Compass shares jump as it shrugs off inflation concerns with profit upgrade
Shares in Compass Group jumped on Monday morning as shrugged off concerns over inflation eating into its margins after upgrading its profit forecasts.
The FTSE 100 catering giant, which has served meals everywhere from prisons to oil rigs, upped its profit growth estimate from 10 per cent to “above” 11 per cent for the year to end September.
The firm served up revenue growth of 10.7 per cent to $25bn (£18.3bn) for the six months to the end of March, with pre-tax profit of $1.5bn, up 14.7 per cent on the previous year.
Compass trumpeted a surge in new contract wins, up 14 per cent to $4.1bn, with roughly half coming from organisations outsourcing food services for the first time, in signs of a structural shift as businesses continue looking for ways to cut costs and improve efficiency.
Chief executive Dominic Blakemore touted “excellent new business wins” and “high levels of client retention.”
Compass shares rose as much as 4.6 per cent to $30.87 in early trade, making it the highest riser in the FTSE 100. The stock remains down by more than 10 per cent over the past year.
Compass ‘continues to demand a premium valuation’
Mark Crouch, market analyst for eToro, said: “Compass Group’s latest results underline why the catering giant continues to command a premium valuation in the FTSE 100.
“At a time when many firms are grappling with weaker consumer demand and economic uncertainty, Compass is still producing a dependable mix of growth, rising margins and strong cash generation. The figures also challenge the narrative that hybrid working and advances in AI will materially weaken demand for workplace catering.
“However, investors will still keep a close eye on inflation risks, particularly if escalating conflict in the Middle East drives another spike in energy and food prices, which could eventually squeeze margins across the sector.”