Compass moves in the right direction for lower risk investors

The catering giant spends £300m on mergers and acquisitions so far this yearAs Compass Group's results beat expectations Nick Raynor, investment adviser at The Share Centre, explains what this means for investors.

"The world's largest catering contractor reported a rise in figures for the past six months after implementing efficiency measures to boost margins. Pre-tax profits increased from £462m last year to £531m and revenues climbed from £7.9bn from £7.1bn. Also investors will be pleased with the interim dividend of 6.5p, a 1.5p increase from 2010.    

"The company has spent £300m on acquisitions so far this year and although these haven't been significantly large, we expect there will be more to come - for example Compass announced today it is set to acquire the remaining 50% of its fast growing business in Turkey. It is encouraging to see sensible deals like this taking place rather than the company overstretching.

"As we see good signs of improvement in Latin America emerging markets are still important for Compass and offer considerable development opportunities. The company's expansion overseas continues to offer lower risk investors international exposure.

"Some analysts expected a potential change in forecasted figures after the events in Japan, however the company's strong performance meant it was able to absorb the expected impact on profit and the disaster did not have a detrimental affect overall.  We continue to recommend Compass as a ‘buy' for investors as the company is certainly moving in the right direction."