British food service company Compass Group Plc (CPG.L) Monday said that it expects organic revenue growth comfortably over 5% for fiscal 2008. The company also projects around a 60 basis point improvement in margins for the full year compared with last year.
According to the company, the positive trading momentum of the first nine months has continued throughout the summer period. The company's financial position is also strong, with free cash flow generation continuing to be well ahead of last year.
Compass Group said its Management and Performance or MAP program continues to drive revenue growth in a more disciplined way, delivering a good balance between net new contract wins and like for like growth. Reflecting the effect of efforts to control food cost inflation during the year, gross margins are in line with the levels achieved last year.
The improvement in operating margins is primarily due to the delivery of further efficiencies in unit costs combined with good leverage of existing above unit overheads, Compass Group noted. Further, the strengthening of most of the currencies against sterling has continued, favorably impacting the translation of the company's reported financials.
In North America, overall trading has continued to be strong. Organic revenue growth for the full year is expected to be around 7% with margin improvement of around 50 basis points, the company said.
In Continental Europe, Compass Group continues to project a modest acceleration of organic revenue growth. In fiscal 2008, organic revenue is expected to rise about 5%. The company also forecasts around 60 basis point improvement in margin, with most of the main countries contributing strongly.
Further, the company's UK revenues and operating profit are projected to be broadly in line with last year. In the Rest of the World, Compass Group expect to see around 9% organic revenue growth for the full year with margin improvement of over 120 basis points. Japan has seen continued good progress in improving the margins, while Australia and Latin America benefited from strong new business wins in the remote site businesses.
The company said it started an additional GBP 400 million share buyback program on July 1 and repurchased 18 million ordinary shares for a total consideration of GBP 65 million, excluding expenses, between July 1 and September 26. This brings the total number of shares repurchased since the share buyback program began in 2006 to 346 million for a total consideration of GBP 1.07 billion.
The company's fiscal 2008 results are scheduled to be announced on November 26.
CPG.L is trading at 341.50 pence on the LSE, up 9.75, or 2.94%, on a volume of 4.89 million shares.
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