30th Jul 2020 10:58
(Alliance News) - Compass Group PLC on Thursday said it was hurt badly by Covid-19 in the third quarter of its financial year, as expected, but is in a solid financial position to survive the crisis.
The contract food service company headquartered in Chertsey, England said group organic revenue for the third quarter ending June 30 was 44% down from a year prior, and down 14% for the nine months to the same date. Compass didn't provide the actual revenue figures.
This comes after it recorded a 6% increase in organic revenue for the five months ending February 29, which is telling of the impact of the virus on the company.
The third quarter decline was led by Europe, down 54%. North America was down 45% and Rest of World down 20%.
The group's operating margin for the quarter was minus 6.3%, versus positive 3.9% in the year to date.
By the end of June, approximately 60% of the business was trading.
"The pace at which our volumes will recover is still unclear, especially given a possible increase in local lockdowns. We are encouraged by the relative improvement in performance in June, as well as the early signs of an acceleration in first time outsourcing opportunities. In the meantime, we continue to work with our clients to help them reopen safely. We are proactively managing the business, reducing our costs, rebuilding our margins and investing to strengthen our competitive advantages," said Compass.
Compass suffered cash outflow in the third quarter of GBP260 million. This included capital expenditure of GBP130 million, which was mainly contractually committed investments, the company said.
Net debt was at GBP3.20 billion at the end of the quarter. Proceeds from a GBP2.00 billion equity raise in May were used to repay some debts, including GBP600 million to the Bank of England's Covid corporate financing facility, GBP201 million in drawn credit facilities, and GBP42 million in maturing commercial paper.
The end of the quarter saw the company's liquidity sitting at GBP5.00 billion, of which GBP2.8 billion was undrawn credit facilities.
"Our solid financial position will allow us to weather the crisis whilst continuing to invest in the business to strengthen our competitive advantages and support our long-term growth prospects," Compass said.
Chief Executive Dominic Blakemore said: "We are working with our clients to help them reopen and bring their teams back safely. We are also seeing encouraging signs of an acceleration in first-time outsourcing opportunities."
"Our focus on operational execution, our scale, and our strengthened balance sheet will enable us to succeed in this new environment and further consolidate our position as the industry leader in food services."
Compass is due to release results for its full financial year on November 24.
Compass shares were down 1.8% at 1,057.00 pence each on Monday in London.
By Greg Roxburgh; [email protected]
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