Initial learns new view of education sector…
Initial Catering Services, one of the UK's leading contract caterers in education, is halting expansion in the state sector.
Jim Walker, chief executive of Initial, told the company's annual conference in London that it would not be tendering for more business in the state sector, because of increased pension costs resulting from the Government's Workforce Code of Practice.
The new code aims to ensure that local government workers on the payrolls of private contractors are paid the same as their government-salaried counterparts and have access to similar pension schemes.
Walker argued that tenders for new local authority school contracts were now governed by the code of practice, which meant protracted wrangles over pension provision.
The situation was complicated, he added, by local authorities refusing to certify how well their staff's current pension scheme had performed.
"Why should we take all the risk?" asked Walker, who said the company would be concentrating on extending contracts with local authorities, rather than letting them go to tender.
"We are not moving out of this sector, but we need to work our way through the code of practice," he said. "We are one of the biggest private players in this market and we want to maintain that."
With growth "temporarily" on hold, Walker said that Initial needed to grow the business in the private schools sector. "We are not really participating in the private schools market as much as we could," he said, "so we are targeting it for growth."
Eden Foodservice has been relaunched and now exclusively targets private boarding schools and colleges. At the same time, the caterer has brought together under the Initial label its separate businesses for state and independent schools.
Mike Jones, business development manager at Eden, said that there were 2,600 potential public school clients, of which 50% had contracted catering and facilities management services.
He said that Eden had to generate £2m additional turnover this year to compensate for state school contracts finishing in Essex and North Yorkshire.
Jones said Eden would offer a no-fee facilities management approach, under which it would provide additional services, such as ground maintenance and security, free of charge.
…while its profits soar by one-third
Initial Catering increased its profits by nearly 30% in 2003, according to the company's chief executive, Jim Walker.
He told staff at the contract caterer's annual conference that this was "a phenomenal achievement and one you should all be proud of".
The group, which was formed in 1991, had a turnover of £81m last year, which was down on the company's £95m turnover in 2002, although this figure included elements of sales from the group's other divisions, a spokeswoman said.
Its biggest area of growth was in education, where it achieved a 42% hike in profits in the state sector, and extended most of its contracts by five years. In independent schools, profits were up by 54%. The overall turnover in education in 2003 was £23m.
He added that Autograph, the company's business and industry arm, had won £9m of new business at 29 sites, including a massive single-site contract with British Nuclear Fuels in Cumbria for 17,000 employees.
Although Autograph retained 89% of its business last year, leaving it with a total of 160 contracts, it also gave up contracts that were losing money.
Andrea Walwyn, regional director of Autograph, said the 2004 target was to increase its new business portfolio by £11m, equivalent to about 50 new contracts. "But they must be profitable," she said. "There's no point winning huge turnover contracts if they are not making any money."
Walker added that he wanted a 20% increase in new business in 2004 and a 42% improvement in profit. He expected Autograph to double its profits, Initial's education division to increase its profits by 11%, and for its new dedicated public schools division, Eden Foodservice, to grow its market.
Source: Caterer & Hotelkeeper magazine, 26 February - 3 March 2004
