6th Feb 2014 09:40
LONDON (Alliance News) - Food and support services company Compass Group PLC said Thursday it has had a good start to the new financial year, with organic revenue growth, boosted by a good level of new business, and a stable retention rate for the group overall.
Compass said after a good first quarter, it remains positive and confident in the group's trading expectations for the full year, supported by an encouraging pipeline of new contracts.
However, the FTSE 100 group warned that trading results from its overseas operations could be hit by the strength of the sterling against major currencies if it continues.
"Trading results from our overseas operations are converted at the average exchange rates for the year. In the first quarter of 2014, sterling has continued to strengthen against many of the group's key currencies. If the current spot rates were to continue through 2014 we would expect a negative currency impact of 5.4%, or GBP942 million, on 2013 reported revenues and 5.7%, or GBP72 million, on 2013 underlying profit. The impact of currency movements is translation only," the company said in its trading update.
Compass said organic revenue growth was around 4% at constant currency in the first quarter, and like-for-like revenue continues to be positive. It said it has delivered further operating efficiencies and achieved good leverage of its overhead base.
"We are using these efficiencies to invest in the exciting growth opportunities in the business and manage the economic conditions in Europe. They also underpin our expectation of delivering a further improvement in the operating margin," it said.
Compass said the underlying trends in its three regions, which includes North America, Europe & Japan, and Fast Growing & Emerging, have continued into the new year.
It said its North America region started the year well, with good levels of new business won across the sectors, and retention remains high. Like-for-like revenues, however, remain broadly flat in the region.
Economic conditions in Europe and Japan continue to be difficult, the company said, resulting in overall organic revenue growth for the region remaining in negative territory in the first quarter. However, the group said it is starting to see some signs of stabilisation in the region, and cost reduction plans are progressing well.
In its Fast Growing & Emerging markets division, Compass said organic revenue growth remains strong, underpinned by the continuing trend to outsourcing, despite economic challenges in some countries, including the continued slowdown in the Australian mining sector.
The group said, since the end of its previous financial year, it has committed around GBP50 million to infill acquisitions.
"In the longer term, we remain excited about the significant structural growth opportunities in both food and support services globally and the potential for further revenue and margin growth," the company added.
Compass shares were trading 0.3% higher at 902.50 pence per share early Thursday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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