Pandemic hits Compass Group's latest financials, but restored and new business drive recovery
In its half-year results report, for the the six months ended Mar. 31, UK-based Compass Group PLC, parent of Compass Group USA and Canteen, said its statutory revenue decreased 32.4% as a result of the pandemic.
Operating profit decreased 78.3% due to the adverse impact of COVID-19 and related actions to resize its business and adjust its cost base.
“During the first half of this financial year, by controlling the controllable, we delivered continued margin progression, strong cashflow and excellent client retention," said group chief executive Dominic Blakemore. "This was despite further lockdowns and limited volume recovery.
"With the gathering pace of vaccination rollouts across our major markets, we are working closely with our clients to prepare to reopen their sites safely, although the picture across the world remains mixed," Blakemore continued. "Whilst we expect any revenue recovery to be gradual, we remain confident in our ability to return to a group underlying margin above 7% before we return to pre-COVID volumes.
Over the last six months, the 'flight to trust' continued as clients sought quality partners with health and safety expertise, supply chain resilience, and financial stability," he added. "As a result, new business wins have increased due to the acceleration of first time outsourcing, which now accounts for about half of our growth. We remain committed to supporting future growth by investing in attractive opportunities to enhance our competitive advantages and further consolidate our position as the industry leader in food services."
Compass performance summary
- Second-quarter operating margin at 4.2%, 20 basis points (bps) ahead of pre-close trading update and an increase of 150bps from the first quarter.
- Restored more than half of pre-COVID margin during Q2, despite volumes being 72% of 2019 revenue.
- Continued strong retention of 95.6%.
- New business wins increased by about 20%1with first time outsourcing now accounting for around 50%, up from a third historically.
- Strong underlying free cashflow of £359m driven by efficient working capital management.
- Gross capex was 3.4% of underlying revenue as we continue to invest in growth opportunities.
- Peak net debt to EBITDA ratio of 3.0 times.
Compass outlook
- Anticipates gradual improvement in Q3 revenue.
- Expects Q3 margin to be between 4.5% and 5% absorbing the impact of re-openings and mobilizations
- Remains confident in rebuilding the group's underlying margin to above 7% before company returns to pre-COVID volumes.
Click here to see Compass's full report, posted on May 12.
