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Compass Group plc Rises On Upbeat Full Year Update

compassThe share price of Compass Group (LSE: CPG) — the  multinational contract food-service, cleaning, property management and support services company — is currently up close to 2% following publication of an upbeat trading statement, issued ahead of its results for the year to 30 September 2014, which are due on 26 November.

Compass says that the fourth quarter saw good performance from the group, with “further strong growth” in both its North America and Fast Growing & Emerging regions, despite lower volumes in some markets in the latter.

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Organic growth in North America for the full year is expected to come in at around 6.5%, with growth in both Healthcare & Seniors and Sports & Leisure described as “good” and the company’s pipeline across all sectors in the region being “encouraging”. Growth in its Fast Growing & Emerging region has been affected by a slowdown in the Australian offshore and remote sector, and organic growth in the region is anticipated to be 8% for the full year.

Compass also said that trading in Europe and Japan had continued to improve. Thanks to contract exits related to the 2012 cost reduction programme now being completed, the rate of decline is expected to be only 1.5% for the year — half that of the previous year — and an increase of 20 basis points in the region’s full-year operating margin is anticipated.

The company said that overall organic revenue growth for the group is expected to be 4% for the full year (at constant currency rates), driven by strong levels of new business, good retention  rates and inflationary price increases. However, its full year operating profit margin, although having risen 50 basis points in the second half of the year compared to the first half, is expected to be flat compared to 2013.

Looking ahead, Compass says that remains excited about what it describes as “significant structural growth opportunities” in its global markets and the potential for future revenue and margin growth.

At 978.5p, Compass’s share price is up 15% on this time last year, since when the FTSE 100 has only increased by 1.9%.  And over five years, Compass leaves the FTSE 100 trailing, recording a share price gain of 172%, compared with a rise of 31% in the index.

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Jon Wallis has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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