Compass serves up higher profits

The Surrey-based group, which provides catering for businesses, schools and venues such as Chelsea Football Club and the All England Tennis Club, posted revenues of £7.9bn for the six months to March 31, an increase of 10 per cent.

Operating profits lifted 12 per cent to £559m while its strong cash generation meant a 30 per cent hike in its half-year dividend to shareholders.

Compass warned that the gradual increase in food cost inflation seen over the first half of the year was set to continue, but added that it was well placed to tackle it through menu planning, regional buying and flexible contracts.

It said: “This is not a new phenomenon and we have experienced many periods of higher inflation, most recently in 2008. The actions we took then enabled us not only to limit its effects but to actually increase the gross margin.”

Compass added that it continued to win new contracts, with its UK division recently securing work with the Department for Environment, Food and Rural Affairs and a contract extension with BSkyB.

Operating profits in the UK - where Compass generates around 12 per cent of its business - were flat at £54m after revenues edged up to £1bn.

On a like-for-like basis, revenues declined slightly by 0.4 per cent but this showed further improvement from a 5.7 per cent drop seen a year earlier.

It added: “This is despite quite difficult economic conditions continuing to impact like-for-like revenues in many of the sectors.”

The company’s Japanese business has been affected by the earthquake and tsunami, with volumes in offices at its client sites down by up to 15 per cent. The situation in the sports and leisure sector is more severe, with Compass estimating that volumes could be 25 per cent below normal in the current quarter.