AGM AND TRADING UPDATE 2021

Compass Group PLC today issues a trading update ahead of its Annual General Meeting. The AGM will be held online and will commence at 10:00 am. At this meeting, shareholders will be provided with the following update on the Group’s performance since 30 September 2020.

Continued progress, despite slow volume recovery

The Group’s organic revenue for the three months to 31 December 2020 was (33.7)%. This performance was in line with our expectations, given the protracted lockdown measures to contain the virus during the winter months. Our retention remained strong at 95.7%.

Despite little volume improvement, the Group’s operating margin continues to improve, increasing from 0.6% in Q4 to 2.7% in Q1, with all regions now profitable. This is due to a series of actions we have taken over the last year to adapt our operations and to manage our cost base more flexibly, including contract renegotiations and resizing of the business.

UK free school meal food parcels

In light of the recent events around the provision of free school meal food parcels by our Education sector, we recognise that the quality and quantity of some food parcels fell short of our usual high standards. We have apologised to everyone who has been affected.

After conducting a thorough investigation, we have taken several corrective measures that include improved supply chain processes, additional guidance and resources for our employees, and stronger quality assurance checks.

Since 25 January, Chartwells has been providing breakfasts to all children currently receiving a lunch parcel from us for the duration of school closures. We will also provide those same children with lunch and breakfast parcels through the February half term break. The costs of these initiatives will be covered by Compass.

Currency

Trading results from our overseas operations are translated at the average exchange rates for the period. Currency movements⁶, compared to the same quarter last year, had a negative translation impact on revenues and operating profit in the quarter of £148 million and

£13 million respectively. If current spot rates were to continue for the remainder of the year, foreign exchange translation would negatively impact 2020 revenue by £793 million and operating profit by £33 million.

Summary and outlook

Although the news around vaccinations is encouraging, the pace of volume recovery remains uncertain. As we enter the second quarter with varying lockdown measures in place across our key markets, we anticipate that Q2 revenues and volumes will be broadly in line with Q1. Despite this, we expect second quarter operating margin to improve by a further 50-100bps.

We are encouraged by the strong pipeline of new business which includes first time outsourcing and share gains, particularly in the more defensive sectors of Healthcare & Seniors, Education and Defence, Offshore & Remote. We are confident in our ability to rebuild our Group underlying margin above 7%, before we return to pre-COVID volumes.

As a reminder, we still expect our leverage ratio to peak around the half year due to the
COVID impact on the trailing 12-month EBITDA calculation.

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

Our next reporting dates are as follows:

25 March 2021            HY 2021 Pre-close trading update

12 May 2021               HY 2021 Results

^{[1] Year on year change.
[2] Underlying operating margin pre-impairment and resizing costs.
[3] Excluding resizing costs of £20m, predominantly in EME.
[4] Restated to include Middle East.
[5] Restated to exclude Middle East.
[6] Closing rates as at 29 January 2021.}

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