Compass Group has issued an update on the impact of COVID-19 and half year results for the six months to 31 March 2020.
First half organic revenue rose 1.6% to £12.6bn, as growth in the first 5 months of the year was offset by declines of 20.4% in March. Sales in April, after the end of the half, fell 46.1% as the pandemic led to over half of the group's businesses being closed.
Underlying operating profits fell 11.7% to £838m, as the effect of coronavirus in March offset margin gains throughout the rest of the half.
Compass has reduced costs by around £500m per month through a range of actions including furloughing employees and salary reductions.
Lower profits saw free cash generated in the period drop significantly to £186m down from £530m last year. Net debt at the end of the half was £4.9bn, 2 times cash profits. The group aims to reduce this to 1-1.5 times.
Compass has taken a number of measures to improve financial resilience. These include reducing capital expenditure, pausing acquisition activity and not paying a dividend this year. Where it can it has applied for government support - including £600m from the UK's Covid Corporate Financing Facility.
Dominic Blakemore, Group Chief Executive, (pictured), said, ‘The COVID-19 pandemic has had a profound impact on Compass. We can only exist with the commitment of our colleagues around the world, many of whom have been on the front line of the battle against the pandemic. I am extremely proud of how the organisation has responded, and I’m humbled by the commitment and dedication our people are showing, day in day out.
'I want to extend my deepest sympathies to the families of those colleagues that have lost their lives to COVID-19. Since the beginning of the crisis, keeping our colleagues safe has been our overriding focus. Colleague and consumer safety will continue to guide everything we do as we move towards reopening more units over the months ahead.'
Blakemore continued, 'The first five months covered by the results we are announcing today showed a continuation of the strong performance we reported last year, but it goes without saying that COVID-19 has changed everything. Compass is a resilient and adaptable organisation and we have moved quickly to manage cash and costs and increase liquidity. We are doing all we can to protect jobs by redeploying colleagues into units that remain open and using government job retention schemes where available.
'The duration of the pandemic, and the pace at which containment measures are relaxed in different countries is unknown, which makes it a challenge to reliably assess the impact across our markets and our business. We are therefore withdrawing our previous growth and margin outlook for 2020. We remain, however, excited about the significant structural market opportunity globally and the potential for further organic revenue growth, margin improvement and returns to shareholders over time.
'Given the uncertainty in the short term outlook, today we have launched a £2 billion equity raise to reduce leverage and increase our liquidity. A strong balance sheet will allow us to weather the crisis whilst continuing to invest in the business to enhance our competitive advantages, support our long term growth prospects and further consolidate our position as the industry leader in food services. Alongside a placing to institutional shareholders, I am pleased that we are giving our valued retail investors an opportunity to participate in the fundraising through a separate retail offer.'
Blakemore concluded, 'Although there are significant short term challenges, I firmly believe that Compass is now well-placed to succeed in a post COVID-19 world. The strengths which have delivered Compass success in the past are the same ones which will deliver success in the future. Our scale and focus on execution, our emphasis on trust and safety, and our financial resilience will put us in a strong position for the recovery and will allow us to generate sustainable long term value for all of our stakeholders.'