Compass Group has updated on progress in the current financial year, ahead of the announcement on 26 November 2014 of its results for the year to 30 September 2014, stating that it has delivered another good performance in the fourth quarter of the financial year with further strong growth in its North America and Fast Growing & Emerging regions and a continued improvement in Europe & Japan.
Organic revenue growth in the year has been driven by strong levels of new business wins, good retention rates and inflationary price increases. For the full year, organic revenue growth at constant currency is expected to be 4% and the operating profit margin is expected to increase by 10 basis points.
Summary and Outlook
The update states:
“Compass has had a good year, delivering solid organic revenue growth and further margin progression. Our expectations for the full year therefore remain positive and unchanged, notwithstanding the translation impact of ongoing movements in foreign currencies. For the full year, we expect North America and Fast Growing & Emerging to deliver healthy levels of organic growth and we are encouraged by the improvement seen through the year in Europe
& Japan.
“Looking to the longer term, we remain excited about the significant structural growth opportunities in our markets globally and the potential for further revenue and margin growth.”
Europe & Japan
Conditions in Europe & Japan continued to improve throughout the year. Increasing rates of net new business and a healthy sales pipeline reflect the investments made in sales and retention teams. The contract exits related to the 2012 cost reduction programme have now been completed and volumes, although still negative overall, are declining at a slower rate than the same period last year. For the full year, Compass is encouraged by the expected decline of 1.5%, which is half the rate of the previous year, and expects expects the full year operating profit margin to increase by 20 basis points compared to last year.
North America
The strong organic revenue growth seen in the first half has accelerated in the second half, with particularly high levels of new business wins and excellent retention rates. Good growth in Healthcare & Seniors and Sports & Leisure and the sales pipeline across all sectors remains encouraging. Overall, for the full year, expect organic revenue growth to be around 6.5%. Expect to deliver a 5 basis points improvement in the operating margin for the full year.
Fast Growing & Emerging
Good organic revenue performance throughout the year in Fast Growing & Emerging despite a softening of volumes in some markets. Accelerated revenue growth in the emerging markets with strong levels of new business in the second half driven by the ongoing structural shift to outsourcing. Growth in the region has been moderated by the second half slowdown in the Australian offshore and remote sector and, as a result, organic revenue growth in the region overall is expected to be around 8.0% for the full year.
The operating profit margin has benefitted in the second half from the investments made at the end of last year, improving by around 50 basis points compared to the first half of this year. The full year margin is therefore expected to be flat compared to full year 2013.
Financial position
Around £115 million committed to infill acquisitions in the financial year to date.
The £500 million share buyback programme announced in November 2013 was resumed on 31 July 2014 following the completion of the £1 billion Return of Cash. As at 26 September 2014, 18.4 million shares have been purchased for cancellation for £174.5 million, and the programme remains on track to complete during 2015. The Company intends to continue the share buyback programme during its close period between 1 October 2014 and 25 November 2014.
Other than the above, there has been no significant change in the strong financial position of the Group in the period since our Interim Management Statement on 30 July 2014.
For more information click here