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Compass shares hit all-time high

TIP UPDATE: Compass has ridden out the storm in Europe and shares in the global catering group hit an all-time high post results
May 15, 2013

Catering giant Compass Group (CPG) encountered a mixture of revenue growth and contraction across its divisions in the first half, with developing markets offsetting weakness in Europe. As well as strength in emerging markets, the ongoing cost savings programme was a big reason for the 6.6 per cent growth in underlying operating profits to £650m.

IC TIP: Hold at 890p

The poor performance in Europe - constant currency revenues fell by 2.4 per cent to £3.08bn and profits edged lower to £212m - highlighted the debilitating effect of the eurozone crisis. The sales contraction was heavily linked to a worrying new trend of rising business failures across the continent. This was in stark contrast to trading in North America where demand from the healthcare and care home sectors helped boost operating profits by 8 per cent to £338m. The region accounts for almost half of group turnover. But the best performance came from emerging markets which experienced double-digit growth rates in countries such as Brazil.

Broker Investec forecasts full-year pre-tax profits of £1.18bn and EPS of 47.2p, up from £1.09bn and 42.4p in 2012, rising to £1.28bn and 52.9p in the 12 months to September 2014.

COMPASS (CPG)

ORD PRICE:890pMARKET VALUE:£16.2bn
TOUCH:890-892p12-MONTH HIGH:897pLOW: 611p
DIVIDEND YIELD:2.5%PE RATIO:27
NET ASSET VALUE:178p*NET DEBT:40%

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20128.5558122.57.2
20138.8057523.18.0
% change+3-1+3+11

Ex-div: 26 Jun

Payment: 29 Jul

*Includes intangible assets of £5.07bn, or 278p a share