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Compass tops growth expectations

The shares headed north after an upbeat trading update

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North America was the best performing region

Investors tucked in to contract caterer Compass's (LON:CPG) shares after a trading update revealed faster-than-expected top line growth.

The company said the three months to the end of December – the first quarter of its financial year – saw strong trading, with year-on-year organic revenue growth of 5.9%. The median forecast among analysts that follow the stock had been for an organic growth rate of 4.8%.

Like-for-like revenues increased, driven by modest pricing and some volume improvement, the company said.

The North American region was the star performer, with organic revenue growth of 7.9%, sparked by growth in technology within the Business & Industry arm, new contract wins for the Healthcare & Senior Living division, and a good performance from the Sports & Leisure business.

In Europe, organic revenue grew by 3.6%, as it did in the Rest of the World.

The company said currency movements put a £116mln dent in revenues and depressed profits by £7mln compared to the same quarter of 2014.

On the plus side, were current spot rates to continue for the remainder of the fiscal year, foreign exchange translation would positively affect revenue by £253 million and operating profit by £24 million.

“Our outlook for 2016 remains positive,” the company is set to tell shareholders at today's annual general meeting. 

“Growth in North America is strong, Europe is improving, and we are managing the challenges in the Rest of World region. We continue to focus on driving efficiencies throughout the business and our margin expectations are unchanged. In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth.”

Shares were up 4.6% at 1,228p in mid-morning trading.

Quick facts: Compass Group

Price: 2010 GBX

LSE:CPG
Market: LSE
Market Cap: £31.89 billion
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