Catering Firm Compass's Margin Outlook Buoys Shares Even As Profits Decline

By Dave Simpson
Catering Firm Compass's Margin Outlook Buoys Shares Even As Profits Decline

Catering firm Compass has said that its margins are on track to improve on the back of cost cuts, driving up its shares even as it reported a 76% decline in annual profit due to the impact of the COVID-19 pandemic on its cafeterias.

Compass, which serves workers at Google and Shell as well as schools, old-age homes and the armed forces, said that it has taken various measures to "resize" its business and cut costs, including furloughing workers and trimming its workforce.

The company declined to say how many jobs have been lost, but said that changes made so far will help save approximately £280 million in annual "in-unit labour costs" - a measure of productivity - and build margins back to above 7% from the 2.9% for its fiscal year ended September 30.

"Although the prospects of a vaccine are encouraging, the resumption of lockdowns in some of our major markets shows that we have to continue to take proactive actions to control the controllable," chief executive Dominic Blakemore said.

Shares in the FTSE 100 company, which have lost a quarter of their value so far this year, were up 5% at 1016 GMT on Tuesday November 24, with analysts citing the margin forecast.


Compass has seen its margins shrink during the pandemic, as the number of students and office workers eating at its cafeterias plunged. It bolstered its finances with a £2 billion capital raise in May.

Blakemore told Reuters that it is difficult to predict how fast revenues will recover, adding that its first-quarter meals volumes will be similar to that of the fourth.

Pre-Tax Profit And Revenue

Compass, which employs approximately 600,000 people across 45 countries, said that its annual pre-tax profit came in at £427 million for the year ended September 30, compared with £1.74 billion last year.

Revenue for the year fell by nearly 19% to £20.2 billion.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.