As Compass updates the market, we explain what it means for investors.
Compass beats market expectations
- The global catering group reported a 5.3% rise in organic revenue, outstripping the 5.0% forecast
- The key North American market continued to provide strong growth, but Europe remains a weak spot
- The steady stream of new business and acquisitions should provide some growth
- Profit margins are also expected to remain at similar levels for the full year
- Recommendation: We continue to recommend the shares as a buy for lower risk investors
Global catering group Compass beat market expectations with its first quarter figures today. The 5.3% rise in organic revenue outstripped the 5.0% forecast, thanks largely to winning new contracts and high customer-retention rates. The key North American market continued to provide strong growth, as did Australia and the LATAM region, but Europe remains a weak spot for the company. Movements in exchange rates reduced profits by £6m, but Compass said it had made an encouraging start to the year and maintained its forecast for full-year revenue growth around 5%. Profit margins are also expected to remain at similar levels for the full year.
These are good figures from Compass today and that is reflected by the 3% rise in the shares in early trading, which comes on top of a good start to the year. The strong trading in North America is especially reassuring for investors, while the flat trading in Europe and currency headwinds are being offset by the cost-saving programme. Compass retains its appeal to investors as a strongly defensive business while the steady stream of new business and acquisitions should provide some growth. We continue to recommend the shares as a buy for lower risk investors.
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