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Compass expects US effective tax rate to fall on Trump's new law

The group's effective tax rate is estimated to fall to 24% from 26.5%
Compass was rocked by the death of its chief executive at the start of the year

Catering giant Compass Group PLC (LON:CPG) expects lower US taxes for the 2018 fiscal year, thanks to President Donald Trump’s sweeping tax reforms.

The group’s effective tax rate is estimated to drop to 24% from 26.5% while the cash tax rate is projected be between 19% and 22% in the year to the end of September 2018.

READ: Compass serves up full year profit growth, driven by growth in North America

The company said the new law means it will need to revalue the net deferred tax asset recognised on its US balance sheet before 30 September 2018 but does not expect this to be material.

“We note that certain aspects of the new law may still be subject to future clarification and as such could affect the extent to which we are impacted by the reduction in the headline tax rate,” Compass said.

“In addition, there is still uncertainty around the interaction between the new federal tax legislation and tax legislation at the state level which could also have an impact.”

Shares edged up 0.5% to 1,535p in morning trading.

Liberum raised its forecast for adjusted earnings per share by 3.5% for 2018 and beyond.

“The quantum of this benefit was largely expected and adds support to our investment thesis that the company will de-lever more rapidly and return cash faster than consensus gives credit for. We reiterate our 'buy'," it said.

At the start of the year the company was rocked by the death of chief executive Richard Cousins. Cousins and his family died in a seaplane crash near Sydney on New Year’s Eve.

READ: Compass pays tribute to CEO Richard Cousins killed in Sydney seaplane crash

Cousins had planned to retire on March 31 after 11 years in the role. His replacement, Dominic Blakemore, was to take over on April 1 but his appointment has been brought forward to January 1.

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