Compass points right way after its setbacks

Nearly two years on from his appointment, Compass chief executive Richard Cousins assured the City today that his shake-up of the business through a stringent "management and performance" regime is bearing fruit.

Ahead of the company's annual meeting in London today, the group told the Stock Exchange: "Compass has had a strong first quarter with global revenues increasing organically in line with growth levels for last year.

"Margins are continuing to improve and operating profit is running well ahead of last year's first quarter and marginally ahead of expectations."

Broker Dresdner Kleinwort believes that puts the company on course to increase underlying pre-tax profits by nearly 20% to £510 million this year.

The latest guidance from the group covering the first quarter of its financial year to the end of December is a long way from the crisis of confidence which £1 million-a-year Cousins found when he joined the group fresh from selling the FTSE 100 plasterboard group BPB for £3.8 billion to the French.

"The MAP programme - management and performance - has been all about making sure that all our units in all our countries are using the same reporting precesses, that they are all singing from the same hymn sheet," said a Compass spokesman.

The biggest threat to Compass is the raging price inflation in segments of the food industry which for instance has seen the price of a bread in the supermarket soar through the £1 a loaf level.

Compass has responded by ditching foods hit by soaring prices from its menus, by reducing the breadth of foodstuffs and suppliers used, and ensuring pressures on prices are built into contracts so that costs can be passed on to the consumer.

"We are managing the impact of food cost inflation through rigorous application of the MAP framework - particularly in the key areas of purchasing and supply chain efficiencies, unit costs efficiencies including menu re-engineering, and client and consumer pricing," the company said.

Cousins took over at Compass after the ousting of his predecessor Mike Bailey following the slating Compass got in a campaign led by celebrity chef Jamie Oliver over its serving of Turkey Twizzlers in school dinners. The company was also in the firing line after its people were caught up in a UN bribery probe in which it became apparent front line issues were being hidden from the executive.

The group which has contracts from the school canteen and shopfloor to the Henley Regatta, said its most remote outposts, catering for oilmen and miners in the North Sea, on the Canadian tundra and in the Australian desert, are among its star performers.

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Some analysts say higher food costs will hinder Compass's future progress, having seen the likes of archrival Sodexho warn about prices hitting its sales and profit growth.

Leslie Zarka, Citigroup analyst said: "Compass continues to mitigate the impact of food inflaton through various initiatives: flexing the menus, passing on the cost increase to clients and improving purchasing efficiencies."