Compass co-operates with investigation as UK market disappoints

Compass Group is continuing to co-operate with authorities over a probe into alleged business malpractices involving a United Nation (UN) contract in Liberia.

The troubled contract caterer said in a statement that the investigation was ongoing and that no final conclusion had been reached.

Compass added that UN contracts account for less that 0.5% of its turnover and profits.

The world's biggest contract caterer is also stepping up its search to replace chief executive Mike Bailey.

It said that it had appointed head hunter Korn Ferry to find Bailey's successor as the group posted a 9.9% fall in annual profit, in-line with analysts' downgraded expectations.

In further management news, Compass confirmed that Sir Roy Gardner will become chairman by next summer, replacing Sir Francis Mackay.

Compass posted profit before tax, amortisation and exceptional items of £581m for the year to 30 September, down from £645m, on sales up 7.9% to £12.7b.

The company said that cost pressures were likely to remain a significant challenge in the UK, but that trading outside Europe was performing better.

"Three out of our four geographies, North America, Continental Europe and the Rest of the World have performed to our expectations, with North America and the Rest of the Word excluding the Middle East military business] delivering a particularly strong result this year," Bailey said.

He added that the performance of the UK had been unsatisfactory.

Like-for-like turnover in the UK increased by 6%, about the same as in 2004, however operating profit excluding goodwill, amortisation and exceptional items, fell £89m to £205m.

It blamed the poor performance on cost pressures in the business and industry sector and the impact of the London bombings, plus lower disposal profits and increased pension costs.

Performance was hampered by a fall in turnover in the education sector, where sales were down by 1%.

The caterer said most businesses in the sector were suffering following "recent negative publicity regarding the standard of school meals".

By James Garner

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