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Catering giant Compass Group has hiked its full year growth forecasts after getting back to pre-Covid sales levels at the end of its first half.

Compass said the positive performance trajectory seen through 2021 as the world recovered from, COVID-19 has continued into the first half of 2022 to 31 March.

Its organic revenue growth for the six months was 37.9% reflecting the lapping of lower revenues in the first half of 2021 and benefiting from volume recovery in 2022.

Its healthcare & senior living, education, and defence, offshore & emote were all trading above pre-pandemic levels during the first half of the year with sports & leisure at 99% of 2019 revenues.

Business & Industry has also seen a notable improvement in top line performance since the start of the year, with Q2 now 83% of pre-pandemic levels, versus 68% in Q4 2021, reflecting the easing of government restrictions across many markets and the associated return to workplaces.

Education also performed particularly well, increasing to 107% of 2019 revenues in Q2 2022, from 94% in Q4 2021.

Overall, second quarter underlying revenue was at 99% of 2019 revenues with run rate now above its pre-COVID level.

Growth was boosted by record new business wins of £2.5bn over the last 12 months, with a client retention rate at its highest ever level of 95.8%.

Underlying operating profit increased by 135% on a constant currency basis, to £673m, with an underlying operating margin was 5.8%, representing around 80% of pre-COVID margin levels.

On a statutory basis, operating profit was £638m up from £168m, an increase of 280%, mainly reflecting the higher revenue.

Compass said that, while there are global inflationary pressures which are expected to increase, it also benefits from a resilient business model to help mitigate this as the environment is also leading to an acceleration in first time outsourcing as organisations seek cost savings.

Given its strong first half performance, it has increased its full year organic revenue growth guidance from 20 - 25% to around 30%.

Whilst we are cautious about the inflationary environment, margin guidance remains unchanged, with full year underlying operating margin expected to be over 6%, exiting the year at around 7%.

CEO Dominic Blakemore said: “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.

We are mindful of global inflationary pressures, which have been exacerbated by the tragic events in Ukraine. Although we expect inflation to increase and continue at a heightened level in the medium term, we have a resilient business model to help mitigate this challenge. Inflation also provides a further impetus to outsourcing as organisations seek savings and we are capturing this growth opportunity as demonstrated by our record new business wins.

“Looking further ahead, we remain excited about the significant structural growth opportunities globally, leading to the potential for revenue and profit growth above historical rates, returning margin to pre-pandemic levels and rewarding shareholders with further returns.”

Compass Group shares jumped 9.7% on the news to 1,731p.

Morning update

Swedish Match, the European producer of oral nicotine pouches, has agreed a $16bn deal to sell to global tobacco giant Philip Morris.

The company has accepted a SEK106 per share in cash, which values the company at approximately SEK161.2bn (£13bn).

The Offer Price represents a premium of approximately 40% compared to the closing share price of SEK 76.06 on 9 May, the last day of trading prior to market speculation regarding a potential public offer for the company.

The two companies said they share “a mutual vision of a world without cigarettes” and a strong commitment to developing, scientifically substantiating, and responsibly commercializing smoke-free products that are less harmful than cigarettes.

PMI said it values how Swedish Match has relentlessly pursued tobacco harm reduction through its range of smoke-free products; received authorizations for its products via strict regulatory pathways in the US; and reshaped the public health environment in countries such as Sweden and Norway.

The combination with Swedish Match would position PMI to “create a comprehensive smoke-free product portfolio globally”

The deal will see it directly enter and compete in the large, attractive and growing US smoke-free market by further supporting and developing Swedish Match’s oral nicotine portfolio in the country and leveraging Swedish Match’s substantial operational platform in the US to unlock commercial opportunities across other smoke-free categories.

PMI CEO Jacek Olczak commented: “We are pleased to announce this exciting next step in Philip Morris International’s and Swedish Match’s trajectory toward a smoke-free future. Underpinned by compelling strategic and financial rationale, this combination would create a global smoke-free champion—strengthened by complementary geographic footprints, commercial capabilities and product portfolios—and open up significant platforms for growth in the U.S. and internationally.

“Swedish Match’s dedicated employees and management have steadfastly pursued the company’s vision of a world without cigarettes, while delivering very strong results. We look forward to building upon this success and joining forces to accelerate our shared smoke-free mission.”

On the markets this morning, the FTSE 100 is up another 0.5% to 7,275.9pts so far this morning.

Along with Compass Group, risers include Bakkavor, up 4.3% to 103.8p, SSP Group, up 2.9% to 213.9p and WH Smith, up 1.8% to 1,398.6p.

Fallers so far include Nichols, down 4.6% to 1,335.8p, Just Eat, down 1.8% to 1,506.6p and Ocado, down 1.5% to 779.8p.

Yesterday in the City

The FTSE 100 made a modest 0.4% recovery yesterday from the sharp market drop on Monday to end trading at 7,243.2pts.

Risers included Glanbia, up 6.5% to €12.00, Bakkavor, up 5.9% to 99.5p, Nichols, up 4.5% to 1,400p, PZ Cussons, up 2.6% to 205p, Britvic, up 2.5% to 816.5p, Cranswick, up 2.2% to 3,044p, Unilever, up 1.8% to 3,700.5p and DS Smith, up 1.8% to 316.3p.

The day’s fallers included Just Eat, down 3.6% to 1,534p, SSP Group, down 2.5% to 207.8p, Naked Wines, down 2.4% to 328.2p, Finsbury Food Group, down 1.8% to 66.8p and Greggs, down 1.1% to 2,116p.