Compass has the recipe for North American success

The world's biggest caterer has just turned out a 9% rise in profit. And Compass must have a secret recipe for pumpkin pie, because something has got the US salivating...

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

Compass is the feeding machine powering umpteen canteens across the world. The firm provides meals for everyone from office workers to schoolchildren and members of the armed forces. And it’s making tidy profit from its culinary endeavours: despite rising food and fuel costs, the group has just reported underlying operating profits of £1.09bn.

The US is without a doubt Compass’ biggest customer. It accounts for £7bn of Compass’ £15.8bn total revenue. That’s a lot of burgers and pot roast. Profits across the Atlantic are also above average, topping 9.6%.

Public and private companies across the US are trying to save money and shunt fiddly jobs out of house; Compass has the economies of scale to offer competitive pricing, and the resource to take on all the extra work. ‘We have an excellent pipeline of new business, high retention rates and ongoing opportunities to drive efficiencies,’ read Compass’ statement to the press earlier today. Food for thought, certainly, but not quite enough to get our juices flowing. 

Emerging markets are also a growth booster for the caterer. While the earthquake in Japan took a bite out of earnings - a £15m chunk, to be precise – Compass has focussed on other high-growth markets to compensate. ‘The strength of our cash flows enables us to increases investment in the business to drive organic growth, as well as investing in high-quality infill acquisition,’ says chairman Roy Gardner. He’s got his eye on growth, is the gist.

After the losses in Japan are totted up, plus restructuring and other costs, Compass’ operating profit is up 2.7% to £1.02bn. Not bad given the ‘headwinds of food cost inflation’ and ‘uncertain economic backdrop in parts of the world’ says Gardner. Turnover may be the vanity to profit’s sanity, but total revenue has also increased: it’s up by almost 10% on last year. Shares in Compass, which have outperformed the FTSE 100 by 10 percent since the start of the year, were up 0.9 percent to 565 pence this morning.

Curly sandwiches all round in the Compass boardroom today, then...

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