Compass Q1 revenue rises, weak pound to lift 2017 earnings

Food service company Compass Group reported growth in first-quarter revenue on Thursday as it maintained its outlook for 2017 and said earnings would see an uplift from the weak pound.

In the three months to the end of December, organic revenue was up 2.8%, in line with the group’s expectations and Compass said it continues to see strong levels of new business wins and good retention rates. Organic revenue growth was a touch short of analysts’ expectations of 2.9%.

Meanwhile, like-for-like revenues increased modestly, with some pricing offsetting weak volumes in the Offshore & Remote sector.

The operating margin moved forward slightly, as efficiencies generated through the company’s management and performance programme more than offset cost inflation and its investment in “the exciting growth opportunities” it sees around the group. In addition, the end of the restructuring programme in its Offshore & Remote business also contributed to the improvement in the operating margin in the quarter.

In terms of regions, North America saw organic revenue up 7%, with very good growth across most sectors. Compass’s core Business & Industry, Vending and Higher Education sub-sectors performed particularly well, while trading in the oil & gas business remained tough.

In Europe, organic revenue was flat as expected. Net new business trends were in line with the last months of full-year 2016 and like-for-like revenues were unchanged as pricing offset weak volumes in the North Sea and France. Organic revenue in the Rest of the World fell 6.5% due to the expected weakness in the commodity-related business and a challenging environment in Brazil.

Compared to the same quarter last year, currency movements had a positive translation impact on revenues and profit in the quarter of £924m and £74m respectively. If current spot rates continue for the rest of the year, foreign exchange translation would boost 2016 revenue by £2.3bn and operating profit by £186m.

“Our outlook for 2017 remains positive and unchanged. Growth in North America is strong, and both Europe and Rest of World are performing as expected with growth weighted to the second half. We continue to focus on driving efficiencies throughout the business and our margin expectations are also unchanged.

"In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth.”

At 0816 GMT, the shares were up 1.5% to 1,418p.