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Compass has announced a continued improvement in profit margins despite an ongoing slump in revenues as the coronavirus outbreak continues to hit sales across its business.

The company announced today that organic revenue for the three months to 31 March 2021 is expected to be down 28%.

This represents a modest improvement from the 31% drop in organic revenues of the six months to the end of March as it begins to benefit from lapping the 2020 COVID restrictions.

North America and Europe continue to show sustained weakness, with sales in both expected to be down around 30% in the second quarter and the rest of the world down 10%.

So far in its half year and second quarter, revenues have been 29% down.

Half year organic revenues in sports and leisure will be down 73%, with business and industry down 42% and education down 33%, while it will see 1% growth in healthcare and seniors.

However, the group’s operating margin is expected to increase by around 130bps from 2.7% in Q1 to 4% in Q2, resulting in a half year margin of 3.4%, despite similar volumes quarter on quarter.

This margin improvement will be dampened by currency movement as, if current spot rates continue to 31 March 2021, foreign exchange translation would negatively impact the 2020 half year revenue by £456m and operating profit by £38m.

Compass said that it remains encouraged by its pipeline of new business and client retention, albeit the pace of volume recovery remains uncertain.

“We are controlling the controllable by managing our costs, adapting our operations and resizing our business. We remain confident in our ability to rebuild our Group underlying margin above 7%, before we return to pre-COVID volumes,” it said.

“Looking further ahead, we are excited about the significant structural market opportunity globally, organic revenue growth, continued margin improvement and returns to shareholders over time.”

Compass shares are up 1.3% to 1,489.5p so far this morning.

Morning update

Personal care products producer PZ Cussons will host a virtual Capital Markets Day for investors and analysts later this morning.

On the markets this morning, the FTSE 100 is up another 0.2% to 6,724.3pts.

Early risers include McColl’s, up 2.8% to 32.9p, Britvic, up 1.6% to 834.5p and Diageo, up 1.6% to 3,056p.

Fallers include Bakkavor, down 2.4% to 114.2p, Wyynstay, down 2.9% to 500p and Nichols, down 3.3% to 1,305p.

Yesterday in the City

The FTSE 100 continued its relatively placid week, edging up 0.2% yesterday to close at 6,712.9pts.

On a day of little news from listed grocery and fmcg players, risers included SSP Group, up 6.4% to 344p, Wynnstay, up 6.2% to 515p, Nichols, up 4.3% to 1,350p, FeverTree, up 3.8% to 2,285p and Naked Wines, up 2.6% to 709p.

The day’s fallers included PZ Cussons, down 3.1% to 263p, Just Eat Takeaway.com, down 2.9% to 6,6600p, Bakkavor, down 2.8% to 117p, Kerry Group, down 2.5% to €105.00, Domino’s Pizza Group, down 2.4% to 361.2p, WH Smith, down 2.4% to 1,764p and Ocado, down 2.3% to 2,055p.

 

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