Booming Compass to set new course

Compass Group, the catering company that has been expanding rapidly over the last three years, is to shift its focus to organic growth.

Francis Mackay, chief executive, said: "Our strategy is to grow organically and improve margins through a combination of better local purchasing power and economies of scale."

He was speaking as Compass reported a sharp jump in annual profits boosted by the first full-year contribution from Eurest International as well as the Eurest France and Service America acquisitions.

He said each of the group's divisions had shown good organic growth and margin improvement on a like-for-like basis.

In the UK the healthcare catering market has been particularly strong. In the US the margin rose in line with expectations to 4.2 per cent from 3.9 per cent and there was a good growth of 7.1 per cent in turnover on a like-for-like basis.

In the continental Europe and rest of the world division, the results were boosted by the integration of Eurest. Margins were boosted by increased volumes of food and beverages.

Compass group profits, before an exceptional item of pounds 13m, jumped 56 per cent from pounds 73.2m to pounds 114m in the year to 29 September.

Turnover rose by more than 70 per cent to pounds 2.65bn and the dividend was raised 13 per cent to 6.6p.

Compass said it did not expect any material impact from the strength of sterling in the current year as over 90 per cent of its key currencies are hedged.

Though the emphasis has shifted to organic growth the company said some smaller "in-fill" acquisitions were still likely. However, management has ruled out deals on the scale of Eurest.