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Compass profit misses forecasts

Britain's Compass Group, the world's biggest caterer, missed analysts' average forecast with a 5.5 percent rise in annual profit, but said trading in its new financial year was matching its expectations.

Compass said on Wednesday that profit before tax, goodwill amortisation and exceptional items for the year ended Sept. 30 was 363 million pounds ($709 million) on a 7.4% rise in revenue from continuing operations to 10.8 billion pounds.

Fourteen analysts polled by Reuters Estimates forecast profit of 369.5 million pounds on average, while 15 forecast revenue of 11.37 billion pounds.

"Sustained weakness of the dollar is likely to put downward pressure on forecasts, owing to North America accounting for 40% of sales," Collins Stewart analyst Julian Cater said, maintaining a 'hold' recommendation on the stock.

Earlier in November French catering group Sodexho Alliance unveiled better-than-expected full-year earnings, painting an upbeat picture for 2007 as it saw an easing of pressure on contracts.

Compass said in September it expected lower revenue growth in the near term as it withdrew from, or renegotiated, low-margin contracts.

Compass said it had used 1.8 billion pounds from asset sales to cut its pension deficit by half, return 500 million pounds to shareholders, buy the remaining 51% interest in Levy Restaurants for 134 million pounds and pay down around 800 million pounds of debt.

The group said it planned to sell its Selecta European vending business and Panmure Gordon analyst Mike Murphy said it could be worth up to 500 million pounds, while cutting his recommendation to 'sell' from 'hold'.

"Although a sale at this level would be EPS dilutive, the group would be more cohesive," he said in a research note.

Shares in Compass, which have outperformed the UK support services sector by 14 percent over the last 12 months, were up 0.2 percent at 271-1/2 pence by 0915 GMT, after earlier falling to 267p, valuing the group at around 5.7 billion pounds.

Investigation

Compass said in October it had agreed a final settlement for claims brought by competitors in the United States based on allegations regarding United Nations contracts.

It said total costs relating to the settlement, with rivals Monaco-based ES-KO International and Swiss-based Supreme Foodservice AG, were less than 40 million pounds.

The group's Eurest Support Services (ESS) unit was embroiled in legal challenges related to contracts with the United Nations alleging it had improperly obtained confidential information concerning a contract to supply food and water to peacekeepers in Liberia.

The U.N. suspended Compass as a registered vendor last October and the caterer said in February an investigation by lawyers and auditors had found serious irregularities in relation to the behaviour of some staff.

"We continue to cooperate fully with the relevant UN and U.S. authorities in their on-going investigation," Compass said.

The group said it would pay a final dividend of 6.7 pence per share, giving a total for the year of 10.1p, up from 9.8p a year ago.