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When it comes to coping with bad news, the contract catering group Compass has “more experience than most”, says John Foley on Breakingviews.com.
This week, it announced its full-year results: sales up 7% on a like-for-like basis, but pre-tax profits down 10%. Even worse, after goodwill and exceptionals, profits fell by 54%. That sounds bad, but after three profit warnings in the last 14 months, the figures were “nowhere as bad as they could have been” – and the shares got an 8% lift.
But shareholder confidence was not helped by the revelation that Compass has been subpoenaed by a US federal prosecuting agency in relation to its role in “corrupt buying practices” at the UN, says Salamander Davoudi in the FT. Here, the Serious Fraud Office has confirmed that it has launched a preliminary examination into Compass to see whether a full investigation is required. In short, Compass has a “big problem with investor trust”, says Foley. When investors got wind of the subpoena on Wednesday, the shares fell back.
As yet more “unsavoury whiffs emerge from the Compass kitchen”, the need for fresh blood at the top becomes ever more pressing, says Patience Wheatcroft in The Times. Although Sir Roy Gardner is due to take over from retiring chairman Sir Francis Mackay, Gardner can’t take over until his old post at Centrica is filled. It may be “kinder to Compass” for him to suggest the troubled caterers find a chairman who can start immediately.
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Annunziata Rees-Mogg
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