(Alliance News) - Catering firm Compass said Tuesday that financial 2020 was a challenging year as lockdown restrictions stifled business in many of its key markets, particularly travel, but it said it got back into the black in the third quarter.
For the 12 months ended September 30, revenue fell 20% to GBP20 billion from GBP24.9 billion in financial 2019, and pretax profit slumped 86% to GBP210 million from GBP1.49 billion last year.
Compass axed its annual dividend having paid out 40.0 pence per share in financial 2019. The company said it will keep future dividends under review and will restart payments when it is appropriate to do so.
More encouragingly, Compass said in the fourth quarter it returned the business to profitability and is now cash neutral. This was achieved, it said, mainly through contract renegotiations to reflect the difficult trading environment, continued discipline in terms of costs, and improvement in volumes.
Looking ahead. Compass expect the underlying operating margin in the first quarter of 2021 to 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," said Chief Executive Dominic Blakemore.
Compass shares were up 4.7% early Tuesday but remains down 26% so far in 2020.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.7% at 6,377.12
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Hang Seng: up 0.4% at 26,588.20
Nikkei 225: closed up 2.5% at 26,165.59
DJIA: closed up 327.79 points, 1.1%, at 29,591.27
S&P 500: closed up 0.6% at 3,577.59
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GBP: up at USD1.3350 (USD1.3289)
EUR: up at USD1.1850 (USD1.1821)
Gold: down at USD1,828.00 per ounce (USD1,833.31)
Oil (Brent): up at USD46.50 a barrel (USD45.78)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1000 CET Germany Ifo business climate index
0855 EST US Johnson Redbook retail sales index
0900 EST US quarterly house price index
0900 EST US monthly house price index
1000 EST US consumer confidence index
1630 EST US API weekly statistical bulletin
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France is expected to loosen its coronavirus restrictions on Tuesday as the boss of a major airline said proof of vaccination will likely become the only way people can fly in a post-pandemic world. Hopes over Covid-19 vaccines have given a boost to virus-weary citizens across the globe, but the disease remains rampant and world leaders are urging people to be patient. French President Emmanuel Macron will address the country – currently under lockdown – to announce a reworking of the rules following a drop in nationwide infections. Macron's televised speech comes a day after UK Prime Minister Boris Johnson said thanks to a major vaccine breakthrough, "the escape route is in sight" from the coronavirus crisis. Johnson said that although the "scientific cavalry" was arriving, he warned "Christmas cannot be normal and there's a long road to spring". The world is still engulfed in the unprecedented health crisis which has shattered economies, infected almost 58.9 million people and left nearly 1.4 million dead. Australia's Qantas announced that international travellers will need to be vaccinated against Covid-19 to fly, becoming the first airline to suggest such rules could become common across the industry. CEO Alan Joyce said the Australian flag carrier would implement the measure once a vaccine was made available to the public.
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BROKER RATING CHANGES
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HSBC CUTS LLOYDS BANKING TO 'HOLD' (BUY) - PRICE TARGET 40 PENCE
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HSBC CUTS NATWEST TO 'HOLD' (BUY) - PRICE TARGET 150 (130) PENCE
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BARCLAYS RAISES MEGGITT TO 'OVERWEIGHT' (UNDERWEIGHT) - TARGET 463 (233) PENCE
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JPMORGAN RAISES IMI PLC TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 1300 (1100) PENCE
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COMPANIES - FTSE 100
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CRH said it delivered a robust performance in a challenging trading environment in the third quarter. For the nine months to September 30, like-for-like sales were down 3% to USD20.6 billion and earnings before interest tax depreciation and amortisation 2% to USD3.4 billion. For the third quarter alone, like-for-like sales also fell 3%. Looking ahead, CRH expects full-year earnings before interest tax depreciation and amortisation to be "in excess" of USD4.4 billion for 2020. CRH posted Ebitda of USD4.0 billion in 2019. CRH also expects annual pretax profit to be ahead of the USD2.2 billion figure posted in 2019. For now, there is limited visibility into 2021, however, the longer-term prospects for CRH remain positive, the company added. "Markets continue to be impacted by the global pandemic and while we have seen some lower activity levels, I am pleased to report further improvement in trading performance, with an advance in both profitability and margins. The outlook for the coming months remains uncertain and visibility is limited, however, I am confident that we are well-positioned for the challenges and opportunities that lie ahead," said CEO Albert Manifold.
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Phoenix Group Holdings noted a press report regarding the potential sale of its European business, Phoenix Europe. On Monday, Bloomberg reported that the life-insurance consolidator, was considering selling international operations to focus on the UK, citing people with knowledge of the matter. The news agency said a potential deal could be worth EUR650 million. In light of interest from third parties for the European business, Phoenix confirmed that it is assessing a range of strategic options to maximise value for shareholders, but said there was no certainty that a transaction will be achieved.
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BHP Group announced the pricing of its global multi-currency subordinated repurchase plan, which is meant to reduce the miner's gross debt balance and improving its capital structure. BHP has invited holders of its USD2.25 billion fixed rate reset notes due 2075, which have a coupon of 6.750% and USD745.8 million in an outstanding principal amount to tender their notes. These notes are to be purchased at a rate of USD1.215 per USD1,000 in the principal amount. Also under the repurchase plan are EUR750.0 million fixed rate resent notes due 2079, which has a coupon of 5.625% and an outstanding principal amount of EUR714.7 million. These notes will be bought back for a consideration of EUR1,812 per EUR1,000 of the principal amount. Should at least 80% of the aggregate principal amount of notes be purchased, a substantial repurchase event will be triggered, leading to the purchase of a further USD295.8 million in US dollar notes and EUR564.7 million in euro notes. BHP is expected to announce the outcome of the plan later on Tuesday.
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COMPANIES - FTSE 250
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Online household appliances retailer AO World reported a swing to half-year profit. It said pretax profit in the six months to September 30 was GBP18.3 million, versus a loss of GBP5.9 million a year before, as total revenue, excluding its shuttered Netherlands operation, rose 58% to GBP717.0 million from GBP454.9 million. Revenue was up by 54% in the UK and by 85% in Germany. AO World said the annual rate of growth in October exceeded that in the first half, amid increased capacity and stock.
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COMPANIES - GLOBAL
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A bill that would give the UK government greater powers to shut out high-risk vendors from the UK's telecoms infrastructure will be laid before Parliament on Tuesday. The Telecommunications Security Bill would create national security powers capable of imposing controls on when – if at all – a telecoms firm could use material supplied by companies such as Huawei. In the summer, the government announced that the Chinese firm was to be banned from the most sensitive core parts of UK networks, alongside plans to rip out all Huawei equipment from 5G networks by 2027 – decisions that would be enshrined in law by the new bill. Under the proposals, security protocols around UK networks will also be strengthened with fines, of 10% of turnover or GBP100,000 a day, for those who do not meet the new standards. Communications regulator Ofcom is to be tasked with the monitoring and assessing of security protocols among telecoms providers.
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Tuesday's Shareholder Meetings
essensys PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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