Cost savings at catering giant Compass helped to keep first-half profits moving in the right direction, despite flat underlying revenue. What's more, the outlook is improving - with organic growth re-emerging and further margin improvements on the cards.
First-half efficiency gains helped lift operating margins from 6.5 per cent to 7 per cent, which more than offset a 3 per cent like-for-like decline in volumes. Ignoring currency effects, first-half underlying operating profits rose 9.6 per cent to £504m. Nearly 90 per cent of revenue now comes from outside the UK, including 10 per cent from emerging markets, so a period of sterling weakness, which many expect, could significantly boost revenues.
While economic conditions remain tough, the level of new business opportunities in Compass' end markets looks strong. Meanwhile, the longer-term growth story remains intact, based on the structural shift towards outsourcing in a £200bn market which is currently only 50 per cent outsourced. Compass also continues to enhance its support services business with infill acquisitions.
Broker Seymour Pierce expects full-year pre-tax profits of £878m and EPS of 34.8p (£784m and 30.5p in 2009).
| Compass (CPG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 544p | MARKET VALUE: | £10.2bn | |
| TOUCH: | 543-544p | 12-MONTH HIGH: | 550p | LOW: 308p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 153p* | NET DEBT: | 26% | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2009 | 6.93 | 387 | 14.7 | 4.40 |
| 2010 | 7.10 | 459 | 17.9 | 5.00 |
| % change | +2 | +19 | +22 | +14 |
Ex-div:30 Jun Payment:2 Aug *Includes intangible assets of £4.3bn, or 227p a share | ||||
