Investment Column: Compass is heading in the right direction

Entertainment One; Tribal


Our view: Buy

Share price: 560.5p (+1.5p)

Compass, the world's largest food-service company, continued its strong momentum over the six months to the end of March.

The group, which operates in 55 countries, grew organic revenues – excluding acquisitions – by 5.5 per cent for the six months to 18 May, boosted by strong performances in the US, continental Europe and overseas. But the City was particularly pleased by Compass lifting its operating margin by 20 basis points in these three regions, and for the group as a whole, over the half year.

Growth in the US – the biggest market of Compass, which provides catering services across multiple industries, healthcare, education and high-profile sporting events – was driven by new business wins, a high level of customer retention and an uplift in like-for-like sales.

The group is also benefiting from buoyant emerging markets, notably in India, China and Latin America, with Brazil already delivering double-digit organic revenue growth. However, Compass found the going tough in some regions.

In particular, the challenging economic conditions in the UK hit underlying revenue volumes in its business and industry sectors, which remained in negative territory in the first half of the year.

However, for its wider UK operation, which provides catering at Wimbledon and the Grand National, organic revenues improved to be broadly flat, as was its underlying operating margin.

Unsurprisingly in Japan, Compass estimates it will suffer a £5m hit to its profits in the first half, following the recent tragic events.

On a global scale, Compass also warned that higher food inflation will continue into the second half, although it is mitigating this impact with improved buying, price increases and further efficiencies. Overall, we believe that Compass has a strong track record of overcoming external pressures, alongside boosting its own prospects with acquisitions.

While a forward-earnings multiple of 14 is not cheap, we think the group is a tasty long-term prospect for future investors, with analysts tipping substantial growth in its dividend yield.

Entertainment One

Our view: Buy

Share price: 158p (-3p)

Like broody vampires who hang out with teenage girls? No? Well, Entertainment One does, as its distribution of the Twilight saga in the UK has proved very lucrative indeed. The independent film and television distribution company put out a short update yesterday without, it should be noted, a mention of its lucrative bloodsuckers. Instead it name-checked recent UK box office No 1 Gnomeo & Juliet, as well as the Bruce Willis vehicle RED, which has made an impact on DVD.

Management said it expected full-year earnings to be line with hopes, which is encouraging. The film arm has continued to perform strongly since the turn of the year, while the television business is growing. Other news included its Peppa Pig character's arrival in the US.

In short, the company has come out of recession strongly. The shares tumbled as low as 13.5p during the downturn but have stormed back since. Yesterday's update did not add a huge amount to the sum total of human knowledge but the business looks to be ploughing on nicely.

The forward-earnings multiple of 12.4 times means there could be more in the way of upside.

Tribal

Our view: Buy

Share price: 36.75p (-2.25p)

Tribal is heavily exposed to the public sector which, on the face of it, hardly bodes well given the Government's austerity drive.

That said, the outsourcing group's full-year figures on Wednesday were in line with hopes.

The company also reported good progress in its international business, and in its education arm, which grew revenues, albeit with reduced operating profit margins.

The Government arm took a hit, but given the backdrop, that is not really surprising. The key question is whether or not the shares reflect the risks.

Having fallen by around 50 per cent since October, we think they do, so much so that they may be ignoring the potential upside from a possible sale of the company, which remains in an offer period, or from recent reports suggesting that Tribal may have received approaches for its education and healthcare arms.

News
Jennifer Lawrence was among the stars allegedly hacked
peopleActress among those on 'master list' of massive hack
Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
PROMOTED VIDEO
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
people'It can last and it's terrifying'
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
The eyes have it: Kate Bush
music
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Business Development Manager / Media Sales Exec

£28 - 32k + Uncapped Commission: Guru Careers: A Business Development Manager ...

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor