Compass Group lifts annual forecast amidst return of live events and commuter travel

Compass Group has upgraded its annual outlook following a continued rebound in live events and workers returning to their offices.

The world’s largest contract catering company now expects its operating profit to expand by around 30 per cent this year, compared to a prior forecast of above 20 per cent.

FTSE 100-listed Compass revealed its underlying core profit surpassed £1billion during the first half, having increased by 41.1 per cent from the previous year.

Strong recovery: Catering giant Compass Group has upgraded its annual outlook and revealed its half-year underlying core profit surpassed £1billion 

Compass expects to post organic revenue growth of approximately 18 per cent for the full-year after expanding by a quarter during the first half of the financial year.

It now forecasts an underlying operating margin in the range of 6.7 to 6.8 per cent for the year, compared to average market expectations of 6.7 per cent and pre-pandemic levels of around 7 per cent.

Around half of first-half revenue growth was attributed to a healthy recovery in like-for-like volumes amid loosening pandemic restrictions, as well as price hikes and gaining new business.

Trading in all regions and industries performed well but was particularly strong in North America, Compass’s largest market, where turnover skyrocketed by about £3billion to £10.7billion.

Sales were further buoyed by hefty demand from its business and industry segment, as people commuted more regularly to their offices, and improved attendance numbers at sports and leisure events.

Following the result, the Surrey-based company announced a 60 per cent hike in its interim dividend to 15p per share alongside a share buyback of up to £750million.

Dominic Blakemore, chief executive of Compass Group, said: ‘Despite pockets of macroeconomic weakness, the outsourcing market remains very attractive.

‘We believe that many of the complexities that drive outsourcing, such as increased regulation, changing client and consumer expectations, and inflation, are here to stay.’

He added: ‘Longer term, we expect the growth opportunities in the market to sustain mid-to-high single-digit organic growth and a path back to our historical margin, leading to profit growth above revenue growth.’

Meanwhile, Blakemore told Reuters that Compass had no plans to list on the New York Stock Exchange, although the firm plans to convert its reporting currency from sterling to US dollars from the start of October.

A growing number of London-listed companies have listed or intend to go public on Wall Street in the hopes of attracting more investment and higher valuations.

Just last week, semiconductor designer ARM filed to sell its shares on the NYSE, after opting not to have an initial public offering in London despite intense lobbying from the UK government. 

Building materials supplier CRH Holdings announced in March that it would switch its primary listing to the US, where it derives more than 90 per cent of total sales.

Education publisher Pearson, Paddy Power owner Flutter, and OakNorth Bank are also reportedly considering a stateside move. 

Compass Group shares were 2.1 per cent higher at £21.08 on Wednesday morning. They have grown by around 30 per cent over the past 12 months.

This post first appeared on Dailymail.co.uk