Interim Results

Compass Group PLC 21 May 2003 21st May 2003 INTERIM UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2003 COMPASS GROUP PLC: CONTINUING STRONG PERFORMANCE 2003 2002 Change Turnover from continuing activities (£m) 5,450 4,847 +12% Total operating profit from continuing activities (1) (£m) 327 290 +13% Free cash flow (£m) 83 23 £60m Basic earnings per share - reported 2.5p 2.2p +14% - underlying (2) 8.1p 7.1p +14% Interim dividend per share 2.7p 2.1p +29% Net debt (£m) 2,338 2,998 £660m Highlights • Like for like turnover growth up 6%. • Like for like margin up 20 basis points. • Underlying basic earnings per share up 14%. • Significant increase in free cash flow, up £60 million to £83 million. • Interim dividend up 29%. • Disposal of Little Chef and Travelodge for £712 million and on-going share buyback programme of up to £300 million. • Contract retention rate of 96%. • New business wins in the half year representing £600 million in annual turnover, with clients such as Met Life, BAA and the Art Institute of Chicago. (1) Total operating profit excludes goodwill amortisation of £130 million (2002: £117 million) and exceptional items of £nil (2002: £15 million). (2) Underlying basic earnings per share has been presented to highlight the results excluding discontinued activities, translation rate movements, goodwill amortisation and exceptional items as detailed under Financial Performance (see attached). Michael J. Bailey, Chief Executive 'This has been another period of continued strong growth by Compass Group. The £600 million of new business wins and a contract retention rate of 96% reinforces our confidence in delivering at least 6% like for like turnover growth for the full year. Looking ahead our top priorities are to continue to deliver like for like turnover growth and margin improvement, to build upon last year's strong free cash flow performance and to maintain our focus on enhancing return on capital employed.' Francis Mackay, Chairman 'We have held firm to our strategic focus on foodservice and vending. Our unique business model, employing sectorisation, brand ownership and international coverage, allied to our scale and global purchasing strength, continues to help us retain clients, whilst attracting new ones as the trend to outsourcing continues.' Enquiries: Compass Group PLC Michael J Bailey Group Chief Executive 020 7404 5959 or 01932 573000 Andrew Lynch Group Finance Director 020 7404 5959 or 01932 573000 Brunswick Group Ltd Timothy Grey 020 7404 5959 Website www.compass-group.com COMPASS GROUP PLC FINANCIAL PERFORMANCE The Group is pleased to report that it has enjoyed a very successful half year achieving increased turnover and operating profits. Reported turnover from continuing activities grew by 12% to £5,450 million, whilst like for like turnover growth was 6%. The Group continues to deliver significant new business gains and a strong contract retention rate of 96% demonstrating the continuing focus on improving client and customer satisfaction levels and the benefit of our employee development and retention programmes. This continuing focus on new business and contract retention is reflected in the announcement today of major new contract gains and the retention of some significant accounts. These are detailed in the notes section. New business gains in the first half of the year amount to £600 million in annual turnover. This represents an 11% increase in turnover on an annualised basis. Total operating profit from continuing activities (before goodwill amortisation and exceptional items) was up 13% at £327 million (2002:£290 million). On a like for like basis, total operating profit before exceptional items and goodwill amortisation increased by 11%. Like for like operating margins in all divisions continue to improve. The like for like increase in the Group's overall margin for the half year is 20 basis points, 10 basis points in North America, 10 basis points in Continental Europe and the rest of the world, and 60 basis points in the UK. Margins within the UK business continue to benefit from the on-going Granada merger synergies. Profit before taxation, goodwill amortisation and exceptional items was up 4% at £269 million (2002:£258 million) when compared with the first half of last year, the increase having been held back by the inclusion of only three months trading results from Little Chef and Travelodge prior to their disposal compared to a full six month's contribution in 2002. Reported basic earnings per share for the six months to 31 March 2003 is 2.5 pence, an increase of 14% on 2002's first half reported earnings per share of 2.2 pence. Adjusting earnings per share for discontinued activities, goodwill amortisation, exceptional items and translation rate movements results in underlying earnings per share for the six months to 31 March 2003 of 8.1 pence and 7.1 pence for the first half of 2002, an increase of 14%. Little Chef and Travelodge were sold with effect from the end of December 2002 and contributed £16 million to total operating profit for the three months period October to December 2002 (£43 million total operating profit for the six months to 31 March 2002). These have been disclosed separately as discontinued activities. After interest and tax, it is estimated that Little Chef and Travelodge contributed approximately £5 million and £18 million to attributable profit for basic earnings per share in the six months to 31 March 2003 and 2002 respectively. Applying 2003's translation rates to the first half of 2002 reduces that half year's attributable profit by £3 million. Free cash flow for the half year is £83 million, a £60 million increase over the first half of 2002. The Group's business profile is such that its cash flows are seasonal and free cash flow generation will be second-half weighted, as in previous years. Net debt as at 31 March 2003 was £2,338 million. Divisional Performance 2003 Reported Like £m Growth % for Like Growth % Turnover UK (continuing activities) 1,208 10 5 Continental Europe and the rest of the world 2,196 25 6 North America 1,808 0 7 ________ ________ _________ 5,212 12 6 ________ ________ ========= Fuel 238 23 ________ ________ 5,450 12 Discontinued activities (UK) 80 (52) ________ ________ Total 5,530 10 ======= ======= Total Operating Profit UK (continuing activities) 125 18 16 Continental Europe and the rest of the world 110 17 8 North America 83 (3) 9 Associates 9 125 0 ________ ________ 327 13 11 ======== Discontinued activities (UK) 16 (63) ________ ________ Total 343 3 ======== ======== Like for like growth adjusts for acquisitions (by excluding current year acquisitions and by including a full six months in respect of prior year acquisitions), disposals (which are excluded from both periods) and exchange rate movements and compares the results against the half-year for 2002, which have been prepared on a consistent basis. Total operating profit is before goodwill amortisation of £130 million. Fuel turnover comprises £220 million in the UK and £18 million in CE&ROW. UK The UK has had a good first half of the year despite continuing weakness in rail and air passenger numbers and the impact of a more challenging economic environment on business and industry. Strong new business gains in education along with continued progress on margin development contributed to a solid first half performance. Turnover from continuing operations (excluding fuel) of £1,208 million was 10% up on 2002 and operating profit excluding associates (before goodwill amortisation and exceptional items) of £125 million was 18% up on the preceding year (2002: £106 million). On a like for like basis turnover and operating profit increased by 5% and 16% respectively. The roll-out of Marks & Spencer Simply Foods across the UK rail network continues with five stores now open, two due to open imminently and five more scheduled to open before the year end. Where Marks & Spencer Simply Foods has replaced an existing convenience store, weekly sales have increased by an average of 400%. North America North America had an excellent first half with double-digit like for like turnover growth in healthcare and education. Despite the weakness in the American economy, like for like turnover growth in business and industry was up 4% and vending was flat. Reported turnover of £1,808 million and operating profit (before goodwill amortisation and exceptional items) of £83 million are flat and down 3% respectively when compared with the first half of 2002. This reflects the adverse translation effect of the US dollar which has moved from 1.37 to 1.58. However, the business is materially protected from any adverse economic or cash effect through the Group's policy of matching its principal cashflows by currency to borrowings in the same currency. Using 2003's translation rates to restate 2002, turnover and operating profit grew by 15% and 12% respectively. The year on year effect of acquisitions has contributed 8% and 3% to turnover and operating profit respectively. On a like for like basis turnover and operating profit increased by 7% and 9% respectively. Margin improvement initiatives, including the rollout of Au Bon Pain products into business and industry sites and the introduction by Canteen of new technology to improve route planning, are beginning to take effect. Continental Europe and the rest of the world Despite the challenging global environment, the division had an excellent half year with strong new business gains and a solid performance in concession operations. Turnover (excluding fuel) of £2,196 million represented an increase of 25% over the previous year (2002: £1,753 million) and operating profit excluding associates (before goodwill amortisation and exceptional items) of £110 million was up 17% from £94 million in the preceding year. The translation effect of exchange rate movements added 2% to turnover and 3% to operating profit growth. The year on year effect of acquisitions, principally Seiyo Foods and Onama, has contributed 17% and 6% to turnover and operating profit respectively. On a like for like basis turnover and operating profit increased by 6% and 8% respectively. In Italy, the integration of the existing Compass Group business into Onama is on track. The Group has also formed a joint venture with Cremonini S.p.A. which will bid for concessions using the Moto brand on the Italian motorway network. The expiration of a large number of motorway service area concessions in Italy over the next two years presents a major opportunity for the Group to leverage its UK experience in order to establish a significant presence in this important market. In Japan, the Group has completed the organisational restructure of Seiyo Foods and has cancelled a number of loss making contracts. The Group has also increased its holding in Seiyo Foods from 68% as at 30 September 2002 to 79% as at 31 March 2003 for a cost of £35 million and has purchased a number of small minority interests in its subsidiary companies for £5 million. The Group is pleased with the sales performance in the first half, with significant new business gains achieved. Weakness in the German economy is creating a difficult trading environment. France continues to show steady progress following the introduction of a new management team a year ago. Strong performances in Spain and in the defence, off-shore and remote site sector have contributed to the strong divisional performance. Disposals On 4 February 2003, the Group successfully completed the sale of Little Chef and Travelodge for a total consideration of £712 million. Proceeds were used to reduce borrowings and fund an on market share buy back programme of up to £300 million, which began on 4 February 2003. As of 31 March 2003, the Group had purchased 19,501,000 shares at a total cost of £55 million, of which £45 million has been paid for in the half year. Acquisitions The Group expects that the aggregate value of acquisitions made in the current financial year will be approximately £200 million, including the acquisition in Italy of a 60% stake in Onama S.p.A. The Group's strategic focus continues to be on the organic development of its core foodservice and vending businesses. Cash Flow The Group is committed to building on the strong free cash flow performance achieved in 2002 notwithstanding the loss of some £50 million of free cash flow generated by Little Chef and Travelodge. Free cash flow generation in the first half of the year has increased to £83 million (2002: £23 million). Adjusting for cash flows in respect of discontinued activities and exceptional items, free cash flow for the half year increased from £30 million to £73 million. Working capital from continuing activities absorbed £105 million (2002 : £106 million) prior to taking into account the seasonal working capital absorbed by Little Chef and Travelodge for the three months prior to their disposal of £17 million. Acquisition payments of £189 million comprise £137 million in respect of current year acquisitions (before debt acquired with subsidiaries of £18 million), £40 million purchasing further shares in the Seiyo Foods group and £12 million of deferred consideration paid. Net proceeds from businesses held for resale generated £31 million in the first half of the year comprising the final £35 million in respect of the sale of Heritage Hotels and £4 million of costs paid. The disposal of Little Chef and Travelodge has realised a net £661 million in the half year. The net cash inflow for the half year is £542 million, before paying £45 million for shares repurchased, £18 million of debt acquired with subsidiaries and a translation loss on net debt for the half year of £116 million principally as a result of the Euro moving from 1.59 to 1.45 over the half year. Closing net debt as at 31 March 2003 was £2,338 million. The average maturity profile, following the recent refinancing of the Group's principal banking facility, is 61/2 years. This refinancing has been concluded with no increase in the cost of debt. Exceptional items and goodwill amortisation The net exceptional item for the half year is £1 million comprising the loss on disposal of Little Chef and Travelodge of £27 million, associated tax of £7 million and an exceptional tax receipt of £33 million. The goodwill amortisation charge for the half year is £130 million. Taxation The tax rate for the first half of 2003 is 26.0% of the profit on ordinary activities before taxation, goodwill amortisation and exceptional items. The Directors believe this to be a prudent estimate of the full year rate. The current tax charge of £61 million (excluding deferred tax, prior year items and exceptional items) is 22.7% of profit on ordinary activities before taxation, goodwill amortisation and exceptional items. The main reasons for this being below the UK corporate tax rate of 30% are the utilisation of tax losses brought forward, 6%, the tax deductibility of part of the Group's goodwill amortisation, 2%, and capital allowances in excess of depreciation, 1%, offset by higher overseas tax rates, 2%. The exceptional tax credit of £26 million consists of a charge of £7 million arising on the disposal of the Little Chef and Travelodge businesses and a prior year credit of £33 million that relates to the recovery of tax not previously recognised in respect of acquired businesses where the hindsight period for adjustments to goodwill has passed. Dividend An interim dividend of 2.7 pence per share has been declared on the existing share capital, an increase of 29% over last year's figure. This reflects the step change in dividends announced in December 2002. The increase in the total dividends for the year is expected to be broadly in line with the increase in underlying earnings with the interim dividend representing approximately one-third of the total annual dividend. Payment of the interim dividend will be made on 3 October 2003 to shareholders on the register at the close of business on 22 August 2003. The ex dividend date will be 20 August 2003. Outlook The strong first half performance, particularly in the healthcare and education sectors, highlights the strength of the Group's business model even though sustained weakness in the global economy continues to create challenging trading conditions. International travel has been further weakened by the war in Iraq and the SARS outbreak in South East Asia and Canada, however, these areas account for less than 2% of the Group's turnover. The Group's broad geographic spread and business sector portfolio means that it is not particularly exposed to any one country, sector or client whilst the Group's unique business model continues to deliver solid like for like turnover growth, continued margin improvement and strong free cash flow generation. The Group's focus on organic turnover growth allied to a contract retention rate of 96% and a strong pipeline of new business gives confidence that the Group is on track to deliver at least 6% like for like turnover growth this year as well as giving a solid base on which to build for 2004. MJ Bailey FH Mackay Chief Executive Chairman NOTES (a) CONTRACT GAINS AND RENEWALS Today the Group is pleased to announce the following new contracts: North America • Met Life: a six-year contract worth over $10 million in annual revenues to cater for 13,500 employees of the leading American insurance company in 20 locations. • P3: a contract with The Healthcare Infrastructure Company of Canada for the new William Osler Health Centre in Brampton Ontario worth over $20 million in annual revenues. • University of North Carolina - Charlotte: a ten-year contract worth $10 million in annual revenues. Other gains in the education sector include: University of San Francisco, University of Texas - San Antonio, Tennessee Tech and Ottawa University with combined annual revenues of $18 million. • Art Institute of Chicago: a five-year contract worth $8 million in annual revenues. UK • BAA: Eurest has been awarded a five-year contract worth £4 million in annual turnover by BAA to provide foodservice for 5,000 construction workers at Heathrow's Terminal 5. • Belfast International Airport: Select Service Partner (SSP) has been awarded a new twelve-year contract with annual turnover of £13 million and a five-year contract with Mersey Ferries with annual revenues of £0.5 million. • Medway Council: Scolarest have been awarded a five-year contract by Medway Council for 84 schools in the Medway area and a three-year contract by the London Borough of Camden for 55 schools with combined annual turnover of nearly £5 million. Continental Europe and the rest of the world • Coega Development Corporation: Eurest Support Services, ESS, has been awarded a five-year contract in South Africa worth over £4 million in annual revenues. • Portuguese State Hospitals: a new contract with annual revenues of €12 million. • ANE/Renfe: Rail Gourmet has renewed this important contract for a further 18 months with annual revenues of €17 million. • KIP Karachaganak International Oil Company: in Kazakhstan, ESS has been awarded a three-year contract worth £4 million in annual revenues. • Wincor Nixdorf: in Germany, Eurest has been awarded a contract with this leading IT supplier worth €4 million in annual revenues. Eurest has also renewed contracts with SAP AG, Dresdner Bank, Flughafen Munchen and Commerzleasing und Immobilien with combined annual revenues of €6 million. • Cegetel: Eurest has won a contract with this leading French telecoms company worth over €2 million in annual revenues. • Qualisante Group: Medirest has won a previously self-operated contract with France's leading private retirement home group worth €5 million in annual revenues. • Sevran and Ville de Toulon: Scolarest in France has been awarded contracts with the cities of Sevran and Toulon with combined annual revenues of over €4 million. • Conoco/Phillips and ExxonMobil: ESS has renewed existing contracts in Venezuela with combined annual revenues of €4 million. • Salen Conference: Eurest has renewed its contract with Salen Conference in Stockholm for a further eight years with annual revenues of over £1 million and has been awarded a three-year contract with the Forsmark Nuclear Power Plant worth £0.5 million in annual revenues. • Spare Banken 1 Group: in Norway, Eurest has been awarded a five-year contract worth £1 million in annual revenues. • Royal New Zealand Air Force: a three-year contract worth over £1.5 million annually. Summary of previously announced contract gains and renewals UK Business and Industry • BT: a seven-year contract renewal, worth £25 million in annual turnover, and a four-year contract with KPMG LLP worth over £7 million in annual turnover. • Orange: a new three-year deal with an annual turnover of £4.5 million providing catering for 10,000 employees across 11 sites. • Computer Associates: a new five-year foodservice contract covering the company's Slough-based European headquarters plus 14 other sites across Europe. • The Sanctuary: a three-year contract to manage the catering services for the relaxation spa, The Sanctuary in London's Covent Garden, with annual turnover of £0.75 million. Leisure & Hospitality • Imperial War Museum & Old Royal Naval College, Greenwich: two five-year contracts with a combined annual turnover of more than £2 million. Education • London Borough of Richmond upon Thames: Scolarest won a five-year extension to its contract providing meals to 40 primary and three special schools worth over £1 million in annual turnover. Richmond's school catering service was praised as a key strength in an Ofsted report on the Local Education Authority released in January. Healthcare • Royal National Orthopaedic Hospital NHS Trust: Medirest has retained the contract to provide catering, housekeeping, portering and security for a further five years with an annual turnover of over £2.5 million. Retail & Travel • Bournemouth Airport: SSP has won a new ten-year contract worth £2 million in annual turnover and a new seven-year contract at Derry Airport, worth over £0.5 million in annual turnover. North America Business and Industry • Best Buy: the electrical retailer has awarded Eurest a ten-year contract for its corporate headquarters with annual revenues of $4 million. • Exxon Mobil, Pfizer and Suncor: have renewed contracts worth over $28 million in annual revenues. Healthcare • Children's Hospital, Washington D.C.: Morrison has been awarded a new ten-year contract with the Children's Hospital in Washington D.C. worth over $5 million in annual revenues. • Simpson House in Philadelphia and Simpson Meadows in Downington: a three-year contract worth $3 million in annual revenues. Education • Morgan House at Baylor University: has awarded Chartwells a five-year contract worth over $10 million in annual revenues. • University of Nevada and the University of Wisconsin: with combined annual turnover of $12 million. Sports and Events • Wachovia Golf: Restaurant Associates have been awarded a four-year contract with annual revenues of $3 million for the Wachovia golf tournament in Charlotte, North Carolina. Continental Europe and the rest of the world Business and Industry • Tele-Danmark: Eurest has won a four-year contract with TDC (Tele-Danmark) for 11 restaurants with annual revenues of £3 million. • European Commission: in Belgium, Eurest has been awarded a three-year contract with annual revenues of €18 million to cater for staff at the European Commission in Brussels. • TPG: in the Netherlands, Eurest has been awarded a five-year contract with annual revenues of €20 million by TPG the holding company for The Royal TPG Post and TNT. • Deutsche Telecom: In Germany, Eurest has won contracts with T-System (part of Deutsche Telecom), Philip Morris and four previously self-operated restaurants with DZ Bank with combined annual revenues of €6 million. Education • ROC, Amsterdam: Selecta Netherlands has signed a five-year contract with the ROC of Amsterdam, the biggest schools' association in Europe, worth more than €2 million annually. Selecta will serve more than 40,000 students with coffee, cold drinks and snacks following the installation of approximately 400 machines. Presentation and teleconference: • A presentation to analysts will take place at 9.30am (BST) on Wednesday 21 May 2003 at: The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. • A teleconference with investors, including a webcast of the presentation slides will start at 9.30am (BST) on Wednesday 21 May 2003. • To participate in the teleconference dial: +44 (0)20 7162 0179. • By dialing this number you will be requesting participation in any discussion of the matters referred to in the analysts' presentation and of any other matters raised at the presentation (including matters raised in questions or referred to in the answers to questions). • To access the web presentation: http://www.genesysrichmedia.com/eventstream/compassmc/21052003/ • A conference call for US analysts and investors will take place at 17:00 (BST) / 12:00 New York time on Wednesday 21 May 2003. To participate in the teleconference dial: +1 952 556 2827 • By dialing this number you will be requesting participation in any discussion of the matters referred to in the analysts' presentation and of any other matters raised at the presentation (including matters raised in questions or referred to in the answers to questions). Synchronised slides can be accessed on the internet at: http://www.genesysrichmedia.com/eventstream/compassmc/21052003/ • Interviews with Michael J Bailey, Group Chief Executive, and Andrew Lynch, Group Finance Director, in video /audio and text, are available at http://www.compass-group.com and http://www.cantos.com Enquiries: Compass Group PLC Michael J Bailey Group Chief Executive 020 7404 5959 or 01932 573000 Andrew Lynch Group Finance Director 020 7404 5959 or 01932 573000 Brunswick Group Ltd Timothy Grey 020 7404 5959 Website www.compass-group.com Compass Group is the world's largest foodservice company with annual revenues in excess of £10 billion. Compass Group has over 375,000 employees working in more than 90 countries around the world providing foodservice and hospitality. For more information visit www.compass-group.com INDEPENDENT REVIEW REPORT TO COMPASS GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 31 March 2003 which comprises the consolidated profit and loss account, the consolidated statement of total recognised gains and losses, the reconciliation of movements in consolidated shareholders' funds, the consolidated balance sheet, the consolidated cash flow statement, the notes to the consolidated cash flow statement and related notes 1 to 10. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 March 2003. Deloitte & Touche Chartered Accountants London 21 May 2003 COMPASS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 31 March 2003 Before goodwill Goodwill Half year Half year Year amortisation amortisation ended ended ended and and 31 Mar 31 Mar 30 Sep exceptional exceptional 2003 2002 2002 items items Reviewed Reviewed Audited £m £m £m £m £m ___________________________________________ ___________ ___________ ________ ________ ________ Turnover (note 2) Continuing activities 5,354 - 5,354 4,847 10,249 Acquisitions 96 - 96 - - ___________________________________________ ___________ ___________ ________ ________ _______ 5,450 - 5,450 4,847 10,249 Discontinued activities 80 - 80 167 368 ___________________________________________ ___________ ___________ ________ ________ _______ 5,530 - 5,530 5,014 10,617 Operating costs (5,196) (130) (5,326) (4,817) (10,096) ___________________________________________ ___________ ____________ ________ _________ ________ Operating profit (note 2) Continuing activities 315 (129) 186 154 416 Acquisitions 3 (1) 2 - - ___________________________________________ ___________ ____________ ________ _________ _______ 318 (130) 188 154 416 Discontinued activities 16 - 16 43 105 ___________________________________________ ___________ ____________ ________ ________ _______ 334 (130) 204 197 521 Share of operating profits of associated undertakings Continuing activities 9 - 9 4 12 ___________________________________________ ___________ ____________ ________ ________ _______ Total operating profit : Group and share of associated undertakings (note 2) 343 (130) 213 201 533 ___________________________________________ ___________ ____________ ________ ________ _______ Loss on disposal of business (note 3) - (27) (27) - - ___________________________________________ ___________ ____________ ________ ________ _______ Interest receivable and similar income 5 - 5 12 18 Interest payable and similar charges (79) - (79) (87) (169) ___________________________________________ ___________ ____________ ________ ________ _______ Net interest (74) - (74) (75) (151) ___________________________________________ ___________ ____________ ________ ________ _______ Profit on ordinary activities before taxation 269 (157) 112 126 382 Tax on profit on ordinary activities (note 4) (70) 26 (44) (68) (138) ___________________________________________ ___________ ____________ ________ ________ _______ Profit on ordinary activities after taxation 199 (131) 68 58 244 Equity minority interests (12) - (12) (8) (22) ___________________________________________ ___________ ____________ ________ ________ _______ Profit for the financial period 187 (131) 56 50 222 Equity dividends (note 5) (60) - (60) (47) (159) ___________________________________________ ___________ ____________ ________ ________ _______ Profit / (loss) for the period retained 127 (131) (4) 3 63 ___________________________________________ ___________ ___________ ________ ________ _______ Basic earnings per ordinary share (note 6) 2.5p 2.2p 10.0p ___________________________________________ ___________ ___________ ________ ________ _______ Basic earnings per ordinary share - excluding goodwill amortisation and exceptional items (note 6) 8.4p 8.0p 20.5p ___________________________________________ ___________ ___________ ________ ________ _______ Diluted earnings per ordinary share (note 6) 2.5p 2.2p 9.9p ___________________________________________ ___________ ___________ ________ ________ _______ Diluted earnings per ordinary share - excluding goodwill amortisation and exceptional items (note 6) 8.4p 7.9p 20.3p ___________________________________________ ___________ ___________ ________ ________ _______ The half year results are unaudited but have been reviewed by the auditors. The results for the year ended 30 September 2002 do not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985 and have been extracted from the Group's published accounts for that year which have been filed with the Registrar of Companies. The audit report on these accounts was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. COMPASS GROUP PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the six months ended 31 March 2003 Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited £m £m £m ______________________________________________________________ ___________ __________ __________ Profit for the financial period 56 50 222 Currency translation differences on foreign currency net investments (31) (46) (41) ______________________________________________________________ ___________ ___________ ___________ Total gains and losses recognised in the period 25 4 181 ______________________________________________________________ ___________ __________ __________ RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS For the six months ended 31 March 2003 Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited £m £m £m ______________________________________________________________ ___________ ___________ ___________ Profit for the financial period 56 50 222 Dividends (60) (47) (159) ______________________________________________________________ ___________ ___________ ___________ (4) 3 63 Currency translation differences on foreign currency net investments (31) (46) (41) Issue of shares 11 42 54 Shares to be issued (5) (23) (27) Repurchase of shares (55) - - ______________________________________________________________ ___________ ___________ ___________ Net (reduction in) / addition to shareholders' funds (84) (24) 49 Opening shareholders' funds 2,831 2,782 2,782 ______________________________________________________________ ___________ ___________ ___________ Closing shareholders' funds 2,747 2,758 2,831 ______________________________________________________________ ___________ ___________ ___________ COMPASS GROUP PLC CONSOLIDATED BALANCE SHEET As at 31 March 2003 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited Notes £m £m £m ____________________________________________________________________ ______ ___________ __________ ____________ Fixed assets intangible assets 4,568 4,424 4,522 Tangible assets 1,684 2,237 2,369 Investments 114 147 101 ____________________________________________________________________ ______ ___________ __________ ____________ 6,366 6,808 6,992 ____________________________________________________________________ ______ ___________ __________ ____________ Current assets Stocks 217 204 196 Debtors: amounts falling due within one year 1,574 1,359 1,258 amounts falling due after more than one year 358 370 293 Businesses held for resale - 122 35 Investments - 12 3 Cash at bank and in hand 281 402 406 ____________________________________________________________________ ______ ___________ __________ ____________ 2,430 2,469 2,191 Creditors: amounts falling due within one year (3,585) (2,935) (3,870) ____________________________________________________________________ ______ ___________ __________ ____________ Net current liabilities (1,155) (466) (1,679) ____________________________________________________________________ ______ ___________ __________ ____________ Total assets less current liabilities 5,211 6,342 5,313 Creditors: amounts falling due after more than one year (1,942) (3,087) (1,954) Provisions for liabilities and charges 7 (453) (400) (431) Equity minority interests (69) (97) (97) ____________________________________________________________________ ______ ___________ __________ ____________ Net assets 2,747 2,758 2,831 ____________________________________________________________________ ______ ___________ __________ ____________ Capital and reserves Called up share capital 222 223 223 Shares to be issued - 9 5 Share premium account 8 80 62 68 Capital redemption reserve 8 2 - - Merger reserve 8 4,170 4,170 4,170 Profit and loss account 8 (1,727) (1,706) (1,635) ____________________________________________________________________ ______ ___________ __________ ____________ Total equity shareholders' funds 2,747 2,758 2,831 ____________________________________________________________________ ______ ___________ __________ ____________ COMPASS GROUP PLC CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 March 2003 Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited £m £m £m £m £m £m _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net cash inflow from operating activities (note I) 309 328 925 Exceptional reorganisation costs - (15) (17) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net cash inflow after exceptional items 309 313 908 Dividends from associated undertakings 2 - 2 Returns on investments and servicing of finance Interest received 5 10 17 Interest paid (75) (86) (175) Interest element of finance lease rental payments (1) (2) (3) Dividends paid to minority interests (2) (1) (10) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net cash outflow from returns on investments and servicing of finance (73) (79) (171) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Taxation Tax received 36 16 31 Tax paid (40) (34) (73) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net tax paid (4) (18) (42) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Capital expenditure and financial investment Purchase of tangible fixed assets (169) (216) (384) Sale of tangible fixed assets 20 23 54 Purchase/sale of own shares, net (2) - 1 _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Total capital expenditure and financial investment (151) (193) (329) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Free cash flow 83 23 368 _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Acquisitions and disposals Purchase of subsidiary companies and investments in associated undertakings (189) (244) (406) Net proceeds from businesses held for resale 31 (15) 22 Sale of minority interest - - 7 Sale of subsidiary companies and associated undertakings 661 - 31 _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Total acquisitions and disposals 503 (259) (346) Equity dividends paid (47) (42) (126) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net cash inflow/(outflow) from investing activities 456 (301) (472) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net cash inflow/(outflow) before financing 539 (278) (104) Management of liquid resources: Sale of marketable securities 3 - 62 Financing Issue of ordinary share capital 6 6 5 Repurchase of share capital (45) - - Debt due within a year: Decrease in bank loans and loan notes (545) (492) (505) Debt due after a year: (Decrease)/increase in bank loans and loan notes (93) 481 289 Capital element of finance lease rentals (5) (7) (14) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Net cash outflow from financing (682) (12) (225) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Decrease in cash in the period (140) (290) (267) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Reconciliation of net cash flow to movement in net debt (note II) Decrease in cash in the period (140) (290) (267) Cash inflow from change in debt and lease finance 643 18 230 _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Change in net debt resulting from cash flows 503 (272) (37) Changes in finance leases and loans acquired with subsidiaries (23) (266) (281) Effect of foreign exchange rate changes (116) (70) 6 _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Movement in net debt in the period 364 (608) (312) Opening net debt (2,702) (2,390) (2,390) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ Closing net debt (2,338) (2,998) (2,702) _______________________________________________ _____ ___________ ______ ___________ ______ ___________ COMPASS GROUP PLC NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT For the six months ended 31 March 2003 Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited £m £m £m ____________________________________________________________________ ___________ ___________ ___________ I Reconciliation of operating profit to net cash inflow from operating activities: Operating profit before goodwill amortisation and exceptional items 343 333 805 Depreciation 119 113 230 ____________________________________________________________________ ___________ ___________ ___________ EBITDA 462 446 1,035 Loss/(profit) on disposal of fixed assets and businesses 1 - (9) Share of profit of associated undertakings (9) (4) (12) Decrease in provisions for liabilities and charges (23) (8) (61) Increase in stocks (12) (11) (4) Increase in debtors (108) (147) (98) (Decrease) / increase in creditors (2) 52 74 ____________________________________________________________________ ___________ ___________ ___________ Net cash inflow from operating activities 309 328 925 ____________________________________________________________________ ___________ ___________ ___________ Acquisitions (excluding Other Cash Exchange cash and non-cash 1 Oct 2002 flow movements overdrafts) changes 31 Mar 2003 £m £m £m £m £m £m ________________________________ __________ _________ ___________ ____________ ___________ ___________ II Analysis of net debt: Cash at bank and in hand 406 (143) 18 - - 281 Overdrafts (29) 3 (3) - - (29) __________________________ __________ _________ ___________ ____________ ___________ ___________ 377 (140) 15 - - 252 __________________________ __________ _________ ___________ ____________ ___________ ___________ Debt due within one year (1,217) 545 (34) (17) - (723) Debt due after one year (1,804) 93 (97) - - (1,808) Finance leases (58) 5 - (1) (5) (59) __________________________ __________ _________ ___________ ____________ ___________ ___________ (3,079) 643 (131) (18) (5) (2,590) __________________________ __________ _________ ___________ ____________ ___________ ___________ Total (2,702) 503 (116) (18) (5) (2,338) __________________________ __________ _________ ___________ ____________ ___________ ___________ COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS For the six months ended 31 March 2003 1. Basis of preparation The results of Compass Group PLC for the six months ended 31 March 2003 have been prepared on the basis of the accounting policies disclosed in the 2002 Annual Report. Half year Half year Year ended ended ended Continuing Discontinued 31 Mar 31 Mar 30 Sep 2003 2002 2002 activities Acquisitions activities Reviewed Reviewed Audited 2. Turnover and operating profit £m £m £m £m £m £m __________________________________________ _________ __________ __________ ________ ________ _______ Turnover Foodservice Geographical analysis: - United Kingdom - Continuing 1,428 - - 1,428 1,288 2,792 - Discontinued - - 80 80 167 368 - Continental Europe and the rest of the world 2,118 96 - 2,214 1,754 3,751 - North America 1,808 - - 1,808 1,805 3,706 __________________________________________ _________ __________ __________ ________ ________ _______ 5,354 96 80 5,530 5,014 10,617 __________________________________________ _________ __________ __________ ________ ________ _______ Operating profit (before goodwill amortisation and exceptional items) Foodservice - The Company and its subsidiary companies - Continuing 315 3 - 318 286 688 - Discontinued - - 16 16 43 105 - Associated undertakings 9 - - 9 4 12 __________________________________________ _________ __________ __________ ________ ________ _______ 324 3 16 343 333 805 __________________________________________ _________ __________ __________ ________ ________ _______ Geographical analysis: - United Kingdom The Company and its subsidiary companies - Continuing 125 - - 125 106 316 - Discontinued - - 16 16 43 105 Associated undertakings 1 - - 1 1 1 - Continental Europe and the rest of the world The Company and its subsidiary companies 107 3 - 110 94 191 Associated undertakings 8 - - 8 3 11 - North America 83 - - 83 86 181 __________________________________________ _________ __________ __________ ________ ________ _______ 324 3 16 343 333 805 __________________________________________ _________ __________ __________ ________ ________ _______ Amortisation of goodwill: - United Kingdom - Continuing (77) - - (77) (75) (164) - Continental Europe and the rest of the world (27) (1) - (28) (18) (39) - North America (25) - - (25) (24) (54) __________________________________________ _________ __________ __________ ________ ________ _______ (129) (1) - (130) (117) (257) __________________________________________ _________ __________ __________ ________ ________ _______ Exceptional items: (note 3) - United Kingdom - Continuing - - - - (12) (12) - Continental Europe and the rest of the - - - - (2) (2) world - North America - - - - (1) (1) __________________________________________ _________ __________ __________ ________ ________ _______ - - - - (15) (15) __________________________________________ _________ __________ __________ ________ ________ _______ (129) (1) - (130) (132) (272) Total operating profit 195 2 16 213 201 533 __________________________________________ _________ __________ __________ ________ ________ _______ Total operating profit after goodwill amortisation and exceptional items for the half year ended 31 March 2003 relates to foodservice analysed as UK £65 million, Continental Europe and the rest of the world £90 million and North America £58 million, (2002 half year: £63 million, £77 million and £61 million respectively and full year ended 30 September 2002: £246 million, £161 million and £126 million respectively). COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2003 Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 30 Sep 2002 2002 Reviewed Reviewed Audited 3. Exceptional items £m £m £m _________________________________________________________________ ___________ __________ ___________ Charged to operating profit: Reorganisation costs - 5 5 Employee share schemes - 10 10 _________________________________________________________________ ___________ __________ ___________ - 15 15 _________________________________________________________________ ___________ __________ ___________ Loss on disposal of Little Chef and Travelodge 27 - - _________________________________________________________________ ___________ __________ ___________ Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited 4. Tax on profit on ordinary activities £m £m £m _________________________________________________________________ ___________ __________ ___________ UK corporation tax 22 29 45 Overseas tax payable 36 27 66 Overseas tax on share of profits of associated undertakings 3 4 5 _________________________________________________________________ ___________ __________ ___________ 61 60 116 UK deferred tax 5 15 51 Impact of discounting UK deferred tax (1) (2) (9) Overseas deferred tax 10 8 37 Impact of discounting overseas deferred tax (3) (5) (14) _________________________________________________________________ ___________ __________ ___________ 72 76 181 Adjustments in respect of prior years: UK corporation tax 5 (4) (60) Overseas tax payable 3 - 2 UK deferred tax (10) - 29 Overseas deferred tax (2) - 23 Impact of discounting overseas deferred tax 2 - - _________________________________________________________________ ___________ __________ ___________ Total tax charge before exceptional items 70 72 175 Exceptional items: UK corporation tax 6 - (5) Overseas tax payable 3 - - UK deferred tax (2) (4) - Prior year UK corporation tax (33) - (32) _________________________________________________________________ ___________ __________ ___________ Total exceptional tax credit (26) (4) (37) _________________________________________________________________ ___________ __________ ___________ Tax on profit on ordinary activities after exceptional items 44 68 138 _________________________________________________________________ ___________ __________ ___________ United Kingdom corporation tax has been charged at 30% (2002: 30%). The exceptional UK corporation tax charge, overseas tax charge and the UK deferred tax credit all relate to the disposal of the Little Chef and Travelodge businesses. The prior year exceptional UK corporation tax credit relates to the recovery of tax not previously recognised in respect of acquired businesses where the hindsight period for adjustments to goodwill has passed. Compass Group PLC NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2003 Half year Half year Year ended ended ended 31 Mar 2003 31 Mar 2002 30 Sep 2002 Reviewed Reviewed Audited 5. Dividends Per share £m Per share £m Per share £m ________________________________ __________ __________ __________ __________ __________ __________ Dividends on ordinary shares of 10p each Interim 2.7p 60 2.1p 47 2.1p 47 Final - - - - 5.0p 112 ________________________________ __________ __________ __________ __________ __________ __________ 2.7p 60 2.1p 47 7.1p 159 ________________________________ __________ __________ __________ __________ __________ __________ Half year Half year Half year Half year Year Year ended ended ended ended ended ended 31 Mar 2003 31 Mar 2003 31 Mar 2002 31 Mar 2002 30 Sep 2002 30 Sep 2002 Before After Before After Before After goodwill goodwill goodwill goodwill goodwill goodwill amortisation amortisation amortisation amortisation amortisation amortisation and and and and and and exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items Reviewed Reviewed Reviewed Reviewed Audited Audited 6. Earnings per share £m £m £m £m £m £m ________________________________ __________ __________ __________ __________ __________ __________ Attributable profit for basic and diluted earnings per share 187 56 178 50 457 222 ________________________________ __________ __________ __________ __________ __________ __________ millions millions millions millions millions millions Average number of shares in issue 2,233 2,233 2,221 2,221 2,227 2,227 Shares to be issued - - 2 2 1 1 ________________________________ __________ __________ __________ __________ __________ __________ Average number of shares for basic earnings per share 2,233 2,233 2,223 2,223 2,228 2,228 Dilutive share options 6 6 34 34 20 20 ________________________________ __________ __________ __________ __________ __________ __________ Average number of shares for diluted earnings per share 2,239 2,239 2,257 2,257 2,248 2,248 Basic earnings per share 8.4p 2.5p 8.0p 2.2p 20.5p 10.0p ________________________________ __________ __________ __________ __________ __________ __________ Diluted earnings per share 8.4p 2.5p 7.9p 2.2p 20.3p 9.9p ________________________________ __________ __________ __________ __________ __________ __________ Earnings per share before goodwill amortisation and exceptional items has been shown to disclose the impact of goodwill amortisation and exceptional items on underlying earnings. COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2003 Insurance, pensions and other post employment Onerous Legal and benefits contracts other Environmental Total claims 7. Provisions for liabilities and charges £m £m £m £m £m ___________________________________________ __________ __________ __________ ____________ ________ At 1 October 2002 252 65 103 11 431 Arising from acquisitions 24 7 5 - 36 Expenditure in the period (3) (15) (5) - (23) Charged to profit and loss account 4 - 4 - 8 Credited to profit and loss account - (1) - - (1) Currency adjustment 2 - - - 2 ___________________________________________ __________ __________ __________ ____________ ________ At 31 March 2003 279 56 107 11 453 ___________________________________________ __________ __________ __________ ____________ ________ Insurance, pensions and other post employment benefits relate to the costs of self funded pension and insurance schemes or statutory retirement arrangements and are essentially long term in nature. Onerous contracts represent the liabilities in respect of leases on non-utilised properties and other contracts. The duration of these contracts ranges from 2 to 17 years. Legal and other claims relate principally to provisions for the cost of litigation and sundry other claims. the timing of the settlement of these claims is uncertain. Environmental provisions are in respect of liabilities relating to the Group's responsibility for maintaining its operating sites in accordance with statutory requirements and the Group's aim to have a low impact on the environment. Consolidated profit and loss account __________________________ Share Capital Before premium redemption Merger goodwill Goodwill account reserve reserve written written Total off off 8. Reserves £m £m £m £m £m £m _________________________________________ _______ _________ _______ _________ _________ _________ At 1 October 2002 68 - 4,170 497 (2,132) (1,635) Foreign exchange reserve movements - - - (31) - (31) Premium on ordinary shares issued, net of 12 - - (2) - (2) expenses Repurchase and cancellation of shares - 2 - (55) - (55) Retained loss for the period - - - (4) - (4) _________________________________________ _______ _________ _______ _________ _________ _________ At 31 March 2003 80 2 4,170 405 (2,132) (1,727) _________________________________________ _______ _________ _______ _________ _________ _________ COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) For the six months ended 31 March 2003 Translation rate for the six months Closing ended 31 rate as at 31 9. Exchange rates March 2003 March 2003 _________________________________________________________________________________ __________ __________ Exchange rates for major currencies used during the period were: Australian Dollar 2.76 2.62 Canadian Dollar 2.44 2.33 Danish Krone 11.37 10.76 Euro 1.53 1.45 Japanese Yen 190.73 187.43 Norwegian Krone 11.43 11.47 Swedish Krona 13.99 13.40 Swiss Franc 2.24 2.14 US Dollar 1.58 1.58 10. This announcement is being sent to all shareholders on the register at 21 May 2003 and is available to the general public at Compass House, Guildford Street, Chertsey, Surrey, KT16 9BQ (the company's registered office) during office hours. This information is provided by RNS The company news service from the London Stock Exchange

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