Compass has good start to year but currency movements weigh

27th Mar 2014 07:00

Catering group Compass reported a good start to the year but said currency volatility would hit profits.The group, which does catering in schools and offices and owns food retailers such as Upper Crust, expects first-half revenues to rise just over 4%, driven by new business wins, strong growth in North America and signs of economic stabilisation in Europe and Japan.Compass won new business in North America particularly in health and education.It said it had won good levels of business in the UK and Ireland, France, Spain and the Nordic countries, although like-for-like volumes remained negative.Revenue from the Australian mining industry is increasing at a slower pace than in 2013 but in emerging markets, revenues rose in double digits."This growth is being driven by strong levels of new business as the structural shift to outsourcing accelerates. We have seen particularly good performances in Brazil and other parts of Latin America, Turkey, India and China," Compass said.The group revealed its operating profit margin in fast-growing and emerging markets would fall by about 50 basis points in the first half due to costs of implementing a new regional management structure, although the impact of this should reverse in the second half.Compass warned that the strength of the pound against the euro, dollar and other currencies meant it would face a negative currency impact of about 5.5%, or £486m, on revenue and 5.7%, or £37m, on underlying profit in the first half."If the current spot rates were to continue through the second half of 2014 we would expect a negative currency impact of 5.9%, or £1.03bn, on 2013 full year reported revenues and 6.2%, or £78m, on 2013 full year underlying profit," it said.It added: "Compass has had a good start to the year and our expectations for the full year remain positive and unchanged, notwithstanding the translation impact of ongoing movements in foreign currencies."PW