Profits plummet at Compass but directors confident in growth opportunities

Foodservice company Compass group has reported a pre-tax profit of £210m in its full-year financial results, a steep drop from last year's £1.49b.

For the year ended 30 September 2020, the group reported earnings before tax, interest, depreciation and amortisation (EBITDA) of £1.42b against £2.46b in 2019, as well as £19.9b in revenue, a 19.8% decrease on the prior year.

In Europe, good results in the healthcare and seniors sector were offset by the significant impact of Covid-19 on sports and leisure and business and industry.

The group's Europe business reported revenue of £5.05b, a 21% reduction. Although the group said government schemes are helping to support employees, as these schemes end, the business is "having to take resizing actions to adjust our cost base to reflect the current trading environment".

Despite subdued new business wins, especially in the UK, France and Germany, Compass saw a higher proportion of new business from small and regional players. Retention was broadly in line with previous years at 92.6%.

Compass directors said they have a reasonable expectation that the group has adequate resources to remain in business for the next year and that the foodservice market remains "very attractive" with "significant structural growth opportunity", particularly in healthcare and seniors, education and defence, and offshore and remote.

Dominic Blakemore, group chief executive, said 2020 had been a "challenging year" for Compass, which began the year on track to deliver its "strongest performance ever" and over a fortnight in March saw coronavirus restrictions close half the business.

He said: "Importantly, in the fourth quarter we returned the business to profitability and are now cash neutral. This was achieved mainly through contract renegotiations to reflect the difficult trading environment, continued discipline in terms of costs and some improvement in volumes. We are executing at pace and expect the underlying operating margin in the first quarter of 2021 will be around 2.5%.

"We are improving the quality of the business and will emerge from the pandemic stronger than we've ever been. We recognise the importance of the dividend to our shareholders and the board looks forward to reinstating it when considered appropriate. Finally, we remain as excited as ever about the significant structural growth opportunities globally, the potential for further revenue and profit growth, and returns to shareholders over time."