Initial Catering has blamed last year's fall in turnover on the bad publicity surrounding the school meals sector.
In its annual results, the group announced a 6.2% drop in turnover for 2005, saying the slump was "largely due to adverse publicity concerning the education meals sector impacting the take-up of school meals."
Parent company Rentokil Initial's facilities services division, which includes Initial Catering, saw revenue rise by 5.5% to £829.4m.
But operating profit in the facilities arm fell by 8.3% from £53.2m to £48.8m.
Overall, Rentokil saw group turnover grow by 4.8% to £2.3b, while pre-tax profits fell by 26% to £190m (2004: £256.7m).
The poor figures in the school meals market have led some to question whether private contractors have a viable future in the market.
One industry source pointed to the fact that Initial would not re-bid on its contract with Wokingham district council in Berkshire as proof of this trend.
The claim was rejected by Initial. "We are not re-tendering in Wokingham for specific local reasons," said Simon James, managing director of education at Initial.
He added that the group was not withdrawing from the market and said it was actively bidding on a school meals deal with Reading County Council.
By Tom Bill
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