TIDMCPG
RNS Number : 9262N
Compass Group PLC
04 February 2021
Legal Entity Identifier (LEI): No. 2138008M6MH9OZ6U2T68
4 February 2021
AGM and Trading Update
Compass Group PLC today issues a trading update ahead of its
Annual General Meeting. The AGM will be held online and will
commence at 10:00 am. At this meeting, shareholders will be
provided with the following update on the Group's performance since
30 September 2020.
Continued progress, despite slow volume recovery
By region Organic revenue([1]) Operating margin([2])
Q3 Q4 Q1 Q3 Q4 Q1
2020 2020 2021 2020 2020 2021([3])
------------- -------- ------- -----------
North America (44.7)% (36.4)% (36.7)% (2.5)% 2.9% 4.0%
------------- -------- -------- -------- ------- -----------
Europe (52.5)%([4]) (35.7)% (34.6)% (12.9)% (4.1)% 1.2%
------------- -------- -------- -------- ------- -----------
Rest of World (20.8)%([5]) (15.8)% (12.3)% 2.4% 2.8% 4.0%
------------- -------- -------- -------- ------- -----------
Group (44.3)% (34.1)% (33.7)% (4.8)% 0.6% 2.7%
------------- -------- -------- -------- ------- -----------
Organic revenue Q3 2020 Q4 2020 Q1 2021
by sector 1
Business & Industry (50.7)% (44.1)% (43.4)%
-------- -------- --------
Education (60.2)% (35.1)% (37.0)%
-------- -------- --------
Healthcare & Seniors (5.1)% 0.2% 0.8%
-------- -------- --------
Sports & Leisure (89.9)% (78.9)% (76.5)%
-------- -------- --------
DOR (8.8)% (7.6)% (1.2)%
-------- -------- --------
Group (44.3)% (34.1)% (33.7)%
-------- -------- --------
The Group's organic revenue for the three months to 31 December
2020 was (33.7)%. This performance was in line with our
expectations, given the protracted lockdown measures to contain the
virus during the winter months. Our retention remained strong at
95.7%.
Despite little volume improvement, the Group's operating margin
continues to improve, increasing from 0.6% in Q4 to 2.7% in Q1,
with all regions now profitable. This is due to a series of actions
we have taken over the last year to adapt our operations and to
manage our cost base more flexibly, including contract
renegotiations and resizing of the business.
UK free school meal food parcels
In light of the recent events around the provision of free
school meal food parcels by our Education sector, we recognise that
the quality and quantity of some food parcels fell short of our
usual high standards. We have apologised to everyone who has been
affected.
After conducting a thorough investigation, we have taken several
corrective measures that include improved supply chain processes,
additional guidance and resources for our employees, and stronger
quality assurance checks.
Since 25 January, Chartwells has been providing breakfasts to
all children currently receiving a lunch parcel from us for the
duration of school closures. We will also provide those same
children with lunch and breakfast parcels through the February half
term break. The costs of these initiatives will be covered by
Compass.
Currency
Trading results from our overseas operations are translated at
the average exchange rates for the period. Currency movements([6])
, compared to the same quarter last year, had a negative
translation impact on revenues and operating profit in the quarter
of GBP148 million and GBP13 million respectively. If current spot
rates were to continue for the remainder of the year, foreign
exchange translation would negatively impact 2020 revenue by GBP793
million and operating profit by GBP33 million.
Summary and outlook
Although the news around vaccinations is encouraging, the pace
of volume recovery remains uncertain. As we enter the second
quarter with varying lockdown measures in place across our key
markets, we anticipate that Q2 revenues and volumes will be broadly
in line with Q1. Despite this, we expect second quarter operating
margin to improve by a further 50-100bps.
We are encouraged by the strong pipeline of new business which
includes first time outsourcing and share gains, particularly in
the more defensive sectors of Healthcare & Seniors, Education
and Defence, Offshore & Remote. We are confident in our ability
to rebuild our Group underlying margin above 7%, before we return
to pre-COVID volumes.
As a reminder, we still expect our leverage ratio to peak around
the half year due to the COVID impact on the trailing 12-month
EBITDA calculation.
Looking further ahead, we remain excited about the significant
structural market opportunity globally, a return to organic revenue
growth, continued margin improvement and returns to shareholders
over time.
Our next reporting dates are as follows:
25 March 2021 HY 2021 Pre-close trading update
12 May 2021 HY 2021 Results
****
Compass will hold a conference call for investors and analysts
today at 8:00 am (U.K. time).
Participant dial in numbers:
UK Toll Number: +44 (0) 330 336 9105
UK Toll-Free Number: 0800 358 6377
US Toll Number: +1 323 794 2093
US Toll-Free Number: +1 866 548 4713
Pin number: 9501750
Replay dial in number (available until 13 February 2021):
London local: +44 (0) 20 7660 0134
London Toll-free: 0 808 101 1153
United States local: +1 719 457 0820
United States Toll-Free: 888 203 1112
Pin number: 9501750
Enquiries
Investors Agatha Donnelly & Helen Javanshiri +44 (0) 1932 573000
Press Tim Danaher & Fiona Micallef-Eynaud, Brunswick +44 (0) 207 404 5959
Website www.compass-group.com
Note to Editors
a) Compass Group PLC is the world's leading food service
company, which generated annual revenues of GBP20.2 billion in the
year to 30 September 2020. It operates in around 45 countries,
employs and engages around 550,000 people and serves over 5.5
billion meals a year. The Company specialises in providing food and
a range of support services across the core sectors of Business
& Industry, Healthcare & Seniors, Education, Sports &
Leisure and Defence, Offshore & Remote, with an established
brand portfolio.
b) Organic revenue, a term used throughout the announcement, is
calculated by adjusting for acquisitions (excluding current period
acquisitions and including a full period in respect of prior period
acquisitions), sale and closure of businesses (excluded from both
periods) and exchange rate movements (translating the prior period
at current period exchange rates).
c) Forward looking statements
Certain information included in this announcement is
forward-looking and involves risks, assumptions and uncertainties
that could cause actual results to differ materially from those
expressed or implied by forward-looking statements. Forward-looking
statements cover all matters which are not historical facts and
include, without limitation, projections relating to results of
operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation,
discussions of expected future revenues, financing plans, expected
expenditures and divestments, risks associated with changes in
economic conditions, the strength of the foodservice and support
services markets in the jurisdictions in which the Group operates,
fluctuations in food and other product costs and prices and changes
in exchange and interest rates. Forward-looking statements can be
identified by the use of forward-looking terminology, including
terms such as "believes", "estimates", "anticipates", "expects",
"forecasts", "intends", "plans", "projects", "goal", "target",
"aim", "may", "will", "would", "could" or "should" or, in each
case, their negative or other variations or comparable terminology.
Forward-looking statements are not guarantees of future
performance. All forward-looking statements in this announcement
are based upon information known to the Company on the date of this
announcement. Accordingly, no assurance can be given that any
particular expectation will be met and readers are cautioned not to
place undue reliance on forward-looking statements, which speak
only at their respective dates. Additionally, forward-looking
statements regarding past trends or activities should not be taken
as a representation that such trends or activities will continue in
the future. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules and the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority), the Company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise. Nothing in this
announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws.
d) A copy of this release, together with all other recent
announcements and presentations can be found on Compass Group's
website at www.compass-group.com .
e) For definitions please refer to the glossary of terms in the 2020 Annual Report and Accounts.
[1] Year on year change.
[2] Underlying operating margin pre-impairment and resizing
costs.
[3] Excluding resizing costs of GBP20m, predominantly in
EME.
[4] Restated to include Middle East.
[5] Restated to exclude Middle East.
[6] Closing rates as at 29 January 2021.
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END
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