SDXAY Sodexo (PK)

Compass Group PLC (CPG.LN) Wednesday posted a 17% rise in first-half net profit and said a strong pipeline of new business would help deliver further sales and margin growth in the second half of the year despite the challenging economic conditions.

The U.K. catering company said that net profit in the six months to March 31 rose to GBP333 million from GBP284 million. Revenue edged up 2.6% to GBP7.1 billion. Stripping out acquisitions and currency effects, the rise was 0.4%.

"Whilst economic conditions are likely to remain challenging in the second half of the year, the combination of a strong new business pipeline and a stabilization in like-for-like volume is expected to deliver modest organic revenue growth," said Chief Executive Richard Cousins in a statement.

Cousins said it was "very encouraging" that organic revenue growth had returned. He said the company had seen an acceleration in the rate of new contract wins, while 93% of existing contracts had been retained. The market welcomed the continued progress by the group and by 0705 GMT, the shares were up 7 pence, or 1.2%, at 536 pence in a lower London market.

"We're very encouraged that organic growth has resumed," said Seymour Pierce analyst Kevin Lapwood. The 0.4% organic revenue growth was slightly higher than earlier guidance, he said. "While it doesn't sound a lot, they must have had a substantial level of growth in the second quarter," he said.

The company, which supplies food services to schools, hospitals, offices and leisure centers in 55 countries added a net GBP18 million of new contracts in the period with companies like Wells Fargo in the U.S., Aviva PLC (AV.LN) in the U.K. and Deutsche Postbank AG (DPB.XE) in Germany.

"Furthermore, the pipeline of new business looks encouraging," said Cousins.

Before the early return to growth, the company had been relying on cost cutting and margin progress to grow profit this year.

"Our continued focus on operating efficiency should enable us to make further progress in the margin in the second half of the year," added Cousins. Operating margin grew 0.5 percentage points in the first half to 7%.

The company has used a number of methods to offset the higher input costs, such as a focus on menu planning, supplier rationalization and waste reduction.

Cousins has consistently improved margins since joining the company in 2006 and said late last year there was still margin improvement to come. The company trimmed GBP161 million of costs in its last financial year, growing margin by 0.6 percentage points.

Catering groups such as Compass and French rival Sodexo SA (SW.FR) have traded relatively well through the downturn, benefiting from an increase in demand for outsourced catering as businesses look to cut their own costs. They are expected to benefit strongly from a cyclical recovery.

Sodexo recently posted a 3.7% rise in first-half profit and a 2.7% rise in underlying sales. Sodexo remained cautious however pointing to delays in contract negotiations with key clients.

The company also raised its dividend by 14% to 5 pence, beating expectations.

"The strength of the cash flow and balance sheet is enabling us to reward shareholders and to accelerate growth through value creating infill acquisitions," said Cousins.

-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

Grafico Azioni Sodexo (PK) (USOTC:SDXAY)
Storico
Da Gen 2025 a Feb 2025

Grafico Azioni Sodexo (PK) (USOTC:SDXAY)
Storico
Da Feb 2024 a Feb 2025