Compass Posts Strong Results Despite Food Price Rises

29/11/07 Catering group Compass has reported that profit before tax from continuing operations increased by 42% to £442 million (2006: £312 million), despite rising food prices. Richard Cousins, the chief executive said in a statement, “We spend around £3.5 billion a year on food. We estimate that for last year we have seen about a one percentage point increase in the rate of inflation. To put this into context each one percentage point of food cost inflation adds about £35 million to the total cost base of £9.7 billion. This is before taking into account that around one third of our contracts are cost plus. We believe that our basket of goods is currently experiencing market increases of some 4-5%.”

“In terms of its impact, most of the geographies in which we operate and most food categories have seen some inflation. However, the larger double digit inflationary increases have been in dairy, rice and pasta. Together these categories account for only about 10% of the Group’s spend on food”, he noted.

Cousins has led an attempt to focus on Compass’s core business since his appointment in June last year. On 2 July 2007, the Group completed the sale of its European vending business, Selecta, for a consideration of £772 million on a debt and cash free basis. The Group has also completed the sale and closure of a number of other small businesses during the year as part of its exit from the travel concessions business. The 2006 revenue and operating profits of all of these businesses closed in the year were £548 million and £51 million respectively.