North America underpins revenue growth for Compass

Compass Group reported a 5.3% improvement in organic revenue for the three months ended 31 December on Thursday, which it said was driven by strong levels of new business wins and good retention rates, particularly in North America.

The FTSE 100 foodservice company - which was holding its annual general meeting later in the day - said its cost action programme, announced in November, was progressing as expected, with the benefits offsetting the anticipated impact of lower volumes from the business and industry division in Europe.

On a regional basis, organic revenue in North America increased 7.5%, with “particularly strong” growth in business and industry, healthcare and education.

In Europe, as expected, Compass said organic revenue was flat year-on-year, as it was impacted by the expected volume softness in business and industry and a “less favourable” sports and leisure calendar.

“These headwinds were offset by a good performance from Turkey, and our central and eastern European region,” the board said in its statement.

Organic revenue in the rest of world geography increased 4.7%, which Compass said was supported by good levels of growth in Australia and Latin America.

The company explained that currency movements, compared to the same quarter last year, had a negative translation impact on revenues and profit in the quarter, of £71m and £6m respectively.

If current spot rates were to continue for the rest of the year, foreign exchange translation would negatively impact 2019 revenue by £745m and operating profit by £61m.

In the first quarter, Compass spent £40m on acquisitions.

“Our strategy is to make targeted and disciplined bolt-on acquisitions, focussed on our core food offering, which strengthen our capabilities,” the board said.

“There continues to be a pipeline of opportunities across the group.”

Following approval from the European Commissioner for Competition, the firm completed the acquisition of Fazer Food Services on 31 January for an initial cash consideration of about €420m (£355.66m).

It also made further progress with its disposals programme, having recently sold 50% of its Japanese highways business for £55m, with agreement to sell the rest over the next three years.

“We expect to make further progress with disposals throughout the year.”

“We have had an encouraging start to the year and our outlook for 2020 remains unchanged with organic growth around the midpoint of our 4% to 6% guidance range whilst maintaining our strong marginIn the longer-term, we remain excited about the significant structural growth opportunities globally, and the potential for further revenue and profit growth combined with further returns to shareholders.”