Compass defies economic gloom as shares rise 9%

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The Independent Online

Shares in Compass yesterday leapt 9 per cent as the world's biggest catering company defied the current economic gloom to reveal strong growth, outshining its international rivals.

The group, which owns food service brands such as Little Chef, Harry Ramsden's and Upper Crust, reiterated its target of organic sales growth of 6 to 9 per cent for 2002, just weeks after France's Sodexho Alliance, its largest competitor, warned that its organic growth would slow. Compass shares gained 42p to 512p, recovering from a low of 398.5p after 11 September, which cost the group £5m.

Compass also said it had agreed to buy Japan's third-largest food services group, Seiyo Food Systems, for £193m, ahead of next year's Fifa World Cup finals in Japan and South Korea. Michael Bailey, the chief executive, said the highly fragmented Japanese food services market offered "great consolidation opportunities and good organic growth prospects". Mr Bailey added: "Compass can offer Seiyo brands and vending experience, both of which are synonymous with Japan."

Analysts said the acquisition, which gives Compass 2 per cent of Japan's £21bn food services market, was a sensible strategic move that typified the group's ability to tap into new markets.

Francis Mackay, the chairman, said he was "very confident" Compass would achieve its 6 to 9 per cent like-for-like sales growth target, notwithstanding the global economic slowdown. "We have to be a bit cautious but we feel very good about the current year," he said.

Compass said that strong growth in the UK and a host of new contract wins had helped like-for-like sales to increase by 8 per cent in the full year to 30 September. New business announced yesterday included a 10-year deal with British Airways to be the sole provider of its employee restaurants and vending services in Britain, and all passenger lounge catering services in the UK, the US and Canada.

The contract wins came as Compass reported full-year profits before exceptionals of £583m. No comparison was given after the group's complex merger and subsequent demerger from Granada. Turnover was £8.7bn, reflecting the acquisition of Granada restaurants.

Richard Finch, an analyst at Williams de Broe, said yesterday's results represented the continuation of a very consistent story. "Think of all the distraction they've had (foot-and-mouth, 11 September and the Granada demerger) and yet they have delivered. What would happen if they had a year when things are average?" he said.

Mr Bailey said the move to spruce up its British motorway service stations, including re-branding them as Moto, had prompted a 7 per cent like-for-like sales increase – its best growth in over a decade. Compass is expected to expand Moto across Europe.