Catering group Compass sees pandemic eat into profits

Catering giant Compass – whose clients include Edinburgh Zoo – has warned over further action to overhaul the business after the pandemic sent annual profits plummeting by 76 per cent.

One of Compass' clients is Edinburgh Zoo, which is running Christmas Nights entertainment. Picture: contributed.

The group's pre-tax profits slumped to £427 million for the year to September 30 from £1.7 billion as the crisis devastated the global hospitality industry and affected its school and workplace canteen services.

Compass said it returned the business to profit in its final quarter after renegotiating contracts, cost control and seeing some improvement in trading. But it said it would continue to overhaul its operations, with ongoing "resizing" actions to weather the coronavirus crisis.

It has already slashed annual labour costs by around £280m at sites such as offices, factories and sports venues, with another £70m trimmed from its head office operations.

Compass has more than 40,000 staff in the UK. Picture: Carl De Souza/AFP via Getty Images.

It did not reveal how many roles have been axed, though the group employs a large number of casual staff and said it was able to limit job losses through government support schemes.

Compass has more than 40,000 staff in the UK out of a global workforce of around 600,000 across 45 countries. Its largest market is North America.

Chief executive Dominic Blakemore said: "2020 was a challenging year for Compass."

He added: "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."

Compass raised £2bn in new capital in May to boost its balance sheet, which came on top of efforts launched in April to slash its overall cost base by £500m a month, including axing its interim and final shareholder dividend payouts and cutting executive salaries.

Analyst Anna Barnfather at Liberum said the focus was now "on the outlook" for Compass. "While existing business remains depressed, particularly in business and industry, sports and leisure, it is encouraged by the strong pipeline of new business in other areas," she added, pointing to growth sectors such as hospitals and care homes.

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