Shares in contract catering business Compass (LSE: CPG) were level in early trading after it reported a 5.4% jump in full-year profit before tax.
An organic 4.1% growth in group revenue was driven by good performances in North America and the “Fast Growing & Emerging” regions and supported with a 93% contract retention rate. Negative currency impact resulted in a2.8% decline in reported revenue, but investors saw past these temporary problems to the progress being made in the underlying business.
Compass grew operating margins by 20 basis points across Europe & Japan after making solid progress on efficiencies and cost reductions. Operating profit still fell 2.6% in the region however, as Eurozone trading conditions continued to prove difficult. Management noted that revenues in the UK, Germany, Netherlands and Southern Europe declined at a slower rate than previously, pointing towards improving conditions in the regions.
Management expect the majority of growth in the medium term to come from its market-leading North American business, which brings in 48% of group revenues.
The group continues to focus on the “structural opportunity in the outsourced food service market,” which is estimated to be worth more than £200bn. Only 50% of the current market is outsourced, offering a significant opportunity for Compass to grow. Group CEO Richard Cousins said: “Looking ahead to next year, the pipeline of new contracts is healthy and we expect to see further good performances in all of our regions.”
Compass also proposed a final dividend of 17.7p, resulting in a final dividend of 26.5p, or a full year increase of 10.5%. Management remain committed to growing the dividend in line with constant currency earnings.
