Compass Group CPG.L, the world's largest caterer, has raised its full-year revenue forecast as it benefitted from offices reopening after the COVID-19 pandemic.
Compass, which feeds office workers, the armed forces and school children in 45 countries, as well as provides catering for sporting events, such as Wimbledon, raised its 2022 organic revenue growth forecast to aproximately 30% from 20%-25%.
Compass has benefited from more companies outsourcing their catering to reduce costs, chief executive Dominic Blakemore said in an interview. It has also reduced menu choices and switched to cheaper ingredients.
"For example, if we see very strong inflation on red meat, we buy poultry, and, within the poultry category, we move from chicken to turkey... we may also look at reducing the protein content," Blakemore told Reuters.
The conflict between Russia and Ukraine, both major wheat suppliers, has sent commodity prices through the roof, forcing companies to look at ways to reduce costs.
The company also announced a £500 million share buyback programme.
Despite the inflationary pressures, Compass kept its profit margin forecast unchanged for the year. Its underlying operating profit more than doubled to £673 million for the six months ended 31 March while underlying revenue rose above its pre-pandemic level in 2019.
Compass' revenue outlook contrasted with that of French rival Sodexo EXHO.PA, which last month cut its annual revenue growth forecast, and U.S. caterer Aramark, which tightened its margin forecast earlier this week.
"Changing behaviours with respect to working from home mean there'll likely be some dilution of previous volumes, but there's still room to squeeze more from the recovery," Hargreaves Lansdown analyst Matt Britzman said in a note.
Decision To Leave Russia
Compass in March decided to leave Russia permanently by selling its operations there to local management. It has also moved away from all known Russian suppliers.