Compass shares rally as catering giant lands Silicon Valley contract
Wednesday 27 November 2013
Shares of Compass jumped after the British catering giant announced it added LinkedIn to its Silicon Valley client portfolio, which include online heavyweights Twitter, Google, Amazon, Yahoo, Ebay and Microsoft.
Chief executive Richard Cousins said: “The Americans have a much more economically liberal attitude to outsourcing than the Europeans. They understand that they should concentrate their efforts on what they do well and let others do the rest. Obviously the recent events around Serco and G4S haven’t helped the case for outsourcing in this country.”
Compass today announced a further £500 million share buyback as profits for the year to September rose by 9% to £1.19 billion on revenues up 4% at £17.6 billion. That takes the value of share buybacks in the last two years to £1.4 billion and pushed earnings per share up by 12.5% to 47.7p a share.
The news came as US rival Aramark gears up for a New York Stock Exchange float which is expected to raise at least $1 billion (£620 million). The firm was the subject of an $8.7 billion private equity takeover in 2007.
North America now makes up 47% of revenues for Compass, and they grew by 7.3% last year. Europe and Japan which together make up 34% of revenues shrank by 3.3% as it got out of loss-making contracts mainly in the south of the region. In the UK, revenues dropped slightly but Compass enjoyed some good contract wins including Henley Regatta. The rest of the world — or “fast growing and emerging markets” as Compass puts it — accounted for 19% of revenues, with 7% growth.
Compass also took a £377 million write-down of goodwill in the UK as a result of the 2001 takeover of Granada. Cousins said: “ Quite frankly Compass grossly overpaid for Granada, paying a huge goodwill premium. It is an accounting not a cash impairment.” The dividend for the year goes up 13% to 24p and the shares rose 23.5p to an all-time high of 950p.
Serco today sold its business which looks after London’s traffic lights and CCTV systems and UK management. America’s Cubic Coporation is paying £43.5 million for the business which Serco’s acting chief executive Ed Casey said was “non-core to the development of our transportation strategy.”
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