Interim Results

Issued 21st May 2002 COMPASS GROUP PLC INTERIM UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2002 Compass Group reports a solid performance for the 6 months ended 31 March 2002. All divisions have delivered strong organic growth and margin improvements within the Group's target ranges. Highlights - Turnover up 23% to £5,014 million. - Total operating profit before goodwill amortisation and exceptional items up 24% to £333 million. - Improvement in free cash flow (before capital expenditure) from £31 million to £216 million. - Dividend per share up 11% at 2.1 pence per share. - Underlying 11% improvement in earnings per share. - Contract retention rate maintained at over 95%. - Strong like for like growth in turnover of 7% and margins of 30 Basis Points. Compass Group is pleased to announce a number of significant new contract wins and contract extensions including: UK - Select Service Partner has signed a series of new airport contracts at Liverpool (7 year contract), Glasgow (8 years) and Exeter (5 years) plus a new contract at Prestwick (10 years) with annual turnover of more than £11.5 million. Germany and Belgium - Eurest has cemented its relationship with Ford by retaining the contract for factories in Cologne and Aachen and has also been awarded new contracts at Saarluis in Germany and at Genk and Lommel in Belgium (both previously self-operated). The annual value of these contracts is Euro 8m. North America - Last week the Group announced that Eurest Dining Services, Canteen Vending and minority-owned partner Thompson Hospitality had signed a 10 year contract with Boeing with annual revenues of US$40 million. Francis Mackay, Chairman, said: 'The foodservice market continues to grow for contract foodservice providers as the trend towards outsourcing continues. We are the clear market leader and we continue to gain market share but still have only a small share of the worldwide market. We look forward with confidence to a future of continuing growth as well as margin improvement.' Michael J Bailey, Chief Executive, said: 'We have continued to make a number of impressive high profile contract gains and our contract retention rates are robust. We expect a reduction in acquisition activity going forward and with our focus on organic growth coupled with the integration of past acquisitions we remain confident that our expectations of organic turnover and margin rate increases will be delivered.' Enquiries: 21 May 2002 Francis Mackay Chairman Compass Group PLC 020 7404 5959 Michael J Bailey Chief Executive Compass Group PLC 020 7404 5959 Andrew Lynch Finance Director Compass Group PLC 020 7404 5959 Timothy Grey/Simon Sporborg Brunswick Group Ltd 020 7404 5959 Thereafter Francis Mackay Compass Group PLC 01932 573 000 Michael J Bailey Compass Group PLC 01932 573 000 Andrew Lynch Compass Group PLC 01932 573 000 Website www.compass-group.com (continued) CHAIRMAN'S STATEMENT The successful growth of the Group over the years has been achieved through a combination of acquisitions and organic growth with steady margin improvement. This growth has been achieved within our core foodservice markets - a strategy which will be continued. On 10 April 2002 we strengthened the Group Board with the addition of two new non-executive directors. Peter Blackburn is Chairman of Northern Foods plc and the current President of the Food and Drink Federation. He is also a non-executive director of SIG plc. Mr Blackburn recently retired as Chairman and Chief Executive of Nestlé UK, the British subsidiary of the Swiss food giant having held a number of senior positions with Rowntree Mackintosh plc including Chairman of the UK and Eire Region. Sven Kado is Chairman of Marsh & McLennan Holdings GmbH. In a career spanning more than 30 years, Sven has held a number of senior positions in finance including Chief Financial Officer at Nixdorf Computer AG, Chief Financial Officer at Dyckerhoff AG and senior advisor at Principal Finance Group/Nomura International. I am delighted to welcome Peter and Sven to the Board of Compass Group. Peter is highly respected in the food and beverage sector and Sven, with his excellent track record in finance, is a well known business figure in Europe and in Germany in particular. I am sure that their experience and expertise will ensure that they make a significant contribution to the development of Compass Group. Both will be members of the Audit, Remuneration and Nomination committees in addition to their roles on the Group Board. Dividend An interim dividend of 2.1p (net) per ordinary share of 10p each has been declared on the existing share capital, an increase of 11% over last year's figure. Payment will be made on 3 October 2002 to shareholders on the register at the close of business on 23 August 2002. The ex-dividend date will be 21 August 2002. Prospects The foodservice market continues to grow for contract foodservice providers as the trend towards outsourcing continues. We are the clear market leader but still have only a small share of the worldwide market. We look forward with confidence to a future of continuing growth as well as margin improvement. F H Mackay Chairman Chief Executive's Report I am pleased to report that we have achieved another half year of record turnover and operating profits. Group margins continue to improve. Reported turnover increased by 23% to £5,014 million, whilst like for like turnover growth was 7%. 2002 Reported Like for Like £m Growth % Growth % Turnover UK 1,254 9 6 Continental Europe and the rest of 1,754 25 8 the world North America 1,805 37 7 4,813 24 7 UK fuel 201 (4) (4) Total 5,014 23 7 Operating Profit UK 149 13 10 Continental Europe and the rest of 94 34 10 the world North America 86 41 11 Total 329 25 11 Like for like growth adjusts for acquisitions, disposals and exchange rate movements and compares the results against the half-year for 2001, which have been prepared on a consistent basis. Operating profit is before goodwill amortisation and exceptional items and excludes associates. Operating profit before goodwill amortisation, exceptional items and associates was up 25% at £329 million (2001: £263 million) and profit before taxation, goodwill amortisation and exceptional items was 10% up at £258 million (2001: £ 234 million) when compared with the first half of last year. On a like for like basis, total operating profit before exceptional items and goodwill amortisation increased by 11%. Like for like margins in all operating divisions continue to improve. Synergies within the UK business are on track to deliver the predicted incremental £20m of benefit for the full year, giving rise to £40m of total synergies for 2002. An incremental £8m was achieved in the current half year. Including these synergies, margin improvements continue to be in line with management expectations and a like for like increase in the overall Group margin of 30 basis points has been achieved - 60 basis points in the UK, 20 basis points in Continental Europe and rest of the world, and 20 basis points in North America. Exceptional items total £15 million of which £5 million relates to the final cost of the UK integration of Granada Restaurants. In addition, exceptional items include the final cost of a commitment plan of £10 million entered into to retain senior employees. This plan will result in the issue of 9,931,031 new Compass Group shares of which 7,988,197 had been issued as at 31 March 2002. The goodwill amortisation in the period was £117 million. The tax rate for the first half of 2002 is 28.0% on the profit on ordinary activities before taxation, goodwill amortisation and exceptional items. The Directors believe this to be a prudent estimate of the full year rate. The Group has adopted FRS 19 'Deferred Tax' for the first time this half year. FRS 19 does not have an impact on tax paid and the effect on the restated 2001 tax charge is explained in note 4 to the Interim financial statements. Basic earnings per share before goodwill amortisation and exceptional items on a reported basis decreased from 8.5 pence to 8.0 pence. However, 2001's half year results benefited from the inclusion of £103 million of imputed interest income, relating to the unwinding of the discounting of the hotel disposal proceeds, which did not attract tax. Calculating 2001 on a proforma basis for a normal tax charge would give earnings per share growth in the half year to 31 March 2002 of 11%. The Group continues to deliver strong rates of business retention, demonstrating the benefit of focus on improving client and customer satisfaction levels, and a retention rate of over 95% has again been achieved. Compass Group is pleased to announce a number of significant new contract wins and contract extensions including: UK - Select Service Partner has signed a series of new airport contracts at Liverpool (7 year contract), Glasgow (8 years) and Exeter (5 years) plus a new contract at Prestwick (10 years) with annual turnover of more than £11.5 million. Germany and Belgium - Eurest has cemented its relationship with Ford by retaining the contract for factories in Cologne and Aachen and has also been awarded new contracts at Saarluis in Germany and at Genk and Lommel in Belgium (both previously self-operated). The annual value of these contracts is Euro 8m. North America - Last week the Group announced that Eurest Dining Services, Canteen Vending and minority-owned partner Thompson Hospitality had signed a 10 year contract with Boeing with annual revenues of US$40 million. Divisional Performance United Kingdom The UK has had a good first half year with like for like growth within our target ranges as shown by the following chart. UK like for like results Turnover Operating Profit 2002 2001 Growth 2002 2001 Growth £m £m % £m £m % Total excluding Roadside and Fuel 966 915 6 91 81 12 Roadside - Motorway estate 140 132 6 22 20 10 - Other roadside estate 117 110 6 21 19 11 - Standalone Travelodge 27 25 8 11 10 10 284 267 6 54 49 10 Total excluding 1,250 1,182 6 145 130 11 fuel Fuel 201 209 (4) 4 5 (20) Total 1,451 1,391 4 149 135 10 Growth in contract and concessions has been aided by the following notable contract gains and extensions. i) Business and Industry Major developments during the period include: - Land Securities Trillium: a 10 year contract worth £15m a year to provide catering services to the BBC in London and Scotland; - Restaurant Associates: six months after its UK launch the division has gained 12 new contracts with a combined total turnover of £60 million. Clients include Deutsche Bank, J Walter Thompson and Esporta plc; - Other notable contract wins and extensions include: Inland Revenue, Centrica, Clerical Medical and Norwich Union Healthcare. ii) Leisure and Hospitality Letheby & Christopher have won the following notable contracts: - Arena Leisure: a five year deal to provide specialist catering services at six of the UK's most popular racecourses. Annual turnover £5.5 million; - Silverstone: a three year, £5 million per annum contract with Octagon Motorsports to operate conferencing, banqueting and hospitality catering services. iii) Education Scolarest have secured the following notable contract gains: - Bedfordshire County Council: a seven year contract, valued at £5.5 million per annum to provide catering services at 174 schools; - Essex County Council: a two year contract, valued at £11 million per annum for catering services at 380 schools; - City University: a ten year contract with annual turnover of £1.7 million; - University of North London: a ten year contract with annual turnover of £1.1 million. The pleasing 6% like for like growth in turnover for the Roadside Division is being driven by the continuing introduction of Group brands into these locations and positive results from the upgrading of the first 14 Little Chef sites. A further 11 Little Chef sites are expected to be upgraded in the second half of the year. North America Turnover of £1,805 million was 37% up on the preceding year and operating profit (before goodwill amortisation) of £86 million was 41% up (£61 million). Like for like turnover growth was 7% and the margin on a like for like basis was up from 4.6 % in 2001 to 4.8%. The growth in like for like turnover of 7% has been calculated excluding current year acquisition turnover of £23m and adjusting 2001's reported results of £1,315m for the pre-acquisition results of 2001's acquisitions (£313m) and translation differences of £32m. Healthcare and education have delivered strong like for like turnover growth of 14% and 16% respectively with the tougher economic environment that has existed in North America having a detrimental effect on the division's existing business and industry and vending estate. Record net new contract gains, stimulated by increased interest in outsourcing, have helped the business and industry division grow by 4% and contain vending's reduction to 3%, both on a like for like basis. Concessions grew a pleasing 10% fuelled by good contract gains at sporting venues. Notable events during the period included the following major contract gains: i) Business and Industry - Restaurant Associates has signed a five year contract with Lehman Brothers in New York to cater for 4,500 customers, worth $5m a year; - Eurest in Canada has signed contracts with IBM, TD Bank Financial Group, Celestica and Oracle. The contract with IBM is worth $7m a year. ii) Healthcare - Morrison Management Services, acquired by the Group in April 2001, announced in April 2002 that it had signed an initial five year agreement with The Fountains Retirement Communities Inc., to provide dining services management for 17 communities across the USA. The agreement, worth more than $20m annually in managed volume, marks the largest retirement community alliance in the for-profit senior living market. Morrison has also gained the contracts to serve 1,000 people daily at the Good Samaritan Hospital in Vincennes, Indiana and 2,000 meals daily at Owensboro Mercy Health System in Kansas. iii) Education - Today Compass Group announces that Chartwells School Dining Services has gained the contract with the Louisiana State University (LSU) to provide foodservice at all LSU sporting events building on Chartwell's existing business with LSU. American Football games at LSU regularly attract over 80,000 spectators. Chartwells has gained a number of prestigious new contracts during the first half including St Louis University, State University of New York-Purchase, Oakland University, Michigan and Winston-Salem/Forsyth County Schools, North Carolina. These contracts represent annual revenues of $ 39.5million. Continental Europe and the Rest of the World Turnover of £1,754 million was 25% up from £1,403 million and operating profit excluding associates (before goodwill amortisation) of £94 million was 34 % up from £70 million. Like for like turnover was up 8% and the like for like margin of 5.6 % was also up from 5.4%. Notable events during the period included the following major contract gains: i) Business and Industry - France: in January, the Group gained three significant contracts with Eurotunnel, Mutuelles du Mans and the European Parliament in Strasbourg, totalling more than Euro 22 million in annual turnover; - Japan: Compass Group Japan has won the contract to provide catering services for Asahi National Broadcasting, serving over 650,000 meals a year with annual turnover of ¥220 million; In addition, contracts awarded included - NTT for ¥1.6 billion turnover per annum; - Mitsui Sumitomo for ¥157 million turnover per annum; - GKN for ¥73 million turnover per annum. - Turkey: a contract with Genoto, a subsidiary of Volkswagen, for sites in five cities, and a contract with Pepsi Cola for two bottling factories in Ankara and Izmir; - Germany: a contract with Stadtwerke München has been awarded to Eurest and Selecta. The contract, which was previously self-operated, reflects the benefit of being able to offer vending alongside foodservice and has annual revenues of Euro 3 million. ii) Vending - Selecta, acquired by the Group in May 2001, continues to add value to our total foodservice offering, particularly in partnership with Eurest. In the period Selecta has installed over 2,500 machines in Compass-operated locations. iii) Healthcare - Norway: Medirest has been awarded the contract for the newly built Norland Hospital BF patient hotel in Bodo with annual revenues in excess of Euro 1 million; - France: a three year contract with Assistance Publique - Paris Hospitals worth Euro 14 million per annum; - Australia: recent contract gains include the Mountain View Retirement Home in Murwillimbah, part of Australian Retirement Homes Group and the Adventist Retirement Village in Victoria Point, which was previously self-operated. iv) Concessions - Germany: SSP has been awarded a 10 year contract for the newly refurbished Terminal C at Dusseldorf International Airport with annual revenues of Euro 3 million; - Hong Kong: two new units in the arrivals hall at Hong Kong International Airport - the contract is for 7 years with annual revenues of over HK$20 million; - Austria: a 10 year contract to provide food and beverage services at the International Airport of Innsbruck, the country's second largest airport with annual revenues of Euro 1 million. v) Remote Site - In January the Group announced the signing of a 'preferred supplier' agreement with Chevron Texaco believed to be the largest ever negotiated in the catering industry. The contract will have annual value of more than US$200 million when fully mobilised. Operations in Kazakhstan are now fully operational with ESS preparing more than 10,000 meals a day. vi) Education - In Japan a contract with the Osaka Industrial University has been won with annual revenues of ¥42 million per annum. FINANCING Cash flow generation from operations continues to be strong with a positive free cash flow before capital expenditure in the period of £216 million (2001: £31 million). This is after a working capital outflow of £106 million (2001: £ 98 million). Capital expenditure absorbed £193 million in the half year resulting in a free cash flow after capital expenditure of £23 million (2001: £ (111) million). Net debt at 31 March 2002 of £2,998 million has increased from £2,390 million at 30 September 2001 principally as a result of spending £502 million on acquisitions including debt in subsidiaries acquired. In May 2002, the Group has broadened its sources of finance and extended the maturity profile of its debt by raising US$ 750 million from the US private placement market, Euro 600 million by way of a first Euro denominated public bond and £200 million with a new Sterling public bond. The proceeds of some £1 billion will be used to repay existing bank debt. Bank facilities of £1 billion mature in June 2002. Moody's Investors Service and Standard & Poor's have recently confirmed their credit ratings for Compass Group of Baa1 and BBB + respectively. Both ratings have a stable outlook. ACQUISITIONS With the acquisition of Seiyo Food Systems, the Group has made an important strategic move resulting in a market-leading position in Japan. On 30 January 2002, the Group completed the acquisition of 80% of Seiyo Foods for £325 million including net debt assumed and costs. Seiyo provides the Group with the ideal platform to exploit the opportunities arising from the ongoing development and consolidation of the £21 billion Japanese foodservice market. Seiyo has a strong presence in each of the key market segments of contract catering, concessions and motorway service areas. Seiyo also has a 24.7% investment in Yoshinoya D&C Co. Ltd, a leading Tokyo listed Japanese fast food retailer. At the time of Compass Group's announcement of its intention to acquire Seiyo Foods, the company had already commenced the sale of its loss-making restaurants business, CASA. In March 2002 Seiyo announced agreement on the disposal of substantially all of this business and proceeds from this disposal , which are due to be received in May 2002, are in line with Compass Group management expectations. In addition to the acquisition of Seiyo Foods, the Group has announced two further key acquisitions in the first half, which completed just after the half year end; - Restorama, Rail Gourmet and parts of Gourmet Nova: In December 2001, the Group announced the acquisition of Restorama AG and Rail Gourmet AG from SAirlines AG and parts of Swissair's Gourmet Nova business for a total consideration of £41m. Restorama provides foodservice in the business and industry sector in Switzerland, Germany and Austria. Rail Gourmet is a leading provider of on board foodservice to customers travelling by rail in Europe. The UK part is subject to clearance by the Competition Commission with an announcement due by 8 July 2002. - Bon Appétit: In March 2002, the Group announced the acquisition in North America of Bon Appétit Management Company for £114 million. This is an important move, strengthening the Group's profile on the US West Coast, in particular in business and industry and education foodservice. OUTLOOK We have continued to make a number of impressive high profile contract gains and our contract retention rates are robust. We expect a reduction in acquisition activity going forward and with our focus on organic growth coupled with the integration of past acquisitions we remain confident that our expectations of organic turnover and margin rate increases will be delivered. Michael J Bailey Chief Executive Enquiries: 21 May 2002 Francis Mackay Chairman Compass Group PLC 020 7404 5959 Michael J Bailey Chief Executive Compass Group PLC 020 7404 5959 Andrew Lynch Finance Director Compass Group PLC 020 7404 5959 Timothy Grey/Simon Sporborg Brunswick Group Ltd 020 7404 5959 Thereafter Francis Mackay Compass Group PLC 01932 573 000 Michael J Bailey Compass Group PLC 01932 573 000 Andrew Lynch Compass Group PLC 01932 573 000 Website www.compass-group.com Notes: (1) Compass Group is the world's largest foodservice company employing over 360,000 people in over 90 countries and with annual revenues in excess of £ 10bn. Compass Group provides foodservice for clients including major employers, educational establishments, hospitals, leisure venues, retail locations and at major airports and railway stations throughout USA, Europe and developing markets in Asia and South America. The Group owns and operates major foodservice brands including Au Bon Pain, Harry Ramsden's, Little Chef, Upper Crust and Ritazza which are available to its clients and customers through its sector brands including Eurest, Scolarest, Medirest and Morrisons, Canteen Vending and Selecta, Select Service Partner and Moto. (2) Results Presentation and Teleconferences: - An analyst presentation and conference call will take place at 09.30 London time on Tuesday, 21 May 2002 at The Merrill Lynch Financial Centre, 2 King Edward Street, London EC1. Analysts or investors unable to attend the meeting in person may access it either via telephone or internet. The telephone dial in numbers are +44 (0) 20 8240 8245 or +44 (0) 20 8781 0571. Synchronised presentation slides and a live audio stream can be accessed on the internet at http://www.genesysrichmedia.com/compassgroup/21052002/default.htm Remote participants will not be able to ask questions during the meeting. An audio replay of the presentation will be available for 7 days (until 28 May) by dialing +44 (0)20 8288 4459, passcode 630112. - A conference call for US analysts and investors will take place at 17:00 London time / 12:00 New York time on Tuesday, 21 May 2002. The telephone dial in numbers are 1 415 217 0050 and 1 303 713 7888. There will be a live Q and A session with management following the presentation. Synchronised slides and a live audio stream can be accessed on the internet at http:// www.genesysrichmedia.com/compassgroup/21052002pm/default.htm INDEPENDENT REVIEW REPORT TO COMPASS GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 31 March 2002 which comprises the profit and loss account, the balance sheet, the cash flow statement, the statement of total recognised gains and losses, the reconciliation of movements in shareholders' funds and related notes 1 to 11. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 March 2002. Deloitte & Touche Chartered Accountants Hill House 1 Little New Street London EC4A 3TR 21 May 2002 Compass Group PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 31 March 2002 Half Year year Before Goodwill Half ended ended year goodwill 31 Mar 30 Sep amortisation amortisation ended 2001 2001 and and 31 Mar Reviewed Audited exceptional exceptional 2002 As As restated restated items items Reviewed £m £m £m £m £m Turnover (note 2) Continuing operations 4,884 - 4,884 4,079 8,716 Acquisitions 130 - 130 - - 5,014 - 5,014 4,079 8,716 Operating costs (note 3) (4,685) (132) (4,817) (3,970) (8,374) Operating profit Continuing operations 326 (127) 199 109 342 Acquisitions 3 (5) (2) - - 329 (132) 197 109 342 Share of operating profits of associated undertakings Continuing operations 1 - 1 4 5 Acquisitions 3 - 3 - - 4 - 4 4 5 Total operating profit : Group and share of associated undertakings (note 333 (132) 201 113 347 2) Reversal of discounting of net proceeds from disposal of businesses to net - - - 103 127 present value Other interest receivable and 12 - 12 7 17 similar income Total interest receivable and 12 - 12 110 144 similar income Interest payable and similar (87) - (87) (144) (237) charges Net interest (75) - (75) (34) (93) Profit on ordinary activities 258 (132) 126 79 254 before taxation Tax on profit on ordinary (72) 4 (68) (16) (92) activities (note 4) Profit on ordinary activities 186 (128) 58 63 162 after taxation Equity minority interests (8) - (8) (7) (16) Profit for the financial 178 (128) 50 56 146 period Equity dividends (note 5) (47) - (47) (42) (126) Profit for the period retained 131 (128) 3 14 20 Basic earnings per ordinary 2.2p 2.5p 6.6p share (note 6) Basic earnings per ordinary share - excluding goodwill amortisation and 8.0p 8.5p 20.0p exceptional items (note 6) Diluted earnings per ordinary 2.2p 2.5p 6.5p share (note 6) Diluted earnings per ordinary share - excluding goodwill amortisation and 7.9p 8.4p 19.8p exceptional items (note 6) The half year results are unaudited but have been reviewed by the auditors. The above amounts are derived from continuing operations. The results for the year ended 30 September 2001 do not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985 and have been extracted from the Group's published accounts for that year which have been filed with the Registrar of Companies. The audit report on these accounts was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. Compass Group PLC Consolidated Statement of Total Recognised Gains and Losses For the six months ended 31 March 2002 Half Year year Half ended ended year ended 31 Mar 30 Sep 2001 2001 31 Mar Reviewed Audited 2002 Reviewed As As restated restated £m £m £m Profit for the financial period 50 56 146 Currency translation differences on foreign currency (46) (62) (84) net investments Total gains and losses recognised in the period 4 (6) 62 Prior year adjustment (note 4) (7) Total gains and losses recognised since last annual (3) report Reconciliation of Movements in Consolidated Shareholders' Funds For the six months ended 31 March 2002 Half year Year Half year ended ended ended 31 Mar 30 Sep 2001 2001 31 Mar Reviewed Audited 2002 Reviewed As As restated restated £m £m £m Profit for the financial period 50 56 146 Dividends (47) (42) (126) 3 14 20 Currency translation differences on foreign (46) (62) (84) currency net investments Issue of shares 42 11 24 Shares to be issued (23) 13 28 Net reduction in shareholders' funds (24) (24) (12) Opening shareholders' funds 2,782 2,798 2,798 Prior year adjustment (note 4) - (4) (4) Opening shareholders' funds as restated 2,782 2,794 2,794 Closing shareholders' funds as restated 2,758 2,770 2,782 Compass Group PLC Consolidated Balance Sheet As at 31 March 2002 31 Mar 31 Mar 30 Sep 2002 2001 2001 Reviewed Audited Reviewed As As restated restated Notes £m £m £m Fixed assets intangible assets 4,424 3,203 4,200 Tangible assets 2,237 1,727 2,081 Investments 147 117 27 6,808 5,047 6,308 Current assets Stocks 204 160 181 Debtors: amounts falling due within one year 1,359 1,064 1,178 amounts falling due after more than one year 370 167 285 Businesses held for resale 122 2,821 75 Investments 12 - 12 Cash at bank and in hand 402 468 692 2,469 4,680 2,423 Creditors: amounts falling due within one (2,935) (2,669) (2,838) year Net current (liabilities)/assets (466) 2,011 (415) Total assets less current liabilities 6,342 7,058 5,893 Creditors: amounts falling due after more (3,087) (3,893) (2,699) than one year Provisions for liabilities and charges 7 (400) (359) (377) Equity minority interests (97) (36) (35) Net assets 2,758 2,770 2,782 Capital and reserves Called up share capital 223 221 222 Shares to be issued 9 17 32 Share premium account 8 62 1 11 Merger reserve 8 4,170 4,170 4,170 Profit and loss account 8 (1,706) (1,639) (1,653) Total equity shareholders' funds 2,758 2,770 2,782 Compass Group PLC Consolidated Cash Flow Statement For the six months ended 31 March 2002 Half Half Year year year ended ended ended 31 Mar 31 Mar 30 Sep 2002 2001 2001 Reviewed Reviewed Audited £m £m £m £m £m £m Net cash inflow from operating 328 239 748 activities (note I) Exceptional reorganisation costs (15) (19) (44) Net cash inflow after exceptional 313 220 704 items Dividends from associated - - 2 undertakings Returns on investments and servicing of finance Interest received 10 5 16 Interest paid (86) (152) (258) Interest element of finance lease (2) (1) (3) rental payments Dividends paid to minority (1) (1) (5) interests Net cash outflow from returns on (79) (149) (250) investments and servicing of finance Taxation Tax received 16 5 19 Tax paid (34) (45) (118) Net tax paid (18) (40) (99) Free cash flow before capital 216 31 357 expenditure and financial investments Capital expenditure and financial investment Purchase of tangible fixed assets (216) (155) (355) Sale of tangible fixed assets 23 13 30 Sale/purchase of own shares, net - - 1 Total capital expenditure and (193) (142) (324) financial investment Acquisitions and disposals Purchase of subsidiary companies and investments in associated undertakings (244) (302) (1,337) Net (costs) / proceeds from hotel (15) 211 2,806 disposal Sale of subsidiary companies - 25 25 Total acquisitions and disposals (259) (66) 1,494 Equity dividends paid (42) (121) (121) Net cash (outflow)/inflow from (494) (329) 1,049 investing activities Net cash (outflow)/inflow before (278) (298) 1,406 financing Financing Issue of ordinary share capital 6 11 24 Debt due within a year: Decrease in bank loans and loan (492) (454) (430) notes Debt due after a year: Increase/ (decrease) in bank loans 481 668 (440) and loan notes Capital element of finance lease (7) (5) (15) rentals Net cash (outflow)/inflow from (12) 220 (861) financing (Decrease)/increase in cash in the (290) (78) 545 period Reconciliation of net cash flow to movement in net debt (note II) (Decrease)/increase in cash in the (290) (78) 545 period Cash inflow/(outflow) from change 18 (209) 885 in debt and lease finance Change in net debt resulting from (272) (287) 1,430 cash flows Changes in finance leases and (266) (12) (73) loans acquired with subsidiaries Effect of foreign exchange rate (70) (54) (51) change Movement in net debt in the period (608) (353) 1,306 Opening net debt (2,390) (3,696) (3,696) Closing net debt (2,998) (4,049) (2,390) Compass Group PLC Notes to the Consolidated Cash Flow Statement For the six months ended 31 March 2002 Half year Half year Year ended ended ended 31 Mar 31 Mar 30 Sep 2002 2001 2001 Reviewed Reviewed Audited £m £m £m I Reconciliation of operating profit to net cash inflow from operating activities: Operating profit before goodwill amortisation 333 268 676 and exceptional items Depreciation 113 83 170 EBITDA 446 351 846 (Profit) on disposal of fixed assets and - (1) (7) businesses Share of profit of associated undertakings (4) (5) (7) Decrease in provisions for liabilities and (8) (8) (33) charges Increase in stocks (11) (6) (8) Increase in debtors (147) (127) (153) Increase in creditors 52 35 110 Net cash inflow from operating activities 328 239 748 Acquisitions (excluding Other Cash Exchange cash and non-cash 1 Oct flow Movements overdrafts) changes 31 Mar 2001 2002 £m £m £m £m £m £m II Analysis of net debt: Cash at bank and in 692 (293) 3 - - 402 hand Overdrafts (47) 3 - - - (44) 645 (290) 3 - - 358 Debt due within one (437) 492 (6) (110) (327) (388) year Debt due after one (2,547) (481) (66) (148) 327 (2,915) year Finance leases (51) 7 (1) - (8) (53) (3,035) 18 (73) (258) (8) (3,356) Total (2,390) (272) (70) (258) (8) (2,998) Other non-cash changes in respect of debt represent amounts which were previously considered repayable in more than one year now due in less than one year. Notes to the Financial Statements For the six months ended 31 March 2002 1. Basis of preparation The results of Compass Group PLC for the six months ended 31 March 2002 have been prepared on the basis of the accounting policies disclosed in the 2001 Annual Report with the exception that deferred taxation is now stated in accordance with FRS19, 'Deferred Tax' on a full liability basis and comparative financial information has been restated as necessary. Certain items in the interim accounts as at 31 March 2001 have been restated on a consistent basis with the treatment adopted in the accounts as at 30 September 2001. Compass Group PLC Notes to the Financial Statements (continued) For the six months ended 31 March 2002 Half Half Year year year ended ended ended Continuing 31 Mar 31 Mar 30 Sep 2002 2001 2001 Operations Acquisitions Reviewed Reviewed Audited 2. Turnover and operating £m £m £m £m £m profit Turnover Foodservice Geographical analysis: - United Kingdom 1,451 4 1,455 1,361 2,877 - Continental Europe and the 1,651 103 1,754 1,403 3,013 rest of the world - North America 1,782 23 1,805 1,315 2,826 4,884 130 5,014 4,079 8,716 Operating profit (before goodwill amortisation and exceptional items) Foodservice - The Company and its 326 3 329 263 669 subsidiary companies - Associated undertakings 1 3 4 5 7 327 6 333 268 676 Geographical analysis: - United Kingdom The Company and its 149 - 149 132 377 subsidiary companies Associated undertakings 1 - 1 1 1 - Continental Europe and the rest of the world The Company and its 92 2 94 70 153 subsidiary companies Associated undertakings - 3 3 4 6 - North America 85 1 86 61 139 327 6 333 268 676 Amortisation of goodwill: - United Kingdom (75) - (75) (72) (149) - Continental Europe and the (14) (4) (18) (8) (31) rest of the world - North America (23) (1) (24) (6) (25) (112) (5) (117) (86) (205) Exceptional items: - United Kingdom (12) - (12) (69) (115) - Continental Europe and the (2) - (2) - (6) rest of the world - North America (1) - (1) - (3) (127) (5) (132) (155) (329) Total operating profit 200 1 201 113 347 Total operating profit after goodwill amortisation and exceptional items for the half year ended 31 March 2002 relates to foodservice analysed as UK £63 million, Continental Europe and the rest of the world £77 million, and North America £61 million, (2001 half year: £(8) million, £66 million and £55 million respectively and full year ended 30 September 2001: £114 million, £122 million and £111 million respectively). Compass Group PLC Notes to the Financial Statements (continued) For the six months ended 31 March 2002 Half year Half Year year ended ended ended 31 Mar 31 Mar 30 Sep 2002 2001 2001 Reviewed Reviewed Audited 3. Exceptional operating items - continuing £m £m £m operations Reorganisation - costs incurred 3 15 40 - accrued costs 2 4 12 - assets written off - 37 44 Employee share schemes 10 13 28 15 69 124 During 2000, the Group acquired Granada Restaurants and has since combined this with the Group's existing UK operations. Costs incurred relate to reorganisation costs of the UK business and the writing off of the net book amount of duplicate assets. Employee share schemes relate to the Commitment Plan which was entered into with effect from 27 July 2000 to retain senior employees which matured on 27 January 2002 and will result in the issue of 9,931,031 new Compass Group PLC shares of which 7,988,197 had been issued as at 31 March 2002. Half Year year Half ended ended year ended 31 Mar 30 Sep 2001 2001 31 Mar Reviewed Audited 2002 Reviewed As As restated restated 4. Tax on profit on ordinary activities £m £m £m UK corporation tax 29 17 37 Overseas tax payable 27 18 52 56 35 89 UK deferred tax 15 5 25 Impact of discounting UK deferred tax (2) (1) (2) Overseas deferred tax 8 5 27 Impact of discounting on overseas deferred tax (5) (4) (14) 72 40 125 Adjustments in respect of prior years: UK corporation tax (4) - 1 Overseas tax payable - (4) (3) 68 36 123 Overseas tax on share of profits of associated 4 1 4 undertakings Total tax charge before exceptional items 72 37 127 Tax on exceptional items: UK corporation tax - (6) (18) UK deferred tax (4) (15) (17) Tax on ordinary activities after exceptional 68 16 92 items United Kingdom corporation tax has been charged at 30% (2001: 30%). The Group tax charge is reduced below this rate since tax is charged at a lower effective rate on overseas earnings. FRS 19 'Deferred Tax' has been adopted with a consequential restatement of prior periods. FRS 19 requires that deferred tax be recognised in respect of all timing differences that have originated but not reversed by the balance sheet date. The Group has decided to adopt the policy of discounting deferred tax balances as permitted by FRS 19. Compass Group PLC Notes to the Financial Statements (continued) For the six months ended 31 March 2002 4. Tax on profit on ordinary activities (continued) The effect of the restatement of 2001 is to increase the tax charge on profit on ordinary activities before taxation, goodwill amortisation and exceptional items, having excluded imputed interest income, which does not attract tax, ('the ordinary tax charge') by 1.3 percentage points. This equates to £6m in the year to 30 September 2001 and £2m in the half year to 31 March 2001. The ordinary tax charge for the year to 30 September 2001 has increased by £6m as described above, but there is an additional exceptional UK deferred tax credit of £6m. The total tax charge has thus remained constant at £92m. However, the restatement has increased the currency translation loss on foreign currency net investment by £3m from £81m to £84m. For the half year to 31 March 2001 the net impact is to reduce the total tax charge from £29m to £16m. The ordinary tax charge has been increased by £2m but there is an exceptional UK deferred tax credit of £15m giving a net reduction of £13m. Half year Half year Year ended ended ended 31 Mar 2002 31 Mar 2001 31 Sep 2001 Reviewed Reviewed Audited 5. Dividends Per share £m Per share £m Per £m share Dividends on ordinary shares of 10p each Interim 2.1p 47 1.9p 42 1.9p 42 Final - - - - 3.8p 84 2.1p 47 1.9p 42 5.7p 126 Half year Half year Year Year Half year Half year ended ended ended ended ended ended 31 Mar 2001 31 Mar 2001 30 Sep 2001 30 Sep 2001 31 Mar 2002 31 Mar 2002 Before After Before After Before After goodwill goodwill goodwill goodwill goodwill goodwill amortisation amortisation amortisation amortisation amortisation amortisation and and and and and and exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items Reviewed Reviewed Audited Audited Reviewed Reviewed As restated As restated As restated As restated 6. earnings per share £m £m £m £m £m £m Attributable 178 50 189 56 446 146 profit for basic and diluted earnings per share millions millions millions millions millions millions Average number of 2,221 2,221 2,214 2,214 2,215 2,215 shares in issue Shares to be 2 2 2 2 10 10 issued Average number of 2,223 2,223 2,216 2,216 2,225 2,225 shares for basic earnings per share Dilutive share 34 34 32 32 26 26 options Average number of 2,257 2,257 2,248 2,248 2,251 2,251 shares for diluted earnings per share Basic earnings per 8.0p 2.2p 8.5p 2.5p 20.0p 6.6p share Diluted earnings 7.9p 2.2p 8.4p 2.5p 19.8p 6.5p per share Earnings per share before goodwill amortisation and exceptional items has been shown to disclose the impact of goodwill amortisation and exceptional items on underlying earnings. Compass Group PLC Notes to the Financial Statements (continued) For the six months ended 31 March 2002 Insurance, pensions and other post employment Onerous Legal and benefits contracts other Environmental Total claims 7. Provisions for £m £m £m £m £m liabilities and charges At 1 October 2001 (219) (69) (78) (11) (377) Arising from (17) (8) (5) - (30) acquisitions Expenditure in the 1 6 1 - 8 period Charged to profit and (3) - - - (3) loss account Credited to profit and - 2 - - 2 loss account Currency adjustment (1) 1 - - - At 31 March 2002 (239) (68) (82) (11) (400) Insurance, pensions and other post employment benefits relate to the costs of self funded pension and insurance schemes or statutory retirement arrangements and are essentially long term in nature. Onerous contracts represent the liabilities in respect of leases on non-utilised properties and other contracts. The duration of these contracts ranges from 2 to 17 years. Legal and other claims relate principally to provisions for the cost of litigation and sundry other claims. the timing of the settlement of these claims is uncertain. Environmental provisions are in respect of liabilities relating to the Group's responsibility for maintaining its operating sites in accordance with statutory requirements and the Group's aim to have a low impact on the environment. Consolidated profit and loss account Share Before premium Merger goodwill Goodwill account reserve written off written Total off 8. Reserves £m £m £m £m £m At 1 October 2001 11 4,170 479 (2,132) (1,653) Foreign exchange - - (46) - (46) reserve movements Premium on ordinary 51 - (10) - (10) shares issued, net of expenses Retained profit for the - - 3 - 3 period At 31 March 2002 62 4,170 426 (2,132) (1,706) 9. Post balance sheet events On 6 March 2002, the Group announced the acquisition of Bon Appétit Management Company for US$ 156 million (£114m). This acquisition was completed in April 2002. The Group announced on 24 December 2001 the acquisition of Restorama AG and Rail Gourmet AG and parts of Swissair's Gourmet Nova business for a total consideration of CHF 97 million (£41m). The acquisition of parts of Gourmet Nova completed in the six months to 31 March 2002 and completion of the remaining businesses took place on 5 April 2002 with the payment of the balance of consideration due of CHF 85 million including debt assumed (£35 million). Since 31 March 2002, the Group has raised some £1 billion of finance which will be used to repay existing debt as detailed in the Chief Executive's Report. Compass Group PLC Notes to the Financial Statements (continued) For the six months ended 31 March 2002 Translation Closing 10. Exchange rates rate rate Exchange rates for major currencies used during the period after taking into account the Group's hedging arrangements were: Australian Dollar 2.63 2.67 Canadian Dollar 2.08 2.27 Danish Krone 12.16 12.13 Euro 1.63 1.63 Norwegian Krone 12.95 12.58 Swedish Krona 15.14 14.75 Swiss Franc 2.48 2.39 US Dollar 1.37 1.42 11. This announcement is being sent to all shareholders on the register at 20 May 2002 and is available to the general public at Cowley House, Guildford Street, Chertsey, Surrey, KT16 9BA (the company's registered office) during office hours. =END=

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