Compass Group PLC is today issuing its first Interim Management Statement for 2014 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 2013.
Compass has had a good start to the new financial year. Organic revenue growth was approximately 4% (at constant currency). We have delivered good levels of new business, the retention rate for the Group overall has remained stable and like for like revenue has continued to be positive. The underlying trends in our three regions have been consistent with the second half of 2013.
The ongoing focus on embedding our management and performance (MAP) programme deeper into the organisation has enabled us to deliver further operating efficiencies and achieve good leverage of our overhead base. We are using these efficiencies to invest in the exciting growth opportunities in the business and manage the economic conditions in Europe. They also underpin our expectation of delivering a further improvement in the operating margin.
North America has started the year well. The underlying trends in 2013 have continued into the first quarter of 2014. We have won good levels of new business across the sectors and retention remains high. Like for like revenue remains broadly flat. Whilst economic conditions in Europe & Japan continue to be difficult and overall organic revenue in the first quarter remains negative, we are starting to see some signs of stabilisation. The cost reduction plans are progressing well and we continue to focus on MAP 1, driving new business and retention. In Fast Growing & Emerging, the slowdown in the Australian mining sector has continued. However, elsewhere, despite economic challenges in some countries, organic revenue growth remains strong, underpinned by the continuing trend to outsourcing.
Since 30 September 2013, we have committed c. £50 million to infill acquisitions. We have also concluded the £400 million share buyback that was announced in November 2012. In total, 47,061,483 shares were purchased for cancellation at an average price of 849.49 pence per share. The Group announced a further £500 million share buyback at its final results in November 2013, which commenced in January 2014. As at 5 February 2014, 3.3 million shares have been purchased for cancellation for a total of £31.1 million.
Trading results from our overseas operations are converted at the average exchange rates for the year. In the first quarter of 2014, sterling has continued to strengthen against many of the Group’s key currencies (including the US dollar, Euro, Yen, Australian dollar and Brazilian real). If the current spot rates were to continue through 2014 we would expect a negative currency impact of 5.4%, or £942 million, on 2013 reported revenues and 5.7%, or £72 million, on 2013 underlying profit. The impact of currency movements is translation only.
At the Company’s AGM on 7 February 2013, Sir Roy Gardner announced his intention to retire as Chairman and a Director of the Company at the conclusion of today’s AGM. As announced on 20 June 2013, Paul Walsh was appointed to the Board as a Non-Executive Director on 1 January 2014 and will become Non-Executive Chairman from the conclusion of the AGM. The Board would like to thank Sir Roy for his contribution to Compass Group and to welcome Paul Walsh into his new role.
Summary & outlook
Compass has had a good first quarter and our expectations for the full year remain positive and unchanged, notwithstanding the translation impact of ongoing movements in foreign currencies. The pipeline of new contracts is encouraging and our focus on efficiencies gives us confidence in another year of delivery. In the longer term, we remain excited about the significant structural growth opportunities in both food and support services globally and the potential for further revenue and margin growth.