Caterer Compass raises growth forecast in post-pandemic recovery

By Eva Mathews

(Reuters) – Compass Group, the world’s largest caterer, raised its revenue growth forecast for the second time this year on the back of new business wins, helping push its shares to their highest in more than two years.

Compass, which feeds office workers, the armed forces and school children in 44 countries, and provides catering for sporting events such as Wimbledon, said on Tuesday it expects full-year organic or self-generated revenue growth of around 35%, up from 30% forecast earlier.

Its shares were up 1.3% at 18.69 pounds by 0750 GMT, having risen as high as 18.78 pounds, their highest since February 2020.

The British company, whose food service brands include Levy, Chartwell and Bon Appetit, was severely impacted by the pandemic when companies shut their businesses and it has had to change its menus and reduce the number of its suppliers to cope.

With a post-pandemic rebound in office-going, a return to schools, and audience-filled sports events, Compass is also seeing an uptick in first-time outsourcing demand as small businesses find it expensive to manage catering in-house.

“New business growth continued to accelerate, benefiting from an increase in first-time outsourcing due to ongoing operational challenges and heightened inflation,” the company said in a statement.

Compass had earlier raised its 2022 organic revenue growth forecast to around 30% from 20%-25% in May.

However, the conflict between Russia and Ukraine has sent food and energy prices to record highs, clouding the global economic outlook and exacerbating inflationary pressures.

That led Compass to forecast its profit margin in the final quarter to moderate slightly from around 7%, even as it maintained an annual margin forecast of around 6%.

The underlying drivers of the business are running on all cylinders, Bernstein analysts said in a note.

“Business & Industry revenues are now above 2019 on a run-rate basis – again showing the most bearish WFH (working from home) scenarios to be wildly pessimistic.”

In the three months to June 30, Compass said organic revenue grew 43.4%.

Earlier this month, rival French catering and food services group Sodexo reported better-than-expected third-quarter revenue, helped by price hikes and post-Omicron volume recovery, and forecast revenue and margins to return to pre-pandemic levels in 2023.

(Reporting by Eva Mathews in Bengaluru; Editing by Vinay Dwivedi and David Holmes)