UPDATE 1-Caterer Compass hands back 1 bln stg to shareholders

Wed May 14, 2014 3:15am EDT

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LONDON May 14 (Reuters) - Compass, the world's biggest catering firm, said it would return 1 billion pounds ($1.68 billion) to shareholders through a special dividend as strong business wins in North America helped push first-half profit up 5.7 percent.

The British group, which employs over 500,000 people to feed office workers, soldiers and school children in some 50 countries, said on Wednesday adjusted pretax profit for the six months to March 31 rose to 608 million pounds versus 604 million forecast by analysts.

A potential payout at Compass had been flagged by some analysts due to the firm's strong cash generation and preference for organic growth alongside small bolt-on acquisitions.

The firm, which is already in the middle of a 500 million pound share buyback programme, said the move would put net debt to EBITDA at a ratio of around 1.5 times, supporting its policy of maintaining strong investment grade ratings.

On top of the 1 billion pound payout, which takes returns to shareholders since 2006 to 6 billion pounds, Compass also raised its interim dividend by 10 percent to 8.8 pence per share.

Chief Executive Richard Cousins said its full-year expectations remained unchanged and that an encouraging pipeline of new contracts left it confident of a good second half.

"Looking forward, the outsourcing proposition remains compelling and I'm positive about the opportunities for further revenue and margin progression," Cousins said in a statement.

First-half revenue grew 4.2 percent to 8.7 billion pounds, led by North America, its largest market worth almost half of group turnover, where it signed new deals with universities, hospitals and firms such as L'Oreal, DreamWorks and Nomura.

Revenue in its smaller Fast Growing & Emerging markets region also grew strongly, with demand in Brazil, Turkey and China offsetting slowing sales in Australia's resources sector.

The group said it had also seen signs of improving economic conditions in Japan and Europe, where it has exited weak contracts and cut costs.

Compass shares were up 4.7 percent to 1027 pence at 0703 GMT. They closed at 980.5 pence on Tuesday, valuing the firm at 17.5 billion pounds.

($1 = 0.5939 British Pounds) (Reporting by Neil Maidment; editing by Kate Holton and Jason Neely)

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