Shares in leading global catering firm Compass (CPG) buck the weaker trend in UK stocks adding 3% to £16.40 as its full-year earnings for the 12 months to the end of September beat estimates.
Sales and operating profits were in line with forecasts but earnings per share inched ahead of expectations at 77.6p, up 12.5%. The company increased its annual dividend by 12.5% in line with the growth in earnings to 37.7p per share.
US market driving sales growth
The main driver for the business continues to be the US, which generates close to 60% of sales and over 60% of operating profit and where like-for-like sales are bubbling away nicely, up nearly 8% over the last year.
Growth in Europe, which generates 25% of sales and just under 25% of profit, was less stellar at 2% like-for-like, but there was a pick-up in the second half on the back of new business wins in the UK, Spain, Germany and Switzerland.
European clients include major manufacturers like Peugeot and Siemens, energy giant Total and UK leisure firms such as Premier Inn and Virgin Trains.
Sales in its Rest of World division which makes up the balance of the business were up 3% on a like-for-like basis thanks to a better performance in Latin America.
Still plenty of room to expand
The global food services market is estimated to be worth more than £200m annually with about a quarter of that controlled by the big outsourcers like Compass and French rival Sodexo.
Another quarter of the market is split between smaller regional players while half of the market is still self-operated catering functions run by big companies so there is plenty of room for Compass to grow in terms of sales.
At the same time the firm is cutting costs and slimming down its operations, selling off businesses which no longer fit with its core capabilities. This year it has sold its US ‘meals on wheels’ business and its operations in Gabon for instance.
The outlook for the coming year - according to company guidance - is another helping of 4% to 6% like-for-like growth driven by its existing pipeline of business and a steady increase in operating margins from the current level of 7.4%.
