Compass Group plc Ordinary 10p (CPG)

Company overview

Compass Group PLC is a global contract food service and support services company headquartered in Chertsey, Surrey. It is the largest contract food service company in the world, generating revenues in the 2010 financial year of over £14 billion, with operations in some 50 countries. It serves around 4 billion meals a year in locations including offices and factories, schools, universities, hospitals, major sports and cultural venues, mining camps and offshore oil platforms. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

HL Comment (2 February 2012)

The group's first quarter update again provided reassurance. Good levels of new business wins had again been seen, with the improved level of customer retention it achieved in the second half of last year continuing into the new financial year. Volumes in North America and the Emerging Markets had remained robust, while in Japan, a gradual return to normal activity levels had been seen following last year's earthquake. Furthermore, using its performance management framework, MAP, management had continued to drive efficiencies across the business.

Negative Points

• Like for like volumes in Europe have continued to be impacted by the challenging economic environment in some countries.
• Food cost inflation remains a potential pressure on margins, while the uncertain economic backdrop continues to overshadow.
• Volatility in currency markets can work against the company.
• Competition across the global industry continues to be intense.

Positive Points

• Management expectations for the full year remain positive and unchanged.
• Group diversification continues to provide a key ingredient, with a 'balanced portfolio' of client industries – both cyclical and defensive – combined with a wide geographical spread playing a significant part in the group’s business model.
• Management retains a tight rein on costs, with the group’s efficiency programme ongoing.
• Small bolt-on acquisitions are now being made, while management also continues to push the group's services into non-food support services.
• Emerging Market growth continues to be pursued.
• As of the November full year results, the board outlined plans to buy back £500 million of its shares during the next 12 months.
• A progressive dividend policy continues to be pursued. As of the last full financial year, a 10% plus increase was enjoyed.

Consensus

On balance, market consensus opinion currently denotes a strong buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.