Compass has emerged as a rare winner from the highest UK food price inflation in almost half a century, as businesses turn to the world’s largest catering group to help keep a lid on the cost of feeding their workforces.
Chief executive Dominic Blakemore said the high level of inflation had helped drive new business in the first half of the company’s financial year, when operating profits jumped by just over 40 per cent.
The FTSE 100 company, which provides food for work canteens across 40 countries, said 45 per cent of its new clients in the six months that ended in March were outsourcing for the first time.
“Inflation is good because it makes us an attractive partner,” said Blakemore. “We think that our ability to manage food inflation is really critical. Typically someone outsourcing for the first time would see a 25 to 30 per cent reduction in food costs because of the capability we bring” due to Compass’s ability to purchase at scale.
While food prices have been rising across major economies, the UK has been hit particularly hard. Overall food prices jumped 19.2 per cent in March from a year earlier.
“We are going to see food costs inflation some way above the long-run average for a while to come,” Blakemore said. “Will it be 20 per cent [like today]? No. Could it be high single-digit or low double-digit? Possibly . . . I think it would certainly apply to the rest of 2023.”
In the six months to the end of March, revenues at Compass climbed by almost a quarter to £15.8bn. Its operating profits hit £1.1bn, up 41 per cent from a year earlier, with operating margins edging up to 6.6 per cent.
Compass said it expected operating profit growth for the full year of “towards 30 per cent”, up from a previous forecast of “above 20 per cent”. It also raised its forecast for revenue growth to about 18 per cent, up from roughly 15 per cent.
After suffering when pandemic lockdowns kept workers at home, Compass continued to benefit as people returned to the office.
Shares in the group were up 1.8 per cent in early afternoon trading on Wednesday, taking their gain for the past 12 months to 33 per cent.
Source: Economy - ft.com
