Preliminary Results - Part 1

Compass Group PLC 28 November 2007 PART 1 Compass Group PLC Preliminary Results For The Year Ended 30 September 2007 ================================================================================ Delivering Profitable Growth • Revenue £10.3 billion, 5% organic growth. • Operating profit £529 million, up 16% reported basis, 24% constant currency. • Margin 5.1%, up 70 basis points. • Underlying earnings per share 15.2p, up 62%. • Total dividend up 7% to 10.8p. • Step change in free cash flow to £357 million, up £145 million, 68%. • Entering a new phase of sustainable value creation. ================================================================================ Richard Cousins, Chief Executive Officer, said: 'Over the last 18 months we have simplified the business to focus on our core food and support services offer by selling non core businesses and we have considerably reduced our risk profile by exiting high risk or volatile businesses. Through the MAP process we have transformed the performance of the business with good quality organic revenue growth, greater focus on like for like growth and cost efficiencies together driving the operating margin forward by 70 basis points. Our focus on capital expenditure and working capital has resulted in a step change in the delivery of free cash flow, up 68% to £357 million. Whilst there is still much to do, we have had an encouraging start to the new financial year and I am excited about the prospects for future growth of revenue, operating profit, margin and free cash flow.' Sir Roy Gardner, Chairman, said: 'The introduction of MAP has given us a common language and agenda resulting in greater focus and visibility across the whole business. We have delivered a step change in profit and free cash flow generation as new processes begin to embed throughout the organisation. Looking ahead, we believe we are entering a new phase of sustainable value creation, with exciting opportunities to grow revenues, improve margins and generate significant cash flow. With good growth in earnings per share and free cash flow we have decided to increase the total dividend by 7% to 10.8 pence.' ------------------------------------- ------------------ --------------------- --------------- Financial summary For the year ended 30 September 2007 2006 Increase ------------------------------------- ------------------ --------------------- --------------- Continuing operations Revenue - constant currency (1) £10,268m £9,768m 5.1% - reported £10,268m £10,267m - Operating profit (2) - constant currency (1) £529m £428m 23.6% - reported £529m £457m 15.8% Operating margin (3) 5.1% 4.4% 70bps Profit before tax - underlying (4) £442m £312m 41.7% - reported £436m £323m 35.0% Free cash flow £357m £212m 68.4% Basic earnings per share - underlying (4) 15.2p 9.4p 61.7% - reported ((5)) 15.0p 9.7p 54.6% Total Group including discontinued operations Basic earnings per share 25.6p 13.3p 92.5% Total dividend per ordinary share 10.8p 10.1p 6.9% ------------------------------------- ------------------ --------------------- --------------- (1) Constant currency restates the prior year results to 2007's average exchange rates. (2) Includes share of profit of associates. (3) Excludes share of profit of associates. (4) Underlying profit before tax excludes revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness) of £(6) million (2006: £11 million). Underlying basic earnings per share excludes these items net of tax. (5) Reported basic earnings per share before exceptional items. (6) Organic growth is calculated by adjusting for acquisitions (excluding current period acquisitions and including a full year in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior year at current year exchange rates) and compares the results against 2006. -------------------------------------------------------------------------------- Management and Performance (MAP) Our strong operating performance is being driven by concentrating on the five key profit drivers of MAP, which are now embedded within our business. Each MAP component has its own set of key performance indicators. Performance is reviewed with country management teams both monthly and in our detailed business reviews which ensure the business is constantly focused on profitable organic growth. MAP has enabled us to deliver the £101 million of constant currency operating profit growth as follows: £30 million of net new business growth driven by better quality new business and retention MAP 1 - Client Sales and Marketing, achieved through: better targeted businesses, tighter contracts and sharper contract evaluation. Included among our new business wins: Asda in the UK; The House of Representatives, Dell and DreamWorks in the US; Continental in Germany; and Shell across Europe. £35 million of base estate profit growth driven by like for like revenue growth and cost efficiencies Driving like for like revenue growth: MAP 1 - Client Sales and Marketing: addresses driving like for like revenue through client pricing strategies and growing client volumes, for example: through additional services, such as: cleaning, portering, reception and concierge. MAP 2 - Consumer Sales and Marketing: focuses on developing our retail philosophy in order to increase participation and spend per head, for example: extending our offer to include breakfast and 'Grab & Go' concepts. Driving Cost Efficiencies: MAP 3 - Food Cost: addresses cost efficiencies through a systematic approach to menu planning, purchasing & supply chain, and unit processes. MAP 4 - Unit Costs: we spend nearly £5.5 billion per year on unit costs and we have been managing this through: Labour productivity and scheduling; control of labour costs and in unit overhead opportunities. £36 million of above unit overhead savings after allowing for inflation MAP 5 - Above Unit Overheads: we spend £0.8 billion on above unit overheads per year. The savings have been achieved through: management reorganisation, consolidated back office functions, change management processes and tightened control of discretionary spend. Food Cost Inflation We spend around £3.5 billion a year on food. We estimate that for last year we have seen about a one percentage point increase in the rate of inflation. To put this into context each one percentage point of food cost inflation adds about £35 million to the total cost base of £9.7 billion. This is before taking into account that around one third of our contracts are cost plus. We believe that our basket of goods is currently experiencing market increases of some 4-5%. In terms of its impact, most of the geographies in which we operate and most food categories have seen some inflation. However, the larger double digit inflationary increases have been in dairy, rice and pasta. Together these categories account for only about 10% of the Group's spend on food. Food price inflation is not a new phenomenon. We have managed it well for many years and continue to do so, but now, through the MAP framework, with greater intensity. The specific actions we are taking to address food inflation fall into three categories: purchasing and supply chain efficiencies; unit cost efficiencies including menu re-engineering; client and consumer price increases. So, in conclusion, food price inflation is well understood and being acted upon. Crucially, despite the inflation we have seen this year, we have been able to hold our gross margins steady through the combination of cost efficiencies and price increases. Strategy and Future Looking back over the achievements of the last 18 months, strategically, we have defined a clearer focused strategy and launched MAP. We have made good progress in developing our Support Services business and we have simplified the business by exiting non core businesses such as SSP, Selecta, Hotels and other non core assets. We have also reduced the number of countries in which we operate and considerably reduced our risk profile. We believe we now have a focused and transparent business model which will generate significant opportunities to grow the top line organically, improve margins and grow profitably and generate significant cash flow. We believe we are entering a new phase of sustainable value creation. There will be no change in our core strategy as we enter the next phase of our development. We remain very excited by the prospects for growth with significant outsourcing potential in our core food and support service markets. We estimate that outsourcing growth in the food service market (valued at £150 Billion) is at least 5% per annum. The support services market is larger that the food services market and growing at a faster rate. Operationally we will stay focused on MAP and embed it deeper into the organisation. The drive for like for like growth and increased operational efficiencies will also continue. From this we will expect further significant cash flow generation. Process and People New monthly reporting processes and regular business reviews with country management teams ensure that we are all constantly focused on the management and performance of the five MAP value drivers. Local managing directors are now empowered to get on with running their businesses, operating within a clearly defined MAP operating framework. The new measures have also led to tighter discipline and sounder governance. Approval processes have been strengthened and remuneration policies reviewed. The Corporate and Social Responsibility Committee, a sub committee of the Board, continues to oversee all aspects of health and food safety, environmental impacts, governance and its reporting. Over the past eighteen months significant management changes have been implemented at Board, Executive Committee and country levels. The introduction of MAP and the removal of divisional management structures have resulted in greater transparency across the organisation. We now have greater management strength at both country and head office level and this new Global Leadership team has been central to driving the improved performance. Enquiries: Compass Group PLC +44 (0)1932 573000 Investors/Analysts Andrew Martin Media Chris King Website www.compass-group.com For presentation and teleconference details refer to the notes on page 12. GROUP TRADING REVIEW Compass Group today announces its preliminary results for the year ended 30 September 2007. -------------------------------------------- -------------- --------------------- ---------------- Financial summary For the year ended 30 September 2007 2006 Increase -------------------------------------------- -------------- --------------------- ---------------- Continuing operations Revenue - constant currency (1) £10,268m £9,768m 5.1% - reported £10,268m £10,267m - Operating profit (2) - constant currency (1) £529m £428m 23.6% - reported £529m £457m 15.8% Operating margin (3) 5.1% 4.4% 70bps Profit before tax - underlying (4) £442m £312m 41.7% - reported £436m £323m 35.0% Free cash flow £357m £212m 68.4% Basic earnings per share - underlying (4) 15.2p 9.4p 61.7% - reported ((5)) 15.0p 9.7p 54.6% Total Group including discontinued operations Basic earnings per share 25.6p 13.3p 92.5% Total dividend per ordinary share 10.8p 10.1p 6.9% -------------------------------------------- -------------- --------------------- ---------------- (1) Constant currency restates the prior year results to 2007's average exchange rates. (2) Includes share of profit of associates. (3) Excludes share of profit of associates. (4) Underlying profit before tax excludes revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness) of £(6) million (2006: £11 million). Underlying basic earnings per share excludes these items net of tax. (5) Reported basic earnings per share before exceptional items. -------------------------------------------------------------------------------- Discontinued Operations On 2 July 2007, the Group completed the sale of its European vending business, Selecta, for a consideration of £772 million on a debt and cash free basis. The Group has also completed the sale and closure of a number of other small businesses during the year as part of its exit from the travel concessions business. The 2006 revenue and operating profits of all of these businesses closed in the year were £548 million and £51 million respectively. The results of these businesses are treated as discontinued operations and are therefore excluded from the results of continuing operations in 2007. The 2006 results have been restated on a consistent basis. Revenue Overall, organic revenue growth was 5%, comprising new business of around 8%, reflecting a slight but deliberate slow down of around one percentage point in the rate of new contract wins as we have focused on gaining better quality business, retention of around 94%, about one percentage point lower than in previous years due to the work we have been doing to exit loss making contracts, and like for like growth of just under 3%. The significant strengthening of sterling, in particular against the US dollar, impacted revenues by 5%, resulting in reported revenues remaining flat. Organic growth is calculated by adjusting for acquisitions (excluding current period acquisitions and including a full period in respect of prior period acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current period exchange rates), and compares the results against 2006. The table below summarises the performance of the Group's continuing operations by geographic segment. --------------------------------- ------- ------- ------------ ------------ ---------- Segmental performance Constant Year ended 30 September 2007 Reported currency Organic change change change 2007 2006 % % % --------------------------------- ------- ------- ------------ ------------ ---------- Continuing operations Revenue (£m) North America 4,162 4,290 (3) 6 6 Continental Europe 2,553 2,484 3 4 4 United Kingdom 1,931 1,882 3 3 2 Rest of the World 1,622 1,611 1 8 9 --------------------------------- ------- ------- ------------ ------------ ---------- Total 10,268 10,267 - 5 5 --------------------------------- ------- ------- ------------ ------------ ---------- Operating profit (1) (£m) North America 261 245 Continental Europe 151 122 United Kingdom 107 107 Rest of the World 64 47 Unallocated overheads (58) (66) Associates 4 2 --------------------------------- ------- ------- Total 529 457 --------------------------------- ------- ------- Operating margin (2) (%) North America 6.3 5.7 Continental Europe 5.9 4.9 United Kingdom 5.5 5.7 Rest of the World 3.9 2.9 --------------------------------- ------- ------- Total 5.1 4.4 --------------------------------- ------- ------- (1) Operating profit includes share of profit of associates UK £3 million (2006: £1 million) & North America £1 million (2006: £1 million). (2) Operating margin is based on revenue and operating profit excluding share of profit of associates. -------------------------------------------------------------------------------- North America - 40.5% Group revenue (2006: 41.8%) North America continues to make excellent progress across a broad and well balanced portfolio. We have seen good organic revenue growth, with a much better balance between new contracts and like for like growth. The Business & Industry sector has been driven through innovation, delivering 4% like for like revenue growth. We have had considerable success in creating a multi-service business in the Healthcare sector through cross-selling between Morrisons, our food service business, and Crothall, our support services business. To support this we completed an infill acquisition, after 30 September, of a company with £37 million of revenues called Professional Services whose services and business model align very closely to Crothall. Healthy eating programmes and the strength of the Chartwells brand contributed to 9% organic revenue growth in the Education sector. Combined with good progress in Levy, our Sports & Leisure business, and in the Canadian business, North America delivered 6% organic revenue growth overall. The pipeline into 2008 looks healthy. Operating profit increased by £39 million, or 18%, on a constant currency basis to £261 million (2006: £222 million on a constant currency basis), and we have seen a step change in the margin of 60 basis points to 6.3%. Around half of the margin growth has come from a significant one-off reduction in overheads. The remainder of the improvement is the result of better like for like growth and ongoing operating efficiencies across the businesses, both in in unit and above unit overheads. We have seen an improvement in margin of 40 basis points, from 6.1% in the first half to 6.5% in the second half. Continental Europe - 24.9% Group revenue (2006: 24.2%) Organic revenue growth in Continental Europe has doubled to 4%, with good growth opportunities for the future. In Spain, good like for like growth, driven by new offerings and an increase in consumer numbers, together with strong new business in the Healthcare and Education sectors resulted in organic revenue growth of 13%. The continued high activity in the oil and gas industry in the Nordic region has contributed to 14% organic revenue growth, while the focus on healthy eating continues to drive increasing volumes through much of the region. We are becoming more established in the Eastern European market with our businesses there growing well. On a constant currency basis, growth of £31 million, or 26%, in operating profit from continuing operations to £151 million (2006: £120 million on a constant currency basis) represents a margin improvement of 100 basis points. Just over half of this improvement is attributable to the completion of the turnaround of previously underperforming countries such as France and the Netherlands. The remaining margin growth has come from improved like for like revenue growth, which is at a high drop through to margin, and focus on cost control across all countries. It is important to remember that the seasonality of this business, with the reduction in headcounts in the Business & Industry sector over the summer period and the closure of schools, means that we record stronger profits and margin in the first half, 6.5%, compared to the second half, 5.3%. The underlying trends in the first and second half margin in 2007 are similar to 2006. UK - 18.8% Group revenue (2006: 18.3%) The UK business has delivered a solid result with, as expected, operating profits in line with last year. Fundamentally we have a very strong business in the UK. We have continued to work hard to fix the basics and build a solid foundation for the future. Good progress has been made by the new senior management team: the work to improve or exit loss making contracts is now largely complete; we have continued to reorganise across the business to drive further efficiencies; and Education, after a difficult period, is now stabilised. Although the organisation of the business is much improved there is still more work to do. As such, we expect the performance of the business to be broadly similar in 2008. Rest of the World - 15.8% Group revenue (2006: 15.7%) In the Rest of the World our two largest businesses, Australia and Japan, together account for 52% of revenue. Australia has continued to deliver strong organic revenue growth driven by the continued buoyancy of the extractive industries. In addition to this, with the help of the MAP programme, Australia has made good progress in developing its margin. In Japan, the focus has been on driving efficiency. By restructuring the business and increasing the focus on cost efficiency we have seen good improvement in the margin. There is still more to do and we need to work harder to drive revenue growth, but we are very encouraged by the progress in the business over the last year. Good progress has been made in Latin America and the UAE with a healthy mix of revenue and profit growth. Overall, the Rest of the World has had another very strong year, delivering £64 million operating profit from continuing operations (2006: £43 million on a constant currency basis), an increase of £21 million, or 49%, on a constant currency basis. This represents margin growth of 100 basis points, approximately half of which has come from the step change in lower margin countries such as Japan and the mobilisation of strong new business particularly in Australia and Latin America. In August, the Group sold a significant part of its remaining high street retail restaurants business in Japan for £26 million - with annual operating profits of around £4 million in the year. There remains significant opportunity to further develop our businesses in the Rest of the World both in size and operating performance. Unallocated Overheads Unallocated overheads for the year were £58 million (2006: £66 million). The decrease is largely due to the absence of non-recurring restructuring costs last year and overhead efficiencies, partly offset by the strengthening of central functions. Operating Profit Operating profit from continuing operations, including associates, was £529 million (2006: £457 million), an increase of 16% on a reported basis. The operating profit increased by £101 million on a constant currency basis, up 24%. This represents a 70 basis point improvement in margin. Finance Cost Underlying net finance cost, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), was £87 million (2006: £145 million). With the full year benefit of the Selecta disposal proceeds going forward, we expect the 2008 underlying finance charge to be around £70 million. Profit Before Tax Profit before tax from continuing operations was £436 million (2006: £323 million). On an underlying basis, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), profit before tax from continuing operations increased by 42% to £442 million (2006: £312 million). Income Tax Expense On an underlying basis, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), the tax charge from continuing operations and before exceptional items was £126 million (2006: £101 million), an effective tax rate of 29% (2006: 32%). Against the background of reducing corporate tax rates in a number of territories, we now expect the Group's effective tax rate to average out at around the 29% level for the short term. Discontinued Operations The profit after tax from discontinued operations was £212 million (2006: £33 million). Basic Earnings per Share Basic earnings per share were 25.6 pence (2006: 13.3 pence). Excluding the results of discontinued operations and exceptional items, basic earnings per share on an underlying basis, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), were 15.2 pence (2006: 9.4 pence). -------------------------------- ----------------- -------------------------------- Attributable Basic earnings Profit per share ----------------- -------------------------------- 2007 2006 2007 2006 Change £m £m Pence Pence % -------------------------------- --------- ------- ----------- --------- --------- Reported 515 285 25.6 13.3 92.5 Discontinued operations and exceptional items (212) (77) (10.6) (3.6) Hedge accounting ineffectiveness (net of tax) 4 (7) 0.2 (0.3) -------------------------------- --------- ------- ----------- --------- --------- Underlying 307 201 15.2 9.4 61.7 -------------------------------- --------- ------- ----------- --------- --------- Dividends A final dividend of 7.2 pence per share will be proposed (to be paid on 3 March 2008 to shareholders on the register on 1 February 2008) and will result in a total dividend for the year of 10.8 pence per share (2006: 10.1 pence per share), a year on year increase of 7%. Dividend cover for 2007 was 2.5 times reported earnings. On an underlying basis the dividend was covered 1.5 times on an earnings basis and 1.7 times on a free cash basis. Free Cash Flow Free cash flow from the continuing business totalled £357 million (2006: £212 million). The major factors contributing to the increase were: £70 million increase in operating profit before associates, £56 million improvement in working capital and £47 million lower net interest payments, offset in part by £24 million higher net tax payments. Gross capital expenditure of £192 million (2006: £198 million), including amounts purchased by finance lease of £15 million (2006: £15 million), represents 1.9% of revenue (2006: 1.9% of revenue). We continue to expect the level of gross capital expenditure to remain at around 2% of revenue going forward. Proceeds from the sale of assets were £22 million and we would expect this to be around £12 million lower in 2008. We have seen a step change in the management of working capital. There has been a focus in all areas, but we have seen excellent improvements in trade debtors and discounts receivable through quicker billing and collections, giving an overall £38 million working capital inflow in the year. We believe there are further improvements possible and expect to achieve an average sustainable improvement of £20 - £30 million a year for the foreseeable future, but with better improvement in the next couple of years. The cash tax rate for the year was 26% (2006: 30%), based on underlying profit before tax for the continuing operations, and we continue to expect the cash tax rate to average out at the mid to high 20s level over the short term. The net interest outflow of £127 million (2006: £174 million) continues to reflect the impact of the 2004 swap monetisation, which will be substantially unwound by the end of 2009. Acquisition Payments The acquisition of the remaining 5% interest in Onama, our Italian business, was completed in December 2006 for £7 million. A further £17 million was spent on deferred consideration relating to prior year acquisitions and £7 million on new acquisitions. Disposal Proceeds The sale of the European vending business, Selecta, was completed in July 2007 for gross consideration of £772 million, £725 million net of transaction costs and completion accounting adjustments. A further £37 million of deferred consideration relating to prior year disposals was received in the year and £56 million from the disposal of other operations in the year. Return on Capital Employed Return on Capital Employed (ROCE) was 12.5% (2006: 11.3%) based on the continuing business before exceptional items, excluding the Group's minority partner's share of total operating profit, net of tax at 30% and using an average capital employed for the year of £2,914 million (2006: £2,751 million) calculated from the IFRS balance sheet. Under UK GAAP, included within average capital employed was goodwill previously written off to reserves, now extinguished under IFRS, and goodwill amortised prior to 30 September 2004, the date at which the net book value of goodwill was frozen under IFRS. Including these adjustments, average capital employed for the year (for the continuing businesses) would have been £5,899 million (2006: £5,736 million) and return on capital employed for the continuing business would have been 6.5% (2006: 5.8%). Financial Targets The Group's three year targets for the continuing business for 2006 to 2008 remain unchanged at: • 100 basis points improvement in ROCE • free cash flow from continuing operations of £800 million to £850 million. Pensions The Group has continued to review and monitor its pension obligations throughout the year working closely with the Trustees and members of schemes around the Group to ensure proper prudent assumptions are used and adequate provision made. Particularly good progress has been made in respect of the Group's UK defined benefit pension schemes where a further £45 million special contribution was paid in during the year following completion of the sale of the Selecta UK vending operation. This follows special contributions in 2006 totalling £280 million to the UK schemes following the sale of the SSP travel concessions business and the Strand Palace Hotel. In the UK defined benefit pension schemes we have again increased our longevity assumptions so that, for example, a female non-pensioner is now assumed to survive 24.7 years following retirement (2006: 23.7 years). The Group's total pension deficit was reduced significantly in the year, despite the adoption of the more prudent assumptions, to £162 million (2006: £282 million). The deficit would have reduced to only £70 million if the surplus on certain schemes had been fully recognised. IFRIC 14 only permits the recognition of a pension fund surplus where a company can clearly demonstrate that it can access the surplus through, for example, reduced future contributions. The Group has taken the prudent view that it will not be able to access these surpluses, totalling £92 million, in the foreseeable future. The total pensions charge for defined contribution schemes in the year was £36 million (2006: £33 million) and £22 million (2006: £35 million) for defined benefit schemes. Of the defined benefit scheme costs, £2 million (2006: £11 million) was charged to net finance cost. Outlook 'The introduction of MAP has given us a common language and agenda resulting in greater focus and visibility across the whole business. We have delivered a step change in profit and free cash flow generation as new processes begin to embed throughout the organisation. Looking ahead, we believe we are entering a new phase of sustainable value creation, with exciting opportunities to grow revenues, improve margins and generate significant cash flow'. Richard Cousins Sir Roy Gardner Chief Executive Chairman NOTES (a) The results for the year ended 30 September 2007 were approved by the Directors on 28 November 2007 and have been have been derived from the Company's statutory accounts for that year. The Auditors' Report on these accounts was unqualified and did not contain statements under section 237(2) or 237(3) of the Companies Act 1985. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. In addition the preliminary results do not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. The full statutory accounts, which comply with IFRS will be delivered to the Registrar of Companies following the Company's Annual General Meeting. (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 final dividend of 7.2p per share is as follows: Ex dividend date: 30 January 2008 Record date: 1 February 2008 Payment date: 3 March 2008 (d) A presentation for analysts and investors will take place at 9:30 a.m. (GMT/ London) on Wednesday 28 November 2007 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 09.30 a.m. (London): • To listen to the live presentation via teleconference, dial (UK) +44 0845 302 2580 or (Intl) +44 (0)1452 583 043. Conference access ID: 24263113 • To view the presentation slides and/or listen to a live webcast of the presentation, go to www.compass-group.com or www.cantos.com • 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: • A teleconference replay of the presentation will be available for seven working days. To hear the replay, dial (UK) 0845 245 5205 or (Intl) +44 (0)1452 55 00 00. The replay access number is 24263113#. • A webcast replay of the presentation will be available for six months, at www.compass-group.com and www.cantos.com Enquiries: Compass Group PLC 01932 573000 Investors/analysts Andrew Martin Media Chris King Website www.compass-group.com Consolidated income statement for the year ended 30 September 2007 2007 2006 -------------------------------- -------------------------------- Before Exceptional Before Exceptional exceptional items exceptional items items (Note 7) Total items (Note 7) Total Notes £m £m £m £m £m £m -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Continuing operations: Revenue 1 10,268 - 10,268 10,267 - 10,267 Operating costs 2 (9,743) - (9,743) (9,812) - (9,812) -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Operating profit 1 525 - 525 455 - 455 Share of profit of associates 4 - 4 2 - 2 -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Total operating profit 529 - 529 457 - 457 Finance income 4 28 - 28 15 - 15 Finance costs 4 (115) - (115) (160) - (160) Hedge accounting ineffectiveness 4 (6) - (6) 11 - 11 -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Profit before tax 436 - 436 323 - 323 Income tax (expense)/credit 5 (124) - (124) (105) 44 (61) -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Profit for the year from continuing operations 1 312 - 312 218 44 262 Discontinued operations: Profit/(loss) for the year from discontinued operations 6 15 197 212 60 (27) 33 -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Continuing and discontinued operations: -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Profit for the year 327 197 524 278 17 295 -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Attributable to: Equity shareholders of the Company 318 197 515 268 17 285 Minority interest 9 - 9 10 - 10 -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Profit for the year 327 197 524 278 17 295 -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Basic earnings per share (pence) From continuing operations 8 15.0p 11.7p From discontinued operations 8 10.6p 1.6p -------------------------------- -------- ------------ -------- ------- ------- -------- ------- From continuing and discontinued operations 8 25.6p 13.3p -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Diluted earnings per share (pence) From continuing operations 8 15.0p 11.7p From discontinued operations 8 10.4p 1.6p -------------------------------- -------- ------------ -------- ------- ------- -------- ------- From continuing and discontinued operations 8 25.4p 13.3p -------------------------------- -------- ------------ -------- ------- ------- -------- ------- Consolidated statement of recognised income and expense for the year ended 30 September 2007 2007 2006 Notes £m £m --------------------------------------------------- ------- ------- -------- Net income/(expense) recognised in equity Fair value movement on cash flow hedges - 4 Currency translation differences (12) (7) Actuarial gains/(losses) on post-retirement employee benefits 23 38 (37) Tax on items taken directly to equity 5 8 3 Recognition of deferred tax asset relating to currency translation differences in prior years 5 37 - --------------------------------------------------- ------- ------- -------- Income/(expense) recognised directly in equity 71 (37) Transfers Transfer to profit or loss from equity of cumulative translation differences on discontinued activities - 2 Transfer to profit or loss from equity on cash flow hedges - (6) --------------------------------------------------- ------- ------- -------- Net transfer to profit or loss from equity - (4) Net gain/(loss) recognised directly in equity --------------------------------------------------- ------- ------- -------- Net gain/(loss) recognised directly in equity 71 (41) Profit for the financial year Profit for the financial year 524 295 --------------------------------------------------- ------- ------- -------- Total recognised income and expense for the year 25 595 254 --------------------------------------------------- ------- ------- -------- Attributable to: Equity shareholders of the Company 576 248 Minority interest 19 6 --------------------------------------------------- ------- ------- -------- Total recognised income and expense for the year 25 595 254 --------------------------------------------------- ------- ------- -------- Consolidated balance sheet as at 30 September 2007 2007 2006 Notes £m £m --------------------------------------------------- ------- ------- --------- Non-current assets Goodwill 10 2,985 3,451 Other intangible assets 11 142 152 Property, plant and equipment 12 576 756 Interests in associates 13 25 39 Other investments 14 12 9 Deferred tax assets* 5 240 237 Trade and other receivables 16 66 117 Derivative financial instruments** 20 13 22 --------------------------------------------------- ------- ------- --------- Non-current assets 4,059 4,783 --------------------------------------------------- ------- ------- --------- Current assets Inventories 17 179 212 Trade and other receivables 16 1,343 1,424 Tax recoverable* 10 10 Derivative financial instruments** 20 2 9 Cash and cash equivalents** 18 839 848 --------------------------------------------------- ------- ------- --------- Current assets 2,373 2,503 --------------------------------------------------- ------- ------- --------- Total assets 6,432 7,286 --------------------------------------------------- ------- ------- --------- Current liabilities Short-term borrowings** 19 (151) (119) Derivative financial instruments** 20 - (2) Current tax liabilities* (171) (357) Trade and other payables 21 (1,833) (1,990) Provisions 22 (86) (65) --------------------------------------------------- ------- ------- --------- Current liabilities (2,241) (2,533) --------------------------------------------------- ------- ------- --------- Non-current liabilities Long-term borrowings** 19 (1,452) (1,835) Derivative financial instruments** 20 (15) (18) Post-employment benefit obligations 23 (162) (282) Provisions 22 (351) (242) Deferred tax liabilities* 5 (5) (18) Other payables 21 (36) (46) --------------------------------------------------- ------- ------- --------- Non-current liabilities (2,021) (2,441) --------------------------------------------------- ------- ------- --------- Total liabilities (4,262) (4,974) --------------------------------------------------- ------- ------- --------- --------------------------------------------------- ------- ------- --------- Net assets 2,170 2,312 --------------------------------------------------- ------- ------- --------- Equity Share capital 24,25 193 210 Share premium account 25 122 96 Capital redemption reserve 25 33 15 Less: own shares 25 (1) - Other reserves 25 4,312 4,288 Retained earnings 25 (2,511) (2,303) --------------------------------------------------- ------- ------- --------- Total equity shareholders' funds 2,148 2,306 Minority interests 25 22 6 --------------------------------------------------- ------- ------- --------- Total equity 2,170 2,312 --------------------------------------------------- ------- ------- --------- * Component of current and deferred taxes ** Component of net debt Approved by the board of directors on 28 November 2007 and signed on their behalf by Richard J Cousins, Director Andrew D Martin, Director Consolidated cash flow statement for the year ended 30 September 2007 2007 2006 Notes £m £m --------------------------------------------------- ------- ------- --------- Cash flow from operating activities Cash generated from operations 28 753 651 Interest paid (152) (186) Interest element of finance lease rentals (3) (3) Tax received 4 4 Tax paid (121) (97) --------------------------------------------------- ------- ------- --------- Net cash from/(used in) operating activities for continuing operations 481 369 Net cash from/(used in) operating activities for discontinued operations 29 (18) 178 --------------------------------------------------- ------- ------- --------- Net cash from/(used in) operating activities 463 547 --------------------------------------------------- ------- ------- --------- Cash flow from investing activities Purchase of subsidiary companies and investments in associated undertakings 27 (31) (167) Proceeds from sale of subsidiary companies and associated undertakings - discontinued activities 6 782 1,807 Proceeds from sale of subsidiary companies and associated undertakings - other activities 32 - Proceeds from sale of other investments 4 - Tax on profits from sale of subsidiary companies and associated undertakings (51) (50) Contribution of disposal proceeds to pension plans (45) (280) Purchase of property, plant and equipment (156) (153) Proceeds from sale of property, plant and equipment 22 20 Purchase of intangible assets and investments (21) (30) Dividends received from associated undertakings 6 2 Interest received 28 15 --------------------------------------------------- ------- ------- --------- Net cash from/(used in) investing activities by continuing operations 570 1,164 Net cash from/(used in) investing activities by discontinued operations 29 (30) (105) --------------------------------------------------- ------- ------- --------- Net cash from/(used in) investing activities 540 1,059 --------------------------------------------------- ------- ------- --------- Cash flow from financing activities Proceeds from issue of ordinary share capital 25 27 2 Purchase of own shares (net) (576) (148) Net increase/(decrease) in borrowings 30 (239) (647) Repayment of obligations under finance leases 30 (15) (15) Equity dividends paid 9, 25 (208) (213) Dividends paid to minority interests 25 (3) (11) --------------------------------------------------- ------- ------- --------- Net cash from/(used in) financing activities by continuing operations (1,014) (1,032) Net cash from/(used in) financing activities by discontinued operations 29 - - --------------------------------------------------- ------- ------- --------- Net cash from/(used in) financing activities (1,014) (1,032) --------------------------------------------------- ------- ------- --------- Cash and cash equivalents Net increase/(decrease) in cash and cash equivalents 30 (11) 574 Cash and cash equivalents at beginning of the year 30 848 281 Exchange gains and losses on cash and cash equivalents 30 2 (7) --------------------------------------------------- ------- ------- --------- Cash and cash equivalents at end of the year 30 839 848 --------------------------------------------------- ------- ------- --------- Reconciliation of free cash flow from continuing operations for the year ended 30 September 2007 2007 2006 £m £m --------------------------------------------------- ------- ------- --------- Net cash from operating activities for continuing operations 481 369 Purchase of property, plant and equipment (156) (153) Proceeds from sale of property, plant and equipment 22 20 Purchase of intangible assets and investments (21) (30) Dividends received from associated undertakings 6 2 Interest received 28 15 Dividends paid to minority interests (3) (11) --------------------------------------------------- ------- ------- --------- Free cash flow from continuing operations 357 212 --------------------------------------------------- ------- ------- --------- This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW FR FVLBLDFBFFBB

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