Compass to raise £2bn to bolster finances during crisis

Compass is raising £2bn of equity to strengthen its finances after the Covid-19 shutdown caused revenue to almost halve in April.

The FTSE 100 catering company said the share placing would not give existing investors first refusal and that it had consulted with some of its big shareholders before going ahead.

Compass said it would raise about £2bn of gross proceeds through an accelerated bookbuild launched on Tuesday and a £1m offer to retail investors. Senior managers will subscribe for about £1.1m of shares.

The company said it was bypassing existing shareholders through a bookbuild to raise funds quickly. The price of the placing will be decided at the end of the bookbuilding process.

Compass shares fell 2.3% to £11.26 at 09:18 BST. The shares have dropped from £19.90 on 10 February as the coronavirus has escalated.

Reporting half-year results to the end of March a day earlier than planned, Compass said it traded strongly for the most of the period but Covid-19 "changed everything". In March organic revenue fell 20.4% and in April revenue dropped 46.1% as half its business was shut down.

"The net proceeds of the placing will be used to strengthen the company's balance sheet and liquidity position, reducing leverage to deal with the challenging environment and ensure Compass remains resilient in the event of further negative developments in the pandemic," Compass said. "These measures will enable Compass to invest in the business to support long term growth, ensuring it is well positioned for the eventual recovery."

First-half operating profit fell 16.9% to £759m as revenue rose 1.2% to £12.5bn. Excluding currency movements operating profit fell 10% to £854m. The company had £4.9bn of net debt at the end of March, which will be reduced to £2.9bn by the share placing. Compass also has undrawn credit facilities of £2.8bn.

Dominic Blakemore, Compass's chief executive, said: "The first five months covered by the results we are announcing today showed a continuation of the strong performance we reported last year, but it goes without saying that Covid-19 has changed everything."

Greg Johnson, an analyst at Shore Capital with a 'buy' rating on Compass shares, said the company's comments on April and May were slightly better than when it last updated the market.

"The interim results to March lay bare the impact of Covid," Johnson said. "Although dilutive the balance sheet is now bullet proofed and well positioned to build on post-recovery."