July 26, 2018 / 6:59 AM / 3 months ago

UPDATE 1-UK's Compass maintains FY margin growth outlook

(Adds details on margins, outlook; background)

July 26 (Reuters) - Compass Group Plc, the world’s biggest catering firm, reported a slight drop in operating margins for the nine months to June 30, but said moves to cut costs would lead to a modest rise in margins for the full year.

The British company, which serves over 5.5 billion meals a year in more than 50 countries, has been cutting food, labour and overhead costs as it struggles with stagnant revenue and declining margins.

“The benefits from the cost actions taken to offset above average inflation in the UK are starting to come through with an improving run rate,” the company said in a statement.

“However, these were offset by a more challenging volume and cost environment in the UK.”

Margins in its European business fell about 70 basis points in the nine months to 30 June 2018 even as organic revenue from the region rose 1.4 percent.

The company said organic revenue from North America, its biggest market, rose 7.2 percent in the nine months, with stable margins.

Margins at the company’s “rest of the world” business rose about 60 basis points, helped by the its focus on productivity and pricing after a restructuring in 2015-16.

The company has also seen a change in leadership with Dominic Blakemore taking over as chief executive officer after long-time CEO Richard Cousins died in a seaplane crash on the New Year’s eve.

More recently, Finance Director Johnny Thomson, one of the candidates considered for the top job, said he plans to leave the company by the end of the year.

Compass, which provides meals for office workers, armed forces and school children across the world, also maintained its full-year expectations for organic growth above the middle of its 4 percent to 6 percent range.

Overall organic revenue rose 5.1 percent in the nine months ended June 30, primarily helped by strong growth in North America. (Reporting by Arathy S Nair and Justin George Varghese in Bengaluru Editing by Saumyadeb Chakrabarty)

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