Jobs threat as Compass profits plummet

THE world's largest catering group, Compass, raised the threat of job cuts after a massive fall in half-year profits. Mike Bailey, chief executive of the Moto motorway service stations-to-school dinners provider, said he wants to make savings of £50m over the next 18 months.

These will come from 'purchasing, overhead reduction and labour productivity,' Bailey said. Compass employs around 400,000 workers in 90 countries including 110,000 in Britain.

'I am not happy with our recent performance. We need to respond more rapidly than we have to the changes taking place in our market,' he said, as he reported a 14.5% fall in pre-tax profits to £124m for the six months to 31 March.

Stripping out goodwill and exceptionals, underlying profits fell 8.6% to £260m, in line with analysts' revised expectations following two profits warnings in six months.

Turnover improved to £6.2bn from £5.84bn last time. Bailey said the group was still on track to achieve 6% like-for-like sales growth in the full year.

Cracks are appearing in Compass's school meals arm, Scolarest. While UK turnover rose 6% to £1.36bn, education sales fell 2%. Scolarest has felt the pressure recently from celebrity chef Jamie Oliver's campaign for more healthy eating in schools.

Scolarest, which feeds 2,200 schools, lost two contracts with local education authorities over the period. But Bailey today said he welcomed Oliver's initiative. 'It helps our cause to charge a better price and do a better job. We have taken out processed foods.'

Serving one in every 10 school meals, Scolarest removed Turkey Twizzlers from its menus following public outrage over unhealthy school food and raised its average price per head nine months ago to 55p from around 47p. The Government has pledged to raise the national average spend to 50p.

Compass today announced it was selling a 75% stake in its North American bakery cafes chain, Au Bon Pain, for $90m (£54m). The shares, which opened today at 236p, have tumbled from a 12-month high of 348p last July. They dropped an immediate 9½p to 226½p when the market opened this morning.