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Compass has embarked on its most aggressive acquisition spree in seven years as it seeks to hand out its menus to armies, office workers and schoolchildren in canteens and restaurants worldwide.
The Surrey-based company has spent £425m ($664m) on 13 deals in 10 countries including Japan, the Netherlands, Sweden and India. In the UK, it bought Cygnet Foods, a supplier of hot or ready-to-heat meals to 450 schools, mostly in north-east England.
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Richard Cousins, chief executive, said the group was benefiting from the trend towards outsourcing as companies sought to focus on core competencies and governments looked to cut costs. “This has been a big year for us. We have done a big deal in every corner of the planet,” he said.
The company, which serves about 4bn meals each year in more than 50 countries, said full-year revenues were expected to rise about 5 per cent from last year, helped by a 7 per cent increase in North America and a 9 per cent rise elsewhere.
Despite this, Mr Cousins acknowledged it was a “tough world”, with business slowing throughout Europe. Sales in the UK and Ireland, which account for 10 per cent of group earnings, are down 1 per cent on the previous year as companies and governments cut corporate catering and hospitality amid government austerity measures and a slow economic recovery.
The group has passed on the impact of food inflation to customers, raising prices by about 2 per cent as some commodities prices doubled. Labour costs, which account for about half of group expenditure, remained fairly stable in most parts of the world, but could rise in emerging markets such as Brazil and China, where it is expanding its business. A £15m-£20m hit from the Japanese earthquake would also push operating profit margins about 0.2 percentage points lower.
Wyn Ellis, analyst at Numis, said the rapid pace of acquisitions made sense after several years spent streamlining the business and withdrawing from non-core markets. “Compass has a strong balance sheet and is a powerful cash generator and it has seen an opportunity to develop the business with sensible medium-sized and small bolt-on acquisitions,” he said.
“This strategy makes a lot of sense as small businesses are relatively easy to integrate and Compass has a strong record of delivering good returns on these. Investors will still want to see a somewhat flabby balance sheet addressed when they deliver their results in November.”
Source:http://www.ft.com/cms/s/0/8b77d2a6-ea7f-11e0-b0f5-00144feab49a.html#axzz1ZRrEfXYu
