Compass confident after third quarter growth

Compass posted a third quarter trading update on Thursday, and said it continues to have a good year, with organic revenue growth of 5.6% for the nine months to 30 June 2016.

The FTSE 100 firm said its focus on growth is driving strong levels of new business wins and retention remains good across all regions.

Organic revenue grew by 5.2% in the third quarter reflecting strong net new business in North America, good growth in Europe, and a challenging environment in Rest of World, the board said.

“Our ongoing commitment to generating efficiencies in the business continues to be supported by our management and performance programme,” Compass’ board said in a statement.

“We are using these efficiencies to invest in exciting growth opportunities around the group.

“In addition, we have been taking restructuring actions to offset the impact of challenging market conditions in our Offshore & Remote business and in some emerging markets.”

Overall, the operating margin for the nine months to 30 June 2016 was flat before restructuring costs and down 10 basis points including restructuring costs, the board said.

“There has been no material change to our financial position in the period.

“In the nine months to 30 June 2016 we have bought back £96m in shares.

“If current spot exchange rates continue, at the end of our fiscal year net debt to EBITDA will be around 1.6x to 1.7x on a reported basis,” the board explained.

It said it will continue to maintain a strong investment grade rating by targeting net debt to EBITDA of around 1.5x based on average exchange rates.

Compass expectations for the full year remain unchanged, the board said, with growth in North America “very good” and the future pipeline “strong”.

“Although we are pleased with the recovery in Europe, the macroeconomic outlook has become increasingly uncertain.

“In the Rest of World trading is more challenging, but we continue to manage the region tightly.,” the board said.”

Compass said it remains focused on costs and efficiencies, which combined with the expected restructuring savings will allow it to deliver a flat operating margin for the full year including restructuring costs.

“Looking to the longer term, we remain excited about the significant structural market opportunity globally and the potential for further revenue growth, margin improvement and continued returns to shareholders.”