Compass Group returns to Q4 profit, shares rise

Compass Group shares (LON: CPG) were up almost 5% on Tuesday morning after the group shares full-year results ending 30 September.

After a “challenging” year for the group, the FTSE 100 firm returned to profit in Q4 thanks to mitigating costs, increasing liquidity, and strengthening the balance sheet.

Revenue fell 18.8% from £24.8bn in 2019 to £20.2bn, whilst operating profit plunged 69.7% to £561m.

The group started the year with strong performance, however, once the pandemic hit had to close half of its business. In the fourth-quarter, Compass was able to return to profitability and is now cash neutral.

“2020 was a challenging year for Compass. I am extremely proud of how the organisation responded to the pandemic,” said chief executive, Dominic Blakemore.

“We began the year on track to deliver our strongest performance ever, and over the course of a fortnight in March, we saw the containment measures to stop the spread of COVID-19 close half of the business. We rapidly enhanced our health and safety protocols, mitigated our costs, increased our liquidity and strengthened our balance sheet.

“Through the summer, our performance began to improve slowly as we helped clients in Education and Business & Industry return to schools and offices safely. 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%.”

Looking forward, the group is preparing for a challenging trading environment and is adapting operations to improve the offer, increase flexibility and manage costs.

Compass Group shares (LON: CPG) are trading +4.39% at 1.402,50 (0903GMT).