Interim Results

Compass Group PLC 18 May 2005 PRESS RELEASE 18 May 2005 COMPASS GROUP PLC INTERIM UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 _________________________________ ____________ _______ _________ ________ Financial summary Reported Constant For the six months ended 31 March movement Currency 2005 2004 _________________________________ ____________ _______ _________ ________ Turnover Â£6,191m Â£5,844m 5.9% 7.8% Operating profit - reported Â£192m Â£210m (8.6)% - underlying (1) Â£328m Â£346m (2.9)% Operating margin(2) 5.4% 6.1% (70)bps Profit before tax - reported Â£124m Â£145m (14.5)% - underlying(1) Â£260m Â£282m (7.8)% Basic earnings per share - reported 1.9p 2.5p (24.0)% - underlying at constant currency(1) 8.2p 8.5p (3.5)% Free cash flow Â£81m Â£86m (5.8)% Dividend per ordinary share 3.3p 3.1p 6.5% _________________________________ ____________ _______ _________ ________ Business summary â€¢ Turnover of Â£6.2 billion, up 6% on a like for like basis(3). â€¢ Underlying operating profit on constant currency basis 2.9% lower. â€¢ Basic earnings per share on an underlying constant currency basis 3.5% lower. â€¢ Interim dividend of 3.3 pence per share, up 6.5%. â€¢ On track to achieve full year cash flow of Â£350m - Â£370m at 2004 exchange rates. â€¢ Will achieve at least 6% like for like growth in the full year. â€¢ Agreed sale of 75% stake in Au Bon Pain for $90m. â€¢ Overhead savings over next 18 months of Â£50m. â€¢ Objective for improvement in ROCE of 100 basis points over the period 2006-2008. â€¢ Objective to generate Â£1 billion of free cash flow over the period 2006-2008. _____________________________________________________________________________ (1) Underlying performance is before goodwill amortisation and excludes discontinued activities. (2) Excludes fuel, associates and goodwill amortisation. (3) Like for like growth excludes fuel and is calculated by adjusting for acquisitions (excluding current year acquisitions and including a full year in respect of prior year acquisitions), disposals (excluded from both years) and exchange rate movements (translating the prior period at current period exchange rates)and compares the results against 2004. Outlook We are encouraged by the first half cash position and remain on track to deliver full year free cash flow in the range of Â£350 million to Â£370 million at 2004 reported exchange rates. For the full year, we would expect turnover and margin to continue the trends seen in the first half, helped in particular by continued good performance in North America and a slight pick up in Continental Europe & rest of the world. Michael J Bailey - Chief Executive - said: 'I am not happy with our recent performance. We need to respond more rapidly than we have to the changes taking place in our market. The business review I have initiated has already identified an initial set of actions in terms of operational efficiency, for example on overheads. The review is on-going and we will evaluate all opportunities to extract maximum value from Compass Group. Our objectives over the medium-term (2006-2008) will be to deliver an improvement of 100 basis points in return on capital employed and to generate free cash flow of Â£1 billion. I am totally committed to implementing and driving forward the operating, financial and cultural changes necessary to deliver enhanced value for shareholders'. Appointment of new Chairman As confirmed on 9 May 2005, Sir Francis Mackay will step down as planned from the Board of Compass Group after 19 years, the last 6 years as Chairman, at the Group's Annual General Meeting in February 2006. The Nominations Committee has begun the search to appoint a new Chairman from outside the Group. Enquiries: Compass Group PLC 01932 573000 Michael J Bailey Chief Executive Andrew Martin Finance Director Sarah Ellis Director of Corporate Strategy and Investor Relations Brunswick 020 7404 5959 Simon Sporborg Pamela Small Website www.compass-group.com Presentation and teleconference details are in the attached notes. OPERATING AND FINANCIAL REVIEW Compass Group today announces its results for the six months to 31 March 2005. Half year turnover was Â£6,191 million (2004: Â£5,844 million) with like for like growth of 6%, in line with expectations. Turnover continues to be driven by new business wins and high levels of contract retention in the Group's primary contract catering business. This growth has been particularly strong in North America, the UK, Australasia and Latin America. Performance in Continental Europe and elsewhere has been mixed and in some areas remains very challenging. New business was also driven by the continued trend towards outsourcing particularly in Healthcare and Education and high levels of activity in offshore and remote site locations. An update on contract wins and renewals is attached in the appendix to this release. Business review The Group has initiated a comprehensive operational and financial review to identify and confirm the opportunities to drive value creation and performance. The initial conclusion of this on-going review is that there are significant opportunities across the Group. Operational efficiency gains will come from purchasing, overhead reduction and labour productivity including: â€¢ the on-going roll-out of our procurement model which will be a key driver of operational efficiency and the Group's purchasing teams have been tasked to ensure that growth in food cost across the business continues to be contained at well below market levels; â€¢ a range of labour monitoring, scheduling and reporting tools are being introduced across the Group to drive improvements in labour productivity; and â€¢ following a review of the Group's structure set against the backdrop of operating in over 90 countries and 'above unit overheads' of circa Â£1 billion, a programme is now underway to deliver savings of Â£50 million over the next 18 months. This will be achieved through restructuring and streamlining the organisation to deliver more effective day to day decision making and control. The opportunity for enhanced revenue generation lies in adopting a more retail focused approach in terms of product management and development, merchandising and, in particular, pricing. Return on capital employed (ROCE) and free cash flow The Group is today announcing medium-term (2006-2008) objectives to improve ROCE by 100 basis points and generate free cash flow of Â£1 billion over the period. ROCE in 2004 was 6.4% (restated at a 30% tax rate). For the full year 2005, we currently expect a decline in ROCE which is a reflection of the impact of currency and previously announced trading issues. From this start point, our objective is to increase ROCE by 100 basis points by 2008. This assumes a 30% tax rate throughout and ignores the impact of IFRS, which still has to be finally quantified. ________________________________ __________ ________ _________ _________ Financial summary Reported Constant For the six months ended 31 March 2005 2004 movement currency ________________________________ __________ _________ _________ _________ Turnover Â£6,191m Â£5,844m 5.9% 7.8% Operating profit - reported Â£192m Â£210m (8.6)% - underlying(1) Â£328m Â£346m (2.9)% Operating margin(2) 5.4% 6.1% (70)bps Profit before tax - reported Â£124m Â£145m (14.5)% - underlying(1) Â£260m Â£282m (7.8)% Basic earnings per share - reported 1.9p 2.5p (24.0)% - underlying at constant currency(1) 8.2p 8.5p (3.5)% Free cash flow Â£81m Â£86m (5.8)% Dividend per ordinary share 3.3p 3.1p 6.5% (1) Underlying performance is before goodwill amortisation and excludes discontinued activities. (2) Excludes fuel, associates and goodwill amortisation. _____________________________________________________________________________ Turnover growth The main factors that affected the period on period change in turnover are summarised below. % Like for like growth(1) 6 Contribution from acquisitions 2 Movements in translation rates (2) _______________________________________ ___ Total - continuing activities 6 _______________________________________ ___ (1) Like for like growth excludes fuel and is calculated by adjusting for acquisitions (excluding current year acquisitions and including a full year in respect of prior year acquisitions), disposals (excluded from both years) and exchange rate movements (translating the prior period at current period exchange rates), and compares the results against 2004. Overall like for like turnover growth of 6% was achieved as a result of new contract gains of 11% offset by contract losses of 5% and marginally positive throughput. In addition to securing new business, the Group remains focused on client retention, which remained strong at 95%. Like for like turnover growth by sector, by geographic segment, excluding fuel, is set out below. --------------------- -------- --------- -------- ------- North CE & ROW UK Group America % % % % --------------------- -------- --------- -------- ------- Contract: Business & Industry 11 1 8 5 Defence, Offshore & Remote Site 46 4 9 7 Education 12 - (2) 6 Healthcare 15 5 6 10 Sports & Leisure 9 - 5 5 --------------------- -------- --------- -------- ------- Total Contract 12 2 6 6 Vending 4 1 13 3 Travel Concessions (1) 12 2 6 7 --------------------- -------- --------- -------- ------- Total 12 2 6 6 --------------------- -------- --------- -------- ------- (1) Travel concessions principally comprises: Creative Host Services and Au Bon Pain in North America; Rail Gourmet, Inflight, airport concessions, motorways in Italy, Japan and Portugal and Mitropa in Continental Europe and rest of the world; and in the UK, Moto, railways, airports, Harry Ramsden's, Millies Cookies and the remaining hotels. ___________________________ _____ ______ __________ ___________ _________ Divisional performance Constant Like Six months ended 31 March 2005 Reported currency for like movement movement Movement 2005 2004 % % % ___________________________ _____ ______ __________ ___________ _________ Turnover(1) (Â£m) North America 1,921 1,778 8 14 12 Continental Europe & rest of the world 2,666 2,563 4 4 2 United Kingdom 1,364 1,272 7 7 6 ___________________________ _____ ______ __________ ___________ _________ Total - continuing activities 5,951 5,613 6 8 6 __________ ___________ _________ Fuel(2) 240 231 ___________________________ _____ ______ Total 6,191 5,844 ___________________________ _____ ______ Total operating profit(1)(3)(4) (Â£m) Subsidiary undertakings North America 97 84 15 25 Continental Europe & rest of the world 141 139 1 2 United Kingdom 89 122 (27) (27) _____________________________ ________ _____ ________ _______ 327 345 (5) (3) Associates (UK) 1 1 - - _____________________________ ________ ______ _________ _________ Total - continuing activities 328 346 (5) (3) ________ __________ Discontinued activities - associates (CE&ROW) - 2 ____________________________ ________ ______ Total 328 348 ____________________________ ________ ______ Operating margin(5)(%) North America 5.0 4.7 Continental Europe & rest of the world 5.3 5.4 United Kingdom 6.2 9.2 ________________________ _______________ ___________ Total - continuing activities 5.4 6.1 ________________________ _______________ ___________ (1) Certain minor reclassifications have been made to the previously reported analysis of operations to align with the Group's current management structures. These include the transfer of the defence business previously reported under the UK to Continental Europe & rest of the world. (2) Fuel turnover comprises Â£16 million in Continental Europe & rest of the world and Â£224 million in the UK (2004: Â£13 million and Â£218 million respectively). (3) Total operating profit is before goodwill amortisation of Â£136 million (2004: Â£138 million). (4) Operating profit from subsidiary undertakings includes Â£4 million in the UK from fuel (2004: Â£5 million). (5) Operating margin is based on turnover and total operating profit excluding fuel, associates and goodwill amortisation. Divisional performance for the six months ended 31 March 2005 is summarised below; the commentary excludes fuel turnover. North America - 32% Group sales (2004: 32%) North America reported turnover increased to Â£1,921 million (2004: Â£1,778 million) and by 12% on a like for like basis. New business growth has been buoyant across all sectors with only Vending showing a more modest increase at 4% on a like for like basis, reflecting continuing weakness in manufacturing. Within Contract, Business & Industry has enjoyed good growth of 11% reflecting higher levels of corporate events and increasing participation. In Healthcare, Morrison and Crothall continued to show strong progress with major new contract mobilisations including Vancouver Island and Fraser Health Authorities. Our position in this important market was further strengthened by the acquisition of HDS Services, the only significant acquisition in the first half, which was completed in January 2005 for Â£16 million. In Education, Chartwells continues to deliver strong performance with new contract mobilisations including Newark Public Schools and Case Western Reserve University. Modest positive throughput is being driven by the continued roll out of healthy eating initiatives such as 'Balanced Choices' and 'Breakfast at School'. Retention and margins continue to be driven by targeted allocation of incremental capital investment. Total operating profit (excluding associates and goodwill amortisation) on continuing activities increased from Â£84 million to Â£97 million, up 15%. Overall, operating margin moved ahead to 5.0% (2004: 4.7%) and strong sales growth has converted through to good growth in operating profit. Increases in food and employee related costs were offset by better pricing, tighter labour controls and good performance in purchasing, including the roll through of purchasing deals completed in the second half of 2004. Second half margin will compare against a particularly strong margin performance in the second half of 2004. Continental Europe & rest of the world - 45% Group sales (2004: 46%) Turnover increased to Â£2,666 million (2004: Â£2,563 million) with growth of 2% on a like for like basis. Northern Europe continues to be very challenging, with little sign of top line growth. Australia, Asia, Latin America and Spain have enjoyed good trading conditions and delivered strong growth, and this is converting through to operating profit growth. Australia in particular is benefiting from the strength of the remote site business as the extractive industries sector meets the growing demand for crude oil and minerals. In Latin America, we are also seeing good business growth of 17% driven by Chile, Mexico and Brazil. Within the Contract business which produced overall turnover growth of 2%, Business & Industry managed to maintain last year's levels of activity despite the very challenging markets in Northern Europe where several large clients are restructuring and reducing staff numbers. Japan and Spain showed strong growth rates of 5% and 7% respectively. Vending grew by 1%, with the core business in Switzerland delivering a 3% increase. Healthcare produced growth of 5% on a like for like basis, with good growth in Australasia, Latin America and France (a large component of the business) which grew by 4% over last year. Education like for like sales were flat compared with last year; however Italy, Switzerland and Japan performed well. ESS, which manages a major part of the Group's Defence, Offshore and Remote sites business, produced turnover of Â£273 million (2004: Â£285 million). The offshore and remote site businesses have continued to grow strongly, again driven by the growing demand for crude oil and minerals. However, as previously reported, revenues from the Middle East defence businesses are declining, to date being replaced in part by lower margin peacekeeping business. The integration of the recent Mitropa acquisition was substantially completed in the first half and contributed 2% to sales growth. Total operating profit (excluding associates and goodwill amortisation) on continuing activities has increased by 1% to Â£141 million despite the difficult trading conditions in Northern Europe and the impact of the reduction in the volume and margin of our Middle East business. Overall, operating margins remained broadly in line with the prior period at 5.3% (2004: 5.4%). In the first half we have spent Â£5 million on restructuring the Northern Europe business, and we would expect to see the benefit of reduced overhead costs flow through in the second half. In Japan, we continue to see progress in moving the margin forward. Australia has seen good margin progression helped by the strong remote site business. ESS operating profit was Â£22 million (2004: Â£33 million) with the reduction principally arising due to the slow down in Middle East military activity, some restructuring costs and opening costs for new UN peacekeeping contracts (the benefit of which should flow through in the second half). For the full year overall, the impact on margins from purchasing and Japan is likely to be offset by lower Middle East margins. UK - 23% Group sales (2004: 22%) Turnover was Â£1,364 million in the period (2004: Â£1,272 million) up 6%. In Contract, like for like sales also increased by 6% with solid performances in all sectors except Education, which saw sales decline by 2%. Major contracts mobilised included the Shell Centre and the Earls Court & Olympia exhibition centres. All Leisure successfully integrated last year's acquisition of the Keith Prowse hospitality business and is now able to deliver a 'one source' hospitality service to a wide range of the UK's most prestigious sporting and cultural events. Travel Concessions achieved like for like growth of 6% with Rail performing strongly, with the continuing roll out of the M&S Simply Food concept. The Travel Concessions business remains heavily weighted towards the second half. Total operating profit (excluding associates and goodwill amortisation) on continuing activities was Â£89 million (2004: Â£122 million). The reduction primarily arising due to the effects of the matters reported during the second half of 2004 including increased distribution costs, higher pension charges, accounting changes and a more accurate allocation of purchasing income and central costs. The underlying UK first half 2004 margin post these items was 6.9%. In first half 2005, we have incurred Â£5 million of expenditure relating to the investment in operational and front line management teams as referred to in our 31 March trading update. The margin achieved overall in the period was 6.2%. We are now winning and retaining an increasing amount of business with a lower level of capital spend, but at a lower margin and this trend, together with increasing cost pressures, is likely to impact margins for the full year. Group operating profit Total operating profit from continuing activities, including associates but before goodwill amortisation was Â£328 million (2004: Â£346 million). Interest Net debt at 31 March 2005 was Â£2,494 million (30 September 2004: Â£2,373 million). Net interest for the period was Â£68 million (2004: Â£65 million). Profit before taxation Profit before taxation and goodwill amortisation decreased by 8% from Â£283 million to Â£260 million. Taxation The overall Group tax charge was Â£65 million giving an overall tax rate on ordinary activities of 25% of profit before tax and goodwill amortisation, which is below the UK corporate tax rate of 30%. The main reasons for the lower rate are the recognition of reliefs associated with past acquisitions (2%), losses brought forward (2%), the tax deductibility of part of the Group's goodwill (2%), and the benefit of prior year items (2%), offset by higher overseas tax rates (3%). Under IFRS (see more detailed comments below), the earnings benefit of the tax deduction for goodwill in the US will no longer be available, although there is no cash tax impact. Overall, the Group's tax rate under IFRS is expected to be more volatile than under UK GAAP. This, combined with the 2005 Budget impact on cross border financing structures, means it is now likely that the Group's tax charge for 2006 onwards is expected to move to around 30% (previously mid to high 20's) and that the cash tax rate is expected to move to mid to high 20's (previously mid 20's). Goodwill amortisation The goodwill amortisation charge for the period was Â£136 million (2004: Â£138 million). Earnings per share Basic and diluted earnings per share on a reported basis, after goodwill amortisation, were both 1.9 pence (2004: 2.5 pence and 2.4 pence on a basic and diluted basis respectively). Basic earnings per share before goodwill amortisation for the period was 8.2 pence (2004: 8.8 pence). Underlying basic earnings per share before goodwill amortisation, adjusting for discontinued activities and currency translation, is down by 3.5% period on period at 8.2 pence per share. Attributable profit and basic earnings per share are reconciled below. Attributable profit Basic earnings per share 2005 2004 2005 2004 Â£m Â£m Pence Pence Change ___________________ __________ _________ _______ ________ __________ Reported 41 53 1.9 2.5 (24.0)% Goodwill amortisation 136 138 ___________________ ___________ _________ Before goodwill amortisation 177 191 8.2 8.8 (6.8)% Currency translation - (8) ___________________ __________ _________ Underlying 177 183 8.2 8.5 (3.5)% ___________________ __________ _________ The effect of currency translation is calculated by applying 2005 translation rates to 2004 attributable profit. Dividends The recommended interim dividend is 3.3 pence per share (2004: 3.1 pence per share), an increase over the 2004 interim dividend per share of 6.5%. Disposals Today, the Group announces the agreed sale of a 75% stake in the North American bakery cafe chain, Au Bon Pain, for a consideration of $90 million. Under the terms of the transaction the Group will retain a 25% equity stake, Au Bon Pain's airport operations and an exclusive franchise for core Compass business channels such as vending, business and industry and education. Au Bon Pain has 224 outlets and, in the year ended 30 September 2004, revenues relating to the parts of the business being sold were circa Â£100 million and operating profit was circa Â£4 million. Au Bon Pain was acquired by the Group in December 2000. Profits on disposal of businesses and fixed assets were Â£nil million (2004: Â£5million). For the full year, profits on disposals are expected to total circa Â£10 million arising in Continental Europe & rest of world and North America rather than in the UK as previously anticipated. Acquisitions The Group's strategic focus continues to be on the organic development of its existing core businesses. During the period, the Group purchased businesses for Â£30 million with Â£1 million of the aggregate purchase price being deferred consideration payable in the future and including Â£3 million of cash acquired. The Group also purchased further shares in companies not wholly owned, for Â£61 million. The most significant of these was a further 30% of the remaining share capital in Onama, the Group's Italian contract catering business, for Â£41 million taking the Group's total share holding to 90%. The Group also paid Â£14 million of deferred consideration in the period in respect of prior year acquisitions. The Group does not anticipate any significant further spend on new acquisitions in the remainder of the 2005 financial year. Further deferred consideration payments of circa Â£20 million are anticipated in respect of prior year acquisitions. Cash flow Net cash flow from operations was in line with last year at Â£373 million. Free cash flow for the first half of 2005 was Â£81 million (2004: Â£86 million). Payments in respect of provisions for liabilities and charges absorbed Â£14 million (2004: Â£24 million). Â£10 million was spent on reducing liabilities in respect of insurance, pensions and other post-employment benefits, Â£3 million on settling onerous contracts and Â£1 million in respect of legal and other claims. Interest payments absorbed a net Â£78 million (2004: Â£58 million). Interest paid was higher principally because of the effect of the swap monetisation concluded in the second half of 2004. The net tax paid in 2005 of Â£43 million (2004: Â£35 million) represents 17% of profit before tax and goodwill amortisation and is significantly less than the total tax charge for the period of Â£65 million. The main reasons for this difference are tax losses brought forward and utilised in the year, capital allowances in excess of depreciation and the timing of tax payments. The Group's cash tax rate is likely to be in the range of 18-20% for full year 2005. Net capital expenditure absorbed Â£164 million (2004: Â£182 million). The Group is in the process of finalising discussions with the trustees of the UK pension schemes. Our current estimates indicate an increase in the Group's cash contributions to these schemes from 2006 onwards in the range Â£10 million to Â£15 million per annum. International Financial Reporting Standards We are well advanced with preparation for the adoption of International Financial Reporting Standards (IFRS) and, as previously announced, the Group will adopt IFRS for the first time in respect of its 2006 financial reporting. The work we have completed indicates that the expected UK GAAP to IFRS adjustments having the most significant impact on the Group's projected 2005 earnings are: â€¢ Ceasing to amortise goodwill; â€¢ Accounting for the costs of share based payments; and â€¢ The loss of the income statement benefit of tax deductions on overseas goodwill. The combined impact of these adjustments would be an estimated increase of Â£200 million to Â£220 million in the Group's profit for the financial year under IFRS. Before goodwill amortisation the Group's profit for the financial year under IFRS is estimated to be in the range Â£55 million to Â£65 million lower than under UK GAAP. This would equate to an increase in earnings per ordinary share of 120% - 140% on a post goodwill amortisation basis or a reduction in earnings per ordinary share of 13% - 15% on a pre goodwill amortisation basis. The above estimate of the impact of adopting IFRS on 2005 earnings does not take into account a number of smaller differences which in aggregate are not currently anticipated to result in material adjustments between reported earnings under UK GAAP and IFRS. They also do not reflect the possible effect on earnings of the IAS 39 requirements relating to financial instruments which cannot be quantified until the year end value of these financial instruments is known. IAS 39 hedging rules mean that hedge accounting treatment will not apply to all the Group's net investment and interest rate hedges and consequently will result in some income statement volatility caused by changes to market interest and foreign exchange rates. The expected UK GAAP to IFRS adjustments having the most significant impact on the Group's opening IFRS balance sheet at 30 September 2004, are: â€¢ The recognition of additional pension liabilities amounting to approximately Â£220 million - Â£240 million arising from the requirements of IAS 19 Employee Benefits; â€¢ Existing goodwill in the Group balance sheet being 'frozen' at the 30 September 2004 level of circa Â£4.2 billion and no longer subject to amortisation. The balance will however be subject to annual impairment testing and movements in exchange rates; â€¢ IAS10 Events after the Balance Sheet Date does not permit recognition of a proposed dividend as a liability; consequently, at 30 September 2004, the liability for the final dividend of Â£134 million will be added back to reserves; and â€¢ IAS 32 and IAS 39 require the Group to recognise as a liability the discounted acquisition cost associated with the potential exercise of put options held by minority shareholders. This will reduce net assets at 30 September 2004 by an estimated Â£200 million. The first financial information to be reported by the Group in accordance with IFRS will be for the six months ending 31 March 2006 but the requirement to present comparative information means that a balance sheet as at 30 September 2004 and primary statements for the six months to 31 March 2005 and the year to 30 September 2005, prepared in accordance with IFRS, will also be required. The Group will continue to report its consolidated financial statements in accordance with UK GAAP for the year to 30 September 2005. The above estimate of the adjustments required has been based on the Group's current knowledge and understanding of the requirements of IFRS, although IFRS standards, interpretation and practice continue to evolve. Outlook We are encouraged by the first half cash position and remain on track to deliver full year free cash flow in the range of Â£350 million to Â£370 million at 2004 reported exchange rates. We would expect turnover and margin to continue the trends seen in the first half, helped in particular by continued good performance in North America and a slight pick up in Continental Europe & rest of world. Michael J Bailey Sir Francis H Mackay Chief Executive Chairman NOTES (a) The financial information set out in the announcement relating to 30 September 2004 does not constitute the Company's statutory accounts for the year ended 30 September 2004 but is derived from those accounts, which have been filed with the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. (b) Forward looking statements This Press Release contains forward looking statements within the meaning of Section 27A of the Securities Act 1933, as amended, and Section 21E of the Securities Exchange Act 1934, as amended. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such forward looking statements. The terms 'expect', 'should be', 'will be', 'is likely to' and similar expressions identify forward looking statements. Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic conditions and business conditions in Compass Group's markets; exchange rate fluctuations; customers' and clients' acceptance of its products and services; the actions of competitors; and legislative, fiscal and regulatory developments. (c) The timetable for the proposed interim dividend of 3.3p per share is as follows: Ex dividend date: 13 July 2005 Record date: 15 July 2005 Payment date: 15 August 2005 (d) A presentation for analysts and investors will take place at 9:30 am (BST/ London) on Wednesday 18 May 2005 at Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1. The live presentation can also be accessed via both a webcast and dial-in teleconference starting at 9:30 am: â€¢ To listen to the live presentation via teleconference, dial (UK) +44 20 7784 1018. â€¢ To view the presentation slides and/or listen to a live audio webcast of the presentation, go to www.compass-group.com or www.cantos.com. â€¢ Please note that remote listeners will not be able to ask questions during the Q&A session. A replay recording of the presentation will also be available via teleconference and webcast: â€¢ A teleconference replay of the presentation will be available for five working days, until 24 May 2005. To hear the replay, dial (UK) +44 20 7784 1024 or (US) +1 718 354 1112. The replay passcode is 1580174#. â€¢ A webcast replay of the presentation will be available for six months, at www.compass-group.com and www.cantos.com. For North American based investors, there will be a question and answer conference call starting at 1:00pm (EDT/New York) â€¢To participate in the live question and answer session via conference call, dial (US) +1 718 354 1152. â€¢A teleconference replay of the call will be available for five working days, until 24 May 2005. To hear the replay, dial (US) +1 718 354 1112. The replay passcode is 5146017#. â€¢The North American investor conference call will also be audio webcast live, and archived for replay, at www.compass-group.com and www.cantos.com. Enquiries: Compass Group PLC 01932 573000 Michael J Bailey Group Chief Executive Andrew Martin Group Finance Director Sarah Ellis Director of Corporate Strategy and Investor Relations Brunswick + 44 (0) 20 7404 5959 Simon Sporborg Pamela Small Website www.compass-group.com. Compass Group is the world's largest foodservice company with annual revenues of some Â£12 billion. Compass Group has over 400,000 employees working in more than 90 countries around the world. For more information visit www.compass-group.com. Appendix CONTRACT GAINS AND RENEWALS 1. New contract gains and renewals announced today and previously released in the financial year 2004/2005. Please note that contract gains/ renewals announced today are indicated with an '*'. Contract Business & Industry â€¢ * UK - Centrica renewed and extended its contract with Eurest for a further five years with annual turnover of Â£4.2 million (includes previously announced Selecta contract with annual turnover of Â£1.4 million). â€¢ * Germany - Alcatel (Stuttgart & Berlin) awarded Eurest a new five-year contract with annual turnover of Â£3.0 million. â€¢ * USA - AT&T awarded Eurest, in conjunction with Canteen, a new three-year contract with annual turnover of Â£2.7 million. â€¢ Sweden - Saab AB Linkoping awarded Eurest a new three-year contract with annual turnover of Â£1.3 million. â€¢ France - Bouygues Arc de Seine awarded Eurest a new three-year contract with annual turnover of Â£1.7 million. â€¢ Japan - Japan Post awarded Seiyo Food Systems a new three-year contract with annual turnover of Â£18.3 million. Defence, Offshore & Remote Site â€¢ * Australia - Commonwealth Government of Australia (Department of Defence, Corporate Services and Infrastructure Group) awarded ESS a new five-year contract with annual turnover of Â£13.1 million. â€¢ * UK - Transcocean awarded ESS Support Services Worldwide a new two-year contract with annual turnover of Â£2.8 million. â€¢ * Norway - Bechtel awarded ESS Onshore AS Norway a new two-year contract with annual turnover of Â£2.8 million. â€¢ UK - Armada project (MoD PFI) awarded ESS Support Services Worldwide a new five-year contract with annual turnover of Â£4.0 million. â€¢ Norway - Statoil renewed its contract with ESS Offshore for a further five years with annual turnover of Â£11.6 million, covering Statfjord A, B and C platforms. Healthcare â€¢ * Morocco - University Hospital of Rabat (CHIS) awarded Eurest Maroc a new five-year contract with annual turnover of Â£1.9 million. â€¢ * Sweden - Maria Gamla Stan District Council awarded Medirest a new three-year contract with annual turnover of Â£1.5 million. â€¢ * USA - Trinitas Hospital (NJ) awarded Morrison Management Specialists, in conjunction with Crothall and Canteen Vending, a new five-year contract with annual turnover of Â£1.0 million. â€¢ Norway - Ulleval Patient Hospital awarded Medirest a new three-year contract with annual turnover of Â£2.1 million. â€¢ USA - Rest Haven Christian Services (IL) awarded Morrison Management Specialists a new five-year contract with annual turnover of Â£4.1 million. â€¢ UK - West Hertfordshire Hospitals NHS Trust renewed its contract with Medirest for a further five years with annual turnover of Â£8.6 million. â€¢ UK - Homerton University Hospital NHS Foundation Trust awarded Medirest a new five-year contract with annual turnover of Â£4.0 million. Education â€¢ * USA - Chicago Public Schools expanded and extended its contract with Chartwells-Thomson Hospitality for a further year with annual incremental turnover of Â£14.7 million. â€¢ * USA - Edinboro University awarded Chartwells Higher Education Dining Services a new seven-year contract with annual turnover of Â£2.7 million. â€¢ UK - Durham County Council renewed its contract with Scolarest for a further two years with annual turnover of Â£8.6 million. â€¢ UK - Millfield School (Somerset) renewed its contract with Scolarest for a further three years with annual turnover of Â£2.5 million. â€¢ USA - Olivet College (MI) awarded Chartwell's Higher Education a new ten-year contract with annual turnover of Â£0.8 million. â€¢ USA - Norfolk State University (VA) awarded Thomson Hospitality a new five-year contract with annual turnover of Â£3.0 million. Correctional â€¢ * Netherlands - The Directorate for Temporary Detention and Special Facilities awarded Eurest a new four-year contract with annual turnover of Â£2.8 million. â€¢ * Mexico - Reclusorios Edo Jalisco awarded Eurest a new one-year contract with annual turnover of Â£2.6 million. Sports & Leisure â€¢ * UK - Bristol Zoo Gardens awarded Milburns (All Leisure) a new ten-year contract with annual turnover of Â£1.8 million. â€¢ Germany - SAP Arena (Mannheim) awarded Eurest Sports & Food a new two-year contract with annual turnover of Â£2.7 million. â€¢ Japan - Fukuoka Mutual Aid Association awarded Seiyo Food Systems a new five-year contract with annual turnover of Â£2.3 million. â€¢ UK - Hatfield House awarded Leith's a new ten-year contract with annual turnover of Â£1.0 million. â€¢ USA - University Place at Indiana University-Purdue University Indianapolis (IN) awarded Flik Conference Center Management a new ten-year contract with annual turnover of Â£8.5 million. Vending â€¢ * USA - United Parcel Service awarded Canteen a new five-year contract with annual turnover of Â£1.0 million. â€¢ USA - Cardone Industries, Inc. awarded Vendlink a new one-year contract with annual turnover of Â£0.5 million. Travel Concessions â€¢ * Norway - Oslo Lufthavn AS extended its contract with SSP for a further seven years with annual turnover of Â£17.2 million. â€¢ * Boston Logan International Airport awarded Creative Host Services a new eight-year contract with annual turnover of Â£1.5 million. â€¢ Spain - AVE-Renfe renewed its contract with Rail Gourmet for a further four years with annual turnover of Â£24.1 million. 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 2005 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated statement of total recognised gains and losses, the consolidated cash flow statement, the notes to the consolidated cash flow statement 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. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. 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 polices and presentation applied to the interim figures are 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 2005. Deloitte & Touche LLP Chartered Accountants London 18 May 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 31 March 2005 Year Before ended 30 Sep goodwill Goodwill 2005 2004 2004 In Â£ million Notes amortisation amortisation Reviewed Reviewed Audited ------------------- ------- ------- ------- ------- ------- ------ Turnover Continuing activities 6,185 - 6,185 5,844 11,772 Acquisitions 6 - 6 - - ------------------- ------- ------- ------- ------- ------- ------ Total turnover 2 6,191 - 6,191 5,844 11,772 Operating costs (5,864) (136) (6,000) (5,637) (11,276) ------------------- ------- ------- ------- ------- ------- ------ Operating profit Continuing activities 327 (136) 191 207 496 Acquisitions - - - - - ------------------- ------- ------- ------- ------- ------- ------ 2 327 (136) 191 207 496 Share of operating profits of associated undertakings Continuing activities 1 - 1 1 2 Discontinued activities - - - 2 2 ------------------- ------- ------- ------- ------- ------- ------ Total operating profit: Group and share of associated undertakings 2 328 (136) 192 210 500 ------------------- ------- ------- ------- ------- ------- ------ Interest receivable and similar income 1 - 1 4 5 Interest payable and similar charges (69) - (69) (69) (135) ------------------- ------- ------- ------- ------- ------- ------ Net interest (68) - (68) (65) (130) ------------------- ------- ------- ------- ------- ------- ------ Profit on ordinary activities before taxation 260 (136) 124 145 370 Tax on profit on ordinary activities 3 (65) - (65) (73) (152) ------------------- ------- ------- ------- ------- ------- ------ Profit on ordinary activities after taxation 195 (136) 59 72 218 Equity minority interests (18) - (18) (19) (38) ------------------- ------- ------- ------- ------- ------- ------ Profit for the financial period 177 (136) 41 53 180 Equity dividends 4 (71) - (71) (66) (200) ------------------- ------- ------- ------- ------- ------- ------ Amount transferred to/(from) reserves 7 106 (136) (30) (13) (20) ------------------- ------- ------- ------- ------- ------- ------ Basic earnings per ordinary share 5 1.9p 2.5p 8.3p ------------------- ------- ------- ------- ------- ------- ------ Basic earnings per ordinary share - excluding goodwill amortisation 5 8.2p 8.8p 21.1p ------------------- ------- ------- ------- ------- ------- ------ Diluted earnings per ordinary share 5 1.9p 2.4p 8.3p ------------------- ------- ------- ------- ------- ------- ------ Diluted earnings per ordinary share - excluding goodwill amortisation 5 8.2p 8.8p 21.0p ------------------- ------- ------- ------- ------- ------- ------ The half-year results are unaudited but have been reviewed by the auditors. The results for the year ended 30 September 2004 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. CONSOLIDATED BALANCE SHEET As at 31 March 2005 31 Mar 2005 31 Mar 2004 30 Sep 2004 In Â£ million Notes Reviewed Reviewed Audited ----------------------------- ------ -------- ------- -------- Fixed assets intangible assets 4,148 4,217 4,223 Tangible assets 1,822 1,735 1,805 Investments 35 75 30 ----------------------------- ------ -------- ------- -------- 6,005 6,027 6,058 ----------------------------- ------ -------- ------- -------- Current assets Stocks 282 251 279 Debtors: amounts falling due within one year 1,734 1,549 1,568 amounts falling due after more than one year 283 271 287 Cash at bank and in hand 272 284 266 ----------------------------- ------ -------- ------- -------- 2,571 2,355 2,400 Creditors: amounts falling due within one year (2,944) (2,900) (2,872) ----------------------------- ------ -------- ------- -------- Net current liabilities (373) (545) (472) ----------------------------- ------ -------- ------- -------- Total assets less current liabilities 5,632 5,482 5,586 Creditors: amounts falling due after more than one year (2,728) (2,500) (2,665) Provisions for liabilities and charges 6 (388) (399) (385) Equity minority interests (69) (58) (54) ----------------------------- ------ -------- ------- -------- Net assets 2,447 2,525 2,482 ----------------------------- ------ -------- ------- -------- Capital and reserves Called up share capital 216 215 216 Share premium account 7 93 92 93 Capital redemption reserve 7 9 9 9 Merger reserve 7 4,170 4,170 4,170 Profit and loss account 7 (2,040) (1,960) (2,005) Less: own shares (1) (1) (1) ----------------------------- ------ -------- ------- -------- Total equity shareholders' 8 2,447 2,525 2,482 funds ------ -------- ------- -------- ----------------------------- CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the six months ended 31 March 2005 Year ended 2005 2004 30 Sep 2004 In Â£ million Reviewed Reviewed Audited -------------------------------- -------- ------- -------- Profit for the financial period 41 53 180 Currency translation differences on foreign currency net investments (5) 21 (17) -------------------------------- -------- ------- -------- Total gains and losses recognised in the period 36 74 163 -------------------------------- -------- ------- -------- CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 March 2005 Year ended 2005 2004 30 Sep 2004 In Â£ million Notes Reviewed Reviewed Audited ---------------------------- ------ -------- -------- -------- Net cash inflow from operating activities I 373 373 735 Dividends from associated 2 2 4 undertakings ------ -------- -------- -------- ---------------------------- Returns on investments and servicing of finance Interest received 1 3 5 Interest paid (78) (60) (134) Proceeds from termination of interest - - - 104 rate swaps Interest element of finance lease rental payments (1) (1) (2) Dividends paid to minority interests (9) (14) (30) ---------------------------- ------ -------- -------- -------- Net cash outflow from returns on investments and servicing of finance (87) (72) (57) ---------------------------- ------ -------- -------- -------- Taxation Tax received 13 1 5 Tax paid (56) (36) (112) ---------------------------- ------ -------- -------- -------- Net tax paid (43) (35) (107) ---------------------------- ------ -------- -------- -------- Capital expenditure and financial investment Purchase of tangible fixed assets (175) (196) (365) Sale of tangible fixed assets 11 14 36 ---------------------------- ------ -------- -------- -------- Total capital expenditure and financial investment (164) (182) (329) ---------------------------- ------ -------- -------- -------- Free cash flow 81 86 246 ---------------------------- ------ -------- -------- -------- Acquisitions and disposals Purchase of subsidiary companies and investments in associated (101) (50) (167) undertakings Net proceeds from businesses held for - - 19 resale Sale of minority interest - - 3 Sale of subsidiary companies and associated undertakings - 6 64 ---------------------------- ------ -------- -------- -------- Total acquisitions and disposals (101) (44) (81) Equity dividends paid (134) (183) (249) ---------------------------- ------ -------- -------- -------- Net cash outflow from investing activities (235) (227) (330) ---------------------------- ------ -------- -------- -------- Net cash outflow before financing (154) (141) (84) ---------------------------- ------ -------- -------- -------- Financing Issue of ordinary share capital - 8 10 Repurchase of share capital - (91) (91) Purchase of own shares, net - (1) (1) Debt due within a year: Decrease in bank loans and loan (42) (47) (26) notes Debt due after a year: Increase in bank loans and loan 122 291 270 notes Capital element of finance lease rentals (9) (14) (21) ---------------------------- ------ -------- -------- -------- Net cash inflow from financing 71 146 141 ---------------------------- ------ -------- -------- -------- (Decrease)/increase in cash in the period (83) 5 57 ---------------------------- ------ -------- -------- -------- NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 March 2005 Year ended 2005 2004 30 Sep 2004 In Â£ million Reviewed Reviewed Audited ------------------------------ -------- -------- -------- I Reconciliation of operating profit to net cash inflow from operating activities: Operating profit before goodwill 328 348 775 amortisation Depreciation 136 130 258 ------------------------------ -------- -------- -------- EBITDA 464 478 1,033 Profit on disposal of fixed assets and - (5) (18) businesses Share of profits of associated (1) (3) (4) undertakings Expenditure in respect of provisions for (14) (24) (73) liabilities and charges Increase in stocks (8) (37) (57) Increase in debtors (183) (105) (110) Increase/(decrease) in creditors 115 69 (36) ------------------------------ -------- -------- -------- Net cash inflow from operating 373 373 735 activities -------- -------- -------- ------------------------------ II Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the period (83) 5 57 Cash flow from change in debt and lease (71) (230) (223) finance -------- -------- -------- ------------------------------ Change in net debt resulting from cash flows (154) (225) (166) Loans acquired with subsidiaries and changes in (8) (7) (19) finance leases Effect of foreign exchange rate changes 41 176 120 ------------------------------ -------- -------- -------- Movement in net debt in the period (121) (56) (65) Opening net debt (2,373) (2,308) (2,308) ------------------------------ -------- -------- -------- Closing net debt (2,494) (2,364) (2,373) ------------------------------ -------- -------- -------- Other Cash Exchange non-cash In Â£ million 1 Oct 2004 flow movements changes 31 Mar 2005 ------------- ------- ------- -------- -------- -------- III Analysis of net debt: Cash at bank and 266 9 (3) - 272 in hand Overdrafts (14) (92) 2 - (104) ------------- ------- ------- -------- -------- -------- 252 (83) (1) - 168 ------------- ------- ------- -------- -------- -------- Debt due within (85) 42 - - (43) one year Debt due after (2,486) (122) 41 - (2,567) one year Finance leases (54) 9 1 (8) (52) ------------- ------- ------- -------- -------- -------- (2,625) (71) 42 (8) (2,662) ------------- ------- ------- -------- -------- -------- Total (2,373) (154) 41 (8) (2,494) ------------- ------- ------- -------- -------- -------- NOTES TO THE FINANCIAL STATEMENTS For the six months ended 31 March 2005 1. Basis of preparation The results of Compass Group PLC for the six months ended 31 March 2005 have been prepared on the basis of the accounting policies disclosed in the 2004 Annual Report. Certain minor reclassifications have been made to the previously reported geographical analysis of operations (note 2) to align with the Group's current management structures. These include the transfer of the defence business included in the United Kingdom segment in the six months to 31 March 2004 to Continental Europe and rest of the world. Year ended Continuing 2005 2004 30 Sep 2004 2. Turnover and activities Acquisitions Reviewed Reviewed Audited operating profit ------- ------- ------ ------ ------ --------------------- In Â£ million Turnover Foodservice Geographical analysis: - North America 1,915 6 1,921 1,778 3,531 - Continental Europe 2,682 - 2,682 2,576 5,149 and the rest of the world - United Kingdom 1,588 - 1,588 1,490 3,092 --------------------- ------- ------- ------ ------ ------ 6,185 6 6,191 5,844 11,772 --------------------- ------- ------- ------ ------ ------ Operating profit (before goodwill amortisation) Foodservice - The Company and its 327 - 327 345 771 subsidiary companies - Associated 1 - 1 1 2 undertakings - Continuing - Discontinued - - - 2 2 --------------------- ------- ------- ------ ------ ------ 328 - 328 348 775 --------------------- ------- ------- ------ ------ ------ Geographical analysis: - North America The Company and its 97 - 97 84 190 subsidiary companies - Continental Europe and the rest of the world The Company and its 141 - 141 139 287 subsidiary companies Associated - - - - 1 undertakings - Continuing - Discontinued - - - 2 2 - United Kingdom The Company and its 89 - 89 122 294 subsidiary companies Associated 1 - 1 1 1 undertakings --------------------- ------- ------- ------ ------ ------ 328 - 328 348 775 --------------------- ------- ------- ------ ------ ------ Amortisation of goodwill - continuing operations - North America (23) - (23) (23) (48) - Continental Europe (35) - (35) (38) (71) and the rest of the world - United Kingdom (78) - (78) (77) (156) --------------------- ------- ------- ------ ------ ------ (136) - (136) (138) (275) --------------------- ------- ------- ------ ------ ------ Total operating 192 - 192 210 500 profit ------- ------- ------ ------ ------ --------------------- Total operating profit after goodwill amortisation for the half-year ended 31 March 2005 relates to foodservice analysed as North America Â£74 million, Continental Europe and the rest of the world Â£106 million and United Kingdom Â£12 million, (2004 half-year: Â£61 million, Â£103 million and Â£46 million respectively and full year ended 30 September 2004: Â£142 million, Â£219 million and Â£139 million respectively). NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2005 Year Ended 2005 2004 30 Sep 2004 3. Tax on profit on ordinary activities Reviewed Reviewed Audited ------------------------------ --------- ------- -------- In Â£ million UK corporation tax 22 15 49 Overseas tax payable 50 53 105 UK tax on share of profits of associated 1 - 1 undertakings Overseas tax on share of profits of - 1 2 associated undertakings --------- ------- -------- ------------------------------ 73 69 157 UK deferred tax 2 15 18 Impact of discounting UK deferred tax - (1) (1) Overseas deferred tax 9 - 17 Impact of discounting overseas deferred (5) (4) (12) tax --------- ------- -------- ------------------------------ 79 79 179 ------------------------------ --------- ------- -------- Adjustments in respect of prior years: UK corporation tax (3) (2) 10 Overseas tax payable (12) (3) (32) UK deferred tax - (1) (2) Overseas deferred tax 1 - (3) ------------------------------ --------- ------- -------- (14) (6) (27) ------------------------------ --------- ------- -------- Tax on profit on ordinary activitities 65 73 152 ------------------------------ --------- ------- -------- United Kingdom corporation tax has been charged at 30% (2004: 30%). NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2005 Year ended 2005 2004 30 Sep 2004 Pence per Reviewed Pence per Reviewed Pence per Audited 4. Dividends share Â£m share Â£m share Â£m ---------------- ------- ------- ------- ------- ------- ------- Dividends on ordinary shares of 10p each Interim 3.3p 71 3.1p 66 3.1p 66 Final - - - - 6.2p 134 ---------------- ------- ------- ------- ------- ------- ------- 3.3p 71 3.1p 66 9.3p 200 ---------------- ------- ------- ------- ------- ------- ------- Year Year ended Ended 2005 2005 2004 2004 30 Sep 2004 30 Sep 2004 Before After Before After Before After goodwill goodwill goodwill goodwill goodwill goodwill amortisation amortisation amortisation amortisation amortisation amortisation 5. earnings per Reviewed Reviewed Reviewed Reviewed Audited Audited share ------- ------- ------- ------- ------- ------- ---------------- In Â£ million Attributable 177 41 191 53 455 180 profit for basic ------- ------- ------- ------- ------- ------- and diluted earnings per share ---------------- Millions of ordinary shares of 10p each Average number 2,155 2,155 2,162 2,162 2,158 2,158 of shares for basic earnings per share Dilutive share 1 1 10 10 7 7 options ------- ------- ------- ------- ------- ------- ---------------- Average number 2,156 2,156 2,172 2,172 2,165 2,165 of shares for ------- ------- ------- ------- ------- ------- diluted earnings per share ---------------- Basic earnings 8.2p 1.9p 8.8p 2.5p 21.1p 8.3p per share ------- ------- ------- ------- ------- ------- (pence) ---------------- Diluted earnings 8.2p 1.9p 8.8p 2.4p 21.0p 8.3p per share ------- ------- ------- ------- ------- ------- (pence) ---------------- Earnings per share before goodwill amortisation shows the impact of goodwill amortisation on underlying earnings. NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2005 Pensions and other post Legal and employment Onerous other 6. Provisions for benefits Insurance contracts claims Environmental Total liabilities and -------- ------ ------ ------ -------- ------ charges ---------------- In Â£ million At 1 October 253 38 31 52 11 385 2004 Expenditure in (8) (2) (3) (1) - (14) the period Charged to 9 7 - - - 16 profit and loss account Credited to - - - - - - profit and loss account Reclassified 4 - - - - 4 Currency (1) - - (2) - (3) adjustment -------- ------ ------ ------ -------- ------ ---------------- At 31 March 257 43 28 49 11 388 2005 -------- ------ ------ ------ -------- ------ ---------------- Pensions and other post-employment benefits and insurance relate to the costs of self-funded pension schemes or statutory retirement benefits and self-funded insurance schemes respectively and are essentially long-term in nature. Onerous contracts represent the liabilities in respect of short and long term leases on non-utilised properties and other contracts lasting under five 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 Capital Before premium redemption Merger goodwill Goodwill 7. Reserves account reserve reserve written off written off Total -------------------- ------ ------- ------ ------- ------- ------- In Â£ million At 1 October 2004 93 9 4,170 127 (2,132) (2,005) Foreign exchange - - - (5) - (5) reserve movements Retained loss for - - - (30) - (30) the period ------ ------- ------ ------- ------- ------- -------------------- At 31 March 2005 93 9 4,170 92 (2,132) (2,040) -------------------- ------ ------- ------ ------- ------- ------- NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2005 Year ended 2005 2004 30 Sep 2004 8. Reconciliation of movements in Reviewed Reviewed Audited consolidated shareholders' funds ------- ------- ------- ------------------------------- In Â£ million Profit for the financial period 41 53 180 Dividends (71) (66) (200) ------------------------------- ------- ------- ------- (30) (13) (20) Currency translation differences on (5) 21 (17) foreign currency net investments Issue of shares - 8 10 Repurchase of shares - (69) (69) Purchase of own shares - (1) (1) ------------------------------- ------- ------- ------- Net reduction in shareholders' funds (35) (54) (97) Opening shareholders' funds 2,482 2,579 2,579 ------------------------------- ------- ------- ------- Closing shareholders' funds 2,447 2,525 2,482 ------------------------------- ------- ------- ------- 9. Post balance sheet events The Group has announced the sale of a 75% stake in the North American bakery cafe chain, Au Bon Pain, for a consideration of $90 million. Under the terms of the transaction the Group will retain a 25% equity stake, Au Bon Pain's airport operations and an exclusive franchise for core Compass business channels such as vending, business and industry and education. Au Bon Pain has 224 outlets and, in the year ended 30 September 2004, revenues relating to the parts of the business being sold were circa Â£100 million and operating profit was circa Â£4 million. Translation rate for the six months Closing ended 31 rate as at 31 Mar 2005 Mar 2005 10. Exchange rates ___________________________________________________________________________________ __________ __________ Exchange rates for major currencies used during the period were: Australian Dollar 2.45 2.44 Canadian Dollar 2.30 2.29 Danish Krone 10.73 10.83 Euro 1.44 1.45 Japanese Yen 197.90 202.11 Norwegian Krone 11.87 11.93 Swedish Krona 13.07 13.31 Swiss Franc 2.22 2.25 US Dollar 1.88 1.89 11. This announcement is being sent to all shareholders on the register at 18 May 2005 and is available to the general public at Compass House, Guildford Street, Chertsey, Surrey, KT16 9BQ (the company's registered office) during office hours. This information is provided by RNS The company news service from the London Stock Exchange

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