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Compass division suspended by UN

27 October 2005
Compass division suspended by UN

Compass Group division ESS has been suspended as a registered contractor by the United Nations.

The move follows allegations that it received confidential information before being awarded a £35.3m food and water deal in Liberia.
A UN spokeswoman said that pending the outcome of its investigation it had "stopped inviting ESS to bid on future tenders and was retendering their existing contracts".

ESS operates seven contracts to provide food and water rations to about 30,000 troops in peacekeeping missions around the world, worth a combined turnover of about £56m. Bidders have already been asked to express an interest in the deals.

Meanwhile, Compass has suspended UK and Ireland chief executive Peter Harris as law firm Freshfields Bruckhaus Deringer carries out an internal investigation into the UN-related allegations. Until July this year, Harris was chief executive of Compass's ESS Support Services, Middle East and Africa division.

The move didn't stop the company's share price closing at a 10-year low of 177.5p last Friday. "The UN inquiry leaves the door open for fines and investors are not yet sure of the implications," said Dresdner Kleinwort Wasserstein analyst Karl Green. He added that uncertainties in the poultry market because of the bird flu scare had also left the market jittery.

Richard Singleton, director of corporate governance at institutional investor F&C, said outgoing Compass chief executive Mike Bailey should be replaced as soon as possible to stop the rot. "It's only marginally better having Bailey there than somebody temporary," he said.

A Compass spokeswoman said it had nothing further to add to last week's statement, in which it said it was co-operating with all the relevant authorities.

  • Analysts played down speculation that Compass was poised for takeover by American equity group Clayton, Dubilier & Rice, owner of food supplier Brakes. "The story isn't surprising given the share price plummets," said a City source. "But Compass has nearly £5b of financial liabilities and its cash-flow situation is not hugely attractive."

By Tom Bill

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