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FTSE 100 falters but catering group Compass climbs following update

Discussion in 'Market News' started by Lily, May 11, 2016.

  1. Lily

    Lily Forum Member

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    Mining shares recover but banks back under pressure

    Leading shares have slipped back in early trading, but the declines would have been worse if not for support from the mining sector, which recovered some lost ground once more.

    And catering group Compass was also one of the climbers, up 16p to £12.78 after it said it would meet full year expectations following strong demand for its services in North America and Europe. Half year revenues rose 5.8% to £9.7bn, slightly down on the 5.9% growth seen in the first quarter, while operating profits after restructuring costs rose 4.8% to £724m. Chief executive Richard Cousins said:

    Savings from restructuring are starting to come through, and are offsetting the weakness in Offshore and Remote and some emerging markets. Therefore margins pre-restructuring were flat.

    Our pipeline of new contracts is encouraging and our focus on organic growth, efficiencies and cash gives us confidence in achieving another year of delivery.

    We are encouraged by the strong start to the year and in our view, Compass is a very high quality business and we share management’s view that there are promising structural growth opportunities globally with potential for further revenue and margin growth. However, we believe that this promise is captured in the 2016 PE ratio of 21.3 times.

    We have revised forecasts following the recent first quarter production reports and changes to our commodity price assumptions. We have also factored in other recent news flow, in particular the planned disposal by Anglo American of its niobium and phosphates business for $1.5bn. We apply a higher commodity price deck for most commodities, and the net result is that we have raised our earnings forecasts and target prices.

    It’s something of a mixed start to trade this morning, with that strong finish on Wall Street evidently counting for little. Commodity prices remain generally upbeat and although crude oil is off a little on resurgent oversupply fears, that too is holding onto the vast majority of yesterday’s gains, so we do at least have the natural resources stocks scattered across the top of the board.

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