Compass full-year profits rise by a third

25 November 2009

International catering giant Compass Group has reported a 34 per cent increase in profits in its full-year results.

In the year to 30 September Compass saw underlying profits climb from £662m to £884m, not allowing for the impact of currency fluctuations.

Revenue grew from £11.44bn to £13.44bn, a 17.5 per cent increase. An aggressive cost-cutting programme also saw the caterer and support services business improve its margins by 80 basis points from 5.7 per cent to 6.5 per cent.

Compass has achieved efficiency savings of £130m in the last fiscal year. Reduced back office functions have helped it save a further £31m by streamlining its back office procedures and processes.

Support services is playing an increasingly bigger role in the group’s operations. In the last year the proportion of revenues raised by multi-service contracts rose to over 18 per cent. Compass reports that more than £200m of contracts for bundled service delivery were signed with companies from the business and industry sector in the last twelve months.

The FTSE-100 caterer expects trading conditions to be challenging in 2010, but with the potential fro strong growth in the medium term. It estimates that less than 50 per cent of the potential market in catering is outsourced and puts its own market share at just 7 per cent. Penetration is even less in the soft support services market. Compass describes this situation as “a vast opportunity”.

Richard Cousins, chief executive, said: “Compass has delivered an excellent performance in a challenging environment. Whilst in the short term the prevailing economic conditions are likely to continue to impact organic revenue growth, the pipeline of new business looks strong. Furthermore, the considerable potential to deliver ongoing efficiencies underpins our expectation of further progress in the margin.”

Compass also told investors that its increased financial headroom gave it the flexibility to make acquisitions.

The UK and Irish part of the business saw operating profit strengthen from £108m to £114m for the full-year. Operating margins were improved by 60 basis points by streamlining back office functions and improving productivity.

Significant business wins for Compass Group UK and Ireland include a 78-site deal with the Lloyds Banking Group, as well as contracts with BSkyB and the National Grid.

The Compass share price strengthened in early trading to reach 417.7p per share, a 3.9 per cent increase (8:22am).