Compass set to grow despite hard markets

Compass Group, the world's biggest caterer, has forecast a slight improvement in sales for 2004, despite continuing tough market conditions.

The contract catering giant has lifted its forecast for growth in turnover for the year to September 2004 from six to seven per cent. Chief executive Michael Bailey said that "2004 has started well, despite the fact that, in many parts of the world, the economic backdrop has remained challenging."

He added: "Our new business growth has been strong and the pipeline for the year remains encouraging."

Bailey was expecting performance to be better in Continental Europe, North America and the rest of the world than in the UK. Operating margins in the UK would remain flat this year, while the caterer predicted that margins would rise by 0.3% in North America and Europe.

In the business and industry sector, Compass said that, for the first time in 18 months, there were some signs of clients spending more on functions and lunches.

But the trend was not consistent across national borders.

"Furthermore," the company added, "there is little evidence of any real increase in the number of customers at clients' sites."

Compass was confident about its performance this year and expected growth to be driven by new business wins coupled with a contract retention rate of 95%. It said that the fastest-growing sectors of the market continued to be healthcare, education, defence, offshore and remote-site business.

The group said it would not be spending as much money on acquisitions this year as it did in 2003, when it paid £215m for new companies.

New Compass UKcontract wins - A deal for Rail Gourmet UK to provide catering and logistics services for First Great Western trains, turning over £6m a year and running to March 2006

• A three-year contract for Scolarest to provide catering and hospitality services at Old Swinford Hospital School in Stourbridge, West Midlands, with turnover of £600,000 a year
• A five-year deal with Perkins Engines at its Peterborough site in Cambridgeshire, where Eurest will provide catering for 3,000 staff at a turnover of £850,000 a year
• Overseas deals include a new one-year contract for Restaurant Associates for the 2005 US Open Golf Championship, worth £2.7m in sales