Compass Group – Under Control and Opening Up

Compass Group – Under Control and Opening Up
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  • Compass Group plc (LON:CPG) (OTCMKTS:CMPGY) today reported interim results that were significantly impacted by the pandemic.

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Q1 2021 hedge fund letters, conferences and more

  • The group provides catering services in factories and offices, education, healthcare, sports and entertainment facilities, with a strong presence in North America.
  • Revenues showed an improvement over the previous six months, but were still almost 30% below the prior year levels.
  • With sales sharply impacted, profits were hit likewise and earnings per share fell by 73% for the period, to 9.6p per share.
  • The shares open 2% higher on the back of a positive outlook statement from the company.

Compass Group Q1 Earnings

Commenting on the results, Steve Clayton, manager of the HL Select funds said:

“Clearly Compass was hard hit by the pandemic. Most of its customers closed their facilities, or ran them with skeleton staffing levels. It’s hard making money from empty canteens, and Compass can’t make their customers reopen. So the group have sought to control the things that were in their power. Costs have been tightly managed and profit margins are recovering. The group see margins returning to 7%, roughly double their current level, and above the pre-pandemic rate, before sales recover to pre-Covid volumes. Crucially, the group have managed cash really well, drawing in £359m of free cash flow, which has allowed them to announce the repayment of government support.

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The most exciting thing in the statement however is the news that new business is picking up, around 20% ahead and crucially, the rate of new clients outsourcing for the first time has jumped from a third to a half. That suggests that the future growth opportunity is getting stronger.

We like Compass for its obsession with performance in every aspect of the business. Management Action Plans for each segment keep the focus sharp and we are seeing this come through in the margin recovery, even though sales remain under great pressure. But clients are slowly reopening and Compass are returning to work, better prepared to maximise the opportunity at each and every site.”

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