Caterer Compass rises on new business appetite

Caterer Compass rises on new business appetite
By Reuters
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By Yadarisa Shabong

-The chief of Compass Group said on Tuesday new business, especially from clients outsourcing their kitchen needs for the first time, will help the British caterer regain its pre-pandemic size and grow faster than before.

Shares in the world's largest catering company reversed early losses to trade up 3% following the comments from Chief Executive Dominic Blakemore on an earnings call.

"The pipeline is exceptional ... we've got the digital and climate offers to win with the balance sheet to exploit all of these opportunities," Blakemore said in a call with analysts after the group reported better-than-expected annual profit and resumed dividend payments.

Compass guided to an underlying operating margin of more than 6% for fiscal 2022, just below average analysts' forecast of 6.5%. The outlook had sent shares falling 2.5% in early trade.

Food catering volumes picked up from pandemic lows, as students returned to universities and schools, sports fans filled stadiums and crowds attended events again. Fourth-quarter revenue recovered to 88% of 2019 levels.

The company said it would return to pre-pandemic margins of about 7% by the end of the fiscal 2022 year, although revenue and volumes would not exceed 2019 on a full-year basis until 2023.

"All in, we would say this is a solid print with the most positive message on how they will exit 2022," Bernstein analyst Richard Clarke said.

Blakemore said the group was varying menu choices and substituting products experiencing high levels of inflation to mitigate some pressures.

"We are seeing a trend towards local sourcing in many of our markets because of the disruptions in supply chain," he told Reuters.

Net new business wins totalled a record 2.1 billion pounds, around half of which were from companies outsourcing for the first time to cut costs, it said.

Compass' underlying operating profit rose 55% to 811 million pounds ($1.1 billion), versus analysts' average view of 797 million pounds.

Compass, which suspended dividends in April 2020, said it would pay an annual dividend of 14 pence per share.

($1 = 0.7470 pounds)

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