Food caterer Compass Group raised its fiscal 2023 forecasts after half-year profit soared 41%, benefiting from more people returning to work and events, while coping with elevated food inflation across its markets.
The world's largest catering group has emerged a much bigger business from the COVID-19 pandemic, thanks to first-time outsourcers turning to big caterers, but its margins have lagged pre-pandemic levels due to higher costs of food, labour and taking on new businesses.
"I think what's really important to us is we continue to see margin progression, that we continue to grow above historic levels, and in the face of significant inflation, we continue to be fair and balanced in pricing with our clients," CEO Dominic Blakemore said in a phone interview with Reuters.
The company, which operates several food service brands catering to offices, universities and sports stadiums across 40 countries, raised its forecast for operating profit growth towards 30% on a constant-currency basis, from above 20% previously, for the year ending September 2023.
It plans to achieve that by delivering organic revenue growth of around 18%, ahead of market expectations, and an underlying operating margin in the range of 6.7% to 6.8%.
Analysts on average had expected margins of 6.7% this year, and pre-pandemic levels of around 7% in fiscal 2024, according to a company-compiled consensus.
The challenge for Compass is to sustain its accelerated level of growth and maintain quality as it gets bigger in an attractive outsourcing market, Blakemore said, adding that it was also the group's biggest opportunity.
Compass, which plans to report in US dollars from October onwards to reduce foreign exchange translation volatility on earnings, has no plans to list in the United States, Blakemore said.
Compass also raised interim dividends by nearly 60% and announced an additional share buyback of up to £750 million ($946.58 million).
Its underlying operating profit was £1.05 billion ($1.33 billion) for the six months to 31 March, compared with £744 million a year earlier.