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Market report: Compass heads south after placing

Louis Ashworth
Compass supplies food for schools

Catering giant Compass slipped more than 3pc after the company surprised investors with a larger-than-expected placement.

The firm said its £2bn placing, which was oversubscribed, would reduce its leverage, increase liquidity and position it better for recovery.

It 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.”

Compass also announced half-year results, saying its organic revenue dropped 20.4pc in March and 46.1pc in April. It withdrew guidance for the full year, but Dominic Blakemore, the chief executive, said the company remained “excited about the significant structural market opportunity globally”. Its profit before tax dropped from £852m to £771m.

Jefferies’ Kean Marden said the placement looked “defensive in tone”, but added the firm’s outlook appeared better than had been feared.

The firm closed down 39.5p at £11.14, leaving it among the biggest fallers on the FTSE 100 on a poor day for European stock markets, which fell into the red after a weak opening.

Markets Hub - Compass Group

British Airways owner International Consolidated Airlines soared 8pc to the top of the blue-chip risers and stayed there through the session, after Heathrow airport said it was working with the Government to form a plan that would allow some people flying in from other countries to avoid quarantine restrictions. It closed up 15.4p at 203.5p.

Sandwich maker Greencore was the biggest faller on the FTSE 250, dropping more than 7pc, or 10.8p, to 140.3p after reporting weekly demand for its food-to-go products had dropped as much as 70pc year on year since the end of March.

Despite a recovery in demand, sales volumes are still about 60pc lower, the company said. On a call, Patrick Coveney, its chief executive, said it expected a strong recovery as offices reopened and homemade lunch ennui drove workers back to shops for more varied products.

Mr Coveney told analysts that “consumers are getting bored and frustrated with the absence of choice”.

Its performance during the six months to the end of March was solid enough, with revenues up 1.6pc, and profit before tax leaping from £5.7m to £27.3m. HSBC’s Doriana Russo said Greencore’s shares looked attractive price-wise, but warned it may remain under pressure as the coronavirus pandemic continued.

Elsewhere, insurer Beazley climbed 25.8p to 357.2p after it raised £247m via a share placing. Peel Hunt analyst Andreas Van Embden said the fundraising would improve the firm’s near-term liquidity. “The capital raising makes sense and places the company on a firmer footing,” he wrote in a note to clients.