Compass Group PLC is today issuing its first Interim Management Statement for 2013 ahead of its Annual General Meeting to be held at 12:00 noon today at the Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE. At this meeting, shareholders will be provided with the following update on the Group’s performance since 30 September 2012.
Compass has had a good start to the new financial year with first quarter organic revenue growth of nearly 6%. Organic revenue growth in North America was particularly strong with the Ascension Health contract contributing over 1% to global sales in the period. The environment in Europe remains difficult, as expected, but our cost reduction plans are on track. In Fast Growing & Emerging, we have continued to see strong levels of demand.
Organic revenue growth has been driven by consistently strong new business levels and high rates of retention. Like for like revenue is positive overall but continues to show different trends across the world; positive in North America, negative in Europe & Japan and strong in Fast Growing & Emerging. The impact of acquisitions broadly mitigated the impact of the disposal of the US Corrections business.
We are continuing to generate considerable efficiencies through applying the MAP framework, which are being reinvested in exciting growth opportunities around the world as well as helping us to manage the challenging economic conditions in parts of Europe. These efficiencies also underpin our expectation of delivering further progress in the operating margin. Free cash flow conversion remains strong.
The 2013 financial year has started well in North America, with strong organic revenue growth and further cost savings. The Ascension Health and Texas A&M University contracts are now fully operational, and we have also won good levels of new business in Business & Industry (B&I). Economic conditions in Europe & Japan remain difficult and, as expected, we have seen a decline in organic revenue. The cost reduction plans announced in September 2012 are progressing well and remain on track. Fast Growing & Emerging continues to enjoy strong levels of organic revenue growth from both new business wins and like for like revenue, with particularly good performances in Australia, Turkey and Latin America. We have also made further progress on generating increased efficiencies, while investing in the many growth opportunities we see.
Since 30 September 2012, we have committed £77 million to infill acquisitions. These include Crown Camps, an experienced food service operator in the oil and gas sector in Colombia, and Nova Services Group, a Toronto-based company that provides food and support services to the B&I and Healthcare sectors. In the US, we have acquired two support services companies, CREST Services Inc. and Mayflower Healthcare Textile Services, LLC, to expand our range of services and geographic presence in the Healthcare sector. In December, we concluded the £500 million share buyback announced in November 2011. In total, 74,581,481 million shares were purchased for cancellation at an average price of 670 pence per share. The Group announced a further £400 million share buyback at its final results in November 2012, which commenced on 7 January 2013. As at 6 February 2013, 5,175,000 shares have been purchased for cancellation for a total of £39 million.
Summary & Outlook
Compass has had a good first quarter and our expectations for the full year remain positive and unchanged. North America and Fast Growing & Emerging are continuing to perform well and we are making good operational progress in Europe & Japan. In the longer term, we remain positive about the significant structural growth opportunities in both food and support services globally and the potential for further revenue and margin growth.