UPDATE: Compass Sales Growth Returns To Trend Ahead Of Schedule

28th Jul 2010 09:40

(Adds detail) By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Compass Group PLC (CPG.LN), the world's largest caterer by sales, Wednesday posted a sharp acceleration in sales growth in the third quarter as it returned to its long-term sales target quicker than expected. The company, which serves four billion meals annually in businesses, hospitals, schools and at sports and music venues in many different countries, said in a trading update that organic sales, which strip out acquisitions, grew 5.5% on a constant currency basis in the three months to June 30, compared with a rise of just 0.4% in the first six months of the year. Chief Executive Richard Cousins told Dow Jones Newswires earlier this month the company would accelerate its sales growth in the second half. He said Compass was aiming to return to its trend revenue growth rate of 5% to 7%--but over the next 18 months-to-two years rather than immediately. The strong growth was driven by a slight improvement in the rate of contract retentions, well as an increase in new business from the likes of Harlequins Rugby Club, Fuji Xerox, Accenture and The Gates Foundation. For the first nine months of the year, sales are running 2% higher on the year and the company said it expects the full-year figure to be more than 2.5%. Seymour Pierce's Caroline de La Soujeole said she was encouraged that the accelerating sales growth was not achieved to the detriment of margins. Cost savings resulted in a 0.35 percentage point rise in the company's margin in the period. "The ongoing focus on operating efficiency should, after reinvestment, enable us to deliver further progress in the operating margin compared to the same period last year," the company said. The focus on efficiency and costs under CEO Cousins has seen Compass's operating margin grow to 7% from 4.5% during his time in charge. Ultimately, the company targets a margin of 8.5%. Cousins joined the 400,000-employee group in summer 2006. Since taking the helm, he has withdrawn the company from around 50 countries and sold a number of non-core businesses, although it remains the world's largest caterer by sales. North American operations continued a strong performance, with sales up 7.6% and margin up 0.2 percentage points, while Continental Europe grew sales 1.3% and margin 0.3 percentage points. Challenging economic conditions continue to hit the UK & Ireland region, and in particular the business & industry sector. Sales in the region dipped 2.1%, though margin improved 0.25 percentage points. The group's resilience in the consumer downturn has seen its shares in the last year climb almost 80% to close Wednesday at 558 pence. By 0820 GMT they had lost earlier gains to trade down 6 pence, or 1.2%, at 551 pence in a flat London market. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires July 28, 2010 04:40 ET (08:40 GMT)