Several large companies have been affected by the pandemic as badly as the Compass Group.
Before COVID-19 began, the world’s largest catering company served 5.5 billion meals a year worldwide not only for large business customers such as Nike, Shell, Google and Coca-Cola, but also for large government agencies such as the United States. The Pentagon, thousands of schools, colleges and universities around the world, as well as a variety of sports facilities such as the All-England Tennis Club, Twickenham Stadium, Eintree Racecourse and Tottenham Hotspur FC.
Thus, the rapid spread of the coronavirus has threatened thousands of employees of the company – it employs about 480,000 people in 44 countries. Then, when governments around the world imposed a blockade, he faced a catastrophe in business when workers and students were sent home.
Since Compass fiscal year ends in September, the company has never reported losses due to the pandemic, but it has suffered a significant drop in profits in the 2019-2020 and 2020-21 fiscal years.
Today, however, there are signs that businesses are rapidly returning to productivity levels before the pandemic.
Six months to the end of March Compass achieved operating profit of £ 673 million compared to £ 287 million for the same period a year ago. The main pre-tax profit for this period was £ 632 million compared to £ 133 million a year ago.
Sales on a base basis rose just under 38% to £ 11.6 billion.
Better yet, the company said it expects sales this year to grow by about 30% over the previous 20-25% range it gave, while it also announced plans for a £ 500 million share buyback program sterling. At one point in the news stocks rose more than 10%.
CEO Dominic Blakemore said the company had received a record number of new business gains during the period and had record retention rates among existing customers.
He added: “We continue to recover strongly after the pandemic and have reached an important milestone of revenue that exceeds our level before COVID-19 based on speed of execution.
“We have seen a marked improvement in business, industry and education when employees return to the office and students return to personal training.”
“We must have the right to be at a higher level of growth”
Mr Blackmore said he expected a net new gain to continue in the second half of the year – receiving around £ 550 million for new business in the first six months of the year.
He said that through COVID the company kept all its vendors and therefore did not fight to win a new business as the economy reopened around the world. The company has also stepped up its training and said it enjoys the best of goodwill and trust from customers.
He continued: “We can work steadily better than before.
“What worries me the most is that … we should have the right to be at a higher level of growth.”
Inflation remains a headache, but Mr Blackmore said the company was confident of mitigating cost increases, suggesting that inflation could even be a stimulus in the long run if it encourages more people to think about outsourcing their catering operations.
About 30% of the company’s contracts consist of a fixed price, and although inflation was ahead of the 5-6% price increase that Compass recently reached, CFO Palmer Brown noted that the company’s profits have actually improved. during this period through initiatives such as efforts to reduce food waste.
He added: “We must continue to do what we do and work even harder, we have the capacity to do so and the confidence that we will succeed.”
That was not all good news. Along with sports and leisure, business and industry – the company’s largest of the five business segments – remain at the pre-pandemic level – and questions remain, and many employers are clearly struggling to get employees back to the office as soon as it is able to pick up.
The war for talent makes it difficult for employees to return to office
Mr Brown said: “This is by far the slowest sector to recover, it is really the only sector that is well below 2019 and is around 83% or so, but we are increasingly feeling it will recover.
“However, it will look different than historically. We are seeing a shift from office work on a long-term basis – somewhere 4.2 days or office work has been reduced to three-quarters.
“That can change – we know a lot of our customers want employees back in the office, but the war for talent at the moment makes it a bit tough.”
But he said, nevertheless, in business and industry there are “significant new business opportunities” that emerge from other avenues such as micro-markets and the fact that many employers offer “storage” and free offers food for employees. He said even traditional cafes for jobs are growing even if workers have not returned to the office to the extent they were before the pandemic.
Such details can provide some comfort to investors that the company is able to quickly return to COVID-19 levels in all parts of its business – even if employees end up switching to hybrid work on an ongoing basis.
But Mr. Blakemare’s ambitions go beyond that. On one slide of today’s investor presentation it was noted that the targeted global food services market is worth at least £ 220 billion, of which Compass accounts for about 10%. The market is still dominated by so-called “self-governing” players who are responsible for their own food in the workplace, who have not yet thought about trying to save money through outsourcing.
A push to pure zero can bring an extra boost to outsourcing
Additional impetus for outsourcing could be further government regulations around the world and a push to net zero. Compass also sees opportunities in food trade and delivery as well as from employers, allowing employees to order food through an app or digital kiosk.
In other words, while serving millions of meals each day may seem like a glamorous occupation to some, there are many innovations, and much more will be made possible by digitization.
As Greg Johnson, a travel and leisure analyst at Shore Capital, told clients today: “The key is the potential to sustain the net growth of new business that more than compensates for any structural deficit from working from home with wider inflationary pressures for more help. the first outsourcing ”.
The shareholders of this large, structurally important company – a rare world leader in the UK – will certainly hope so.