Granada Compass criticised for select briefings

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The Independent Online

Francis Mackay, chairman-designate of Granada Compass, the merged catering giant, came under fire yesterday for briefing only a selection of City analysts on why the house broker had cut profit forecasts.

Francis Mackay, chairman-designate of Granada Compass, the merged catering giant, came under fire yesterday for briefing only a selection of City analysts on why the house broker had cut profit forecasts.

The briefings were made on Thursday after the downgrade surfaced on the internet, sending Granada Compass shares into free fall.

The shares closed down 66p, or 8 per cent, at 711p yesterday, after falling 68p on Thursday. Alain Dupuis, a Compass executive director, is sitting on a £190,000 loss after buying 200,000 shares at 806p last month.

HSBC, one of Granada Compass's brokers, has lowered its pre-tax forecast for this year by £40m. The revisions raise questions for shareholders about the value of Granada's assets, and hence the terms of the merger,completed in July.

Granada Compass yesterday said the adjustment arose because Granada's accounting policies were less conservative.Granada writes off depreciation on plates and cutlery over three years, Compass does so over just one. It also takes certain fees up front, while Compass accounts for them over a period.

The company had private phone calls with several investment banks on Thursday afternoon, in which it emerged that Granada's administration costs were higher, and trading in some parts of the business poorer, than previously thought. Some analysts cut full year pre-tax profit forecasts by as much as £70m.

However, the company did not contact a handful of leading houses, including Crédit Lyonnais and UBS Warburg, which has the top-rated leisure analyst. "We spoke to all the brokers that wanted to speak to the company," said a Granada Compass spokesman.

But one analyst the company had not spoken to said: "You really have an obligation to do a conference call when the share price has fallen so badly."

Granada Compass dismissed suggestions that the accounting inconsistencies called into question the terms of the merger. But some in the City were not convinced. "If I were a Compass shareholder, I would say the merger terms were wrong," said an analyst.

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