Killik says Compass profits to continue rising in medium term

27th Mar 2014 11:39

Killik & Co believes Compass Group profits will get tastier as the caterer benefits from more outsourcing and growth in emerging markets.Killik said underlying earnings and dividends will carry on rising in excess of 10% a year in the medium term after Compass issued a trading statement saying it had a good start to the year, although currency volatility would affect profits.The broker, which retained its 'buy' recommendation on Compass, said the update was very reassuring and showed it was still trading well.Killik said action by Compass to address issues in its European business was proving successful."Strong growth is being generated in those parts of the world that account for two thirds of the group's revenue, driven by an increase in outsourcing, growth in emerging markets, margin expansion and the reinvestment of cash from an under-geared balance sheet," the broker said."The only near-term headwind is the strength of sterling, which has placed some downward pressure on forecasts."We remain positive on the shares, which currently trade on 17 times September 2015 earnings per share and offer a progressive 2.5% dividend yield." Shares in Compass fell 3.5p or 0.4% to 925.5p at 11:43 in London.PW