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Compass beats rising food prices to report record profit

A management overhaul, rising food prices and the deteriorating economic outlook did little to hamper progress at Compass Group, the caterer, as it unveiled record pre-tax profits for the year to September.

Sales at the world�s largest food service company, which serves 4bn meals a year, rose to �11.4bn ($17.5bn) from �10.3bn in the year to end September, aided in part by favourable currency movements.

The growth comes despite a period of upheaval at Compass and in the industry.

Richard Cousins, chief executive, has continued to refocus the business around its core catering offering and pushed to withdraw from more countries in an effort to make the group more manageable and less prone to the sort of governance issues which have dogged it in the past.

The full-year results, including a 30 per cent rise in pre-tax profits to �566m (�436m), cover the second year of his management action plan, an initiative which aims to boost operational performance and reduce costs.

Rising costs have been a key focus of the industry over the last year, with food prices in particular experiencing a record rise until recently.

The trend pushed Compass to take further action to control costs, ranging from tweaking the supply chain and purchasing activities to cutting the amount of food served to clients.

Mr Cousins on Wednesday stressed: �In the context of a more challenging economic environment we are not complacent. We have considerable flexibility in the cost base and further significant scope for cost reduction.�

Shares in Compass were among the most resilient of the FTSE 100 until October, with analysts agreeing that the group could be a net beneficiary in a downturn as companies look to outsource their catering operations to cut costs.

Since then, however, the scale of the downturn has raised concerns over those parts of the business � the US in particular � which are exposed to discretionary consumer spending.


Speedy action

Speedy Hire is slashing capital expenditure and forsaking dividend growth to deal with the downturn in the construction sector .

The equipment hire specialist is looking to other fields, such as defence and engineering, to make up the shortfall in custom from contractors.

Like its peers, Speedy Hire is cutting costs by closing sites � 38 out of 470 have been earmarked � and reducing capital expenditure. The company expects to spend �22m on replacing its fleet in the coming half year, down 60 per cent on last year.

The move will cut full-year debt by about �45m from the nearly �300m it revealed in June. Current net debt stands at �276.8m, more than three times the company�s market capitalisation.

Sales for the six-month period rose to �256.2m (�209.5m) and pre-tax profits increased to �19.4m (�18.2m), helped by acquisitions during the period. The interim dividend is to remain at 6.4p from earnings per share slightly down at 28.03p (28.7p).

Shares in Speedy Hire closed down 3�p at 180�p, about one-fifth of their value at the start of 2008.

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