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Compass Group PLC  -  CPG   

Full year results announcement

Released 07:00 22-Nov-2016

RNS Number : 7660P
Compass Group PLC
22 November 2016
 

 

 

Full year results announcement for the year ended 30 September 2016

 

 

Compass reports another strong set of results.  Organic revenue growth of 5% was converted into profit and cash which was reinvested in the business or returned to shareholders. 

 

 

 

Underlying1 results

Statutory results

 

2016

2015

Change

2016

2015

Change

Revenue

£19.9 billion

£18.7 billion2

+5.0%3

£19.6 billion

£17.6 billion

+11.5%

Operating profit

£1,445 million

£1,368 million2

+5.6%2

£1,409 million

£1,261 million

+11.7%

Operating margin

7.2%

7.2%

-

7.1%

7.1%

-

Earnings per share

61.1 pence

56.7 pence2

+7.8%2

60.4 pence

52.3 pence

+15.5%

Free cash flow

£908 million

£722 million

+25.8%

£899 million

£686 million

+31.0%

Full year dividend per share

31.7 pence

29.4 pence

+7.8%

31.7 pence

29.4 pence

+7.8%

 

1 Underlying measures are defined in the glossary of terms on page 44 and explained on page 3.

2 Measured on a constant currency basis.

3 Organic revenue growth.

 

Strong organic revenue growth of 5%

·      Another excellent year in North America with growth of 8.1%

·      Continued progress in Europe, with organic revenue up 2.8%

·      Rest of World grew 3.6%, excluding Offshore & Remote

 

Underlying operating margin flat

·      Our Management and Performance (MAP) programme continues to drive operating efficiencies

·      Investment to support growth and the creation of nine sub-regional business units in Europe

·      Restructuring plan announced in July 2015, is now complete and delivering the expected savings

 

Growth, execution and returns to shareholders: a proven and sustainable model

·      Underlying free cash flow of £908 million, up 26%

·      Proposed full year dividend up 7.8%, in line with constant currency EPS growth

 

Statutory results

·     On a statutory basis, revenue, operating profit and earnings per share benefitted by around 6% from the translational effect of weaker sterling

 

 

Chief Executive's Statement 

 

 

 

Richard Cousins, Group Chief Executive, said:

 

"Compass has had another strong year. Performance in North America continues to be excellent, and we are pleased with our progress in Europe. In the Rest of World, the performance is mixed, with the impact of the cyclical downturn in our commodity related business offsetting reasonable progress elsewhere.

 

Our expectations for 2017 are positive, with growth weighted to the second half of the year. The pipeline of new contracts is good and our focus on organic growth, efficiencies and cash gives us confidence in another year of delivery.

 

In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue growth, margin improvement, and continued returns."

 

Results presentation today

 

The results presentation for investors and analysts is being held today at 9.30 a.m. at Bank of America Merrill Lynch, 2 King Edward Street, London EC1A 1HQ. A live webcast of the results presentation will be broadcast today at 9.30 a.m., accessible via the Company's website, www.compass-group.com. At the end of the presentation you will be able to participate in a question and answer session by dialling:

 

UK Toll Number:                                                            +44 (0) 203 139 4830

UK Toll-Free Number:                                                     +44 (0) 808 237 0030

 

US Toll Number:                                                            +1 718 873 9077

US Toll-Free Number:                                                     +1 866 928 7517

 

Participant PIN Code:                                                     17775331#

 

Financial calendar

 

Ex-dividend date for 2016 final dividend                           19 January 2017                       

Record date for 2016 final dividend                                  20 January 2017                       

Annual General Meeting/Q1 Trading Update                     2 February 2017

2016 final dividend payment                                            20 February 2017                      

 

Enquiries

 

Analysts/Investors          Sandra Moura/Agatha Donnelly   +44 1932 573 000

Press                            Clare Hunt                                 +44 1932 573 116

 

Website                        www.compass-group.com

 

 

 

 

Chief Executive's Statement (continued)

 

 

Basis of preparation

 

Throughout the Annual Results Announcement, and consistent with prior years, underlying measures are used to describe the Group's performance. These are not recognised under IFRS or other generally accepted accounting practice principles (GAAP).

 

The Executive Board of the Group manage and assess the performance of the business on these measures and believe they are more representative of ongoing trading, facilitate meaningful year on year comparisons and hence provide more useful information to shareholders. All underlying measures are defined in the glossary of terms on page 44.

 

A summary of the adjustments from statutory results to underlying results is shown on page 10 and further detailed in the consolidated income statement (page 17), reconciliation of free cash flow (page 23), and note 1 segmental reporting (pages 24 to 25).

 

Group overview

 

Revenue for the Group increased by 5.0% on an organic basis. New business wins were 8.8% driven by strong MAP 1 (client sales and marketing) performance in most countries.  Our retention rate was 94.1% as a result of our ongoing focus and investment.  We aim to increase participation and spend through MAP 2 (consumer sales and marketing) initiatives.  Like for like revenue growth of 2.1% reflected sensible price increases and modest volume improvement in North America offset by negative volumes in Rest of World.

 

The restructuring programme announced in July 2015 to reduce the cost base in our Offshore & Remote business and in some emerging markets is now complete and delivering the expected savings.  Restructuring costs totalled £51 million (£25 million and £26 million charged in 2016 and 2015 respectively). These costs have been included in underlying Group operating profit.

 

Underlying operating profit increased by 5.6% on a constant currency basis. The underlying operating margin was flat, as we continue to drive efficiencies across the business using our Management and Performance (MAP) framework.  We have maintained our focus on MAP 3 (cost of food) with initiatives such as menu planning and supplier rationalisation, as well as continually optimising MAP 4 (labour and in unit costs) and MAP 5 (above unit overheads).  These efficiencies enabled us to invest to support the exciting growth opportunities we see around the world.

 

Returns to shareholders continue to be an integral part of our business model.  The Group returned £596 million to shareholders in the year, £496 million by way of dividends and £100 million in share buybacks. Our leverage policy is to maintain strong investment grade credit ratings, returning any surplus cash to shareholders to target net debt to underlying EBITDA of around 1.5x.

 

 

 

 

 

Chief Executive's Statement (continued)

 

 

Regional performances

 

North America - 56% of underlying Group revenue (2015: 52%)

 

 

Underlying

Change

Regional financial summary

2016

2015

Reported rates

Constant currency

Organic

 

 

 

 

 

 

Revenue

£11,198m

£9,361m

19.6%

10.5%

8.1%

Operating profit

£908m

£760m

19.5%

10.3%

9.1%

Operating margin

8.1%

8.1%

-

 

 

 

Our business in North America has had another strong year, with organic revenue growth of 8.1%, driven by new business wins and high retention rates. We have seen good like for like revenue improvement across the region as we drive MAP 2 participation, with the exception of the Offshore & Remote sector where we are experiencing ongoing volume pressure.

 

In the Business & Industry sector, our sub-sectorisation provides high end/premium offers (for example Bon Appetit and Restaurant Associates), value offers (for example Canteen's vending business), and our core Eurest business. We have seen good levels of new business and positive like for like volumes in some of the sub-sectors. New contract wins include Coach, Inc and Oracle as well as adding new locations and services at LinkedIn.

 

Excellent organic revenue growth in the Healthcare & Seniors business was delivered through new contract wins where we are benefitting from accelerating rates of outsourcing and consolidation in the sector. Examples include Mountain States Health Alliance, where we have added additional business, Maricopa Integrated Health System and the McLaren Health Care Corporation.

 

The Education sector has seen increased levels of participation along with new business wins, including Furman University, Babson College and the DeSoto Independent Schools District.

 

We have delivered double digit organic revenue growth in our Sports & Leisure business with excellent retention and strong like for like revenues coming from additional playoff matches and increased spend per head. New business wins include the University of Notre Dame and Greater Columbus Convention Center and we have expanded our service offering at the Target Center.

 

Low commodity prices continue to impact our Offshore & Remote business. Organic revenue declines of 16% result from business closures and lower volumes on site. However, we continue to win new business, including contracts with CH2M Hill and ExxonMobil.

 

Underlying operating profit of £908 million increased by 10.3% (£85 million) on a constant currency basis.  We incurred high levels of mobilisation costs with the top line growth, above average labour inflation and the dilutive impact of the first year of the CulinArt acquisition. These headwinds were offset by overhead leverage and ongoing efficiency initiatives across MAPs 3 and 4, resulting in a flat underlying operating margin.

 

  

 

Chief Executive's Statement (continued)

 

 

 

Europe - 28% of underlying Group revenue (2015: 29%)          

 

 

Underlying

Change

Regional financial summary

2016

2015

Reported rates

Constant currency

Organic

 

 

 

 

 

 

Revenue

£5,458m

£5,192m

5.1%

2.7%

2.8%

Operating profit

£394m

£374m

5.3%

2.6%

2.6%

Operating margin

7.2%

7.2%

-

 

 

 

Europe grew organic revenue by 2.8%, the highest growth rate we have seen since 2008. This was driven by good levels of new business wins. Like for like revenue was slightly positive due to some pricing and flat volumes.  Our fourth quarter growth rate was impacted by the closure of some contracts and strong Sports & Leisure comparatives in the UK.

 

New business wins were strong in the UK, Nordics, BeNeLux, Iberia and Turkey. Some examples of wins include the Politieacademie in the Netherlands, AXA in Spain, Darussafaka in Turkey and the Aeroports de Paris and Macif in France. Contract extensions include Arcelor Mittal in Germany and BT and HSBC in the UK.

 

Like for like volumes were impacted by the timing of a number of sports events in the UK in the fourth quarter of 2015 and by weakness in the oil and gas business, where we have seen revenue declines of 25% in the year, and France which is still challenging.

 

Underlying operating profit grew by 2.6% (£10 million) on a constant currency basis, delivering a flat underlying operating margin at 7.2%.  Our ongoing focus on pricing and operational efficiencies allowed us to reinvest in the business to support the higher levels of growth, absorb the impact of lower like for like volumes in the oil and gas business, offset minimum wage pressures across the region and cover the cost of creating nine sub-regional business units.  This new structure will allow us to maximise our scale in procurement, leverage our overheads and speed up the sharing and implementation of best practices. 

 

 

 

Chief Executive's Statement (continued)

 

 

 

Rest of World - 16% of underlying Group revenue (2015: 19%)

 

 

Underlying

Change

Regional financial summary

2016

2015

Reported rates

Constant currency

Organic

 

 

 

 

 

 

Revenue

£3,215m

£3,290m

(2.3)%

(1.9)%

(1.2)%

Operating profit

£218m

£241m

(9.5)%

(8.8)%

(7.9)%

Operating margin

6.8%

7.3%

(50)bps

 

 

             

 

In the Rest of World region, organic revenue declined by 1.2%.  Excluding the Offshore & Remote business, organic revenue grew by 3.6% while in the Offshore & Remote business, organic revenue declined by 10%.

 

In the non-Offshore & Remote business, good new business wins in Brazil, which include Centre Norte, Carrefour and Hospital Novo Metropolitano, have been offset by further negative like for like volumes as a result of a challenging macroeconomic environment. Across the rest of Latin America, we continue to see strong organic growth driven by contract wins including Hospital Britanico in Argentina, Jabil Chihuahua and Banco Santander in Mexico and San Vicente de Paul in Colombia.

 

We delivered modest growth in Japan with new contract wins including Yame City Health Promotion Facility and the Canon Headquarters. India and China continue to perform well with growth driven by contract wins such as TCS Mumbai and Flipkart in India, plus Ant Financial and Yew Wah International School in China.

 

Across the Middle East, we saw good levels of new business including contracts with Abu Dhabi Water and Electricity Authority and Zakum Development Company in the UAE, Sidra Medical and Research Centre in Qatar and the Children's Cancer Hospital Foundation in Egypt.

 

In Australia we have won business across all sectors including Riverview College, a prestigious school in Sydney, Melbourne Museum's cafes and special event catering, and a number of Seniors' contracts including Aurrum and Baptist Care.

 

In the Offshore & Remote business, Australia saw organic revenue declines of 17%, as expected.   Many construction contracts moved into their production phases and there are ongoing pricing pressures, site closures and lower volumes. We expect the current revenue decline to accelerate through 2017. Our other Offshore & Remote businesses in Latin America, Africa and Asia are facing similar pressures.

 

Underlying operating margins excluding Australia were flat. The savings from the restructuring programme announced in 2015, along with pricing and ongoing efficiencies, offset the impact of weak volumes in Brazil and our Offshore & Remote business. However, pricing pressures and site closures have reduced the profitability of our Australian business by £26 million. Underlying operating profit therefore declined by 8.8% (£21 million) on a constant currency basis, with the underlying operating margin down 50 basis points to 6.8%, in line with expectations.

 

 

 

 

Chief Executive's Statement (continued)

 

 

Strategy

 

Focused on food

 

Food is our focus and our core competence.  The addressable food service market is estimated to be more than £200 billion.  With only around 50% of the market currently outsourced, there is a significant structural growth opportunity.  We believe the benefits of outsourcing become increasingly apparent as economic conditions and regulatory changes put pressure on organisations' budgets.  As one of the largest providers in all of our sectors, we are well placed to benefit from these trends.

 

Our approach to support and multi services is low risk and incremental, with strategies developed on a country by country basis.  This is a complex segment and there are significant differences in client buying behaviour across countries, sectors and sub-sectors. Our largest sector in this market is Defence, Offshore & Remote, where the model is almost universally multi service.  In addition, we have an excellent support services business in North America and other selected countries. 

 

Geographic spread

 

We have a truly international business, with operations in over 50 countries.  We manage the business in three geographic regions. 

 

North America (56% of underlying Group revenue) is the principal growth engine for the Group.  The outsourcing culture is vibrant and the addressable market is significant.  We have a market leading business, which delivers high levels of growth by combining a sectorised client facing approach with the cost advantage of our scale. 

 

The fundamentals of our businesses in Europe (28% of underlying Group revenue) are good and we see many opportunities to drive revenue growth and margin improvement. We have invested in MAP 1 sales and retention to return the region to growth. This year we have created nine new business units to leverage our scale in procurement, lower costs and speed up the sharing and implementation of best practices.

 

Rest of World (16% of underlying Group revenue) offers very good long term growth potential.  Our largest markets are Australia, Japan and Brazil, and we are growing in India and China.  Lower commodity prices and weak volumes have impacted our Offshore & Remote business. We have restructured our business to adapt to the changing market environment, and remain excited about the attractive long term growth prospects of the region.

 

Sectorised approach

 

We segment the market and create sectors and sub-sectors to develop customised solutions that meet the requirements of a wide and growing range of clients and consumers. Our portfolio of B2B brands enables us to differentiate these propositions and maximise our market coverage.

 

Scale

 

As we continue to grow, our increasing scale allows us to achieve our goal of being the lowest cost, most efficient provider of food and support services.  Scale is a benefit in terms of food procurement, labour management and back office costs.  It underpins our competitiveness and enables us to deliver sustainable growth over time.

 

Management and Performance (MAP) culture

 

We speak one common 'MAP' language.  All our employees use this simple framework to drive performance across the business.  It helps us focus on a common set of business drivers, whether it is winning new business in the right sector on the right terms (MAP 1), increasing our consumer participation and spend (MAP 2), reducing our food costs (MAP 3), or labour costs (MAP 4 and 5). 

 

  

 

Chief Executive's Statement (continued)

 

 

 

Uses of cash and balance sheet priorities

 

The Group's cash flow generation remains excellent and it will continue to be a key part of the business model. Our priorities for how we use our cash remain unchanged.  We will continue to: (i) invest in the business to support organic growth where we see opportunities with good returns; (ii) pursue M&A opportunities, our preference is for small to medium sized infill acquisitions, where we look for returns greater than our cost of capital by the end of year two; (iii) grow the dividend in line with constant currency earnings per share; and (iv) maintain strong investment grade credit ratings by returning any surplus cash to shareholders to target net debt to underlying EBITDA of around 1.5x. 

 

Non-executive Board changes

 

The Company announces changes to the composition of its Non-Executive Directors as part of its ongoing review of the Board membership which is designed to ensure that an appropriate number of independent Non-Executive Directors is maintained through orderly succession and without compromising the effectiveness of the Board and its committees.

 

Mrs Susan Murray's 9-year term of appointment came to an end on 11 October 2016.  Mrs Murray has agreed to remain on the Board until the conclusion of the Annual General Meeting of the Company which will be held on 2 February 2017, at which meeting she will not seek re-election and will retire.  Nelson Silva will succeed Mrs Murray as Chairman of the Corporate Responsibility Committee from 2 February 2017.

 

Summary and outlook

 

Compass has had another strong year. Performance in North America continues to be excellent, and we are pleased with our progress in Europe. In the Rest of World, the performance is mixed, with the impact of the cyclical downturn in our commodity related business offsetting reasonable progress elsewhere.

 

Our expectations for 2017 are positive, with growth weighted to the second half of the year. The pipeline of new contracts is good and our focus on organic growth, efficiencies and cash gives us confidence in another year of delivery.

 

In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue growth, margin improvement, and continued returns.

 

 

 

 

Richard Cousins

Group Chief Executive

22 November 2016

           

 

 

 

 

Business Review

 

 

2016 has been another strong year with good organic revenue growth of 5.0%, underlying margin delivery of 7.2% and an increase in free cash flow of 26%.

 

Financial summary

 

 

2016

 

2015

 

Increase

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Underlying at constant currency

 

£19,871m

 

£18,725m

 

6.1%

Underlying at reported rates

 

£19,871m

 

£17,843m

 

11.4%

Statutory

 

£19,605m

 

£17,590m

 

11.5%

Organic growth

 

5.0%

 

5.8%

 

 

 

 

 

 

 

 

 

Total operating profit

 

 

 

 

 

 

Underlying at constant currency

 

£1,445m

 

£1,368m

 

5.6%

Underlying at reported rates

 

£1,445m

 

£1,296m

 

11.5%

Statutory

 

£1,409m

 

£1,261m

 

11.7%

 

Operating margin

 

 

 

 

 

 

Underlying at reported rates

 

7.2%

 

7.2%

 

-

Statutory

 

7.1%

 

7.1%

 

-

 

 

 

 

 

 

 

Profit before tax

 

 

 

 

 

 

Underlying at constant currency

 

£1,344m

 

£1,260m

 

6.7%

Underlying at reported rates

 

£1,344m

 

£1,192m

 

12.8%

Statutory

 

£1,321m

 

£1,159m

 

14.0%

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

Underlying at constant currency

 

61.1p

 

56.7p

 

7.8%

Underlying at reported rates

 

61.1p

 

53.7p

 

13.8%

Statutory

 

60.4p

 

52.3p

 

15.5%

 

 

 

 

 

 

 

Free cash flow

 

 

 

 

 

 

Underlying at reported rates

 

£908m

 

£722m

 

25.8%

Statutory

 

£899m

 

£686m

 

31.0%

 

 

 

 

 

 

 

Full year dividend per ordinary share

 

31.7p

 

 29.4p

 

7.8%

 

 

 

 

Business Review (continued)

 

 

Segmental performance

 

 

Underlying revenue

 

Underlying revenue growth

 

 

2016

£m

 20151

£m

 

Reported Rates

Constant Currency

Organic

North America

 

11,198

9,361

 

19.6%

10.5%

8.1%

Europe

 

5,458

5,192 

 

5.1%

2.7%

2.8%

Rest of World

 

3,215

3,290

 

(2.3)%

(1.9)%

(1.2)%

Total

 

19,871

17,843

 

11.4%

6.1%

5.0%

 

 

 

 

 

 

 

 

 

 

Underlying operating profit

 

Underlying operating margin

 

 

 

2016

20151

 

2016

20151

 

 

 

£m

£m

 

%

%

 

North America

 

908

760

 

8.1%

8.1%

 

Europe

 

394

374

 

7.2%

7.2%

 

Rest of World

 

218

241

 

6.8%

7.3%

 

Unallocated overheads

 

(65)

(66)

 

 

 

 

Total before associates and EM & OR restructuring

 

1,455

1,309

 

7.3%

7.3%

 

EM & OR restructuring

 

(25)

(26)

 

 

 

 

Total before associates

 

1,430

1,283

 

7.2%

 7.2%

 

Associates

 

15

13

 

 

 

 

Total

 

1,445

1,296

 

 

 

 

 

1 Europe and Rest of World segments have been restated to reflect a change in the way these are managed.

 

Statutory and underlying results

 

 

 

2016

2015

 

 

 

Statutory

Adjustments

Underlying

Statutory

Adjustments

Underlying

Constant Currency

 

 

£m

£m

£m

£m

£m

£m

£m

Revenue

 

19,605

266

19,871

17,590

253

17,843

18,725

Operating profit

 

1,409

36

1,445

1,261

35

1,296

1,368

Other gains/(losses)

 

1

(1)

-

(1)

1

-

-

Net finance costs

 

(89)

(12)

(101)

(101)

(3)

(104)

(108)

Profit before tax

 

1,321

23

1,344

1,159

33

1,192

1,260

Tax

 

(319)

(11)

(330)

(282)

(10)

(292)

(309)

Profit after tax

 

1,002

12

1,014

877

23

900

951

Non-controlling interest

 

(10)

-

(10)

(8)

-

(8)

(8)

Attributable profit

 

992

12

1,004

869

23

892

943

Average number of shares (millions)

 

1,643

-

1,643

1,662

-

1,662

1,662

Basic earnings per share (pence)

 

60.4p

0.7p

61.1p

52.3p

1.4p

53.7p

56.7p

EBITDA

 

1,835

5

1,840

1,627

9

1,636

n/a

Gross capex

 

580

-

580

506

1

507

n/a

Free cash flow

 

899

9

908

686

36

722

n/a

 

 

 

 

 

 

                     

Further details of the adjustments can be found in the Consolidated income statement and Consolidated cash flow statement.

 

 

 

 

 

Business Review (continued)

 

 

Statutory results

 

Statutory revenue was £19,605 million (2015: £17,590 million), with growth of 11.5%. Statutory operating profit was £1,409 million (2015: £1,261 million), an increase of 11.7% over the prior year. Statutory profit before tax of £1,321 million (2015: £1,159 million) delivered basic earnings per share of 60.4 pence (2015: 52.3 pence), an increase of 15.5% over the prior year. The weakening of sterling against the majority of the Group's key currencies has given rise to approximately 6% positive impact in each of these measures.

 

Underlying revenue

 

Underlying revenue was £19,871 million (2015: £ 17,843 million), an increase of 11.4%. If we restate 2015's revenue at the 2016 average exchange rates for the year, it would increase by £882 million. On a constant currency basis, underlying revenue has therefore increased by £1,146 million, or 6.1%. Organic revenue growth for the year was 5.0%, comprising new business of 8.8%, a retention rate of 94.1% and like for like growth of 2.1%.

 

Underlying operating profit

 

Underlying operating profit was £1,445 million (2015: £1,296 million), an increase of 11.5%. If we restate 2015's profit at the 2016 average exchange rates for the year, it would increase by £72 million. On a constant currency basis, underlying operating profit has therefore increased by £77 million, or 5.6%.

 

Underlying finance costs

 

The underlying net finance cost was £101 million (2015: £104 million), with the decrease a result of lower pension interest costs given the increased surplus on the UK scheme. For 2017, we expect an underlying net finance cost of around £110 million, reflecting the weakness of sterling on foreign denominated debt. This equates to an effective interest rate of around 3% on gross debt.

 

Underlying income tax expense

 

On an underlying basis, the tax charge was £330 million (2015: £292 million), equivalent to an effective tax rate of 24.5% (2015: 24.5%).

In 2017 we expect to see upward pressure on the tax rate. This is a consequence of both the changing regulatory environment affecting all multinationals and the impact of exchange rates. Our current expectations are for the 2017 tax rate to be around 1% higher than 2016, but we note that we are likely to see a continuing period of significant uncertainty in the international corporate tax environment as we look forward.

 

Underlying basic earnings per share

 

On an underlying basis, the basic earnings per share grew by 13.8% to 61.1 pence (2015: 53.7 pence). If we restate 2015's basic earnings per share at the 2016's average rates for the year, it would be 56.7 pence. On a constant currency basis, basic earnings per share therefore increased by 7.8%.

 

Dividends

 

Our dividend policy is to grow the dividend in line with growth in underlying constant currency earnings per share. It is therefore proposed that a final dividend of 21.1 pence per share be paid on 20 February 2017 to shareholders on the register on 20 January 2017. This will result in a total dividend for the year of 31.7 pence per share (2015: 29.4 pence per share), a year on year increase of 7.8%. The dividend is covered 1.9 times on an underlying earnings basis and 1.8 times on a cash basis. We remain committed to growing the dividend in line with constant currency earnings.

 

 

 

 

Business Review (continued)

 

 

 

Underlying Free cash flow

 

Underlying free cash flow grew by 26% to £908 million (2015: £722 million), in part due to foreign exchange. Free cash flow conversion has increased to 63% (2015: 56%).

 

Underlying gross capital expenditure of £580 million (2015: £507 million) is equivalent to 2.9% of underlying revenues (2015: 2.8% of underlying revenues), and we expect that capex in 2017 will be at a similar percentage of underlying revenues. We continue to deliver strong returns on our capital expenditure across all regions.

 

Excluding pensions and provisions, trade working capital has decreased by £12 million (2015: £17 million increase). Some underlying improvements and some timing differences offset the negative impact of around £70 million from the timing of our payroll run in September in the USA and UK. We continue to focus on improving working capital and expect a small outflow in 2017.

 

The cash outflow of £39 million (2015: £59 million) on post-employment benefit obligations largely reflects payments agreed with trustees to reduce deficits on the defined benefit pension scheme in the UK. Following the completion of the tri-annual valuation of the Compass Group Pension Plan in the UK, which now has a funding surplus, we have agreed with the trustees that we will stop our deficit reduction payments. We therefore expect our cash outflow on post-employment benefit obligations to reduce to around £20 million in 2017.

 

The underlying cash tax rate for the year was 18% (2015: 20%) which is slightly lower than the expected level. This is largely a result of certain legislation changes during the year in North America. In 2017 we expect the cash tax rate to be in the range of 20 to 23%.

 

The net interest outflow for the year was £94 million (2015: £93 million).

 

Post-employment benefit obligations

 

The Group has continued to review and monitor its pension obligations throughout the year, working closely with the trustees and members of schemes around the Group to ensure proper and prudent assumptions are used and adequate provision and contributions are made.

 

The Group has a net pension deficit of £21 million at 30 September 2016, calculated in accordance with IAS 19, for all Group defined benefit schemes (2015: £9 million deficit). The total pensions charge for defined contribution schemes in the year was £100 million (2015: £84 million) and £17 million (2015: £21 million) for defined benefit schemes. Included in the defined benefit scheme costs was a £1 million charge to net finance cost (2015: £5 million), which has reduced due to the increase in the UK accounting surplus in 2015 compared to 2014.

 

Acquisition payments

 

The total cash spend on acquisitions in the year, net of cash acquired, was £180 million (2015: £89 million), comprising £148 million of infill acquisitions, £2 million of acquisition transaction costs and £30 million of deferred consideration relating to prior years' acquisitions.

 

Return on capital employed

 

Return on capital employed was 19.4% (2015: 19.1%) based on underlying operations, net of tax at the effective underlying rate of 24.5% (2014: 24.5%), and excluding the Group's non-controlling partners' share of total operating profit. The average capital employed was £5,565 million (2015: £5,093 million). On a constant currency basis, the increase in return on capital employed would have been 10 basis points, with the remainder a result of currency movements.

 

 

 

 

Business Review (continued)

 

 

 

Purchase of own shares

 

During the year, the Group purchased shares for a consideration of £100 million (2015: £328 million).

 

Related party transactions

 

We have not had, or expect to have, any transactions with related parties that have a material effect on the financial performance or position of the Group.

 

Financial position

 

The ratio of net debt to market capitalisation of £24,737 million as at 30 September 2016 was 12% (2015: 15%).

 

At the end of the year, net debt was £2,874 million (2015: £2,603 million). The ratio of net debt to underlying EBITDA was 1.6x, higher than usual due to movements in currency in the final quarter of the year. Our leverage policy is to maintain strong investment grade credit ratings, returning any surplus cash to shareholders to target net debt to underlying EBITDA of around 1.5x.

 

Shareholder return

 

The market price of the Group's ordinary shares at the close of the financial year was 1,495.00 pence per share (2015: 1,053.00 pence per share).

 

Risks and uncertainties

 

The Board takes a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Group, its shareholders, employees, clients, consumers and all other stakeholders.

 

The principal risks and uncertainties that face the business and the activities the Group undertakes to mitigate these are set out on pages 14 to 16.

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review, as is the financial position of the Group, its cash flows, liquidity position, and borrowing facilities.

 

The Group has considerable financial resources together with longer term contracts with a number of clients and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months from the date of approval of this Results Announcement. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

 

 

 

 

 

 

 

Johnny Thomson

Group Finance Director

22 November 2016

 

 

 

 

Focus on Risk        

 

 

Identifying and managing risk

 

The Board continues to take a proactive approach to recognising, assessing and mitigating risk with the aim of protecting its employees and consumers and safeguarding the interests of the Company and its shareholders in the constantly changing environment in which it operates.

 

As set out in the Corporate Governance section within the Annual Report, the Group has policies and procedures in place to ensure that risks are properly identified, evaluated and managed at the appropriate level within the business.

 

The identification of risks and opportunities, the development of action plans to manage the risks and maximise the opportunities, and the continual monitoring of progress against agreed key performance indicators (KPIs) are integral parts of the business process and core activities throughout the Group.

 

The table below sets out the principal risks and uncertainties facing the business at the date of this Announcement. These have been subject to robust assessment and review. They do not comprise all of the risks that the Group may face and are not listed in any order of priority. Additional risks and uncertainties not presently known to management, or deemed to be less material at the date of this Report, may also have an adverse effect on the Group. These include risks resulting from the recent Brexit Referendum which could adversely affect the risks noted under the 'economic and political environment' noted in the table below as well as affecting financial risks such as liquidity and credit.

 

Although the risks related to the Brexit Referendum have been discussed by the Board, it is too early to properly understand the impact on the business. In accordance with the provisions of the UK Corporate Governance Code, the Board has taken into consideration the principal risks in the context of determining whether to adopt the going concern basis of accounting and when assessing the prospects of the Company for the purpose of preparing the Viability Statement. The Going Concern and Viability Statement can be found in the Strategic Report in the Annual Report.

 

The Group faces a number of operational risks on an ongoing basis such as litigation and financial (including liquidity and credit) risk and some wider risks, for example, environmental and reputational. Additionally, there are risks (such as those relating to the eurozone economy, pensions, and acquisitions and investments) which vary in importance depending on changing conditions. All risks disclosed in previous years can be found in the annual reports available on our website at www.compass-group.com. We recognise that these risks remain important to the business and they are kept under review. However, we have focused the disclosures on pages 14 to 16 on those risks that are currently considered to be more significant to the Group.

 

 

 
Change in risk key
 
Ý   Increased risk                                               Ý   Consistent risk
RISKS
DESCRIPTION
EXAMPLES OF MITIGATION
 HEALTH ANDSAFETY                                                                                                                             
HEALTH AND SAFETY
2015 Ü
2016 Ü
Health and safety is our number one operational priority. We are focused on protecting people’s wellbeing, as well as avoiding serious business interruption and potential damage to our reputation. Compass feeds millions of consumers and employs thousands of people around the world every day. Therefore, setting the highest standards for food hygiene and safety is paramount.
All management meetings throughout the Group feature a health and safety update as their first agenda item.
Health and safety improvement KPIs are included in the annual bonus plans for each of the business’ management teams.
The Group has policies, procedures and standards in place to ensure compliance with legal obligations and industry standards.
The safety and quality of our global supply chain are assured through compliance against a robust set of standards which are regularly reviewed, audited and upgraded as necessary to improve supply chain visibility and product integrity.
 
 
 
 
Focus on Risk (continued)   
 
 
 
RISKS
DESCRIPTION
EXAMPLES OF MITIGATION
CLIENTS AND CONSUMERS                                                                                                                        
CLIENT AND CONSUMER SALES AND RETENTION
2015 Ü
2016 Ü
Our business relies on securing and retaining a diverse range of clients.
We have strategies which strengthen our long term relationships with our clients and consumers based on quality, value and innovation.
Our business model is structured so that we are not reliant on one particular sector, geography or group of clients.
BIDDING
2015 Ü
2016 Ü
Each year, the Group could bid for a large number of opportunities.
A rigorous tender review process is in place, which includes a critical assessment of contracts to identify potential risks (including social and ethical risks) and rewards, prior to approval at an appropriate level in the organisation.
SERVICE DELIVERY AND CONTRACTUAL COMPLIANCE
2015 Ü
2016 Ü
The Group’s operating companies contract with a large number of clients. Failure to comply with the terms of these contracts, including proper delivery of services, could lead to loss of business.
Processes are in place to ensure that the services delivered to clients are of an appropriate standard and comply with the required contract terms and conditions.
COMPETITION
2015 Ü
2016 Ü
We operate in a highly competitive marketplace. The levels of concentration and outsource penetration vary by country and by sector. Some markets are relatively concentrated with two or three key players. Others are highly fragmented and offer significant opportunities for consolidation and penetration of the self-operated market. Aggressive pricing from our competitors could cause a reduction in our revenues and margins.
We aim to minimise this by continuing to promote our differentiated propositions and by focusing on our points of strength, such as flexibility in our cost base, quality and value of service and innovation.
PEOPLE                                                                                                                                                 
RECRUITMENT
2015 Ü
2016 Ü
Failure to attract and recruit people with the right skills at all levels could limit the success of the Group. The Group faces resourcing challenges in some of its businesses due to a lack of industry experience amongst candidates and appropriately qualified people, and the seasonal nature of some of our business.
The Group aims to mitigate this risk by efficient, time critical resource management, mobilisation of existing, experienced employees within the organisation and through offering training and development programmes.
RETENTION AND MOTIVATION
2015 Ü
2016 Ü
Retaining and motivating the best people with the right skills, at all levels of the organisation, is key to the long term success of the Group.
The Group has established training, development, performance management and reward programmes to retain, develop and motivate our best people.
The Group has a well established employee engagement initiative, Your Voice, which helps us to monitor, understand and respond to our employees’ needs.
ECONOMIC AND POLITICAL ENVIRONMENT                                                                                                   
ECONOMY
2015 Ý
2016 Ý
Some sectors of our business could be susceptible to adverse changes in economic conditions and employment levels.
With the variable and flexible nature of our cost base, it is generally possible to contain the impact of these adverse conditions.
 
 
 
 
 
Focus on Risk (continued)   
 
 
RISKS
DESCRIPTION
EXAMPLES OF MITIGATION
ECONOMIC AND POLITICAL ENVIRONMENT                                                                                                  
COST INFLATION
2015 Ý
2016 Ü
Our objective is always to deliver the right level of service in the most efficient way. An increase in the cost of labour, for example, minimum wages in the USA and UK, or food, especially in countries such as Brazil, could constitute a risk to our ability to do this.
As part of our MAP framework, we seek to manage inflation by continuing to drive greater efficiencies through menu management, supplier rationalisation, labour scheduling and productivity. Cost indexation in our contracts also gives us the contractual right to review pricing with our clients.
POLITICAL STABILITY
2015 Ü
2016 Ý
We are a global business operating in countries and regions with diverse economic and political conditions. Our operations and earnings may be adversely affected by political or economic instability caused, for example, by the Brexit Referendum.
The Group remains vigilant to future changes presented by emerging markets or fledgling administrations and we try to anticipate and contribute to important changes in public policy.
COMPLIANCE AND FRAUD                                                                                                                        
COMPLIANCE AND FRAUD
2015 Ü
2016 Ý
Ineffective compliance management with increasingly complex laws and regulations, or evidence of fraud, could have an adverse effect on the Group’s reputation and could result in an adverse impact on the Group’s performance if significant financial penalties are levied or a criminal action is brought against the Company or its directors.
The Group’s zero tolerance based Codes of Business Conduct and Ethics continue to govern all aspects of our relationships with our stakeholders. All alleged breaches of the Codes, including any allegations of fraud, are investigated.
The Group’s procedures include regular operating reviews, underpinned by a continual focus on ensuring the effectiveness of internal controls.
Regulation and compliance risk is also considered as part of our annual business planning process.           
TAX COMPLIANCE
2015 Ý
2016 Ü
As a Group, we seek to plan and manage our tax affairs efficiently in the jurisdictions in which we operate. In doing so, we act in compliance with the relevant laws and disclosure requirements.
However, in an increasingly complex international corporate tax environment, a degree of uncertainty is inevitable and we note in particular the policy efforts being led by the EU and the OECD which may have a material impact on the taxation of all international businesses.
We manage and control these risks in a proactive manner and in doing so exercise our judgement and seek appropriate advice from reputable professional firms. Tax risks are assessed as part of the Group’s formal governance process and are reviewed by the Board and the Audit Committee on a regular basis.
INFORMATION SYSTEMS AND TECHNOLOGY                                                                                                 
INFORMATION SYSTEMS AND TECHNOLOGY
2015 Ý
2016 Ý
The digital world creates many risks for a global business including technology failures, loss of confidential data and damage to brand reputation, through, for example, the use of social media.
We seek to assess and manage the maturity of our enterprise risk and security infrastructure and our ability to effectively defend against current and future cyber risks by using analysis tools and experienced professionals to evaluate and mitigate potential impacts.
The Group relies on a variety of IT systems in order to manage and deliver services and communicate with our clients, consumers, suppliers and employees.
We are focused on the need to maximise the effectiveness of our information systems and technology as a business enabler and to reduce both cost and exposure as a result.
 
 
 
 

 

 

Compass Group PLC

Consolidated Financial Statements

 

 

CONSOLIDATED INCOME STATEMENT

 

 

 

 

 

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

2016

Total

 2015

 

 

Notes

 £m

 £m

 

 

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

 

 

 1

19,871

17,843

 

Less: share of sales of equity accounted joint ventures

 

 

10

(266)

(253)

 

Revenue

 

 

 

19,605

17,590

 

Operating costs

 

 

 2

(18,235)

(16,368)

 

Operating costs, excluding Emerging Markets and Offshore & Remote restructuring

 

 

 

(18,210)

(16,342)

 

Emerging Markets and Offshore & Remote restructuring

 

 

 

(25)

(26)

 

Operating profit before joint ventures and associates

 

 

 

1,370

1,222

 

Share of profit after tax of joint ventures and associates

 

 

1,10 

39

39

 

Operating profit

 

 

 

1,409

1,261

 

Underlying operating profit1

 

 

1

1,445

1,296

 

Amortisation of intangibles arising on acquisition

 

 

8

(31)

(26)

 

Acquisition transaction costs

 

 

19

(2)

(2)

 

Adjustment to contingent consideration on acquisition

 

 

 

-

(5)

 

Share-based payments expense - non-controlling interest call option

 

 

 

(1)

-

 

Tax on share of profit of joint ventures

 

 

 

(2)

(2)

 

Profit/(loss) on disposal of US businesses

 

 

 

1

(1)

 

Finance income

 

 

 3

4

3

 

Finance costs

 

 

3

(105)

(107)

 

Other financing items

 

 

 

12

3

 

Profit before tax

 

 

 

1,321

1,159

 

Income tax expense

 

 

 4

(319)

(282)

 

Profit for the year

 

 

 

1,002

877

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO

 

 

 

 

 

 

Equity shareholders of the Company

 

 

 

992

869

 

Non-controlling interests

 

 

 

10

8

 

Profit for the year

 

 

 

1,002

877

 

BASIC EARNINGS PER SHARE (PENCE)

 

 

 5

60.4p

52.3p

 

DILUTED EARNINGS PER SHARE (PENCE)

 

 

5

60.3p

52.2p

 

 

 

 

5

1 Underlying operating profit excludes amortisation of intangibles arising on acquisition, acquisition transaction costs, adjustment to contingent consideration on acquisition and share-based payments expense relating to non-controlling interest call options, but includes share of profit after tax of associates and operating profit of joint ventures.

 

 

 

  

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

 

 

 

2016

2015

£m

£m

Profit for the year

 

1,002

877

Other comprehensive income

 

 

 

Items that are not reclassified subsequently to profit or loss

 

 

 

Remeasurement of post-employment benefit obligations - loss

 

(500)

(37)

Return on plan assets, excluding interest income - gain

 

480

145

Tax on items relating to the components of other comprehensive income

 

6

(20)

 

 

(14)

88

Items that may be reclassified subsequently to profit or loss

 

 

 

Currency translation differences

 

158

(92)

 

 

158

(92)

Total other comprehensive income/(loss) for the year

 

144

(4)

Total comprehensive income for the year

 

1,146

873

 

 

 

 

ATTRIBUTABLE TO

 

 

 

Equity shareholders of the Company

 

1,136

865

Non-controlling interests

 

10

8

Total comprehensive income for the year

 

1,146

873

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to equity shareholders of the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium account

Capital redemption reserve

 Own shares

Other reserves

Retained earnings

Non-controlling interests

Total

 

 

£m

 £m

£m

£m

£m

£m

£m

£m

At 1 October 2015

 

176

182

295

(1)

4,189

(2,904)

13

1,950

Profit for the year

 

-

-

-

-

-

992

10

1,002

Other comprehensive income

 

 

 

 

 

 

 

 

 

Currency translation differences

 

-

-

-

-

158

-

-

158

Remeasurement of post-employment benefit obligations - loss

 

-

-

-

-

-

(500)

-

(500)

Return on plan assets, excluding interest income - gain

 

-

-

-

-

-

480

-

480

Tax on items relating to the components of other comprehensive income

 

-

-

-

-

(2)

8

-

6

Total other comprehensive income/(loss)

 

-

-

-

-

156

(12)

-

144

Total comprehensive income for the year

 

-

-

-

-

156

980

10

1,146

Employee share options

 

-

-

-

-

-

-

-

-

Fair value of share-based payments

 

-

-

-

1

16

1

-

18

Release of LTIP award settled by issue of shares

 

-

-

-

-

(2)

-

-

(2)

Tax on items taken directly to equity

 

-

-

-

-

-

9

-

9

Share buyback1

 

-

-

-

-

-

(100)

-

(100)

Issue of treasury shares to satisfy employee share scheme awards exercised

-

-

-

-

-

3

-

3

Other changes

 

-

-

-

-

-

-

1

1

 

 

176

182

295

-

4,359

(2,011)

24

3,025

Dividends paid to Compass shareholders (note 6)

 

-

-

-

-

-

(496)

-

(496)

Dividends paid to non-controlling interests

 

-

-

-

-

-

-

(9)

(9)

At 30 September 2016

 

176

182

295

-

4,359

(2,507)

15

2,520

1 Including stamp duty and brokers' commission.

 

 Share-based payment

Merger

Revaluation

Translation

Adjustment for non-controlling interest put options

Total other

 

reserve

reserve

reserve

reserve

reserve

reserves

OTHER RESERVES

£m

 £m

£m

£m

£m

£m

At 1 October 2015

179

4,170

7

(161)

(6)

4,189

Other comprehensive income

 

 

 

 

 

 

Currency translation differences

-

-

-

158

-

158

Tax on items relating to the components of other comprehensive income (note 4)

-

-

-

(2)

-

(2)

Total other comprehensive income

-

-

-

156

-

156

Fair value of share-based payments

16

-

-

-

-

16

Release of LTIP award settled by issue of shares

(2)

-

-

-

-

(2)

At 30 September 2016

193

4,170

7

(5)

(6)

4,359

                           

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

Own shares held by the Group represent 16,198 ordinary shares in Compass Group PLC (2015: 27,799 ordinary shares). No shares (2015: 11,601) are held by the Compass Group Employee Share Trust (ESOP) and 16,198 (2015: 16,198) shares are held by the Compass Group Long Term Incentive Plan Trust (LTIPT). These shares are listed on a recognised stock exchange and their market value at 30 September 2016 was £0.2 million (2015: £0.3 million). The nominal value held at 30 September 2016 was £1,721 (2015: £2,954).
 

ESOP and LTIPT are discretionary trusts for the benefit of employees and the shares held are used to satisfy some of the Group's liabilities to employees for share options, share bonus and long term incentive plans. All of the shares held by the ESOP and LTIPT are required to be made available in this way.

 

Up to 31 March 2016, repurchased ordinary shares were transferred and held in treasury for the purpose of satisfying the Company's obligations under employee equity incentive schemes.  From 1 April 2016 onwards, all repurchased ordinary shares were cancelled rather than being placed in treasury.

 

The merger reserve arose in 2000 following the demerger from Granada Compass plc.

 

 

Attributable to equity shareholders of the Company

 

 

 

 

 

Share capital

 Share premium account

Capital redemption reserve

Own shares

Other reserves

Retained earnings

Non-controlling interests

Total

 

 

 

£m

 £m

£m

£m

£m

£m

£m

£m

 

At 1 October 2014

178

174

293

(1)

4,277

(3,082)

9

1,848

 

Profit for the year

-

-

-

-

-

869

8

877

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

-

(92)

-

-

(92)

 

Remeasurement of post-employment benefit obligations - loss

-

-

-

-

-

(37)

-

(37)

 

Return on plan assets, excluding interest income - gain

-

-

-

-

-

145

-

145

 

Tax on items relating to the components of other comprehensive income

-

-

-

-

(1)

(19)

-

(20)

 

Total other comprehensive (loss)/income

-

-

-

-

(93)

89

-

(4)

 

Total comprehensive (loss)/income for the year

-

-

-

-

(93)

958

8

873

 

Issue of shares (for cash)

-

2

-

-

-

-

-

2

 

Fair value of share-based payments

-

-

-

-

15

-

-

15

 

Tax on items taken directly to equity

-

-

-

-

-

2

-

2

 

Share buyback1

(2)

-

2

-

-

(328)

-

(328)

 

Issue of treasury shares to satisfy employee share scheme awards exercised

-

-

-

-

-

1

-

1

 

Release of LTIP award settled by issue of new shares

-

6

-

-

(6)

-

-

-

 

Other changes

-

-

-

-

(4)

2

2

-

 

 

176

182

295

(1)

4,189

(2,447)

19

2,413

 

Dividends paid to Compass shareholders (note 6)

-

-

-

-

-

(457)

-

(457)

 

Dividends paid to non-controlling interests

-

-

-

-

-

-

(6)

(6)

 

At 30 September 2015

176

182

295

(1)

4,189

(2,904)

13

1,950

 

OTHER RESERVES

Share-based payment reserve

Merger reserve

Revaluation reserve

Translation reserve

Adjustment for non-controlling interest put options reserve

Total other reserves

£m

 £m

£m

£m

£m

£m

At 1 October 2014

170

4,170

7

(70)

-

4,277

Other comprehensive income

 

 

 

 

 

 

Currency translation differences

-

-

-

(92)

-

(92)

Tax on items relating to the components of other comprehensive income

-

-

-

(1)

-

(1)

Total other comprehensive loss

-

-

-

(93)

-

(93)

Fair value of share-based payments

15

-

-

-

-

15

Release of LTIP award settled by issue of new shares

(6)

-

-

-

-

(6)

Other changes

-

-

-

2

(6)

(4)

At 30 September 2015

179

4,170

7

(161)

(6)

4,189

                           

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

CONSOLIDATED BALANCE SHEET

 

 

 

AS AT 30 SEPTEMBER 2016

 

 

 

 

 

2016

2015

 

Notes

 £m

 £m

NON-CURRENT ASSETS

 

 

 

Goodwill

7

4,050

3,538

Other intangible assets

8

1,469

1,130

Property, plant and equipment

9

953

764

Interests in joint ventures and associates

10

222

203

Other investments

 

50

38

Trade and other receivables

11

97

71

Deferred tax assets*

 

149

182

Derivative financial instruments**

 

184

58

Non-current assets

 

7,174

5,984

CURRENT ASSETS

 

 

 

Inventories

 

347

282

Trade and other receivables

11

2,596

2,115

Tax recoverable*

 

77

64

Cash and cash equivalents**

12

346

283

Derivative financial instruments**

 

2

19

Current assets

 

3,368

2,763

Total assets

 

10,542

8,747

CURRENT LIABILITIES

 

 

 

Short term borrowings**

13

(321)

(247)

Derivative financial instruments**

 

(9)

(7)

Provisions

15

(143)

(136)

Current tax liabilities*

 

(195)

(169)

Trade and other payables

14

(3,851)

(3,157)

Current liabilities

 

(4,519)

(3,716)

NON-CURRENT LIABILITIES

 

 

 

Long term borrowings**

13

(3,075)

(2,684)

Derivative financial instruments**

 

(1)

(25)

Post-employment benefit obligations

16

(21)

(9)

Provisions

15

(280)

(251)

Deferred tax liabilities*

 

(40)

(28)

Trade and other payables

14

(86)

(84)

Non-current liabilities

 

(3,503)

(3,081)

Total liabilities

 

(8,022)

(6,797)

Net assets

 

2,520

1,950

 

 

 

 

EQUITY

 

 

 

Share capital

17

176

176

Share premium account

 

182

182

Capital redemption reserve

 

295

295

Less: Own shares

 

-

(1)

Other reserves

 

4,359

4,189

Retained earnings

 

(2,507)

(2,904)

Total equity shareholders' funds

 

2,505

1,937

Non-controlling interests

 

15

13

Total equity

 

2,520

1,950

* Component of current and deferred taxes. 

 

 

 

** Component of net debt.

 

 

 

 

 

 

 

Approved by the Board of Directors on 22 November 2016 and signed on their behalf by

 

 

 

 

 

 

 

RICHARD COUSINS, Director

 

 

 

JOHNNY THOMSON, Director

 

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

CONSOLIDATED CASH FLOW STATEMENT

 

 

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

 

 

 

2016

2015

 

Notes

 £m

 £m

CASH FLOW FROM OPERATING ACTIVITIES

 

 

 

Cash generated from operations

20

1,768

1,476

Interest paid

 

(98)

(96)

Tax received

 

17

19

Tax paid

 

(263)

(261)

Net cash from operating activities

 

1,424

1,138

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

Purchase of subsidiary companies and investments in associated undertakings1

 

(180)

(89)

Proceeds from sale of subsidiary companies and associated undertakings1

 

2

3

Purchase of intangible assets

8

(267)

(222)

Purchase of property, plant and equipment2

 

(311)

(282)

Proceeds from sale of property, plant and equipment/intangible assets

 

29

28

Purchase of other investments

 

(6)

(1)

Proceeds from sale of other investments

 

2

1

Dividends received from joint ventures and associates

 

33

27

Interest received

 

4

3

Net cash used in investing activities

 

(694)

(532)

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

Proceeds from issue of ordinary share capital

 

-

2

Purchase of own shares3

 

(100)

(328)

Receipts from issue of treasury shares to satisfy employee share scheme awards exercised

 

3

1

Increase in borrowings

21

194

334

Repayment of borrowings

21

(309)

(250)

Repayment of obligations under finance leases

21

(3)

(5)

Equity dividends paid

6

(496)

(457)

Dividends paid to non-controlling interests

 

(9)

(6)

Net cash used in financing activities

 

(720)

(709)

CASH AND CASH EQUIVALENTS

 

 

 

Net increase/(decrease) in cash and cash equivalents

21

10

(103)

Cash and cash equivalents at beginning of the year

21

283

408

Currency translation gains/(losses) on cash and cash equivalents

21

53

(22)

Cash and cash equivalents at end of the year

21

346

283

1 Net of cash acquired or disposed and payments received or made under warranties and indemnities.

 

 

 

2 Includes property, plant and equipment purchased under client commitments.

 

 

 

3 Includes stamp duty and brokers' commission.

 

 

 

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

RECONCILIATION OF FREE CASH FLOW

 

 

 

FOR YEAR ENDED 30 SEPTEMBER 2016

 

 

2016

2015

 

 

 £m

 £m

Net cash from operating activities

 

1,424

1,138

Purchase of intangible assets

 

(267)

(222)

Purchase of property, plant and equipment

 

(311)

(282)

Proceeds from sale of property, plant and equipment/intangible assets

 

29

28

Purchase of other investments

 

(6)

(1)

Proceeds from sale of other investments

 

2

1

Dividends received from joint ventures and associates

 

33

27

Interest received

 

4

3

Dividends paid to non-controlling interests

 

(9)

(6)

Free cash flow

 

899

686

Add back: Europe & Japan cash restructuring costs in the year

 

9

36

Underlying free cash flow

 

908

722

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

 

 

 

 

 

 

The financial information included within this announcement has been prepared using accounting policies in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and adopted for use in the European Union (EU), and in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority. The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The Auditor has reported on those accounts; its Reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying its Report and did not contain statements under s498(2) or (3) Companies Act 2006.

 

1 SEGMENTAL REPORTING

 

The management of the Group's operations, excluding Central activities, is organised within three segments: North America, Europe and our Rest of World markets. These, together with Central activities, comprise the Group's reportable segments. Each segment derives revenue from delivery of food and support services.   Our geographical segments have been restated in 2015 to reflect a change in the way these are managed: Europe now includes Turkey and Russia and Rest of World includes Japan.

             

 

 

 

 

 

Geographical segments

 

 

 

 

North America

Europe

Rest of World

Total

REVENUE1

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures2,3

11,198

5,458

3,215

19,871

 

 

 

 

 

 

 

YEAR ENDED 30 SEPTEMBER 20154

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures2,3

9,361

5,192

3,290

17,843

 

 

 

 

Sectors

 

REVENUE¹

Business & Industry

Education

Healthcare & Seniors

Sports & Leisure

Defence, Offshore & Remote

Total

 

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures2

7,602

3,621

4,472

2,416

1,760

19,871

 

 

 

 

 

 

 

YEAR ENDED 30 SEPTEMBER 2015

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures2

6,743

3,139

3,847

2,138

1,976

17,843

1 There is no inter-segmental trading.

2 This is the revenue measure considered by the chief operating decision maker.

 

 

 

 

 

 

3 Continuing underlying revenue from external customers arising in the UK, the Group's country of domicile, was £1,981 million (2015: £1,912 million).  Continuing underlying revenue from external customers arising in the US was £10,350 million (2015: £8,557 million).  Continuing underlying revenue from external customers arising in all foreign countries from which the Group derives revenue was £17,890 million (2015: £15,931 million).

4 2015 Europe and Rest of World segments have been restated to reflect a change in the way these are managed.

 

 

  

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

1 SEGMENTAL REPORTING CONTINUED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical segments

 

 

 

North America

Europe

Rest of

 World

Central activities

Total

RESULT

 

£m

£m

£m

£m

£m

YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

Underlying operating profit before joint ventures and associates and Emerging Markets and Offshore & Remote restructuring

906

394

194

(65)

1,429

Add: Share of profit before tax of joint ventures

2

-

24

-

26

Underlying operating profit before associates and Emerging Markets and Offshore & Remote restructuring2

908

394

218

(65)

1,455

Add: Share of profit of associates

10

5

-

-

15

Underlying operating profit before Emerging Markets and Offshore & Remote restructuring

918

399

218

(65)

1,470

Less: Emerging Markets and Offshore & Remote restructuring1

-

(6)

(19)

-

(25)

Underlying operating profit2

918

393

199

(65)

1,445

 

 

 

 

Geographical segments

 

 

 

 

North America

Europe

Rest of World

Central activities

Total

 

RESULT

£m

£m

£m

£m

£m

 

YEAR ENDED 30 SEPTEMBER 20153

 

 

 

 

 

 

Underlying operating profit before joint ventures and associates and Emerging Markets and Offshore & Remote restructuring

759

372

216

(66)

1,281

 

Add: Share of profit of joint ventures

1

2

25

-

28

 

Underlying operating profit before associates and Emerging Markets and Offshore & Remote restructuring2

760

374

241

(66)

1,309

 

Add: Share of profit of associates

8

5

-

-

13

 

Underlying operating profit before Emerging Markets and Offshore & Remote restructuring

768

379

241

(66)

1,322

 

Less: Emerging Markets and Offshore & Remote restructuring1

-

(3)

(18)

(5)

(26)

 

Underlying operating profit2

768

376

223

(71)

1,296

 

1 The Group has incurred charges resulting from the restructuring in response to the downturn in the trading conditions of its Emerging Markets and Offshore & Remote activities which include headcount

reductions £22 million (2015: £17 million), other expenses £3 million (2015: £6 million), depreciation of owned property, plant and equipment £nil (2015: £2 million) and property lease rentals £nil

(2015 £1 million).

2 Underlying operating profit is the profit measure considered by the chief operating decision maker.

3 2015 Europe and Rest of World segments have been restated to reflect a change in the way these are managed.

  

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

2 OPERATING COSTS

 

 

 

 

 

 

 

 

 

 

 

 

Total

Total

OPERATING COSTS

2016

2015

£m

£m

 

 

 

 

 

Cost of food and materials:

 

 

 

 

Cost of inventories consumed

 

 

5,742

5,219

 

 

 

 

 

Labour costs:

 

 

 

 

Employee remuneration

 

 

8,909

7,959

 

 

 

 

 

Overheads:

 

 

 

 

Depreciation - owned property, plant and equipment

 

 

213

190

Depreciation -leased property, plant and equipment

 

 

3

3

Amortisation - owned intangible assets

 

 

179

147

 

 

 

 

 

Property lease rentals

 

 

81

74

Other occupancy rentals - minimum guaranteed rent

 

 

53

64

Other occupancy rentals - rent in excess of minimum guaranteed rent

 

 

9

11

Other asset rentals

 

 

79

72

 

 

 

 

 

Audit and non-audit services

 

 

5

5

 

 

 

 

 

Emerging Markets and Offshore & Remote restructuring1

 

 

25

26

 

 

 

 

 

Other expenses

 

 

2,903

2,565

 

 

 

 

 

 

 

 

 

 

Operating costs before costs relating to acquisitions

 

 

18,201

16,335

 

 

 

 

 

Amortisation - intangible assets arising on acquisition

 

 

31

26

Acquisition transaction costs

 

 

2

2

Adjustment to contingent consideration on acquisition

 

 

-

5

Share-based payments expense - non-controlling interest call option

 

 

1

-

 

 

 

 

 

Total

 

 

18,235

16,368

1 Emerging Markets and Offshore & Remote restructuring comprises £22 million employee remuneration (2015: £17 million), £nil depreciation owned property, plant and equipment (2015: £2 million), £nil property lease rentals (2015: £1 million) and £3 million other expenses (2015: £6 million).

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

3 FINANCE INCOME, COSTS AND RELATED (GAINS)/LOSSES

 

 

Finance income and costs are recognised in the income statement in the period in which they are earned or incurred.

 

 

 

FINANCE INCOME AND COSTS

2016

2015

 £m

 £m

 

 

 

FINANCE INCOME

 

 

Bank interest

4

3

Total finance income

4

3

 

 

 

FINANCE COST

 

 

Interest on bank loans and overdrafts

16

13

Interest on other loans

82

82

Finance lease interest

1

1

Interest on bank loans, overdrafts, other loans and finance leases

99

96

Unwinding of discount on provisions

5

6

Interest on net post-employment benefit obligations

1

5

Total finance costs

105

107

 

 

 

ANALYSIS OF FINANCE COSTS BY DEFINED IAS 39¹ CATEGORY

 

 

Fair value through profit or loss (unhedged derivatives)

4

5

Derivatives in a fair value hedge relationship

(19)

(23)

Derivatives in a net investment hedge relationship

3

5

Other financial liabilities

111

109

Interest on bank loans, overdrafts, other loans and finance leases

99

96

Fair value through profit or loss (unwinding of discount on provisions)

5

6

Outside of the scope of IAS 39 (net pension scheme charge)

1

5

Total finance costs

105

107

1 IAS 39 'Financial Instruments: Recognition and Measurement'.

 

The Group uses derivative financial instruments such as forward currency contracts, cross currency swaps and interest rate swaps to hedge the risks associated with changes in foreign currency exchange rates and interest rates. In accordance with the Group's accounting policies, such derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. For derivative financial instruments that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement in the period.

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

4 TAX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECOGNISED IN THE INCOME STATEMENT:

 

 

 

 

 

2016

2015

INCOME TAX EXPENSE ON OPERATIONS 

£m

£m

CURRENT TAX

 

 

 

 

 

 

 

Current year

 

 

 

 

 

315

284

Adjustment in respect of prior years

 

 

 

 

 

(38)

(24)

Current tax expense

 

 

 

 

 

277

260

DEFERRED TAX

 

 

 

 

 

 

 

Current year

 

 

 

 

 

27

12

Impact of changes in statutory tax rates

 

 

 

 

 

6

1

Adjustment in respect of prior years

 

 

 

 

 

9

9

Deferred tax expense

 

 

 

 

 

42

22

TOTAL INCOME TAX

 

 

 

 

 

 

 

Income tax expense on operations

 

 

 

 

 

319

282

 

The income tax expense for the year is based on the effective UK statutory rate of corporation tax for the period of 20% (2015: 20.5%). The impact of changes in statutory rates relates principally to the reduction of the UK corporation tax rate from 20% to 19% from 1 April 2017 and to 17% from 1 April 2020. These changes have resulted in a deferred tax charge arising from the reduction in the balance sheet carrying value of deferred tax assets to reflect the anticipated rate of tax at which those assets are expected to reverse.  Overseas tax is calculated at the rates prevailing in the respective jurisdictions.

 

5 EARNINGS PER SHARE

 

 

The calculation of earnings per share is based on earnings after tax and the weighted average number of shares in issue during the year. The adjusted earnings per share figures have been calculated based on earnings excluding the effect of the amortisation of intangible assets arising on acquisition, acquisition transaction costs, adjustment to contingent consideration on acquisition, non-controlling interest put options, profits and losses on disposal of businesses, hedge accounting ineffectiveness and the tax attributable to these amounts. These items are excluded in order to show the underlying trading performance of the Group.

 

 

2016

2015

 

Attributable

Attributable

ATTRIBUTABLE PROFIT

profit

profit

£m

£m

 

 

 

Profit for the year attributable to equity shareholders of the Company

992

869

Amortisation of intangible assets arising on acquisition (net of tax)

21

20

Acquisition transaction costs (net of tax)

1

1

Adjustment to contingent consideration on acquisition (net of tax)

-

3

Non-controlling interest put options (net of tax)

1

-

(Profit)/loss on disposal of US businesses (net of tax)

(1)

1

Hedge accounting ineffectiveness (net of tax)

(10)

(2)

Underlying attributable profit for the year from operations

1,004

892

 

 

2016

2015

 

Ordinary shares

Ordinary shares

AVERAGE NUMBER OF SHARES (MILLIONS OF ORDINARY SHARES)

of 10 5/8p each

of 10 5/8p each

millions

millions

 

 

 

Average number of shares for basic earnings per share

1,643

1,662

Dilutive share options

3

4

Average number of shares for diluted earnings per share

1,646

1,666

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

5 EARNINGS PER SHARE CONTINUED

 

2016

2015

 

Earnings

Earnings

per share

per share

pence

pence

 

 

 

BASIC EARNINGS PER SHARE

 

 

From operations

60.4

52.3

Amortisation of intangible assets arising on acquisition (net of tax)

1.2

1.2

Acquisition transaction costs (net of tax)

0.1

0.1

Adjustment to contingent consideration on acquisition (net of tax)

-

0.2

Non-controlling interest put options (net of tax)

0.1

-

(Profit)/loss on disposal of US businesses (net of tax)

(0.1)

0.1

Hedge accounting ineffectiveness (net of tax)

(0.6)

(0.2)

From underlying operations

61.1

53.7

DILUTED EARNINGS PER SHARE

 

 

From operations

60.3

52.2

Amortisation of intangible assets arising on acquisition (net of tax)

1.2

1.2

Acquisition transaction costs (net of tax)

0.1

0.1

Adjustment to contingent consideration on acquisition (net of tax)

-

0.2

Non-controlling interest put options (net of tax)

0.1

-

(Profit)/loss on disposal of US businesses (net of tax)

(0.1)

0.1

Hedge accounting ineffectiveness (net of tax)

(0.6)

(0.2)

From underlying operations

61.0

53.6

 

6 DIVIDENDS

 

 

 

 

A final dividend in respect of 2016 of 21.1 pence per share, £347 million in aggregate1, has been proposed, giving a total dividend in respect of 2016 of 31.7 pence per share (2015: 29.4 pence per share). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 2 February 2017 and has not been included as a liability in these financial statements.

 

 

2016

2015

 

Dividends

 

Dividends

 

DIVIDENDS ON ORDINARY SHARES

per share

 

per share

 

pence

£m

pence

£m

 

 

 

 

 

Amounts recognised as distributions to equity shareholders during the year:

 

 

 

 

Final 2014 - 17.7p per share

-

-

17.7p

295

Interim 2015 - 9.8p per share

-

-

9.8p

162

Final 2015 - 19.6p per share

19.6p

322

-

-

Interim 2016 - 10.6p per share

10.6p

174

-

-

Total dividends

30.2p

496

27.5p

457

1 Based on the number of ordinary shares, excluding treasury shares, in issue at 30 September 2016: 1,643 million shares.

 

 

 

 

 

  

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

7 GOODWILL

 

 

 

 

During the year the Group made a number of acquisitions.

 

GOODWILL

 

 

 

 

 

 

 

£m

 

 

 

 

 

COST

 

 

 

 

At 1 October 2014

 

 

 

4,010

Additions

 

 

 

25

Currency adjustment

 

 

 

(13)

At 30 September 2015

 

 

 

4,022

 

 

 

 

 

At 1 October 2015

 

 

 

4,022

Additions

 

 

 

105

Currency adjustment

 

 

 

448

At 30 September 2016

 

 

 

4,575

 

 

 

 

 

IMPAIRMENT

 

 

 

 

At 1 October 2014

 

 

 

482

Disposals

 

 

 

2

At 30 September 2015

 

 

 

484

 

 

 

 

 

At 1 October 2015

 

 

 

484

Currency adjustment

 

 

 

41

At 30 September 2016

 

 

 

525

 

 

 

 

 

At 30 September 2015

 

 

 

3,538

At 30 September 2016

 

 

 

4,050

 

GOODWILL BY BUSINESS SEGMENT

 

 

2016

20151

 

 

 

£m

£m

 

 

 

 

 

 

 

USA

 

 

1,619

1,316

 

Canada

 

 

156

125

 

Total North America

 

 

1,775

1,441

 

UK

 

 

1,440

1,433

 

Rest of Europe

 

 

420

358

 

Total Europe

 

 

1,860

1,791

 

Japan

 

 

172

124

 

Rest of Rest of World

 

 

243

182

 

Total Rest of World

 

 

415

306

 

Total 

 

 

4,050

3,538

 

1 Europe and Rest of World segments have been restated to reflect a change in the way these are managed.

 

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of a CGU is determined from value in use calculations. The key assumptions for these calculations are long term growth rates and pre-tax discount rates and use cash flow forecasts derived from the most recent financial budgets and forecasts approved by management covering a five year period. Budgets and forecasts are based on expectations of future outcomes taking into account past experience, adjusted for anticipated revenue growth, from both new business and like for like growth and taking into consideration external economic factors. Cash flows beyond the five year period are extrapolated using estimated growth rates based on local expected economic conditions and do not exceed the long term average growth rate for that country. The pre-tax discount rates are based on the Group's weighted average cost of capital adjusted for specific risks relating to the country in which the CGU operates.

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

8 OTHER INTANGIBLE ASSETS

 

 

 

 

 

 

 

 

 

 

 

Contract and other intangibles1

 

 

Computer software

Arising on

 

 

 

 acquisition

Other

Total

 £m

£m

£m

£m

 

 

 

 

 

COST

 

 

 

 

At 1 October 2014

232

473

973

1,678

Additions

31

-

191

222

Disposals

(3)

-

(85)

(88)

Business acquisitions

-

62

-

62

Business disposals

-

(1)

-

(1)

Reclassified

-

(1)

2

1

Currency adjustment

(6)

(12)

47

29

At 30 September 2015

254

521

1,128

1,903

 

 

 

 

 

At 1 October 2015

254

521

1,128

1,903

Additions

27

-

240

267

Disposals

(10)

(3)

(82)

(95)

Business acquisitions

-

101

1

102

Reclassified

2

-

(4)

(2)

Currency adjustment

41

86

190

317

At 30 September 2016

314

705

1,473

2,492

 

 

 

 

 

AMORTISATION

 

 

 

 

At 1 October 2014

167

84

417

668

Charge for the year

21

26

126

173

Disposals

(2)

-

(75)

(77)

Reclassified

-

(1)

-

(1)

Currency adjustment

(2)

(6)

18

10

At 30 September 2015

184

103

486

773

 

 

 

 

 

At 1 October 2015

184

103

486

773

Charge for the year

24

31

155

210

Disposals

(10)

(3)

(76)

(89)

Reclassified

-

-

(4)

(4)

Currency adjustment

28

21

84

133

At 30 September 2016

226

152

645

1,023

 

 

 

 

 

NET BOOK VALUE

 

 

 

 

At 30 September 2015

70

418

642

1,130

At 30 September 2016

88

553

828

1,469

1 Contract related intangible assets, other than those arising on acquisition, result from payments made by the Group in respect of client contracts and generally arise where it is economically more efficient for a client to purchase assets used in the performance of the contract and the Group funds these purchases.  The intangible assets arising on acquisition are all contract related.

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

9 PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

 

 

 

 

 

Land and

Plant and

Fixtures and

 

PROPERTY, PLANT AND EQUIPMENT

buildings

 machinery

 fittings

Total

£m

£m

£m

£m

 

 

 

 

 

COST

 

 

 

 

At 1 October 2014

356

1,038

544

1,938

Additions1

13

171

89

273

Disposals

(21)

(104)

(40)

(165)

Business disposals - other activities

-

(1)

-

(1)

Business acquisitions

2

2

2

6

Reclassified

(1)

9

(1)

7

Currency adjustment

(10)

(15)

(29)

(54)

At 30 September 2015

339

1,100

565

2,004

 

 

 

 

 

At 1 October 2015

339

1,100

565

2,004

Additions1

26

178

92

296

Disposals

(19)

(87)

(41)

(147)

Business disposals - other activities

-

(3)

-

(3)

Business acquisitions

-

3

1

4

Reclassified

4

8

1

13

Currency adjustment

72

186

81

339

At 30 September 2016

422

1,385

699

2,506

 

 

 

 

 

DEPRECIATION

 

 

 

 

At 1 October 2014

175

682

357

1,214

Charge for the year

21

118

54

193

Disposals

(18)

(92)

(35)

(145)

Business disposals - other activities

-

(1)

-

(1)

Reclassified

-

4

-

4

Currency adjustment

(1)

(7)

(17)

(25)

At 30 September 2015

177

704

359

1,240

 

 

 

 

 

At 1 October 2015

177

704

359

1,240

Charge for the year

21

135

60

216

Disposals

(13)

(74)

(37)

(124)

Business disposals - other activities

-

(2)

-

(2)

Reclassified

-

15

(1)

14

Currency adjustment

35

121

53

209

At 30 September 2016

220

899

434

1,553

 

 

 

 

 

NET BOOK VALUE

 

 

 

 

At 30 September 2015

162

396

206

764

At 30 September 2016

202

486

265

953

 

 

 

 

 

 

 

 

 

 

The net book amount of the Group's property, plant and equipment includes assets held under finance leases as follows:

 

 

 

 

 

 

Land and

Plant and

Fixtures and

 

PROPERTY, PLANT AND EQUIPMENT HELD UNDER FINANCE LEASES

buildings

machinery

fittings

Total

£m

£m

£m

£m

 

 

 

 

 

At 30 September 2015

6

6

1

13

At 30 September 2016

6

7

1

14

1 Includes leased assets at a net book value of £2 million (2015: £2 million).

 

 

 

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

10 EQUITY ACCOUNTED INVESTMENTS

 

 

 

 

 

 

 

 

 

Significant interests in associates are:

 

 

 

 

 

 

 

 

 

 

Country of  incorporation

 

2016 ownership1

2015 ownership1

 

Twickenham Experience Limited2

England & Wales

 

16%

16%

 

Oval Events Limited3

England & Wales

 

25%

25%

 

AEG Facilities, LLC4

 

USA

 

49%

49%

 

Thompson Hospitality Services, LLC4

USA

 

49%

49%

 

1 % ownership is of the ordinary share capital.

 

2 Financial statements applied using the equity method relate to the year ended 30 June, rolled forward to 30 September.

 

3 Financial statements applied using the equity method relate to the year ended 31 January, rolled forward to 30 September.

 

4 Financial statements applied using the equity method relate to the year ended 31 December of the prior year, rolled forward to 30 September.

 

 

 

 

 

 

 

 

 

 

 

Significant interests in joint ventures are:

 

 

 

 

 

 

 

 

 

 

Country of  incorporation

 

2016 ownership1

2015 ownership1

 

Quadrant Catering Ltd2

England & Wales

 

49%

49%

 

ADNH-Compass Middle East LLC

United Arab Emirates

 

50%

50%

 

Express Support Services Limitada2

Angola

 

49%

49%

 

1 % ownership is of the ordinary share capital.

 

2 49% ownership entitles Compass Group to 50% of voting rights.

 

None of these investments is held directly by the ultimate Parent Company. All joint ventures provide food and/or support services in their respective countries of incorporation and make their accounts up to 30 September.  All holdings are in the ordinary shares of the respective joint venture company.

 

These investments are structured through separate vehicles and the Group has a residual interest in their respective net assets. Accordingly, the Group has classified its interests as joint ventures which are equity accounted.  The tables below reconcile the summarised financial information to the carrying amount of the Group's interests in its associates and joint ventures.

 

INTERESTS IN ASSOCIATES AND JOINT VENTURES

2016

2015

£m

£m

NET BOOK VALUE

 

 

 

 

 

 

 

 

Interests in associates

 

 

 

 

 

 

137

122

Interests in joint ventures

 

 

 

 

 

 

85

81

At 30 September

 

 

 

 

 

 

222

203

At 1 October

 

 

 

 

 

 

203

189

Additions

 

 

 

 

 

 

2

2

Share of profits less losses (net of tax)

 

 

 

 

 

 

39

39

Dividends declared

 

 

 

 

 

 

(34)

(33)

Currency and other adjustments

 

 

 

 

 

 

12

6

At 30 September

 

 

 

 

 

 

222

203

                                 

 

The Group's share of revenues and profits is included below:

ASSOCIATES AND JOINT VENTURES

2016

2015

Associates

Joint Ventures

Total

Associates

Joint Ventures

Total

£m

£m

£m

£m

£m

£m

SHARE OF REVENUE AND PROFITS

 

 

 

 

 

 

Revenue

52

266

318

57

253

310

Expenses/taxation1

(37)

(242)

(279)

(42)

(229)

(271)

Profit after tax for the year

15

24

39

15

24

39

Share of net assets

 

 

 

 

 

 

Non-current assets

 132

 44

176

 121

44 

165

Current assets

 69

 134

203

 49

 108

157

Non-current liabilities

 (7)

 (10)

(17)

 (5)

 (8)

(13)

Current liabilities

 (57)

 (83)

(140)

 (42)

 (64)

(106)

Net assets

 137

 85

222

 123

 80

203

SHARE OF CONTINGENT LIABILITIES

 

 

 

 

 

 

Contingent liabilities

 -

(26) 

(26)

 -

(22) 

(22)

1 Expenses include the relevant portion of income tax recorded by associates and joint ventures.

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

11 TRADE AND OTHER RECEIVABLES

 

 

 

 

 

 

 

2016

2015

TRADE AND OTHER RECEIVABLES

Current

 Non-current

Total

Current

 Non-current

Total

£m

£m

£m

£m

£m

£m

NET BOOK VALUE

 

 

 

 

 

 

At 1 October

2,115

71

2,186

2,069

70

2,139

Net movement

124

12

136

142

2

144

Currency adjustment

357

14

371

(96)

(1)

(97)

At 30 September

2,596

97

2,693

2,115

71

2,186

COMPRISED OF

 

 

 

 

 

 

Trade receivables

1,994

-

1,994

1,627

-

1,627

Less: Provision for impairment of trade receivables

(60)

-

(60)

(57)

-

(57)

Net trade receivables1

1,934

-

1,934

1,570

-

1,570

Other receivables

330

111

441

254

80

334

Less: Provision for impairment of other receivables

(6)

(22)

(28)

(9)

(15)

(24)

Net other receivables

324

89

413

245

65

310

Accrued income

168

4

172

177

-

177

Prepayments

153

4

157

117

6

123

Amounts owed by associates, joint ventures and related parties1

17

-

17

6

-

6

Trade and other receivables

2,596

97

2,693

2,115

71

2,186

1 Categorised as 'loans and receivables' financial assets (IAS 39).

 

TRADE RECEIVABLES

 

 

 

 

 

 

 

 

 

 

 

 

 

The book value of trade and other receivables approximates to their fair value due to the short term nature of the majority of the receivables.

 

 

 

 

 

 

 

Credit sales are only made after credit approval procedures have been completed satisfactorily. The policy for making provisions for bad and doubtful debts varies from country to country as different countries and markets have different payment practices, but various factors are considered, including how overdue the debt is, the type of receivable and its past history, and current market and trading conditions. Full provision is made for debts that are not considered to be recoverable.

 

 

 

 

 

 

 

There is limited concentration of credit risk with respect to trade receivables due to the diverse and unrelated nature of the Group's client base. Accordingly, the directors believe that there is no further credit provision required in excess of the provision for the impairment of receivables. The book value of trade and other receivables represents the Group's maximum exposure to credit risk.

 

 

 

 

 

 

 

Trade receivable days at 30 September 2016 were 41 days (2015: 42 days) on a constant currency basis.

 

 

 

Compass Group PLC

Consolidated Financial Statements (continued)

 

 

12 CASH AND CASH EQUIVALENTS

 

 

 

 

CASH AND CASH EQUIVALENTS

 

2016

2015

 

 

£m

£m

 

Cash at bank and in hand

 

291

224