UK remains 'challenging' for Compass as organic revenue growth stays flat

Contract caterer Compass Group expects economic conditions in the UK and Ireland to remain "challenging" as it revealed that it expected organic revenue growth in the business for the half year to remain broadly flat.

In a trading update ahead of its half-year results to 31 March, Compass said like-for-like volumes in the business and industry (B&I) sector remained negative but it had made "good progress" in retention. The performance is expected to mark an improvement on the same period in the previous year when organic revenue declined by 5.7%.

However, profit margins are expected to drop slightly as a result of the impact of acquisitions in the previous financial year and associated one-off restructuring costs.

Across the whole group, revenue is expected to rise 9.5% over the period.

Meanwhile organic revenue growth is expected to be around 5.5% for the same period thanks to "good levels of new business" across the group and a slight improvement in retention.

Profit margins across the world are likely to remain broadly flat and Compass said it was grappling with the increase in the level of food inflation in the first half of the year and expected it to continue through the second half.

It said it was managing the effect of this inflation through a combination of menu planning, professional purchasing, ongoing efficiencies and price increases.

Compass committed around £140m of acquisitions in the first half, including in food service, the recent acquisition of Coffee Distributing Corp in the US and Elior's operation in the Netherlands.

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By Gemma Rowbotham

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