What to watch: Compass returns to profit, Pets at Home grows, and IAG gains as COVID-19 rules loosen

Kumutha Ramanathan
·4-min read
A waiter wearing a face mask serves customers in a restaurant, following the outbreak of the coronavirus disease (COVID-19), in St. Albans, Britain, October 8, 2020.  REUTERS/Peter Cziborra
A waiter wearing a face mask serves customers in a restaurant. Photo: Peter Cziborra/Reuters

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.

Compass returns to profit in Q4

Catering giant Compass Group (CPG.L) announced on Tuesday that the business returned to profit in the fourth quarter and is now “cash neutral” following the “challenges of COVID-19” that led to the closure of half of the business.

It also reported an operating profit of £561m ($749.5m) in 2020 (down from £1,852m in 2019) on Tuesday.

“This was achieved mainly through contract renegotiations to reflect the difficult trading environment, continued discipline in terms of costs and some improvement in volumes,” said Dominic Blakemore, group chief executive of Compass. “We are executing at pace and expect the underlying operating margin in the first quarter of 2021 will be around 2.5%.”

The business was forced to adjust quickly to the new environment, including enhancing its health and safety protocols, mitigating its costs, increasing liquidity and strengthening its balance sheet.

“Through the summer, our performance began to improve slowly as we helped clients in Education and Business & Industry return to schools and offices safely,” said Blakemore.

He added that the Board hopes to reinstate the dividend to shareholders “when considered appropriate” and remains optimistic about the business’ future.

Pets at Home reports double digit growth

Pets at Home (PETS.L) swung to a double digit revenue growth in its full-year 2021 interim results, driven by a boost in sales.

People working at home during the pandemic has meant an increase in pet ownership, as people consider what they can do to improve their surroundings.

“It’s no surprise in that respect. The number one reason people buy pets is for companionship, and so they’ve made a huge difference during the pandemic. For some people, the only reason they’re going out during lockdown is to walk their dog,” chief executive Peter Pritchard told BBC Radio 4’s Today Programme.

The FTSE 250-listed firm also noted its allocation as an “essential” retailer amid widespread COVID-19 lockdowns for its 12.5% like-for-like revenue growth in Q2, saying it had an “exceptional period of demand” during lockdown.

READ MORE: Pets at Home sales jump as COVID-19 drives sales

IAG gains as COVID-19 rules loosen

IAG (IAG.L) shares have been gaining on Tuesday as the UK government announced that passengers arriving into England will be able to reduce mandatory self-isolation by up to a week or more by getting themselves tested for COVID-19.

The move has been well received by the travel industry, which has been battered by two lockdowns in the UK and wider fears of travel spurred on by the global pandemic.

The government also announced financial support for airports.

Also supporting market optimism that a global economic recovery is coming are developments on the COVID-19 vaccine front.

AstraZeneca (AZN) said on Monday that its COVID-19 vaccine could be as much as 90% effective, be cheaper to make, easier to distribute and faster to scale-up than its rivals.

READ MORE: Relief for travel industry as quarantine rules reduced to a week

European markets rejoice as Biden transition begins

Watch: European markets rise as Biden transition begins

European markets gained on Tuesday as a prominent US independent agency formally accepts president-elect Joe Biden as the country’s next leader, which has added to market enthusiasm over a COVID-19 vaccine and that a global economic recovery is on its way.

On Monday, the US General Services Administration chief Emily Murphy wrote in a letter to Biden that he can formally begin the hand-over process.

European markets opened in positive territory in early trading. The FTSE 100 (^FTSE) gained 0.9% in London. In Paris, the CAC 40 (^FCHI) and Germany’s DAX (^GDAXI) were both higher 1%.

US futures also rose. S&P futures (ES=F) are up 0.7%. The Dow Jones gained 0.8% (YM=F). Nasdaq futures (NQ=F) headed higher 0.5%.

Asian markets were mixed. The Shanghai Composite (000001.SS) fell 0.3% and the Shenzen Component (399001.SZ) dropped 0.4%. Elsewhere, the Hong Kong Hang Seng (^HSI) was up 0.3%, South Korea’s KOSPI (^KS11) gained 0.6%.

-With additional reporting from Saleha Riaz and Lucy Harley-McKeown

Watch: Why don’t governments just print more money?