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Compass, the FTSE 100 catering group, celebrated a 25 per cent climb in first half profits with the announcement of a £1bn special dividend, as the weak pound provided a big boost to its revenues.
Revenues in the six months to March 31 were 20.3 per cent higher than the same period last year, at £11.5bn, at the lower end of forecasts by analysts surveyed by FactSet.
The company said trading since the start of 2017 was stronger than the previous quarter, and it also received a boost of more than 15 per cent from the weak pound.
The US was the strongest performer, with revenue up 7.1 per cent, while revenues in Europe increased by 1.6 per cent and rest of world declined, mostly due to the impact of weakness in its offshore and remote business.
Although not an obvious victim of the global slump in oil prices, low commodities prices have hit Compass’ business providing food on oil rigs and at remote mining camps, leading the group to begin a restructuring programme.
On an underlying basis, excluding the impact of currency movements, total revenues were 3.6 per cent higher than the same period in the previous year. Profit before tax grew by a quarter, to £831m.
Compass said the business’ strength and “excellent cash generation” allowed it to pay a special dividend of 61p per share, on top of its interim dividend of 11.2p per share.
The company said the payment “reflects our commitment to return surplus cash to shareholders, whilst maintaining an efficient balance sheet”.
Compass had previously warned that rising inflation linked to the weak pound would force it to increase prices on some of its UK contracts. However, Compass relies on the UK for just 10 per cent of its revenues.
Like many of its peers on the FTSE 100, its high proportion of overseas earnings has helped boost Compass’ shares, which have risen 26 per cent over the last twelve months and hit a series of record highs in recent weeks.
Richard Cousins, Compass Group chief executive, said:
Compass had a good six months, with the business performing as expected. North America continues to deliver excellent growth and trends in Europe are improving. In Rest of World, reasonable growth in Business & Industry, Healthcare and Education was offset by ongoing weakness in Brazil and our Offshore & Remote sector.
Our expectations for FY 2017 are positive and unchanged, with growth weighted to the second half. Our pipeline of new contracts is encouraging and our focus on organic growth, efficiencies and cash gives us confidence in achieving another year of delivery.