Compass Group enjoys strong close to year, improving revenue and margin

Compass Group PLC this week reported improvement in most of the foodservice segments it serves, led by Sports and Leisure where improved attendance, particularly in outdoor sports, had a strong per capita spend. However, Business and Industry venues, which includes conferences, is recovering slowly.

The catering giant, which is parent to Compass USA and U.S.vending operator Canteen, reported revenue in the fourth quarter, ended Sep. 30, to be about 86% of 2019 levels, slightly ahead of guidance between 80% and 85%. Full-year revenues are predicted to be 76% of 2019's.

Compass's Healthcare, Defense, Offshore and Remote sectors proved resilient throughout the COVID-19 pandemic and continued to trade above 100% of 2019 revenues during the period.  Education has reportedly been strong with high on-campus spending since September.

As stated in its latest update this week, "The group’s underlying operating margin in the fourth quarter is expected to be around the mi-point of the guidance range of 5.5% to 6% as we continue to manage mobilization costs and inflation whilst adapting our operations according to clients’ changing requirements. For the full year 2021, our underlying operating margin is expected to be 4.4%."

Outlook

Compass said it continues to be encouraged by the ongoing growth opportunities, including strong momentum in new business wins, from the acceleration in first-time outsourcing, and increased potential for market share gains.

Looking ahead to the start of the new financial year, most of its sectors are expected to continue performing well; but it remains cautious about Business and Industry given continued uncertainty over the pace of office reopening in our major markets.

The group’s recovery is unlikely to be linear and will depend on a number of factors including vaccination and infection rates, according to its statement, as well as any further containment measures taken by governments.  However, Compass said it remains confident in its ability to return to a group underlying margin above 7% before a return to pre-COVID volumes.