Compass Group has released its interim statement for the period from 31 March 2012, showing strong performance in the third quarter of the year and unchanged, positive expectations for the full year.
North America and the Fast Growing & Emerging regions grew strongly, with several large new contracts commencing; no surprise that conditions in Europe are described as ‘difficult’.
Including the contribution from acquisitions, constant currency revenue for the Group increased by 7.8% in the quarter compared to the same period last year, with organic revenue growth of 5.7% (5.3% for the nine months to 30 June 2012).
The focus on driving efficiencies in food and labour costs delivered further benefits which were partly reinvested in growth opportunities, and also helped the management of the difficult economic conditions and negative like for like volume trends in parts of Europe.
Overall, the operating profit margin in the third quarter was slightly above the same period last year. Free cash flow conversion was strong.
Strong growth in North America – and a record contract
The trading momentum in the first half of the year accelerated in the third quarter, with year on year organic revenue growth of 9.0%. This particularly strong growth was driven by both the ongoing roll out of the Ascension Health multi-services contract and an exceptional performance in the Sports & Leisure business, which benefited from the remaining catch up games following the NBA strike earlier in the year.
There were good performances across the rest of North America, outsourcing trends remained positive, and Compass has just won the 10 year contract for food and support services with Texas A&M University – the largest Higher Education outsourcing contract ever awarded in the US.
The ongoing drive to generate efficiencies and leverage the overhead base resulted in an improvement in the operating profit margin. Including the impact of mobilising the Ascension contract, the reported operating profit margin in the third quarter increased by 10 basis points on the same period last year.
Europe & Japan
In the third quarter, organic revenue declined by 0.9%, as the impact of the tougher economic environment in Europe was partially offset by a stronger performance in Japan relative to last year.
Economic conditions in Europe, and particularly in southern Europe, were difficult. As a result, there was negative like for like volume growth during the quarter. Good levels of new business in the Nordics saw trends in like for like volume remaining positive. In other countries, such as France and Spain, new business was healthy but like for like volume came under increasing pressure.
The year on year performance in Japan was relatively strong due to the weak comparative, as the third quarter of last year was the most severely affected by the earthquake and tsunami. Underlying trading in Japan continued to improve gradually.