Compass Group returns to profit in Q4 following ‘challenging year’
Compass Group has made an operating profit of £561m in 2020 after a difficult year that saw parts of the business closed due to the coronavirus pandemic.
The catering giant 2020 operating profit was down on last year’s £1,852m. Nearly two-thirds of Compass Group’s revenue came from north America.
The group was able to return to profit in Q4 and is now “cash neutral”. It did this by renegotiating contracts to reflect the trading environment, and being disciplined when it came to costs and volume.
Organic revenue at the food firm was down 18.8% year on year as Covid-19 related restrictions reduced volumes in Business & Industry, Education and Sports & Leisure in all three regions.
In May it launched a £2bn share offer that sought to raise extra cash and help it through the pandemic.
Group chief executive Dominic Blakemore said: “2020 was a challenging year for Compass. I am extremely proud of how the organisation responded to the pandemic.
“We began the year on track to deliver our strongest performance ever, and over the course of a fortnight in March, we saw the containment measures to stop the spread of Covid-19 close half of the business.
“We rapidly enhanced our health and safety protocols, mitigated our costs, increased our liquidity and strengthened our balance sheet. Through the summer, our performance began to improve slowly as we helped clients in education and business & industry return to schools and offices safely.”
Quilter Cheviot equity research analyst Amisha Chohan described Compass’s results as “slightly better than expected”.
“Pre-covid-19, the ‘best in class’ global food caterer had a superior track record on organic growth, margin expansion and cash returns over the past decade,” she continued.
“Do we think this will return? Yes. Operating in a fragmented market, with over 10% market share, it is well-positioned, especially post-Covid-19, to capitalise from an increasing trend of outsourcing catering services as its cheaper and safer.”