Compass pays the price for UN scandal

Compass, the catering giant under fire from Jamie Oliver and the United Nations, saw profits fall in the first half of the year because of lost contracts.

The company supplies food to about 2,000 UK schools and has found itself embroiled in the celebrity chef's campaign for better lunches for schoolchildren.

It is also at the centre of an investigation in the US into allegations of corruption in the winning of contracts to supply UN soldiers in Liberia.

Profits in the past six months were £184m, £19m down on a year earlier.

Andrew Martin, Compass's finance director, said the company was working hard to improve the standards of school food. He conceded that in many cases the new ranges that will be available soon will be more expensive than current ones. "In the UK, I'm satisfied we're making progress in implementing the actions necessary to create a solid platform for future growth," he said.

Compass has completed its investigation into the UN scandal - after which three staff left - but is awaiting results of the official inquiry.

In October, the company was suspended as a supplier to the UN after allegations that it had improperly obtained confidential information about a deal to supply food and water to peacekeepers in Liberia.

The UN contracts are only a small amount of Compass's business but analysts believe the shares are unlikely to move much until the issue is resolved.

Two rival firms have filed complaints against Compass in the US courts.

Kevin Lapwood, at Seymour Pierce, said: "The question is how much in punitive damages can be awarded if the litigation is successful." Seymour thought the results were slightly better than expected.

Compass is the world's biggest catering outfit, with operations in about 90 countries. The group performed well in the US, helping overall sales rise 8 per cent to £5.7bn. Earnings per share fell from 6.3p to 5.6p.

Michael Bailey, the chief executive, described the results as "steady as she goes".

Compass sold its SSP arm, including the Harry Ramsden's fish and chip shop chain, for £1.8bn in April. It was demerged from Granada Compass in 2001.

Shares in Compass, which have lost 40 per cent in the past two years, closed up 6p at 240p.