Regulatory Story
Go to market news section View chart   Print
RNS
Compass Group PLC  -  CPG   

Half year results announcement

Released 07:00 10-May-2017

RNS Number : 6648E
Compass Group PLC
10 May 2017
 

 

 

 

Half year results announcement for the six months ended 31 March 2017

 

 

Underlying1 results

Statutory results

 

HY 2017

HY 2016

Change

HY 2017

HY 2016

Change

Revenue

£11.6 billion

£11.2 billion2

+3.6%3

£11.5 billion

£9.5 billion

+20.3%

Operating profit

£894 million

£850 million2

+5.2%2

£877 million

£704 million

+24.6%

Operating margin

7.6%

7.4%

+20bps

7.6%

7.4%

+20bps

Earnings per share

37.9 pence

36.4 pence2

+4.1%2

37.5 pence

30.4 pence

+23.4%

Free cash flow

£502 million

£396 million

+26.8%

 

 

 

Interim dividend per share

11.2 pence

10.6 pence

+5.7%

11.2 pence

10.6 pence

+5.7%

 

 

1 Full details of the underlying results can be found on pages 33 - 35.

2 Measured on a constant currency basis.

3 Organic revenue growth.

 

Compass reports a good start to the year and proposes a £1bn special dividend. 

Organic revenue grew by 3.6% and operating margin improved by 20 basis points.  

Full year expectations remain positive and unchanged.

 

Organic revenue growth of 3.6%

·      Growth in Q2 accelerated compared with Q1

·      Another strong six months in North America with organic revenue up 7.1%

·      Improving trends in Europe with organic revenue up 1.6%

·      Rest of World declined by 5.1% organically, but grew 2.6% excluding Offshore & Remote

 

Margin up 20bps

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

·      Margin improvement aided by the end of restructuring plan in Offshore & Remote

 

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

·      Free cash flow of £502 million, up 26.8% on H1 2016

·      Proposed interim dividend up 5.7%

·      Remain committed to ongoing returns to shareholders with a proposed £1bn special dividend

 

Statutory results

·      On a statutory basis, revenue, operating profit and earnings per share benefitted by over 15% from the translational effect of weaker sterling

 

 

Chief Executive’s Statement 

 

 

 

Richard Cousins, Group Chief Executive, said:

 

"Compass had a good six months, with the business performing as expected.  North America continues to deliver excellent growth and trends in Europe are improving. In Rest of World, reasonable growth in Business & Industry, Healthcare and Education was offset by ongoing weakness in Brazil and our Offshore & Remote sector.

 

We continue to drive operating efficiencies around the business which, combined with the end of the restructuring in our Offshore and Remote business, resulted in margin improvement of 20bps in the period. 

 

Given our excellent cash generation and the strength of the business, we are announcing a £1 billion special dividend. This reflects our commitment to return surplus cash to shareholders whilst maintaining an efficient balance sheet.

 

Our expectations for FY 2017 are positive and unchanged, with growth weighted to the second half. Our pipeline of new contracts is encouraging and our focus on organic growth, efficiencies and cash gives us confidence in achieving 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, as well as continued returns to shareholders."

 

 

Results presentation today

 

The results presentation for investors and analysts is being held today, Wednesday 10th May 2017, at 9 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 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:                                                     94454716#

 

Financial calendar

 

Ex-dividend date for 2017 interim dividend                         18 May 2017

Record date for 2017 interim dividend                               19 May 2017

2017 interim dividend payment                                        19 June 2017

Q3 Trading Update                                                         26 July 2017

Full year results                                                             21 November 2017

 

 

Enquiries

 

Investors                       Sandra Moura                            +44 1932 573 000

Press                            Gordon Simpson, Finsbury         +44 207 251 3801

 

Website                        www.compass-group.com 

 

Legal Entity Identifier (LEI) No. 2138008M6MH9OZ6U2T68

 

 

Chief Executive's Statement (continued)

 

 

Basis of preparation

 

Throughout the Interim 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 (GAAP).

 

The Executive Board of the Group manages and assesses the performance of the business on these measures and believes 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 37.

 

A summary of the adjustments from statutory results to underlying results is shown in note 9 on pages 33 to 34 and further detailed in the condensed income statement (page 16), reconciliation of free cash flow (page 23), note 2 segmental reporting (pages 25 to 26) and note 10 organic revenue and organic profit (page 35).

 

Group overview

 

Revenue grew by 20% on a statutory basis, 16% of which was the benefit of currency translation. On an organic basis it increased by 3.6%. New business wins were 8.1% driven by strong MAP 1 (client sales and marketing) performance in most countries, our retention rate was 94.3% as a result of our ongoing focus and investment while like for like revenue grew by 1.2% reflecting sensible price increases and weak volumes in our commodity related business and in Brazil.

 

Operating profit grew by 25%, with 18% a result of foreign currency translations. Underlying operating profit increased by 5.2% on a constant currency basis.  The operating profit margin increased by 20 basis points as we continue to drive efficiencies across the business using our Management and Performance (MAP) framework. We benefitted from the end of the restructuring plan in the Emerging Markets and Offshore & Remote last year and the absence of these costs this year. 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 combined with modest pricing increases enabled us to offset inflation pressures and reinvestment to support the exciting growth opportunities we see around the world. 

 

Returns to shareholders continue to be an integral part of our business model. As a result of continued strong cash flow generation, the Group proposes a shareholder return by way of a special dividend of £1 billion (61 pence per share) expected to be paid in July and an interim dividend of 11.2 pence per share (up 5.7%). In the first half, we have also bought back £18 million of shares. Our leverage policy remains unchanged: to maintain strong investment grade credit ratings, returning any surplus cash to shareholders to target net debt to EBITDA of around 1.5x.

 

 

 

Chief Executive’s Statement (continued)

 

 

Regional performances

 

North America - 58.5% Group revenue (2016: 56.0%)

 

 

Underlying

Change

Regional financial summary

2017

2016

Reported rates

Constant currency

Organic

 

 

 

 

 

 

Revenue

£6,792m

£5,418m

25.4%

6.6%

7.1%

Regional operating profit

£580m

£461m

25.8%

7.0%

7.6%

Regional operating margin

8.5%

8.5%

-

 

 

 

 

Our North American business has delivered another strong performance with organic revenue growth of 7.1%. This was driven by good new business wins and an excellent retention rate. Like for like revenues were positive with good pricing and broadly flat volumes across the business - with the exception of the Offshore & Remote sector which continues to be weak. The half year benefitted from the positive impact of Easter, which more than offset the negative impact of the 2016 Leap year. The quarterly impact of Easter is estimated to be between 0.5% and 1%.

 

Strong net new business in our core Eurest sub-sector drove solid organic growth in our Business & Industry sector. New contract wins include Verizon and Comcast.

 

Organic revenue growth in Healthcare & Seniors was driven by good levels of new business. New contract wins included the Mayo Foundation, Texas Children's Hospital and Richfield Living.

 

The Education sector has enjoyed solid levels of net new business with contract wins including food service contracts with the Darden School of Business and Wichita Fall ISD, as well as a support services contract with Dekalb County ISD.

 

In our Sports & Leisure business, excellent retention and some improvements in like for like volumes continue to drive organic revenue growth. Contract wins include the Nassau Veterans Memorial Coliseum and the Toledo Mud Hens stadium.

 

Our Offshore & Remote business - which is small at around 2% of revenues - saw a 5.7% decline in organic revenue due to continued volume and pricing pressures. However, the rate of decline is reducing and new contracts continue to be won, including additional business with Shell.

 

Underlying operating profit of £580 million increased by 7.0% (£38 million) on a constant currency basis.  Margins were unchanged as the benefits of ongoing efficiency initiatives across MAPs 3 and 4, sensible price increases and leverage of the overhead base were largely offset by the continued weakness in our Offshore & Remote business, above average labour inflation and the dilutive impact of the CulinArt acquisition.

 

 

Chief Executive’s Statement (continued)

 

 

 

Europe - 26.0% Group revenue (2016: 28.2%)  

 

 

Underlying

Change

Regional financial summary

 

2017

2016

Reported rates

Constant currency

Organic

 

 

 

 

 

 

Revenue

£3,023m

£2,722m

11.1%

1.6%

1.6%

Regional operating profit

£226m

£201m

12.4%

2.3%

2.3%

Regional operating margin

7.5%

7.4%

10bps

 

 

 

Organic revenue in Europe grew by 1.6% reflecting good levels of new business and the benefit of pricing in some countries, partly offset by the negative impact of contract closures seen in the second half of 2016.  In addition, the first half of the year has benefitted by the timing of Easter partially offset by the negative impact of the 2016 Leap year.  The quarterly impact of Easter is estimated at around 2.5% percent.

 

Our new business performance reflects good levels of wins in Turkey, Iberia and Central & Eastern Europe. New contracts include the Institut Pasteur in France, Residencias Sanyres in Spain, Aston Villa Football Club in the UK, Jacobs Douwe Egberts in the Netherlands and Carrefour in Turkey. Contract extensions include Siemens Real Estate in Denmark, Prosafe in Norway, ENI Headquarters in Italy and Hospital de Basurto in Spain.

 

After a slowdown in new business in the UK post the Brexit referendum, contracts are now mobilising as expected. The oil & gas market in the North Sea continues to be weak with double digit revenue declines. Challenging trading conditions remain in France.

 

Underlying operating profit grew by 2.3% (£5 million) on a constant currency basis. The ongoing focus on driving operational efficiencies and sensible pricing allowed us to support the creation of nine sub-regional business units, offset the impact of lower volumes in the oil & gas business, and manage the pressures of labour and food inflation, particularly in the UK. As a result of our actions, the underlying operating margin improved by 10 basis points to 7.5%.

 

 

 

 

Chief Executive’s Statement (continued)

 

 

 

Rest of World - 15.5% Group revenue (2016: 15.8%)

 

 

Underlying

Change

Regional financial summary

 

2017

2016

Reported rates

Constant currency

Organic

 

 

 

 

 

 

Revenue

£1,802m

£1,526m

18.1%

(5.1)%

(5.1)%

Regional operating profit

£113m

£97m

16.5%

(6.6)%

(6.6)%

Regional operating margin

6.3%

6.4%

(10)bps

 

 

             

 

Organic revenue in our Rest of World region declined by 5.1%. Excluding the Offshore & Remote business, organic revenue grew by 2.6%. The Offshore & Remote business declined by 20%, reflecting the continuing impact of the transition of construction contracts to production in Australia and continued weakness in our commodity related business around the region. In the half year the benefit of Easter was offset by the negative impact of the 2016 Leap year. The quarterly impact of Easter is estimated to be up to 0.5%.

 

The Offshore & Remote business in Australia, as expected, saw an acceleration in organic revenue declines to 28% reflecting contracts continuing to move from their construction to production phase and the ongoing pressures of site closures and lower volumes. Similar challenges continue to be seen in our non-Australian Offshore & Remote business across the region. Revenue declines reached a low point in quarter one and while our commodity related business will continue to be challenged, the trends are improving. We continue to win and retain contracts including Anglo Gold Ashanti in Australia, De Beers Group Services in South Africa and Petrobras Urucu in Brazil.  

 

The Business & Industry, Healthcare and Education sectors of the region, continue to perform reasonably well. We have experienced good growth in New Zealand, India, China, Australia and our Spanish speaking Latin American businesses. However, Brazil is still very tough.  New business wins include the Massey University in New Zealand, Adani in India, Tencent in China, National Bank of Australia, Mazda in Mexico and Makro in Brazil. We continue to retain contracts, including Citi Bank and Discovery Health in South Africa, Coca Cola in Colombia and Sanofi in Mexico. 

 

Underlying operating margins excluding Australia were slightly positive, with the savings from the restructuring programme, along with pricing and ongoing efficiencies, offsetting the impact of weak volumes in our Offshore & Remote sector and Brazil. In Australia, pricing pressures and site closures are reducing the profitability of our business. Overall, underlying operating profit therefore declined by 6.6% (£8 million) on a constant currency basis, with the underlying margin down 10 basis points to 6.3%.

 

 

Chief Executive’s Statement (continued)

 

 

Strategy

 

Focus on food

 

Food is our focus and our core competence. The food service market is estimated to be more than £200 billion; with only around 50% of the market currently outsourced, it represents a significant structural growth opportunity. We believe the benefits of outsourcing become further apparent as economic conditions and regulatory changes put further 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. 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 some operations in other parts of the world. This is a complex segment and there are significant differences in client buying behaviour across countries, sectors and sub-sectors.

 

Geographic spread

 

We have a truly international business, with operations in around 50 countries.

 

North America (58% of Group revenue) is likely to remain the principal growth engine for the Group. We have a market leading business, which delivers high levels of growth by combining the cost advantage of our scale with a segmented client facing sector approach. The outsourcing culture is vibrant and the addressable market is significant.

 

The fundamentals of our businesses in Europe (26% of Group revenue) are good and we see many opportunities to drive growth in revenue and margin. Our investment in MAP 1 sales and retention has accelerated our organic revenue growth and with the creation of the nine sub-regional business units, we continue to see opportunities to deliver efficiencies and make our operations more competitive.

 

Rest of World (16% of Group revenue) offers excellent long term growth potential. Our largest markets are Australia, Japan and Brazil, whilst India and China have strong long term growth potential. Lower commodity prices and a weak macroeconomic backdrop have impacted our Offshore & Remote business and some of our emerging markets. We have concluded a restructuring of 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 dining solutions that meet the requirements of a growing range of clients and consumers. Our portfolio of B2B brands enables us to differentiate these propositions and maximise our market coverage, while benefitting from the cost advantages of scale in food procurement and back office costs.

 

Scale

 

As we continue to grow, our scale enables 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.

 

MAP culture

 

We use the Management and Performance (MAP) framework across the business. 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), our labour costs (MAP 4) or our overhead (MAP 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 underlying constant currency earnings per share; and (iv) maintain strong investment grade credit ratings returning any surplus cash to shareholders to target net debt to EBITDA of around 1.5x. 

 

In light of the above, the Group has announced a proposed shareholder return by way of a special dividend of £1 billion (61 pence per share) expected to be paid in July.

 

Summary and outlook

 

Compass had a good six months, with the business performing as expected.  North America continues to deliver excellent growth and trends in Europe are improving. In Rest of World, reasonable growth in Business & Industry, Healthcare and Education was offset by ongoing weakness in Brazil and our Offshore & Remote sector.

 

We continue to drive operating efficiencies around the business which, combined with the end of the restructuring in our Offshore and Remote business, resulted in margin improvement of 20bps in the period. 

 

Given our excellent cash generation and the strength of the business, we are announcing a £1 billion special dividend. This reflects our commitment to return surplus cash to shareholders whilst maintaining an efficient balance sheet.

 

Our expectations for FY 2017 are positive and unchanged, with growth weighted to the second half. Our pipeline of new contracts is encouraging and our focus on organic growth, efficiencies and cash gives us confidence in achieving 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, as well as continued returns to shareholders.

 

Richard Cousins

Group Chief Executive

10 May 2017

 

 

Business Review 

 

 

Segmental performance

 

Six months ended 31 March

 

Underlying revenue1

 

Growth

 

 

 

2017

2016

 

Reported

Constant

 

 

 

 

£m

£m

 

Rates

Currency

Organic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

6,792

5,418

 

25.4%

6.6%

7.1%

 

Europe

 

3,023

2,722

 

11.1%

1.6%

1.6%

 

Rest of World

 

1,802

1,526

 

18.1%

(5.1)%

(5.1)%

 

 

 

 

 

 

 

 

 

 

Total

 

11,617

9,666

 

20.2%

3.3%

3.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying operating profit1

 

Underlying operating margin1

 

 

 

 

2017

2016

 

2017

2016

 

 

 

 

£m

£m

 

%

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

580

461

 

8.5%

8.5%

 

 

Europe

 

226

201

 

7.5%

7.4%

 

 

Rest of World

 

113

97

 

6.3%

6.4%

 

 

Unallocated overheads

 

(34)

(32)

 

 

 

 

 

EM & OR restructuring

 

-

(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total after EM & OR restructuring

 

885

716

 

7.6%

7.4%

 

 

 

 

 

 

 

 

 

 

Associates

 

    9

                   8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

894

724

 

 

 

 

 

                           

 

1 Definitions of underlying measures of performance can be found in the glossary on page 37.

 

 

Business Review (continued)

 

 

 

Statutory results

 

On a statutory basis, revenue was £11,470 million (2016: £9,536 million), growth of 20.3%, mainly driven by foreign currency translation of 16% and organic growth of 3.6%.

 

Operating profit was £877 million (2016: £704 million), an increase of 24.6% over the prior year driven by 18% of foreign currency translation and 5.2% of underlying operating profit growth.

 

Operating margin was 7.6% (2016: 7.4%).

 

Net finance costs were £47 million (2016: £38 million).

 

Profit before tax was £831 million (2016: £666 million) giving rise to an income tax expense of £209 million          (2016: £162 million), equivalent to an effective tax rate of 25.2% (2016 FY: 24.3%).

 

Basic earnings per share were 37.5 pence (2016: 30.4 pence), an increase of 23.4%, of which 19% relates to foreign currency translation.

 

Underlying results

 

On an organic basis, revenue increased by 3.6%. This was broken down as follows: new business wins were 8.1% driven by a strong performance in most countries, our retention rate was 94.3% as a result of our ongoing focus and investment, while like for like revenue growth of 1.2% reflected sensible price increases and weak volumes in our commodity related business and in Brazil.

 

Underlying operating profit was £894 million (2016: £724 million), an increase of 23.5%. If we restate 2016's profit at the 2017 average exchange rates, it would increase by £126 million to £850 million. On a constant currency basis, underlying operating profit has therefore increased by £44 million, or 5.2%.

 

The underlying operating margin increased by 20 basis points as we continue to drive efficiencies across the business and benefitted from the end of the Emerging Markets and Offshore & Remote restructuring. The efficiencies, combined with modest pricing increases, enabled us to offset inflation pressures and reinvestment to support the exciting growth opportunities we see around the world. 

 

The underlying net finance cost increased to £52 million (2016: £47 million) as a result of the weakness of sterling on foreign denominated debt. This equates to an effective interest rate of around 3% on gross debt. We continue to expect an underlying net finance cost of around £110 million, including the cost of additional debt to fund the proposed special dividend, as well as the continued weakness of sterling on our foreign currency borrowings.

 

On an underlying basis, the tax charge was £213 million (2016: £166 million), equivalent to an effective tax rate of 25.3% (2016 FY: 24.5%). This increase is a consequence of both the changing regulatory environment affecting all multinational groups, and specifically the enactment into law in the UK of the OECD BEPS legislation, and the impact of exchange rate movements. We expect the underlying tax rate to be around the same level for the full year. As previously noted, we are likely to see a continuing period of significant uncertainty in the international corporate tax environment.

 

On a constant currency basis, the underlying basic earnings per share were 37.9 pence (2016: 36.4 pence), an increase of 4.1%.

 

 

Business Review (continued)

 

 

Interim dividend

 

An increase of 5.7% in our interim dividend to 11.2 pence per share is above our first half constant currency earnings per share growth, in recognition that our growth this year is second half weighted. The dividend will be paid on 19 June 2017 to shareholders on the register on 19 May 2017.

 

Special dividend

 

The Board is proposing to return 61 pence per share, or £1 billion in aggregate, to shareholders through a special dividend and share consolidation. The special dividend and share consolidation will be subject to shareholder approval at a General Meeting on 7 June 2017. The special dividend, if approved, is expected to be paid on 17 July 2017 to shareholders on the register on 26 June 2017. Details of the share consolidation will be set out in a separate circular to shareholders on or around 15 May 2017. The resulting new ordinary shares are expected to be listed on the London Stock Exchange on 27 June 2017. The Group has arranged a committed bridge facility to fund the special dividend which it plans to replace with longer term bond finance in due course.

 

Free cash flow

 

Free cash flow totalled £502 million (2016: £391 million). In the first half of 2016, we made cash payments of £5 million related to the European exceptional programme. Adjusting for this, free cash flow on an underlying basis would have grown by £106 million or 26.8%. Underlying free cash flow conversion was 56% (2016: 55%).

 

Gross capital expenditure of £337 million (2016: £264 million), including assets purchased under finance leases of nil (2016: £1 million), is equivalent to 2.9% of underlying revenues (2016: 2.7% of underlying revenues). We expect capex in the full year to continue at these levels.

 

The working capital outflow, excluding provisions and pensions, of £78 million (2016: £83 million) reflects the seasonality of the business. Looking forward, annual trade working capital movements are expected to average out at a small outflow.

 

The £5 million outflow (2016: £21 million) in respect of post-employment benefit obligations reflects the reduction in regular payments agreed with trustees of the UK scheme as a result of the funding surplus following the triennial valuation in April 2016. We now expect a total outflow for the Group of around £20 million per annum.

 

The net interest outflow was £38 million (2016: £39 million).

 

The underlying cash tax rate was 19% (2016: 17%). For the full year we expect the cash tax rate to be in range of 20 to 23 percent, reflecting the fact that proportionately more tax payments are made in the second half.

 

Acquisition payments

 

The total cash spent on acquisitions in the first half, net of cash acquired, was £63 million (2016: £144 million), comprising £59 million on infill acquisitions, £1 million on acquisition transaction costs and £3 million of deferred consideration relating to prior years' acquisitions.

 

Disposals

 

The Group received £17 million (2016: £1 million) in respect of the disposal of some small non-core businesses.

 

Post-employment benefit obligations

 

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

 

The Group's net pension surplus at 31 March 2017, calculated in accordance with IAS 19, for all Group defined benefit schemes was £17 million (30 September 2016: £21 million net deficit).

 

 

 

 

Business Review (continued)

 

 

Financial position

 

During the first six months of the year, net debt decreased to £2,866 million (30 September 2016: £2,874 million). The Group generated £502 million of free cash flow, including investing £325 million in net capital expenditure, and spent £46 million on acquisitions net of disposal proceeds. £347 million was paid in respect of the final dividend for 2016 and £18 million returned to shareholders through share buybacks.

 

The remaining £83 million movement in net debt related predominantly to currency translation.

 

Related party transactions

 

Transactions with related parties have not had, and are not expected to have, a material effect on the financial performance or position of the Group.

 

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 and its shareholders.

 

A summary of the principal risks and uncertainties that face the business is set out on page 13.

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in this Business Review, as is the financial position of the Group, its cash flows, liquidity position, and borrowing facilities. In addition, note 17 of the Consolidated Financial Statements of our 2016 Annual Report includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit risk and liquidity risk.

 

The Group has considerable financial resources together with longer term contracts with a number of customers 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 despite the current uncertain economic outlook.

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

 

 

 

 

 

Johnny Thomson

Group Finance Director

10 May 2017 

 

 

 

Focus on Risk         

 

 

Identifying and managing risk

 

The Board continues to take a proactive approach to recognising 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.

 

Details of the principal risks facing the Group are included on pages 27-29 of the 2016 Annual Report. These remain unchanged, with the exception of two specific updates highlighted, and are expected to continue to be relevant for the remaining six months of this financial year. A summary of the principal risks and uncertainties is set out below:

 

·    Health and safety - 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

·     Client and consumer sales and retention - our business relies on securing and retaining a diverse range of clients

·     Bidding - each year the Group could bid for a large number of opportunities

·   Service delivery and contractual compliance - the Group's operating companies contract with a large number of clients.  Failure to comply with the terms of these contracts could lead to loss of business

·    Competition - we operate in a highly competitive marketplace where aggressive pricing from our competitors could cause a reduction in our revenues and margins

·     Recruitment - failure to attract and recruit people with the right skills at all levels could limit the success of the Group

·    Retention and motivation - 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

·      Economy - some sectors of our business could be susceptible to adverse changes in economic conditions and employment levels

·    Cost inflation - increases in labour or food costs could hamper our ability to deliver the right level of service in the most efficient way

·    Political stability - as a global business, our operations and earnings may be adversely affected by political or economic instability

·    Compliance and fraud - ineffective compliance management or evidence of fraud could have an adverse effect on the Group's reputation and performance

·    Tax compliance - as a Group we operate 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

·     Information systems and technology - the digital world brings risks such as technology failures, loss of confidential data and damage to brand reputation

Updates to 'Economic and Political Environment' risks since the 2016 Annual Report:

  

·     Brexit - following the UK's decision to exit the European Union (the 'EU') and the announcement of a UK general election on 8 June 2017, there is significant uncertainty about the withdrawal process, its timeframe, the outcome of negotiations about future arrangements between the UK and the EU, and the period for which existing EU laws for member states will continue to apply to the UK. The Board views the potential impact of Brexit as an integral part of its Principal Risks rather than as a stand-alone risk. As the process of Brexit evolves, the Board will continue to assess its impact.

·     US Political reform - the Group has significant operations and a substantial employee base in North America, where the new US administration has signalled broad policy changes. Some of these potential changes in policy are in respect of trade and tax, none of which are clear at this stage. We are closely monitoring developments from the new US administration and will continue to assess the impact of changes when there is more clarity on the nature of the changes and the extent to which they will be enacted.

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. In addition, the geographic, sector and contract diversification of the Group helps to minimise the impact of individual risks on its consolidated results.

 

 

 

Compass Group PLC

Condensed Financial Statements

 

 

Directors' responsibilities 

 

The Interim Report complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Conduct Authority in respect of the requirement to produce a half-yearly financial report. The Interim Management Report is the responsibility of, and has been approved by, the directors.

 

We confirm that to the best of our knowledge:

 

• the condensed set of financial statements has     been prepared in accordance with IAS 34;

• the Interim Management Report includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and

• the Interim Management Report includes a fair review of disclosure of related party transactions and changes therein, as required by DTR 4.2.8R.

 

On behalf of the Board

 

 

 

 

 

 

Mark J White

General Counsel and Company Secretary

10 May 2017

 

 

 

The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards ('IFRS').

 

International Accounting Standard 34 ('IAS 34'), defines the minimum content of an interim financial report, including disclosures, and identifies the accounting recognition and measurement principles that should be applied to an interim financial report.

 

Directors are also required to:

 

• select suitable accounting policies and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and

• provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

 

The directors are also responsible for the maintenance and integrity of the corporate and financial information Compass Group PLC website.

 

Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

Independent review report to Compass Group PLC

 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 which comprises the condensed income statement, the condensed statement of comprehensive income, the condensed statement of changes in equity, the condensed balance sheet, the condensed cash flow and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

 

The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

 

 

 

 

Anthony Sykes

For and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

10 May 2017

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED INCOME STATEMENT

 

 

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

Six months to 31 March

 

 

 

 

 

Year ended

30 September

2016

 £m

 

 

2017

2016

 

Notes

Unaudited

Unaudited

 £m

 £m

 

 

 

 

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

2

11,617

9,666

19,871

Less: share of sales of equity accounted joint ventures

 

(147)

(130)

(266)

Revenue

 

11,470

9,536

19,605

Operating costs

 

(10,615)

(8,853)

(18,235)

Operating costs, excluding Emerging Markets and Offshore & Remote restructuring

 

(10,615)

(8,842)

(18,210)

Emerging Markets and Offshore & Remote restructuring

 

-

(11)

(25)

Operating profit before joint ventures and associates

 

855

683

1,370

Share of profit after tax of joint ventures and associates

 

22

21

39

Operating profit

 

877

704

1,409

Underlying operating profit1

2

894

724

1,445

Amortisation of intangibles arising on acquisition

 

(19)

(14)

(31)

Acquisition transaction costs

 

(1)

(1)

(2)

Adjustment to contingent consideration on acquisition

 

4

(4)

-

Share based payment expense - non-controlling interest put options

 

-

-

(1)

Tax on share of profit of joint ventures

 

(1)

(1)

(2)

Gain on disposal of business

 

1

-

1

Finance income

 

4

4

4

Finance costs

 

(56)

(51)

(105)

Other financing items

 

5

9

12

Profit before tax

 

831

666

1,321

Income tax expense

3

(209)

(162)

(319)

Profit for the period

 

622

504

1,002

 

 

 

 

 

ATTRIBUTABLE TO

 

 

 

 

Equity shareholders of the Company

 

616

500

992

Non-controlling interests

 

6

4

10

Profit for the period

 

622

504

1,002

 

 

 

 

 

EARNINGS PER SHARE (PENCE)

 

 

 

 

Basic

4

37.5p

30.4p

60.4p

Diluted

4

37.4p

30.4p

60.3p

 

1 Underlying operating profit excludes amortisation of intangibles arising on acquisition, acquisition transaction costs and adjustment to contingent consideration on acquisition, but includes share of profit after tax of associates and operating profit of joint ventures.

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

 

 

2017

2016

Year ended

30 September

 

 

Unaudited

Unaudited

2016

 £m

 £m

£m

 

 

 

 

 

Profit for the period

 

622

504

1,002

Other comprehensive income

 

 

 

 

Items that are not subsequently reclassified to profit or loss

 

 

 

 

Remeasurement of post-employment benefit obligations - gain/(loss)

 

84

(66)

(500)

Return on plan assets, excluding interest income - (loss)/gain

 

(49)

74

480

Tax on items relating to the components of other comprehensive income

 

(8)

(1)

6

 

 

27

7

(14)

Items that may be subsequently reclassified to profit or loss

 

 

 

 

Currency translation differences

 

6

61

158

 

 

6

61

158

Total other comprehensive income for the period

 

33

68

144

Total comprehensive income for the period

 

655

572

1,146

 

 

 

 

 

ATTRIBUTABLE TO

 

 

 

 

Equity shareholders of the Company

 

649

568

1,136

Non-controlling interests

 

6

4

10

Total comprehensive income for the period

 

655

572

1,146

           

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 2016

176

182

295

-

4,359

(2,507)

15

2,520

 

Profit for the period

-

-

-

-

-

616

6

622

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

-

6

-

-

6

 

Remeasurement of post-employment benefit obligations - gain

-

-

-

-

-

84

-

84

 

Return on plan assets, excluding interest income - loss

-

-

-

-

-

(49)

-

(49)

 

Tax on items relating to the components of other comprehensive income

-

-

-

-

-

(8)

-

(8)

 

Total other comprehensive income

-

-

-

-

6

27

-

33

 

Total comprehensive income for the period

-

-

-

-

6

643

6

655

 

Fair value of share-based payments

-

-

-

-

10

-

-

10

 

Tax on items taken directly to equity

-

-

-

-

-

1

-

1

 

Share buy back1

-

-

-

-

-

(18)

-

(18)

 

Other changes

-

-

-

-

(9)

-

-

(9)

 

Non-controlling interests arising on acquisition

-

-

-

-

-

-

4

4

 

 

176

182

295

-

4,366

(1,881)

25

3,163

 

Dividends paid to Compass shareholders (note 5)

-

-

-

-

-

(347)

-

(347)

 

Dividends paid to non-controlling interests

-

-

-

-

-

-

(9)

(9)

 

At 31 March 2017

176

182

295

-

4,366

(2,228)

16

2,807

 

 

1 Including stamp duty and brokers' commission.

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based

payment

reserve

£m

Merger

reserve

 £m

Revaluation

reserve

£m

Translation

reserve

£m

Adjustment for

non-controlling interest put options reserve

£m

Total other reserves

£m

 

OTHER RESERVES

 

 

 

At 1 October 2016

 

 

193

4,170

7

(5)

(6)

4,359

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

Currency translation differences

 

 

-

-

-

6

-

6

 

Total other comprehensive income

 

 

-

-

-

6

-

6

 

Fair value of share-based payments

 

 

10

-

-

-

-

10

 

Other changes

 

 

-

-

-

-

(9)

(9)

 

At 31 March 2017

 

 

203

4,170

7

1

(15)

4,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

 

FOR THE SIX MONTHS ENDED 31 MARCH 2016

 

 

Attributable to equity shareholders of the Company

 

 

 

Share

capital

£m

 Share

premium

account

 £m

 Capital

redemption

reserve

£m

 Own

shares

£m

Other

reserves

£m

Retained

earnings

£m

 Non-controlling

interests

£m

Total

£m

 

 

 

 

 

 

 

 

 

At 1 October 2015

176

182

295

(1)

4,189

(2,904)

13

1,950

Profit for the period

-

-

-

-

-

500

4

504

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

-

61

-

-

61

Remeasurement of post-employment benefit obligations - loss

-

-

-

-

-

(66)

-

(66)

Return on plan assets, excluding interest income - gain

-

-

-

-

-

74

-

74

Tax on items relating to the components of other comprehensive income

-

-

-

-

-

(1)

-

(1)

Total other comprehensive income

-

-

-

-

61

7

-

68

Total comprehensive income for the period

-

-

-

-

61

507

4

572

Use of own shares to satisfy employee share options

-

-

-

1

-

-

-

1

Fair value of share-based payments

-

-

-

-

8

-

-

8

Tax on items taken directly to equity

-

-

-

-

-

3

-

3

Share buy back1

-

-

-

-

-

(72)

-

(72)

Issue of treasury shares to satisfy employee share scheme awards exercised

-

-

-

-

-

2

-

2

Other changes

-

-

-

-

-

-

(1)

(1)

 

176

182

295

-

4,258

(2,464)

16

2,463

Dividends paid to Compass shareholders (note 5)

-

-

-

-

-

(322)

-

(322)

Dividends paid to non-controlling interests

-

-

-

-

-

-

(4)

(4)

At 31 March 2016

176

182

295

-

4,258

(2,786)

12

2,137

1 Including stamp duty and brokers' commission.

 

 

 

 

 

 

 

 

 

OTHER RESERVES

 

 

Share-based

payment

reserve

£m

Merger

reserve

 £m

Revaluation

reserve

£m

Translation

reserve

£m

Adjustment for

non-controlling interest put options reserve

£m

Total other reserves

£m

 

 

At 1 October 2015

 

 

179

4,170

7

(161)

(6)

4,189

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

 

 

-

-

-

61

-

61

Total other comprehensive income

 

 

-

-

-

61

-

61

Fair value of share-based payments

 

 

8

-

-

-

-

8

At 31 March 2016

 

 

187

4,170

7

(100)

(6)

4,258

                   

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

 

FOR THE YEAR ENDED 30 SEPTEMBER 2016

 

 

Attributable to equity shareholders of the Company

 

 

 

Share

capital

£m

 Share

premium

account

 £m

 Capital

redemption

reserve

£m

 Own

shares

£m

Other

reserves

£m

Retained

earnings

£m

 Non-controlling

interests

£m

Total

£m

 

 

 

 

 

 

 

 

 

At 1 October 2015

176

182

295

(1)

4,189

(2,904)

13

1,950

Profit for the period

-

-

-

-

-

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

-

-

-

-

156

(12)

-

144

Total comprehensive income for the period

-

-

-

-

156

980

10

1,146

Fair value of share-based payments

-

-

-

1

16

1

-

18

Tax on items taken directly to equity

-

-

-

-

-

9

-

9

Share buy back1

-

-

-

-

-

(100)

-

(100)

Issue of treasury shares to satisfy employee share scheme awards exercised

-

-

-

-

-

3

-

3

Release of LTIP award settled by issue of new shares

-

-

-

-

(2)

-

-

(2)

Other changes

-

-

-

-

-

-

1

1

 

176

182

295

-

4,359

(2,011)

24

3,025

Dividends paid to Compass shareholders (note 5)

-

-

-

-

-

(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.

 

 

 

 

OTHER RESERVES

 

 

Share-based

payment

reserve

£m

Merger

reserve

 £m

Revaluation

reserve

£m

Translation

reserve

£m

Adjustment for

non-controlling interest put options reserve

£m

Total other reserves

£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

 

 

-

-

-

(2)

-

(2)

Total other comprehensive income

 

 

-

-

-

156

-

156

Fair value of share-based payments

 

 

16

-

-

-

-

16

Release of LTIP award settled by issue of new shares

 

 

(2)

-

-

-

-

(2)

At 30 September 2016

 

 

193

4,170

7

(5)

(6)

4,359

                   

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED BALANCE SHEET

 

 

 

 

AS AT 31 MARCH 2017

 

 

 

 

 

 

As at 31 March

 

 

 

2017

2016

Year ended

30 September

 

Notes

Unaudited

Unaudited

2016

£m

 £m

 £m

NON-CURRENT ASSETS

 

 

 

 

Goodwill

 

4,126

3,768

4,050

Other intangible assets

 

1,565

1,293

1,469

Property, plant and equipment

 

994

846

953

Interests in joint ventures and associates

 

233

211

222

Other investments

 

48

42

50

Post-employment benefit assets1

 

216

209

192

Trade and other receivables

 

108

81

97

Deferred tax assets*

 

134

162

149

Derivative financial instruments**

7,8 

112

105

184

Non-current assets

 

7,536

6,717

7,366

CURRENT ASSETS

 

 

 

 

Inventories

 

373

316

347

Trade and other receivables

 

2,738

2,373

2,596

Tax recoverable*

 

82

60

77

Cash and cash equivalents**

       7

418

356

346

Derivative financial instruments**

 7,8

7

19

2

Current assets

 

3,618

3,124

3,368

Total assets

 

11,154

9,841

10,734

CURRENT LIABILITIES

 

 

 

 

Short term borrowings**

     7     

(42)

(566)

(321)

Derivative financial instruments**

        7,8

(4)

(9)

(9)

Provisions

 

(136)

(129)

(143)

Current tax liabilities*

 

(234)

(190)

(195)

Trade and other payables

 

(3,965)

(3,405)

(3,851)

Current liabilities

 

(4,381)

(4,299)

(4,519)

NON-CURRENT LIABILITIES

 

 

 

 

Long term borrowings**

7

(3,356)

(2,816)

(3,075)

Derivative financial instruments**

        7,8

(1)

(6)

(1)

Post-employment benefit obligations1

 

(199)

(201)

(213)

Provisions

 

(279)

(269)

(280)

Deferred tax liabilities*

 

(40)

(37)

(40)

Trade and other payables

 

(91)

(76)

(86)

Non-current liabilities

 

(3,966)

(3,405)

(3,695)

Total liabilities

 

(8,347)

(7,704)

(8,214)

Net assets

 

2,807

2,137

2,520

 

 

 

 

 

EQUITY

 

 

 

 

Share capital

 

176

176

176

Share premium account

 

182

182

182

Capital redemption reserve

 

295

295

295

Other reserves

 

4,366

4,258

4,359

Retained earnings

 

(2,228)

(2,786)

(2,507)

Total equity shareholders' funds

 

2,791

2,125

2,505

Non-controlling interests

 

16

12

15

Total equity

 

2,807

2,137

2,520

 

* Component of current and deferred taxes. 

** Component of net debt.

 

 

 

 

1 Represented to reclassify post-employment benefit obligations included within post-employment benefit assets of £201m as at 31 March 2016 and £192m of post-employment benefit assets included within post-employment benefit obligations for the year ended 30 September 2016. As a result, non-current assets and non-current liabilities have also increased by £201m as at 31 March 2016 and £192m as at 30 September 2016.

Compass Group PLC

Condensed Financial Statements (continued)

 

 

CONDENSED CASH FLOW STATEMENT

 

 

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

Six months to 31 March

 

 

 

2017

Unaudited

 2016

Unaudited

Year ended

30 September

2016

 

Notes

£m

 £m

 £m

CASH FLOW FROM OPERATING ACTIVITIES

 

 

 

 

Cash generated from operations

6

1,021

782

1,768

Interest paid

 

(42)

(42)

(98)

Tax received

 

5

2

17

Tax paid

 

(164)

(114)

(263)

Net cash from operating activities

 

820

628

1,424

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

 

Purchase of subsidiary companies and investments in associated undertakings1

 

(63)

(144)

(180)

Proceeds from sale of subsidiary companies and associated undertakings1

 

17

1

2

Purchase of intangible assets

 

(160)

(113)

(267)

Purchase of property, plant and equipment2

 

(177)

(150)

(311)

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

 

12

12

29

Purchase of other investments

 

-

-

(6)

Proceeds from sale of other investments

 

1

1

2

Dividends received from joint ventures and associates

 

11

14

33

Interest received

 

4

3

4

Net cash used in investing activities

 

(355)

(376)

(694)

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

Purchase of own shares3

 

(18)

(72)

(100)

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

 

-

2

3

Increase in borrowings

 

35

395

194

Decrease in borrowings

 

(59)

(196)

(309)

Repayment of obligations under finance leases

 

(2)

(2)

(3)

Equity dividends paid

5

(347)

(322)

(496)

Dividends paid to non-controlling interests

 

(9)

(4)

(9)

Net cash used in financing activities

 

(400)

(199)

(720)

CASH AND CASH EQUIVALENTS

 

 

 

 

Net increase in cash and cash equivalents

 

65

53

10

Cash and cash equivalents at beginning of the year

 

346

283

283

Currency translation gains on cash and cash equivalents

 

7

20

53

Cash and cash equivalents at end of the period

 

418

356

346

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

Condensed Financial Statements (continued)

 

 

RECONCILIATION OF FREE CASH FLOW

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

 

 

2017
Unaudited

2016
Unaudited

Year ended
30 September 2016

 

 

£m

 £m

 £m

 

 

 

 

 

Net cash from operating activities

 

820

628

1,424

Purchase of intangible assets

 

(160)

(113)

(267)

Purchase of property, plant and equipment

 

(177)

(150)

(311)

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

 

12

12

29

Purchase of other investments

 

-

-

(6)

Proceeds from sale of other investments

 

1

1

2

Dividends received from joint ventures and associated undertakings

 

11

15

33

Interest received

 

4

3

4

Dividends paid to non-controlling interests

 

(9)

(5)

(9)

Free cash flow from operations

 

502

391

899

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

 

-

5

9

Underlying free cash flow

 

502

396

908

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

1 BASIS OF PREPARATION

 

The unaudited condensed financial statements for the six months ended 31 March 2017 have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34'), and have been prepared on the basis of International Financial Reporting Standards ('IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted by the European Union that are effective for the year ending 30 September 2017.
 

The unaudited condensed financial statements for the six months ended 31 March 2017, which were approved by the Board on 10 May 2017, and the comparative information in relation to the half year ended 31 March 2016, do not comprise statutory accounts for the purpose of Section 434 of the Companies Act 2006, and should be read in conjunction with the Annual Report for the year ended 30 September 2016. Those accounts have been reported upon by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

               

The financial statements have been prepared on a going concern basis. This is discussed in the Business Review on page 12.

The accounting policies adopted in the preparation of these unaudited condensed financial statements are consistent with the policies applied by the Group in its consolidated financial statements for the year ended 30 September 2016. The following accounting standards, interpretations and amendments have been adopted by the Group in the current period:

Amendments to IAS 1 - Disclosure initiative

 

Amendments to IAS 16 and 38 - Clarification of acceptable methods of depreciation and amortisation

 

Amendments to IAS 27 - Equity method in separate financial statements

Amendments to IFRS 11 - Accounting for acquisitions of interests in joint operations

Improvements to IFRS - 2012-2014 cycle

 

 

There is no material impact on this interim financial report as a result of adopting these new standards.

The following accounting standards, interpretations and amendments that are applicable to the Group have been issued by the IASB but had either not been adopted by the European Union or were not yet effective in the European Union at 31 March 2017. The Group is currently analysing the impact these standards would have on its consolidated results and financial position.

IFRS 9 - Financial instruments

IFRS 15 - Revenue from contracts with customers (see further details below)

IFRS 16 - Leases

Amendments to IAS 7 - Disclosure initiative

Amendments to IAS 12 - Recognition of deferred tax assets from unrealised losses

Amendments to IFRS 2 - Classification and measurement of share based payment transactions

Improvements to IFRS - 2014-2016 cycle

 

 

IFRS 15 'Revenue from Contracts with Customers' (not yet endorsed by the European Union):  We have made good progress in training our people and identifying areas of divergence with current practice and based on this assessment believe that IFRS 15 will not have a significant impact on the timing and recognition of revenue, operating profit margin or net assets.  It is anticipated that there will be some impact on the Group as a result of changes in the disclosure of some client commitment contract intangibles, variable payments to and variable receipts from clients and the accounting for sales commissions.  The Group plans to apply IFRS 15 for the year ended 30 September 2019 with a retrospective approach to the restatement of comparatives.

 

 

In preparing these condensed financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense.  Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 September 2016.

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

2 SEGMENTAL REPORTING

 

 

 

 

 

 

 

 

 

Geographical segments

 

REVENUE1

 

 

North America

£m

 

Europe

£m

Rest of World

£m

 

Total

£m

SIX MONTHS ENDED 31 MARCH 20172,3

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

6,792

3,023

1,802

11,617

SIX MONTHS ENDED 31 MARCH 20162,3,

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

 

5,418

2,722

1,526

9,666

YEAR ENDED 30 SEPTEMBER 20162,3,

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

 

11,198

5,458

3,215

19,871

 

 

 

 

 

 

 

 

Sectors

 

REVENUE1

Business & Industry

£m

Education

£m

 

Healthcare & Seniors

£m

Sports & Leisure

£m

Defence, Offshore & Remote

£m

Total

£m

SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

4,433

2,346

2,620

1,315

903

11,617

SIX MONTHS ENDED 31 MARCH 2016

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

3,589

1,919

2,126

1,139

893

9,666

YEAR ENDED 30 SEPTEMBER 2016

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

7,602

3,621

4,472

2,416

1,760

19,871

 

1 There is no inter-segmental trading.

 

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

 

 

 

 

 

 

3 Continuing revenue from external customers arising in the UK, the Group's country of domicile, was £1,017 million (six months to 31 March 2016: £993 million, year ended 30 September 2016: £1,981 million).  Continuing revenue from external customers arising in the US was £6,321 million (six months to 31 March 2016: £5,006 million, year ended 30 September 2016: £10,350 million).  Continuing revenue from external customers arising in all foreign countries from which the Group derives revenue was £10,600 million (six months to 31 March 2016: £8,673 million, year ended 30 September 2016: £17,890 million).

 

 

 

 

 

 

 

 

 

 

 

Geographical segments

 

RESULT

 

North America

£m

 

Europe

£m

Rest of World

£m

Central Activities

£m

 

Total

£m

SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

Underlying operating profit before joint ventures and associates

579

226

100

(34)

871

Add: Share of profit before tax of joint ventures

 

1

-

13

-

14

Underlying operating profit before associates

580

226

113

(34)

885

Add: Share of profit of associates

 

5

4

-

-

9

Underlying operating profit1

 

585

230

113

(34)

894

 

 

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

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

2 SEGMENTAL REPORTING (CONTINUED)

 

 

 

 

 

 

 

 

Geographical segments

 

RESULT

 

North America

£m

 

Europe

£m

Rest of World

£m

Central Activities

£m

 

Total

£m

 

 

 

 

 

 

 

SIX MONTHS ENDED 31 MARCH 2016

 

 

 

 

 

 

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

461

201

83

(32)

713

Add: Share of profit before tax of joint ventures

 

-

-

14

-

14

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

461

201

97

(32)

727

Add: Share of profit of associates

 

5

3

-

-

8

Underlying operating profit before Emerging Markets and Offshore & Remote restructuring

466

204

97

(32)

735

Less: Emerging Markets and Offshore & Remote restructuring1

-

(3)

(8)

-

(11)

Underlying operating profit2

 

466

201

89

(32)

724

 

 

 

1 The Group incurred charges resulting from the restructuring and downturn in the trading conditions of its Emerging Markets and Offshore & Remote activities which include headcount reductions (£10 million) and other expenses (£1 million).

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical segments

 

RESULT

 

North America

£m

 

Europe

£m

Rest of World

£m

Central Activities

£m

 

Total

£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 restructuring

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

 

 

1 The Group incurred charges resulting from the restructuring and downturn in the trading conditions of its Emerging Markets and Offshore & Remote activities which include headcount reductions (£22 million) and other expenses (£3 million).

 

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

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

3 TAX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

RECOGNISED IN THE INCOME STATEMENT: INCOME TAX EXPENSE

 

 

Year ended

30 September

2017

2016

2016

£m

£m

£m

 

 

 

 

 

 

 

CURRENT TAX   

 

 

 

 

 

 

Current year

 

 

 

219

171

315

Adjustment in respect of prior years

 

 

 

(16)

(18)

(38)

Current tax expense

 

 

 

203

153

277

 

 

 

 

 

 

 

DEFERRED TAX   

 

 

 

 

 

 

Current year

 

 

 

5

2

27

Impact of changes in statutory tax rates

 

 

 

1

4

6

Adjustment in respect of prior years

 

 

 

-

3

9

Deferred tax expense

 

 

 

6

9

42

 

 

 

 

 

 

 

TOTAL INCOME TAX

 

 

 

 

 

 

Income tax expense

 

 

 

209

162

319

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets have not been recognised in respect of tax losses of £93 million (31 March 2016: £115 million, 30 September 2016: £101 million) and other temporary differences of £18 million (31 March 2016: £17 million, 30 September 2016: £16 million).  These deferred tax assets have not been recognised as the timing of recovery is uncertain.

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

4 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 period. The underlying earnings per share figures have been calculated based on earnings excluding the effect of the amortisation of intangibles arising on acquisition, acquisition transaction costs, adjustment to contingent consideration on acquisition, non-controlling interest put options, gains and losses on disposal of businesses, other financing items, change in fair value of investments and the tax attributable to these amounts. These items are excluded in order to show the underlying trading performance of the Group.

 

Six months to 31 March

 

 

 

 

Year ended

30 September

ATTRIBUTABLE PROFIT

2017

2016

2016

 £m

 £m

 £m

Profit for the period attributable to equity shareholders of the Company

616

500

992

Amortisation of intangibles arising on acquisition (net of tax)

13

9

21

Acquisition transaction costs (net of tax)

1

1

1

Adjustment to contingent consideration on acquisition (net of tax)

(3)

5

-

Non-controlling interest put options

-

-

1

Gain on disposal of businesses (net of tax)

-

-

(1)

Other financing items (net of tax)

(4)

(7)

(10)

Profit from change in the fair value of investments (net of tax)

-

(1)

-

Underlying attributable profit for the year from operations

623

507

1,004

 

 

 

 

 

Six months to 31 March

Year ended

 

 

 

30 September

 

2017

2016

2016

 

Ordinary

Ordinary

Ordinary

 

shares of

shares of

 shares of

AVERAGE NUMBER OF SHARES (MILLIONS OF ORDINARY SHARES)

 105/8p each millions

 105/8p each millions

105/8p each millions

Average number of shares for basic earnings per share

1,644

1,645

1,643

Dilutive share options

2

2

3

Average number of shares for diluted earnings per share

1,646

1,647

1,646

 

 

 

 

 

Six months to 31 March

 

 

 

Year ended

30 September

 

2017

2016

2016

 

Earnings

Earnings

Earnings

per share

per share

per share

pence

pence

pence

BASIC EARNINGS PER SHARE (PENCE)

 

 

 

From operations

37.5

30.4

60.4

Amortisation of intangibles arising on acquisition (net of tax)

0.7

0.5

1.2

Acquisition transaction costs (net of tax)

0.1

0.1

0.1

Adjustment to contingent consideration on acquisition (net of tax)

(0.2)

0.3

-

Non-controlling interest put options (net of tax)

-

-

0.1

Gain on disposal of businesses (net of tax)

-

-

(0.1)

Other financing items (net of tax)

(0.2)

(0.4)

(0.6)

Profit from change in the fair value of investments (net of tax)

-

(0.1)

-

From underlying operations

37.9

30.8

61.1

DILUTED EARNINGS PER SHARE (PENCE)

 

 

 

From operations

37.4

30.4

60.3

Amortisation of intangibles arising on acquisition (net of tax)

0.7

0.5

1.2

Acquisition transaction costs (net of tax)

0.1

0.1

0.1

Adjustment to contingent consideration on acquisition (net of tax)

(0.2)

0.3

-

Non-controlling interest put options (net of tax)

-

-

0.1

Gain on disposal of businesses (net of tax)

-

-

(0.1)

Other financing items (net of tax)

(0.2)

(0.4)

(0.6)

Profit from change in the fair value of investments (net of tax)

-

(0.1)

-

From underlying operations

37.8

30.8

61.0

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

5 DIVIDENDS

 

 

 

 

 

 

 

 

 

 

 

 

 

The interim dividend of 11.2 pence per share (2016: 10.6 pence per share), £184 million in aggregate1, is payable on 19 June 2017 to shareholders on the register at the close of business on 19 May 2017.  The dividend was approved by the Board after the balance sheet date, and has therefore not been reflected as a liability in the interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

DIVIDENDS ON ORDINARY SHARES

 

 

 

2017

£m

2016

£m

Year ended

30 September

2016

£m

Amounts recognised as distributions to equity shareholders during the year:

 

Final 2015 - 19.6p per share

 

 

 

-

322

322

Interim 2016 - 10.6p per share

 

 

 

-

-

174

Final 2016 - 21.1 per share

 

 

 

347

-

-

 

 

 

 

 

 

 

Total dividends

 

 

 

347

322

496

 

1 Based on the number of ordinary shares, excluding treasury shares, in issue at 31 March 2017 (1,644 million shares).

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

6 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS

 

 

 

 

 

Six months to 31 March

 

 

2017

£m

2016

£m

Year ended 30 September 2016

£m

Operating profit

855

683

1,370

Adjustments for:

 

 

 

Acquisition transaction costs

1

1

2

Amortisation of intangible assets

110

85

179

Amortisation of intangible assets arising on acquisition

19

14

31

Depreciation of property, plant and equipment

129

104

216

(Gain)/Loss on disposal of property, plant and equipment/intangible assets

(1)

1

(1)

Decrease in provisions

(19)

(10)

(19)

Decrease in post-employment benefit obligations

(5)

(21)

(39)

Share-based payments - charged to profits

10

8

16

 

 

 

 

Operating cash flows before movement in working capital

1,099

865

1,756

Increase in inventories

(15)

(15)

(13)

Increase in receivables

(84)

(96)

(93)

Increase in payables

21

28

118

 

 

 

 

Cash generated from operations

1,021

782

1,768

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

 

 

 

 

 

 

 

 

 

 

 

This table is presented as additional information to show movement in net debt, defined as overdrafts, bank and other borrowings, finance leases and derivative financial instruments, net of cash and cash equivalents.

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

 

Cash

 

Bank

Total

 

Derivative

 

 

Year ended

Net debt

and cash

Bank

and other

overdrafts and

Finance

financial

Net debt

Net debt

30 September

equivalents

overdrafts

borrowings

borrowings

leases

instruments

2017

2016

2016

£m

£m

£m

£m

£m

£m

£m

£m

£m

Brought forward

346

(27)

(3,355)

(3,382)

(14)

176

(2,874)

(2,603)

(2,603)

Net increase in cash and cash equivalents

65

-

-

-

-

-

65

53

10

Cash outflow from repayment of loan notes

-

-

35

35

-

-

35

110

114

Cash (inflow)/outflow from bank loans

-

-

(35)

(35)

-

-

(35)

(394)

195

Cash outflow/(inflow) from other changes in gross debt

 

 -

-

-

-

-

24

24

85

(194)

Cash outflow from repayment of obligations under finance leases

-

-

-

-

2

-

2

2

3

Increase in net debt as a result of new finance leases taken out

-

-

-

-

-

-

-

(1)

(2)

Currency translation gains/(losses)

7

(2)

(58)

(60)

-

(23)

(76)

(161)

(395)

Other non-cash movements

-

-

56

56

-

(63)

(7)

(8)

(2)

Carried forward

418

(29)

(3,357)

(3,386)

(12)

114

(2,866)

(2,917)

(2,874)

 

 

 

 

 

Other non-cash movements are comprised as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

Year ended

30 September

Other non-cash movements in net debt

2017

2016

2016

£m

£m

£m

Amortisation of fees and discount on issuance

 

 

 

(1)

(1)

(1)

Changes in the fair value of bank and other borrowings in a designated fair value hedge 

57

(19)

(24)

Bank and other borrowings

 

 

 

 

 

 

56

(20)

(25)

Changes in the value of derivative financial instruments including accrued income

(63)

12

23

Other non-cash movements

 

 

 

 

 

 

(7)

(8)

(2)

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

8 FINANCIAL INSTRUMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

The Group held certain financial instruments at fair value at 31 March 2017.

 

The fair values have been determined by reference to Level 2 inputs as defined by the fair value hierarchy of IFRS 13 'Fair value measurements'. There were no transfers between levels in the current and comparative periods. 

 

All derivative financial instruments are shown at fair value on the balance sheet and are present values determined from future cashflows discounted at rates derived from market sourced data. The fair values of derivative financial instruments represent the maximum credit exposure.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

DERIVATIVE ASSETS

 

 

 

2017

£m

2016

£m

Year ended

30 September

2016

£m

Interest rate swaps:

 

Fair value hedges1

 

 

 

35

69

74

Not in a hedging relationship2

 

 

 

2

-

-

Other derivatives:

 

 

 

 

 

 

Forward currency contracts and cross currency swaps3

 

 

 

82

55

112

Total

 

 

 

119

124

186

 

 

 

 

 

 

 

 

 

Six months to 31 March

 

DERIVATIVE LIABILITIES

 

 

 

2017

£m

2016

£m

Year ended

30 September

2016

£m

Interest rate swaps:

 

Fair value hedges1

 

 

 

-

-

-

Not in a hedging relationship2

 

 

 

(2)

(5)

(4)

Other derivatives:

 

 

 

 

 

 

Forward currency contracts and cross currency swaps3

 

 

 

(3)

(10)

(6)

Total

 

 

 

(5)

(15)

(10)

 

1 Derivatives that are designated and effective as hedging instruments carried at fair value (IAS 39).

2 Derivatives carried at 'fair value through profit or loss' (IAS 39).

3 Other derivatives include cross currency swaps that are designated and effective as hedging instruments carried at fair value (IAS 39) amounting to £75 million (31 March 2016: £35 million, 30 September 2016: £111 million).

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

9 STATUTORY AND UNDERLYING RESULTS

 

 

 

 

 

 

                                                                                                          

                                                                                                                                                                                                          

 

 

 

 

 

 

 

Six Months to 31 March 2017

 

 

 

 

 

                

 

Adjustments

 

 

 

 

2017
Statutory
£m

 

 

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

2017
Underlying
£m

 

 

 

 

 

 

 

 

 

Operating profit

877

19

1

(4)

1

-

-

894

Gain on disposal of businesses

1

-

-

-

-

(1)

-

-

Net finance cost

(47)

-

-

-

-

-

(5)

(52)

Finance income

4

-

-

-

-

-

-

4

Finance costs

(56)

-

-

-

-

-

-

(56)

Other financing items

5

-

-

-

-

-

(5)

-

Profit before tax

831

19

1

(4)

1

(1)

(5)

842

Income tax expense

(209)

(6)

-

1

(1)

1

1

(213)

Tax rate

25.2%

 

 

 

 

 

 

25.3%

Profit for the year

622

13

1

(3)

-

-

(4)

629

Non-controlling interests

(6)

-

-

-

-

-

-

(6)

Profit attributable to equity shareholders of the Company

616

13

1

(3)

-

-

(4)

623

Average number of shares

1,644

 

 

 

 

 

 

1,644

BASIC EARNINGS PER SHARE (PENCE)

37.5

0.7

0.1

(0.2)

-

-

(0.2)

37.9

 

 

Adjustments:

1. Amortisation of intangibles arising on acquisition.

2. Acquisition transaction costs.

3. Adjustment to contingent consideration on acquisition.

4. Tax on share of profit of joint ventures.

5. Gain on disposal of businesses.

6. Other financing items including hedge accounting ineffectiveness.

 

 

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

9 STATUTORY AND UNDERLYING RESULTS (continued)

 

 

 

 

 

 

 

 

 

 

 

 

                       Six Months to 31 March 2016

 

 

 

 

 

 

 

 

Adjustments

 

 

 

2016
Statutory
£m

 

 

 

 

1

 

 

 

 

2

 

 

 

 

3

 

 

 

 

4

 

 

 

 

5

 

 

 

 

6

2016
Underlying
£m

 

 

 

 

 

 

 

 

 

Operating profit

704

14

1

4

1

-

-

724

Net finance cost

(38)

-

-

-

-

(9)

-

(47)

Finance income

4

-

-

-

-

-

-

4

Finance costs

(51)

-

-

-

-

-

-

(51)

Other financing items

9

-

-

-

-

(9)

-

-

Profit before tax

666

14

1

4

1

(9)

-

677

Income tax expense

(162)

(5)

-

1

(1)

2

(1)

(166)

Tax rate

24.3%

 

 

 

 

 

 

24.5%

Profit for the year

504

9

1

5

-

(7)

(1)

511

Non-controlling interests

(4)

-

-

-

-

-

-

(4)

Profit attributable to equity shareholders of the Company

 

500

 

9

 

1

 

5

 

-

 

(7)

 

(1)

 

507

Average number of shares

1,645

 

 

 

 

 

 

1,645

BASIC EARNINGS PER SHARE (PENCE)

30.4

0.5

0.1

0.3

-

(0.4)

(0.1)

30.8

 

Adjustments:

1. Amortisation of intangibles arising on acquisition.

2. Acquisition transaction costs.

3. Adjustment to contingent consideration on acquisition.

4. Tax on share of profit of joint ventures.

5. Other financing items including hedge accounting ineffectiveness.

6. Profit from change in the fair value of investments.

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

10 ORGANIC REVENUE AND ORGANIC PROFIT

 

 

 

 

 

Six Months to 31 March

 

 

 

       Geographical segments

 

 

 

 

North America
£m

Europe
£m

Rest of World
£m

Other
£m

Group
£m

 

2017

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

 

6,792

 

3,023

 

1,802

 

-

 

11,617

 

% growth actual rates

 

 

25.4%

 

11.1%

 

18.1%

 

 

20.2%

 

% growth constant currency

 

 

6.6%

 

1.6%

 

(5.1)%

 

 

3.3%

 

Organic adjustments

 

(27)

 

(3)

 

-

 

-

 

(30)

 

Organic revenue

 

6,765

3,020

1,802

-

11,587

 

% growth organic

 

 

7.1%

 

1.6%

 

(5.1)%

 

 

 

3.6%

 

2016

 

 

 

 

 

 

 

Combined sales of Group and share of equity accounted joint ventures

 

5,418

 

2,722

 

1,526

 

-

 

9,666

 

Currency adjustments

 

953

253

372

-

1,578

 

Constant currency underlying revenue

 

6,371

2,975

1,898

-

11,244

 

Organic adjustments

 

 

(57)

 

(2)

 

-

 

-

 

(59)

 

Organic revenue

 

6,314

2,973

1,898

-

11,185

 

2017

 

 

 

 

 

 

 

Underlying operating profit

 

 

585

 

230

 

113

 

(34)

 

894

 

Move share of profit of associates to other

 

 

(5)

 

(4)

 

-

 

9

 

-

 

Underlying operating profit

 

 

580

 

226

 

113

 

(25)

 

894

 

Underlying operating margin - Region

 

8.5%

7.5%

6.3%

 

 

 

Underlying operating margin - Group

 

 

 

 

 

7.6%

 

% growth actual rates

 

25.8%

12.4%

16.5%

 

23.5%

 

% growth constant currency

 

7.0%

2.3%

(6.6)%

 

5.2%

 

Organic adjustments

(1)

-

-

-

(1)

 

Organic profit

 

579

226

113

(25)

893

 

% growth organic

 

 

7.6%

 

2.3%

 

(6.6)%

 

 

5.6%

 

2016

 

 

 

 

 

 

 

Underlying operating profit

 

 

466

 

201

 

89

 

(32)

 

724

 

Move share of profit of associates to other

 

 

(5)

 

(3)

 

-

 

8

 

-

 

Move Emerging Markets and Offshore & Remote restructuring costs to other

 

 

-

 

3

 

8

 

(11)

 

-

 

Underlying operating profit

 

 

461

 

201

 

97

 

(35)

 

724

 

Underlying operating margin - Region

 

8.5%

7.4%

6.4%

 

 

 

Underlying operating margin - Group

 

 

 

 

 

7.4%

 

Currency adjustments

 

 

81

 

20

 

24

 

1

 

126

 

Constant currency underlying profit

 

 

542

 

221

 

121

 

(34)

 

850

 

Organic adjustments

(4)

-

-

-

(4)

 

Organic profit

 

538

221

121

(34)

846

 

                     

 

 

 

 

Compass Group PLC

Condensed Financial Statements (continued)

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

 

 

FOR THE SIX MONTHS ENDED 31 MARCH 2017

 

 

 

 

 

 

 

11 POST BALANCE SHEET EVENTS

 

 

 

 

 

 

 

The Board is proposing to return 61 pence per share, which is equivalent to £1 billion in aggregate, to shareholders through a special dividend and share consolidation. The special dividend and share consolidation will be subject to shareholder approval at a General Meeting on 7 June 2017. If approved, the special dividend is expected to be paid on 17 July 2017 to shareholders on the register on 26 June 2017. Details of the share consolidation will be set out in a separate circular to shareholders. The Group has arranged a committed bank facility to fund the special dividend which it plans to replace with longer term bond finance over the coming months.

 

 

 

 

 

 

 

 

12 EXCHANGE RATES

 

 

 

 

Six months to 31 March

 

 

 

 

Year ended

30 September

 

2017

2016

2016

 

 

 

 

AVERAGE EXCHANGE RATE FOR THE PERIOD1

 

 

 

Australian Dollar

1.66

2.04

1.94

Brazilian Real

4.02

5.73

5.19

Canadian Dollar

1.66

1.98

1.88

Euro

1.16

1.34

1.28

Japanese Yen

138.07

174.46

159.94

Norwegian Krone

10.46

12.65

12.01

South African Rand

16.96

21.79

20.88

Swedish Krona

11.18

12.45

12.00

Swiss Franc

1.25

1.46

1.40

Turkish Lira

4.30

4.30

4.16

UAE Dirham

4.60

5.40

5.22

US Dollar

1.25

1.47

1.42

 

 

 

 

CLOSING EXCHANGE RATE AS AT THE END OF THE PERIOD1

 

 

 

Australian Dollar

1.64

1.87

1.70

Brazilian Real

3.97

5.09

4.22

Canadian Dollar

1.67

1.86

1.71

Euro

1.17

1.26

1.16

Japanese Yen

139.34

161.55

131.54

Norwegian Krone

10.74

11.89

10.38

South African Rand

16.77

21.14

17.86

Swedish Krona

11.16

11.65

11.13

Swiss Franc

1.25

1.38

1.26

Turkish Lira

4.55

4.05

3.90

UAE Dirham

4.59

5.28

4.77

US Dollar

1.25

1.44

1.30

 

 

 

 

 

1 Average rates are used to translate the income statement and cash flow statement. Closing rates are used to translate the balance sheet. Only the most significant currencies are shown.

 

 

 

 

 

 

Glossary of terms

 

 

Constant currency

Restates the prior year results to current year's average exchange rates.

Underlying revenue

The combined sales of Group and share of equity accounted joint ventures.

Underlying operating profit - Group

Includes share of profit after tax of associates and profit before tax of joint ventures but excludes the specific adjusting items, as listed below.

Underlying operating profit - Region

Includes share of profit before tax of joint ventures but excludes the specific adjusting items, as listed below, profit after tax of associates and EM & OR restructuring.

Underlying operating margin - Group

Based on underlying revenue and underlying operating profit excluding share of profit after tax of associates.

Underlying operating margin - Region

Based on underlying revenue and underlying operating profit excluding share of profit after tax of associates and EM & OR restructuring.

Underlying net finance cost

Excludes specific adjusting items.

Underlying profit before tax

Excludes specific adjusting items.

Underlying basic earnings per share

Excludes specific adjusting items and the tax attributable to those items.

Underlying EBITDA

Based on underlying operating profit, adding back amortisation of intangible assets and depreciation of property, plant and equipment.

Underlying tax

Excludes tax attributable to specific adjusting items.

Underlying effective tax rate

Based on underlying tax charge and underlying profit before tax.

Underlying cash tax rate

Based on net cash tax and underlying profit before tax.

Free cash flow

Calculated by adjusting operating profit for non-cash items in profit, cash movements in provisions, post-employment benefit obligations and working capital, cash purchases and proceeds from disposal of non-current assets, cash interest received, dividends received from joint ventures and associated undertakings, and dividends paid to non-controlling interests.

Underlying free cash flow

Adjusted for cash restructuring costs in the year relating to the 2012 and 2013 European exceptional programme.

Free cash flow conversion

Underlying free cash flow expressed as a percentage of underlying operating profit.

Organic revenue

Calculated by adjusting underlying revenue for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates).

Organic revenue growth

Calculated by adjusting underlying revenue for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates) and compares the current year results against the prior year.  In addition, where applicable, a 53rd week has been excluded from the prior year's underlying revenue.

Organic profit

Calculated by adjusting underlying operating profit for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates)

Organic operating profit growth

Calculated by adjusting underlying operating profit for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates) and compares the current year results against the prior year.  In addition, where applicable, a 53rd week has been excluded from the prior year's underlying operating profit.

Specific adjusting items

amortisation of intangibles arising on acquisition;

acquisition transaction costs;

adjustment to contingent consideration on acquisition;

share-based payments expense - non-controlling interest call option;

tax on share of joint ventures;

profit/(loss) on disposal of businesses;

change in the fair value of investments;

other financing items.

EM & OR restructuring

Emerging Markets and Offshore & Remote restructuring.

Net debt

Overdrafts, bank and other borrowings, finance leases and derivative financial instruments, net of cash and cash equivalents.

Net debt to EBITDA

Net debt divided by underlying EBITDA.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR FMGGKLLNGNZM
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Half year results announcement - RNS