Compass Group PLC (LON:CPG) doled out a strong dash of revenue growth for the past year and said its outlook “remains strong” but profits were undercooked as it moved fast to readjust to slowing economic growth in Europe.
The FTSE 100 catering giant said it was “taking prompt action to adjust our cost base” in Europe and certain markets elsewhere resulting in non-underlying cash charges of around £160mln spread across the past and the new financial year, plus a non-cash charge of £140mln.
As a result, statutory operating profit fell 5.4% to £1.6bn as these costs offset 4.7% growth in underlying operating profit to £1.9bn and the benefits of a weaker pound.
Revenue for the year to 30 September swelled 6.4% to £25.2bn, which was better than the company’s targeted range of 4% to 6%.
Organic revenue growth in North America, which now accounts for more than 60% of group sales, was 7.7% over the year and profit increased 9%, while European revenue growth was 4.1% for the year with growth slowing in the second half and profit declining 6.6%.
In Europe, strong performances in UK Defence and Sports & Leisure, as well as a focus on efficiencies, pricing and portfolio management only managed to partially offset cost inflation and weakness in sales from the Business & Industry segment, which declined significantly in the fourth quarter.
Revenues from the Rest of World division were up 4.3%, an improvement on the previous year, while profits were up 7.4%.
Compass chief executive Dominic Blakemore said the group was “making good strategic progress”, with a reshaping of the portfolio seeing disposal proceeds reinvested in bolt-on acquisitions in food service, such as the proposed acquisition of Fazer Food Services in the Nordics.
He said “deteriorating business and consumer confidence” in Europe was the cause of lower volumes, new business activity and profit margins.
With free cash flow up 9% to £1.25bn the annual dividend was lifted 6% to 40p per share.