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Jump in outsourcing food services boosts Compass profits

Catering giant Compass has revealed a surge in profits as demand recovered following the impact of the pandemic (Compass/PA)
Catering giant Compass has revealed a surge in profits as demand recovered following the impact of the pandemic (Compass/PA)

A wave of outsourcing by cash-strapped companies has buoyed results at catering group Compass, which posted a 175.2% jump in profits to £1.5 billion for the last year.

The company’s latest set of results also showed statutory revenues climbed 42.5% to £25.5 billion in the year to 30 September, as it recovered much of the losses it suffered during the Covid pandemic and beat market expectations.

Like many companies, Compass has been hit by soaring costs of food and labour and has been tackling high inflation by changing ingredients such as switching from sunflower oil to rapeseed oil in the UK and reducing the number of options its menu offers.

But as well as pushing Compass’s own costs up, the challenging economic environment and fears of a recession have also forced more companies to outsource their canteen needs to cut overheads, helping Compass gain more new businesses and retain clients.

CEO Dominic Blakemore said the last year’s performance had “surpassed our expectations both in terms of net new business growth and base volume recovery”.

The company, which serves office workers, university students, patients in hospitals and older people in care homes across 40 countries, has emerged from the pandemic as a “stronger and more resilient business”, he said.

He added: “Our clients are continuing to face operational complexities and inflationary pressures, which are driving increased outsourcing, and we are successfully capitalising on the resulting growth opportunities.”

However, shares in the company dropped more than 3% in early trading on Monday morning on the prospect of slowing growth in the current year.

Compass said its underlying operating profit growth for 2023 would be above 20%, delivered through organic revenue growth.

It also announced a £250 million share buyback on Monday, adding to a previous £500 million programme it launched in May, and more than doubled its dividend to 31.5p for the year.

“Looking further ahead, we remain excited about the significant structural growth opportunities globally, leading to the potential for revenue and profit growth above historical rates, returning margin to pre-pandemic levels and rewarding shareholders with further returns,” Blakemore said.