Compass Group PLC is issuing a trading update ahead of its Annual General Meeting to be held at 12:00 noon today in the Live Room, Rugby Football Union, Rugby House, Twickenham, Middlesex TW2 7BA. At this meeting, shareholders will be provided with the following update on the Group’s performance since 30 September 2017.
Compass’ organic revenue for the first three months to 31 December 2017 grew by 5.9% driven by strong levels of new business wins, excellent retention and good like for like revenues.
We continue to generate efficiencies through our management and performance (MAP) programme. We are also taking actions to offset above average cost pressures in the UK, the benefits of which will come through in our operating margin in the second half of the year.
Organic revenue in North America increased by 8.2%. Growth was very good across all sectors, with particularly strong growth in Healthcare & Seniors, Vending and Sports & Leisure. In Europe, organic revenue grew by 2.1%, due to good growth in UK Business & Industry and a favourable calendar in Sports & Leisure. Organic revenue in Rest of the World increased by 4.0%, driven by strong performances in Turkey and some of our Spanish speaking Latin American businesses. Our Offshore & Remote business declined by 1.6%, which was better than expected due to delays in the transition from construction to production at certain sites. Growth in Rest of World excluding Offshore & Remote was 6.1%.
Currency movements, compared to the same quarter last year, had a negative translation impact on revenues and profit in the quarter of £288 million and £24 million respectively. If current spot rates were to continue for the remainder of the year, foreign exchange translation would negatively impact 2017 revenue by £1.2 billion and operating profit by £97 million.
The Group spent £265m on acquisitions during the quarter, the largest of which was Unidine, a pure-play food service provider in the rapidly growing Healthcare & Seniors market in the United States. The acquisition of Unidine, which has annual revenues of around $220m and margins broadly in line with Compass North America, completed on 31 December 2017.
As announced on 22 January 2018, as a result of the passage into law of the Tax Cuts and Jobs Act in the United States, we expect the Group’s effective tax rate to be reduced from 26.5% to around 24%, and the Group's cash tax rate to between 19% - 22% in the year ending 30 September 2018.
We had a strong quarter and our outlook for 2018 is positive. Growth in North America is excellent, and both Europe and Rest of World are performing better than planned. Therefore, we now expect to be above the middle of our target 4-6% organic growth range for the full year. We continue to focus on driving efficiencies throughout the business and expect modest margin progression on a full year basis, albeit second half weighted. In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth.