REG - Compass Group PLC - Interim Management Statement <Origin Href="QuoteRef">CPG.L</Origin>

CompassAnnouncement

06/09/2014 22:35

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RNS Number : 6707N
Compass Group PLC
30 July 2014 
 
30 July 2014 
 
Compass Group PLC 
 
Interim Management Statement 
 
This statement updates investors on the Group's progress in the period since
31 March 2014. 
 
Group 
 
Compass has delivered another good performance in the third quarter of the
year with North America and Fast Growing & Emerging markets seeing good levels
of growth and conditions in Europe & Japan continuing to improve. Organic
revenue growth for the Group in the quarter was 4.0% on a comparable working
days basis1 and 3.9% for the nine months to 30 June 2014. 
 
We have continued to drive efficiencies across the business using our
performance management framework, MAP. These efficiencies are in part being
reinvested in exciting growth opportunities around the world and helping us to
manage negative volumes in parts of Europe. They are also enabling us to
deliver further improvement in the operating profit margin, which has
increased by 10 basis points in the quarter and for the nine months to 30 June
2014. Free cash flow conversion remains strong. 
 
North America 
 
We have delivered another strong performance in North America. Year on year
organic revenue growth in the third quarter was 6.5% on a comparable working
days basis1, and 6.4% for the nine months to 30 June 2014, reflecting high
levels of new business and good retention rates across all sectors. Like for
like volumes remained broadly flat. 
 
We continue to see steady progress on the margin with around 10 basis points
increase in the third quarter compared to the same period last year. 
 
Europe & Japan 
 
The more positive trends seen in the first half have continued into the third
quarter with organic revenue declining at the slower rate of 1.2% on a
comparable working days basis1, 1.8% for the nine months to 30 June 2014. The
contract exits related to the 2012 cost reduction programme were largely
completed during the third quarter and volumes, although still negative
overall, are showing signs of improving. The investments we have made in sales
and retention teams are being reflected in an encouraging pipeline of new
business. 
 
In line with expectations, we have increased the operating profit margin by a
further 10 basis points in the quarter and 20 basis points in the nine months
to 30 June 2014. 
 
Fast Growing & Emerging 
 
We continue to deliver good organic revenue growth in the Fast Growing &
Emerging region. Double digit growth in the emerging markets has been
moderated by an acceleration in the slowdown of the Australian offshore and
remote sector, resulting in organic revenue growth of 6.5%1 in the quarter and
8.4% for the nine months to 30 June 2014. 
 
As stated in our interim results in May, the benefit from the investments made
in the region has started to flow through to the operating profit margin,
which increased by 30 basis points in the third quarter. 
 
Financial Position 
 
We have committed around £100 million to infill acquisitions in the financial
year to date.We have also received US$40 million (approximately £23 million)
relating to the disposal of a small non-core support services business in
North America. 
 
During the period, the Group completed the £1 billion Return of Cash to
shareholders announced in our interim results on 14 May 2014. As a result of
the associated share capital consolidation, in which every 17 Existing
Ordinary Shares of 10 pence were consolidated into 16 New Ordinary Shares of
10 5/8 pence, the total number of Ordinary Shares in issue as at 8 July 2014
was 1,681,091,168. As part of the funding for the Return of Cash, the Group
issued a new £250 million bond due 2026 with a 3.85% coupon, and a new E500
million bond due 2023 with a 1.875% coupon. It also increased the commitment
in its existing revolving credit facility to £1 billion while extending the
maturity to June 2019. 
 
The £500 million share buyback programme announced in November 2013 will
resume following the completion of the Return of Cash on 29 July 2014.  No
shares were repurchased during the three months to 30 June 2014. 
 
Currency 
 
Trading results from our overseas operations are converted at the average
exchange rates for the year. In the third quarter of 2014, sterling has
continued to strengthen against many of the Group's key currencies (including
the US, Canadian and Australian dollars, the euro, yen, and Brazilian real).
If the current spot rates were to continue through the fourth quarter of 2014,
we would expect a negative currency impact of 7.3% or £92 million on the 2013
full year underlying operating profit, and a 6.9% or £1,204 million impact on
the 2013 full year revenue. The impact of currency movements on revenue and
profit is translation only. 
 
Summary & Outlook 
 
Compass has had a good third quarter. We have delivered healthy levels of
organic revenue growth and our ongoing focus on driving efficiencies has
resulted in a further increase in the operating profit margin in all three
regions. 
 
As we look out to the fourth quarter, our overall expectations for the full
year remain positive and unchanged, notwithstanding the translation of ongoing
movements in foreign currencies. The pipeline of new contracts is encouraging
and our continued focus on efficiencies gives us confidence in another period
of delivery. 
 
Looking to the longer term, we remain excited about the significant structural
growth opportunities in our markets globally, Compass's strong position within
these markets, and the potential for further revenue and margin growth. 
 
 Enquiries:                                                   
                                                              
 Clare Hunt    Communications Director  +44 (0) 1932 573 000  
 Kate Patrick  Investor Relations       +44 (0) 1932 573 000  
                                                              
 Website       www.compass-group.com                          
 
 
Note to Editors 
 
a)    Compass Group PLC is a world leading food and support services company,
which generated annual revenues of £17.6 billion in the year to 30 September
2013. It operates in around 50 countries, employs over 500,000 people and
serves over 4 billion meals every year. The Company specialises in providing
food and a range of support services across the core sectors of Business &
Industry, Healthcare & Seniors, Education, Defence, Offshore & Remote, Sports
& Leisure and Vending with an established brand portfolio. 
 
b)    MAP (Management and Performance) is a simple, but clearly defined Group
operating framework. MAP focuses on five key value drivers, enabling the
businesses to deliver disciplined, profitable growth with the focus more on
organic growth and like for like growth. 
 
The five key value drivers are: 
 
MAP 1: Client sales and marketing 
 
MAP 2: Consumer sales and marketing 
 
MAP 3: Cost of food 
 
MAP 4: Unit costs 
 
MAP 5: Above unit overheads 
 
c)     Organic revenue growth, a term used throughout the announcement, is
calculated by adjusting for acquisitions (excluding current period
acquisitions and including a full period in respect of prior period
acquisitions), disposals (excluded from both periods) and exchange rate
movements (translating the prior period at current period exchange rates). 
 
d)    Forward looking statements 
 
Certain information included in this announcement is forward-looking and
involves risks, assumptions and uncertainties that could cause actual results
to differ materially from those expressed or implied by forward-looking
statements. Forward-looking statements cover all matters which are not
historical facts and include, without limitation, projections relating to
results of operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation, discussions
of expected future revenues, financing plans, expected expenditures and
divestments, risks associated with changes in economic conditions, the
strength of the foodservice and support services markets in the jurisdictions
in which the Group operates, fluctuations in food and other product costs and
prices and changes in exchange and interest rates. Forward-looking statements
can be identified by the use of forward-looking terminology, including terms
such as "believes", "estimates", "anticipates", "expects", "forecasts",
"intends", "plans", "projects", "goal", "target", "aim", "may", "will",
"would", "could" or "should" or, in each case, their negative or other
variations or comparable terminology. Forward-looking statements are not
guarantees of future performance. All forward-looking statements in this
announcement are based upon information known to the Company on the date of
this announcement. Accordingly, no assurance can be given that any particular
expectation will be met and readers are cautioned not to place undue reliance
on forward-looking statements, which speak only at their respective dates.
Additionally, forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules and the Disclosure and
Transparency Rules of the Financial Conduct Authority), the Company undertakes
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. Nothing in
this announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws. 
 
e)    A copy of this release, together with all other recent announcements and
presentations can be found on Compass Group's website at
www.compass-group.com. 
 
1 Excluding the impact of the timing of Easter and other working days, which
account, in the third quarter, for 0.8% at Group level, 0.5% in North America,
1.0% in Europe & Japan and 0.5% in Fast Growing & Emerging. 
 
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