Compass Group will not recommend an interim or a final dividend for the year ending 30 September 2020

Compass Group plc (LON:CPG) has today provided a further update in light of the disruption brought about by the COVID-19 pandemic. 

Dominic Blakemore, Group Chief Executive said:

“I’d like to thank the tens of thousands of Compass colleagues around the world who are supporting clients and governments in providing critical and essential services.  Their dedication, combined with the many initiatives around the world to prepare and distribute food to help those most in need, make me extremely proud of the contribution our people are making to the fight against COVID-19.

We are managing the business to protect the interests of all our stakeholders.  Compass is a strong, resilient organisation that is well-positioned to continue to support our colleagues, clients, consumers and the communities we serve during this challenging period.”

PEOPLE

Throughout this crisis our objective has been to protect and reassure our people during a period of great uncertainty. 

We are committed to supporting our frontline staff that are providing critical and essential services.  Their safety and wellbeing is our absolute priority and we have strengthened our Health & Safety protocols.  We are recognising and rewarding their vital and brave work – for example in the UK we are awarding bonuses to all of our employees supporting the National Health Service, and have provided them with 10,000 food hampers.

Our priority has been to protect jobs as much as possible.  Employees working in units that have been closed, have, where possible, been redeployed to other sites where critical work is still required such as Healthcare, Education and Defence.  In the event redeployment has not been possible, employees have been furloughed according to local government support schemes and labour regulations.  Most of our regions provide support through Employee Assistance Programmes and have set up funds or other mechanisms to support employees who might be facing financial difficulties as a result of these actions. 

PURPOSE

Our purpose is to care for the communities we serve.  Our Healthcare teams around the world have mobilised resources at scale and with pace to allow us to support governments and Healthcare clients.  We are also preparing and delivering food to critical and essential workers, the elderly, vulnerable and those in financial distress, often working in partnership with grassroots support organisations. 

Examples of the support our teams are providing include:

·    We are redeploying thousands of employees from other sectors to support new hospitals such as the NHS Nightingale Hospital in London, the Louisa Jordan Hospital in Glasgow and the hospital in the IFEMA exhibition centre in Madrid 

·    In the UK, we are working with our partner FareShareUK to ensure food waste is minimised and that surplus food is redistributed to those who need it most

·    In New York, we are supporting a new external testing centre in Brooklyn and providing technical support by inspecting and distributing donated ventilators

·    In India we have a partnership with government and NGOs to prepare and deliver food to those in need with initiatives like www.letsfeedtogether.com

PERFORMANCE

Trading and cost actions

In the last two weeks of March, the business performed in line with the expectations set out in our Coronavirus Trading Update of 17 March 2020.  Organic revenue growth for Half Year 2020 was c.1.6%, within the 0%-2% expected range. 

Currently around 55% of our business is closed due to country lock downs.  The impact of government containment measures varies significantly by sector:

We are proactively mitigating our cost base by around £450m per month by taking a wide range of actions such as:

·    Limited use of variable forms of in-unit labour (MAP 4) such as over-time, contractors, and temporary workers

·    Redeployed or furloughed much of the fixed element of our in-unit labour (MAP 4)

·    Reduced salary, hours or furloughed above-unit overhead (MAP 5) employees

·    The Chief Executive has temporarily reduced his salary by 30%, whilst the Group Board and Executive Committee have temporarily reduced their fees and salaries by 25%

The drop through impact of lost revenues on HY operating profit was between 28%-29%, within the anticipated range of 25%-30%.

HY 2020 Cash and net debt

We are working hard to protect our cash flow:

·    Net capital expenditure in half year 2020 was around £400m and we expect capex to be lower in the second half of the year

·    Mergers & Acquisition activity has been paused

·    At 31 March 2020 net debt was around £4.9bn, including a drawdown of c.£200m from our Revolving Credit Facility (RCF), and net debt/ EBITDA was between 1.6x-1.7x

Liquidity

Since our previous announcement we have taken significant measures to strengthen our liquidity:

·    We have put in place an additional RCF³ of £800m with existing relationship banks and now have total committed credit facilities of £2.8bn

·    We qualified for the Bank of England’s Covid Corporate Financing Facility (CCFF) and drew down £600m in March

·    As a precautionary measure, we are in constructive discussions with our US Private Placement investors to obtain a waiver of the covenant tests^[5]

·    Standard & Poor’s reaffirmed our long term (A) and short term (A-1) credit ratings on 24 March and Moody’s A3/P-2 long and short term credit ratings remain unchanged

Dividend

We recognise the importance of a dividend to our shareholders.  However, we need to balance this with the exceptional circumstances that the Covid-19 pandemic represents.  As a result, the Board has decided not to recommend an interim or a final dividend for the year ending 30 September 2020. The Board will keep future dividends under review and will restart payments when it is appropriate to do so.

DATE OF HALF YEARS 2020 RESULTS PRESENTATION

In order to provide enough time to prepare and review financial information in the current climate, the interim results will now be published on 20 May 2020 rather than 13 May 2020 as originally scheduled.  Compass Group management will host a webcast presentation and Q&A session, details of which will be circulated ahead of the event.