Compass reports "strong" half-year results but mixed performance in Europe
In its results for the six months ended 31 March 2018 contract caterer Compass Group reported revenue increase of 4.8% to £11.5b, although profit before tax was down from £831m to £792m.
European revenue was up just 0.5% to £2.9b on the previous financial year and regional operating profit down 9.6% to £197m. The timing of Easter is estimated to have adversely impacted the quarter by around 1%.
Underlying operating profit in Europe declined by 9.6% to £21m. Inflation and the impact of extreme weather in the UK were not fully offset by pricing and efficiencies and as a result, the underlying operating margin declined by 80 basis points to 6.7%. However, the UK saw "good growth" in new business, including a contract win with the Goodwood Estate and a contract extension with Royal Surrey Hospital.
Dominic Blakemore, group chief executive, said: "Compass had another strong half with good revenue growth. North America continues to make excellent progress with broad-based growth across sectors. Performance in Europe was mixed, with good growth in the UK, offset by subdued trading in Continental Europe. Notably, the performance in our Rest of World region is improving.
"Our continuous focus on efficiencies and pricing was offset by inflation and cost of change actions in the UK. As a result, our group operating margin declined slightly in the half. However, the benefits of these actions will come through in the second half.
"The business is trading well and our full year expectations are unchanged, with organic growth above the middle of our 4-6% range, and modest margin progression.
"I want us to drive performance by focusing on our core food business. We are increasing our intensity around our MAP framework, with the systematic roll out of best practices and technology. At the same time, we are reviewing the portfolio to strengthen our capability and simplify the business."
He added: "Targeted, disciplined bolt-on acquisitions strengthen our capabilities. M&A is an important way to support our organic growth potential. It has also proven to be an extraordinary source of talent. We are also considering disposals and exits to simplify the portfolio. We will consider disposals and exits based on potential, be that market growth, scalability, or our own position and capability."
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