Catering group Compass, whose customers range from Amazon to Henley Regatta, has been hit by the strength of sterling given its large number of overseas clients.
And analysts are concerned that chief executive Richard Cousins - a non-executive at troubled Tesco - might need to spend more time at the supermarket group.
Meanwhile Compass full year revenues rose by 4.1% but after taking into account exchange rate conversions, they fell by 2.8%. Profit before tax jumped 5.4% to £1.15bn, and the dividend has been raised by 10.5% but the group’s shares are flat at £10.74 in a rising market.
Compass saw strong growth in north America and in emerging markets, with conditions in Europe and Japan improving. Cousins said:
We remain excited about the attractive structural growth opportunities in our markets globally and we believe we are well placed to capitalise on them.
We also expect to deliver further cost efficiences, which will help to support future growth.
Panmure Gordon analyst Anna Barnfather said:
Full year results to September were broadly in line with foreign exchange headwinds offsetting a solid underlying performance showing organic revenue growth of 4.1% and 10 basis point margin improvement. Growth in North America is accelerating, Europe and Japan are improving, Emerging Markets growth partially offset by Australia (as expected). We will need to trim our 2015 (around 3%) to account for the foreign exchange impact...The investment case is very much in tact and we retain our buy recommendation.
Wyn Ellis at Numis said:
We believe that Compass continues to have attractive structural growth prospects driven by a global trend towards outsourcing. The biggest risk at present (at least to sentiment) is that chief executive Richard Cousins, who is currently a non-exec at Tesco, assumes greater responsibilities at the supermarket chain. There will be relief that there is no announcement this morning.
Overall the FTSE 100 continues to edge higher, up 18.70 points at 6749.84 as UK GDP came in as expected. Later come a number of US figures ahead of the Thanksgiving holiday.
One of the day’s big fallers is Thomas Cook, currently down 25.1p or 18% to 112.8p following the shock departure of chief executive Harriet Green.
And its warning of a tougher trading environment and slower growth in 2015 has hit rival Tui Travel, down 4.6p at 421.9p, and budget airline easyJet, 7p lower at £15.53.
United Utilities has dipped 6p to 908.5p after virtually flat half year profits of £340.5m.
Marks & Spencer has added 3.5p to 484.4p after JP Morgan began coverage with an overweight rating and 550p price target, while as part of a review of the retail sector Canaccord Genuity issued a hold rating with a 500p target. Canaccord said:
For too long, the consistent and laudable progress of Marks & Spencer’s food division has been undermined by the weak and faltering performance of its General Merchandise (GM) division, which is dominated by clothing. Womenswear is the largest constituent of clothing and has seen market share erosion for several years.
October’s interim results surprised on the upside through the delivery of a better than expected gross margin gain in GM, primarily from supply chain efficiencies (and improved markdown performance). Guidance on GM gross margin was raised, and together with as yet unquantified future gains from moving the “direct design” mix from 25% to 60% over the next three years, M&S could be about to embark on a gross margin improvement journey lasting several years.
It remains to be seen whether this is to be the bright start of a new era or another false dawn, hence our hold recommendation on initiation with a target price of 500p.
But Canaccord did damage to Qinetiq, cutting from hold to sell and 205p to 180p. The defence technology group - whose chief executive Leo Quinn is leaving to join Balfour Beatty - is down 7.8p at 198.3p. Canaccord said:
We downgrade QinetiQ on a combination of accelerating cash outflows, margin pressure and a period of limbo during the chief executive transition. We see the stock underperforming through this period.
