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Heat's on Compass chief Bailey after poor figures

07 October 2005
Heat's on Compass chief Bailey after poor figures

Compass Group chief executive Mike Bailey is under increasing pressure to step down immediately following the catering giant's third profit warning in 12 months.

Bailey announced he would quit "some time during 2006" at last week's trading statement, but City analysts are already baying for his blood.

"We need a fresh pair of eyes, but he could still be here this time next year," said Panmure Gordon analyst Mike Murphy.

Richard Singleton, director of corporate governance at institutional investor F&C, agreed. "Shareholders would prefer him to go sooner, although it's entirely dependent on the new chairman," he said.

In its trading statement, Compass said pre-tax profit for the year to 30 September 2005 would be £580m, below the expected level of £620m. Compass shares fell to a 10-year low of 204p at the news.

Some believe the poor figures indicate a deeper malaise at Compass, and see Bailey's exit as part of a wider shake-up. Food service consultant Chris Stern said: "The old guard are on their way out and the company seems to be having a complete rethink about the way it does business."

The world's largest caterer also announced the sale of its SSP travel concession business for about £1b.

The deal includes its Caffe Ritazza and Upper Crust branded outlets and the Moto service station business.

Compass said the sale would allow it to focus on its core contract catering business and grow its support services business. The proceeds will help it reduce debt, and return cash to investors. Analysts speculated that the sell-off was prompted by higher rents and an anticipated downturn in consumer spending at its travel sites.

  • The United Nations has launched an investigation into alleged kickbacks during the awarding of its contracts. Compass Group division ESS Support Services, which has won numerous UN facilities and catering deals around the world, is co-operating with the inquiry.
    A Compass spokesman said there was no suggestion of any wrongdoing on the part of the company.
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