TIDMCPG
RNS Number : 0772X
Compass Group PLC
21 November 2017
Legal Entity Identifier (LEI) No. 2138008M6MH9OZ6U2T68
Full year results announcement for the year ended 30 September
2017
Underlying(1) results Statutory results
2017 2016 Change 2017 2016 Change
GBP22.9 GBP22.0 GBP22.6 GBP19.6
Revenue billion billion(2) 4.0%(3) billion billion 15.1%
Operating GBP1,705 GBP1,614 GBP1,665 GBP1,409
profit million million(2) 5.6%(2) million million 18.2%
Operating +20 +20
margin 7.4% 7.2% bps 7.4% 7.2% bps
Earnings
per share 72.3 pence 68.4 pence(2) 5.7%(2) 71.3 pence 60.4 pence 18.0%
Free cash GBP974 GBP908
flow million million 7.3%
Annual dividend
per share 33.5 pence 31.7 pence 5.7% 33.5 pence 31.7 pence 5.7%
================= =========== ============== ======== =========== =========== =======
(1) Reconciliation of statutory to underlying results can be
found on pages 34 - 35.
(2) Measured on a constant currency basis.
(3) Organic revenue growth.
Compass reports another strong set of results. Organic revenue
grew by 4%, operating margin improved by 20 basis points and we
returned GBP1.6bn to shareholders.
Organic revenue growth of 4.0%
-- Growth accelerated in the second half as expected
-- Another excellent year in North America with organic revenue up 7.1%
-- Organic revenue grew by 1.6% in Europe
-- Rest of World declined by 2.5%, but excluding Offshore & Remote it grew by 3.0%
Margin up 20bps
-- The Management and Performance (MAP) programme continues to drive operating efficiencies
-- Margin improvement benefitted from the end of restructuring plan in Offshore & Remote
Growth, performance and returns to shareholders: a proven and
sustainable model
-- Free cash flow of GBP974 million, up 7.3% on 2016
-- Proposed annual dividend up 5.7%, in line with constant currency EPS
-- Total returns to shareholders of GBP1.6bn, including GBP1bn special dividend
Statutory results
-- On a statutory basis, revenue, operating profit and earnings
per share benefitted by around 11% from the translational effect of
weaker sterling
Chief Executive's Statement
Richard Cousins, Group Chief Executive, said:
"Compass had another strong year. North America continues to
deliver excellent growth, we are continuing to make progress in
Europe and in Rest of World, with trends in our commodity related
business improving.
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, this year we returned GBP1.6 billion to shareholders via
ordinary and special dividends and share buybacks. This reflects
our commitment to return surplus cash to shareholders whilst
maintaining an efficient balance sheet.
Our expectations for FY2018 are positive, with growth and margin
improvement weighted to the second half. The pipeline of new
contracts is encouraging and our focus on organic growth,
efficiencies and cash gives us confidence in achieving another year
of progress.
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, Tuesday 21 November 2017, at 9.00 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
9.00 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) 3333 000 804
UK Toll-Free Number: +44 (0) 800 358 9473
US Toll Number: +1 631 913 1422
US Toll-Free Number: +1 855 857 0686
Participant PIN Code: 03721269#
Financial calendar
Ex-dividend date for 2017 final dividend 18 January 2018
Record date for 2017 final dividend 19 January 2018
2017 final dividend date for payment 26 February 2018
Q1 Trading Update / Annual General Meeting 8 February 2018
Half year results 9 May 2018
Enquiries
Investors Sandra Moura +44 1932 573 000
Press Gordon Simpson, Finsbury +44 207 251 3801
Website www.compass-group.com
Chief Executive's Statement (continued)
Basis of preparation
Throughout this preliminary announcement, and consistent with
prior years, underlying and other alternative performance measures
are used to describe the Group's performance. These are not
recognised under International Financial Reporting Standards (IFRS)
or other generally accepted accounting principles (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 pages 37 to 38.
A summary of the adjustments from statutory results to
underlying results is shown in note 8 on page 34 and further
detailed in the consolidated income statement (page 21),
reconciliation of free cash flow (page 27), note 2 segmental
reporting (pages 28 to 29) and note 9 organic revenue and organic
profit (page 35).
Group overview
Revenue for the Group grew by 4.0% on an organic basis. New
business wins were 8.7% driven by strong MAP 1 (client sales and
marketing) performance in all regions, our retention rate was 94.3%
as a result of our ongoing focus and investment, and like for like
revenue grew by 1.0% reflecting sensible price increases partially
offset by weak volumes in our commodity related business. On a
statutory basis, revenue grew by 15.1%, of which 11.3% was the
benefit of currency translation.
Underlying operating profit increased by 5.6% on a constant
currency basis. Operating profit margin increased by 20 basis
points as we continue to drive efficiencies across the business
using our Management and Performance (MAP) framework and foreign
exchange. We also 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 reinvest to support the exciting
growth opportunities we see around the world. On a statutory basis,
operating profit grew by 18.2%, of which 11.3% was the benefit of
currency translation.
Returns to shareholders continue to be an integral part of our
business model. As a result of continued strong cash flow
generation, and limited M&A this year, we paid a special
dividend of GBP1 billion (61.0 pence per share) in July and
declared an annual dividend of 33.5 pence per share (up 5.7%). We
have also bought back GBP19 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 - 58.3% Group revenue (2016: 56.3%)
Underlying Change
Regional financial summary 2017 2016 Reported rates Constant currency Organic
============================ =========== =========== =============== ================== ========
Revenue GBP13,322m GBP11,198m 19.0% 6.7% 7.1%
Regional operating profit GBP1,082m GBP908m 19.2% 6.9% 7.4%
Regional operating margin 8.1% 8.1% -
============================ =========== =========== =============== ================== ========
We have had another strong performance from our North American
business with organic revenue growth of 7.1%. This was driven by
good new business wins and an excellent retention rate at 96%. Like
for like revenues were positive across the business reflecting
modest pricing and flat volumes - with the exception of the
Offshore & Remote sector which remains challenging.
Solid organic growth in our Business & Industry sector was
driven by strong new business and excellent retention. New contract
wins include Costco as well as additional business with Qualcomm
Inc.
In the Healthcare & Seniors sector, organic revenue growth
was driven by double digit new business and some like for like
growth. New contract wins include Mayo Foundation, University of
Cincinnati Health System, Cleveland Clinic and Arkansas Children's
Hospital.
Excellent retention in our Education sector has contributed to
the delivery of solid organic revenue growth along with contract
wins including the University of Houston and Vassar College.
Our Sports & Leisure business had excellent retention of
nearly 100%. Increased participation at some sporting events, with
the benefit of additional playoffs, contributed to strong organic
revenue growth. Contract wins include the George R. Brown
Convention Center, Vivint Smart Home Arena, home of the Utah Jazz,
and Smith's Ballpark, home of the Salt Lake Bees.
Offshore & Remote is small at circa 2% of revenues. It
continued to decline in the year, with the second half of the year
worsening due to client site closures, the impact of which will
continue in 2018. Volume and pricing pressures also remain.
However, some new contracts continue to be won including additional
projects for Noble Drilling and Forbes Bros. Ltd.
Underlying operating profit of GBP1,082 million increased by
6.9% (GBP70 million) on a constant currency basis. The benefits
generated by ongoing efficiency initiatives across MAPs 3 and 4,
along with sensible price increases and leverage of the overhead
base, were largely offset by the continued weakness in our Offshore
& Remote business and above average labour inflation. As a
result, the underlying operating margin for the year was
unchanged.
Chief Executive's Statement (continued)
Europe - 25.9% Group revenue (2016: 27.5%)
Underlying Change
Regional financial summary 2017 2016 Reported rates Constant currency Organic
============================ ========== ========== =============== ================== ========
Revenue GBP5,911m GBP5,458m 8.3% 1.5% 1.6%
Regional operating profit GBP428m GBP394m 8.6% 1.2% 1.2%
Regional operating margin 7.2% 7.2% -
============================ ========== ========== =============== ================== ========
Organic revenue growth for the region was 1.6% with growth
improving as the year progressed. The performance was driven by
good levels of new business in the UK and Turkey, partly offset by
dull trading on the Continent, principally in France and Germany.
Like for like revenues benefitted from some pricing but continued
to be impacted by poor trading conditions in our North Sea oil
& gas business.
Our improving new business performance reflects good levels of
wins in the UK, Turkey and Iberia. New contracts include Colegios
Mayores UCM in Spain and Oxford University in the UK. Contract
extensions include Peugeot in France and Slovakia, Rabobank in the
Netherlands, Premier Inn and Wimbledon both in the UK and Mercedes
in Turkey.
Underlying operating profit grew by 1.2% (GBP5 million) on a
constant currency basis. The ongoing focus on driving operational
efficiencies and sensible pricing allowed us to support the higher
levels of growth, and associated mobilisation costs. This was
offset by lower volumes in the oil & gas business, and
inflationary pressures, particularly unrecovered labour cost
inflation in our UK support services business. As a result of our
actions, we have maintained the underlying operating margin at
7.2%.
Chief Executive's Statement (continued)
Rest of World - 15.8% Group revenue (2016: 16.2%)
Underlying Change
Regional financial summary 2017 2016 Reported rates Constant currency Organic
============================ ========== ========== =============== ================== ========
Revenue GBP3,619m GBP3,215m 12.6% (2.5)% (2.5)%
Regional operating profit GBP248m GBP218m 13.8% (2.0)% (2.0)%
Regional operating margin 6.9% 6.8% 10bps
============================ ========== ========== =============== ================== ========
Organic revenue in our Rest of World region declined by 2.5%.
Excluding the Offshore & Remote business, organic revenue grew
by 3.0%. Offshore & Remote contracted by 14%, 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. However, the rate of decline
has slowed in recent months and we expect this trend to continue
into 2018.
As expected, our Australian Offshore & Remote business saw a
slowdown in the rate of organic revenue decline to 14% in the
second half of the year. Contracts continue to move from their
construction to production phase and the ongoing pressures from
lower volumes remain, however the number of site closures have
reduced. Similar challenges continue to be seen in our
non-Australian Offshore & Remote business, although trends are
starting to improve. We continue to win and retain contracts at the
RAPID site in Malaysia and Centinela in Chile.
The non-Offshore & Remote business continues to perform
reasonably well across the region with several countries enjoying
double digit growth, including India, China and some of our Spanish
speaking Latin American businesses. Although the rate of decline
has marginally slowed, Brazil remains challenging. New business
wins include the Calvary Bruce Public Hospital in Australia, Fiat
in Brazil, Apple Shenzhen in China, J-Village in Japan and Mercedes
Benz in India. We continue to retain contracts, including the
Kagoshima University Hospital in Japan, New York University Abu
Dhabi, Roche in China and Prodeco Food in Colombia.
Overall, underlying operating profit declined by 2.0% (GBP5
million) on a constant currency basis. The underlying margin
benefitted more than expected from last year's restructuring
allowing for 10 basis points of margin improvement to 6.9%.
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 GBP200 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 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. Our investment in MAP 1 sales and retention has
returned the region to growth and with the creation of 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, but trends are beginning to improve. 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
The global food services market is very large and disparate and
we find that segmenting the market into various sectors and
sub-sectors using our portfolio of B2B brands allows us to operate
more effectively. It allows us to be closer to our clients and
consumers and better understand their different needs. In this way,
we can create innovative, bespoke offers that meet their
requirements, and in so doing truly differentiate ourselves.
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 Group. 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.
Summary and outlook
"Compass had another strong year. North America continues to
deliver excellent growth, we are continuing to make progress in
Europe and in Rest of World, with trends in our commodity related
business improving.
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, this year we returned GBP1.6 billion to shareholders via
ordinary and special dividends and share buybacks. This reflects
our commitment to return surplus cash to shareholders whilst
maintaining an efficient balance sheet.
Our expectations for FY2018 are positive, with growth and margin
improvement weighted to the second half. The pipeline of new
contracts is encouraging and our focus on organic growth,
efficiencies and cash gives us confidence in achieving another year
of progress.
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
21 November 2017
Business Review
2017 has been another strong year with good organic revenue
growth of 4.0%, underlying margin delivery of 7.4% and an increase
in free cash flow of 7.3%.
Financial summary 2017 2016
GBPm GBPm Increase
Revenue
Underlying at constant currency 22,852 22,017 3.8%
Underlying at reported rates 22,852 19,871 15.0%
Statutory 22,568 19,605 15.1%
Organic growth 4.0% 5.0%
================================== ======= ======= =========
Total operating profit
Underlying at constant currency 1,705 1,614 5.6%
Underlying at reported rates 1,705 1,445 18.0%
Statutory 1,665 1,409 18.2%
================================== ======= ======= =========
Operating margin
Underlying at reported rates 7.4% 7.2% 20 bps
Statutory 7.4% 7.2% 20 bps
================================== ======= ======= =========
Profit before tax
Underlying at constant currency 1,591 1,504 5.8%
Underlying at reported rates 1,591 1,344 18.4%
Statutory 1,560 1,321 18.1%
================================== ======= ======= =========
Basic earnings per share
Underlying at constant currency 72.3p 68.4p 5.7%
Underlying at reported rates 72.3p 61.1p 18.3%
Statutory 71.3p 60.4p 18.0%
================================== ======= ======= =========
Free cash flow
Underlying at reported rates 974 908 7.3%
Full year dividend per ordinary
share 33.5p 31.7p 5.7%
================================== ======= ======= =========
Definitions of underlying measures of performance can be found
in the glossary on pages 37 to 38.
Business Review (continued)
Segmental performance
Underlying Growth
revenue(1)
------------------------ ----------------------------- ----------------------- --------
2017 2016 Reported Constant
GBPm GBPm Rates Currency Organic
------------ --------------- ----------- ---------- --------
North America 13,322 11,198 19.0% 6.7% 7.1%
Europe 5,911 5,458 8.3% 1.5% 1.6%
Rest of World 3,619 3,215 12.6% (2.5%) (2.5%)
Total 22,852 19,871 15.0% 3.8% 4.0%
------------------------- ------------ --------------- ----------- ---------- --------
Underlying Underlying operating
operating profit(1) margin(1)
----------------------------- -----------------------
2017 2016 2017 2016
GBPm GBPm % %
------------ --------------- ----------- ----------
North America 1,082 908 8.1% 8.1%
Europe 428 394 7.2% 7.2%
Rest of World 248 218 6.9% 6.8%
Unallocated overheads (70) (65)
Total before
EM & OR restructuring 1,688 1,455 7.4% 7.3%
------------------------- ------------ --------------- ----------- ----------
EM & OR restructuring - (25)
Total before
associates 1,688 1,430 7.4% 7.2%
Associates 17 15
------------------------- ------------ ---------------
Total 1,705 1,445
------------------------- ------------ ---------------
(1) Definitions of underlying measures of performance can be
found in the glossary on page 37 to 38.
Business Review (continued)
Statutory and underlying results
2017 2016
Statutory Adjustments Underlying Statutory Adjustments Underlying
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 22,568 284 22,852 19,605 266 19,871
Operating profit 1,665 40 1,705 1,409 36 1,445
Other gains/ (losses) - - - 1 (1) -
Net finance costs (105) (9) (114) (89) (12) (101)
Profit before tax 1,560 31 1,591 1,321 23 1,344
Tax (389) (15) (404) (319) (11) (330)
======================= ========== ============ =========== ========== ============ ===========
Profit after tax 1,171 16 1,187 1,002 12 1,014
Non-controlling
interest (10) - (10) (10) - (10)
Attributable profit 1,161 16 1,177 992 12 1,004
Average number
of shares (millions) 1,628 - 1,628 1,643 - 1,643
Basic earnings
per share (pence) 71.3p 1.0p 72.3p 60.4p 0.7p 61.1p
======================= ========== ============ =========== ========== ============ ===========
EBITDA 2,188 1,840
Gross capex 717 580
Free cash flow 974 908
======================= ========== ============ =========== ========== ============ ===========
Further details of the adjustments can be found in the
consolidated income statement, note 2 segmental reporting and note
8 statutory and underlying results.
Statutory results
On a statutory basis, revenue was GBP22,568 million (2016:
GBP19,605 million), growth of 15.1%, which included 11.3% of
foreign currency translation benefit.
Operating profit was GBP1,665 million (2016: GBP1,409 million),
an increase of 18.2% over the prior year, which included 11.3% of
foreign currency translation benefit.
Operating margin was 7.4% (2016: 7.2%).
Net finance costs were GBP105 million (2016: GBP89 million).
Profit before tax was GBP1,560 million (2016: GBP1,321 million)
giving rise to an income tax expense of GBP389 million (2016:
GBP319 million), equivalent to an effective tax rate of 24.9%
(2016: 24.1%).
Basic earnings per share were 71.3 pence (2016: 60.4 pence), an
increase of 18.0%, of which 11.3% relates to foreign currency
translation.
Business Review (continued)
Underlying results
A summary of adjustments from statutory results to underlying
results is shown on page 34 and further detailed in the
consolidated income statement (page 21), reconciliation of free
cash flow from operations (page 27), the segmental reporting note
(pages 28 to 29) and the organic revenue and organic profit note
(page 35).
Underlying revenue
On an organic basis, revenue increased by 4.0%. New business
wins were 8.7% driven by a strong performance in most countries.
Our retention rate was 94.3% as a result of our ongoing focus and
investment. Like for like revenue growth was 1.0%, reflecting
sensible price increases partly offset by weak volumes in our
commodity related business.
Underlying operating profit
Underlying operating profit was GBP1,705 million (2016: GBP1,445
million), an increase of 18.0%. If we restate 2016's profit at the
2017 average exchange rates, it would have increased by GBP169
million to GBP1,614 million. On a constant currency basis,
underlying operating profit has therefore increased by GBP91
million, or 5.6%.
Underlying operating margin
The underlying operating margin increased by 20 basis points as
we continue to drive efficiencies across the business, benefitted
from the end of the Emerging Markets and Offshore & Remote
restructuring and foreign exchange. These efficiencies, combined
with modest pricing increases, enabled us to offset inflation
pressures and reinvest to support the exciting growth opportunities
we see around the world.
Underlying finance costs
The underlying net finance cost increased to GBP114 million
(2016: GBP101 million) as a result of sterling weakness and the
additional interest on debt to fund the GBP1 billion special
dividend. This equates to an effective interest rate of just under
3.0% on gross debt. For 2018, we expect an underlying net finance
cost of around GBP120 million.
Underlying tax charge
On an underlying basis, the tax charge was GBP404 million (2016:
GBP330 million), equivalent to an effective tax rate of 25.4%
(2016: 24.5%). This increase is a consequence of both the changing
regulatory environment affecting all multinational groups,
specifically the enactment into law in the UK of the OECD BEPS
legislation, and the impact of exchange rate movements. Our current
expectations for the 2018 tax rate are to be around 1.0% higher
than 2017. As previously noted, we are likely to see a continuing
period of significant uncertainty in the international corporate
tax environment.
Underlying basic earnings per share
On a constant currency basis, the underlying basic earnings per
share were 72.3 pence (2016: 68.4 pence), an increase of 5.7%.
Dividends
Our dividend policy is to grow the dividend in line with growth
in underlying constant currency earnings per share.
In determining the level of dividend in any year in accordance
with the policy, the Board also considers a number of other factors
that influence the proposed dividend, which include but are not
limited to:
-- the level of available distributable reserves in the Parent Company;
-- future cash commitments and investment needs to sustain the
long-term growth prospects of the business;
-- potential strategic opportunities; and
-- the level of dividend cover.
Further surpluses, after considering the matters set out above,
are distributed to shareholders over time by way of special
dividend payments, share repurchases or a combination of both.
Compass Group PLC, the Parent Company of the Group, is a
non-trading investment holding company which derives its
distributable reserves from dividends paid by subsidiary companies.
The level of distributable reserves in the Parent Company is
reviewed annually and the Group aims to maintain distributable
reserves that provide adequate cover for dividend payments. The
distributable reserves of the Parent Company include the balance on
the profit and loss account reserve, which at 30 September 2017
amounted to GBP1,127 million.
The Group is currently in a strong position to continue to fund
its dividend which continues to be well covered by cash generated
by the business. Details on the Group's going concern assessment
can be found on page 16.
The ability of the Board to maintain its future dividend policy
will be influenced by a number of the principal risks identified on
pages 17 to 20 that could adversely impact the performance of the
Group although we believe we have the ability to mitigate those
risks as outlined on pages 17 to 20.
It is proposed that a final dividend of 22.3 pence per share be
paid on 26 February 2018 to shareholders on the register on 19
January 2018. This will result in a total dividend for the year of
33.5 pence per share (2016: 31.7 pence per share), a year on year
increase of 5.7%. The dividend is covered 2.2 times on an
underlying earnings basis and 1.8 times on a cash basis.
The final dividend of 22.3 pence will be paid gross and a
Dividend Reinvestment Plan (DRIP) will be available. The last date
for receipt of elections for the DRIP will be 5 February 2018.
Special dividend
On 7 June 2017, shareholder approval was given at a General
Meeting for a return of 61.0 pence per share to shareholders, which
was equivalent to GBP1 billion in aggregate and was accompanied by
a Share Capital Consolidation. The special dividend was paid on 17
July 2017 to shareholders on the register on 26 June 2017.
Purchase of own shares
During the year, the Group purchased shares for a consideration
of GBP19 million (2016: GBP100 million).
Shareholder return
The market price of the Group's ordinary shares at the close of
the financial year was 1,583.00 pence per share (2016: 1,495.00
pence per share).
Business Review (continued)
Free cash flow
Free cash flow totalled GBP974 million (2016: GBP899 million).
In 2016, we made cash payments of GBP9 million related to the
European exceptional programme. Adjusting for this, free cash flow
on an underlying basis would have grown by GBP66 million or 7.3%.
Free cash flow conversion was 57% (2016: 63%).
Gross capital expenditure of GBP717 million (2016: GBP580
million), including assets purchased under finance leases of GBP2
million (2016: GBP2 million), is equivalent to 3.1% of underlying
revenues (2016: 2.9% of underlying revenues). We continue to
deliver strong returns on our capital expenditure across all
regions. In 2018 we expect capital expenditure to be just over 3%
of revenue, which includes an investment in a long term partnership
with the LA Dodgers in the US.
The working capital outflow, excluding provisions and pensions,
was GBP62 million (2016: GBP12 million inflow). In 2018 we expect a
small underlying outflow which will be offset by a positive inflow
of around GBP70 million due to the timing of our payroll run in
September. This payroll inflow is a reversal of the outflow which
occurred in 2016.
The GBP14 million outflow (2016: GBP39 million) in respect of
post employment benefit obligations reflects the reduction in
regular payments agreed with trustees of the UK defined benefit
pension scheme as a result of the funding surplus following the
triennial valuation in April 2016. We now continue to expect a
total outflow for the Group of around GBP20 million per annum.
The net interest outflow was GBP97 million (2016: GBP94
million).
The underlying cash tax rate was in line with expectations at
21% (2016: 18%).
Acquisition payments
The total cash spent on acquisitions in the year, net of cash
acquired, was GBP96 million (2016: GBP180 million), comprising
GBP72 million of infill acquisitions, GBP1 million of acquisition
transaction costs net of cash acquired and GBP23 million of
contingent consideration relating to prior years' acquisitions.
Disposals
The Group received GBP19 million (2016: GBP2 million) in respect
of the disposal of some 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, calculated in accordance with
IAS 19, for all Group defined benefit schemes was GBP28 million
(2016: GBP21 million deficit).
The total pensions charge for defined benefit contribution
schemes in the year was GBP123 million (2016: GBP100 million) and
GBP20 million (2016: GBP17 million) for defined benefit
schemes.
Return on capital employed
Return on capital employed was 20.3% (2016: 19.4%) based on net
operating profit after tax at the underlying effective tax rate of
25.4% (2016: 24.5%). The average capital employed was GBP6,218
million (2016: GBP5,565 million).
On a constant currency basis, the increase in return on capital
employed was 10 basis points.
Related party transactions
Details of transactions with related parties are set out in note
29 of the consolidated financial statements. These transactions
have not had, and are not expected to have, a material effect on
the financial performance or position of the Group.
Business Review (continued)
Financial position
The ratio of net debt to market capitalisation of GBP25,035
million as at 30 September 2017 was 13.8% (2016: 12%).
Net debt increased to GBP3,446 million (2016: GBP2,874 million).
The ratio of net debt to underlying EBITDA was 1.6x, slightly above
the target ratio due to the funding of the GBP1 billion special
dividend. Our leverage policy is to maintain strong investment
grade credit ratings, returning any surplus cash to shareholders to
target net debt to underlying EBITDA of around 1.5x.
The Group generated GBP974 million of free cash flow (2016:
GBP899 million), including investing GBP683 million in net capital
expenditure, and spent GBP77 million on acquisitions net of
disposal proceeds. GBP347 million was paid in respect of the final
dividend for the financial year 2016, GBP184 million was paid for
the interim 2017 dividend, GBP1,003 million in relation to the
special dividend and GBP19 million returned to shareholders through
share buybacks.
The remaining GBP84 million movement in net debt related
predominantly to foreign currency translation.
Liquidity risk
The Group finances its borrowings from a number of sources
including the bank, the public and the private placement markets.
The Group has developed long term relationships with a number of
financial counterparties with the balance sheet strength and credit
quality to provide credit facilities as required. The Group seeks
to avoid a concentration of debt maturities in any one period to
spread its refinancing risk.
The maturity profile of the Group's principal borrowings at 30
September 2017 shows that the average period to maturity is 5.6
years (2016: 5.0 years).
The Group's undrawn committed bank facilities at 30 September
2017 were GBP1,387 million (2016: GBP1,000 million).
Financial management
The Group continues to manage its interest rate and foreign
currency exposure in accordance with the policies set out
below.
The Group's financial instruments comprise cash, borrowings,
receivables and payables that are used to finance the Group's
operations. The Group also uses derivatives, principally interest
rate swaps, forward currency contracts and cross currency swaps, to
manage interest rate and currency risks arising from the Group's
operations. The Group does not trade in financial instruments. The
Group's treasury policies are designed to mitigate the impact of
fluctuations in interest rates and exchange rates and to manage the
Group's financial risks. The Board approves any changes to the
policies. These policies have not changed in the year.
Foreign currency risk
The Group's policy is to match as far as possible its principal
projected cash flows by currency to actual or effective borrowings
in the same currency. As currency cash flows are generated, they
are used to service and repay debt in the same currency. Where
necessary, to implement this policy, forward currency contracts and
cross currency swaps are taken out which, when applied to the
actual currency borrowings, convert these to the required
currency.
The borrowings in each currency can give rise to foreign
exchange differences on translation into sterling. Where the
borrowings either are less than, or equate to, the net investment
in overseas operations, these exchange rate movements are treated
as movements on reserves and recorded in the consolidated statement
of comprehensive income rather than in the income statement.
Non-sterling earnings streams are translated at the average rate
of exchange for the year. Fluctuations in exchange rates have
given, and will continue to give, rise to translation differences.
The Group is only partially protected from the impact of such
differences through the matching of cash flows to currency
borrowings.
Business Review (continued)
Interest rate risk
As set out above, the Group has effective borrowings in a number
of currencies and its policy is to ensure that, in the short term,
it is not materially exposed to fluctuations in interest rates in
its principal currencies. The Group implements this policy either
by borrowing fixed rate debt or by using interest rate swaps so
that the interest rates on at least 80% of the Group's projected
debt are fixed for one year, reducing to 60% fixed for the second
year and 40% fixed for the third year.
Group tax policy
As a Group, we are committed to creating long term shareholder
value through the responsible, sustainable and efficient delivery
of our key business objectives. This will enable us to grow the
business and make significant investments into the Group and its
operations.
We therefore adopt an approach to tax that supports this
strategy and also balances the various interests of our
stakeholders including shareholders, governments, employees and the
communities in which we operate. Our aim is to pursue a principled
and sustainable tax strategy that has strong commercial merit and
is aligned with our business strategy. We believe this will enhance
shareholder value whilst protecting Compass' reputation.
In doing so, we act in compliance with the relevant local and
international laws and disclosure requirements, and we conduct an
open and transparent relationship with the relevant tax authorities
that fully complies with the Group's Code of Business Conduct and
Code of Ethics.
In an increasingly complex international environment, a degree
of tax risk and uncertainty is, however, inevitable. We manage and
control these risks in a proactive manner and in doing so, exercise
our judgement and seek appropriate advice from relevant
professional firms. Tax risks are assessed as part of the Group's
formal governance process and are reviewed by the Board and the
Audit Committee on a regular basis.
Risks and uncertainties
The Board takes a proactive approach to risk management with the
aim of protecting its employees and customers and safeguarding the
interests of the Group, its shareholders, employees, clients,
consumers and all other stakeholders.
The principal risks and uncertainties that face the business and
the activities the Group undertakes to mitigate these are set out
on pages 17 to 20.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Business Review, as is the financial position of
the Group, its cash flows, liquidity position, and borrowing
facilities.
The Group has considerable financial resources together with
longer term contracts with a number of clients and suppliers across
different geographic areas and industries. As a consequence, the
directors believe that the Group is well placed to manage its
business risks successfully.
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the 12 months from the date of approval
of the Annual Report. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
Johnny Thomson
Group Finance Director
21 November 2017
Focus on Risk
Identifying and managing risk
The Board continues to take a proactive approach to recognising,
assessing and mitigating risk with the aim of protecting its
employees and consumers and safeguarding the interests of the
Company and its shareholders in the constantly changing environment
in which it operates.
As set out in the Corporate Governance section within the Annual
Report, the Group has policies and procedures in place to ensure
that risks are properly identified, evaluated and managed at the
appropriate level within the business.
The identification of risks and opportunities, the development
of action plans to manage the risks and maximise the opportunities,
and the continual monitoring of progress against agreed key
performance indicators (KPIs) are integral parts of the business
process and core activities throughout the Group.
The table on pages 18 to 20 sets out the principal risks and
uncertainties facing the business at the date of this announcement.
These have been subject to robust assessment and review. They do
not comprise all of the risks that the Group may face and are not
listed in any order of priority. Additional risks and uncertainties
not presently known to management, or deemed to be less material at
the date of this announcement, may also have an adverse effect on
the Group. These include risks resulting from the UK's decision to
leave the EU and the potential for US tax reform which could
adversely affect the risks noted under the 'economic and political
environment' section of the table on the following pages as well as
affecting financial risks such as liquidity and credit. The Board
views the potential impact of Brexit as an integral part of its
principal risks rather than a stand-alone risk. However, there is
still significant uncertainty about the withdrawal process, its
timeframe, and 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. Therefore, although the risks related to Brexit have been
discussed by the Board, it remains too early to properly understand
the impact on the business whilst negotiations continue to take
place. The Board will continue to assess the risk to the business
as the Brexit process evolves.
The Group has significant operations and a substantial employee
base in the USA where the new 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 administration and
will continue to assess the impact of any changes and the extent to
which they will be enacted.
In accordance with the provisions of the UK Corporate Governance
Code, the Board has taken into consideration the principal risks in
the context of determining whether to adopt the going concern basis
of accounting and when assessing the prospects of the Company for
the purpose of preparing the Viability Statement. The Going Concern
and Viability Statement can be found in the Strategic Report in the
Annual Report.
The Group faces a number of operational risks on an ongoing
basis such as litigation and financial (including liquidity and
credit) risk and some wider risks, for example, environmental and
reputational. Additionally, there are risks (such as those relating
to the eurozone economy, pensions, and acquisitions and
investments) which vary in importance depending on changing
conditions. All risks disclosed in previous years can be found in
the annual reports available on our website at
www.compass-group.com. We recognise that these risks remain
important to the business and they are kept under review. However,
we have focused the disclosures on pages below on those risks that
are currently considered to be more significant to the Group.
Focus on Risk (continued)
Principal risks
-- Increased risk Consistent risk
RISKS DESCRIPTION EXAMPLES OF MITIGATION
HEALTH AND SAFETY
Health and Health and safety All management meetings
safety is our number one throughout the Group
operational priority. feature a health and
We are focused on safety update as their
protecting people's first substantive
wellbeing, as well agenda item.
as avoiding serious
business interruption
and potential damage
to our reputation.
Compass feeds millions
of consumers and employs
thousands of people
around the world every
day. Therefore, setting
the highest standards
for food hygiene and
safety is paramount.
2017 Health and safety
improvement KPIs are
included in the annual
bonus plans for each
of the business' management
teams.
2016 The Group has policies,
procedures and standards
in place to ensure
compliance with legal
obligations and industry
standards.
The safety and quality
of our global supply
chain are assured
through compliance
against a robust set
of standards which
are regularly reviewed,
audited and upgraded
as necessary to improve
supply chain visibility
and product integrity.
CLIENTS AND CONSUMERS
Client and Our business relies We have strategies
consumer sales on securing and retaining which strengthen our
retention a diverse range of long term relationships
clients. with our clients and
consumers based on
quality, value and
innovation.
2017 Our business model
is structured so that
we are not reliant
on one particular
sector, geography
or group of clients.
2016
---------------- ------------------------------- ---------------------------------
Bidding Each year, the Group A rigorous tender
could bid for a large review process is
number of opportunities. in place, which includes
a critical assessment
of contracts to identify
potential risks (including
social and ethical
risks) and rewards,
prior to approval
at an appropriate
level in the organisation.
2017
2016
---------------- ------------------------------- ---------------------------------
Service delivery The Group's operating Processes are in place
and contractual companies contract to ensure that the
compliance with a large number services delivered
2017 of clients. Failure to clients are of
2016 to comply with the an appropriate standard
terms of these contracts, and comply with the
including proper delivery required contract
of services, could terms and conditions.
lead to loss of business.
---------------- ------------------------------- ---------------------------------
Competition We operate in a highly We aim to minimise
competitive marketplace. this by continuing
The levels of concentration to promote our differentiated
and outsource penetration propositions and by
vary by country and focusing on our points
by sector. Some markets of strength, such
are relatively concentrated as flexibility in
with two or three our cost base, quality
key players. Others and value of service
are highly fragmented and innovation.
and offer significant
opportunities for
consolidation and
penetration of the
self-operated market.
Aggressive pricing
from our competitors
could cause a reduction
in our revenues and
margins.
2017
2016
Focus on Risk (continued)
RISKS DESCRIPTION EXAMPLES OF MITIGATION
PEOPLE
Recruitment Failure to attract The Group aims to
and recruit people mitigate this risk
with the right skills by efficient, time
at all levels could critical resource
limit the success management, mobilisation
of the Group. The of existing, experienced
Group faces resourcing employees within the
challenges in some organisation, improved
of its businesses use of technology
due to a lack of industry and through offering
experience amongst training and development
candidates and appropriately programmes.
qualified people,
and the seasonal nature
of some of our business.
2017
2016
--------------- -------------------------------- ----------------------------
Retention Retaining and motivating The Group has established
and motivation the best people with training, development,
the right skills, performance management
at all levels of the and reward programmes
organisation, is key to retain, develop
to the long term success and motivate our best
of the Group. people.
2017 The Group has a well
established employee
engagement initiative,
Your Voice, which
helps us to monitor,
understand and respond
to our employees'
needs.
2016
ECONOMIC AND POLITICAL ENVIRONMENT
Economy Some sectors of our With the variable
business could be and flexible nature
susceptible to adverse of our cost base,
changes in economic it is generally possible
conditions and employment to contain the impact
levels. of these adverse conditions.
2017
2016
-------------- --------------------------------- ----------------------------------
Cost inflation Our objective is always As part of our MAP
to deliver the right framework, we seek
level of service in to manage inflation
the most efficient by continuing to drive
way. An increase in greater efficiencies
the cost of labour, through menu management,
for example, minimum supplier rationalisation,
wages in the USA and labour scheduling
UK, or food, especially and productivity.
in countries such Cost indexation in
as Brazil, could constitute our contracts also
a risk to our ability gives us the contractual
to do this. right to review pricing
with our clients.
2017
2016
-------------- --------------------------------- ----------------------------------
Political We are a global business The Group remains
stability operating in countries vigilant to future
and regions with diverse changes presented
economic and political by emerging markets
conditions. Our operations or fledgling administrations
and earnings may be and we try to anticipate
adversely affected and contribute to
by political or economic important changes
instability caused, in public policy.
for example, by the
UK's decision to leave
the EU.
2017
2016
COMPLIANCE AND FRAUD
Compliance Ineffective compliance The Group's zero tolerance
and fraud management with increasingly based Codes of Business
complex laws and regulations, Conduct and Ethics
or evidence of fraud, continue to govern
could have an adverse all aspects of our
effect on the Group's relationships with
reputation and could our stakeholders.
result in an adverse All alleged breaches
impact on the Group's of the Codes, including
performance if significant any allegations of
financial penalties fraud, are investigated.
are levied or a criminal
action is brought
against the Company
or its directors.
2017 The Group's procedures
include regular operating
reviews, underpinned
by a continual focus
on ensuring the effectiveness
of internal controls.
2016 Regulation and compliance
risk is also considered
as part of our annual
business planning
process.
-------------- --------------------------------- ----------------------------------
Focus on Risk (continued)
RISKS DESCRIPTION EXAMPLES OF MITIGATION
COMPLIANCE AND FRAUD
Tax compliance As a Group, we seek We manage and control
to plan and manage these risks in a proactive
our tax affairs efficiently manner and in doing
in the jurisdictions so exercise our judgement
in which we operate. and seek appropriate
In doing so, we act advice from reputable
in compliance with professional firms.
the relevant laws Tax risks are assessed
and disclosure requirements. as part of the Group's
formal governance
process and are reviewed
by the Board and the
Audit Committee on
a regular basis.
2017 However, in an increasingly
complex international
corporate tax environment,
a degree of uncertainty
is inevitable and
we note in particular
the policy efforts
being led by the EU
and the OECD which
may have a material
impact on the taxation
of all international
businesses.
2016
INFORMATION SYSTEMS AND TECHNOLOGY
Information The digital world We seek to assess
systems and creates many risks and manage the maturity
technology for a global business of our enterprise
including technology risk and security
failures, loss of infrastructure and
confidential data our ability to effectively
and damage to brand defend against current
reputation, through, and future cyber risks
for example, the use by using analysis
of social media. tools and experienced
professionals to evaluate
and mitigate potential
impacts.
2017 The Group relies on
a variety of IT systems
in order to manage
and deliver services
and communicate with
our clients, consumers,
suppliers and employees.
2016 We are focused on
the need to maximise
the effectiveness
of our information
systems and technology
as a business enabler
and to reduce both
cost and exposure
as a result.
============== ================================ ==============================
Compass Group PLC
Consolidated Financial Statements
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 SEPTEMBER 2017
Total Total
2017 2016
Notes GBPm GBPm
Combined sales of Group and share
of equity accounted joint ventures 2 22,852 19,871
Less: share of sales of equity
accounted joint ventures (284) (266)
======================================================================== ========== ========= =========
Revenue 22,568 19,605
Operating costs (20,945) (18,235)
======================================================================== ========== ========= =========
Operating costs, excluding Emerging
Markets and Offshore & Remote
restructuring (20,945) (18,210)
Emerging Markets and Offshore
& Remote restructuring - (25)
======================================================================== ========== ========= =========
Operating profit before joint
ventures and associates 1,623 1,370
Share of profit after tax of joint
ventures and associates 42 39
======================================================================== ========== ========= =========
Operating profit 1,665 1,409
======================================================================== ========== ========= =========
Underlying operating profit(1) 2 1,705 1,445
Amortisation of intangibles arising
on acquisition (39) (31)
Acquisition transaction costs (2) (2)
Adjustment to contingent consideration
on acquisition 3 -
Share-based payments expense -
non-controlling interest call
option - (1)
Tax on share of profit of joint
ventures (2) (2)
======================================================================== ========== ========= =========
Profit on disposal of businesses - 1
Finance income 6 4
Finance costs (120) (105)
Other financing items 9 12
Profit before tax 1,560 1,321
Income tax expense 3 (389) (319)
======================================================================== ========== ========= =========
Profit for the year 1,171 1,002
======================================================================== ========== ========= =========
ATTRIBUTABLE TO
Equity shareholders of the Company 1,161 992
Non-controlling interests 10 10
======================================================================== ========== ========= =========
Profit for the year 1,171 1,002
======================================================================== ========== ========= =========
BASIC EARNINGS PER SHARE (PENCE) 4 71.3p 60.4p
======================================================================== ========== ========= =========
DILUTED EARNINGS PER SHARE (PENCE) 4 71.3p 60.3p
======================================================================== ========== ========= =========
5
(1) Underlying operating profit excludes amortisation
of intangibles arising on acquisition, acquisition
transaction costs, adjustment to contingent consideration
on acquisition and share-based payments expense
relating to non-controlling interest call options,
but includes share of profit after tax of associates
and operating profit of joint ventures.
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE YEARED 30 SEPTEMBER 2017
2017 2016
============================================== ===
GBPm GBPm
================================================= === ====== ======
Profit for the year 1,171 1,002
================================================= === ====== ======
Other comprehensive income
Items that are not reclassified subsequently
to profit or loss
Remeasurement of post employment benefit
obligations - gain / (loss) 125 (500)
Return on plan assets, excluding interest
income - gain / (loss) (96) 480
Tax on items relating to the components of
other comprehensive income (8) 6
================================================= === ====== ======
21 (14)
================================================= === ====== ======
Items that may be reclassified subsequently
to profit or loss
Currency translation differences (47) 158
================================================= === ====== ======
(47) 158
================================================= === ====== ======
Total other comprehensive (loss)/income for
the year (26) 144
================================================= === ====== ======
Total comprehensive income for the year 1,145 1,146
================================================= === ====== ======
ATTRIBUTABLE TO
Equity shareholders of the Company 1,135 1,136
Non-controlling interests 10 10
================================================= === ====== ======
Total comprehensive income for the year 1,145 1,146
================================================= === ====== ======
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED
30 SEPTEMBER 2017
Attributable to equity
shareholders of the Company
=========================================================
Share Capital
Share premium redemption Other Retained Non-controlling
capital account reserve reserves earnings interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ======== ======== =========== ============= ========= ================ ===========
At 1 October 2016 176 182 295 4,359 (2,507) 15 2,520
Profit for the
year - - - - 1,161 10 1,171
================== ======== ======== =========== ============= ========= ================ ===========
Other
comprehensive
income
Currency
translation
differences - - - (47) - - (47)
Remeasurement of
post
employment
benefit
obligations -
gain - - - - 125 - 125
Return on plan
assets,
excluding
interest
income - loss - - - - (96) - (96)
Tax on items
relating
to the
components
of other
comprehensive
income - - - (1) (7) - (8)
================== ======== ======== =========== ============= ========= ================ ===========
Total other
comprehensive
(loss)/income - - - (48) 22 - (26)
================== ======== ======== =========== ============= ========= ================ ===========
Total
comprehensive
(loss)/income
for
the year - - - (48) 1,183 10 1,145
Fair value of
share-based
payments - - - 21 - - 21
Use of treasury
shares
to satisfy
employee
share scheme
awards - - - (3) - - (3)
Tax on items
taken
directly to
equity - - - - 3 - 3
Share buyback(1) - - - - (19) - (19)
Other changes - - - (9) (1) 10 -
================== ======== ======== =========== ============= ========= ================ ===========
176 182 295 4,320 (1,341) 35 3,667
Dividends paid to
Compass
shareholders
(note 5) - - - - (1,534) - (1,534)
Dividends paid to
non-controlling
interests - - - - - (13) (13)
================== ======== ======== =========== ============= ========= ================ ===========
At 30 September
2017 176 182 295 4,320 (2,875) 22 2,120
================== ======== ======== =========== ============= ========= ================ =========== ====
(1) Including stamp duty and brokers' commission.
Adjustment
for non-controlling
Share-based interest Total
payment Merger Revaluation Translation put options other
reserve reserve reserve reserve reserve Reserves
OTHER RESERVES GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ============= ======== ============ ============ ===================== =========
At 1 October 2016 193 4,170 7 (5) (6) 4,359
=========================== ============= ======== ============ ============ ===================== =========
Other comprehensive
income
Currency translation
differences - - - (47) - (47)
Tax on items relating
to the components of
other comprehensive
income - - - (1) - (1)
=========================== ============= ======== ============ ============ ===================== =========
Total other comprehensive
loss - - - (48) - (48)
=========================== ============= ======== ============ ============ ===================== =========
Fair value of share-based
payments 21 - - - - 21
Use of treasury shares
to satisfy employee
share scheme awards (3) - - - - (3)
Other changes - - - - (9) (9)
=========================== ============= ======== ============ ============ ===================== =========
At 30 September 2017 211 4,170 7 (53) (15) 4,320
=========================== ============= ======== ============ ============ ===================== =========
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 SEPTEMBER 2017
Attributable to equity
shareholders of the Company
===============================================================================
Share Capital
Share premium redemption Own Other Retained Non-controlling
capital account reserve shares reserves earnings interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ========= ========= =========== ============ ============ ================ ================ ======
At 1 October 2015 176 182 295 (1) 4,189 (2,904) 13 1,950
Profit for the
year - - - - - 992 10 1,002
================== ========= ========= =========== ============ ============ ================ ================ ======
Other
comprehensive
income
Currency
translation
differences - - - - 158 - - 158
Remeasurement of
post
employment
benefit
obligations -
loss - - - - - (500) - (500)
Return on plan
assets,
excluding
interest
income - gain - - - - - 480 - 480
Tax on items
relating
to the
components
of other
comprehensive
income - - - - (2) 8 - 6
================== ========= ========= =========== ============ ============ ================ ================ ======
Total other
comprehensive
income/(loss) - - - - 156 (12) - 144
================== ========= ========= =========== ============ ============ ================ ================ ======
Total
comprehensive
income for the
year - - - - 156 980 10 1,146
Fair value of
share-based
payments - - - 1 16 1 - 18
Release of LTIP
award
settled by issue
of
shares - - - - (2) - - (2)
Tax on items
taken
directly to
equity - - - - - 9 - 9
Share buyback(1) - - - - - (100) - (100)
Issue of treasury
shares
to satisfy
employee
share scheme
awards
exercised - - - - - 3 - 3
Other changes - - - - - - 1 1
================== ========= ========= =========== ============ ============ ================ ================ ======
176 182 295 - 4,359 (2,011) 24 3,025
Dividends paid to
Compass
shareholders
(note 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.
Adjustment
for
non-controlling
Share-based interest Total
payment Merger Revaluation Translation put options other
reserve reserve reserve reserve reserve reserves
OTHER RESERVES GBPm GBPm GBPm GBPm GBPm GBPm
=================== ==================== =========== ============ ============ ================ ========================
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
shares (2) - - - - (2)
=================== ==================== =========== ============ ============ ================ ========================
At 30 September
2016 193 4,170 7 (5) (6) 4,359
=================== ==================== =========== ============ ============ ================ ========================
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2017
2017 2016
Notes GBPm GBPm
==================================================== ======= ======== ========
NON-CURRENT ASSETS
Goodwill 3,994 4,050
Other intangible assets 1,537 1,469
Property, plant and equipment 1,000 953
Interests in joint ventures and associates 220 222
Other investments 63 50
Post employment benefit assets(1) 259 244
Trade and other receivables 104 97
Deferred tax assets* 132 149
Derivative financial instruments** 7 139 184
==================================================== ======= ======== ========
Non-current assets 7,448 7,418
==================================================== ======= ======== ========
CURRENT ASSETS
Inventories 353 347
Trade and other receivables 2,701 2,596
Tax recoverable* 86 77
Cash and cash equivalents** 7 387 346
Derivative financial instruments** 7 4 2
==================================================== ======= ======== ========
Current assets 3,531 3,368
==================================================== ======= ======== ========
Total assets 10,979 10,786
==================================================== ======= ======== ========
CURRENT LIABILITIES
Short term borrowings** 7 (20) (321)
Derivative financial instruments** 7 (6) (9)
Provisions (132) (143)
Current tax liabilities* (227) (195)
Trade and other payables (3,892) (3,851)
==================================================== ======= ======== ========
Current liabilities (4,277) (4,519)
==================================================== ======= ======== ========
NON-CURRENT LIABILITIES
Long term borrowings** 7 (3,939) (3,075)
Derivative financial instruments** 7 (11) (1)
Post employment benefit obligations (231) (265)
Provisions (266) (280)
Deferred tax liabilities* (48) (40)
Trade and other payables (87) (86)
==================================================== ======= ======== ========
Non-current liabilities (4,582) (3,747)
==================================================== ======= ======== ========
Total liabilities (8,859) (8,266)
==================================================== ======= ======== ========
Net assets 2,120 2,520
==================================================== ======= ======== ========
EQUITY
Share capital 176 176
Share premium account 182 182
Capital redemption reserve 295 295
Other reserves 4,320 4,359
Retained earnings (2,875) (2,507)
Total equity shareholders' funds 2,098 2,505
Non-controlling interests 22 15
==================================================== ======= ======== ========
Total equity 2,120 2,520
==================================================== ======= ======== ========
* Component of current and deferred taxes.
** Component of net debt.
(1) Represented to reclassify GBP244 million of post
employment defined benefit pension schemes in a net surplus
position included within post employment benefit obligations
for the year ended 30 September 2016. As a result, non-current
assets and non-current liabilities have increased by
the same amount.
Approved by the Board of Directors on 21 November 2017
and signed on their behalf by
RICHARD COUSINS, Director
JOHNNY THOMSON, Director
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 30 SEPTEMBER 2017
2017 2016
Notes GBPm GBPm
===================================================== ====== ======== ======
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations 6 2,068 1,768
Interest paid (103) (98)
Tax received 25 17
Tax paid (357) (263)
===================================================== ====== ======== ======
Net cash from operating activities 1,633 1,424
===================================================== ====== ======== ======
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of subsidiary companies and investments
in associated undertakings(1) (96) (180)
Purchase of additional interest joint operations (5) -
Proceeds from sale of subsidiary companies
and associated undertakings(1) 19 2
Purchase of intangible assets (339) (267)
Purchase of property, plant and equipment(2) (376) (311)
Proceeds from sale of property, plant and
equipment/intangible assets 32 29
Purchase of other investments (8) (6)
Proceeds from sale of other investments - 2
Dividends received from joint ventures and
associates 39 33
Interest received 6 4
===================================================== ====== ======== ======
Net cash used in investing activities (728) (694)
===================================================== ====== ======== ======
CASH FLOW FROM FINANCING ACTIVITIES
Purchase of own shares(3) (19) (100)
Receipts from issue of treasury shares to
satisfy employee share scheme awards exercised - 3
Increase in borrowings 1,290 194
Repayment of borrowings (571) (309)
Repayment of obligations under finance leases (6) (3)
Equity dividends paid 5 (1,534) (496)
Dividends paid to non-controlling interests (13) (9)
===================================================== ====== ======== ======
Net cash used in financing activities (853) (720)
===================================================== ====== ======== ======
CASH AND CASH EQUIVALENTS
Net increase in cash and cash equivalents 52 10
Cash and cash equivalents at beginning of
the year 346 283
Currency translation gains/(losses) on cash
and cash equivalents (11) 53
===================================================== ====== ======== ======
Cash and cash equivalents at end of the year 387 346
===================================================== ====== ======== ======
(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
Consolidated Financial Statements (continued)
RECONCILIATION OF FREE CASH FLOW
FOR THE YEARED 30 SEPTEMBER 2017
2017 2016
GBPm GBPm
Net cash from operating activities 1,633 1,424
Purchase of intangible assets (339) (267)
Purchase of property, plant and equipment (376) (311)
Proceeds from sale of property, plant and
equipment/intangible assets 32 29
Purchase of other investments (8) (6)
Proceeds from sale of other investments - 2
Dividends received from joint ventures and
associates 39 33
Interest received 6 4
Dividends paid to non-controlling interests (13) (9)
Free cash flow 974 899
Add back: Europe & Japan cash restructuring
costs in the year - 9
================================================ === ====== ======
Underlying free cash flow 974 908
================================================ === ====== ======
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
1 BASIS OF PREPARATION
The financial information included within this announcement has
been prepared using accounting policies in accordance with
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB) and adopted for
use in the European Union (EU), and in accordance with the
Disclosure Guidance and Transparency Rules (DGTR) of the Financial
Conduct Authority.
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 30 September 2017
or 2016, but is derived from those accounts. Statutory accounts for
2016 have been delivered to the Registrar of Companies and those
for 2017 will be delivered following the Company's Annual General
Meeting. The auditor has reported on those accounts; its Reports
were unqualified, did not draw attention to any matters by way of
emphasis without qualifying its Report and did not contain
statements under s498(2) or (3) Companies Act 2006.
2 SEGMENTAL REPORTING
Geographical
segments
========================================
North Rest
America Europe of Total
GBPm GBPm World GBPm
REVENUE(1) GBPm
================================ ============ ========== ============= =========== ============ ========
YEARED 30 SEPTEMBER
2017
Combined sales of Group and share
of equity accounted joint ventures(2,3) 13,322 5,911 3,619 22,852
========================================================== ============= =========== ============ ========
YEARED 30 SEPTEMBER
2016
Combined sales of Group and share
of equity accounted joint ventures(2,3) 11,198 5,458 3,215 19,871
Sectors
==================================================================
Defence,
Business Healthcare Sports Offshore
& Industry Education & Seniors & Leisure & Remote Total
REVENUE(1) GBPm GBPm GBPm GBPm GBPm GBPm
================================ ============ ========== ============= =========== ============ ========
YEARED 30 SEPTEMBER
2017
Combined sales of Group
and share of equity accounted
joint ventures 8,847 4,124 5,264 2,820 1,797 22,852
================================ ============ ========== ============= =========== ============ ========
YEARED 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) Underlying revenue from external customers arising
in the UK, the Group's country of domicile, was GBP2,070
million (2016: GBP1,981 million). Underlying revenue
from external customers arising in the US was GBP12,449
million (2016: GBP10,350 million). Underlying revenue
from external customers arising in all foreign countries
from which the Group derives revenue was GBP20,782
million (2016: GBP17,890 million).
Geographical segments
North Rest Central
America Europe of Activities Total
GBPm GBPm World GBPm GBPm
OPERATING PROFIT GBPm
================================ ============ ========== ============= =========== ============ ========
YEARED 30 SEPTEMBER
2017
Underlying operating profit before
joint ventures and associates 1,079 428 224 (70) 1,661
Add: Share of profit before
tax of joint ventures 3 - 24 - 27
================================ ============ ========== ============= =========== ============ ========
Regional underlying operating
profit(1) 1,082 428 248 (70) 1,688
Add: Share of profit of
associates 12 5 - - 17
============ ========== ============= =========== ============ ========
Group underlying operating
profit(1) 1,094 433 248 (70) 1,705
================================ ============ ========== ============= =========== ============ ========
(1) Underlying operating profit is the profit measure
considered by the chief operating decision maker.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER
2017
Geographical
segments
===========================================
North Rest Central
America Europe of Activities Total
GBPm GBPm World GBPm GBPm
OPERATING PROFIT GBPm
YEARED 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
================================================ ========= ========= ======= ============ ==========
Regional underlying operating profit(2) 908 394 218 (65) 1,455
Add: Share of profit of
associates 10 5 - - 15
Less: Emerging Markets and Offshore
& Remote restructuring(1) - (6) (19) - (25)
Group underlying operating
profit(2) 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 (GBP22 million)
and other expenses (GBP3 million).
(2) Underlying operating profit is the profit measure
considered by the chief operating decision maker.
3 TAX
RECOGNISED IN THE INCOME STATEMENT: INCOME
TAX EXPENSE 2017 2016
===============================================================================
GBPm GBPm
========================================= === ========= ========= =======
CURRENT TAX
Current year 424 315
Adjustment in respect of
prior years (47) (38)
========================================== === ============================= ============ ========
Current tax expense 377 277
========================================== === ============================= ============ ========
DEFERRED TAX
Current year 7 27
Impact of changes in statutory
tax rates 2 6
Adjustment in respect of
prior years 3 9
========================================== === ============================= ========
Deferred tax expense 12 42
TOTAL INCOME TAX
Income tax expense 389 319
Deferred tax assets have not been recognised in respect of tax
losses of GBP54 million (2016: GBP101 million) and other temporary
differences of GBP23 million (2016: GBP16 million). Of the total
tax losses, GBP44 million (2016: GBP92 million) will expire at
various dates between 2018 and 2022. These deferred tax assets have
not been recognised as the timing of recovery is uncertain.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 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 year. 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,
hedge accounting ineffectiveness, 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.
2017 2016
ATTRIBUTABLE PROFIT GBPm GBPm
Profit for the period attributable to equity shareholders of
the Company 1,161 992
Adjustments stated net of tax:
Amortisation of intangible assets arising on acquisition 25 20
Acquisition transaction costs 2 2
Adjustment to contingent consideration on acquisition (3) -
Gain on disposal of businesses - (1)
Gain from other financing items including hedge accounting
ineffectiveness (8) (10)
Non-controlling interest call options - 1
Underlying attributable profit for the year from operations 1,177 1,004
2017 2016
Ordinary Ordinary
shares of shares of
AVERAGE NUMBER OF SHARES (MILLIONS OF ORDINARY SHARES) 11(1/20) p each millions(1) 10(5/8) p each millions
Average number of shares for basic earnings per share 1,628 1,643
Dilutive share options 1 3
Average number of shares for diluted earnings per share 1,629 1,646
(1) On 26 June 2017 shareholders received 25 shares of
11(1/20) pence in return for 26 shares
of 10(5/8) pence.
2017 2016
Earnings Earnings
per share per share
pence pence
BASIC EARNINGS PER SHARE
From operations 71.3 60.4
Adjustments stated net of tax:
Amortisation of intangible assets arising on acquisition 1.5 1.2
Acquisition transaction costs 0.1 0.1
Adjustment to contingent consideration on acquisition (0.2) -
Gain on disposal of businesses - (0.1)
Gain from other financing items including hedge accounting
ineffectiveness (0.4) (0.6)
Non-controlling interest call options - 0.1
From underlying operations 72.3 61.1
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
4 EARNINGS PER SHARE CONTINUED
2017 2016
Earnings Earnings
per share per share
pence pence
DILUTED EARNINGS PER SHARE
From operations 71.3 60.3
Adjustments stated net of tax:
Amortisation of intangible assets arising on acquisition 1.5 1.2
Acquisition transaction costs 0.1 0.1
Adjustment to contingent consideration on acquisition (0.2) -
Gain on disposal of businesses - (0.1)
Gain from other financing items including hedge accounting ineffectiveness (0.4) (0.6)
Non-controlling interest call options - 0.1
From underlying operations 72.3 61.0
5 DIVIDS
A final dividend in respect of 2017 of 22.3 pence per share,
GBP353 million in aggregate(1) , has been proposed, giving a total
dividend in respect of 2017 of 33.5 pence per share (2016: 31.7
pence per share). The proposed final dividend is subject to
approval by shareholders at the Annual General Meeting to be held
on 8 February 2018 and has not been included as a liability in
these financial statements.
2017 2016
Dividends per share Dividends per share
DIVIDS ON ORDINARY SHARES pence GBPm pence GBPm
Amounts recognised as distributions to equity shareholders
during the year:
Final 2015 - - 19.6 322
Interim 2016 - - 10.6 174
Final 2016 21.1 347 - -
Interim 2017 11.2 184 - -
Total dividends 32.3 531 30.2 496
(1) Based on the number of ordinary shares, excluding treasury shares, in issue at 30 September
2017 (1,582 million shares).
In addition, a special dividend of 61.0 pence per share,
GBP1,003 million in aggregate, was paid to shareholders on 17 July
2017.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
6 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS
2017 2016
RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY OPERATIONS GBPm GBPm
Operating profit from operations 1,623 1,370
Adjustments for:
Acquisition transaction costs 2 2
Amortisation of intangible assets 221 179
Amortisation of intangible assets arising on acquisition 39 31
Share-based payments expense - non-controlling interest call option - 1
Depreciation of property, plant and equipment 262 216
Profit on disposal of property, plant and equipment/intangible assets - (1)
Decrease in provisions (24) (19)
Decrease in post employment benefit obligations (14) (39)
Share-based payments - charged to profits 21 16
Operating cash flows before movement in working capital 2,130 1,756
Increase in inventories (11) (13)
Increase in receivables (152) (93)
Increase in payables 101 118
Cash generated by operations 2,068 1,768
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 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.
Gross debt
Total
Cash and Bank and overdrafts Derivative
cash Bank other and Finance financial Total gross
equivalents overdrafts borrowings borrowings leases instruments debt Net debt
NET DEBT GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 October 2015 283 (59) (2,859) (2,918) (13) 45 (2,886) (2,603)
Net increase in
cash and cash
equivalents 10 - - - - - - 10
Cash outflow from
repayment of
bank loans - - 195 195 - - 195 195
Cash outflow from
repayment of
loan notes - - 114 114 - - 114 114
Cash
(inflow)/outflow
from other
changes in gross
debt - 42 (378) (336) - 142 (194) (194)
Cash outflow from
repayments of
obligations
under finance
leases - - - - 3 - 3 3
Increase in net
debt as a result
of new finance
leases taken out - - - - (2) - (2) (2)
Currency
translation
gains/(losses) 53 (10) (402) (412) (2) (34) (448) (395)
Other non-cash
movements - - (25) (25) - 23 (2) (2)
At 30 September
2016 346 (27) (3,355) (3,382) (14) 176 (3,220) (2,874)
Net increase in
cash and cash
equivalents 52 - - - - - - 52
Cash outflow from
repayment of
bank loans - - 536 536 - - 536 536
Cash inflow from
borrowing of
bank loans - - (301) (301) - - (301) (301)
Cash outflow from
repayment of
loan notes - - 35 35 - - 35 35
Cash inflow from
issue of bonds - - (942) (942) - - (942) (942)
Cash
(inflow)/outflow
from other
changes in gross
debt - 16 1 17 - (64) (47) (47)
Cash outflow from
repayments of
obligations
under finance
leases - - - - 6 - 6 6
Increase in net
debt as a result
of new finance
leases - - - - (2) - (2) (2)
Currency
translation
gains/(losses) (11) 3 17 20 - 80 100 89
Other non-cash
movements - - 68 68 - (66) 2 2
At 30 September
2017 387 (8) (3,941) (3,949) (10) 126 (3,833) (3,446)
Other non-cash movements are comprised as follows:
2017 2016
OTHER NON-CASH MOVEMENTS IN NET DEBT GBPm GBPm
Amortisation of fees and discount on issuance (3) (1)
Changes in the fair value of bank and other borrowings in a designated fair value hedge 71 (24)
Bank and other borrowings 68 (25)
Changes in the value of derivative financial instruments including accrued income (66) 23
Other non-cash movements 2 (2)
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
8 STATUTORY AND UNDERLYING RESULTS
Adjustments
2017 2017
Statutory Underlying
Notes GBPm 1 2 3 4 5 6 7 GBPm
Operating profit 1,665 39 2 (3) 2 - - - 1,705
Profit on disposal of businesses - - - - - - - - -
Net finance cost (105) - - - - - (9) - (114)
Finance income 6 - - - - - - - 6
Finance costs (120) - - - - - - - (120)
Other financing items 9 - - - - - (9) - -
Profit before tax 1,560 39 2 (3) 2 - (9) - 1,591
Income tax expense (389) (14) - - (2) - 1 - (404)
Tax rate 24.9% - - - - - - - 25.4%
Profit for the year 1,171 25 2 (3) - - (8) - 1,187
Non-controlling interests (10) - - - - - - - (10)
Profit attributable to equity shareholders
of the Company 1,161 25 2 (3) - - (8) - 1,177
Average number of shares 1,628 - - - - - - - 1,628
BASIC EARNINGS PER SHARE (PENCE) 4 71.3 1.5 0.1 (0.2) - - (0.4) - 72.3
Adjustments
2016 2016
Statutory Underlying
Notes GBPm 1 2 3 4 5 6 7 GBPm
Operating profit 1,409 31 2 - 2 - - 1 1,445
Profit on disposal of businesses 1 - - - - (1) - - -
Net finance cost (89) - - - - - (12) - (101)
Finance income 4 - - - - - - - 4
Finance costs (105) - - - - - - - (105)
Other financing items 12 - - - - - (12) - -
Profit before tax 1,321 31 2 - 2 (1) (12) 1 1,344
Income tax expense (319) (11) - - (2) - 2 - (330)
Tax rate 24.1% - - - - - - - 24.5%
Profit for the year 1,002 20 2 - - (1) (10) 1 1,014
Non-controlling interests (10) - - - - - - - (10)
Profit attributable to equity shareholders
of the Company 992 20 2 - - (1) (10) 1 1,004
Average number of shares 1,643 - - - - - - - 1,643
BASIC EARNINGS PER SHARE (PENCE) 4 60.4 1.2 0.1 - - (0.1) (0.6) 0.1 61.1
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.
7. Share-based payments expense - non-controlling interest call option.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
9 ORGANIC REVENUE AND ORGANIC PROFIT
Geographical segments
North America Europe Rest of World Other Group
GBPm GBPm GBPm GBPm GBPm
2017
Combined sales of Group and share of equity accounted
joint ventures 13,322 5,911 3,619 - 22,852
% growth reported rates 19.0% 8.3% 12.6% - 15.0%
% growth constant currency 6.7% 1.5% (2.5%) - 3.8%
Organic adjustments (57) (3) - - (60)
Organic revenue 13,265 5,908 3,619 - 22,792
% growth organic 7.1% 1.6% (2.5%) - 4.0%
2016
Combined sales of Group and share of equity accounted
joint ventures 11,198 5,458 3,215 - 19,871
Currency adjustments 1,286 364 496 - 2,146
Constant currency underlying revenue 12,484 5,822 3,711 - 22,017
Organic adjustments (97) (5) - - (102)
Organic revenue 12,387 5,817 3,711 - 21,915
2017
Regional underlying operating profit 1,082 428 248 (70) 1,688
Share of profit of associates 12 5 - - 17
Group underlying operating profit 1,094 433 248 (70) 1,705
Underlying operating margin 8.1% 7.2% 6.9% - 7.4%
% growth reported rates 19.2% 8.6% 13.8% - 18.0%
% growth constant currency 6.9% 1.2% (2.0%) - 5.6%
Organic adjustments (4) - - - (4)
Organic profit 1,090 433 248 (70) 1,701
% growth organic 7.4% 1.2% (2.0%) - 5.9%
2016
Regional underlying operating profit 908 394 218 (65) 1,455
Share of profit of associates 10 5 - - 15
EM & OR restructuring - (6) (19) - (25)
Group underlying operating profit 918 393 199 (65) 1,445
Underlying operating margin 8.1% 7.2% 6.8% - 7.2%
Currency adjustments 105 29 35 - 169
Constant currency underlying profit 1,023 422 234 (65) 1,614
Organic adjustments (8) - - - (8)
Organic profit 1,015 422 234 (65) 1,606
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 SEPTEMBER 2017
10 POST BALANCE SHEET EVENTS
There are no material post balance sheet events.
11 EXCHANGE RATES
2017 2016
AVERAGE EXCHANGE RATE FOR THE YEAR(1)
Australian Dollar 1.67 1.94
Brazilian Real 4.09 5.19
Canadian Dollar 1.68 1.88
Chilean Peso 837.69 972.94
Euro 1.15 1.28
Japanese Yen 141.38 159.94
New Zealand Dollar 1.78 2.08
Norwegian Krone 10.55 12.00
Turkish Lira 4.44 4.16
UAE Dirham 4.69 5.22
US Dollar 1.28 1.42
CLOSING EXCHANGE RATE AS AT 30 SEPTEMBER(1)
Australian Dollar 1.71 1.70
Brazilian Real 4.24 4.22
Canadian Dollar 1.68 1.71
Chilean Peso 857.49 855.93
Euro 1.13 1.16
Japanese Yen 151.02 131.54
New Zealand Dollar 1.86 1.79
Norwegian Krone 10.68 10.38
Turkish Lira 4.77 3.90
UAE Dirham 4.93 4.77
US Dollar 1.34 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
Capital employed Total equity shareholders' funds adjusted for net debt, post employment
benefit obligations
net of associated deferred tax, amortised intangibles arising on
acquisition, impaired goodwill
and excluding the Group's non-controlling partners' share of net assets and
net assets of
discontinued operations.
Constant currency Restates the prior year results to the current year's average exchange
rates.
EM & OR restructuring Emerging Markets and Offshore & Remote restructuring
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, net cash interest, net cash tax, dividends
received from joint
ventures and associated undertakings, and dividends paid to non-controlling
interests
Free cash flow conversion Underlying free cash flow expressed as a percentage of underlying operating
profit.
Like for like revenue growth Calculated by adjusting organic revenue growth for new business wins and
lost business.
Net debt Bank 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.
NOPAT Net operating profit after tax (NOPAT) is calculated as underlying operating
profit from continuing
operations less operating profit of non-controlling interests before tax,
net of income tax
at the underlying rate of the year.
Organic 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.
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 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.
ROCE Return on capital employed (ROCE) divides NOPAT by the 12 month average
capital employed.
Specific adjusting items acquisition transaction costs;
adjustment to contingent consideration on acquisition;
amortisation of intangibles arising on acquisition;
change in the fair value of investments;
other financing items including hedge accounting ineffectiveness;
profit/(loss) on disposal of businesses;
share-based payments expense relating to non-controlling interest call
options;
tax on share of profit of joint ventures.
Underlying basic earnings per share Excludes specific adjusting items and the tax attributable to those items.
Underlying cash tax rate Based on underlying cash tax and underlying profit before tax.
Underlying depreciation and amortisation Excludes specific adjusting items.
Underlying EBITDA Based on underlying operating profit, adding back underlying depreciation
and amortisation.
Underlying effective tax rate Based on underlying tax charge and underlying profit before tax.
Underlying free cash flow Free cash flow adjusted for cash restructuring costs in the year relating to
the 2012 and
2013 European exceptional programme.
Underlying net finance cost Excludes specific adjusting items.
Glossary of terms (continued)
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 operating profit - Group Includes share of profit after tax of associates and profit before tax of equity
accounted
joint ventures but excludes the specific adjusting items.
Underlying operating profit - Region Includes share of profit before tax of equity accounted joint ventures but
excludes the specific
adjusting items profit after tax of associates and EM & OR restructuring.
Underlying profit before tax Excludes specific adjusting items.
Underlying revenue The combined sales of Group and share of equity accounted joint ventures.
Underlying tax charge Excludes tax attributable to specific adjusting items.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGGAGGUPMURG
(END) Dow Jones Newswires
November 21, 2017 03:32 ET (08:32 GMT)
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