Thriving Compass braced for City blow

Catering giant Compass is pursuing an unpaid bill from collapsed investment bank Lehman Brothers, a sign of the turmoil it could face as the City axes jobs and financial institutions go bust.

Although the caterer unveiled figures today that show it is in rude health, it is likely to see business in the Square Mile and Canary Wharf shrink as large firms look for cutbacks.

Compass ran Lehman's Canary Wharf head-office canteen for 4000 staff and also provided fine dining for the top brass. The contract was thought to be worth around £5 million a year.

Compass now has a smaller, but possibly more profitable, contract to feed the administrators from PricewaterhouseCoopers who are overseeing the wind-up of Lehman.

Chief executive Richard Cousins expects to be paid by Lehman Brothers eventually, but admits there will be somewhat of a downturn in business from other City firms. "We will see a little bit of softness," he said.

Compass employs 350,000 across the world, providing meals for schools, hospitals and prisons as well as for rich corporate clients.

Today it said profits for the year to the end of September rose 19% to £662 million, allowing an 11% increase in the dividend to 12p. Compass refuted talk from analysts that it would suspend its £400 million share buyback programme, but confirmed it may slow down the drive to buy up its own stock.

Sales rose 6% to £11.4 billion, but Cousins reckons there are huge growth opportunities. He is two and a half years into his turnaround of the company but says he has no plans to move on.

"Your work is never done. About 55% of all catering is still done in house, so there are loads of growth opportunities. This is an exciting business," he said. Compass clients include Chelsea Football Club, London's O² arena and the Bank of England. It also caters Wimbledon and other major sporting events which are likely to remain popular, however bad the recession becomes.

The business throws off huge amounts of cash and it has no immediate need to renegotiate debts, putting it in a stronger position than many rivals.