Compass Group's profits continue to head south

Catering giant Compass today reported a 9% slump in pre-tax profits as it said the switch to provide healthier meals in schools continued to be its greatest challenge.

The world's largest caterer posted profits of £184m for the six months to 31 March, compared with £203m last year.

Group turnover was £5.7b, up 8% on a like-for-like basis helped by an encouraging performance in North America.

Andrew Martin, group finance director, said: "In the UK, I'm satisfied we are making progress in implementing the actions necessary to create a solid platform for future growth."

Compass has been focusing on renegotiating or exiting poorer performing contracts after UK profits fell by a third in its last financial year.

The firm today reported it has already exited 50% of lower margin contracts in the UK and plans are being put in place to exit or improve the margins on the remainder.

Compass has been battling to restore its reputation in the City after a profits warning caused by weaker margins on UK school meal contracts and poor summer trading in Europe wiped off a quarter of the value of its shares.

"In education, which continues to provide the greatest challenge, we are actively working with schools, teachers and parents to develop new healthier eating concepts such as fresh fruit bars, salad bars, pasta dishes, fresh dish of the day and yoghurt bars," the company said in its trading statement.

It added: "This work is progressing well, in advance of the introduction of the Government's new nutritional standards from September 2006."

Compass said its UK healthcare division was working with several clients on a new concept called "Steamplicity" which will enable them to prepare high-quality, fresh ingredients off site in large volumes, packaged with a simple valve mechanism. This will cut out the need for a traditional kitchen on site.

Compass has exclusive rights to the technology and expects to introduce it to 20% of healthcare clients by the year end.

The group has appointed a new chief executive, former BPB plasterboard boss Richard Cousins to lead its turnaround. He is due to start in June.

By Karen Attwood, PA City Staff

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