PRESS RELEASE: Fitch Affirms Compass at 'BBB+'/'F2'; Outlook Stable

19th Jul 2010 10:23

The following is a press release from Fitch Ratings: Fitch Ratings-London/Paris-19 July 2010: Fitch Ratings has affirmed UK-based food service company Compass Group PLC's (Compass) Long-term Issuer Default (IDR) and senior unsecured ratings at 'BBB+' and its Short-term IDR at 'F2'. The Outlook is Stable. "Compass is demonstrating strong business resilience despite the anaemic economic recovery. With a simplified business structure, low leverage and a more disciplined approach to profitable growth and cash flow generation, Compass is likely to continue showing improved performance and strong credit metrics next year," says Johnny Da Silva, Director in Fitch's European Retail, Leisure, and Consumer Products team. The business profile benefits from a diversified customer base, good customer retention rate, geographical diversification and management focus on cost control. All these factors are likely to enable the group to continue improving margin and cashflow generation in FY10 and FY11. Although some of Compass' businesses such as the B&I (business & industry) are not immune to recession, the company should continue to benefit from the resilience of others segment such as healthcare and education that continue to perform well. These latter two segments remain promising due to the still low level of outsourcing (less than 30% is outsourced). Fitch also notes that the company is also expanding its soft support services business, which represented 18% of group revenue at FYE09. Due to the fragmented nature of the foodservice industry and still subdued growth, Fitch expects Compass to increase investment and accelerate its expansion notably through bolt-on acquisitions to drive revenue growth. With the implementation of the MAP (management and performance) programme, Compass is showing the capacity to adjust its cost base. This has enabled the group to continue improving its operating margin (up 50bp for the six months to 31 March 2010 at 7%). The group's financial profile is strong, as Compass continues to generate strong positive free cash flow after dividends, due to good operating performance and the low capital-intensive nature of its business. Adjusted debt ratios are strong for the rating with a lease-adjusted net debt/ EBITDAR at 1.6x at FYE09. This gives Compass financial flexibility within the ratings. >> Fitch has made major improvements to its credit research on EMEA and AsiaPac corporates. To view these improvements, visit our 'Clear Thinking' web page at http://clearthinking.fitchratings.co.uk/Index.html Applicable criteria, 'Corporate Rating Methodology', dated 24 November, 2009, are available at www.fitchratings.com. Contacts: Johnny Da Silva, Paris, Tel: +33 1 44 29 91 36; Britta Holt, London, +44 (0) 20 7682 7422. Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: [email protected]; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: [email protected]. Additional information is available on www.fitchratings.com. Related Research: Corporate Rating Methodologyhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489018 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. (END) Dow Jones Newswires July 19, 2010 05:23 ET (09:23 GMT)