City Talk: Tesco grows franchises

Tesco is set to open a chain of franchise convenience stores in unspecified overseas markets. This follows a successful trial in South Korea. Tesco has opened 18 franchise convenience stores in South Korea, which is the group's largest overseas market. The UK's largest grocery supermarket chain will share the cost of opening the stores in other markets and will also share the profits with the franchisees.

In South Korea franchisees have put up 20% of the capital needed to build the new convenience stores with Tesco supplying the remainder. Tesco guarantees franchisees a minimum income but will not disclose how the profits are shared.

Tesco also plans to quadruple its sales in China to 4bn over the next five years. The group plans to double the number of hypermarkets it has in China to over 200 and open 50 Lifespace shopping malls.

This expansion should see the number of customers each week triple to 12 million. At present Tesco has 82 hypermarkets and four 500,000 sq ft Lifespace malls along eastern China's seaboard.

Compass beats recession

Compass, the world's biggest caterer, has surprised the market by announcing that underlying operating profit margins have risen by 40 basis points. Compass is targeting a medium to long term margin expansion of 8.5% compared with 6.9% in the last financial year.

The company provides in-house catering services for large sporting events such as the Henley Regatta, Wimbledon and for companies, for example Virgin Media, and business centres, such as the Barbican.

In the year to 30 September revenues boomed to 14.5bn, a 7.6% rise. Pre-tax profits climbed 18% to 913m. The group saw record results boosted by a return to organic growth of 3.2% compared with a flat performance last year.

The most significant growth came from Compass' North American operations with new contracts coming from The Gates Foundation's new campus site and Amazon.com's headquarters as well as Sun Microsystems. The success on the new contract front pushed revenues ahead in North America by nearly 10%. Europe, however, was sluggish. Revenue growth in Europe rose 2.2% with the UK & Ireland showing a 2.6% fall in revenues.

Del Monte says 'yes'

Del Monte Foods has agreed to sell out to a bid of around 3.1bn from a private equity consortium led by Kohlberg Kravis Roberts.

This is the largest private equity deal of the year and could lead to others during 2011.

Del Monte concentrates on pet products the deal follows the purchase of Pets at Home.