Compass Group (CMPGY) shares fell to the bottom of the FTSE 100 Tuesday after the world's largest contract catering group posted disappointing fourth quarter sales despite a solid full-year earnings report.
The Chertsey, England-based caterer, which earns most of its revenue outside the U.K., reported a 6% rise in revenue and earnings for the full year ending in September as a fall in the pound boosted its top and bottom lines. Compass, the sixth-largest publicly traded employer in the world, posted a pre-tax profit improvement of 14% to £1.3 billion on an 11.5% increase in sales to £19.6 billion.
Compass shares fell 5% to the bottom of the FTSE 100, however, to change hands at 1,320 pence each by 10:15 GMT in London, trimming the year-to-date advance to 14.55%. Compass said Tuesday it would lift its full-year dividend 7.8% to 31.7 pence.
The company, which offers catering services to oil rigs and remote mining camps, along with company canteens and the Wimbledon Tennis Championships, saw sales grew 8.1% in North America, which accounts for 56% of group revenue. There was 2.8% in Europe and 3.6% in the rest of the world.
The fourth quarter however was impacted by the closure of some contracts and strong competitors in the U.K.
"Like for like volumes were impacted by the timing of a number of sports events in the UK in the fourth quarter of 2015 and by weakness in the oil and gas business, where we have seen revenue declines of 25% in the year, and France which is still challenging," the company said.
Operating profit grew by 2.6% in the quarter but underlying margin remained at 7.2%.
"Our expectations for 2017 are positive, with growth weighted to the second half of the year. The pipeline of new contracts is good and our focus on organic growth, efficiencies and cash gives us confidence in another year of delivery," group CEO Richard Cousins said in a statement.
He added that there are significant structural growth opportunities around the world and "the potential for further revenue growth, margin improvement and continued returns."
"Compass are to some extent suffering from the curse of being a well-run business with a great track record. People have high expectations," said Nicholas Hyett, an analyst at Hargreaves Lansdown. "A strong performance in North America and currency tailwinds have boosted Compass' results in the second half."
"We think there remain plenty of reasons to be positive about the group long term," Hyett added. "Growth in the U.S. remains strong, while the movement towards outsourced catering looks likely to continue. In the nearer term, recovering commodity prices should help the group's mining and oil and gas operations, traditionally a higher margin business where poor performances have impacted the group in recent years."