Compass reports profits up at £515m

That compares with a net profit of £285 in financial year 2006 and allows the world's largest catering company to offer a total dividend per share of 10.8 pence, a 7% rise on last year's 10.1 pence. Chief executive Richard Cousins said: "Through the introduction of the management and performance (MAP) process we have transformed the performance of the business with good quality organic revenue growth, greater focus on like-for-like growth and cost efficiencies together driving the operating margin forward by 70 basis points." "There is still much to do, but we have had an encouraging start to the financial year and I am excited about the prospects for future growth of revenue, operating profit, margin and free cash flow." The group's MAP strategy, introduced 18 months ago, has five key profit drivers. The first of these is client sales and marketing, where Cousins points to client gains such as the staff feeding contract with Asda UK and the high-profile House of Representatives contract in the US. Another strand is consumer sales where the extension of breakfast and grab-and-go concepts is increasing spend per head. A third element is controlling food costs, which Cousins admits has been tricky with food price inflation of 4-5% on annual group food spending of £35 billion. "The larger, double-digit inflationary increases have been in dairy, rice and pasta, though these categories combined account for only about 10% of our annual spending on food. "Food price inflation is not a new phenomenon. We have managed it well for many years and continue to do so. But now, through the MAP framework, with greater intensity." The straegies involved include purchasing and supply chain efficiencies, unit cost efficiencies including menu re-engineering plus client and consumer price increases. The fourth and fifth strands of Map are unit costs and 'above unit costs', which together account for £6.3 bn. Cousins says the Group has managed these through productivity increases, control of labour costs, management reorganisation and consolidated back office functions. The UK part of Compass's operations contributed 18.8% to revenue in fiscal 2007, up from the figure of 18.3% in 2006. Cousins described this as a "solid result" and expected performance to be broadly similar in 2008. "Fundamentally we have a very strong business in the UK. We have continued to work hard to fix the basics and build a solid foundation for the future. Good progress has been made by the new senior management team: the work to improve or exit loss-making contracts is now largely complete. "We have continued to reorganise across the business to drive further efficiencies and education, after a difficult period, is now stabilised." You can download the Compass Group PLC preliminary results for the year ended 30 September 2007 at http://compassmedia.digitallook.com/cgi-bin/digitalcorporate/ir/cms.cgi?section_id=3.