| Compass profits dip, but shares rally |
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LONDON: Britain's leading catering group Compass Group Plc. reported 10 per cent fall in profits for the year ended September 2005. The company's profit before tax, amortisation and exceptional items fell to 581 million pounds from 645 pounds in the previous year. Its turnover went up 7.9 per cent to 12.7 billion pounds.
The company attributed the dip in profits to pricing pressure from clients, impact of the London bombings, higher pension costs, lower disposal-related costs and significant restructuring charges.
The company, the world's largest contract caterer, said an investigation into an alleged UN-related contract bidding was progressing and no final conclusions had been reached. It is continuing to cooperate with the investigating authorities. The company derives less than 0.5 per cent in terms of revenue and profits from the U.N. contracts.
The United Nations had suspended the company as a registered vendor pending the outcome of an inquiry into contract bidding irregularities by its Eurest Support Services, which is alleged to have improperly obtained information concerning a contract to supply food and water to U.N. peacekeepers in Liberia. The company had later dismissed the head of its British division and two other employees.
The company is also under review by the U.K.'s Serious Fraud Office in connection with the U.N. contracts.
Surprisingly, the FTSE 100 company's shares rose by 4.4 per cent to 209 1/4 pence, the biggest percentage rise in the FTSE 100. Dealers said this was because the results were in line with expectations.
Compass chief executive Michael Bailey said the company performed as per expectations in North America, Continental Europe and the Rest of the World (excluding the Middle East military business). The performance in the U.K. has been unsatisfactory, he said.
Compass employs over 400,000 staff globally and around 80,000 in the U.K. It has set a goal of improving its returns on capital employed by 100 basis points by 2006-2008 and generating free cash flow over the period of 800 to 850 million pounds. It said it is on track to meet these goals.
The company is paying a final dividend of 6.5 pence per share, up 4.8 per cent on last year.
Bailey and chairman and Francis Mackay have expressed their desire to leave the company. Mackay is being replaced in the summer by Roy Gardner, chief executive of Centrica Plc while placement consultants Korn Ferry has been hired to search for a replacement for Bailey. , who will leave next year. He declined today to give a specific date for when he will step down.
Posted
on : Tue, 29 Nov 2005 20:20 GMT | Business News
By : Anne Philips
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