World's biggest caterer warns on £225m profit hit from Covid-19

Oscar Williams-GrutSenior City Correspondent, Yahoo Finance UK
Yahoo Finance UK
Compass runs canteens around the world. (Nicolas Tucat/AFP via Getty Images)
Compass runs canteens around the world. (Nicolas Tucat/AFP via Getty Images)

Compass Group (CPG.L), the world’s biggest catering firm, on Tuesday became the latest major company to warn coronavirus will impact its business.

Compass said the closure of offices and schools and the cancellation of sports events across Europe and North America would lead to lower revenues and profits this year.

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The company downgraded its forecast for half-year revenue growth to between 0% and 2%. Operating profit in the six-month period is expected to be £125m ($153m) to £225m lower than expected.

Greg Johnson, an analyst at Shore Capital, said the revenue downgrade amounted to around £2bn of lost revenue across the year. Full-year profits could be 40% lower than previously expected.

Shares in Compass dropped 22% on the update.

Compass is the world’s largest catering services firm and runs canteens in offices, museums, schools, and venues around the world. The company works with corporate giants like Google, HSBC, and Boeing, as well as places like the Imperial War Museum and Heathrow.

Read more: Stocks fall ahead of EU leaders’ coronavirus response

“Compass Group is in the frontline of companies facing damage from the coronavirus outbreak,” said Neil Wilson, chief market analyst at Markets.com. “Schools are closing fast, sports fixtures are being called off wholesale — it's a devastating combination for the group.”

Sports & Leisure accounts for 13% of Compass’s revenues, Johnson said, while Education accounts for 18%.

The company had revenues of £24.8bn last year and made an operating profit of £1.6bn. Compass employs around 600,000 staff worldwide.

Compass said it is “proactively” managing costs and expenses to ensure it doesn’t run out of cash. It added that it has “substantial liquidity” thanks to a £2bn revolving credit facility and “significant headroom” before it triggers certain clauses in its bonds that limit the ratio of debt to earnings.

The company said its “priority remains the health and safety of our employees, clients and consumers” and said it “continue[s] to monitor the situation closely.” Compass promised a further update alongside half-year results in May.

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