Compass Group (LON:CPG) reported a “strong start” to fiscal 2026 in its first-quarter trading update, with management citing organic revenue growth above 7% and continued momentum across regions and sectors. Group Chief Executive Officer Dominic Blakemore, speaking alongside Chief Financial Officer Petros Poutachidis, said growth moderated as expected from an “exceptional” fourth-quarter run rate, but remained “strongly within” the company’s multi-year growth algorithm.
Q1 growth drivers: net new business, retention, and sector performance
Blakemore said both regions and all sectors performed well in the quarter, with sports and leisure and business and industry (B&I) described as the fastest-growing areas. For the fifth consecutive year, the company reported net new business in its 4% to 5% range, supported by client retention “over 96%.”
In the Q&A, Blakemore cautioned against overemphasizing quarter-to-quarter movements in net new business, noting that the opening of a single large contract can distort quarterly comparisons. He said net new business was “closer to 4% at the moment,” compared with 4.5% delivered in the prior year, and attributed some of the moderation between Q4 and Q1 to lower pricing as inflation eased—something he said had been signaled in prior calls.
On phasing, Blakemore said the company expects a similar level of net new performance in the first half, with Q2 trends similar to Q1. He added that record signings, coupled with sustained retention, should support a “modest acceleration” in net new business in the second half and for the full year.
Poutachidis provided additional detail on volumes, saying the company saw about “half a point” of positive volume contribution in Q1, and expected volumes to remain positive in subsequent quarters. He noted the comparison was against a “massive” Q1 in the prior year that included return-to-office effects and a holiday calendar impact.
Guidance reiterated; margin progress expected
Compass reiterated its expectations for fiscal 2026. Management said it anticipates underlying operating profit growth of around 10% on a constant currency basis, driven by:
- Organic revenue growth of around 7%
- Approximately 2% profit growth from M&A
- Ongoing margin progression
On margins, Poutachidis said the company feels confident about margin progress in 2026 and beyond, pointing to three levers: core business margin expansion through purchasing and productivity initiatives; operating leverage as the business grows; and M&A synergies, including benefits delivered last year and additional opportunities this year. He described the implied margin expansion in Compass’s guidance as “a floor for 2026.”
Asked about phasing, management said it expects margin progress in the first half versus last year, and in the second half versus last year, consistent with its growth and P&L algorithm.
M&A update: Vermaat integration and bolt-ons
The company completed the acquisition of Vermaat in December and said integration work is underway. Poutachidis said Compass spent $1.9 billion in Q1 on acquisitions, including $1.7 billion related to Vermaat and $200 million of bolt-on deals. He characterized the $200 million as consistent with Compass’s long-standing approach to bolt-on acquisitions, describing them as supportive for growth and margin expansion.
On Vermaat, Poutachidis said it was too early to comment on integration progress, but management said it was “very excited” to welcome the business and its management team.
Blakemore added that Vermaat operates in the Netherlands, France, and Germany, which he said creates an immediate opportunity to expand sub-sectorization in those markets, with potential to extend the offering to other continental European countries over time. He also said Compass has learned that building brands organically can be difficult, and that sub-sectorization strategy is “very much based on acquisition rather than own development.”
AI economy: management highlights opportunity, limited risk
Blakemore devoted part of his prepared remarks to what he described as accelerating AI-related opportunities, particularly in B&I. He said contract signings in B&I were “very healthy,” with “over half” of new wins coming from first-time outsourcing—driven in part by continued expansion in the tech sector, where he said Compass has a strong presence and is growing at “above double-digit” rates.
He told investors that 80% of Compass’s business is in sectors such as sports, defense, mining, manufacturing, education, and healthcare, which he described as “largely insulated from any AI risk.” The remaining 20% is in white-collar B&I spanning tech, professional, and financial services, with over one-third of that white-collar mix related to tech.
In response to questions, Blakemore provided more detail, saying white-collar B&I represents about 20% of the portfolio and that 7% of that 20% is with tech clients. He said the company grew 14% in that tech-related area in the last quarter and described a “phenomenal opportunity” with hyperscalers.
He pointed to data centers as a new sub-sector, citing client plans that he said imply roughly 6,000 data centers in the U.S. by 2030. Blakemore said Compass sees an opportunity of around $4 million to $5 million per data center when facilities scale, suggesting a total addressable opportunity of $10 billion to $20 billion. He said Compass may have “perhaps a 1% share today,” describing it as an emerging sub-sector where the company aims to increase penetration over time.
On risk, Blakemore said the portion of professional and financial services exposure tied to entry-level roles most at risk from AI was “no more than 10%, 15% at most” of that slice, which he described as manageable and “largely insignificant and immaterial.” He also said that lessons from the pandemic led Compass to reorganize and restructure contracts to protect against volume declines, and that the company maintains a “basket of contracts” that provides mitigation should volume risk materialize.
Other themes: pricing moderation, GLP-1, education and healthcare, and World Cup impact
On pricing and inflation, Poutachidis said Q1 pricing was “about two and a half percent,” while market basket inflation was “north of three percent.” He added that versus Q4, there was about a 70-basis-point reduction on inflation that flowed through to the organic growth print from Q4 to Q1. Management said it expects inflation to moderate further into Q3 and Q4 and indicated its guidance includes some additional moderation.
On GLP-1 adoption, Blakemore said the company is not seeing an impact at this point and suggested that if consumption patterns change, Compass can adapt menus and portion sizes and “premiumize” in ways that could be positive. He also cited growth in protein-enriched products in the company’s canteen and vending activity and said that can broaden the SKU range and consumer offering. When asked about snack and confectionery mix, Blakemore said he did not have an exact breakdown and emphasized that Compass’s core business is food and beverage “on the plate,” though it also has vending operations that he said remain among the fastest-growing parts of the business.
In education and healthcare, Poutachidis said both sectors performed well, with continued first-time outsourcing opportunities. He said Compass was not seeing tightening spend concerns in healthcare, including patient and employee feeding. He also referenced recent mobilizations in education that he said provide credentials to support continued growth.
Finally, on the upcoming Football World Cup, Blakemore said some of Compass’s stadium venues will be used, but noted those venues might otherwise have been used for concerts and other events during that period. He described the overall effect as “broadly neutralish,” while adding that fan zones could provide a small volume tailwind in the fourth quarter, though not something he characterized as material.
Compass also said it intends to change the currency of its share price from sterling to U.S. dollars from April 1. Management said it looks forward to updating investors again at the half-year results.
About Compass Group (LON:CPG)
Compass Group is a global leader in food services, operating in over 25 countries, with over 590,000 employees worldwide and generating underlying revenues of over $46 billion for the 2025 fiscal year. The company’s primary listing is the London Stock Exchange and also trades on OTCQX® Best Market.
Our core offer is the provision of outsourced food services and targeted support services across the world. Compass operates across five sectors: Business & Industry, Healthcare & Senior Living, Education, Sports & Leisure, and Defence, Offshore & Remote, using a portfolio of bespoke B2B brands.
