Trading Statement

RNS Number : 5622T

Compass Group PLC

30 September 2010

Compass Group PLC

Trading Update

This statement updates investors on the Group's progress in the current year, ahead of the announcement on 24 November 2010 of its results for the year to 30 September 2010.

Group

The positive trading momentum seen in the first nine months of the year has continued into the fourth quarter. Organic revenue growth has improved from 0.4% in the first half of the year and is expected to be over 5% in the second half of the year. For the full year, organic revenue growth is now expected to be towards 3%. Including the impact of acquisitions, constant currency revenue growth is expected to be around 4%. Organic revenue growth has been driven by increased new business wins across the Group and a slight improvement in the rate of retention. Like for like volumes in the Business & Industry and Sports & Leisure sectors remain challenging but, in the second half of the year, they have been broadly level with the same period last year.

Through the application of our operating framework, MAP, we have generated further efficiencies. These have in part been re-invested to support the exciting growth opportunities we see around the world. We have made good progress in growing the margin and expect to deliver around 40 basis points growth for the full year compared to last year. We expect a favourable impact of around £25 million on operating profit from the movement of our key currencies compared with last year - translating the profits of last year using this year's actual exchange rates. On a constant currency basis, underlying earnings per share are expected to grow by around 15%. Cash flow conversion remains strong.

North America

Organic revenue growth has continued to be driven by strong growth in new business across all sectors, high levels of retention and gradually stabilising like for like volumes. Overall, for the full year we expect organic revenue growth of around 5.5% and an operating margin improvement of around 20 basis points.

Continental Europe

Whilst economic conditions still remain quite challenging in parts of Continental Europe, encouragingly, we have seen increased levels of new business and a slight improvement in retention during the year. We expect organic revenues for the full year to be broadly flat on last year. With the continued focus on cost efficiency, we expect an increase in the operating margin of around 30 basis points for the full year.

UK & Ireland

We have seen some progressive improvement in organic revenue growth, from a decline of 5.7% in the first half of the year to an expected decline of around 1.5% in the second half of the year. This is despite challenging economic conditions continuing to impact like for like revenue in the Business & Industry and Sports & Leisure sectors. For the full year we expect revenues to be just under 4% lower than last year. We have driven significant cost efficiencies in the year and expect to see around 20 basis points of improvement in the operating margin for the full year.

Rest of the World

Strong growth in new business in Australia and Brazil, together with the ongoing strength of the energy and extraction businesses around the world, has continued into the fourth quarter. We are also very encouraged by the prospects in the other key emerging markets, in particular China, India and Russia. Overall, we expect organic revenue growth of around 6% for the full year with an improvement in operating margin of around 90 basis points.

Acquisitions

Since 31 March 2010, we have invested around £180 million on previously announced infill acquisitions. These include the acquisition in food services of Caterine Restauration in France and in support services, Clean Mall Servicos Ltda and FB Projetos Multi Service Ltda in Brazil and Southeast Service Corporation in the USA

Since our IMS on 28^th July, we have announced two further acquisitions. Tirumala Hospitality Services Private Limited adds to our food service business in India and in the UK, VSG Group Limited further strengthens our support services offer there.

These take the total investment in acquisitions in the year to around £220m.

Whilst our primary focus remains on driving organic growth, we continue to evaluate infill acquisition opportunities that enable us to take advantage of the significant growth opportunity in our core food and fast growing support services markets in both developed and emerging countries.

Summary and outlook

Over the past twelve months we have focused on positioning the Group for growth. It is therefore pleasing to see the progress that has been made in organic revenue growth over the year. Whilst too early to call a trend, it is particularly encouraging to see an increase in new business and an improvement in retention in the second half of the year. Our continuing ability to deliver operating efficiencies is enabling us to re-invest in growth, whilst at the same time drive margin improvement.

Looking forward, the ongoing challenging economic conditions are likely to continue to impact like for like revenues in the near term. However, we are well placed to exploit the significant structural growth opportunity in both food and support services around the world and we are encouraged by the pipeline of new business. In an environment where cost efficiency remains high on the agenda, we believe the benefits of outsourcing are clear. Furthermore, the ongoing focus on operating efficiency should enable us to continue to re-invest in growth whilst delivering further margin progression. In addition, the strength of the cash flow and balance sheet is enabling us to reward shareholders and to accelerate growth through value creating infill acquisitions.

Note to Editors:

(a) Compass Group is the world's largest foodservice company with annual revenues in 2009 of over £13 billion operating in 50 countries.

(b) MAP (Management and Performance) is a simple, but clearly defined Group operating framework. MAP focuses on five key value drivers, enabling the businesses to deliver disciplined, profitable growth with the focus more on organic growth and like for like growth.

The five key value drivers are:

MAP 1: Client sales and marketing

MAP 2: Consumer sales and marketing

MAP 3: Cost of food

MAP 4: Unit costs

MAP 5: Above unit overheads

(c) Organic revenue growth, a term used throughout the announcement, is calculated by adjusting for acquisitions (excluding current period acquisitions and including a full period in respect of prior period acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current period exchange rates) and compares the current period results against the prior period.

(d) Operating profit, a term used throughout this announcement, includes share of profit of associates and is wholly consistent with the presentation in the Group's 2009 Annual Report and Accounts.

(e) This Press Release contains forward looking statements within the meaning of Section 27A of the Securities Act 1933, as amended, and Section 21E of the Securities Exchange Act 1934, as amended. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such forward looking statements. The terms 'expect', 'should be', 'will be', 'is likely to' and similar expressions identify forward looking statements. Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic conditions and business conditions in Compass Group's markets; exchange rate fluctuations; customers' and clients' acceptance of its products and services; the actions of competitors; and legislative, fiscal and regulatory developments.

A copy of this release, together with all other recent announcements can be found on Compass Group's website at www.compass-group.com. Copies of the presentations given to institutional investors and analysts are also available at this site.