Catering giant Compass has launched a bid to raise £2 billion equity to shore up its balance sheet as it warned of a “profound impact” from the coronavirus pandemic.
The world’s largest catering group said the proceeds from the mammoth share placing would help it weather the crisis, which has devastated the global hospitality industry.
The pandemic has seen schools close and events cancelled worldwide, with catering to businesses also decimated as lockdown has forced offices to shut and workers to stay at home.
This has knocked Compass hard, with around 50% of its business closed in April.
The Covid-19 pandemic has had a profound impact on CompassChief executive Dominic Blakemore
Group chief executive Dominic Blakemore warned: “The Covid-19 pandemic has had a profound impact on Compass.
“Given the uncertainty in the short-term outlook, today we have launched a £2 billion equity raise to reduce leverage and increase our liquidity.
“A strong balance sheet will allow us to weather the crisis whilst continuing to invest in the business.”
The share placing comes on top of efforts to slash its cost base by £500 million a month in April, including axing its final shareholder dividend payout and cutting executive salaries.
Compass unveiled the equity raise as it posted a 16.9% plunge in operating profits to £759 million for the six months to March 31.
On an underlying basis, earnings fell 10% to £854 million.
The group had warned in March of a first-half profit hit of up to £225 million from coronavirus.
Shares in the group fell 4% after its interim results and share placing.
But Greg Johnson, an analyst at Shore Capital, said the equity raise means the group’s balance sheet is now “now bullet-proofed and well positioned to build on post recovery”.
Compass had already issued an alert in February over a potential currency impact of up to £745 million on full-year earnings.
But the group said at the time that cost-cutting was offsetting lower catering demand among business and industry clients in Europe.
Compass is axing up to 4,000 jobs over the next two years as part of earlier cost-cutting efforts.