According to Compass Group, 2020 has been a “year of two halves” for the company, which began the year on track to deliver its strongest performance ever before the Covid-19 pandemic led to all of its Sports & Leisure business and most of its Education and Business & Industry sectors close.
In its published full year results ending 30 September, the Group saw revenue fall 18.8% from £24.8 billion in 2019 to £20.2 billion. Underlying Operating profit fell by 69.7% to £561 million (£1.9 billion in 2019).
In Europe organic revenue declined by 24% for the full year. Revenues declined by 44% in the second half given that 71% of Europe’s revenues are in Business & Industry (51%), Education (12%) and Sports & Leisure (8%), the three sectors that have been most impacted by the pandemic.
In June, July and August as businesses began to reopen, Compass saw a a recovery in its Business & Industry division as consumers returned to the office, especially in continental Europe. By September, all sectors except Sports & Leisure, which is largely in the UK, were partially or fully open representing about 65% of the business.
Q4 saw Compass return to profitability and the company has reported that it is now cash neutral.
Looking ahead, the Group expects Q1 2021 margin to be around 2.5% and says it is committed to rebuilding the Group underlying margin to above 7% before volumes return to pre-Covid levels.
Dominic Blakemore, Group Chief Executive, said: “2020 was a challenging year for Compass. I am extremely proud of how the organisation responded to the pandemic. I have been humbled by the commitment of our people in the face of unprecedented adversity and want to thank them for their continued dedication and hard work.
“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%.
“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 and ensure the business can thrive despite the ongoing pandemic. We are innovating and evolving our operating model to be more flexible and to provide our clients and consumers with an exciting offer that is delivered safely and provides great value. This combined with our existing scale, ability to flex costs and focus on operational execution, will allow us to return to a Group underlying margin above 7% before we return to pre-COVID volumes.
“The scope for growth from first time outsourcing and share gains is significant. In addition, we have a strong pipeline of new business in Healthcare & Seniors, Education and Defence, Offshore & Remote that will diversify and broaden our revenue base. We are investing in the business organically and inorganically to support our long term growth prospects, enhance our competitive advantages, and further consolidate our position as the industry leader in food services.
“We are improving the quality of the business and will emerge from the pandemic stronger than we’ve ever been. We recognise the importance of the dividend to our shareholders and the Board looks forward to reinstating it when considered appropriate. Finally, we remain as excited as ever about the significant structural growth opportunities globally, the potential for further revenue and profit growth, and returns to shareholders over time.”