Susannah Streeter, chief investment strategist at Wealth Club, said: “Catering giant Compass Group has whetted the appetite for investors given its latest numbers show the business has hit on a winning recipe to attract new business, helping lift guidance for the full year.
“The company is demonstrating why large-scale outsourcing appears to be a resilient long-term trend.
“With organic growth of 7.2 per cent and client retention up at 96 per cent, it’s a very reassuring set of figures, indicating that current customers are staying loyal to the group, and new business is in the pipeline despite the uncertain economic backdrop.
“While other companies have flagged a clouded outlook ahead, Compass is expecting trading to be robust in the second half of the year, with its deep procurement systems helping it stay resilient.
“There are also signs the company is becoming more efficient as it grows, with underlying operating profit growth of 12 per cent, outpacing revenue growth.
“Recent acquisitions have helped, and savings are feeding through to the bottom line. But there’s also a focus in this update on using AI tools to operate more effectively as it grows which appears to be reaping significant rewards.
“As regulations become more complex, including the need for catering providers to be transparent with allergy information, it appears many outlets want help in tracking ingredients through supply chains, and Compass can offer that support at scale.
“It’s positioning itself as a reliable partner and reckons its addressable market could grow to around $600 billion by 2035.
“But as always there will be risks ahead, especially if a longer-term higher inflation environment persists, which could have an impact on profitability down the line.
“For now, though, Compass appears resilient, especially given how diversified its customer base is.”
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