Shares in contract catering company Compass Group rose more than 5% on Thursday after a strong start to its financial year was rewarded with upgrades to its growth forecasts.
The company, which provides catering services to public bodies such as the NHS and to popular tourist locations, said revenues in its first three months to 31 December rose by 5.9%, thanks to new business wins and strong like-for-like revenues.
Rising cost pressures
Compass added that it was taking action to mitigate the effects of rising cost pressures in the UK and this would be reflected in its operating margin in the second half of the year.
Rising food price inflation has been noted by consumer and retail groups in the past few months.
The company said its outlook for 2018 was positive and that it now expected organic growth to be at least in the middle of its target range of 4%-6% for the full-year.
"We continue to focus on driving efficiencies throughout the business and expect modest margin progression on a full year basis, albeit second half weighted," the company said in its trading statement.
"In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue and margin growth."
Helal Miah, analyst at The Share Centre, said: "These are a very encouraging set of results showing a company benefiting particularly well from the good economic health of the US economy along with economic growth picking up in the rest of the world.
"We have long liked these shares and continue to recommend Compass as a ‘buy’ for investors seeking balanced return and willing to accept a lower level of risk.”
Investors welcome the results and pushed shares in Compass Group as much as 5.5% higher. By mid-morning on London Stock Exchange, the shares were up 4.68% to £15.04.