Compass catering sales knocked by recession

The world's biggest catering firm today said it was unlikely to see a return to sales growth in the financial year ahead as economic woes continue to hit corporate hospitality spend.

The world's biggest catering firm today said it was unlikely to see a return to sales growth in the financial year ahead as economic woes continue to hit corporate hospitality spend.

Compass, which has extrensive operations in Ireland, said comparable sales volumes declined sharply in the fourth quarter, down 6%.

This left the group's overall full-year revenues flat and Compass said it expected organic sales to remain "broadly flat" in the current financial year.

However, the sales blow failed to halt a 37% leap in pre-tax profits, to £773m (€860.5m), which was better than most analysts were expecting.

Compass said trading had been impacted by steep cuts in corporate hospitality combined with job losses and shorter working hours within its key markets amid the recession.

Sales in the UK and Ireland - which account for 13.6% of group revenues - dropped 5% to £1.8bn (€2bn).

But the group added that the pace of decline in revenues had slowed - a trend that has continued in the new financial year.

It has also continued to win "good quality" new business contracts and hopes the increased need for outsourcing among firms will provide an ongoing revenue stream.

Big contract wins over the past year include further work for oil giant Royal Dutch Shell - including support services, which is a targeted growth area for Compass.

It also won the mandate to provide staff catering for the enlarged Lloyds Banking Group, having previously worked for Lloyds TSB before its takeover of Halifax Bank of Scotland.

Richard Cousins, chief executive of Compass, said: "Whilst in 2010 the prevailing economic conditions are expected to lead to broadly flat organic revenue growth, we are very encouraged by the pipeline of new business.

"In the medium term the group is set to enjoy the combination of structural growth in outsourcing and, as the global economies recover, a cyclical upswing in demand."

Compass said its full year results had been boosted by £161m (€179m) in cost savings as it has streamlined back office capabilities, although staff numbers affected were small, according to the firm.

It has largely achieved cost reductions through self-help measures, such as better use of labour and scheduling, menu planning and cutting food waste.

Shares in the firm rose 4% today as the annual profits came in slightly higher than expectations.

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