Catering giant Compass (CPG) will raise considerable new funds as it looks to weather the coronavirus crisis. The company plans to issue new shares to raise up to £2bn.

There will be a retail offer, opening the door for DIY investors to get involved if they wish.

News of the cash call came as Compass reported first half results and pulled its previous growth and margin guidance for 2020. How long the Covid-19 pandemic drags on for and the pace of reopening global economies were the chief reasons for withdrawing the guidance.

For the first half, pre-tax profit fell to £771m from £852m on-year, while revenue inched 1.2% higher to £12.5bn, sending the share price spiralling more than 4% lower to £11.025.

Organic revenue grew by around 6% for the five months to February and declined by 20.4% in March. In April revenue declined by 46.1%.

SENSIBLE TIMING

Shore Capital analyst Greg Johnson said: ‘With the group having some £3bn of liquidity it remains well funded. A £2bn equity raise, increasing liquidity to £5bn, providing significant flexibility to invest in the business, including organic capex, rightsizing if required and M&A; we continue to expect significant opportunities post Covid.

‘Although dilutive the balance sheet is now bullet proofed and well positioned to build-on post recovery,’ he added.

AJ Bell investment director Russ Mould said: ‘The business could probably have withstood a fair while longer in the pressure cooker of the coronavirus crisis without going cap in hand to shareholders.

‘However the fundraise should reinforce its credentials as a survivor in its market and one with the capacity to invest for recovery and to take advantage of M&A opportunities as and when they arise.

‘Compass is already at the top of the food chain and its smaller rivals don’t have the luxury of tapping the capital markets for billions in fresh liquidity.’

READ MORE ON COMPASS HERE

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Issue Date: 19 May 2020