Analyst Note
| Michael Field, CFA |Narrow-moat catering giant Compass Group proffered up an appetizing fiscal first quarter update. Although the persistence of lockdown measures in key regions such as North America and Europe led to little improvement in revenue growth, broadly no change from the near 37% decline seen in the fourth quarter of fiscal 2020, internal actions led to a significant operating margin improvement. Margins reached 2.7% over the quarter, a long way off the usual 7.5% delivered for the last number of years, but a vast and linear improvement on the 0.6% and negative 4.8% delivered in fourth quarter and third quarter fiscal 2020 respectively. This was achieved primarily through contract re-negotiations with clients and the downsizing of operations in some areas. We reiterate our GBX 1,560 fair value estimate. We still see modest upside from the prevailing share price.