Compass Group sees a 7.1% rise in profit in full-year 2018
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Compass Group sees a 7.1% rise in profit in full-year 2018

Compass Group, the world’s largest catering firm, reported the fourth quarter of fiscal 2018 this week, demonstrating a strong underlying business that was seeing better profitability thanks to cost-cutting measures and a more lucrative pricing strategy. It also announced that it was positive about the coming year, and expected 2019 to deliver organic growth in the middle of a 4% to 6% range.

Investors liked what they saw in full-year 2018 and sent the share price up this week

graph 2211 compass

Source: Yahoo Finance

Compass Group said that organic revenue grew by 5.5% to £23.24 billion against full-year 2017. Operating profit, meanwhile, rose by an impressive 7.1% against the previous year – a clear indication that the Group’s cost-cutting initiatives and higher price points are paying off. When it came to earnings per share, Compass Group outperformed by an even greater degree, delivering 77.6 pence per share. That met analysts’ expectations, and is a 12.5% beat against the previous year’s earnings. Operating margin remained flat, but free cash flow rose by 17.1% from 2017.

Compass, which serves more-than 5.5 billion meals a year in over 50 countries, said that its North American business outperformed, driving its business by returning 7.8% organic revenue growth year on year. In that region, the company counts Google, Coke, Shell, and Nike, as customers. In the UK – its domestic market – things weren’t quite as positive.

The company managed a strong showing financially – Compass doesn’t break it out, but for Europe as a whole, the company saw revenue growth of 2.1% year on year, and it said that new business in the UK spurred that on. However, it said it had “identified a potential impact” on its food supply chain and labour force ahead of the UK’s exit from the European Union (Brexit). Compass said that it was “taking actions to assess and mitigate any impact” that Brexit could cause.

The Group’s CEO, Dominic Blakemore, made the following comments in a statement over the results: “Compass had another very strong year. Revenue growth was healthy, driven by excellent growth in North America, an acceleration in Europe and good progress in Rest of World. […] Our expectations for FY2019 are positive. […] In the longer term, we remain excited about the significant structural growth opportunities globally, the potential for further revenue growth and margin improvement, combined with further returns to shareholders.”

Dominion holds Compass Group in its Global Trends Managed Fund.

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