Compass Group’s shares slump as coronavirus closures dent profits
Compass Group is the FTSE 100’s biggest faller as it warned interim profits will be lower than expected because of closures in its sport, leisure and education businesses.
The catering company said the acceleration of containment measures adopted by governments and clients in Europe and North America, notably the closure of schools and cancellation of sports fixtures, had affected its expectations for the half year.
Shares are down 21.32 per cent at 9am.
Compass Group expects organic revenue growth to be between 0 and two per cent. The drop-through impact of the lost revenue is expected to be between 25 per cent and 30 per cent. As a result, operating profit will be £125m to £225m lower than expected.
Organic revenue growth for the five months ending 29 February was six per cent. Compass said measures to contain coronavirus in the Asia Pacific region did not materially impact the business. Additionally, Compass Group’s operating margin during the period increased 10 basis points.
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Governments across Europe are implementing draconian measures to mitigate the impact of coronavirus, and curb the spread of the virus. It has forced a number of so-called non-essential businesses to close.
Yesterday, Prime Minister Boris Johnson urged Brits to practice “social distancing” and to avoid all non-essential contact.
Neil Wilson, chief market analyst at Markets.com, said Compass “is in the front line of companies facing damage from the coronavirus outbreak.”
The closure of the vast majority of its sports, leisure and education businesses “is a devastating combination for the group.”
Compass Group has plenty of headroom with a £2bn revolving credit facility but given that cash is not flowing into the business, profits are still expected to be dented.
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