Catering group Compass' shares fall as AI concerns overshadow revenue beat

Adds CEO comments in paragraphs 3,4,9 and 10

By Raechel Thankam Job and Yadarisa Shabong

Feb 5 (Reuters) - Compass Group CPG.L reported stronger-than-expected quarterly revenue growth on Thursday and stuck to its annual forecast, but shares hit their lowest in over three years with analysts citing the potential impact of AI on its office-based clients.

About 20% of Compass' revenue comes from technology, professional and financial services clients, exposing it to investor concerns about AI disrupting office-based work.

"We do feel should risks materialize, we're well-placed to address it. We actually believe that there is more opportunity than risk for us in that space," CEO Dominic Blakemore told analysts.

He said entry-level positions, seen as most vulnerable to AI displacement, represent no more than 10-15% of its 13% exposure to white collar office jobs.

"Whilst a sound in-line print like today's should otherwise be sufficient to reassure, it is unlikely to be sufficient to improve sentiment," JPMorgan analysts said, noting the stock was trading at depressed multiples due to AI concerns.

PUSH INTO NEW REVENUE STREAMS

Fears that AI advances could upend business models triggered a broad selloff in software stocks recently.

Shares in the world's largest caterer fell as much as 8% and looked headed for a fourth week of losses, with analysts also worried that weight-loss drugs could hurt its business model. Blakemore said there had been no impact from GLP-1 drugs so far.

Blakemore said Compass was pushing into new sectors, including defense contracts, airline lounges outside North America and data centers globally, to boost its revenue stream.

Compass, which employs 590,000 people in over 25 countries, posted 7.3% organic revenue growth in its first quarter, beating expectations of 7.1%, driven by double-digit growth in its North American Business & Industry segment.

Compass also said it will change its LSE share trading currency to U.S. dollars from sterling from April to reduce foreign exchange volatility.

(Reporting by Raechel Thankam Job and Yadarisa Shabong in Bengaluru; Editing by Subhranshu Sahu and Emelia Sithole-Matarise)

((RaechelThankam.Job@thomsonreuters.com;))