26th Nov 2019 08:15
(Alliance News) - Compass Group PLC on Tuesday said annual organic revenue growth beat its own targets in a strong annual performance, though it has warned on the economic environment in Europe.
Shares were 6.9% lower in early trade on Tuesday in London at a price of 1,927.50 pence each, the worst performer in the FTSE 100 index.
Chertsey, Surrey-based Compass is the largest contract catering firm in the world, with over 500,000 employees and operations in 45 countries. It also provides support services, such as cleaning hospitals.
Revenue growth in the year to September was 8.8% to GBP24.88 billion, with organic revenue growth "strong" at 6.4% and above Compass's target of 4% to 6% growth. The market had expected organic revenue growth of 6%, according to company-compiled consensus figures.
Compass's pretax profit fell 3.5% on the year before to GBP1.47 billion. Compass said this was due to a cost action programme bringing a GBP190 million one-off charge, offsetting foreign exchange benefits.
Compass is paying a final dividend of 26.9 pence per share, taking the year's total to 40.0p, 6.1% higher than the year before. This is eased back from the 13% growth a year before, though Compass has maintained a streak of increased payouts stretching back to 2001.
Performance in North America was "excellent", Compass continued, with organic revenue growth of 7.7%. In Europe, organic growth was 4.1%, and Rest of World grew 4.3% organically.
"Compass has had another strong year. Organic revenue growth was 6.4%, ahead of our target range, thanks to excellent growth in North America and an improving performance in Rest of World," said Chief Executive Dominic Blakemore.
"There was good growth in our European business with strong performances in UK Defence and Sports & Leisure offsetting weak volumes in Business & Industry. The group margin during 2019 was maintained despite this more challenging trading environment in Europe," Blakemore added.
Regarding Europe, Compass said it is "not immune" to macroeconomic changes.
"Deteriorating business and consumer confidence in Europe has impacted our Business & Industry volumes, new business activity and margin. Given these trends, we are taking prompt action in Europe and certain Rest of World markets to adjust our cost base," continued Blakemore.
"As well as offsetting short-term margin pressures, by taking this action from a position of strength, we will be better placed to capitalise on future growth opportunities."
Looking ahead, Blakemore said expectations for Compass's new financial year are positive, though it does remain "cautious" on conditions in Europe.
The pipeline in North America is "strong", he continued, with Rest of World doing well, but in Europe there is "hesitation" in decision making by customers.
"Thanks to the group's geographic and sectoral diversity, we are nevertheless confident of continued progress. As such we expect organic growth to be around the mid-point of our 4% to 6% range whilst maintaining our strong margin as we mitigate the expected volume pressures through our cost actions," Blakemore concluded.
By George Collard; [email protected]
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