Shares in catering firm Compass (CPG) are the best performers in the FTSE 100 today, up 3% to £17.80 after the company released a strong set of half year results and raised its full year sales forecast thanks to continued growth in the US market.

Underlying revenues for the six months to 31 March were up 6.6% to £12.5bn with operating profits up 5.8% to £951m on an underlying basis.



At a group level like-for-like sales increased by 3.2% thanks to a remarkable 94.8% retention rate among its customers and what the company calls ‘sensible’ price increases.

On top of this strong core business, new customer wins grew by 8.6% and the company made more bolt-on acquisitions, principally in the US.

Thanks to price rises, cost efficiencies and the disposal of some non-core businesses, group margins held steady at 7.5% during the first half in spite of higher up-front costs from new contract wins.

Like-for-like revenues were up 7.9% in the US thanks to positive trading in the Sports & Leisure division, helped by a few big sporting events, and by new contract wins for the business, Healthcare and Education divisions.

Growth in Europe and Rest of the World was slower on a like-for-like basis at 5.5% and 3.2% respectively but downward pressure on costs and more small price increases to customers helped keep operating margins roughly stable.


Thanks to its better than expected top-line performance in the first half, Compass has raised its guidance for full-year organic revenue growth and margin progression to similar levels to 2018.

Even though it is the largest player in the £200bn a year global food services industry, the company still sees room to grow both in the 50% of the market which is outsourced and in the 50% which is run ‘in-house’.

Around half of the outsourced market is in the hands of small and regional players, giving firms like Compass an opportunity to bolt on specialist competitors, extending its reach and consolidating its number one position.

Acquisitions in the first half totalled £370m including cash in the acquired businesses with the biggest deal the £163m purchase of Client Rewards, a provider of supply-chain management services.

Free cash flow increased by 14% to £530m during the period while disposals netted £68m after exit costs. In total Compass aims to sell off businesses which represent around £1.2bn of revenues in order to simply its offering with no negative effect on margins.

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Issue Date: 15 May 2019