Compass Group plc’s fourth-quarter earnings have exceeded expectations by reaching about 86 per cent of pre-pandemic levels, with its Sports & Leisure sector leading the way.
Healthcare and Defence, Offshore & Remote divisions are also all trading ahead of 2019 levels, reveals the group’s financial update ahead of the close of the financial year on 30 September.
The update shows an uptick in margins since the third-quarter report.
Underlying operating margins are likely to be at the mid-point of the 5.5 per cent to 6.0 per cent guidance range in the fourth quarter, and 4.4 per cent for the full year.
The group "remains cautious" about recovery in the Business & Industry division, but is confident of returning to a group operating margin of 7 per cent before reaching pre-pandemic volumes. The shares were unmoved following the announcement.
The group’s revenue performance in the fourth quarter is expected to improve to about 86 per cent of 2019’s revenues, ahead of its guidance earlier this year. For the full year 2021, group revenues are anticipated at about 76 per cent of 2019 results.
The strong performance was led by Sports & Leisure with improved attendance – particularly at outdoor sports. The group says its Healthcare and Defence, Offshore & Remote divisions have shown resilience during the pandemic, trading above 100 per cent of 2019 revenues during the period.
Since the beginning of September, the return to educational establishments has seen strong spending, and trading for the Business & Industry division has been in line with group expectations.
Trading results from the group’s overseas operations are translated at the average exchange rates for the period. At current spot rates (based on closing rates as of 17 September), foreign exchange translation is expected to reduce 2020 reported revenue by about £943 million and operating profit by £39 million.
The group statement says: “We continue 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 our sectors are expected to continue performing well; although we remain cautious about Business & Industry, given continued uncertainty over the pace of office reopening in our major markets.
“As previously stated, the group’s recovery is unlikely to be linear and will depend on a number of factors including vaccination and infection rates as well as any further containment measures taken by governments. However, we remain confident in our ability to return to a group underlying margin above 7% before we return to pre-Covid volumes.
“Overall, we are excited about the significant structural market opportunities globally, the potential for further revenue and profit growth, and shareholder returns over time.”
Compass Group will provide a further update on trading performance in its full-year results on 23 November.
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