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Compass Group ups full-year growth expectations as contract caterer reports "excellent" start to the year

In a trading update, delivered ahead of today’s AGM, the FTSE 100-listed firm said organic revenue grew by 6.9% year-on-year in the three months to the end of December 2018
Catering
Compass said it expects annual growth to be slightly above the middle of its target growth range of 4% to 6%

Compass Group PLC (LON:CPG) shares rose on Thursday has lifted its full-year growth expectations after the contract caterer reported an "excellent" start to the year.

In a trading update, delivered ahead of today’s annual general meeting, the FTSE 100-listed firm said organic revenue grew by 6.9% year-on-year in the three months to the end of December 2018.

READ: Cost-cutting helps boost Compass Group full-year profit

The company added that the growth was driven by strong levels of new business wins, and continued good retention rates.

Compass said revenue in North America increased by 8.0%, reflecting very good growth across all sectors, particularly in Business & Industry and Sports & Leisure.

In Europe, it added, organic revenue growth was 6.4%, reflecting the significant impact of UK Defence contracts, mobilised in the second half of 2018, and a beneficial Sports & Leisure calendar.

The group said revenue in the Rest of the World increased by 2.8%, with ongoing good performance in developing markets partially offset by the run-off of the construction project in Australia.

Looking ahead, Compass added, it expects annual growth to be slightly above the middle of its target growth range of 4% to 6%, with modest margin progression.

At the end of November, the company expected its growth to be in the middle of its 4% to 6% range.

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

In early morning trading, Compass Group shares were 3.2% higher at 1,751p.

Doing what they do best

Steve Clayton, head of equity funds and manager of the HL Select UK Growth Shares fund commented: “Compass is doing what they do best, grinding out market share gains and squeezing a bit of extra margin from an efficiency drive, at a time when many others will be struggling to hold margins flat.

“With the bulk of the global contract catering market still undertaken in-house, Compass’s outsourcing service offer still has plenty of scope to grow for years to come.”

 He added: “The group does face cost pressures currently, but their constant search for efficiencies across the business is minimising the impact.”

 

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