May 11, 2016 / 9:02 AM / 2 years ago

UPDATE 1-Caterer Compass Group revenue beats on strong North America growth

(Adds comments from CEO, analyst, details, share movement)

By Esha Vaish

May 11 (Reuters) - Compass Group, the world’s biggest catering firm, reported better-than-expected organic revenue growth on the back of strong demand for its services in North America and the UK, and stood by its full-year expectations.

The group’s organic revenue grew 5.8 percent in the six months ended March 31, as strong growth in North America and a recovery in Europe more than made up for weakness in Australia, Brazil and some other businesses. At least two analysts said this was ahead of their expectations.

Shares in Compass, which serves about 5 billion meals a year, rose as much as 1.8 percent, outperforming the broader FTSE 100 index, which was down 0.3 percent on Wednesday. Compass was the third largest gainer on London’s blue chip index.

In North America, which accounts for more than half of the company’s business, organic revenue rose 8.3 percent in the first half, ahead of the 7.9 percent seen in the first quarter.

This strong growth mainly drove the results beat, analysts at Bank of America Merrill Lynch wrote in a client note. They upgraded their earnings expectations for fiscal year 2016-17 by 3-4 percent, citing a strong U.S. dollar.

Chief Executive Richard Cousins told Reuters that in the second half, Compass could match the top end of the 7-8 percent organic growth it has generally had in North America.

“I think we’re going to have another very strong half, perhaps not quite as good as the first half but there or thereabouts,” Cousins added.

Europe, which makes up just under 30 percent of the group revenue, saw a 3.7 percent rise, with the company pointing to strong performance in the UK, its second largest market.

The strong momentum in its two main markets encouraged Compass to maintain its full-year outlook, with the company saying that its pipeline of new contracts was encouraging.

Analysts on an average were expecting revenue of about 19 billion pounds ($27 billion) for the financial year, according to Thomson Reuters I/B/E/S.

Compass reported revenue of 17.8 billion pound last year. ($1 = 0.6939 pounds) (Reporting by Esha Vaish in Bengaluru; Editing by Sunil Nair and Gopakumar Warrier)

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