Compass to Cut Around 3,000 Jobs Following European Market Slowdown

--Compass said it is planning cost cuts to protect the profitability of the business

--Most of the jobs being cut are in Europe

--Its European business has been hit by low consumer confidence in deteriorating environment

 
   By Sabela Ojea 
 

Compass Group PLC (CPG.LN) said Tuesday that it will cut jobs as part of a cost-reduction program following a deteriorating business environment in Europe, which has hurt consumer confidence in the region.

The contract caterer said the job cuts represent "less than 0.5%" of its global workforce of 600,000. It said most of the jobs being cut will be in Europe, but there will also be some losses in a number of other regions as it expands the cost cuts.

Compass said its cost base is being adjusted to "protect the profitability of the business and further strengthen" its operational position, which will result in around 90 million pounds ($115.9 million) in cost savings.

"The cuts are spread across a number of countries with the cuts in any country in the low to mid hundreds," said a spokeswoman of the FTSE-100 company, which operates in 45 countries around the world.

Underlying operating profit at the European business fell 6.8% to GBP368 million for the year ended Sept. 30 compared with the same period a year earlier, and underlying operating margin declined by 60 basis points to 6.3%. Europe generates about 23% of group revenues.

The company expects to book GBP300 million of costs against these actions, of which GBP190 million has been incurred in its fiscal 2019 accounts, with the rest being booked next year.

Despite this, Compass said its expectations for the next financial year are positive and it is confident for growth in its North American market--which represents more than 62% of group revenue. The company forecasts organic growth for the group around the mid-point of its 4%-6% guidance range for fiscal 2020.

Shares at 1121 GMT were down 108 pence, or 5.2%, at 1,963 pence.

Overall, Compass reported a 3.3% fall in pretax profit for fiscal 2019 and said it delivered full-year growth of 6.4%, ahead of its target range of 4%-6%.

It made a pretax profit of GBP1.47 billion for the year compared with GBP1.52 billion a year earlier.

Operating profit decreased to GBP1.60 billion from GBP1.70 billion, while adjusted operating profit--one of the company's preferred metrics--rose to GBP1.88 billion from GBP1.80 billion.

Revenue rose to GBP24.88 billion from GBP22.89 billion last year--with broad based organic revenue growth of 7.7% in its North America market.

Net profit was GBP1.11 billion for the year, compared with GBP1.13 billion in fiscal 2018.

The board declared a final dividend of 26.9 pence, up from 25.4 pence last year, taking the total payout to 40.0 pence from 37.7 pence.

Compass is one of 26 current FTSE 100 members to have increased their annual dividend distribution every year for the last decade and its streak of increases dates back to 2001, AJ Bell said.

"Compass has had another strong year. Organic revenue growth was 6.4%, ahead of our target range, thanks to excellent growth in North America and an improving performance in the rest of the world", Compass Chief Executive Dominic Blakemore said.

Write to Sabela Ojea at [e-mail]; @sabelaojeaguix

(END) Dow Jones Newswires

November 26, 2019 06:43 ET (11:43 GMT)

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