Compass Group sees strong growth thanks to new business wins in 1Q2019
Compass Group, the world’s largest catering company, reported first-quarter earnings for the year last week, demonstrating a solid underlying business that was benefiting from new business wins. The UK-based company said it faced inflationary headwinds, but that “efficiencies” generated by its “management and performance programme” had offset them. Likewise, wobbles over Brexit were compensated for by price increases which were implemented last year and last quarter.
Compass Group’s share price has appreciated by 6% year to date
Source: Yahoo Finance
Compass Group said organic sales growth throughout the first quarter rose by 6.9% year on year. The company put this down to “strong levels of new business wins, continued retention rates and a positive sporting events calendar.” Organic sales in North America rose by 8%, with positive figures across all its sectors (the “winners” were Business & Industry and Sports & Leisure).
Compass Group’s European division posted organic sales growth of 6.4%, representing on-going strong performance in Continental Europe as well as “notably solid gains” from new UK government contracts.
Answering a question about the strength of Compass Group’s retention rates on the earnings call, the company’s CEO Dominic Blakemore said:
“On the retention rates, look we continue to trend in North America at the level of retention that we achieved at the end of last year. I think we’ve seen an improvement in Europe of a point or so let’s say. But conversely, in rest of world we’ve obviously got the run-off of some big business which is just going the other way at touch. So, in the round, I think we are slightly better at a group level, but of course as retention is a fairly imprecise number. I think the good news is we’ve got a reasonable confidence that our retention rates will continue to trend to the levels you’ve seen for the group as we look forward.”
Dominion holds Compass Group in its Global Trends Managed Fund.
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