Compass can credit Cousins for top table legacy

21 November 2017, 12:30

When the average tenure of a FTSE-100 chief executive is five and a half years, to notch up more than a decade in the same role is some going, particularly when you've already been at the helm of another blue-chip company.

That is the accomplishment of Richard Cousins, who today presented his final set of results as chief executive of Compass, the world's largest contract catering company, prior to his departure next March.

It is an achievement made all the more impressive when the sheer size and scale of Compass, one of those rare British companies that is a leader in its field, is weighed up.

This is an absolute behemoth of a company, employing more than half a million people in 50 countries and which provides the meals to school children, students, the armed forces and to workers at big-name companies such as Shell, Nike, Sony, Boeing and HSBC, not to mention prestigious sporting events such as the Wimbledon tennis championships, the Cheltenham Festival and venues such as Wembley Stadium.

It serves around 5 billion - yes, BILLION - meals around the world annually, including 9 million meals daily in the United States alone.

A scan through the latest results reveals the eclectic mix of customers. Catering contracts won during the last few months include ones to serve meals at Arkansas Children's Hospital, Vivant Smart Home Arena - home of the Utah Jazz basketball team - Oxford University and the Indian operations of Mercedes-Benz.

The results also underline the scale of the operation: full year sales rose by 15.1%, to £22.6bn, while full year pre-tax profits rose on an underlying basis rose by 18% to £1.17bn.

With a stock market value of £25.2bn, even after today's slip in the share price on profit-taking, it is the 23rd-largest company in the FTSE-100. It's not a bad legacy to be handing over to his successor Dominic Blakemore.

Shareholders will also wish him well: they have received £9bn via dividends and share buy-backs during his time at the helm while total shareholder return has been 940.3% - compared with just 107% for the FTSE-All Share Index.

Yet it wasn't quite like this when, in June 2006, Mr Cousins took over, having led the plasterboard maker BPB for six years, prior to its takeover by Saint Gobain of France the previous year.

The business he inherited was in need of some tender loving care.

His predecessor, Mike Bailey, had been bedevilled by criticism of Compass's school dinners - and its notorious "turkey twizzlers" - by the celebrity chef Jamie Oliver.

The company was also accused of corruption in the winning of contacts to feed UN troops in Liberia. And, operationally, it was in patchy shape too.

Bought out of the old conglomerate Grand Metropolitan in 1987 by a management team led by Mr Bailey's mentor, Sir Francis Mackay, Compass expanded rapidly from a business turning over just £250m a year to one turning over £12bn.

Yet this had seen break-neck expansion and, what felt at the time, like growth for the sake of it - what the City calls "flag-planting" - which had taken the company into almost 100 countries around the world.

In short, it was in too many countries and had too many contracts that were not sufficiently profitable, while the balance sheet was under strain from too many expansionary acquisitions.

Yorkshireman Mr Cousins's solution was to pull out of more than 30 countries where Compass lacked either scale or was not making sufficient profits.

He also offloaded a number of businesses, including Selecta, a vending business; SSP, the travel concessions found at airports and stations everywhere; and Moto, the motorway services business. Complexity was also reduced by cutting the number of products bought by the business from 40,000 to 5,000 - giving it more bulk-buying power.

What will have pleased cricket-loving Mr Cousins most about today's results is that organic sales growth - in other words, growth from existing contracts, rather than new ones - was up by 4%.

That proves that, unlike in previous times, Compass is not a business that needs to grow by acquisitions of the kind that made it too unwieldy to manage in the past.

It is not clear where Mr Cousins will go after nearly 18 years of unbroken service at the helm of two big businesses. A stint as chairman of another looks a likely bet.

And whoever is chief executive of that company will need to be on their toes. Earlier this year, Mr Cousins resigned as a non-executive director of Tesco, in protest at its £3.7bn takeover of Booker.

He is not a man afraid to speak his mind.