CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Compass Group shares bounce on Covid comeback

The catering company reported a jump in half-year profits this week

Compass Group marked its bumper half-year results by launching a share buyback programme for investors. The contract food services provider’s figures beat analysts’ forecasts as it unveiled a £500 million share buyback scheme and “record” new business wins.

Shares in Compass Group rose 10% on the day of results. Revenues at the world’s biggest catering group rose 36% to £11.5bn from £8.4bn last year. Meanwhile, pre-tax profits for the half-year more than quadrupled to £632m (from £133m last year) and operating profits rose 280%.

Compass makes surprise Covid comeback

The contract food services provider’s results beat analysts’ forecasts, pushing revenues above pre-Covid level and making a surprise comeback from the ravages of the Covid-19 pandemic. Two years ago Compass was badly hit by event cancellations and forced to undertake a £2bn rights issue.

The company also increased its revenue growth guidance for the full-year, from between 20% and 25% to around 30%. The world’s biggest catering group also said it delivered organic sales growth during the period of 37.9%, boosted by a good performance in Europe and North America.

In addition, Compass landed £2.5bn of new business in the past 12 months, while client retention rates stand at 95.8% - record levels.

“We continue to recover strongly from the pandemic and have achieved the important milestone of revenue exceeding our pre-COVID level on a run rate basis,” group chief executive Dominic Blakemore told investors.

“We have seen a notable improvement in business and industry and education, as employees return to the office and students to in-person learning. Net new business growth has been excellent, particularly in North America and Europe where we have mobilised a significant number of recent wins and benefited from our highest ever client retention rate.”

Inflationary pressures could feed new business at the caterer

While Blakemore says Compass is “mindful of global inflationary pressures,” he believes the company's “resilient business model” is strong enough to mitigate these. He also says that inflation may actually help fuel new business growth, as customers look to make savings and outsource their catering needs.

The company’s guidance on margins was unchanged, with management expecting underlying operating margins of over 6% for the full-year 2022 but finishing the year at around the 7% mark.

Strong cash generation also enabled management to reduce net debt to 1.3 times EBITDA (earnings before interest, tax, depreciation and amortisation).

Analysts at Barclays said that Compass shares were “particularly attractive in light of the macro uncertainties today with limited revenue risks in a recession relative to most of the sector”. Meanwhile, analysts at Morgan Stanley increased their price target on the shares from 1950p to 2100p.

The shares are up 15% to 1755p this year. However, they are still below their five-year highs of 2094p and are worth buying for their potential resilience.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.