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Cousins eases in as City's flavour of the month

13 April 2006

Hold the jokes about plastering over the cracks. Last month's announcement that Richard Cousins, the 46-year-old former boss of plasterboard company BPB, will in June become the new chief executive of Compass was met with a mixture of open arms and shrugged shoulders.

Although he's an unknown quantity in the catering industry, his appointment has produced some encouraging noises in the City. Compass could certainly do with some good news. Its woes have been well documented - tumbling profits, Jamie Oliver at its throat over school meals, a revolving door of executives, an embarrassing UN investigation and now a second US lawsuit.

Praise from analysts Before even setting foot inside Compass's Chertsey headquarters, Mike Bailey's replacement (his £750,000 salary dwarfed by Bailey's £977,000 package) has already succeeded in doing something that has not happened for many years - uniting financial analysts in praise.

"He is highly regarded in construction circles and has good operating and merger and acquisition credentials," says Karl Green, at Dresdner Kleinwort Wasserstein.

Panmure Gordon's Mike Murphy adds: "He has a good reputation in the City. Most people I have spoken to are happy about his appointment."

And David Hancock at Morgan Stanley echoes: "He is well respected by the market and his appointment should be well received by investors."

If anything, says Green, being an outsider to the industry may be to his advantage because he is untainted by the past.

With much of the turnaround strategy put in place last year by chief financial officer Andrew Martin and a posse of consultants, what is needed now is someone who can deliver. "It is going to be about execution for him for the next couple of years," Green stresses.

But what of the man himself? A profile in the Financial Times last year portrayed him as a no-nonsense industrialist with little time for short-term gimmickry. Cousins also described himself as someone who hates politics. "If anyone plays politics, I break their kneecaps and kick 'em out," he is quoted as saying, in a somewhat Ramsay-esque fashion.

David Taylor, construction analyst at stockbroker Teather & Greenwood, says: "I like the guy, which is not true about all the people who run the companies that I research. He has clarity, vision and focus."

Cousins also has a reputation as someone who can master a brief rapidly and who is not afraid to take risks. When he took over BPB, it was big in Canada but not the USA - one of the largest world markets for gypsum products.

He made one US acquisition, only to see the market then fall by 30%. Undeterred, he gambled on buying a much larger company 18 months later and, by the time BPB was bought out by a French rival, it was the third-largest player in the country. He also made acquisitions in eastern Europe, Egypt, Mexico and India, while cutting costs in Europe and North America by £100m.

So, given his background, where will Cousins take Compass? There were some hints in the official appointment announcement in March.

Such statements are usually littered with meaningless platitudes, but the emphasis put by chairman Roy Gardner on Cousins's "business transformation skills" was telling. Equally significant was Cousins's comment that he wanted, among other things, to "further clarify the strategy" at the company. It seems Compass believes it is in need of a shake-up and fresh direction.

If Cousins can keep the City with him and build confidence that Compass is running well and in the right direction, that will be a major achievement in itself, argues Jonathan Doughty of consultancy Coverpoint. "Much like Stuart Rose at Marks & Spencer, Cousins needs to be a figurehead, putting the passion and charisma that has been lacking back into the business," he says.

Other issues
Compass's reputation for robust relationships with suppliers, cut-throat margins and an aggressive, but not always successful, merger and acquisition strategy are other issues Cousins will need to look at closely, adds consultant Chris Stern.

Keeping morale high at unit level will also be important. Stern says: "It is still not necessarily perceived as being the quality company that it would like to be. When it comes to fresh food and high levels of service, its image is not as good as it could be."

The company's £420m pensions black hole is another area of concern, although this week's announcement that £275m from the sale of its SSP travel concession business will be used to plug the gap will give Cousins a good start. Shareholders may also have an extra spring in their step over the next 18 months as they receive their £500m cut from the £1.82b deal.

Clear mandate
What is clear is that, with all this goodwill behind him, Cousins has a clear mandate to stamp his authority on the company and pull it back on track in whatever way he sees fit. Further down the line, there may even be appetite for more acquisitions, with Elior's contract catering assets a possible target, according to Green.

The City is notoriously fickle, but it does for now appear prepared to give Cousins - and more importantly Compass - vital breathing space. Green predicts: "I think he'll get at least a year's honeymoon."

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