Compass improves margin and revenues but currency impact grows

30th Jul 2014 08:08

- Q3 organic revenue up 4%- Operating margins up 10bps- FY expectations maintainedCatering and facilities management giant Compass served up a healthy third quarter of trading, improving margin across the group as revenue growth in North America remained strong while Europe and Japan improved. The FTSE 100 group delivered healthy levels of organic revenue growth of 4% on a comparable working days basis, dragging up performance for the nine months of its financial year to date to 3.9%.A focus on efficiency has resulted in a continued increase in the operating profit margin by 10 basis points in the quarter across the three regions, allowing the group to manage negative volumes in parts of Europe and partly reinvest the gains in "exciting" growth opportunities around the world. North American operations produced 6.5% year-on-year revenue growth despite broadly flat volumes, which Compass said reflected high levels of new business and good retention rates across all sectors. Following on from the previous months, a plan to cut costs by exiting certain contracts helped organic revenue decline at a slower rate of 1.2% in Europe and Japan, or 1.8% for the nine months to June 30th.Investments in sales and retention teams in Europe and Japan were being reflected in an "encouraging" new business pipeline. Management expectations for the full year were unchanged, though it was made clear that this was notwithstanding currencies effects. "The pipeline of new contracts is encouraging and our continued focus on efficiencies gives us confidence in another period of delivery," the company said in its statement. "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."Analyst Greg Johnson at Shore Cap said he expected a further modest drag to full year earnings from currency of circa £10m against the £83m guidance at the interim stage.Compass shares were down 1% to 997.5p at 08:58 on Wednesday. OH