Compass offers £1bn special dividend as acquisitions flow dries up

Compass Group, the world's biggest catering company, plans to return £1 billion (€1.2 billion) to shareholders as its balance sheet becomes less efficient after more than two years without an acquisition.

The money will be handed back through a special dividend and share consolidation, Compass said yesterday, sending the shares up to their highest level in three years.

The company, which also reported higher first-half profit and raised the interim dividend by 10 per cent, will have returned £6 billion to investors since 2006, it said.

After spending £600 million on acquisitions in the two years to March 2012, purchases have dried up for Compass. The company is continuing to seek opportunities, though is "very picky," chief executive Richard Cousins said yesterday. "There are some interesting small- to medium-sized deals in the pipeline, but it's lumpy. We can't be confident we'll land them."

Returning cash to shareholders is “right for today. Our debt was getting too low,’’ he added.

Compass said it expected net debt to fall below earnings before interest, taxation, depreciation and amortisation this year, compared with an optimal level of 1.5 times.

Compass’s announcement should be “received positively even if the shares have had a good run into the event,’’ wrote Vicki Stern, an analyst at Barclays in London. Before yesterday, the stock had risen 7.5 per cent in the past month.

First-half revenue, excluding some items, was £8.7 billion, representing so-called organic growth of 4.2 per cent from a year earlier. Compass said it expects business to continue at a similar pace this year.

A £500 million share buyback programme will be suspended until payment of the special dividend on July 29th, pending shareholder approval, the company said. Shareholders will receive an interim dividend of 8.8 pence a share, up 10 per cent on a year earlier. – (Bloomberg)