Compass share price: Company issues trading update
Compass Group (LON:CPG) today update the market on its progress in the current year, ahead of the announcement on 13 May 2015 of its results for the half year to 31 March 2015.
**Highlights from the company’s statement:**
Compass is having a strong first half of the year, with expected organic revenue growth towards 5.5% and operating profit margin improvement of around 10 basis points. We are seeing good levels of new business, high retention rates, and modest like for like revenue growth.
North America: North America is having a strong first half, with organic revenue growth expected to be around 8%. New business wins have been good, retention levels remained unusually high and there has been some improvement in like for like revenues.
We continue to generate good levels of efficiencies which we have partly reinvested to drive and support this above average growth. For the half year, we expect operating margins to improve by around 5 basis points.
Europe & Japan: Europe & Japan has returned to growth, despite a mixed economic backdrop across the region. This performance reflects our increased focus on organic growth and the investments we have made in our sales and retention teams. For the half year, organic revenue growth is expected to be around 0.5%, reflecting improving levels of new business wins and retention rates, and recovering – but still negative – like for like volumes. As a result of our continued focus on efficiencies we expect an operating margin improvement of around 10 basis points.
Fast Growing & Emerging: In the Fast Growing & Emerging region, strong levels of new business wins in emerging markets are expected to deliver around 14% organic revenue growth which is helping offset the expected decline in the Australian offshore and remote sector. As a result, we anticipate organic revenue growth for the region overall to be towards 8%.
We have made good progress in driving operating efficiencies and are reinvesting as appropriate to support growth. However, due to the weakness in like for like volumes in some emerging markets and pressures in our offshore and remote business, we expect the operating margin to decline by around 10 basis points.
Currency: Trading results from our overseas operations are translated at the average exchange rates for the period. Sterling weakened against the US dollar; however, it continued to strengthen against many of the Group’s other key currencies, including the Euro, Australian and Canadian dollars, Yen and Brazilian real. Taken together, these currency movements, compared to the same six month period last year, are expected to have a positive translation impact on half year revenue and profit of £35 million and £5 million respectively. If current spot rates continue for the remainder of the year, foreign exchange translation would benefit full year revenues by £323 million and profits by £31 million.
Close Period Share Buyback Programme: The Company intends to continue its existing share buyback programme during its close period between 1 April 2015 and 13 May 2015. The repurchases made during the period will be managed by an independent third party(b).
Summary and Outlook: Compass is having a strong first half and our expectations for the full year remain positive. However, the economic environment in some of our emerging markets is uncertain, and lower commodity prices are impacting our offshore and remote business. Nevertheless, our pipeline of new contracts is encouraging, and our continued focus on organic growth and efficiencies gives us confidence in achieving another year of delivery. In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth.
**More to follow…**
As of 07:17 BST, Monday, 30 March, Compass Group plc share price is 1,174.00p.
