Compass Group PLC

The negative outlook reflects our view that the COVID-19 outbreak will continue to impact Compass' trading in FY2022. However, we anticipate that cost and cash-saving measures implemented during the pandemic will be sufficient for metrics to rebound close to pre-pandemic levels, despite lower adjusted EBITDA. We would consider lowering the ratings if Compass' cash flow dropped such that adjusted funds from operations (FFO) to debt fell below 40% over the next two years, or adjusted debt to EBITDA remained consistently above 2.5x. This could happen due to persistently challenging operating conditions without sufficient mitigating actions taken by management regarding shareholder remuneration and cost control. We could revise the outlook to stable if the pandemic's effects are short-lived, supporting sustained FFO

...Despite rebounding demand, S&P Global Ratings does not expect Compass Group PLC's revenue and EBITDA to rebound to pre-pandemic levels until financial year (FY) 2024. Despite a year-on-year decline in revenue by 10% in FY2021, in the fourth quarter, volumes rebounded to almost 90% of pre-pandemic levels (compared with about 70% at the start of the year), driven by the resumption of sports and leisure events and in-person education, coupled with continued strength in the group's health care and senior living, defence, offshore, and remote divisions. We anticipate that this momentum will result in revenue growth of 22%-23% in FY2022. We anticipate an even stronger rebound in adjusted EBITDA as the group has adjusted its cost base in Europe and North America over the past two years. With the benefits from measures already taken, the rebound in demand, and lower restructuring, we expect adjusted EBITDA to improve by about a third. Nevertheless, we still expect revenue and adjusted EBITDA to...

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