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COMPASS GROUP CONFIDENT OF WINNING HEALTHCARE AND EDUCATION CONTRACTS

Compass Group are confident of winning healthcare and education contracts

Thursday November 26,2009

By Andrew Johnson

GOVERNMENTS struggling to pay down their enormous public sector debt are poised to deliver a growth bonanza to the world’s largest contract caterer Compass Group.

Chief executive Richard Cousins said the company was confident of winning further contracts in areas such as healthcare and education as politicians in the world’s top economies, including the UK, strive to cut costs.

“About a third of catering in healthcare and education is outsourced at the moment,” said Cousins. “It’s not going to become 100 per cent outsourced in the next two years but it could become 60 per cent in the next five or six years.”

Compass is one of a number of companies hoping to benefit from government need to cut public sector spending. Others include VT Group and Capita, who are hoping for a string of contract wins after the next general election.

He was speaking as the company’s shares rose 24dp to 426dp to hit a seven-year high after reporting a leap in pre-tax profits from £566million to £773million on revenues up from £11.4billion to £13.4billion for the year to September.

Compass provides catering for schools, offices, health trusts and the army, as well as corporate hospitality to venues and organisations such as the O2 Arena, Chelsea Football Club and Twickenham Stadium. The group’s profits rise was driven by new contract wins, a weaker pound and by stripping out £161million a year in costs.

However, the company was not completely immune from the impact of recession, with underlying revenues based on contracts held the previous year falling by six per cent as corporate hospitality fell sharply. Organic sales were likely to remain flat in 2010.

But Cousins was confident the group would rebound. “The encouraging thing is the rate of contraction is slowing,” he said. “In the long term we will get back to our historic revenue growth of five to six per cent a year.”

He said the group was on the look out for acquisitions and would continue the drive to cut costs. Cousins added the new business pipeline was looking strong.

“Over the medium term, the company should benefit from the structural growth in outsourcing,” said Charles Stanley analysts.

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