Currency woes hamper Compass

Given the circumstances, Mr Blakemore has done an admirable job of keeping the group on track. Adverse currency movements undermined progress in the caterer’s statutory numbers, but on an underlying basis revenue and operating profit were up 4.8 and 4.5 per cent, respectively, albeit with an operating margin that contracted 10 basis points to 7.5 per cent. However, translation effects, along with increased capital expenditure, had a pronounced impact on free cash flow, which fell by 7.4 per cent to £465m. As ever, the US business continues to bolster group performance, with regional revenues up 7.3 per cent through the period. And its contribution to full-year earnings will be enhanced through a reduction in the effective tax rate from 26.5 to 24 per cent, courtesy of the Trump administration's corporate tax reforms. 

The group’s newly refocused strategy will increase the onus on cost 'pass-through' to counteract the impact of inflation, as well as maintaining growth in its core food business. Management estimates the food services sector is worth £200bn across the 50 countries in which the group operates, more than enough to sustain the group’s target organic growth rate of 4 to 6 per cent annually. Roughly half of the sector is outsourced, and the group expects this to increase as economic conditions and regulatory changes increase pressure on budgets.

Bloomberg puts the consensus EPS forecast at 76.7p for the year to September 2018 (from 72.3p in 2017).