipeline of opportunities across the group."
It also got the EUR420 million takeover of Finnish group Fazer Foods over the line in January, after securing the green light from the European Union Competition Commission.
Compass added: "We also continued to make progress with the disposal programme and have recently sold 50% of our Japanese Highways business for a consideration of GBP55 million, with agreement to sell the remainder over the next three years. We expect to make further progress with disposals throughout the year."
Shares in the FTSE 100 company were 2.0% higher at 1,945.00 in London on Thursday morning.
By Eric Cunha; [email protected]
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