Compass to Return $1.7 Billion Amid Dearth of Acquisitions

Compass Group Plc (CPG), the world’s biggest catering company, plans to return 1 billion pounds ($1.7 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, Chertsey, England-based Compass said today, sending the shares up the most in three years. The company, which also reported higher first-half profit and raised the interim dividend by 10 percent, will have returned 6 billion pounds to investors since 2006, it said today.

After spending 600 million pounds on acquisitions in the two years through March 2012, purchases have dried up for Compass. The company is continuing to seek opportunities, though is “very picky,” Chief Executive Officer Richard Cousins said today in a phone interview with Bloomberg News.

“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,” Cousins said. Compass is seeking so-called infill deals and doesn’t like “the big, glamorous stuff,” he said.

Returning cash to shareholders is “right for today, Cousins said. ‘‘Our debt was getting too low.’’

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

Shares Jump

The shares rose as much as 6 percent in London, the steepest intraday advance since Nov. 24, 2010. They were up 4.4 percent at 1,024 pence as of 9:40 a.m.

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 today, the stock had risen 7.5 percent in the past month.

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

Compass, which provides catering services globally, has been focusing on cutting costs to drive profitability and win and retain business. Sales in North America and most of its emerging markets grew in the first half, while conditions in Europe and Japan showed some improvement as the company trimmed its outgoings and reinvested in its businesses there.

A 500 million-pound share buyback program will be suspended until payment of the special dividend on July 29, pending shareholder approval, the company said. The company has bought back about 100 million pounds of shares so far, Cousins said.

Shareholders will receive an interim dividend of 8.8 pence a share, up from 8 pence a year earlier.

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Paul Jarvis

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