Interim Results

RNS Number : 3714U

Compass Group PLC

14 May 2008

 

Compass Group PLC

Interim Results

For The Six Months Ended 31 March 2008

Strong first half - ahead of expectations

·                     Revenue £5.6 billion		+ 5% organic growth
·                     Operating profit £322 million		+ 21% on a reported basis
		+ 18% on a constant currency basis
·                     Margin 5.7%		+ 60 basis points
·                     Underlying earnings per share 10.8p		+ 44%
·                     Interim dividend 4.0p		+ 11%
·                     Free cash flow £180 million		+ 32%
·                     Share buy back		Further £400 million

Richard Cousins, Chief Executive Officer, said:

'The Group has delivered a strong set of results as we continue to benefit from the implementation of the MAP (Management and Performance) framework and the tight operational focus it has instilled across the organisation. We have seen another step up in our margin, with all our geographies contributing to a 60 basis points Group wide increase. Our improved operational performance lifted free cash flow generation by 32%, whilst underlying earnings per share rose by 44%. The Group has also strengthened its contract mix by continuing to win high quality new business in key markets.'

Sir Roy Gardner, Chairman, said:

'After more than two years of disposals, country exits, restructuring and the roll out of MAP across the business, it is clear that our strategy is delivering value for our shareholders. We believe that we have a well balanced and sustainable business model which has the capacity to drive continued revenue and margin growth over the medium term. Balance sheet efficiency (whilst not compromising flexibility) remains a priority and looking forward, we are confident about the second half of the year and the future potential for the business. With this as the background, we are increasing the interim dividend by 11% and will buy back a further £400 million of our shares over the next 18 months'.

Financial summary

For the six months ended 31 March

2008

2007

Increase

Continuing operations

Revenue

-    constant currency (1)

£5,589m

£5,313m

5.2%

-    reported

£5,589m

£5,181m

7.9%

Operating profit(2)

-    constant currency (1)

£322m

£273m

17.9%

-    reported

£322m

£267m

20.6%

Operating Margin (3)

5.7%

5.1%

60bps

Profit before tax

-     underlying (4)

£289m

£224m

29.0%

-     reported

£281m

£224m

25.4%

Free cash flow

£180m

£136m

32.4%

Basic earnings per share

-    underlying (4)

10.8p

7.5p

44.0%

-    reported

10.4p

7.5p

38.7%

Total Group including discontinued operations

Basic earnings per share

11.3p

9.6p

17.7%

Interim dividend per ordinary share

4.0p

3.6p

11.1%

(1)

Constant currency restates the prior year results to 2008's average exchange rates.

(2)

Includes share of profit of associates.

(3)

Excludes share of profit of associates.

(4)

Underlying profit before tax excludes revaluation gains and losses on swaps and hedging instruments (hedge accounting

ineffectiveness) of £(8) million (2007: £nil). Underlying basic earnings per share excludes these items net of tax.

(5)

Organic growth is calculated by adjusting for acquisitions (excluding current period acquisitions and including a full period

in respect of prior period acquisitions), disposals (excluded from both periods) and exchange rate movements (translating

the prior period at current period exchange rates) and compares the results against 2007.

 Delivery of growth through Management and Performance (MAP) (b)

Our MAP programme continues to be embraced and embedded within the businesses, enabling us to deliver £49 million of constant currency operating profit growth as follows:

£15 million from net new business: Revenue growth from new business was just over 8% and retention levels were stable at around 94%. The process of addressing loss making contracts should largely be completed by the end of the year and we are renewing the focus on retention with the medium term objective to get back to a 95% level. Total new business for the year should be around £800 million, with the continued focus on the quality of this new business. 

£31 million from like for like growth: Through MAP we are focussing on all lines of the Income Statement, not just food and labour costs. We have continued to achieve better like for like revenue growth of around 3%. On the cost side we have also continued to see good progress in minimising input cost increases and delivering efficiency savings, through menu planning and labour scheduling. We have around £1.5 billion of in unit overheads across the businesses each year and we are now beginning to focus on this in the same way as on food and labour costs.

£3 million above unit overheads savings: Overhead productivity improved by approximately £11 million, more than offsetting £8 million of inflationary impact. We are working hard to leverage the reduced overhead base.

Food cost inflation

We continue to see market inflation for our basket of goods of 4-5% (last reported in November). Although the increases occurring in dairy, rice and pasta prices have been at significantly higher rates, these account for only about 10% of the Group's spend on food. We are able to mitigate around 1 percentage point through leveraging our purchasing scale, as well as benefiting from menu planning, a focus on reducing waste, product and supplier rationalisation and client and consumer price increases. Our ability to manage inflationary pressures has helped us to deliver the 60 basis points improvement in operating margin.

Strategy and the future

Over the last two years we have significantly reduced the risk profile of the Group by:

• Selling non-core businesses such as SSP, Moto and Selecta, exiting around 35 small countries (we are now present in 62 countries) and focussing our efforts on the core contract catering and support services businesses.

• Improving transparency and governance by launching MAP and driving it across and down into the businesses together with improved and consistent monthly reporting and business review processes. 

• Strengthening our senior management team.

We now have a much healthier and more disciplined business. The implementation of MAP means that revenue growth is focused on quality new business and we are committed to providing a good service, both to our clients and consumers, whilst creating value and improved returns for our shareholders. We have a tremendous contract base with retention rates of 94% and a balanced geographical spread with strong positions in our most important geographies and a good spread of business across sectors.

By staying focused on our tighter business model we believe we will generate significant free cash flows. We intend to continue to invest intelligently in capital expenditure to grow our business organically, and in the medium term, we expect to see an increase in infill acquisition opportunities in our core businesses and in our core countries. We will only invest in infill acquisitions where they clearly create real shareholder value.  Over the last six months we have invested £39 million in infill acquisitions, predominantly in the USA, and £102 million in the buyout of minority interests, mainly in Brazil and Japan. 

Over the next 18 months we will buy back a further £400 million of our shares, which will maintain an efficient balance sheet whilst allowing flexibility for further infill acquisitions.

Notes to editors:

(a)    Compass Group is the world's largest foodservice company with annual revenue of over £10 billion operating in 62 countries. For more information visit www.compass-group.com

(b)    MAP is a simple, but clearly defined Group operating framework. MAP focuses on five key value drivers, enabling the businesses to deliver disciplined, profitable growth with the focus more on organic growth and like for like growth.

The five key value drivers are:

MAP 1: Client sales and marketing

MAP 2: Consumer sales and marketing

MAP 3: Cost of food

MAP 4: Unit costs

MAP 5: Above unit overheads

(c)    The timetable for payment of the interim dividend of 4.0p per share is as follows:

Ex dividend date:	25 June 2008
Record date:	27 June 2008
Payment date:	4 August 2008

(d)    Forward looking statements

This Press Release contains forward looking statements within the meaning of Section 27A of the Securities Act 1933, as amended, and Section 21E of the Securities Exchange Act 1934, as amended. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such forward looking statements. The terms 'expect', 'should be', 'will be', 'is likely to' and similar expressions identify forward looking statements. Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic conditions and business conditions in Compass Group's markets; exchange rate fluctuations; customers' and clients' acceptance of its products and services; the actions of competitors; and legislative, fiscal and regulatory developments.

(e)     A presentation for analysts and investors will take place at 9:30 a.m. (BST/London) on Wednesday 14 May 2008 at Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ.

    The live presentation can also be accessed via both a teleconference and webcast:

• To listen to the live presentation via teleconference, dial [phone], passcode 825778.

• To view the presentation slides and/or listen to a live webcast of the presentation, go to www.compass-group.com or www.cantos.com

• Please note that remote listeners will not be able to ask questions during the Q&A session.

A replay recording of the presentation will also be available via teleconference and webcast:

• A teleconference replay of the presentation will be available from 3:00 p.m. (BST/London) on Wednesday 14 May 2008  for seven days. To hear the replay, dial [phone], passcode 67707009.  

• A webcast replay of the presentation will be available for six months, at www.compass-group.com and www.cantos.com

Enquiries:
Investors/Analysts	Andrew Martin	[phone]
Media	Chris King	[phone]

Website:

www.compass-group.com

  Interim management report

Business review

Group trading review

Compass Group today announces its unaudited interim results for the six month period ended 31 March 2008. 

Financial summary

For the six months ended 31 March

2008

2007

Increase

Continuing operations

Revenue

- constant currency (1)

£5,589m

£5,313m

5.2%

- reported

£5,589m

£5,181m

7.9%

Operating profit (2)

- constant currency (1)

£322m

£273m

17.9%

- reported

£322m

£267m

20.6%

Operating Margin (3)

5.7%

5.1%

60bps

Profit before tax

- underlying (4)

£289m

£224m

29.0%

- reported

£281m

£224m

25.4%

Free cash flow

£180m

£136m

32.4%

Basic earnings per share

- underlying (4)

10.8p

7.5p

44.0%

- reported

10.4p

7.5p

38.7%

Total Group including discontinued operations

Basic earnings per share

11.3p

9.6p

17.7%

Interim dividend per ordinary share

4.0p

3.6p

11.1%

(1)

Constant currency restates the prior year results to 2008's average exchange rates.

(2)

Includes share of profit of associates.

(3)

Excludes share of profit of associates.

(4)

Underlying profit before tax excludes revaluation gains and losses on swaps and hedging instruments (hedge accounting

ineffectiveness) of £(8) million (2007: £nil). Underlying basic earnings per share excludes these items net of tax.

  Revenue

Overall, organic revenue growth was 5%, comprising new business of 8%, retention of 94% and like for like growth of 3%. Organic growth is calculated by adjusting for acquisitions (excluding current period acquisitions and including a full period in respect of prior period acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current period exchange rates), and compares the results against the same period in 2007.  

The table below summarises the performance of the Group's continuing operations by geographic segment.

								Constant
						Reported		currency	Organic
Segmental performance						change		change	change
Six months ended 31 March			2008	2007		%		%	%
Continuing operations
Revenue (£m)
North America			2,267	2,155		5		7	7
Continental Europe			1,488	1,306		14		4	4
United Kingdom			965	955		1		1	1
Rest of the World			869	765		14		6	9
Total			5,589	5,181		8		5	5
Operating profit (1) (£m)
North America			153	132
Continental Europe			106	85
United Kingdom			52	51
Rest of the World			38	25
Unallocated overheads			(29)	(29)
Associates			2	3
Total			322	267
Operating margin (2) %
North America			6.7	6.1
Continental Europe			7.1	6.5
United Kingdom			5.4	5.3
Rest of the World			4.4	3.3
Total			5.7	5.1
(1)	Operating profit includes share of profit of associates UK £1 million (2007: £2 million) and North America £1 million  (2007: £1 million)
(2)	Operating margin is based on revenue and operating profit excluding share of profit of associates.

  North America - 40.6% Group revenue (2007: 41.6%)

In North America all of the sectors are performing well and we are continuing to see good quality organic revenue growth of 7% across a broad and well balanced portfolio. We are winning large and good quality contracts, are seeing excellent retention of over 96% and there is an increased focus on driving like for like performance. Our success in creating a multi-service Healthcare business through cross-selling between Morrisons, our food service business, and Crothall, our support services business has delivered double digit organic revenue growth in this sector. Chartwells, our Education business, continues to generate strong like for like growth through innovation and we have made good progress in the Business & Industry sector, Levy, our Sports & Leisure business, and in the Canadian business.

Operating profit increased by £25 million, or 20%, on a constant currency basis to £153 million (2007: £128 million on a constant currency basis). This represents a further increase in the margin by 60 basis points to 6.7%, benefiting from the reduction in overheads in the second half of last year. Good management of input costs, better like for like growth and ongoing operating efficiencies across all of the main businesses are contributing to the improvement. We are currently working to drive further supply chain efficiencies and there remains a good opportunity to leverage the overhead base.

Continental Europe - 26.6% Group revenue (2007: 25.2%)

We are seeing an inflow of good quality new business and are placing a greater focus on like for like growth in Continental Europe with the organic revenue growth of 4% seen in the second half of 2007 continuing into the first half of 2008. There has been good progress in France, Spain, Nordic and Portugal and Italy is continuing to improve.

On a constant currency basis, growth of £12 million in operating profit from continuing operations to £106 million (2007: £94 million on a constant currency basis) represents a margin improvement of 60 basis points to 7.1%. The margin growth has come from further like for like revenue growth being converted at a high drop through and an attention to detail across all areas of MAP and across all countries. It is important to remember that the seasonality of this business, with the reduction in participation in the Business & Industry sector over the summer period and the closure of schools, means that we record stronger profits and margin in the first half compared to the second half.

UK - 17.3% Group revenue (2007: 18.4%)

The UK performance in the first half of the year is in line with expectations. Operating profit was £52 million (2007: £51 million), representing a 10 basis points improvement in the margin.

Over the last 18 months there has been extensive restructuring of the business, reducing management layers and increasing simplicity; we have almost completed the extensive process of addressing loss making contracts; we have made substantial operational changes to our Education business, and we now have a strong platform for moving forward; and we have simplified the purchasing organisation.

Within the business we continue to focus on all aspects of the culinary experience. In 2007 we appointed a UK Executive Chef and senior executive chefs for our major sectors, who are also part of our senior leadership team. This is an initiative adapted from our US business, and encourages the development of the culinary side of the business through working with our chefs, suppliers and clients. This is working well and as an example we have been able to build on the progress already made within our schools business, with both our Executive Chef and fully qualified educational nutritionist developing healthier menus.

We also continue to build on culinary heritage that exists within the business and were pleased to announce last week that we are to strengthen our fine dining offer with Gordon Ramsay at Restaurant Associates. This builds on the existing relationships with Albert & Michel Roux and Gary Rhodes.

We continue to simplify business processes and are increasing our focus on generating quality revenue growth and improving our retention levels. However, we do now have the key building blocks in place which will allow the business to move forward in the medium term.

Rest of the World - 15.5% Group revenue (2007: 14.8%)

In the Rest of the World, our two largest businesses, Australia and Japan, together account for just over 50% of revenues. Australia has continued to deliver good organic revenue growth of 5% and ongoing margin progression. We have a great market position in the remote site business to service the requirements of the fast moving extractive industries sector.

In Japan, the focus has been on driving efficiency, addressing loss making contracts and integrating our Healthcare business, and the margin is now moving closer to the Rest of the World average. There is still much hard work to do and we need to continue to drive for improved revenue growth and further operating efficiencies.

The Latin American business is dominated by Brazil which is now one of our largest 10 countries following the acquisition of the remaining 50% interest in GR SA. The business is performing well in a very buoyant market with 15% organic revenue growth and we are seeing encouraging early signs of further improvement in the business performance.

Performance in the remaining remote site business has also been good and in the UAE we are benefiting from the strength of the economy to deliver 29% organic revenue growth combined with steady margin progression.

Overall, the Rest of the World has again made good progress, delivering £38 million operating profit from continuing operations (2007: £27 million on a constant currency basis), an increase of £11 million, or 41%, on a constant currency basis. This represents margin growth of 110 basis points.

Unallocated overheads

Unallocated overheads for the six months were £29 million (2007: £29 million), in line with the same period last year, reflecting the continuing strengthening of the central functions together with delivery of overhead efficiencies.

Operating profit

Operating profit from continuing operations, including associates, was £322 million (2007: £267 million), an increase of 21% on a reported basis. The operating profit increased by £49 million on a constant currency basis, up 18%. This represents a 60 basis point improvement in margin.  

Net finance cost

Underlying net finance cost, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), was £33 million (2007: £43 million). We expect a higher second half net finance cost as a result of the increased level of net debt following the completion of the £1 billion share buy back and the acquisition spend in the first six months, giving a full year expected net finance cost of £75 million.

Profit before tax

Profit before tax from continuing operations was £281 million (2007: £224 million). 

On an underlying basis, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), profit before tax from continuing operations increased by 29% to £289 million (2007: £224 million).

  Income tax expense

On an underlying basis, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), the tax charge from continuing operations and before exceptional items was £83 million (2007: £65 million), an effective tax rate of 29% (2007: 29%). We continue to expect the Group's effective tax rate to average out at around the 29% level for the short term.  

Discontinued operations

Profit after tax and exceptional items from discontinued operations was £16 million (2007: £44 million). 

Basic earnings per share

Basic earnings per share were 11.3 pence (2007: 9.6 pence). Excluding the results of discontinued operations and exceptional items, basic earnings per share on an underlying basis, excluding revaluation gains and losses on swaps and hedging instruments (hedge accounting ineffectiveness), were 10.8 pence (2007: 7.5 pence).

	Attributable Profit			Basic earnings per share
	2008 £m	2007 £m		2008 Pence	2007 Pence	Change %
Reported	213	198		11.3	9.6	17.7
Discontinued operations    and exceptional items	(16)	(44)		(0.9)	(2.1)
Hedge accounting ineffectiveness    (net of tax)	6	-		0.4	-
Underlying	203	154		10.8	7.5	44.0

Dividends

An interim dividend of 4.0 pence per share, a year on year increase of 11%, will be paid on 4 August 2008 to shareholders on the register on 27 June 2008.  

Free cash flow

Free cash flow from the continuing business totalled £180 million (2007: £136 million). The major factors contributing to the increase were a £55 million increase in operating profit after associates and a £15 million reduction in the net interest outflow.

Gross capital expenditure of £83 million (2007: £79 million), including amounts purchased by finance lease of £3 million (2007: £3 million), represents 1.5% of revenues (2007: 1.5% of revenues). We continue to expect a higher level of gross capital expenditure in the second half, driven in part by the Education sector where projects typically take place over the summer holiday months. We therefore expect gross capital expenditure in the full year to be around the 2% of revenues level.

Further good progress on working capital has resulted in an outflow in the first six months of £62 million (2007: £56 million). We continue to expect to achieve an average sustainable improvement of £20 - £30 million a year for the foreseeable future, but with better improvement for this year and next year.

The cash tax rate for the first six months was 24% (2007: 27%), based on underlying profit before tax for the continuing operations, and we continue to expect the cash tax rate to average out at the mid to high 20s level over the short term.

The net interest outflow of £32 million (2007: £47 million) continues to reflect the impact of the 2004 swap monetisation, which will be substantially unwound by the end of 2009. 

Acquisitions

The acquisition spend in the first half of the year totalled £146 million, comprising £39 million of infill acquisitions (including £36 million on Professional Services in the USA), £102 million on the buyout of minority interests (including £87 million on the remaining 50% of our Brazilian business and £14 million to take our shareholding in Seiyo Foods, our Japanese business, from 86% to 95%) and £5 million of deferred consideration relating to previous acquisitions.

Related party transactions

Details of transactions with related parties are set out in note 19. With the exception of the acquisition of the remaining 50% interest in GR SA, the group's Brazilian business, these transactions have not, and are not expected to have, a material effect on the financial performance or the position of the Group.

Outlook

After more than two years of disposals, country exits, restructuring and the roll out of MAP across the business, it is clear that our strategy is delivering value for our shareholders. We believe that we have a well balanced and sustainable business model which has the capacity to drive continued revenue and margin growth over the medium term. Balance sheet efficiency (whilst not compromising flexibility) remains a priority and looking forward, we are confident about the second half of the year and the future potential for the business. With this as the background, we are increasing the interim dividend by 11% and will buy back a further £400 million shares of our over the next 18 months.

  Interim management report

Principal risks and uncertainties

Risk management

The Board has a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Company and its shareholders.

Compass Group has specific policies in place to ensure that risks are properly evaluated and managed at the appropriate level within the business. A risk assessment exercise is carried out across the Group twice per year and the outcomes are reviewed by the Board.

Outlined below is a summary of what the Board considers to be the key risks and uncertainties currently facing the business and the activities the Group undertakes to mitigate against these key risks and uncertainties. 

The Group's approach to managing liquidity risk, foreign currency risk and interest rate risk are set out on page 16 of the Annual Report for the year ended 30 September 2007. The Annual Report is published in the Investor Relations section of the Group website (www.compass-group.com) and is available from the Company on request. 

Key risks and uncertainties

Description		Mitigating activities
Food safety		The Group has in place policies, processes and training procedures to ensure compliance with its legal obligations in relation to food hygiene  and safety.
Client retention		Our business model is structured so that we are not reliant on one particular sector, geography or group of clients.
People retention  and motivation		Training and development programmes, succession planning and performance management are designed to align rewards with our corporate objectives and to retain and motivate our best people.
Health, safety  and environment		Our Health, Safety and Environment Forum promotes policy, sets standards and monitors best practice and reports to the Corporate Social Responsibility Committee.
Purchasing		To reduce risk we are focusing on traceability, clear specification of our requirements to nominated suppliers and the improvement of purchasing compliance by unit managers.
Litigation		Though we do not operate in a litigious industry we have in place policies and processes in our major countries to mitigate against third-party litigation.
Reputation		The Group's zero tolerance based Code of Ethics governs all aspects of our relationship with our stakeholders. The Corporate Social Responsibility Committee investigates any alleged breaches.

Richard J Cousins	Andrew D Martin
Group Chief Executive	Group Finance Director

  Responsibility statement

Directors' responsibilities

The interim report complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of the requirement to produce a half-yearly financial report. The interim report is the responsibility of, and has been approved by, the directors.

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34;

• the interim management report includes a fair review of the important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and

• the interim management report includes a fair review of disclosure of related party transactions and changes therein, as required by DTR 4.2.8R.

On behalf of the Board

Mark J White

General Counsel and Company Secretary

14 May 2008  Independent review report to Compass Group PLC

Introduction

We have been engaged by Compass Group PLC ('the Company') to review the condensed set of financial statements in the interim report for the six months ended 31 March 2008 which comprises the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 21. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 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 is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdoms' Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Review conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 31 March 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte & Touche LLP

Chartered Accountants and Registered Auditors, London

14 May 2008

Consolidated income statement
for the six months ended 31 March 2008
				Six months to 31 March			Year ended
							30 September
				2008	2007		2007
				Unaudited	Unaudited		Audited
		Notes		£m	£m		£m
Continuing operations:
Revenue		3		5,589	5,181		10,268
Operating costs				(5,269)	(4,917)		(9,743)
Operating profit		3		320	264		525
Share of profit of associates		3		2	3		4
Total operating profit		3		322	267		529
Finance income		4		16	13		28
Finance costs		4		(49)	(56)		(115)
Hedge accounting ineffectiveness		4		(8)	-		(6)
Profit before tax				281	224		436
Income tax expense		5		(81)	(65)		(124)
Profit for the period from continuing operations		3		200	159		312
Discontinued operations:
Profit for the period from discontinued operations		6,7		16	44		212
Continuing and discontinued operations:
Profit for the period				216	203		524
Attributable to:
Equity shareholders of the Company				213	198		515
Minority interest				3	5		9
Profit for the period				216	203		524
Basic earnings per share (pence)
From continuing operations		8		10.4p	7.5p		15.0p
From discontinued operations		8		0.9p	2.1p		10.6p
From continuing and discontinued operations		8		11.3p	9.6p		25.6p
Diluted earnings per share (pence)
From continuing operations		8		10.4p	7.5p		15.0p
From discontinued operations		8		0.8p	2.1p		10.4p
From continuing and discontinued operations		8		11.2p	9.6p		25.4p
Impairment of goodwill, impairment of inventories, impairment of financial assets and net foreign exchange gains / losses recorded in the income statement £nil (2007: £nil).

Consolidated statement of recognised income and expense
for the six months ended 31 March 2008
				Six months to 31 March			Year ended
							30 September
				2008	2007		2007
				Unaudited	Unaudited		Audited
		Notes		£m	£m		£m
Net income / (expense) recognised in equity
Currency translation differences				7	(2)		(12)
Actuarial gains / (losses) on post-retirement employee benefits		11		(18)	-		38
Tax on items taken directly to equity				9	-		8
Recognition of deferred tax asset relating to currency translation differences in prior years				-	37		37
Net income / (expense) recognised directly in equity				(2)	35		71
Profit for the period
Profit for the period				216	203		524
Total recognised income and expense for the period		12		214	238		595
Attributable to:
Equity shareholders of the Company				210	231		576
Minority interest				4	7		19
Total recognised income and expense for the period		12		214	238		595

Consolidated balance sheet
as at 31 March 2008
				As at 31 March			As at
							30 September
				2008	2007		2007
				Unaudited	Unaudited		Audited
		Notes		£m	£m		£m
Non-current assets
Goodwill				3,147	3,017		2,985
Other intangible assets				205	139		142
Property, plant and equipment				600	579		576
Interests in associates				25	40		25
Other investments				13	6		12
Trade and other receivables				79	101		66
Deferred tax assets*				244	270		240
Derivative financial instruments**				19	4		13
Non-current assets				4,332	4,156		4,059
Current assets
Inventories				197	180		179
Trade and other receivables				1,530	1,339		1,343
Tax recoverable*				14	7		10
Cash and cash equivalents**				400	536		839
Derivative financial instruments**				1	8		2
Current assets				2,142	2,070		2,373
Assets of disposal groups
Assets included in disposal groups held for sale		6		-	652		-
Total assets				6,474	6,878		6,432
Current liabilities
Short-term borrowings**				(111)	(141)		(151)
Derivative financial instruments**				(8)	(1)		-
Provisions		10		(92)	(70)		(86)
Current tax liabilities*				(169)	(219)		(171)
Trade and other payables				(1,983)	(1,764)		(1,833)
Current liabilities				(2,363)	(2,195)		(2,241)
Non-current liabilities
Long-term borrowings**				(1,509)	(1,771)		(1,452)
Derivative financial instruments**				(2)	(13)		(15)
Post-employment benefit obligations		11		(177)	(254)		(162)
Provisions		10		(372)	(291)		(351)
Deferred tax liabilities*				(23)	(6)		(5)
Other payables				(32)	(46)		(36)
Non-current liabilities				(2,115)	(2,381)		(2,021)
Liabilities of disposal groups
Liabilities included in disposal groups held for sale		6		-	(149)		-
Total liabilities				(4,478)	(4,725)		(4,262)
Net assets				1,996	2,153		2,170
Equity
Share capital				185	201		193
Share premium account				144	103		122
Capital redemption reserve				42	24		33
Less: own shares				(4)	(4)		(1)
Other reserves				4,342	4,301		4,312
Retained earnings				(2,729)	(2,490)		(2,511)
Total equity shareholders' funds				1,980	2,135		2,148
Minority interests				16	18		22
Total equity		12		1,996	2,153		2,170
* Component of current and deferred taxes ** Component of net debt

Consolidated cash flow statement
for the six months ended 31 March 2008
				Six months to 31 March				Year ended
				2008	2007			30 September 2007
		Notes		Unaudited £m	Unaudited £m			Audited  £m
Cash flow from operating activities
Cash generated from operations		14		348	304			753
Interest paid				(47)	(59)			(152)
Interest element of finance lease rentals				(1)	(1)			(3)
Tax received				6	-			4
Tax paid				(76)	(61)			(121)
Net cash from / (used in) operating activities of continuing operations				230	183			481
Net cash from / (used in) operating activities of discontinued operations				2	18			(18)
Net cash from / (used in) operating activities				232	201			463
Cash flow from investing activities
Purchase of subsidiary companies and investments in associated undertakings (1)		13		(146)	(24)			(31)
Proceeds from sale of subsidiary companies and associated undertakings - discontinued activities(1)		6		(10)	-			782
Proceeds from sale of subsidiary companies and associated undertakings - other activities(1)				-	29			32
Proceeds from sale of other investments				-	-			4
Tax on profits from sale of subsidiary companies and associated undertakings				(5)	(61)			(51)
Contribution of disposal proceeds to pension plans				-	-			(45)
Purchase of property, plant and equipment				(65)	(64)			(156)
Proceeds from sale of property, plant and equipment				14	17			22
Purchase of intangible assets and investments				(15)	(12)			(21)
Dividends received from associated undertakings				3	-			6
Interest received				16	13			28
Net cash from / (used in) investing activities by continuing operations				(208)	(102)			570
Net cash from / (used in) investing activities by discontinued operations				-	(22)			(30)
Net cash from / (used in) investing activities				(208)	(124)			540
Cash flow from financing activities
Proceeds from issue of ordinary share capital		12		22	7			27
Purchase of own shares (2)				(290)	(290)			(576)
Net increase / (decrease) in borrowings - excluding new leases and lease repayments		15		(61)	42			(239)
Repayment of obligations under finance leases		15		(6)	(9)			(15)
Equity dividends paid		9,12		(135)	(136)			(208)
Dividends paid to minority interests		12		(3)	(1)			(3)
Net cash from / (used in) financing activities by continuing operations				(473)	(387)			(1,014)
Net cash from / (used in) financing activities by discontinued operations				-	-			-
Net cash from / (used in) financing activities				(473)	(387)			(1,014)
Cash and cash equivalents
Net increase / (decrease) in cash and cash equivalents		15		(449)	(310)			(11)
Cash and cash equivalents at beginning of the period				839	848			848
Currency translation gains / (losses) on cash and cash equivalents				10	(2)			2
Cash and cash equivalents at end of the period				400	536			839
(1) Net of cash acquired or disposed and payments received or made under warranties and indemnities.
(2) Share buy-back and increase / (decrease) in own shares held to satisfy employee share-based payments.

Reconciliation of free cash flow from continuing operations
for the six months ended 31 March 2008
				Six months to 31 March			Year ended
				2008	2007		30 September 2007
				Unaudited £m	Unaudited  £m		Audited  £m
Net cash from operating activities for continuing operations				230	183		481
Purchase of property, plant and equipment				(65)	(64)		(156)
Proceeds from sale of property, plant and equipment				14	17		22
Purchase of intangible assets and investments				(15)	(12)		(21)
Dividends received from associated undertakings				3	-		6
Interest received				16	13		28
Dividends paid to minority interests				(3)	(1)		(3)
Free cash flow from continuing operations				180	136		357

  Notes to the condensed financial statements

for the six months ended 31 March 2008

1 Basis of preparation

The unaudited interim condensed financial statements for the six months ended 31 March 2008 have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34'), and have been prepared on the basis of International Financial Reporting Standards ('IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted by the European Union that are effective for the year ended 30 September 2008.

The unaudited interim condensed financial statements for the six months ended 31 March 2008, which were approved by the Board on 14 May 2008, do not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985, and should be read in conjunction with the Annual Report for the year ended 30 September 2007. Those accounts have been reported upon by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985. The Annual Report is published in the Investor Relations section of the Group website (www.compass-group.com) and is available from the Company on request.

Except as described below, the accounting policies and method of computation adopted in the preparation of the unaudited interim condensed financial statements are consistent with the policies applied by the Group in its consolidated financial statements for the year ended 30 September 2007.

In the current financial year, the Group will adopt International Financial Reporting Standard 7 'Financial Instruments: Disclosures' ('IFRS 7') for the first time. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the interim financial statements. Full details of the change will be disclosed in the Annual Report for the year ended 30 September 2008.

2 Seasonality of operations

Overall, seasonality is not a significant factor across the Group. However, within individual sectors and  geographies we do see some seasonal effects. Revenues in the Education sector are lower outside term time  and activity in the Business & Industry sector in Continental Europe slows down throughout the summer.

3 Segmental reporting
		Geographical segments
Revenues		North America £m		Continental Europe £m		United Kingdom £m	Rest of the World £m	Intra  Group £m		Total £m
Six months to 31 March 2008
Total revenue		2,267		1,488		965	872	-		5,592
Less: inter-segment revenue(3)		-		-		-	-	-		-
External revenue		2,267		1,488		965	872	-		5,592
Less: discontinued businesses		-		-		-	(3)	-		(3)
External revenue - continuing		2,267		1,488		965	869	-		5,589
Six months to 31 March 2007
Total revenue		2,155		1,525		996	786	(15)		5,447
Less: inter-segment revenue(3)		-		(6)		(5)	(4)	15		-
External revenue		2,155		1,519		991	782	-		5,447
Less: discontinued businesses		-		(213)		(36)	(17)	-		(266)
External revenue - continuing		2,155		1,306		955	765	-		5,181
Year ended 30 September 2007
Total revenue		4,206		2,842		1,986	1,610	(18)		10,626
Less: inter-segment revenue(3)		-		(7)		(7)	(4)	18		-
External revenue		4,206		2,835		1,979	1,606	-		10,626
Less: discontinued businesses		-		(282)		(48)	(28)	-		(358)
External revenue - continuing		4,206		2,553		1,931	1,578	-		10,268

		Geographical segments
Result		North  America £m	Continental Europe £m	United Kingdom £m	Rest of the World £m	Central activities £m		Total £m
Six months to 31 March 2008
Total operating profit before associates		153	106	52	38	(29)		320
Less: discontinued businesses		-	-	-	-	-		-
Operating profit before associates - continuing		153	106	52	38	(29)		320
Add: Share of profit of associates		1	-	1	-	-		2
Operating profit - continuing		154	106	53	38	(29)		322
Finance income								16
Finance costs								(49)
Hedge accounting ineffectiveness								(8)
Profit before tax								281
Income tax expense								(81)
Profit for the period from continuing operations								200
Six months to 31 March 2007
Total operating profit before associates		132	109	52	24	(29)		288
Less: discontinued businesses		-	(24)	(1)	1	-		(24)
Operating profit before associates - continuing		132	85	51	25	(29)		264
Add: Share of profit of associates		1	-	2	-	-		3
Operating profit - continuing		133	85	53	25	(29)		267
Finance income								13
Finance costs								(56)
Hedge accounting ineffectiveness								-
Profit before tax								224
Income tax expense								(65)
Profit for the period from continuing operations								159
Year ended 30 September 2007
Total operating profit before associates		264	181	107	54	(58)		548
Less: discontinued businesses		-	(30)	-	7	-		(23)
Operating profit before associates - continuing		264	151	107	61	(58)		525
Add: Share of profit of associates		1	-	3	-	-		4
Operating profit - continuing		265	151	110	61	(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
(1) Mexico was transferred from the Rest of the World to the North America segment during the current reporting period to reflect a similar change in the management reporting structure.   The 2007 segmental results have been restated on a consistent basis.
(2) The revenues and result for the six months to 31 March 2007 have also been restated to reflect other organisational changes implemented in the second half of 2007. (3) In prior periods inter-segment revenue largely arose as the result of trading between Selecta and other discontinued companies and the rest of the Group.

4 Finance income and costs
		Six months to 31 March			Year ended
Finance income and costs		2008 £m	2007 £m		30 September 2007 £m
Finance income
Bank interest		15	13		28
Expected return on pension scheme assets net of amount charged to scheme liabilities (note 11)		1	-		-
Total finance income		16	13		28
Finance costs
Bank loans and overdrafts		7	2		5
Other loans		41	52		104
Finance lease interest		1	1		3
Interest on bank loans, overdrafts, other loans and finance leases		49	55		112
Unwinding of discount on put options held by minority shareholders		-	-		1
Amount charged to pension scheme liabilities net of expected return on scheme assets (note 11)		-	1		2
Total finance costs		49	56		115
Hedge accounting ineffectiveness
Unrealised net losses / (gains) on financial instruments		8	-		3
Unhedged translation losses on foreign currency borrowings		-	-		3
Total hedge accounting ineffectiveness losses / (gains)		8	-		6

5 Tax
The income tax expense on continuing operations for the period is based on an estimated full year effective tax rate of 29% (last full year 28%).
				Six months to 31 March			Year ended
Recognised in the income statement:  income tax expense on continuing operations				2008	2007		30 September 2007
				£m	£m		£m
Current year				79	86		149
Adjustment in respect of prior years				(8)	(19)		(27)
Current tax expense / (credit)				71	67		122
Current year deferred tax				10	(2)		2
Impact of changes in statutory tax rates				-	-		6
Adjustment in respect of prior years				-	-		(6)
Deferred tax expense / (credit)				10	(2)		2
Income tax expense / (credit) on continuing operations				81	65		124
The impact of changes in statutory tax rates in the year ended 30 September 2007 related principally to the reduction of the UK corporation tax rate from 30% to 28% from 1 April 2008. This change 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 were expected to reverse. This impact was not reflected in the interim report to 31 March 2007 as the relevant legislation regarding the rate change had not been substantively enacted at that date.
The Group does not recognise deferred tax assets in respect of tax losses and other temporary differences where the recovery is uncertain. No deferred tax liability is recognised on temporary differences 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.
There has been no material change to the level of unrecognised deferred tax assets since 30 September 2007.

6 Discontinued operations
Period ended 31 March 2008:
The profit for the period from discontinued operations comprises the release of surplus provisions and accruals relating to prior period disposals.
Period ended 31 March 2007:
In November 2006, as part of the Group's strategy of focussing on its core contract catering business, the Group announced its intention to dispose of its European vending business, Selecta. The transaction completed on 2 July 2007. The Group 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 assets and liabilities of most of these businesses were classified as being held for sale at  31 March 2007.   In addition, the Group established additional provisions totalling £45 million during the period in respect of the prior year disposal of the travel concessions catering business and the discontinued Middle East military catering operations, resulting in a net loss (both before and after tax) of £45 million before the net release of tax provisions of £69 million.  Overall an exceptional net credit of £24 million was recognised in the period.
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 the disposal of these operations was £68 million. Overall an exceptional net credit of £197 million was recognised in the period. The disposal process was complete by the end of the year and no assets or liabilities were classified as being held for sale as at 30 September 2007.
		Six months to 31 March			Year ended
Financial performance of discontinued operations		2008(1) £m	2007(2) £m		30 September 2007(3) £m
Trading activities of discontinued operations
External revenue		3	266		358
Inter-segment revenue		-	-		15
Total revenue		3	266		373
Operating costs		(3)	(241)		(350)
Trading activities of discontinued operations before exceptional costs		-	25		23
Exceptional operating costs		-	-		-
Profit before tax		-	25		23
Income tax (expense) / credit		-	(5)		(8)
Profit after tax		-	20		15
Exceptional items:  disposal of net assets and other adjustments relating to discontinued operations
Profit on disposal of net assets of discontinued operations		-	-		148
Increase in provisions related to discontinued operations(4)		-	(45)		(45)
Release of surplus provisions and accruals related to discontinued operations(5)		16	-		-
Cumulative translation exchange loss recycled on disposals(6)		-	-		-
Profit on disposal before tax		16	(45)		103
Income tax (expense) / credit		-	69		94
Total profit after tax		16	24		197
Profit / (loss) for the period from discontinued operations
Profit / (loss) for the period from discontinued operations		16	44		212

The profit / (loss) on disposal can be reconciled to the cash inflow / (outflow) from disposals as follows:
		Six months to 31 March			Year ended
Net assets disposed and disposal proceeds		2008 £m	2007(2) £m		30 September 2007(3) £m
Net assets disposed		-	-		588
Increase / (decrease) in retained liabilities(4) (5)		(33)	45		108
Cumulative exchange translation loss recycled on disposals(6)		-	-		-
Profit / (loss) on disposal before tax		16	(45)		103
Consideration, net of costs		(17)	-		799
Consideration deferred to future periods		-	-		-
Cash disposed of		-	-		(54)
Cash inflow / (outflow) from current activity		(17)	-		745
Deferred consideration and other payments relating to previous disposals		7	-		37
Cash inflow / (outflow) from disposals		(10)	-		782
The major classes of assets and liabilities included in disposal groups held for sale (on a debt free / cash free basis) at the balance sheet date were as follows:
		As at 31 March			As at
Net assets included in disposal groups held for sale		2008 £m	2007(2) £m		30 September 2007(3) £m
Goodwill		-	394		-
Property, plant and equipment		-	144		-
Inventories		-	36		-
Trade and other receivables		-	71		-
Cash and cash equivalents		-	7		-
Gross assets included in disposal groups held for sale		-	652		-
Trade and other payables		-	(129)		-
Other liabilities		-	(20)		-
Gross liabilities included in disposal groups held for sale		-	(149)		-
Net assets included in disposal groups held for sale		-	503		-
(1) The trading activity in the period ended 31 March 2008 relates to the final run off of activity in businesses earmarked for closure.
(2) Comprises Selecta, travel concessions and various other non-core businesses.
(3) Comprises Selecta, travel concessions and various other non-core businesses and adjustments to prior year disposals.
(4) Additional provisions were 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 in the period ended 31 March 2007.
(5) Released surplus accruals / provisions of £16 million and utilised accruals / provisions in respect of purchase price adjustments, warranty claims and other indemnities of £17 million in the period ended 31 March 2008. Total £33 million.
(6) The Group manages foreign currency exposures in accordance with the policies set out in the Annual Report for the year ended 30 September 2007, 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.

7 Exceptional items
Exceptional items are disclosed and described separately in the interim 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. All of the exceptional items occurring in the period relate to discontinued operations and are described in more detail in note 6.
		Six months to 31 March				Year ended
Exceptional items		2008 £m	2007 £m			30 September 2007 £m
Discontinued operations
Profit on disposal of net assets and other adjustments  relating to discontinued operations net of tax (note 6)		16	24			197
Total		16	24			197

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, exceptional items and hedge accounting ineffectiveness (net of tax); these are disclosed to show the underlying trading performance of the Group.
		Six months to 31 March			Year ended
Attributable profit		2008  £m	2007 £m		30 September 2007 £m
Profit for the period attributable to equity shareholders of the Company		213	198		515
Less: profit for the period from discontinued operations		(16)	(44)		(212)
Attributable profit for the period from continuing operations		197	154		303
Less: profit from exceptional items included in continuing operations (net of tax)		-	-		-
Attributable profit for the period from continuing operations before exceptional items		197	154		303
Add back: loss / (profit) from hedge accounting ineffectiveness (net of tax)		6	-		4
Underlying attributable profit for the period from continuing operations before exceptional items		203	154		307
Average number of shares (millions of ordinary shares of 10p each)		Six months to 31 March			Year ended
		2008	2007		30 September 2007
Average number of shares for basic earnings per share		1,886	2,052		2,015
Dilutive share options		9	13		11
Average number of shares for diluted earnings per share		1,895	2,065		2,026
Basic earnings per share (pence)
From continuing and discontinued operations		11.3	9.6		25.6
From discontinued operations		(0.9)	(2.1)		(10.6)
From continuing operations		10.4	7.5		15.0
Exceptional items included in continuing operations (net of tax)		-	-		-
From continuing operations before exceptional items		10.4	7.5		15.0
Hedge accounting ineffectiveness (net of tax)		0.4	-		0.2
From underlying continuing operations before exceptional items		10.8	7.5		15.2
Diluted earnings per share (pence)
From continuing and discontinued operations		11.2	9.6		25.4
From discontinued operations		(0.8)	(2.1)		(10.4)
From continuing operations		10.4	7.5		15.0
Exceptional items included in continuing operations (net of tax)		-	-		-
From continuing operations before exceptional items		10.4	7.5		15.0
Hedge accounting ineffectiveness (net of tax)		0.3	-		0.2
From underlying continuing operations before exceptional items		10.7	7.5		15.2

9 Dividends
The interim dividend of 4.0 pence per share (2007: 3.6 pence per share), £74 million in aggregate(1), is payable on 4 August 2008 to shareholders on the register at the close of business on 27 June 2008. The dividend was approved by the Board after the balance sheet date, and has therefore not been reflected as a liability in the interim financial statements.
		Six months to 31 March			Year ended
Dividends on ordinary shares of 10p each		2008 £m	2007 £m		30 September 2007   £m
Final 2006 - 6.5p per share		-	136		136
Interim 2007 - 3.6p per share		-	-		72
Final 2007 - 7.2p per share		135	-		-
Total dividends		135	136		208
(1) Based on the number of shares in issue at 31 March 2008.

10 Provisions
				Six months to 31 March
				2008											2007		Year ended
					Discontinued												30 September
Provisions				Insurance £m	and disposed businesses £m		Onerous contracts  £m		Legal and other claims  £m	Environmental  £m		Total £m			Total £m		2007  Total £m
Brought forward				112	200		46		71	8		437			307		307
Reclassified(1)				-	3		-		9	4		16			-		3
Expenditure in the year				(2)	(17)		(3)		(1)	(2)		(25)			(12)		(28)
Charged to income statement				18	-		-		9	1		28			72		165
Credited to income statement				(1)	(7)		(1)		-	-		(9)			(1)		(2)
Fair value adjustments arising   on acquisitions (note 13)				-	-		7		4	-		11			-		-
Currency adjustment				3	1		1		-	1		6			(5)		(8)
Carried forward				130	180		50		92	12		464			361		437
												As at 31 March					As at
Provisions												2008 £m			2007 £m		30 September 2007   £m
Non-current												372			291		351
Current												92			70		86
Total provisions												464			361		437
(1) Including items reclassified from accrued liabilities and other balance sheet captions.
The provision for 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. Surplus provisions of £7 million were credited to the discontinued operations section of the income statement in the period (2007: £nil). Provisions for onerous contracts represent the liabilities in respect of short-term and long-term leases on unoccupied properties and other contracts lasting under five years.  Provisions for legal and other claims relate principally to 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.

11 Post-employment benefit obligations
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 arrangements are described in more detail in note 23 of the Company's Annual Report for the year ended 30 September 2007.
			Six months to 31 March
													Year ended
			2008							2007			30 September
Post-employment benefit obligations: total surplus / deficit			UK £m		USA £m	Other £m		Total £m		Total £m			2007 Total £m
Total (surplus) / deficit of defined benefit    pension plans brought forward			(62)		60	72		70		282			282
Business acquisitions			-		-	4		4		-			-
Current service cost			5		1	6		12		12			27
Past service cost / (credit)			-		-	-		-		-			(1)
Curtailment credit			-		-	-		-		-			(6)
Amount charged to plan liabilities			35		4	4		43		38			80
Expected return on plan assets			(39)		(2)	(3)		(44)		(37)			(78)
Actuarial (gains) / losses			31		(2)	2		31		-			(130)
Employer contributions			(14)		(3)	(10)		(27)		(34)			(110)
Other movements			-		-	-		-		(3)			10
Currency adjustment			-		1	8		9		(4)			(4)
Total (surplus) / deficit of defined benefit
pension plans carried forward			(44)		59	83		98		254			70
The deficit can be reconciled to the post-employment benefit obligations reported in the consolidated balance sheet as follows:
								As at 31 March					As at
Post-employment benefit obligations: recognised in the balance sheet													30 September
								2008     £m		2007 £m			2007    £m
Total deficit of defined benefit pension plans per above								98		254			70
Surplus not recognised in accordance with IFRIC 14(1)								79		-			92
Post-employment benefit obligations per the balance sheet								177		254			162
The actuarial gain / loss reported in the consolidated statement of recognised income and expense can be reconciled as follows:
								Six months to 31 March					Year ended
													30 September
								2008		2007			2007
Actuarial adjustments								£m		£m			£m
Actuarial (gains) / losses per the above table								31		-			(130)
Increase / (decrease) in surplus not recognised								(13)		-			92
Actuarial (gains) / losses per the statement of recognised income and expense								18		-			(38)
(1) IFRIC Interpretation 14 'IAS 19 -The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction' ('IFRIC 14').

12 Reconciliation of movements in total shareholders' equity
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 to repurchase a total of £1 billion of shares. The programme was completed on 19 March 2008. During the period, a total of 88,614,468 ordinary shares of 10p each were repurchased for a consideration of £282 million(1) and cancelled.
				Six months to 31 March					Year ended
Reconciliation of movements in equity				2008 £m		2007  £m			30 September 2007  £m
Total shareholders' equity brought forward				2,170		2,312			2,312
Total recognised income and expense (per SORIE)				214		238			595
Issue of shares				22		7			27
Fair value of share-based payments (net)				6		11			14
Share buy-back (1)				(282)		(282)			(575)
Transfer on exercise of put options				-		8			9
Buyout of minority interest				(6)		-			-
Fair value adjustments arising on acquisitions(2)				13		-			-
Other changes				-		-			(1)
				2,137		2,294			2,381
Dividends paid to Compass shareholders (note 9)				(135)		(136)			(208)
Dividends paid to minority interest				(3)		(1)			(3)
				1,999		2,157			2,170
Increase in own shares held for staff compensation schemes(3)				(3)		(4)			-
Total shareholders' equity carried forward				1,996		2,153			2,170
The amount charged to profits in respect of share-based payments can be reconciled to the amount credited to equity as follows:
				Six months to 31 March					Year ended
Fair value of share-based payments				2008 £m		2007  £m			30 September 2007  £m
Charged to profits of continuing operations				10		11			24
Charged to profits of discontinued operations				-		-			1
Credit in respect of cash-settled phantom share options (credited back to profits of continuing operations)				-		-			(1)
Other				-		-			1
				10		11			25
Settled in cash or existing shares(4)				(4)		-			(11)
Fair value of share-based payments credited to equity				6		11			14
(1) Including stamp duty and brokers commission.
(2) The fair value adjustments arising on the acquisition of the remaining 50% interest in GR SA relate to 100% of the shareholding. The portion of the fair value adjustment pertaining to the Group's existing 50% shareholding in GR SA was credited to the revaluation reserve in accordance with IFRS 3.
(3) These shares are held in trust and are used to satisfy some of the Group's liabilities to employees for share options, share bonus and long-term incentive plans.
(4) It was originally anticipated these payments would be satisfied by the issue of new shares.

13 Business combinations
The Group acquired the remaining 50% interest in GR SA, its 50% owned Brazilian joint venture, for cash consideration of £91 million on 6 March 2008. Propoco Inc ('Professional Services'), a leading regional provider of facilities management services to the US healthcare market, was acquired on 1 October 2007 for a total consideration of £38 million. £36 million was paid at closing, with the remaining £2 million being deferred for 12 months. Three other small infill acquisitions were made during the period for a total consideration of £6 million, £3 million of which was deferred. On 29 November 2007 the Group bought out the remaining 10% minority interest in Palmar S.p.A, its Italian subsidiary which provides support services, and on 25 March 2008 it acquired a further 9% of the shares of Seiyo Food - Compass Group Inc, its Japanese subsidiary, taking the Group's shareholding from 86% to 95%. The total consideration for both transactions was £15 million.
		Acquisition of 50% interest in GR SA (1)							Other acquisitions					Buy out of minority interests		Total
		Book			Fair				Book	Fair				Fair		Fair
		value			value				value	value				value		value
		£m			£m				£m	£m				£m		£m
Net assets acquired:
Goodwill		22			22				-	-				-		22
Other intangible assets		1			53				-	2				-		55
Property, plant and equipment		11			11				1	1				-		12
Deferred tax asset		-			4				-	-				-		4
Inventories		3			3				-	-				-		3
Trade and other receivables		26			26				3	3				-		29
Cash and cash equivalents		4			4				-	-				-		4
Other assets		1			1				-	-				-		1
Trade and other payables		(31)			(31)				(3)	(4)				-		(35)
Provisions (note 10)		-			(11)				-	-				-		(11)
Post-employment benefit obligations (note 11)		(4)			(4)				-	-				-		(4)
Deferred tax liabilities		(1)			(19)				-	-				-		(19)
Other liabilities		(1)			(1)				-	-				-		(1)
Minority interest (note 12)		-			-				-	-				6		6
		31			58				1	2				6		66
Portion of fair value adjustment credited to
revaluation reserve (note 12)(1)					(13)					-				-		(13)
Fair value of net assets acquired					45					2				6		53
Goodwill arising on acquisition					46					42				9		97
Total consideration					91					44				15		150
Satisfied by:
Cash consideration and costs					91					39				15		145
Deferred consideration					-					5				-		5
					91					44				15		150
Cash flow:
Cash consideration					91					39				15		145
Cash acquired					(4)					-				-		(4)
Net cash outflow arising on acquisition					87					39				15		141
Deferred consideration and other payments relating to previous acquisitions																5
Total cash outflow arising from the purchase of subsidiary companies and investments in associated undertakings																146
The fair value adjustments arising on the acquisition of the remaining 50% interest in GR SA relate to 100% of the shareholding. The portion of the fair value adjustment pertaining to the    Group's existing 50% shareholding in GR SA was credited to the revaluation reserve in accordance with IFRS 3.

Adjustments made to the fair value of assets acquired include the value of intangible assets, provisions and other adjustments recognised on acquisition in accordance with International Financial Reporting Standard 3 'Business Combinations' ('IFRS 3'). The adjustments made in respect of the acquisitions in the six months to 31 March 2008 are provisional and will be finalised within 12 months of the acquisition date.
The goodwill arising on the acquisition of the remaining 50% interest in GR SA represents the premium the Group paid to gain full operational and strategic control of the company. This will allow the business to be fully integrated into the Group. The initial goodwill arising on the acquisition of the other businesses represents the premium the Group paid to acquire three small companies which complement the existing business and create significant opportunities for cross selling and other synergies.
In the period from acquisition to 31 March 2008 the acquisitions contributed revenue of £38 million and operating profit of £4 million to the Group's results. If the acquisitions had occurred on 1 October 2007, Group revenue for the period would have been £5,662 million and total Group operating profit (including associates) would have been £325 million.

14 Reconciliation of operating profit to cash generated by operations
		Six months to 31 March
Reconciliation of operating profit to cash generated by continuing operations		2008 £m	2007 £m		30 September 2007 £m
Operating profit from continuing operations		320	264		525
Adjustments for:
Depreciation of property, plant and equipment		70	71		142
Amortisation of intangible fixed assets		14	15		31
(Gain) / loss on disposal of property, plant and equipment		-	(1)		5
Increase / (decrease) in provisions		17	(7)		43
Decrease in post-employment benefit obligations		(15)	-		(42)
Share-based payments - charged to profits(1)		10	11		23
Share-based payments - settled in cash or existing shares(1) (2)		(4)	-		(11)
Operating cash flows before movement in working capital		412	353		716
(Increase) / decrease in inventories		(7)	(7)		(7)
(Increase) / decrease in receivables		(82)	(26)		8
Increase / (decrease) in payables		25	(16)		36
Cash generated by continuing operations		348	304		753
(1) A reconciliation of the amount charged to profits in respect of share-based payments and the amount credited to equity is given in note 12.
(2) It was originally anticipated these payments would be satisfied by the issue of new shares.

15 Reconciliation of net cash flow to movement in net debt
This table is presented as additional information to show movement in net debt, defined as overdrafts, bank and other borrowings, finance leases and derivative financial instruments, net of cash and cash equivalents.
		Six months to 31 March			Year ended
Net debt					30 September
		2008 £m	2007 £m		2007 £m
Net increase / (decrease) in cash and cash equivalents		(449)	(310)		(11)
Cash (inflow) / outflow from changes in net debt		61	(42)		239
Cash (inflow) / outflow from repayment of obligations under finance leases		6	9		15
(Increase) / decrease in net debt as a result of new finance leases taken out		(3)	(3)		(15)
Currency translation gains / (losses) on net debt		(54)	51		74
Acquisitions and disposals (excluding cash and overdrafts)		-	-		7
Other non-cash movements		(7)	12		22
(Increase) / decrease in net debt during the period		(446)	(283)		331
Opening net debt		(764)	(1,095)		(1,095)
Closing net debt		(1,210)	(1,378)		(764)
Other non-cash movements are comprised as follows:
		Six months to 31 March			Year ended
Other non-cash movements in net debt					30 September
		2008 £m	2007 £m		2007          £m
Amortisation of the fair value adjustment in respect of     the £250 million sterling Eurobond redeemable in 2014		2	2		4
Fair value debt adjustment		(23)	16		4
Swap monetisation credit		4	7		25
Changes in the value of derivative financial instruments		10	(13)		(11)
Other non-cash movements		(7)	12		22

16 Contingent liabilities
		As at 31 March			As at
Contingent liabilities					30 September
		2008 £m	2007 £m		2007 £m
Performance bonds, guarantees and indemnities  (including those of associated undertakings)		229	203		227
On 21 October 2005, the Company announced that it had instructed Freshfields Bruckhaus Deringer to conduct an investigation into the relationships between Eurest Support Services ('ESS') (a member of the Group), IHC Services Inc. ('IHC') and the United Nations. Ernst & Young assisted Freshfields Bruckhaus Deringer in this investigation. On 1 February 2006, it was announced that the investigation had concluded. The investigation established serious irregularities in connection with contracts awarded to ESS by the UN. The work undertaken by Freshfields Bruckhaus Deringer and Ernst & Young gave no reason to believe that these issues extended beyond a few individuals within ESS to other parts of ESS or the wider Compass Group of companies. The Group settled all outstanding civil litigation against us in relation to this matter in October 2006, but litigation continues between competitors of ESS, IHC and other parties involved in UN procurement. IHC's relationship with the UN and ESS was part of a wider investigation into UN procurement activity being conducted by the United States Attorney's Office for the Southern District of New York, and with which the Group co-operated fully. The current status of that investigation is uncertain and a matter for the US authorities. Those investigators could have had access to sources unavailable to the Group, Freshfields Bruckhaus Deringer or Ernst & Young, and further information may yet emerge which is inconsistent with, or additional to, the findings of the Freshfields Bruckhaus Deringer investigation, which could have an adverse impact on the Group. The Group has however not been contacted by, or received further requests for information from, the United States Attorney's Office for the Southern District of New York in connection with these matters since January 2006. The Group has cooperated fully with the UN throughout. In February 2007, the Group's Portuguese business, Eurest (Portugal) Sociedade Europeia Restaurantes LDA, was visited by the Portuguese Competition Authority (PCA) as part of an investigation into possible past breaches of competition law by the Group and other caterers in the sector. The PCA investigation relates to a part of the Portuguese catering business which services mainly public sector contracts. The Group is co-operating fully with the PCA's investigation which is still ongoing. It is likely that it will take several more months to complete and its outcome cannot be predicted at this point. Revenues of the Portuguese business for the year ended 30 September 2007 were £90 million (€134 million).  It is not currently possible to quantify any potential liability which may arise in respect of these matters. The directors currently have no reason to believe that any potential liability that may arise would be material to the financial position of the Group. The Group, through a number of its subsidiary undertakings, is, from time to time, party to various other legal proceedings or claims arising from its normal business. Provisions are made as appropriate. None of these proceedings is regarded as material litigation. The Group has provided a guarantee to one of its joint venture partners over the level of profits which will accrue to them in future periods. The maximum amount payable under this guarantee is £35 million, which would be payable in respect of the period from 1 July 2007 to 31 December 2010. Based on the latest management projections, no liability is expected to arise in relation to this guarantee and accordingly, no provision has been recorded at 31 March 2008 (2007: £nil).

17 Capital commitments
		As at 31 March			As at
		2008 £m	2007 £m		30 September 2007 £m
Capital commitments
Contracted for but not provided for		23	30		23

18 Operating lease and concessions commitments
The Group leases offices and other premises under non-cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group has some leases that include revenue-related rental payments that are contingent on future levels of revenue.
There has been no material change to the level of future minimum rentals payable under non-cancellable operating leases and concession agreements since 30 September 2007.

19 Related party transactions

The following transactions were carried out with related parties of Compass Group PLC:

Subsidiaries

Transactions between the ultimate parent company and its subsidiaries, and between subsidiaries, have been eliminated on consolidation.

Joint ventures

There were no significant transactions between joint ventures or joint venture partners and the rest of the Group during the period except for the acquisition of the remaining 50% interest in GR SA, the Group's 50% owned Brazilian joint venture (see note 13).

Associates

There were no significant transactions with associated undertakings during the period.

Key management personnel

During the period there were no material transactions or balances between the Group and its key management personnel or members of their close family, other than from remuneration.

20 Post balance sheet events

On 14 May 2008, the Group announced it would buy back a further £400 million of shares over the next 18 months in order to maintain an efficient capital structure whilst at the same time retaining the flexibility to fund future infill acquisitions.

21 Exchange rates
Exchange rates		Six months to 31 March			Year ended
		2008	2007		30 September 2007
Average exchange rate for period
Australian Dollar		2.24	2.48		2.44
Brazilian Real		3.56	4.14		4.02
Canadian Dollar		2.00	2.26		2.19
Euro		1.36	1.49		1.48
Japanese Yen		220.10	230.72		234.05
Norwegian Krone		10.84	12.15		11.98
South African Rand		14.53	14.10		14.18
Swedish Krona		12.77	13.62		13.63
Swiss Franc		2.23	2.39		2.40
US Dollar		2.02	1.95		1.97
Closing exchange rate as at end of period
Australian Dollar		2.17	2.43		2.30
Brazilian Real		3.46	4.01		3.75
Canadian Dollar		2.03	2.26		2.02
Euro		1.26	1.47		1.43
Japanese Yen		198.35	231.59		234.33
Norwegian Krone		10.17	11.97		11.05
South African Rand		16.08	14.22		14.05
Swedish Krona		11.85	13.76		13.18
Swiss Franc		1.99	2.39		2.38
US Dollar		1.99	1.96		2.04
Average rates are used to translate the income statement and cash flow. Closing rates are used to translate the balance sheet. Only the most significant currencies are shown.

 

END

 

 

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