Compass goes to investors for £2bn as canteens lie idle


The world’s biggest catering group launched the largest equity-raising of the coronavirus pandemic so far yesterday.

Compass Group said that the £2 billion fundraising, which features a retail offer for small investors, would increase its total liquidity to £5 billion and would secure its short-term position, giving it a platform to rebuild for the long term.

Reporting results for the half-year to the end of March, Compass said that the first five months had been a continuation of last year’s strong performance, but after that Covid-19 had “changed everything”.

Dominic Blakemore, 50, chief executive, said that he was withdrawing the company’s 2020 growth and margin outlook. “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,” he said.

A total of 195 million new shares were sold at £10.25 each, a discount of about 6 per cent from where they were trading before reports of the plans surfaced last week.

The equity-raising was held via a placing of shares with institutional investors, led by Goldman Sachs, Barclays and Morgan Stanley, with directors and senior management including Mr Blakemore subscribing for about £1.1 million of shares.

Private investors successfully bought £5.6 million of new Compass shares.

The offer, handled by Primary Bid, is one of only a few to be announced amid the equity-raisings held since the coronavirus outbreak began. Compass said that it “values its retail investor base and recognises the importance of pre-emption rights in the UK listed company environment”. Nevertheless, investors had to move quickly because the retail offer was due to close at the same time as the accelerated bookbuilding process.

Compass operates in 45 countries and before the lockdown was serving 5.5 billion meals in work canteens, schools and universities, on oilrigs, in the defence sector and at sporting events. It employs 600,000 people and last year generated revenues of more than £25 billion. The company said that 45 per cent of its business had been closed because of lockdowns and that it was cutting costs by £500 million a month and second-half capital expenditure by £200 million.

It has scrapped the dividend for the time being and Mr Blakemore has temporarily cut his salary by 30 per cent.

In the first half, revenues rose by 1.6 per cent to £12.6 billion on an underlying basis, with operating profit down 10 per cent at £854 million owing to the impact of Covid-19. On a statutory basis, pre-tax profits fell by 9.5 per cent to £771 million. In the first five months, organic revenues rose by 6 per cent.

The pandemic has hit trading severely, with organic revenues falling by 20.4 per cent in March and by 46.1 per cent in April. About 300,000 staff were put on furlough in March, including a third of its 60,000 workers in the UK. Many staff are employed in hospitals and similar operations. Mr Blakemore said that 23 colleagues had died of the virus, including five in Britain.

In China, where Compass has a small operation, 95 per cent of sites had reopened at an average volume of 70 per cent. Mr Blakemore said that the group would have to get used to lower volumes. He cited the office sector as the most likely to be hit in the longer term as companies and employees get used to home working and said Compass would have to “adapt our offer”.