Compass confident of growing appetite for outsource catering

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The Independent Online

Compass, the world's largest catering company, said that a trend to outsourcing and high client retention would help to keep the company on course to make its targets for 2003.

The chief executive, Mike Bailey, said that like-for-like turnover for the year to the end of September should meet the 6 per cent growth and the company should see like-for-like margin improvements of 20 to 30 basis points.

Despite 2003 being "a challenging year", Mr Bailey said that the "geographic and sector diversity" of the company and "our continued focus on client retention" had helped the company remain on track to achieve their goals.

Mr Bailey said that "despite uncertainty over the extent and timing of any economic recovery" the company would enter the new financial year "with confidence".

The company expected to report the retention of 95 per cent of its clients for the 12 months to 30 September, when preliminary results are released on 2 December.

North America was predicted to see the highest like-for-like turnover growth at 7 per cent while the weakest performances for the company were forecast to come in continental Europe.

Mr Bailey said that the "macro economic backdrop" had continued to deteriorate in France and Germany. The situation in France had been exacerbated by industrial action over the summer. He said that there remains "significant growth potential in contract foodservice, particularly in healthcare and education".

A spokesperson for the company said that 48 per cent of new business had come from self-operators or from new operators, during the period.

The previously acquisitive company confirmed its new focus on organic growth by stating that aggregate spend on new acquisitions in 2003 would be just £200m.

With free cash flow for the year expected to be about £400m, the company did not rule out the possibility of further share buy-back schemes in the future. It said it had already returned £209m to shareholders through a buy-back programme announced earlier this year.

The company said it had proved its "recession resilience" and that it was "well-placed for the recovery" with a range of operational initiatives taken to improve efficiencies. It also said it continued to benefit from its huge purchasing power and close relationships with suppliers.

Paul Steegers, an analyst at Merrill Lynch, said "the outlook in education and healthcare remained strong while business and industry was still suffering from weak same store growth as a result of the weak employment market".

Mr Steegers also said that management was happy with the consensus pre-tax profit range of £650m to £660m for 2003. Shares in the company closed down 2p at 346.75p yesterday.