TIDMCPG
RNS Number : 5339U
Compass Group PLC
30 July 2020
Legal Entity Identifier (LEI): No. 2138008M6MH9OZ6U2T68
30 July 2020
Q3 Trading update
This statement updates investors on the Group's performance
since 31 March 2020.
Dominic Blakemore, Group Chief Executive said:
"Throughout the COVID-19 pandemic our priority has remained the
health and safety of our employees and consumers. Trading has been
challenging, but we continue to manage the business to protect the
interests of all our stakeholders, including our people and the
communities in which we operate.
We are working with our clients to help them reopen and bring
their teams back safely. We are also seeing encouraging signs of an
acceleration in first-time outsourcing opportunities. Our focus on
operational execution, our scale, and our strengthened balance
sheet will enable us to succeed in this new environment and further
consolidate our position as the industry leader in food
services."
Group
Organic revenue Operating margin
Q3 2020 Q3 YTD 2020 Q3 2020 Q3 YTD 2020
-------- ------------ ----------- ------------
North America (45)% (13)% (3.1)% [1] 5.7%1
-------- ------------ ----------- ------------
Europe (54)% (21)% (14.5)%1 1.1%1
-------- ------------ ----------- ------------
Rest of World (20)% (5)% 3.1% 1 5.4% 1
-------- ------------ ----------- ------------
(6.3)%
Group (44)% (14)% [2] 3.9% 2
-------- ------------ ----------- ------------
In a quarter when lockdown measures were at their most severe in
our major markets, the steps taken to contain the spread of the
virus impacted our sectors in different ways. Performance in
Healthcare and Defence, Offshore & Remote was good. Our
Education and Business & Industry sectors were mostly closed in
April and May, and started to cautiously reopen in June, while
Sports & Leisure remained fully shut. By the end of June, about
60% of our business [3] was open, compared to 55% by the end of
May. Retention was robust at 95% and we have started to see
attractive new first-time outsourcing opportunities. Group organic
revenue declined by 44% in the third quarter and by 14% for the
nine months to 30 June 2020.
Our sites are re-opening with best in class Health & Safety
protocols, and we are actively entering into contract
re-negotiations with our clients to recover the costs of operating
safely and with lower attendance levels. We began to adjust our
business to the new trading environment and in the third quarter
spent GBP42 million in resizing costs in North and South America.
Encouragingly, the Group's operating margin improved within the
quarter, and the drop through [4] improved further to 20% in June.
As a result, the Group's operating margin was (6.3)% [5] in the
third quarter and 3.9%5 for the nine months to 30 June 2020.
Regions
Our business in North America has a good sector balance between
Business & Industry, Education, Healthcare, Sports &
Leisure and Defence, Offshore & Remote. Due to the different
containment measures at the state level in the US, our operations
in North America have been slightly more open than in Europe. As
sites reopen, we have entered constructive conversations with
clients to recover the higher costs of operating with enhanced
Health & Safety protocols and lower participation rates. This,
combined with more flexible labour laws, has allowed us to adjust
our cost structure and start to rebuild the operating margin.
In Europe, our business is more weighted towards Business &
Industry with a relatively small Healthcare business. In addition,
the lockdown measures in our major markets have been deeper and
more widespread than in other regions. We are starting to see a
small number of sites reopening, and in those cases, we are working
with our clients to pass through higher operating costs. However,
the exposure to Business & Industry, stricter containment
measures and a less flexible work force mean that although we are
actively managing the situation, progress in the region will be
slower.
In Rest of World, most of our business was open at the end of
June. This is mainly due to our higher exposure to Offshore &
Remote which has not been significantly impacted by lockdowns. The
operating margin was slightly positive as a result of the good
performance in Offshore & Remote in Asia Pacific combined with
swift labour cost actions in South America.
Cash
We continue to manage our cash judiciously and have focused on
working capital management and agreed tax deferrals. Our free cash
flow in the third quarter was an outflow of GBP260 million, which
included capital expenditure of GBP130 million, and was mainly
contractually committed investments. Working capital was an outflow
of GBP100 million, flattered by tax deferrals of around GBP220
million and a significant improvement in the collection of
receivables.
Financial position
Net debt was GBP3.2 billion at 30 June 2020. Proceeds from the
GBP2 billion equity raised on 19 May 2020 were used to repay GBP600
million of the Bank of England's COVID Corporate Financing Facility
(CCFF), repay GBP201 million drawn credit facilities and repay
GBP42 million maturing Commercial Paper. As of 30 June 2020, our
total liquidity was GBP5.0 billion (GBP2.8 billion in undrawn
credit facilities, GBP600 million available CCFF limit and GBP1.6
billion in cash). Our solid financial position will allow us to
weather the crisis whilst continuing to invest in the business to
strengthen our competitive advantages and support our long-term
growth prospects.
Currency
Trading results from our overseas operations are translated at
the average exchange rates for the period. If current spot rates
[6] continue for the remainder of the year, foreign exchange
translation is expected to reduce 2019 reported revenue and
underlying operating profit by around GBP245 million and GBP19
million respectively.
Outlook
At the time of our Half Year results announcement on 19 May 2020
we withdrew our previous growth and margin outlook for 2020.
Trading in the third quarter was in line with the Slow Recovery
scenario described in our Company Presentation of 19 May 2020.
The pace at which our volumes will recover is still unclear,
especially given a possible increase in local lockdowns. We are
encouraged by the relative improvement in performance in June, as
well as the early signs of an acceleration in first time
outsourcing opportunities. In the meantime, we continue to work
with our clients to help them reopen safely. We are proactively
managing the business, reducing our costs, rebuilding our margins
and investing to strengthen our competitive advantages.
Looking further ahead, we remain excited about the significant
structural market opportunity globally, and the return to organic
revenue growth, margin improvement and returns to shareholders over
time.
2020 Reporting Calendar
In order to provide analysts and investors with more frequent
updates on our financial performance our reporting calendar in 2020
will be as follows:
30 September 2020 FY 2020 Pre-close trading update
24 November 2020 FY 2020 Results
Compass will hold a conference call for investors and analysts
today 8:30a.m. (UK time).
Participant dial in numbers:
UK Toll Number: +44 (0) 330 336 9411
UK Toll-Free Number: 0800 279 7204
US Toll Number: +1 929 477 0402
US Toll-Free Number: +1 888 204 4368
Pin number: 4156257
Enquiries
Investors Sandra Moura, Agatha Donnelly & Simon Bielecki +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 GBP25.2 billion in the
year to 30 September 2019. It operates in around 45 countries,
employs and engages over 600,000 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 growth, 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), disposals (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 .
[1] Excluding resizing costs
[2] Including Group overheads and GBP42m in resizing costs
[3] % of June 2019 revenues including all acquisitions and
disposals
[4] Drop through is defined as margin on lost revenue
[5] Including Group overheads and GBP42m in resizing costs
[6] Closing rates as at 24 July 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTFLFEDDVIAFII
(END) Dow Jones Newswires
July 30, 2020 02:00 ET (06:00 GMT)
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