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Caterer Compass' margins rise as it vows to improve UK school food packs

Yadarisa Shabong
·2-min read

By Yadarisa Shabong

(Reuters) - Compass Group, the world's largest catering firm, said on Thursday it had improved its supply chain and quality checks after receiving a barrage of criticism for the low standards of children's food packages supplied to homes in Britain.

The British company, which serves office workers, school kids, seniors in old age homes and armed forces across dozens of countries, had a tough 2020 and has had to cut jobs and manage its food cost by "careful" menu planning and reducing the number of products it buys and the suppliers it buys from.

In a trading update ahead of its annual general meeting, it said that all the regions it operates in had turned profitable in its first quarter ended December even as organic revenue tumbled by a third, as operating margins rose by 2.7%.

It predicted another 50 to 100 basis points rise in operating margins in its second quarter.

However its UK subsidiary Chartwells faced a fierce public and political backlash last month after images shared on social media showed meagre food packages supplied to children by schools via catering companies during the COVID-19 lockdown.

That led the government to warn private suppliers to raise their standards, and Chartwells apologising, saying it would refund some money to schools.

"In light of the recent events around the provision of free school meal food parcels by our education sector, we recognise that the quality and quantity of some food parcels fell short of our usual high standards," Compass said on Thursday.

"After conducting a thorough investigation, we have taken several corrective measures that include improved supply chain processes, additional guidance and resources for our employees, and stronger quality assurance checks."

Shares in the FTSE 100 company rose 4% in morning trade following the margin forecast. The stock is still down about 28% over the past 12 months.

Compass also said it would cover the cost of providing lunch and breakfast parcels to eligible students during the February half-term break.

Britain provides free lunches to some children in primary schools, and turned to private companies to replace them with food packages after it shut schools last month.

"From an investment perspective, this chapter has been an unwelcome addition to what is a torrid time for Compass," said Hargreaves Lansdown analyst Sophie Lund-Yates.

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Uttaresh.V and Pravin Char)