Compass Group PLC

Overview Key strengths Key risks Leading global player in the food services industry with a portfolio of established brands and extensive global footprint. Competitive and fragmented industry, with relatively low barriers to entry and limited pricing flexibility. Track record of strong credit metrics and liquidity, along with solid free operating cash flow (FOCF). Exposure to macroeconomic uncertainties in Europe, particularly the U.K. Supportive financial policy including a conservative leverage target over the medium term. Move to hybrid working environment creates lower demand and volumes in the business and industry segment compared with pre-pandemic levels. Solid cost flexibility and ability to pass through increases in food prices and labor costs. Rising food costs continue to weigh on in-house catering solutions, which

...We expect Compass Group PLC (Compass) to grow by 15%-17% in 2023 on the back of increased outsourcing by clients and price rises linked to inflation. Rising food costs continue to weigh on in-house catering solutions, which creates greater outsourcing demand, thus translating into a higher-than-normal rate of new-client engagements. Furthermore, Compass' business and industry segment recovered beyond our expectations, and we expect it to trade above pre-pandemic levels thanks to the widespread return to the office, new customer wins, and inflation-linked price increases. While there remain macro-economic uncertainties that could affect volumes, especially in the sports and leisure segment, growth in 2023 will be supported by the inflation boost, a strong pipeline, and stable employment statistics. For 2024, we forecast that growth will halve compared with 2023, mainly because of lower inflation, but also because certain 2023 tailwinds will not be replicated in 2024. We anticipate that Compass'...

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