Compass buoyed by American sales growth

FTSE 100 caterer for schoolchildren and troops across the world reports sales drop in UK and Europe, but growth in US

The divergent fortunes of European and North American economies have been laid bare after Compass, the world's biggest caterer, updated the market on Tuesday morning.

The FTSE 100 company, which feeds schoolchildren and army troops across the world, said sales dropped in the UK and Europe, but continued to grow in North America.

Overall sales are expected to rise by 8.5% in the six months to March, helped by rapid growth in emerging markets. Like-for-like sales, which discount the impact of acquisitions, grew by nearly 5%.

The company said in a statement: "As we look out to the second half, whilst the current economic uncertainty is likely to continue to put pressure on like-for-like volume in some regions, we remain positive about the opportunities to grow the business and we are encouraged by the pipeline of new business."

In Europe, like-for-like sales dropped in the first half compared with the same period last year. Compass said: "Challenging economic conditions continue to affect like-for-like volume, most notably in the UK and parts of southern Europe."

The Japanese market continued to improve after the earthquake, it said, but profitability would still be lower. It forecast a 0.2% drop in margins for Europe and Japan.

In North America, Compass reported "strong organic revenue growth across all sectors". It noted that the sports and leisure side of the business had benefited from catch-up basketball games played after the NBA strike. The company expects revenue growth, excluding acquisitions, to be around 7%, with a 0.2% increase in the profit margin.

Emerging and fast-growing markets powered ahead, with 19% sales growth in Australia, Latin America, Russia, India, China and Turkey, including acquisitions, and 12% without them. The company said this group of companies would remain a focus for future growth. "We continue to invest in the many growth opportunities we see in these regions and the operating profit margin is expected to be in line with the same period last year."

The company's shares, which rallied last week, dropped 1.8% in early trade, making it one of the biggest fallers on the blue-chip index.