Sales growth to come in smaller portions at Compass

27th Mar 2012 07:15

Contract caterer Compass maintained its full year guidance despite admitting that like-for-like (LFL) sales growth in the first half of its financial year is likely to be slower than that seen in the corresponding period a year earlier.The group said the slow-down in LFL sales growth could largely be attributed to challenging economic conditions which continue to have an impact on trading volume in the UK and parts of Europe.Total revenue growth is expected to be around 8.5% in the first half of the financial year (to end-September) and organic growth is set to increase by nearly 5%, driven by further good performances in North America and Fast Growing & Emerging Markets. Overall, the operating profit margin for the first half is expected to be at the same level as the first half of last year. "We continue to see good levels of free cash flow conversion," the group said.North AmericaLooking at the regional performance, the group said positive trading momentum in North America has continued with strong organic revenue growth across all sectors. Good levels of organic revenue growth have been delivered in Business & Industry and Education and, in the second quarter, the Sports & Leisure business has benefited from the 'catch up' games played following the National Basketball Association strike. In Healthcare, the group has seen strong organic revenue growth in North America, driven in part by the accelerated start-up of the multi-service Ascension contract, which will be one of its largest contracts in North America. "Overall, we expect organic revenue growth to be around 7% and the underlying operating profit margin to be 20 basis points [one-fifth of a percentage point] ahead of the same period last year. Including the impact of the mobilisation of the Ascension contract, the reported operating profit margin is expected to increase by 10 basis points," the group said.Europe Performance across Europe has been mixed, with the UK and parts of southern Europe not pulling their weight. For Europe as a whole, like-for-like volume remains below the levels of the first half of last year. JapanThe Japanese market has continued to improve since the earthquake of 12 months ago; however, first half profitability will still be below the same period last year. Overall, the group expects organic revenue growth for the first half to be slightly negative and, due to the difficult climate in some economies, Compass is bracing itself for a 20 basis points decline in the operating profit margin versus the same period last year.Fast Growing & Emerging MarketsOrganic revenue growth in the first half has been strong, driven by good levels of new business wins and good LFL revenue growth. The energy and extraction sector continues to deliver strong organic revenue growth in Australia and Compass's businesses in Latin America, Russia, India, China and Turkey are continuing to grow at double digit percentage rates. Including the contribution from acquisitions, Compass expects revenue growth of 19% for the first half, with organic revenue growth of over 12%. ~"As we look out to the second half, whilst the current economic uncertainty is likely to continue to put pressure on like-for-like volume in some regions, we remain positive about the opportunities to grow the business and we are encouraged by the pipeline of new business," the group statement said. The market had little appetite for the shares following the trading update, with the stock sliding to 656.5p in the first couple of hours of trading, down 11.5p.jh