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Good results at Compass keep expectations high for full-year profit growth

27 September 2012 by

Compass Group's strong performance in the fourth quarter has led expectations for full-year profit growth to remain high at the catering giant.

Organic revenue growth is likely to be 5.5%, while operating profit is expected to rise 8.8% on the previous year, the company said in a trading update released today.

Richard Cousins (pictured), group chief executive, attributed the figures to "positive trading momentum" in North America and its Fast Growing & Emerging sectors, which includes markets such as Australia, Brazil and India.

But worsening economic conditions in Europe have led Compass to announce a programme of further cost-cutting measures in the region.

Cousins said: "The fundamentals of the European business remain solid, but we are taking decisive action to protect profitability in the immediate future and improve operational efficiency over the medium term."

As well as cost-cutting exercises across the division, Compass said the "very challenging" conditions in southern Europe required more comprehensive action. It plans to simplify the business and focus on a "smaller core of profitable, cash-generative contracts" that will see revenue in southern Europe drop from £800m to around £600m.

Compass said it had invested around £200m in acquisitions in the year to date and that its £500m share buy-back programme remained on track to complete within the calendar year.

"Overall, the prospects for the business around the world are good and I remain confident that we will continue to drive revenue and margin growth," concluded Cousins.

By Janie Manzoori-Stamford

E-mail your comments to Janie Manzoori-Stamford here.

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