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Soaring inflation helps Compass Group as ‘first-time outsourcers’ scramble to cut costs

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Compass serves 6 billion meals a year and is the world’s largest contract caterer (Anthony Devlin/PA) (PA Archive)
Compass serves 6 billion meals a year and is the world’s largest contract caterer (Anthony Devlin/PA) (PA Archive)

Rising inflation is prompting more companies to seek outside help to control costs according to Compass Group, the world’s largest contract caterer.

Third-quarter revenue at the FTSE 100 company surpassed pre-Covid levels, helped by what it called “first time outsourcing”. All areas of its business operated above pre-pandemic levels, with underlying revenues up 109% from the same period in 2019. At its last set of annual results, it reported annual revenue of £18.1 billion and operating profit of £811 million.

Compass, which runs staff restaurants and canteens for corporate clients around the world, said in its latest update it was “particularly pleased” with the recovery in its Business and Industry operation, which was trading above levels seen before the pandemic struck, as workers returned to offices after the end of Covid restrictions. The group took a big hit from the impact of the pandemic, with group sales down 44% when lockdown measures were at their most severe.

Dominic Blakemore, chief executive, previously described hybrid working, when staff split their time between working from home and in the office, as a “long term challenge”. On Wednesday, he told investors that the pipeline of new business was very strong, driven in part by soaring inflation. “The new business wins are across all sectors and across all regions,” he said. “We do feel the marketplace is exciting.”

Compass also serves food at major sporting venues including Wimbledon, Chelsea FC and the Oval. It lifted its full-year revenue growth guidance for 2022 to “around 35%” from “around 30%” and stood by its operating margin guidance of “over 6%”. It also cooks for schools and in public sector canteens.

Food inflation reached 10% in parts of the business and it also said some supply chain disruptions remained.

“While we are mindful of the challenging macroeconomic environment, we remain excited about the significant structural growth opportunities globally,” the company said.

It also benefited from the weak pound. It said if the current exchange rates on currency markets were to continue for the rest of the year, FX effects “would positively impact 2021 revenue by £533 million and operating profit by £33 million.”

Compass provides almost 6 billion meals per year at 55,000 client locations in 44 countries. It has reduced the amount of red meat it uses, turning to more sustainable alternatives such as chicken in a move which also helps it control its costs.

It launched what it called a “Sustainable Financing Framework” in July as part of a commitment to reach net zero carbon emissions by 2050 . As well as its Business and Industry unit, its business is split into Healthcare & Senior Living, Education, Sports & Leisure and Defence and Offshore & Remote.

Its shares rose 1% to 1863p in Tuesday morning trade in London.

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