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Caterer Compass boosted by post-pandemic return to work
Global Banking & Finance Review®
Company
By Shanima A and Yadarisa Shabong
(Reuters) -Compass Group, the world’s largest caterer, raised its full-year revenue forecast as it benefited from offices reopening after the COVID-19 pandemic, helping its shares rise by more than 10% on Wednesday.
Compass, which feeds office workers, the armed forces and school children in 45 countries, as well as provides catering for sporting events, such as Wimbledon, raised its 2022 organic revenue growth forecast to around 30% from 20%-25%.
Compass has benefited from more companies outsourcing their catering to reduce costs, Chief Executive Dominic Blakemore said in an interview. It has also reduced menu choices and switched to cheaper ingredients.
“For example, if we see very strong inflation on red meat, we buy poultry, and, within the poultry category, we move from chicken to turkey… we may also look at reducing the protein content,” Blakemore told Reuters.
The conflict between Russia and Ukraine, both major wheat suppliers, has sent commodity prices through the roof, forcing companies to look at ways to reduce costs.
Shares in Compass were up 8% at 1000 GMT. The company also announced a 500 million pound ($619 million) share buyback programme.
Despite the inflationary pressures, Compass kept its profit margin forecast unchanged for the year. Its underlying operating profit more than doubled to 673 million pounds for the six months ended March 31 while underlying revenue rose above its pre-pandemic level in 2019.
Compass’ revenue outlook contrasted with that of French rival Sodexo, which last month cut its annual revenue growth forecast, and U.S. caterer Aramark, which tightened its margin forecast earlier this week.
“Changing behaviours with respect to working from home mean there’ll likely be some dilution of previous volumes, but there’s still room to squeeze more from the recovery,” Hargreaves Lansdown analyst Matt Britzman said in a note.
Compass in March decided to leave Russia permanently by selling its operations there to local management. It has also moved away from all known Russian suppliers.
($1 = 0.8083 pounds)
(Reporting by Shanima A in Bengaluru; editing by Uttaresh.V, Matt Scuffham and Tomasz Janowski)
Organic revenue growth refers to the increase in revenue generated from a company's existing operations, excluding any revenue from acquisitions or mergers.
A share buyback program is when a company purchases its own shares from the market, reducing the number of outstanding shares and often increasing the value of remaining shares.
Profit margin is a financial metric that indicates the percentage of revenue that exceeds the costs of goods sold, reflecting a company's profitability.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Outsourcing is the practice of hiring external firms to handle certain business functions or services, often to reduce costs and improve efficiency.
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