Compass lifts revenues outlook as trading rebounds despite cost pressures

Catering giant Compass has hiked its annual sales outlook as it cheered a bounce back to pre-pandemic trading thanks to workers beginning to return to offices worldwide.

Shares in the group jumped eight per cent as it saw half-year profits increase to £632 million in the six months to March 31, up from £133 million a year earlier, on revenues up 36.3% at £11.5 billion.

It raised its revenue guidance for the full-year from growth of 20% to 25% to around 30% after the first half bounce-back and unveiled plans for up to £500 million of share buy-backs in 2022.

However, the firm said it was facing soaring costs as the Ukraine war pushes commodity prices higher while it also flagged ongoing staff shortages in the wider global jobs market and supply chain woes.

It hiked its own prices by five per cent on average over the first half and expects to push through further increases over the final six months as it warned the group’s cost inflation could hit double figures by the year-end.

The price changes come as part of efforts to offset surging costs, which have so far paid off, helping it keep its profit margin forecasts unchanged for the year.

The group added that rising inflation was also driving a push towards outsourcing as schools and companies look to make savings.

Chief executive Dominic Blakemore told the PA news agency the group was “positive but cautious”, given the inflation pressures and wider economic backdrop.

He said the group was having “open and honest” conversations on prices with its customers, which range from schools and companies to events firms.

He added that the firm’s scale would help it through the current inflation pressures and expected hits to wider UK and global economies.

“The challenges there are in our industry around inflation and supply chains – we can deal with those better than smaller companies.

“That creates good growth opportunities for us.”

He stressed the firm was “not complacent” amid warnings that a recession may be on the way.

The group outlined measures to combat cost pressures, with catering firms in particular impacted by the Ukraine war, with Russia and Ukraine both major wheat producers, while ingredients costs more widely are also rising rapidly alongside fuel, energy and staff wages.

Compass has been keeping a tight lid on costs while also overhauling its suppliers.

Mr Blakemore said it was still battling staff shortages – in particular trained chefs.

He said hiring woes had eased a little, with vacancy rates that were running at around 10% to 15% at its worst in the UK now in the “single digits”.