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Compass sees FY boosted by costs cuts

Source: Reuters - Tue 29th Sep 2009

Compass, the world's biggest caterer, expects to grow full-year earnings per share by 14 percent as new business wins, cost cuts and a weak British pound helped maintain growth, sending its shares up.

The British company, which feeds office and factory workers, soldiers and school children, on Tuesday said it expects underlying sales to grow by around 1 percent in the year to the end of September and that favourable currency moves would add around 120 million pounds to annual operating profit.

Compass said contract wins with the likes of Google in Australia and Electrolux in Sweden would help push full year margins up 60 basis points and that it expected demand to pick up in the coming months.

"Encouragingly, throughout the year the level of new contract wins and underlying retention has remained strong" the group said in a statement.

"In the medium-term, a combination of the growth in outsourcing and global economies recovering should produce an upswing in demand."

Its shares, which have underperformed the FTSE All Share index by 11 percent so far this year, were 2.9 percent up at 369.70 in early trade, valuing the group at around 6.6 billion pounds.

Compass, which counts Chelsea football club, London's O2 arena and the Bank of England among its clients, said it was performing well in the fourth quarter, with year-on-year margin growth of around 70 basis points expected.

In spite of the positivity, Compass said like-for-like sales and volume growth at its Business & Industry and Sports & Leisure units continued to be hit by reduced levels of employment and less discretionary spend by clients. 

Sales volumes in the education, healthcare and defence, offshore and remote site sectors, however, had been solid throughout the year.

The company expects annual sales to be down 5.5 percent and 1 percent in the UK and Ireland and continental Europe, respectively, but its North American division should grow revenues by 1.5 percent.

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