Preliminary Results - Part 2

Compass Group PLC 28 November 2007 PART 2 1 Segmental reporting ------------------------------------------------- -------- ----------- -------- -------- --------- ------- Geographical segments ----------------------------------------------------- Revenues North Continental United Rest of Intra America Europe Kingdom the World Group Total £m £m £m £m £m £m ------------------------------------------------- -------- ----------- -------- -------- --------- ------- Year ended 30 September 2007 Total revenue 4,162 2,842 1,986 1,654 (18) 10,626 Less: inter-segment revenue - (7) (7) (4) 18 - ------------------------------------------------- -------- ----------- -------- -------- --------- ------- External revenue 4,162 2,835 1,979 1,650 - 10,626 Less: discontinued businesses - (282) (48) (28) - (358) ------------------------------------------------- -------- ----------- -------- -------- --------- ------- External revenue - continuing 4,162 2,553 1,931 1,622 - 10,268 ------------------------------------------------- -------- ----------- -------- -------- --------- ------- Year ended 30 September 2006 Total revenue 4,437 3,321 2,815 1,730 (39) 12,264 Less: inter-segment revenue - (13) (10) (16) 39 - ------------------------------------------------- -------- ----------- -------- -------- --------- ------- External revenue 4,437 3,308 2,805 1,714 - 12,264 Less: discontinued businesses (147) (824) (923) (103) - (1,997) ------------------------------------------------- -------- ----------- -------- -------- --------- ------- External revenue - continuing 4,290 2,484 1,882 1,611 - 10,267 ------------------------------------------------- -------- ----------- -------- -------- --------- ------- Geographical segments ----------------------------------------------------- Result North Continental United Rest of Central America Europe Kingdom the World activities Total £m £m £m £m £m £m ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Year ended 30 September 2007 Total operating profit before associates 261 181 107 57 (58) 548 Less: discontinued businesses - (30) - 7 - (23) ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Operating profit before associates - continuing 261 151 107 64 (58) 525 Add: Share of profit of associates 1 - 3 - - 4 ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Operating profit - continuing 262 151 110 64 (58) 529 ------------------------------------------------- --------- ---------- -------- ---------- --------- Finance income 28 Finance costs (115) Hedge accounting ineffectiveness (6) ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Profit before tax 436 Income tax expense (124) ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Profit for the year from continuing operations 312 ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Year ended 30 September 2006 Total operating profit before associates 247 177 125 46 (66) 529 Less: discontinued businesses (2) (55) (18) 1 - (74) ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Operating profit before associates - continuing 245 122 107 47 (66) 455 Add: Share of profit of associates 1 - 1 - - 2 ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Operating profit - continuing 246 122 108 47 (66) 457 ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Finance income 15 Finance costs (160) Hedge accounting ineffectiveness 11 ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Profit before tax 323 Income tax expense (61) ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Profit for the year from continuing operations 262 ------------------------------------------------- --------- ---------- -------- ---------- --------- ------- Russia and Turkey were transferred from the Rest of the World to the Continental Europe segment during the current reporting period to ensure alignment with the new management reporting structure. The 2006 segmental results have been restated on a consistent basis. The combined revenue and operating profit of these businesses was £46 million and £3 million respectively for the year ended 30 September 2006. ------------------------ --- ------ ------ ------ ------ ------- ------ Business segments --------------- Travel Revenues Contracts Vending Concessions Total £m £m £m £m ------------------------ --- ------ ------ ------ ------ ------- ------ Year Ended 30 September 2007 External revenue 9,843 783 - 10,626 Less: discontinued businesses (33) (325) - (358) ------------------------ --- ------ ------ ------ ------ ------- ------ External revenue - continuing 9,810 458 - 10,268 ------------------------ --- ------ ------ ------ ------ ------- ------ Year Ended 30 September 2006 External revenue 9,784 1,009 1,471 12,264 Transfers 77 - (77) - Less: discontinued businesses (121) (482) (1,394) (1,997) ------------------------ --- ------ ------ ------ ------ ------- ------ External revenue - continuing 9,740 527 - 10,267 ------------------------ --- ------ ------ ------ ------ ------- ------ ------------------------ --- ------ ------ ------ ------ ------- ------ The Travel Concessions businesses held on 30 September 2006 were transferred to the Contracts segment to ensure alignment with the new management reporting structure. 2 Operating costs 2007 2006 Operating costs £m £m -------------------------------------------- ------ ------ Cost of food and materials: Cost of inventories consumed 3,426 3,441 Labour costs: Employee benefit expense (note 3) 4,518 4,506 Overheads: Depreciation - owned property, plant and equipment 131 140 Depreciation - leased property, plant and equipment 11 11 Amortisation - owned intangible assets 31 37 Property lease rentals 52 56 Other occupancy rentals - minimum guaranteed rent 38 36 Other occupancy rentals - rent in excess of minimum guaranteed rent 4 4 Other asset rentals 55 60 Audit and non-audit services 5 7 Other expenses 1,472 1,514 -------------------------------------------- ------ ------ Total continuing operations 9,743 9,812 -------------------------------------------- ------ ------ The 2006 amounts in respect of rental expenses have been restated to reflect a more accurate classification of costs adopted in 2007. Impairment of goodwill and inventories and net foreign exchange gains/ losses recorded in income statement £nil (2006: £nil) 3 Employees Average number of employees, including directors and part-time employees 2007 2006 ------------------------------------------- Number Number ------- ------- ------------------------------------------- North America 126,691 122,412 Continental Europe 66,990 67,302 United Kingdom 66,105 68,885 Rest of the World 101,541 96,633 ------------------------------------------- ------- ------- Total continuing operations 361,327 355,232 Discontinued businesses 4,303 34,008 ------------------------------------------- ------- ------- Total continuing and discontinued 365,630 389,240 ------------------------------------------- ------- ------- Aggregate remuneration of all employees including directors 2007 2006 ------------------------------------------- £m £m ------- ------- ------------------------------------------- Wages and salaries 3,804 3,853 Social security costs 638 587 Share-based payments 24 21 Pension costs - defined contribution plans 34 27 Pension costs - defined benefit plans 18 18 ------------------------------------------- ------- ------- Total continuing operations 4,518 4,506 Discontinued businesses 102 505 ------------------------------------------- ------- ------- Total continuing and discontinued 4,620 5,011 ------------------------------------------- ------- ------- In addition to the pension cost shown in operating costs above, there is a pensions-related net charge to finance costs of £2 million (2006: £11 million) 4 Finance income and costs Finance income and costs 2007 2006 -------------------------------------------- £m £m ------ ------ -------------------------------------------- Finance income Bank interest 28 15 -------------------------------------------- ------ ------ Finance costs Bank loans and overdrafts 5 35 Other loans 104 107 Finance lease interest 3 3 -------------------------------------------- ------ ------ Interest on bank loans, overdrafts, other loans and finance leases 112 145 Unwinding of discount on put options held by minority shareholders 1 4 Interest on pension scheme liabilities net of expected return on scheme assets (note 23) 2 11 -------------------------------------------- ------ ------ Total finance costs 115 160 -------------------------------------------- ------ ------ Hedge accounting ineffectiveness Unrealised net losses/(gains) on financial instruments 3 (11) Unhedged translation losses on foreign currency borrowings 3 - -------------------------------------------- ------ ------ Total hedge accounting ineffectiveness losses/(gains) 6 (11) -------------------------------------------- ------ ------ 5 Tax 2007 2006 --------------- ----------------- Recognised in the income Before Before statement: Income tax exceptional Exceptional exceptional Exceptional expense on continuing items items Total items items Total operations £m £m £m £m £m £m -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Current year 149 - 149 146 (17) 129 Adjustment in respect of prior years (27) - (27) (40) (5) (45) -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Current tax expense/(credit) 122 - 122 106 (22) 84 -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Current year 2 - 2 (1) (22) (23) Impact of changes in statutory tax rates 6 - 6 - - - Adjustment in respect of prior years (6) - (6) - - - -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Deferred tax expense/(credit) 2 - 2 (1) (22) (23) -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Income tax expense/(credit) on continuing operations 124 - 124 105 (44) 61 -------------------------- ------- ------- ----- ------ --- ------- --- ------ The income tax expense for the year is based on the United Kingdom statutory rate of corporation tax of 30% (2006: 30%). Overseas tax is calculated at the rates prevailing in the respective jurisdictions. The impact of changes in statutory tax rates relates principally to the reduction of the UK corporation tax rate from 30% to 28% from 1 April 2008. This change has resulted in a deferred tax charge arising from the reduction in the balance sheet carrying value of deferred tax assets to reflect the anticipated rate of tax at which those assets are expected to reverse. 2007 2006 --------------- ----------------- Before Before Reconciliation of the exceptional Exceptional exceptional Exceptional income tax expense on items items Total items items Total continuing operations £m £m £m £m £m £m -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Profit before tax from continuing operations before exceptional items 436 - 436 323 - 323 -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Notional income tax expense at the UK statutory rate of 30% on profit before tax 131 - 131 97 - 97 Effect of different tax rates of subsidiaries operating in other jurisdictions 19 - 19 20 - 20 Impact of changes in statutory tax rates 6 - 6 - - - Permanent differences 3 - 3 22 - 22 Impact of share-based payments - - - 3 - 3 Tax on profit of associates (1) - (1) (1) - (1) Losses and other temporary differences not previously recognised (10) - (10) (7) (27) (34) Unrelieved current year tax losses 9 - 9 7 - 7 Prior year items (33) - (33) (37) (17) (54) Other - - - 1 - 1 -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Income tax expense on continuing operations 124 - 124 105 (44) 61 -------------------------- ------- ------- ----- ------ --- ------- --- ------ 2007 2006 --------------- ----------------- Before Before exceptional Exceptional exceptional Exceptional Tax credited/(charged) items items Total items items Total to equity £m £m £m £m £m £m -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Deferred tax (charge)/credit on actuarial gains/losses on post-employment benefits (6) - (6) 10 - 10 Tax on foreign exchange movements recognised in equity 13 - 13 (10) - (10) Other current and deferred tax credits 1 - 1 3 - 3 -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Tax on items credited to equity 8 - 8 3 - 3 Recognition of deferred tax asset relating to currency translation differences in prior years 37 - 37 - - - -------------------- ------- ------- ----- ------ --- ------- --- ------ Tax credited to equity 45 - 45 3 - 3 -------------------- --- ------ ------- ------- ----- ------ --- ------- --- ------ Movement in net Pensions Net deferred tax asset/ and post- Self-funded short-term (liability) Tax employment Tax insurance temporary depreciation Intangibles benefits losses provisions differences Total £m £m £m £m £m £m £m -------------------- ------- --- ------- ------- ----- --- ------ --- ------- --- ------ At 1 October 2005 (51) 12 172 12 19 17 181 Credit/(charge) to income 22 (8) (23) - 4 47 42 Credit/(charge) to equity - (9) 10 - - (3) (2) Transfer from/(to) current tax - - (1) - - - (1) Business disposals 4 (4) - (1) - 4 3 Other movements 3 2 (1) - 1 (9) (4) Exchange adjustment 1 5 (3) (1) (1) (1) - -------------------- ------- --- ------- ------- ----- --- ------ --- ------- --- ------ At 30 September 2006 (21) (2) 154 10 23 55 219 -------------------- ------- --- ------- ------- ----- --- ------ --- ------- --- ------ At 1 October 2006 (21) (2) 154 10 23 55 219 Credit/(charge) to income 36 (12) (45) 1 9 6 (5) Credit/(charge) to equity - (7) (8) - - 36 21 Transfer from/(to) current tax (11) - - - - - (11) Business disposals 11 - (2) - - - 9 Other movements - (1) 1 (2) - 5 3 Exchange adjustment 2 - (4) - (2) 3 (1) -------------------- ------- --- ------- ------- ----- --- ------ --- ------- --- ------ At 30 September 2007 17 (22) 96 9 30 105 235 -------------------- ------- --- ------- ------- ----- --- ------ --- ------- --- ------ Net short-term temporary differences relate principally to provisions and other liabilities of overseas subsidiaries. After netting off balances within countries, the following are the deferred tax assets and liabilities recognised in the consolidated balance sheet: Net deferred tax balance 2007 2006 £m £m ---------------------- --- ------- --- ------ ------ ------ --- ------ ------ ------ Deferred tax assets 240 237 Deferred tax liabilities (5) (18) ---------------------- --- ------- --- ------ ------ ------ --- ------ ------ ------ Net deferred tax 235 219 ---------------------- --- ------- --- ------ ------ ------ --- ------ ------ ------ Unrecognised deferred tax assets in respect of tax losses and other temporary differences amount to £43 million (2006: £55 million). Of the total, tax losses of £2 million will expire at various dates between 2009 and 2013. These deferred tax assets have not been recognised as the timing of recovery is uncertain. No deferred tax liability is recognised on temporary differences of £2,726 million (2006: £1,850 million) relating to the unremitted earnings of overseas operations as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. 6 Discontinued operations Year ended 30 September 2007: The Group disposed of its European vending business, Selecta, on 2 July 2007. The Group has also completed the sale and closure of a number of other small businesses as part of the exit from the discontinued travel concessions business. The results of all these businesses are classified 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. The process was complete by the end of the year and no assets or liabilities are classified as being held for sale as at 30 September 2007. Year ended 30 September 2006: The Group disposed of its Inflight catering operations, which operated principally in Continental Europe, on 19 December 2005, and disposed of its travel concession catering business, Select Service Partner, including Creative Host Services in the US (together 'SSP') on 15 June 2006. The Group also discontinued its Middle East military catering operations and withdrew from or disposed of various other businesses. The results of these businesses are classified as discontinued operations and are therefore excluded from the results of continuing operations in 2006. This process was substantially complete by the end of the year and no assets or liabilities were classified as being held for sale at 30 September 2006. 2007 2006 -------------- ------------------- Net assets disposed and disposal Selecta Other* Total SSP Selecta Other** Total proceeds £m £m £m £m £m £m £m ----------------------- ------ ------ ------ ------ ------ ------ ------ Goodwill 411 2 413 798 - 51 849 Other intangible assets - - - 10 - - 10 Property, plant and equipment 144 2 146 755 - 125 880 Investments - - - 5 - 3 8 Inventories 37 - 37 29 - 9 38 Trade and other receivables 58 3 61 74 - 49 123 Cash and cash equivalents 53 1 54 94 - 24 118 ----------------------- ------ ------ ------ ------ ------ ------ ------ Gross assets disposed of 703 8 711 1,765 - 261 2,026 Trade and other payables (100) - (100) (208) - (51) (259) Post-employment benefit obligations - (3) (3) (10) - (4) (14) Tax (15) - (15) (6) - (6) (12) Minority interest - - - (1) - (5) (6) Other liabilities (3) (2) (5) - - (5) (5) ----------------------- ------ ------ ------ ------ ------ ------ ------ Gross liabilities disposed of (118) (5) (123) (225) - (71) (296) ----------------------- ------ ------ ------ ------ ------ ------ ------ Net assets disposed of 585 3 588 1,540 - 190 1,730 Liabilities retained 63 45 108 88 - 21 109 Cumulative exchange translation loss recycled on disposals (a) - - - 2 - - 2 Profit/(loss) on disposal 130 (27) 103 168 - (54) 114 ----------------------- ------ ------ ------ ------ ------ ------ ------ Consideration, net of costs 778 21 799 1,798 - 157 1,955 Consideration deferred to future periods - - - (37) - (8) (45) Cash disposed of (53) (1) (54) (94) - (24) (118) ----------------------- ------ ------ ------ ------ ------ ------ ------ Cash inflow from current year disposals 725 20 745 1,667 - 125 1,792 Deferred consideration relating to previous disposals - 37 37 - - 15 15 ----------------------- ------ ------ ------ ------ ------ ------ ------ Cash inflow from disposals 725 57 782 1,667 - 140 1,807 ----------------------- ------ ------ ------ ------ ------ ------ ------ 2007 2006 -------------- ------------------- Financial performance of Selecta Other* Total SSP Selecta Other** Total discontinued operations £m £m £m £m £m £m £m ----------------------- ------ ------ ------ ------ ------ ------ ------ Trading activities of discontinued operations External revenue 325 33 358 1,238 483 276 1,997 Inter-segment revenues 14 1 15 - 21 - 21 ----------------------- ------ ------ ------ ------ ------ ------ ------ Total revenue 339 34 373 1,238 504 276 2,018 Operating costs (307) (43) (350) (1,209) (456) (279) (1,944) ----------------------- ------ ------ ------ ------ ------ ------ ------ Trading activities of discontinued operations before exceptional costs 32 (9) 23 29 48 (3) 74 Exceptional operating costs (note 7) - - - - - (47) (47) ----------------------- ------ ------ ------ ------ ------ ------ ------ Profit before tax 32 (9) 23 29 48 (50) 27 Income tax expense (see below) (8) - (8) (7) (8) 1 (14) ----------------------- ------ ------ ------ ------ ------ ------ ------ Profit after tax 24 (9) 15 22 40 (49) 13 ----------------------- ------ ------ ------ ------ ------ ------ ------ Exceptional items: disposal of net assets and other adjustments relating to discontinued operations Profit on disposal of net assets of discontinued operations 130 18 148 170 - (54) 116 Increase in provisions related to discontinued operations (b) - (45) (45) - - - - Cumulative translation exchange loss recycled on disposals (a) - - - (2) - - (2) ----------------------- ------ ------ ------ ------ ------ ------ ------ Profit on disposal before tax 130 (27) 103 168 - (54) 114 Tax (1) 95 94 (99) - 5 (94) ----------------------- ------ ------ ------ ------ ------ ------ ------ Total profit after tax 129 68 197 69 - (49) 20 ----------------------- ------ ------ ------ ------ ------ ------ ------ Profit/(loss) for the year of discontinued operations ----------------------- ------ ------ ------ ------ ------ ------ ------ Profit/(loss) for the year of discontinued operations 153 59 212 91 40 (98) 33 ----------------------- ------ ------ ------ ------ ------ ------ ------ 2007 2006 -------------- ------------------- Tax from discontinued operations Selecta Other* Total SSP Selecta Other** Total £m £m £m £m £m £m £m ----------------------- ------ ------ ------ ------ ------ ------ ------ Income tax expense on trading activities of discontinued operations Current tax (7) - (7) (9) (12) 1 (20) Deferred tax (1) - (1) 2 4 - 6 ----------------------- ------ ------ ------ ------ ------ ------ ------ Income tax on discontinued operations (expense) (8) - (8) (7) (8) 1 (14) ----------------------- ------ ------ ------ ------ ------ ------ ------ Exceptional items: tax on disposal of net assets and other adjustments relating to discontinued operations Current tax (1) 18 17 (117) - 11 (106) Deferred tax - (2) (2) 18 - (6) 12 Exceptional tax credit (note 7) - 79 79 - - - - ----------------------- ------ ------ ------ ------ ------ ------ ------ Tax on disposal of net assets of discontinued operations (expense) (1) 95 94 (99) - 5 (94) ----------------------- ------ ------ ------ ------ ------ ------ ------ Total tax from discontinued operations ------ ------ ------ ------ ------ ------ ------ ----------------------- Total tax from discontinued operations (expense) (9) 95 86 (106) (8) 6 (108) ----------------------- ------ ------ ------ ------ ------ ------ ------ * Travel concessions and various other non-core businesses and adjustments to prior year disposals ** Middle East military catering operations and various other non-core businesses (a) The Group manages foreign currency exposures in accordance with the policies set-out in note 20, matching its principal projected cash flows by currency to actual or effective borrowings in the same currency. As a result the cumulative exchange translation loss recycled on disposals is £nil (2006: £2 million). (b) Additional provisions established in respect of the prior year disposal of travel concessions catering businesses and in respect of Middle East military catering operations discontinued in the prior year. 7 Exceptional items Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to clearly explain the financial performance of the Group. Items reported as exceptional are material items of income or expense that have been shown separately due to the significance of their nature or amount. Exceptional items 2007 2006 -------------------------------------------- £m £m ------ ------ Continuing operations Current year tax - 5 Adjustment in respect of prior years tax - 17 -------------------------------------------- ------ ------ Current year tax - 22 Current year deferred tax - 22 Adjustment in respect of prior years deferred tax - - -------------------------------------------- ------ ------ Current year deferred tax - 22 -------------------------------------------- ------ ------ Continuing operations (note 5) - 44 -------------------------------------------- ------ ------ Discontinued operations Profit on disposal of net assets and other adjustments relating to discontinued operations net of tax (note 6) 197 20 Settlement of UN contract claims and related expenses - (39) Middle East military catering business - (8) -------------------------------------------- ------ ------ Discontinued operations 197 (27) -------------------------------------------- ------ ------ Continuing and discontinued operations -------------------------------------------- ------ ------ Total 197 17 -------------------------------------------- ------ ------ Year ended 30 September 2007: The Group disposed of its European vending business, Selecta, on 2 July 2007 for a net profit after tax of £129 million. The Group also completed the sale and closure of a number of other small businesses as part of the exit from discontinued operations, and established additional provisions totalling £45 million in respect of prior year disposals in these areas, resulting in a net loss after tax of £11 million before the release of net tax provisions of £79 million. These provisions were released following the settlement of a number of long-standing issues connected with prior year discontinued activities. The total net profit after tax arising on disposal of these operations was £68 million. Overall an exceptional net credit of £197 million was recognised in the period. Year ended 30 September 2006: A £44 million exceptional tax credit arose in respect of previously unrecognised tax losses and tax deductions in respect of pension prepayments in the UK tax group that originated in previous years. £39 million was charged to complete investigations and to settle lawsuits for lost profits brought by two competitors of the Group, ES-KO International Inc and Supreme Foodservice AG in relation to contracts awarded to Eurest Support Services by the United Nations. £8 million was provided to settle claims arising in respect of the discontinued Middle East military catering operations. A profit of £20 million (net of cumulative translation exchange losses and tax) was recognised in respect of the disposal of the Group's Inflight catering services business on 19 December 2005 and its travel concessions catering business ('SSP') on 15 June 2006. 8 Earnings per share The calculation of earnings per share is based on earnings after tax and the weighted average number of shares in issue during the period. The adjusted earnings per share figures have been calculated based on earnings excluding the effect of discontinued activities and exceptional items; these are disclosed to show the underlying trading performance of the Group. 2007 2006 Attributable Attributable Attributable profit profit profit £m £m ------------------------------------------- ------- ------- Profit for the year attributable to equity shareholders of the Company 515 285 Less: profit for the year from discontinued operations (212) (33) ------------------------------------------- ------- ------- Attributable profit for the year from continuing operations 303 252 Less: profit from exceptional items included in continuing operations (net of tax) - (44) ------------------------------------------- ------- ------- Attributable profit for the year from continuing operations before exceptional items 303 208 Add back: loss/(profit) from hedge accounting ineffectiveness (net of tax) 4 (7) ------------------------------------------- ------- ------- Underlying attributable profit for the year from continuing operations before exceptional items 307 201 ------------------------------------------- ------- ------- 2007 2006 Ordinary Ordinary shares shares Average number of shares (millions of ordinary shares of 10p of 10p each of 10p each each) Millions Millions ------------------------------------------- ------- ------- Average number of shares for basic earnings per share 2,015 2,147 Dilutive share options 11 3 ------------------------------------------- ------- ------- Average number of shares for diluted earnings per share 2,026 2,150 ------------------------------------------- ------- ------- 2007 2006 Earnings Earnings per share per share pence pence ------------------------------------------- ------- ------- Basic earnings per share (pence) From continuing and discontinued operations 25.6 13.3 From discontinued operations (10.6) (1.6) ------------------------------------------- ------- ------- From continuing operations 15.0 11.7 Exceptional items included in continuing operations (net of tax) - (2.0) ------------------------------------------- ------- ------- From continuing operations before exceptional items 15.0 9.7 Hedge accounting ineffectiveness (net of tax) 0.2 (0.3) ------------------------------------------- ------- ------- From underlying continuing operations before exceptional items 15.2 9.4 ------------------------------------------- ------- ------- Diluted earnings per share (pence) From continuing and discontinued operations 25.4 13.3 From discontinued operations (10.4) (1.6) ------------------------------------------- ------- ------- From continuing operations 15.0 11.7 Exceptional items included in continuing operations (net of tax) - (2.0) ------------------------------------------- ------- ------- From continuing operations before exceptional items 15.0 9.7 Hedge accounting ineffectiveness (net of tax) 0.2 (0.4) ------------------------------------------- ------- ------- From underlying continuing operations before exceptional items 15.2 9.3 ------------------------------------------- ------- ------- 9 Dividends A final dividend in respect of 2007 of 7.2 pence per share, £139 million in aggregate,* is to be proposed at the Annual General Meeting on 8 February 2008 giving a total dividend in respect of 2007 of 10.8 pence per share (2006: 10.1 pence per share). These financial statements do not include the accrual for this final dividend. 2007 2006 ---------- ---------- Dividends Dividends Dividends on ordinary shares of 10p each per share per share pence £m pence £m ------------------------------------ ------ ------ ------ ------ Amounts recognised as distributions to equity shareholders during the year: Final dividend for the prior year 6.7p 136 6.5p 140 Interim dividend for the current year 3.6p 72 3.4p 73 ------------------------------------ ------ ------ ------ ------ Total dividends 10.3p 208 9.9p 213 ------------------------------------ ------ ------ ------ ------ * Based on the number of shares in issue at 30 September 2007. 10 Goodwill During the year the Group acquired the remaining 5% of its Italian subsidiary Onama S.p.A. It also made a number of small acquisitions in North America and the Rest of the World. This is reflected in the £12 million addition to goodwill shown below. Goodwill £m ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ Cost At 1 October 2005 4,327 Additions arising from acquisitions 152 Reclassified (6) Business disposals - discontinued activities (849) Currency adjustment (66) ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 30 September 2006 3,558 ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 1 October 2006 3,558 Additions arising from acquisitions 12 Reclassified - Business disposals - discontinued activities (413) Currency adjustment (65) ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 30 September 2007 3,092 ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ Impairment At 1 October 2005 107 Impairment charge recognised in the year - ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 30 September 2006 107 ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 1 October 2006 107 Impairment charge recognised in the year - ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 30 September 2007 107 ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ Net book amounts At 30 September 2006 3,451 ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ At 30 September 2007 2,985 ---------------------------- --- ------ --- ------ --- ------ --- ------ ------ Goodwill acquired in a business combination is allocated at acquisition to the cash generating units ('CGUs') that are expected to benefit from that business combination. A summary of goodwill allocation by business segment is shown below. 2006 ---------------------- Goodwill by business segment 2007 Original Transfers Disposals After Disposals £m £m £m £m £m ---------------------------- ------ ------ ------ ------ ------ USA 757 825 - - 825 Rest of North America 87 83 - - 83 ---------------------------- ------ ------ ------ ------ ------ Total North America 844 908 - - 908 Continental Europe 161 500 2 (352) 150 United Kingdom 1,733 1,798 - (65) 1,733 Rest of the World 247 245 (2) - 243 ---------------------------- ------ ------ ------ ------ ------ Continuing Business 2,985 3,451 - (417) 3,034 Discontinued Business - - - 417 417 ---------------------------- ------ ------ ------ ------ ------ Total 2,985 3,451 - - 3,451 ---------------------------- ------ ------ ------ ------ ------ Russia and Turkey were transferred from the Rest of the World to the Continental Europe segment during the current reporting period to ensure alignment with the new management reporting structure. The transfers column adjusts prior year goodwill so that it is on a consistent basis. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of a CGU has been determined from value in use calculations. The key assumptions for these calculations are long-term growth rates and pre-tax discount rates and use cash flow forecasts derived from the most recent financial budgets and forecasts approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates based on local expected economic conditions and do not exceed the long-term average growth rate for that country. The pre-tax discount rates are based on the Group's weighted average cost of capital adjusted for specific risks relating to the country in which the CGU operates. Growth and discount rates Residual Pre-tax Growth discount rates rates --------------------------- ------- ------- USA 2.8% 12.2% Rest of North America 2.2% 10.4% Continental Europe 0.6 - 2.7% 7.0 - 10.7% United Kingdom 2.5% 9.8% Rest of the World (0.3) - 9.0% 6.5 - 17.6% --------------------------- ------- ------- 11 Other intangible assets Other intangible assets Contract Computer Total related software £m £m £m ----------------------------------------- ------ ------ ------ Cost At 1 October 2005 81 173 254 Additions 16 15 31 Disposals (3) - (3) Business acquisitions (1) - (1) Business disposals - discontinued activities (3) (20) (23) Reclassified 10 - 10 Currency adjustment (6) (3) (9) ----------------------------------------- ------ ------ ------ At 30 September 2006 94 165 259 ----------------------------------------- ------ ------ ------ At 1 October 2006 94 165 259 Additions 16 5 21 Disposals (10) (22) (32) Business acquisitions 1 - 1 Business disposals - discontinued activities (3) (1) (4) Reclassified 12 2 14 Currency adjustment (3) (2) (5) ----------------------------------------- ------ ------ ------ At 30 September 2007 107 147 254 ----------------------------------------- ------ ------ ------ Amortisation At 1 October 2005 23 63 86 Charge for the year 13 25 38 Disposals (1) - (1) Business disposals - discontinued activities - (13) (13) Reclassified - - - Currency adjustment (2) (1) (3) ----------------------------------------- ------ ------ ------ At 30 September 2006 33 74 107 ----------------------------------------- ------ ------ ------ At 1 October 2006 33 74 107 Charge for the year 14 17 31 Disposals (8) (21) (29) Business disposals - discontinued activities (3) (1) (4) Reclassified 8 - 8 Currency adjustment (1) - (1) ----------------------------------------- ------ ------ ------ At 30 September 2007 43 69 112 ----------------------------------------- ------ ------ ------ Net book amounts At 30 September 2006 61 91 152 ----------------------------------------- ------ ------ ------ At 30 September 2007 64 78 142 ----------------------------------------- ------ ------ ------ Contract related intangible assets result from payments made by the Group in respect of client contracts and generally arise where it is economically more efficient for a client to purchase assets used in the performance of the contract and the Group fund these purchases. 12 Property, plant and equipment Land and Plant and Fixture and Property, plant and equipment buildings machinery fittings Total £m £m £m £m ------------------------------------ ------ ------ ------- ------ Cost At 1 October 2005 973 1,346 768 3,087 Additions 22 193 69 284 Disposals (19) (75) (77) (171) Business acquisitions - - 4 4 Business disposals - discontinued activities (679) (328) (283) (1,290) Reclassified 15 (59) 28 (16) Currency adjustment (19) (41) (12) (72) ------------------------------------ ------ ------ ------- ------ At 30 September 2006 293 1,036 497 1,826 ------------------------------------ ------ ------ ------- ------ At 1 October 2006 293 1,036 497 1,826 Additions 18 144 43 205 Disposals (46) (121) (63) (230) Business acquisitions - - - - Business disposals - discontinued activities (16) (318) (58) (392) Reclassified (32) 46 (17) (3) Currency adjustment (7) (30) 1 (36) ------------------------------------ ------ ------ ------- ------ At 30 September 2007 210 757 403 1,370 ------------------------------------ ------ ------ ------- ------ Depreciation At 1 October 2005 220 800 410 1,430 Charge for the year 24 152 67 243 Disposals (9) (75) (52) (136) Business disposals - discontinued activities (112) (171) (127) (410) Reclassified (3) (7) (6) (16) Currency adjustment (8) (26) (7) (41) ------------------------------------ ------ ------ ------- ------ At 30 September 2006 112 673 285 1,070 ------------------------------------ ------ ------ ------- ------ At 1 October 2006 112 673 285 1,070 Charge for the year 14 110 46 170 Disposals (27) (107) (52) (186) Business disposals - discontinued activities (7) (197) (42) (246) Reclassified 4 (4) 3 3 Currency adjustment 1 (20) 2 (17) ------------------------------------ ------ ------ ------- ------ At 30 September 2007 97 455 242 794 ------------------------------------ ------ ------ ------- ------ Net book amounts At 30 September 2006 181 363 212 756 ------------------------------------ ------ ------ ------- ------ At 30 September 2007 113 302 161 576 ------------------------------------ ------ ------ ------- ------ The net book amount of the Group's property, plant and equipment includes assets held under finance leases as follows: Land and Plant and Fixtures and Property, plant and equipment held under finance leases buildings machinery fittings Total £m £m £m £m ------------------------------------ ------ ------ ------- ------ At 30 September 2006 5 39 6 50 ------------------------------------ ------ ------ ------- ------ At 30 September 2007 2 41 2 45 ------------------------------------ ------ ------ ------- ------ 13 Interests in associates During the year the Group sold half of its 25% interest in its former associate Au Bon Pain leaving it with a 12.5% shareholding. This shareholding is now accounted for as an investment (note 14). Principal associates Country of incorporation ---------------------------------- --- ------ --- ------ ------ --- ------ Twickenham Experience Ltd England & Wales Oval Events Limited England & Wales Thompson Hospitality Services LLC USA ---------------------------------- --- ------ --- ------ ------ --- ------ Interests in associates 2007 2006 £m £m ---------------------------------- --- ------ --- ------ ------ --- ------ Net book value At 1 October 39 45 Additions - - Business disposals - discontinued activities - (5) Business disposals - other activities (7) - Share of profits less losses (net of tax) 4 2 Dividends received (6) (2) Reclassified to investments (note 14) (6) - Currency and other adjustments 1 (1) ---------------------------------- --- ------ --- ------ ------ ------ At 30 September 25 39 ---------------------------------- --- ------ --- ------ ------ ------ The Group's share of revenues and profits (including those from Au Bon Pain up to the date the Group reduced its shareholding to 12.5%) is included below: Share of revenue and profits Revenue 37 50 Expenses (33) (48) ---------------------------------- --- ------ --- ------ ------ ------ Profit after tax for the year 4 2 ---------------------------------- --- ------ --- ------ ------ ------ Share of net assets Goodwill 19 25 Other 6 14 ---------------------------------- --- ------ --- ------ ------ ------ Net assets 25 39 ---------------------------------- --- ------ --- ------ ------ ------ Share of Contingent liabilities Contingent liabilities - - ---------------------------------- --- ------ --- ------ ------ ------ 14 Other investments Other investments 2007 2006 -------------------------------------------- ------ ------- Net book value At 1 October 9 6 Additions 2 2 Business disposals - discontinued activities - (2) Business disposals - other activities (4) - Reclassified from interests in associates (note 13) 6 - Currency and other adjustments (1) 3 -------------------------------------------- ------ ------- At 30 September 12 9 -------------------------------------------- ------ ------- Comprised of Debenture and other holdings in sports and leisure venues 1 4 Investment in Au Bon Pain 6 - Other investments 5 5 -------------------------------------------- ------ ------- Total 12 9 -------------------------------------------- ------ ------- 15 Joint ventures During the year the Group's joint venture partner in Turkey exercised an option to acquire 4% of the share capital of Sofra Yemek Uretim Ve Hizmet AS, reducing the Group's holding to 50%. This did not affect the treatment of Sofra which was accounted for as a joint venture in the prior year as the partners worked with equal powers to control the entity. Principal joint ventures Country of % incorporation ownership ------------------------ ----------- ------------- ---- ---- ------- GR SA Brazil 50 Radhakrishna Hospitality Services Ltd India 50 Sofra Yemek Uretim Ve Hizmet AS Turkey 50 ADNH-Compass Middle East LLC United Arab 50 Emirates ------------------------ ----------- ------------- ---- ---- ------- Joint ventures 2007 2006 £m £m ------------------------ ------- ------ Share of revenue and profits Revenue 318 282 Expenses (291) (266) ------------------------ ------- ------ Profit after tax for the year 27 16 ------------------------ ------- ------ Share of net assets Non-current assets 34 40 Current assets 66 72 Non-current liabilities (6) (10) Current liabilities (56) (51) ------------------------ ------- ------ Net assets 38 51 ------------------------ ------- ------ Share of Contingent liabilities Contingent liabilities 10 3 ------------------------ ------- ------ 16 Trade and other receivables 2007 2006 ----------- ----------- Trade and other receivables Current Non-current Current Non-current £m £m £m £m ----------------------------------- ------ ------- ------ ------- Trade receivables 1,196 4 1,212 4 Less: provision for the impairment of receivables (47) - (41) - ----------------------------------- ------ ------- ------ ------- Net trade receivables 1,149 4 1,171 4 Amounts owed by associates 5 1 - 1 Other receivables 63 54 151 100 Prepayments and accrued income 126 7 102 12 ----------------------------------- ------ ------- ------ ------- Trade and other receivables 1,343 66 1,424 117 ----------------------------------- ------ ------- ------ ------- The book value of net trade receivables approximates to their fair value because of the short-term nature of the receivables. There is limited concentration of credit risk with respect to trade receivables due to the diverse and unrelated nature of the Group's customer base. Trade receivable days for the continuing business at 30 September 2007 were 50 days (2006: 51 days). 17 Inventories Inventories 2007 2006 £m £m -------------------------------------------- ------ ------- Food and beverage inventories 135 154 Other inventories 44 58 -------------------------------------------- ------ ------- Inventories 179 212 -------------------------------------------- ------ ------- 18 Cash and cash equivalents Cash and cash equivalents 2007 2006 £m £m -------------------------------------------- ------ ------- Cash at bank and in hand 140 153 Short-term bank deposits 699 695 -------------------------------------------- ------ ------ Cash and cash equivalents 839 848 -------------------------------------------- ------ ------ Cash and cash equivalents by currency 2007 2006 £m £m -------------------------------------------- ------ ------- Sterling 685 741 US dollar 45 20 Euro 35 53 Japanese yen 5 3 Other 69 31 -------------------------------------------- ------ ------ Cash and cash equivalents 839 848 -------------------------------------------- ------ ------ 19 Short-term and long-term borrowings 2007 2006 --------------- ----------------- Short-term and long-term Current Non-current Total Current Non-current Total borrowings £m £m £m £m £m £m ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ Bank overdrafts 118 - 118 56 - 56 Bank loans 19 17 36 15 22 37 Loan notes - 380 380 33 421 454 Bonds - 1,019 1,019 - 1,350 1,350 ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ Borrowings (excluding finance leases) 137 1,416 1,553 104 1,793 1,897 Finance leases 14 36 50 15 42 57 ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ Borrowings (including finance leases) 151 1,452 1,603 119 1,835 1,954 ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ Bank overdrafts principally arise as a result of uncleared transactions. Interest on bank overdrafts is at the relevant money market rates. All amounts due under bonds, loan notes and bank facilities are shown net of unamortised issue costs. Bonds are unsecured and are comprised as follows: Bonds Nominal Redeemable Interest value ------------------------- --- ------ ------ --- ----- ------ ------ ------ Euro Eurobond €300m 2009 6.0% Sterling Eurobond £200m 2010 7.125% Sterling Eurobond £325m 2012 6.375% Sterling Eurobond £250m 2014 7.0% ------------------------- --- ------ ------ --- ----- ------ ------ ------ The bond redeemable in 2014 is recorded at its fair value to the Group on acquisition. The Group has fixed term, fixed interest private placements totalling US$769 million (£377 million) at interest rates between 5.11% and 7.955%. US$15 million (£7 million) is repayable in 5 to 10 years. The carrying value of these loan notes is £380m. Maturity profile of borrowings (excluding finance leases) 2007 2006 £m £m ------------------------- --- ------ ------ --- ----- ------ ------ ------ Within 1 year, or on demand 137 104 Between 1 and 2 years 292 7 Between 2 and 3 years 224 606 Between 3 and 4 years 63 228 Between 4 and 5 years 550 72 In more than 5 years 287 880 ------------------------- --- ------ ------ --- ------ --- ------ ------ ------ Borrowings (excluding finance leases) 1,553 1,897 ------------------------- --- ------ ------ --- ------ --- ------ ------ ------ 2007 2006 ------------ ----------- Carrying Fair Carrying Fair Carrying value/fair value value value value value of borrowings (excluding finance leases) £m £m £m £m ------------------------- --- ------ ------ ------ --- ------ ------ --- ------ €300m/€750m Eurobond 2009* 212 214 519 531 £200m Eurobond 2010 201 204 204 208 £325m Eurobond 2012 328 324 339 333 £250m Eurobond 2014 278 258 288 266 US private placements 380 392 448 478 Other loan notes - - 6 6 Bank loans 36 37 37 36 Overdrafts 118 118 56 56 ------------------------- --- ------ ------ ------ --- ------ ------ --- ------ Borrowings (excluding finance leases) 1,553 1,547 1,897 1,914 ------------------------- --- ------ ------ ------ --- ------ ------ --- ------ *€450m of Eurobonds due in 2009 were repurchased during the current year leaving €300m outstanding. 2007 2006 ------------ ----------- Present Present Present value of finance lease Gross value Gross value liabilities £m £m £m £m ------------------------- --- ------ ------ ------ --- ------ ------ --- ------ Finance lease payments falling due: Within 1 year 16 14 18 15 In 2 to 5 years 32 28 35 33 In more than 5 years 9 8 11 9 ------------------------- --- ------ ------ ------ --- ------ ------ ------ 57 50 64 57 Less: future finance charges (7) - (7) - ------------------------- --- ------ ------ ------ --- ------ ------ --- ------ Present value of finance lease liabilities 50 50 57 57 ------------------------- --- ------ ------ ------ --- ------ ------ --- ------ 2007 2006 --------------- ----------------- Finance Finance Borrowings by currency Borrowings leases Total Borrowings leases Total £m £m £m £m £m £m ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ Sterling 831 1 832 849 3 852 US dollar 452 24 476 481 25 506 Euro 237 21 258 525 22 547 Japanese yen 16 - 16 22 1 23 Other 17 4 21 20 6 26 ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ Total 1,553 50 1,603 1,897 57 1,954 ------------------------- ------ ------ --- ------ ------ --- ------ --- ------ The Group had the following undrawn committed facilities available at 30 September 2007, in respect of which all conditions precedent had then been met: Undrawn committed facilities 2007 2006 £m £m ------------------------- --- ------ ------ --- ------ --- ------ ------ ------ Expiring between 2 and 5 years 630 960 ------------------------- --- ------ ------ --- ------ --- ------ ------ ------ 20 Derivative financial instruments The Group continues to manage its interest rate and foreign currency exposure in accordance with the policies set out in the Company's Annual Report. The Group's financial instruments comprise cash, borrowings, receivables and payables that are used to finance the Group's operations. The Group also uses derivatives, principally interest rate and cross currency swaps and forward currency contracts, to manage interest rate and currency risks arising from the Group's operations. The Group does not trade in financial instruments. The Group's treasury policies are designed to mitigate the impact of fluctuations in interest rates and exchange rates and to manage the Group's financial risks. The Board approves any changes to the policies. 21 Trade and other payables 2007 2006 ----------- ----------- Trade and other payables Current Non-current Current Non-current £m £m £m £m ------------------------------------ ------ ------ ------ ------ Trade payables 660 4 777 4 Amounts owed to associates - - - - Social security and other taxes 190 - 176 - Other payables 169 18 210 28 Deferred consideration on acquisitions 3 3 20 3 Liability on put options held by minority equity partners - 8 9 8 Accruals and deferred income 811 3 798 3 ------------------------------------ ------ ------ ------ ------ Trade and other payables 1,833 36 1,990 46 ------------------------------------ ------ ------ ------ ------ The directors consider that the carrying amount of trade payables approximates to their fair value. Trade payable days for the continuing business at 30 September 2007 were 48 days (2006: 48 days). 22 Provisions Provisions in respect of discontinued Onerous Legal and disposed and other Provisions Insurance businesses contracts claims Environmental Total £m £m £m £m £m £m --------------------------- ------ ------- ------ ------ ------ --- ------ At 1 October 2005 59 - 24 59 11 153 Reclassified 67 - 14 (10) (1) 70 Expenditure in the year (40) (1) (1) (5) - (47) Charged to income statement 45 109 8 - - 162 Credited to income statement - - (1) (5) - (6) Transferred to post-employmen t benefit obligations (20) - - - - (20) Currency adjustment (4) - - (1) - (5) --------------------------- ------ ------- ------ ------ ------ ------ At 30 September 2006 107 108 44 38 10 307 --------------------------- ------ ------- ------ ------ ------ ------ At 1 October 2006 107 108 44 38 10 307 Reclassified - - 3 4 (4) 3 Expenditure in the year (7) (14) (6) - (1) (28) Charged to income statement 19 108 5 30 3 165 Credited to income statement - (2) - - - (2) Transferred to post-employment - - - - - - benefit obligations Currency adjustment (7) - - (1) - (8) --------------------------- ------ ------- ------ ------ ------ ------ At 30 September 2007 112 200 46 71 8 437 --------------------------- ------ ------- ------ ------ ------ ------ Provisions 2007 2006 £m £m --------------------------- ------ ------- ------ ------ ------ ------ Non-current 351 242 Current 86 65 --------------------------- ------ ------- ------ ------ ------ ------ Total provisions 437 307 --------------------------- ------ ------- ------ ------ ------ ------ Insurance relates to the costs of self-funded insurance schemes and is essentially long-term in nature. Provisions in respect of discontinued and disposed businesses relate to estimated amounts payable in connection with onerous contracts and claims arising from disposals. The final amount payable remains uncertain as, at the date of approval of these financial statements, there remains a further period during which claims may be received. The timing of any settlement will depend upon the nature and extent of claims received. Onerous contracts represent the liabilities in respect of short-term and long-term leases on unoccupied properties and other contracts lasting under five years. Legal and other claims relate principally to provisions for the estimated cost of litigation and sundry other claims. The timing of the settlement of these claims is uncertain. Environmental provisions are in respect of potential 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. These provisions are expected to be utilised as operating sites are disposed of or as environmental matters are resolved. 23 Post-employment benefit obligations Pension schemes operated The Group operates a number of pension arrangements throughout the world which have been developed in accordance with statutory requirements and local customs and practices. The majority of schemes are self administered and the schemes' assets are held independently of the Group's finances. Pension costs are assessed in accordance with the advice of independent, professionally qualified actuaries. The Group makes employer contributions to the various schemes in existence within the range of 6% - 30% of pensionable salaries. The contributions payable for defined contribution schemes of £36 million (2006: £33 million) have been fully expensed against profits in the current year. Total pension costs/(credits) recognised in the income statement 2007 2006 --------------------- --------------------- UK USA Other Total UK USA Other Total £m £m £m £m £m £m £m £m ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ Current service cost 12 3 12 27 19 3 16 38 Past service credit - (1) - (1) - (2) - (2) Curtailment credit - - (6) (6) (6) (6) - (12) ------------ --- --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ Charged/ (credited) to operating expenses 12 2 6 20 13 (5) 16 24 ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ Amount charged to pension liability 64 8 8 80 59 9 8 76 Expected return on plan assets (67) (5) (6) (78) (54) (5) (6) (65) ------------ --- --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ (Credited) / charged to finance costs (3) 3 2 2 5 4 2 11 -------------- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ Total pension costs/(credits) 9 5 8 22 18 (1) 18 35 ------------ --- --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ The total pension costs/(credits) shown above relate to both continuing and discontinued business. --------------------- --------------------- Fair value of pension plan assets recognised 2007 2006 in the balance sheet --------------------- --------------------- UK USA Other Total UK USA Other Total £m £m £m £m £m £m £m £m ------ ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ At 1 October 1,174 68 166 1,408 812 71 157 1,040 Currency adjustment - (6) 1 (5) - (4) (8) (12) Expected return on plan assets 67 5 6 78 54 5 6 65 Actuarial gain* 14 5 3 22 27 - 12 39 Employee contributions 4 - 4 8 5 - 4 9 Employer contributions 68 17 25 110 314 5 10 329 Asset transfer from Granada scheme - - - - 3 - - 3 Benefits paid (47) (20) (13) (80) (41) (9) (6) (56) Merger of Vendepac Scheme into the UK Scheme 10 - (10) - - - - - Disposals & plan settlements - - (99) (99) - - (9) (9) ------------- --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ At 30 September 1,290 69 83 1,442 1,174 68 166 1,408 ------------ --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------ Present value of defined benefit obligations recognised in the balance sheet 2007 2006 --------------------- ---------------------- UK USA Other Total UK USA Other Total £m £m £m £m £m £m £m £m ------ ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------- At 1 October 1,269 155 266 1,690 1,179 166 250 1,595 Currency adjustment - (11) 2 (9) - (9) (9) (18) Current service cost 12 3 12 27 19 3 16 38 Past service cost - (1) - (1) - (2) - (2) Curtailment credit - - (6) (6) (6) (6) - (12) Amount charged to plan liabilities 64 8 8 80 59 9 8 76 Actuarial (gain)/loss* (84) (5) (19) (108) 55 5 16 76 Employee contributions 4 - 4 8 5 - 4 9 Benefits paid (47) (20) (13) (80) (41) (9) (6) (56) Benefits paid by the Group - - - - (1) - (6) (7) Merger of Vendepac Scheme into the UK Scheme 10 - (10) - - - - - Disposals and plan settlements - - (103) (103) - - (23) (23) Other balance sheet transfers - - 14 14 - - 20 20 Reclassified - - - - - (2) (4) (6) ------------ --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------- At 30 September 1,228 129 155 1,512 1,269 155 266 1,690 ------------ --- ------ --- ------ --- ------ --- ------ ------ --- ------ --- ------ --- ------- The history of experience adjustments is as follows. In accordance with the transitional provisions for the amendments to IAS 19 'Employee Benefits' issued on 16 December 2004, the disclosures above are determined prospectively from the 2005 reporting period. Experience adjustments 2007 2006 2005 £m £m £m --------------- --- --- --- ------ --- ------ --- ------ --- ------ --- ---- ------ ------ ------ Present value of defined benefit plan liabilities 1,512 1,690 1,595 Fair value of plan assets (1,442) (1,408) (1,040) Surplus not recognised in accordance with IFRIC 14* 92 - - --------------- --- --- --- ------ --- ------ --- ------ --- ------ --- ---- ------ ------ ------ Net deficit reported 162 282 555 --------------- --- --- --- ------ --- ------ --- ------ --- ------ --- ---- ------ ------ ------ Experience adjustments on plan liabilities - (loss) (15) (14) (8) --------------- --- --- --- ------ --- ------ --- ------ --- ------ --- ---- ------ ------ ------ Experience adjustments on plan assets - gain 22 39 75 --------------- --- --- --- ------ --- ------ --- ------ --- ------ --- ---- ------ ------ ------ The Group made total contributions of £110 million in the year (2006: £329 million) including special contributions of disposal proceeds to pension plans of £45 million (2006: £280 million) and expects to make regular ongoing contributions of £38 million in 2008. The expected return on plan assets is based on market expectations at the beginning of the period. The actual return on assets was £100 million (2006: £104 million). The cumulative actuarial loss recognised in the statement of recognised income and expense was £156 million (2006: £194 million). An actuarial gain of £38 million (2006: actuarial loss £37 million) was recognised during the year. The deficit would have reduced to £70 million if the full 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 actuarial gain/loss reported in the Consolidated statement of income and expense is the sum of the items marked with an asterisk. 24 Called up share capital During the year 4,463,879 options were granted under the Compass Group Management Share Option Plan. All options were granted over the Company's ordinary shares and the grant price was equivalent to the market value of the Company's shares at the date of grant. No options were granted under any of the Company's other share option plans. The Company commenced an on market share buy-back programme following the disposal of Select Service Partner in June 2006. This programme was extended following the disposal of Selecta in July 2007. During the year, a total of 181,407,434 ordinary shares of 10p each were repurchased for consideration of £575 million and cancelled. 2007 2006 -------------- ---------------- Authorised and allotted share Number of Number of capital shares shares ---------- ---------- £m £m ----------------------- ------ ---------- ------ ---------- ------- Authorised: - Ordinary shares of 10p each 3,000,010,000 300 3,000,010,000 300 ----------------------- ------ ---------- ------ ---------- ------- Allotted and fully paid: - Ordinary shares of 10p each 1,926,996,323 193 2,098,723,901 210 ----------------------- ------ ---------- ------ ---------- ------- 2007 2006 -------------- ---------------- Number of Number of shares shares ----------------------- ------ ---------- ------ ---------- ------- Ordinary shares of 10p each allotted as at 1 October 2,098,723,901 2,155,661,135 Ordinary shares allotted during the year on exercise of share options 9,679,856 743,766 Repurchase of ordinary share capital (181,407,434) (57,681,000) ----------------------- ------ ---------- ------ ---------- ------- Ordinary shares of 10p each allotted as at 30 September 1,926,996,323 2,098,723,901 ----------------------- ------ ---------- ------ ---------- ------- This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW FR FVLBLDFBFFBB

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