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UPDATE 1-UK's Compass expects margins to improve sequentially on cost controls

(Adds details on forecast, background)

March 25 (Reuters) - British catering firm Compass Group on Thursday forecast better margins in the second quarter than in the first, as it trimmed costs to cope with an expected hit to revenue from most schools and offices remaining shut.

The world’s largest catering company had a tough 2020 as lockdowns ate into the revenues of food services contractors, including France’s Sodexo and Elior Group as well as U.S.-based Aramark.

To soften the coronavirus blow, Compass has had to cut jobs and manage its food costs by “careful” menu planning, and by reducing suppliers and the number of products it buys.

Compass said its operating margin for the second quarter ended March 31 is expected to increase by about 130 basis points to about 4%, compared with 2.7% in the previous quarter.

Its half-year organic revenue was expected to drop 31%, with the UK-based company warning that foreign exchange translation could impact revenue by 456 million pounds ($623.72 million).

In the trading update outlining its expectations for the second quarter and half year, Compass said it has been operating at about 71% of its 2019 revenue in both the periods.

“We are controlling the controllable by managing our costs, adapting our operations and resizing our business,” said the company, which serves office workers, school kids, seniors in old age homes and armed forces across dozens of countries.

$1 = 0.7311 pounds Reporting by Yadarisa Shabong in Bengaluru; Editing by Devika Syamnath

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