Compass Group

Compass Group plc

Type	Public limited company
Traded as	LSE: CPG
Industry	Conglomerate
Founded	1941 (1941)
Headquarters	Chertsey, Surrey, England, United Kingdom
Area served	Worldwide
Key people	Paul S. Walsh (Chairman)[1] Richard Cousins (CEO)
Services	Foodservice, facility management, cleaning, service vouchers
Revenue	£17,843 million (2015)[2]
Operating income	£1,261 million (2015)[2]
Net income	£877 million (2015)[2]
Number of employees	500,000 (2016) [3]
Website	www.compass-group.com

Compass Group plc is a British multinational contract foodservice, cleaning, property management and support services company headquartered in the Compass House in Chertsey, Surrey.^[4] It is the largest contract foodservice company in the world and has operations in over 50 countries.^[5] It serves around 4 billion meals a year in locations including offices and factories, schools, universities, hospitals, major sports and cultural venues, mining camps and offshore oil platforms.^[6]

Compass Group is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

History

Origin

Compass Group has its origins in a company which was founded by Jack Bateman in 1941 as Factory Canteens Limited and which subsequently became known as Bateman Catering.^[7] Bateman Catering and Midland Catering were acquired by Grand Metropolitan in 1967 and 1968 respectively^[7][8] and a management buy-out from Grand Metropolitan followed in 1987 when the Compass Group was formed.^[7][8]

Public listing

Compass Group was first listed on the London Stock Exchange in 1988.^[7] Eurest, one of the company's US subsidiaries, was launched in the USA in 1996 to provide dining services to local, regional and national companies within the business and industry markets, including employee dining centers, on-site catering, vending, executive dining rooms, and other managed services.^[9]

Corporate growth

Compass Group purchased Morrison Management Specialists and then merged with Granada plc as part of a planned strategy to separate the media and catering interests of the latter. The two companies demerged in February 2001 to form Compass plc and Granada Media.^[7] It had become the world's biggest catering firm by 2005.^[10]

Compass Group then sold its roadside and travel catering businesses for a combined £1.82 billion in April 2006.^[7] The transaction included the sale of 43 Moto motorway service areas to Australia's Macquarie Bank for an estimated £600 million.^[7] Compass's Select Service Partners (SSP) travel concessions business was sold to companies controlled by private equity firm EQT Partners, for an estimated £1.2 billion.^[7]

Compass Group PLC made further acquisitions in 2009, including Kimco and Lackmans in the USA, Plural in Germany and the retail franchises for several McColls retail site leases in the UK.^[2]

Association with UN and Armed Forces

Compass Group's subsidiary ESS became a UN-registered food vendor in 2000 and then won contracts to supply UN peace-keepers operating in Sudan, East Timor, Liberia, Burundi, Eritrea, Lebanon, Cyprus and Syria.^[10][10] The company bought Morrison Management Specialists in 2000 and in July of that year the company merged with Granada plc as part of a strategy to separate the media and catering interests of the latter. The two companies demerged in February 2001 to form Compass plc and Granada Media.^[7]

ESS was contracted by the U.S. Marine Corps, the 82nd Airborne Division, the British Ministry of Defence, the Coalition Provisional Authority, along with the major defense contractors Fluor, RMS, Bechtel, and most notably KBR (a subsidiary of Halliburton) under the U.S. Army troop support contract called LOGCAP III to provide dining and construction services at desert bases and encampments in Kuwait.^[11] and Iraq^[11] from the start of operations in 2003 to 2006.^[11]

Reorganization

In 2011, Morrison Management Specialist was re-organised into three sectors (Morrison Healthcare, Morrison Senior Living, Touchpoint Support Services). Then in 2013 the Czech branch of Eurest was listed as one of the “100 Best Czech Companies” in 2013.^[12] The company also acquired Integrated Cleaning Management in 2013.^[13]

Operations

• Compass Group Index is the parent/holding firm ^[10] and directly owns Compass Group.^[14]
• Compass Group owns the following brands and businesses: Kimco, Lackmann Culinary Services, Plural, All Leisure Hospitality, Bon Appétit Management Company,^[15][16][17] Canteen Vending, Best Vendors Management, Chartwells, Crothall, DeltaFM, Eurest, Eurest Support Services (ESS), Keith Prowse Corporate Hospitality, Levy Restaurants, Medirest, Morrison Management Specialists, ICM,^[13] DeltaFM,^[18] Omega Security Services,^[19] All Leisure Hospitality, Rapport,^[20] Restaurant Associates,^[21] Scolarest and Vision Security Group (VSG).^[22][23][24] It also does cleaning, housekeeping, waste management, building operations, maintenance, gardening and outdoor services for schools and educational facilities to world-class HSEQ standards.^[25]
• Compass Group operates several owned brands including Trattoria Pizza, Mondo Subs, (UK & USA) Grab&Co Food to go and Spice of Life (UK Hospitals) as well as operating Costa Coffee, Subway, Papa John's Pizza, Chick-Fil-A and Starbucks under license. Compass Group also operates several owned service systems including Steamplicity, and Trim Trax.^[26]

Eurest's corporate logo.

• Eurest (or Eurest Services) which operates in 80 countries, providing staff restaurants and supplying vending machines for businesses. Eurest is a $1.3 billion food and vending organization with more than 15,000 associates throughout the U.S., and is a division of NC-based Compass Group North America. In North America the company is known as Eurest Dining Services.^[27] It was bought out in the early 2000s. As of 2005 the then 50-year-old firm employed 15,500 people in 1,850 sites, in 80 nations. Eurest was launched in the USA during 1955 and provides dining services to local, regional and national companies within the Business & Industry markets, including employee dining centers, on-site catering, vending, executive dining rooms, and other managed services as of 1996.^[9] (Compass Group's U.S. website) ^[28] Integrated Cleaning Management was launched in the UK that year.^[13]

• Eurest Support Services (ESS) is the subsidiary specializing in harsh-environment/large-scale food service and facilities management. Its primary clients are military forces and other security services, UN conferences and some Blue Beret army rations, major defense contractors, and construction, mining, the UN and oil exploration and production facilities worldwide.^{[9][27][28][28][29][30]}

The Integrated Cleaning Management Ltd company logo.

• Integrated Cleaning Management is a major UK and Irish retail, leisure, health club industry, hotel and commercial cleaning firm^[13] with 10,000 staff and 5,000 contracts as of 2014.^[13] It sponsors the U.K.'s Springboard Charity Event.^[13]
• Medirest operates in the UK and provides services in retail and medical places. Medirest Retail Shops and Cafes runs In-shop Cafes.^[31] It has several NHS contracts weld by A+ NHS cleaners clean hospitals,^[32] Pulse Hospital porters, who are NHS Hospital porters^[33][34] and Medirest Health Sector which do other stuff like deposing of surgical waste, catering and cleaning.^[35]
• 14forty is a UK wide facility management firm ^[36]

Criticisms of Compass Group

2005 United Nations misconduct incident

ESS became a UN-registered food vendor in 2000 and then went on to win contracts to supply UN peacekeepers operating in Sudan, East Timor, Liberia, Burundi, Eritrea, Lebanon, Cyprus and Syria.^[10]

In 2005, subsidiary Eurest Support Services won contracts to provide food to UN peacekeepers in Liberia, valued at $237 million.^[10][37][38]

In November 2005, Compass sacked the head of its UK division and two other employees as the investigation continued.^[39] Compass said staff members had been dismissed but did not officially say how many.^[40]

The investigation was conducted by law firm Freshfields and accountants Ernst & Young and overseen and ultimately by the chairman of Compass’ audit committee, Steve Lucas.^[39][40]

The UN suspended Compass in October 2005 after allegations of contract bidding irregularities. It is alleged that ESS may have improperly obtained confidential information concerning a three-year contract to supply food and water to UN peacekeepers in Liberia.^[39] ESS's poor performance on a food contract to provide rations to peacekeepers in Burundi was also looked in to before it lost the contract.^[10]

The scandal broke after former HIC official and former procurement officer Alexander Yakovlev was arrested on suspicion of conspiracy, wire fraud, money laundering and related issues.^[41][42] The Russian^[10] official Alexander Yakovlev, the UN procurement officer, and Vladimir Kuznetsov, head of the UN Committee for Administrative and Budgetary Issues, were arrested and indicted after taking nearly $1 million^[10] in bribes from Compass.^[37]

In a separate UN investigation into the oil-for-food program hand found that Mr Yakovlev was guilty of fraudulent conduct. He subsequently pleaded guilty to criminal charges of both wire fraud and money laundering relating to claims he had taken $1m in bribes from companies doing business with the UN.^[10]

The rivals firms who made the allegations were Es-Ko and Switzerland's^[10] Supreme Foodservice AG^[10] in bribes from Compass.^[10][37] Officials initiated lawsuits claiming violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act, the Sherman Antitrust Act and New York State's Donnelly Act regulating free trade.^[43] Federal investigations are underway and the case has been referred to the Serious Fraud Office (UK).^[44] The lawsuits are for the two compeditors who are claiming a total of £600m in damages, against Compass in March 2006 alleged that Compass had tried to rig the awarding of UN contracts for United Nations peace keepers across the world, worth in excess of $350m (£188m) world.^[10] The long-running dispute is centered on the allegations that five senior executives at a Compass subsidiary, Eurest Support Services (ESS), bribed a UN official to win the contracts.^[10]

After its own £5m,^[10] three-month internal investigation, Compass had declared it had discovered "serious irregularities" in its UN business, but that these were limited to "only a few individuals" who were dismissed: Peter R. Harris,^[10] Andy Seiwert and Doug Kerr.^[37] Mr Harris, who by then was the head of the group's British, Middle East and African division at this point.^[10] While Compass refused to make public its investigation,^[37] CEO Michael Bailey stepped down in June 2006. The subsidiary Eurest Support Services was soon restructured and reformed along a new business model.^[39]

The corruption allegations were also referred to the UK's Serious Fraud Office^[39] a criminal investigation by US federal prosecutors^[10] and wider investigations into UN procurement by both the Southern District Court of New York, the US Congress and the UN.^[40] Compass had agreed by October 2006 to pay to up to £40m to settle 2 lawsuits brought against it for allegedly bribing a UN official to win catering contracts.^[10] Compass Group did not admit any legal liability and paid a confidential settlement in the region of £40m.^[10]

The chief executive of Compass Group, Richard Cousins, was quoted as saying: "We believe it is in the best interests of the business and shareholders, and good management, to avoid the uncertainties and costs associated with prolonged litigation. My focus is on the future and this settlement is a major step in putting the matter behind us."^[10]

Canadian Prisons

The supplier of food to seven of Ontario's correctional facilities, Eurest Dining Services, informed the Halton Regional Health Department that some samples taken during routine surveillance had tested positive for Listeria monocytogenes on November 21, 2008. Dr. David Williams, Ontario's acting chief medical officer of health later commented on the issue.^{[9][27][27][28]}

New York Schools

Compass USA settled for $18 million on its overcharging on school meals.^[45]

February 2013 horse meat scandal

On 7 February 2013, it was revealed by the Food Standards Agency that the Findus beef lasagne range in the UK, France and Sweden and the shepherd's pie and moussaka ranges in France contained horse meat without proper declaration or official scrutiny.^[46][47] Findus, Compass Group, Whitbread, Brewers Fayre and Premier Inn were indicted for illegally selling concealed horse meat in food products.^[48] Compass Group had sold it to 47 Lancashire schools and a "small number" of schools in northern Ireland.^[48]

In a public letter later that day, 11 firms, including Tesco and Asda, said they shared shoppers' "anger and outrage".^[49] Whitbread vowed to remedy the unacceptable situation on 26 February 2013.^[50] The Food Standards Agency's (FSA) chief executive, Catherine Brown also said "it is unlikely we will ever know" how many unwittingly ate horsemeat.^[51]

April 2015 Exploiting US Senate kitchen staff

On 22 April 2015 the Compass Group was accused of underpaying their employees in the US Senate's kitchen.^[52]

Chartwell's, Compass USA subsidiary, pays $19 million in whistleblower case^[53]

Southern DHB

In 2016, the Southern DHB (District Health Board) in New Zealand received numerous complaints about the quality of the food being served at Dunedin Hospital,^[54] where a 15-year contract was controversially awarded to Compass Group in 2015,^[55] replacing the hospital's local kitchen in an effort to keep costs down. November 2016^[56] Compass announce "Frozen Fresh, of Tauranga, will replace airline food company LSG Sky Chefs, of Auckland. Compass Group confirmed the overhaul late last month, but at that time did not disclose the new provider. In Otago and Southland the change takes effect on November 28".

Major competitors

Compass Group's major competitors include Aramark and Sodexo.

References

External links

• Compass Group PLC – Official site
• Yahoo! profile

FTSE 100 companies of the United Kingdom   → FTSE 250
3i Admiral Group Anglo American Antofagasta Ashtead Group Associated British Foods AstraZeneca Aviva BAE Systems BHP Billiton BP Babcock International Barclays Barratt Developments British American Tobacco British Land BT Group Bunzl Burberry Capita Carnival Centrica Coca-Cola HBC Compass Group CRH Croda International DCC Diageo Direct Line Group Dixons Carphone easyJet Experian Fresnillo GKN GlaxoSmithKline Glencore Hammerson Hargreaves Lansdown Hikma Pharmaceuticals HSBC Imperial Brands Informa InterContinental Hotels Group International Airlines Group Intertek Intu Properties ITV Johnson Matthey Kingfisher Land Securities Group Legal & General Lloyds Banking Group London Stock Exchange Group Marks & Spencer Mediclinic International Merlin Entertainments Micro Focus International Mondi Morrisons National Grid Next Old Mutual Paddy Power Betfair Pearson Persimmon Polymetal International Provident Prudential Randgold Resources Royal Bank of Scotland Reckitt Benckiser RELX Group Rio Tinto Group Rolls-Royce Royal Dutch Shell Royal Mail RSA Insurance Group Sage Group J Sainsbury Schroders Severn Trent Shire Sky Smith & Nephew Smiths Group SSE Standard Chartered Standard Life St. James's Place Taylor Wimpey Tesco Travis Perkins TUI Unilever United Utilities Vodafone Whitbread Wolseley Worldpay WPP