UK's Compass raises annual profit outlook as workplace dining fuels growth
Compass Group's Upgraded Profit Forecast and Market Performance
May 11 (Reuters) - Compass Group raised its 2026 profit outlook on Monday, as the world's largest caterer bet on demand for workplace dining and new contract wins to offset rising concerns over the impact of artificial intelligence on office-based clients.
Profit Growth and Share Performance
The company, which serves office workers at the likes of Google, Amazon, and Microsoft, said it expects full-year underlying operating profit growth above 11%, up from about 10% forecast earlier.
Its shares rose more than 4% in early trade, putting it among the top gainers in the benchmark FTSE 100 index.
Sector Resilience and New Business
The upgraded forecast underscores the resilience of the food services sector as companies increasingly outsource catering operations amid rising costs, with Compass noting that half of its $4.1 billion in new business came from first-time clients.
Diversification and Revenue Streams
Compass has been pushing into new sectors including defence contracts, airline lounges outside North America and data centres globally to diversify its revenue stream and offset potential headwinds from AI and GLP-1 weight-loss drugs.
Exposure to Technology and Professional Clients
About 20% of its revenue comes from technology, professional and financial services clients, exposing it to investor concerns about AI disrupting office-based work, though CEO Dominic Blakemore said in February the company was well-placed to address any risks.
Impact of Weight-Loss Drugs
The caterer is also keeping an eye on the effect of weight-loss drugs on its business model as the medications suppress appetite. Compass, which serves everything from basic cafeteria meals to premium fine dining, has said it has not seen a material impact from the drugs so far.
Financial Results and Comparisons
It said underlying operating profit for the six months ended March 31 jumped 12% to $1.84 billion, as the company benefited from synergies from recent deals including its largest-ever acquisition of European premium food services business Vermaat.
Organic revenue grew 7.2%.
Comparison with Industry Peers
Compass' results contrast with French rival Sodexo, which cut its annual sales and profitability targets in April, citing execution challenges and contract reviews.
(Reporting by Yamini Kalia in Bengaluru; Editing by Nivedita Bhattacharjee, Rashmi Aich and Emelia Sithole-Matarise)
