I think this is not compressed. It just stores the image as you asked every sample is 1 bit. So a byte contains 8 pixels. You wants every byte is a single pixel, but to that you have to convert it by yourself.
And the periodic letters are there because the lines are padded not to start them in the inside of a byte. (But it's possible it uses a different padding size. e.g. to start on an address dividable by 4.)