Catering giant Compass said it had shrugged off the effects of soaring food prices as it posted forecast-beating results.
The business, which has a catering and support services operation in Halesowen, spends around £3.5 billion on food every year although inflation has added more than £100 million to its costs.
But chief executive Richard Cousins said the biggest food increases - for rice, pasta and dairy products - only accounted for around ten per cent of its food costs.
Mr Cousins said: "We're taking it seriously and managing it hard, but I'm not worried about it. Compass posted underlying pre-tax profits of £442 million in the year to September 30 - 42 per cent up on last year and ahead of consensus forecasts of £429 million.
The group - which supplies food services for
schools, hospitals and businesses - is tackling the extra costs through changing its menus, driving savings from its supply chain and increasing its customer charges.
Surrey-based Compass added that it had made an "encouraging start" to the new financial year and cheered investors with a dividend rise, despite feeling the pinch of a weaker dollar in the US, which accounts for more than 40 per cent of group revenues.
Panmure Gordon analyst Mike Murphy said: "The increase in the dividend is significant as it sends the message of a continuing optimism over the outlook despite fears of margin pressure from food inflation."
Underlying operating profits were up 18 per cent to £261 million on improved margins in the US, although UK profits were flat at £107 million.
The company said its UK school meals business was now "stabilised" after a weaker per
formance in recent years following a campaign for better quality meals sparked by celebrity chef Jamie Oliver.
Compass has overhauled the senior management and exited loss-making contracts, but said there "would be more work to do" to improve the business next year.
Mr Cousins, appointed in June last year, has led an attempt to focus on the group's core food service operations.
The strategy has seen the disposal of operations including the firm's Selecta vending arm for £772 million to German private equity group Allianz Capital Partners.
Mr Cousins, who oversaw five per cent organic growth in revenues to £10.3 billion, added: "Over the last 18 months we have simplified the business to focus on our core food and support services and we have considerably reduced our risk profile by exiting high risk or volatile businesses."