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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Compass Group Plc | LSE:CPG | London | Ordinary Share | GB00BD6K4575 | ORD 11 1/20P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-5.00 | -0.22% | 2,226.00 | 2,225.00 | 2,226.00 | 2,253.00 | 2,217.00 | 2,242.00 | 826,133 | 16:17:05 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Eating Places | 31.03B | 1.31B | 0.7696 | 28.83 | 37.89B |
TIDMCPG
RNS Number : 0772X
Compass Group PLC
21 November 2017
Legal Entity Identifier (LEI) No. 2138008M6MH9OZ6U2T68
Full year results announcement for the year ended 30 September 2017
Underlying(1) results Statutory results 2017 2016 Change 2017 2016 Change GBP22.9 GBP22.0 GBP22.6 GBP19.6 Revenue billion billion(2) 4.0%(3) billion billion 15.1% Operating GBP1,705 GBP1,614 GBP1,665 GBP1,409 profit million million(2) 5.6%(2) million million 18.2% Operating +20 +20 margin 7.4% 7.2% bps 7.4% 7.2% bps Earnings per share 72.3 pence 68.4 pence(2) 5.7%(2) 71.3 pence 60.4 pence 18.0% Free cash GBP974 GBP908 flow million million 7.3% Annual dividend per share 33.5 pence 31.7 pence 5.7% 33.5 pence 31.7 pence 5.7% ================= =========== ============== ======== =========== =========== =======
(1) Reconciliation of statutory to underlying results can be found on pages 34 - 35.
(2) Measured on a constant currency basis.
(3) Organic revenue growth.
Compass reports another strong set of results. Organic revenue grew by 4%, operating margin improved by 20 basis points and we returned GBP1.6bn to shareholders.
Organic revenue growth of 4.0%
-- Growth accelerated in the second half as expected -- Another excellent year in North America with organic revenue up 7.1% -- Organic revenue grew by 1.6% in Europe -- Rest of World declined by 2.5%, but excluding Offshore & Remote it grew by 3.0%
Margin up 20bps
-- The Management and Performance (MAP) programme continues to drive operating efficiencies -- Margin improvement benefitted from the end of restructuring plan in Offshore & Remote
Growth, performance and returns to shareholders: a proven and sustainable model
-- Free cash flow of GBP974 million, up 7.3% on 2016 -- Proposed annual dividend up 5.7%, in line with constant currency EPS -- Total returns to shareholders of GBP1.6bn, including GBP1bn special dividend
Statutory results
-- On a statutory basis, revenue, operating profit and earnings per share benefitted by around 11% from the translational effect of weaker sterling
Chief Executive's Statement
Richard Cousins, Group Chief Executive, said:
"Compass had another strong year. North America continues to deliver excellent growth, we are continuing to make progress in Europe and in Rest of World, with trends in our commodity related business improving.
We continue to drive operating efficiencies around the business which, combined with the end of the restructuring in our Offshore and Remote business, resulted in margin improvement of 20bps in the period.
Given our excellent cash generation and the strength of the business, this year we returned GBP1.6 billion to shareholders via ordinary and special dividends and share buybacks. This reflects our commitment to return surplus cash to shareholders whilst maintaining an efficient balance sheet.
Our expectations for FY2018 are positive, with growth and margin improvement weighted to the second half. The pipeline of new contracts is encouraging and our focus on organic growth, efficiencies and cash gives us confidence in achieving another year of progress.
In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue growth, margin improvement, as well as continued returns to shareholders."
Results presentation today
The results presentation for investors and analysts is being held today, Tuesday 21 November 2017, at 9.00 a.m. at Bank of America Merrill Lynch, 2 King Edward Street, London EC1A 1HQ. A live webcast of the results presentation will be broadcast today at 9.00 a.m., accessible via the Company's website, www.compass-group.com. At the end of the presentation you will be able to participate in a question and answer session by dialling:
UK Toll Number: +44 (0) 3333 000 804 UK Toll-Free Number: +44 (0) 800 358 9473 US Toll Number: +1 631 913 1422 US Toll-Free Number: +1 855 857 0686 Participant PIN Code: 03721269#
Financial calendar
Ex-dividend date for 2017 final dividend 18 January 2018 Record date for 2017 final dividend 19 January 2018 2017 final dividend date for payment 26 February 2018 Q1 Trading Update / Annual General Meeting 8 February 2018 Half year results 9 May 2018
Enquiries
Investors Sandra Moura +44 1932 573 000 Press Gordon Simpson, Finsbury +44 207 251 3801 Website www.compass-group.com
Chief Executive's Statement (continued)
Basis of preparation
Throughout this preliminary announcement, and consistent with prior years, underlying and other alternative performance measures are used to describe the Group's performance. These are not recognised under International Financial Reporting Standards (IFRS) or other generally accepted accounting principles (GAAP).
The Executive Board of the Group manages and assesses the performance of the business on these measures and believes they are more representative of ongoing trading, facilitate meaningful year on year comparisons, and hence provide more useful information to shareholders. All underlying measures are defined in the glossary of terms on pages 37 to 38.
A summary of the adjustments from statutory results to underlying results is shown in note 8 on page 34 and further detailed in the consolidated income statement (page 21), reconciliation of free cash flow (page 27), note 2 segmental reporting (pages 28 to 29) and note 9 organic revenue and organic profit (page 35).
Group overview
Revenue for the Group grew by 4.0% on an organic basis. New business wins were 8.7% driven by strong MAP 1 (client sales and marketing) performance in all regions, our retention rate was 94.3% as a result of our ongoing focus and investment, and like for like revenue grew by 1.0% reflecting sensible price increases partially offset by weak volumes in our commodity related business. On a statutory basis, revenue grew by 15.1%, of which 11.3% was the benefit of currency translation.
Underlying operating profit increased by 5.6% on a constant currency basis. Operating profit margin increased by 20 basis points as we continue to drive efficiencies across the business using our Management and Performance (MAP) framework and foreign exchange. We also benefitted from the end of the restructuring plan in the Emerging Markets and Offshore & Remote last year and the absence of these costs this year. We have maintained our focus on MAP 3 (cost of food) with initiatives such as menu planning and supplier rationalisation, as well as continually optimising MAP 4 (labour and in unit costs) and MAP 5 (above unit overheads). These efficiencies combined with modest pricing increases enabled us to offset inflation pressures and reinvest to support the exciting growth opportunities we see around the world. On a statutory basis, operating profit grew by 18.2%, of which 11.3% was the benefit of currency translation.
Returns to shareholders continue to be an integral part of our business model. As a result of continued strong cash flow generation, and limited M&A this year, we paid a special dividend of GBP1 billion (61.0 pence per share) in July and declared an annual dividend of 33.5 pence per share (up 5.7%). We have also bought back GBP19 million of shares. Our leverage policy remains unchanged: to maintain strong investment grade credit ratings, returning any surplus cash to shareholders to target net debt to EBITDA of around 1.5x.
Chief Executive's Statement (continued)
Regional performances
North America - 58.3% Group revenue (2016: 56.3%)
Underlying Change Regional financial summary 2017 2016 Reported rates Constant currency Organic ============================ =========== =========== =============== ================== ======== Revenue GBP13,322m GBP11,198m 19.0% 6.7% 7.1% Regional operating profit GBP1,082m GBP908m 19.2% 6.9% 7.4% Regional operating margin 8.1% 8.1% - ============================ =========== =========== =============== ================== ========
We have had another strong performance from our North American business with organic revenue growth of 7.1%. This was driven by good new business wins and an excellent retention rate at 96%. Like for like revenues were positive across the business reflecting modest pricing and flat volumes - with the exception of the Offshore & Remote sector which remains challenging.
Solid organic growth in our Business & Industry sector was driven by strong new business and excellent retention. New contract wins include Costco as well as additional business with Qualcomm Inc.
In the Healthcare & Seniors sector, organic revenue growth was driven by double digit new business and some like for like growth. New contract wins include Mayo Foundation, University of Cincinnati Health System, Cleveland Clinic and Arkansas Children's Hospital.
Excellent retention in our Education sector has contributed to the delivery of solid organic revenue growth along with contract wins including the University of Houston and Vassar College.
Our Sports & Leisure business had excellent retention of nearly 100%. Increased participation at some sporting events, with the benefit of additional playoffs, contributed to strong organic revenue growth. Contract wins include the George R. Brown Convention Center, Vivint Smart Home Arena, home of the Utah Jazz, and Smith's Ballpark, home of the Salt Lake Bees.
Offshore & Remote is small at circa 2% of revenues. It continued to decline in the year, with the second half of the year worsening due to client site closures, the impact of which will continue in 2018. Volume and pricing pressures also remain. However, some new contracts continue to be won including additional projects for Noble Drilling and Forbes Bros. Ltd.
Underlying operating profit of GBP1,082 million increased by 6.9% (GBP70 million) on a constant currency basis. The benefits generated by ongoing efficiency initiatives across MAPs 3 and 4, along with sensible price increases and leverage of the overhead base, were largely offset by the continued weakness in our Offshore & Remote business and above average labour inflation. As a result, the underlying operating margin for the year was unchanged.
Chief Executive's Statement (continued)
Europe - 25.9% Group revenue (2016: 27.5%)
Underlying Change Regional financial summary 2017 2016 Reported rates Constant currency Organic ============================ ========== ========== =============== ================== ======== Revenue GBP5,911m GBP5,458m 8.3% 1.5% 1.6% Regional operating profit GBP428m GBP394m 8.6% 1.2% 1.2% Regional operating margin 7.2% 7.2% - ============================ ========== ========== =============== ================== ========
Organic revenue growth for the region was 1.6% with growth improving as the year progressed. The performance was driven by good levels of new business in the UK and Turkey, partly offset by dull trading on the Continent, principally in France and Germany. Like for like revenues benefitted from some pricing but continued to be impacted by poor trading conditions in our North Sea oil & gas business.
Our improving new business performance reflects good levels of wins in the UK, Turkey and Iberia. New contracts include Colegios Mayores UCM in Spain and Oxford University in the UK. Contract extensions include Peugeot in France and Slovakia, Rabobank in the Netherlands, Premier Inn and Wimbledon both in the UK and Mercedes in Turkey.
Underlying operating profit grew by 1.2% (GBP5 million) on a constant currency basis. The ongoing focus on driving operational efficiencies and sensible pricing allowed us to support the higher levels of growth, and associated mobilisation costs. This was offset by lower volumes in the oil & gas business, and inflationary pressures, particularly unrecovered labour cost inflation in our UK support services business. As a result of our actions, we have maintained the underlying operating margin at 7.2%.
Chief Executive's Statement (continued)
Rest of World - 15.8% Group revenue (2016: 16.2%)
Underlying Change Regional financial summary 2017 2016 Reported rates Constant currency Organic ============================ ========== ========== =============== ================== ======== Revenue GBP3,619m GBP3,215m 12.6% (2.5)% (2.5)% Regional operating profit GBP248m GBP218m 13.8% (2.0)% (2.0)% Regional operating margin 6.9% 6.8% 10bps ============================ ========== ========== =============== ================== ========
Organic revenue in our Rest of World region declined by 2.5%. Excluding the Offshore & Remote business, organic revenue grew by 3.0%. Offshore & Remote contracted by 14%, reflecting the continuing impact of the transition of construction contracts to production in Australia and continued weakness in our commodity related business around the region. However, the rate of decline has slowed in recent months and we expect this trend to continue into 2018.
As expected, our Australian Offshore & Remote business saw a slowdown in the rate of organic revenue decline to 14% in the second half of the year. Contracts continue to move from their construction to production phase and the ongoing pressures from lower volumes remain, however the number of site closures have reduced. Similar challenges continue to be seen in our non-Australian Offshore & Remote business, although trends are starting to improve. We continue to win and retain contracts at the RAPID site in Malaysia and Centinela in Chile.
The non-Offshore & Remote business continues to perform reasonably well across the region with several countries enjoying double digit growth, including India, China and some of our Spanish speaking Latin American businesses. Although the rate of decline has marginally slowed, Brazil remains challenging. New business wins include the Calvary Bruce Public Hospital in Australia, Fiat in Brazil, Apple Shenzhen in China, J-Village in Japan and Mercedes Benz in India. We continue to retain contracts, including the Kagoshima University Hospital in Japan, New York University Abu Dhabi, Roche in China and Prodeco Food in Colombia.
Overall, underlying operating profit declined by 2.0% (GBP5 million) on a constant currency basis. The underlying margin benefitted more than expected from last year's restructuring allowing for 10 basis points of margin improvement to 6.9%.
Chief Executive's Statement (continued)
Strategy
Focus on food
Food is our focus and our core competence. The food service market is estimated to be more than GBP200 billion; with only around 50% of the market currently outsourced, it represents a significant structural growth opportunity. We believe the benefits of outsourcing become further apparent as economic conditions and regulatory changes put further pressure on organisations' budgets. As one of the largest providers in all of our sectors, we are well placed to benefit from these trends.
Our approach to support services is low risk and incremental, with strategies developed on a country by country basis. Our largest sector in this market is Defence, Offshore & Remote, where the model is almost universally multi service. In addition, we have an excellent support services business in North America and some operations in other parts of the world. This is a complex segment and there are significant differences in client buying behaviour across countries, sectors and sub-sectors.
Geographic spread
We have a truly international business, with operations in around 50 countries.
North America (58% of Group revenue) is likely to remain the principal growth engine for the Group. We have a market leading business, which delivers high levels of growth by combining the cost advantage of our scale with a segmented client facing sector approach. The outsourcing culture is vibrant and the addressable market is significant.
The fundamentals of our businesses in Europe (26% of Group revenue) are good. Our investment in MAP 1 sales and retention has returned the region to growth and with the creation of sub-regional business units, we continue to see opportunities to deliver efficiencies and make our operations more competitive.
Rest of World (16% of Group revenue) offers excellent long term growth potential. Our largest markets are Australia, Japan and Brazil, whilst India and China have strong long term growth potential. Lower commodity prices and a weak macroeconomic backdrop have impacted our Offshore & Remote business and some of our emerging markets, but trends are beginning to improve. We have concluded a restructuring of our business to adapt to the changing market environment and remain excited about the attractive long term growth prospects of the region.
Sectorised approach
The global food services market is very large and disparate and we find that segmenting the market into various sectors and sub-sectors using our portfolio of B2B brands allows us to operate more effectively. It allows us to be closer to our clients and consumers and better understand their different needs. In this way, we can create innovative, bespoke offers that meet their requirements, and in so doing truly differentiate ourselves.
Scale
As we continue to grow, our scale enables us to achieve our goal of being the lowest cost, most efficient provider of food and support services. Scale is a benefit in terms of food procurement, labour management and back office costs. It underpins our competitiveness and enables us to deliver sustainable growth over time.
MAP culture
We use the Management and Performance (MAP) framework across the business. All our employees use this simple framework to drive performance across the Group. It helps us focus on a common set of business drivers, whether it is winning new business in the right sector on the right terms (MAP 1), increasing our consumer participation and spend (MAP 2), reducing our food costs (MAP 3), our labour costs (MAP 4) or our overhead (MAP 5).
Chief Executive's Statement (continued)
Uses of cash and balance sheet priorities
The Group's cash flow generation remains excellent and it will continue to be a key part of the business model. Our priorities for how we use our cash remain unchanged. We will continue to: (i) invest in the business to support organic growth where we see opportunities with good returns; (ii) pursue M&A opportunities; our preference is for small to medium sized infill acquisitions, where we look for returns greater than our cost of capital by the end of year two; (iii) grow the dividend in line with underlying constant currency earnings per share; and (iv) maintain strong investment grade credit ratings returning any surplus cash to shareholders to target net debt to EBITDA of around 1.5x.
Summary and outlook
"Compass had another strong year. North America continues to deliver excellent growth, we are continuing to make progress in Europe and in Rest of World, with trends in our commodity related business improving.
We continue to drive operating efficiencies around the business which, combined with the end of the restructuring in our Offshore and Remote business, resulted in margin improvement of 20bps in the period.
Given our excellent cash generation and the strength of the business, this year we returned GBP1.6 billion to shareholders via ordinary and special dividends and share buybacks. This reflects our commitment to return surplus cash to shareholders whilst maintaining an efficient balance sheet.
Our expectations for FY2018 are positive, with growth and margin improvement weighted to the second half. The pipeline of new contracts is encouraging and our focus on organic growth, efficiencies and cash gives us confidence in achieving another year of progress.
In the longer term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue growth, margin improvement, as well as continued returns to shareholders."
Richard Cousins
Group Chief Executive
21 November 2017
Business Review
2017 has been another strong year with good organic revenue growth of 4.0%, underlying margin delivery of 7.4% and an increase in free cash flow of 7.3%.
Financial summary 2017 2016 GBPm GBPm Increase Revenue Underlying at constant currency 22,852 22,017 3.8% Underlying at reported rates 22,852 19,871 15.0% Statutory 22,568 19,605 15.1% Organic growth 4.0% 5.0% ================================== ======= ======= ========= Total operating profit Underlying at constant currency 1,705 1,614 5.6% Underlying at reported rates 1,705 1,445 18.0% Statutory 1,665 1,409 18.2% ================================== ======= ======= ========= Operating margin Underlying at reported rates 7.4% 7.2% 20 bps Statutory 7.4% 7.2% 20 bps ================================== ======= ======= ========= Profit before tax Underlying at constant currency 1,591 1,504 5.8% Underlying at reported rates 1,591 1,344 18.4% Statutory 1,560 1,321 18.1% ================================== ======= ======= ========= Basic earnings per share Underlying at constant currency 72.3p 68.4p 5.7% Underlying at reported rates 72.3p 61.1p 18.3% Statutory 71.3p 60.4p 18.0% ================================== ======= ======= ========= Free cash flow Underlying at reported rates 974 908 7.3% Full year dividend per ordinary share 33.5p 31.7p 5.7% ================================== ======= ======= =========
Definitions of underlying measures of performance can be found in the glossary on pages 37 to 38.
Business Review (continued)
Segmental performance
Underlying Growth revenue(1) ------------------------ ----------------------------- ----------------------- -------- 2017 2016 Reported Constant GBPm GBPm Rates Currency Organic ------------ --------------- ----------- ---------- -------- North America 13,322 11,198 19.0% 6.7% 7.1% Europe 5,911 5,458 8.3% 1.5% 1.6% Rest of World 3,619 3,215 12.6% (2.5%) (2.5%) Total 22,852 19,871 15.0% 3.8% 4.0% ------------------------- ------------ --------------- ----------- ---------- -------- Underlying Underlying operating operating profit(1) margin(1) ----------------------------- ----------------------- 2017 2016 2017 2016 GBPm GBPm % % ------------ --------------- ----------- ---------- North America 1,082 908 8.1% 8.1% Europe 428 394 7.2% 7.2% Rest of World 248 218 6.9% 6.8% Unallocated overheads (70) (65) Total before EM & OR restructuring 1,688 1,455 7.4% 7.3% ------------------------- ------------ --------------- ----------- ---------- EM & OR restructuring - (25) Total before associates 1,688 1,430 7.4% 7.2% Associates 17 15 ------------------------- ------------ --------------- Total 1,705 1,445 ------------------------- ------------ ---------------
(1) Definitions of underlying measures of performance can be found in the glossary on page 37 to 38.
Business Review (continued)
Statutory and underlying results
2017 2016 Statutory Adjustments Underlying Statutory Adjustments Underlying GBPm GBPm GBPm GBPm GBPm GBPm Revenue 22,568 284 22,852 19,605 266 19,871 Operating profit 1,665 40 1,705 1,409 36 1,445 Other gains/ (losses) - - - 1 (1) - Net finance costs (105) (9) (114) (89) (12) (101) Profit before tax 1,560 31 1,591 1,321 23 1,344 Tax (389) (15) (404) (319) (11) (330) ======================= ========== ============ =========== ========== ============ =========== Profit after tax 1,171 16 1,187 1,002 12 1,014 Non-controlling interest (10) - (10) (10) - (10) Attributable profit 1,161 16 1,177 992 12 1,004 Average number of shares (millions) 1,628 - 1,628 1,643 - 1,643 Basic earnings per share (pence) 71.3p 1.0p 72.3p 60.4p 0.7p 61.1p ======================= ========== ============ =========== ========== ============ =========== EBITDA 2,188 1,840 Gross capex 717 580 Free cash flow 974 908 ======================= ========== ============ =========== ========== ============ ===========
Further details of the adjustments can be found in the consolidated income statement, note 2 segmental reporting and note 8 statutory and underlying results.
Statutory results
On a statutory basis, revenue was GBP22,568 million (2016: GBP19,605 million), growth of 15.1%, which included 11.3% of foreign currency translation benefit.
Operating profit was GBP1,665 million (2016: GBP1,409 million), an increase of 18.2% over the prior year, which included 11.3% of foreign currency translation benefit.
Operating margin was 7.4% (2016: 7.2%).
Net finance costs were GBP105 million (2016: GBP89 million).
Profit before tax was GBP1,560 million (2016: GBP1,321 million) giving rise to an income tax expense of GBP389 million (2016: GBP319 million), equivalent to an effective tax rate of 24.9% (2016: 24.1%).
Basic earnings per share were 71.3 pence (2016: 60.4 pence), an increase of 18.0%, of which 11.3% relates to foreign currency translation.
Business Review (continued)
Underlying results
A summary of adjustments from statutory results to underlying results is shown on page 34 and further detailed in the consolidated income statement (page 21), reconciliation of free cash flow from operations (page 27), the segmental reporting note (pages 28 to 29) and the organic revenue and organic profit note (page 35).
Underlying revenue
On an organic basis, revenue increased by 4.0%. New business wins were 8.7% driven by a strong performance in most countries. Our retention rate was 94.3% as a result of our ongoing focus and investment. Like for like revenue growth was 1.0%, reflecting sensible price increases partly offset by weak volumes in our commodity related business.
Underlying operating profit
Underlying operating profit was GBP1,705 million (2016: GBP1,445 million), an increase of 18.0%. If we restate 2016's profit at the 2017 average exchange rates, it would have increased by GBP169 million to GBP1,614 million. On a constant currency basis, underlying operating profit has therefore increased by GBP91 million, or 5.6%.
Underlying operating margin
The underlying operating margin increased by 20 basis points as we continue to drive efficiencies across the business, benefitted from the end of the Emerging Markets and Offshore & Remote restructuring and foreign exchange. These efficiencies, combined with modest pricing increases, enabled us to offset inflation pressures and reinvest to support the exciting growth opportunities we see around the world.
Underlying finance costs
The underlying net finance cost increased to GBP114 million (2016: GBP101 million) as a result of sterling weakness and the additional interest on debt to fund the GBP1 billion special dividend. This equates to an effective interest rate of just under 3.0% on gross debt. For 2018, we expect an underlying net finance cost of around GBP120 million.
Underlying tax charge
On an underlying basis, the tax charge was GBP404 million (2016: GBP330 million), equivalent to an effective tax rate of 25.4% (2016: 24.5%). This increase is a consequence of both the changing regulatory environment affecting all multinational groups, specifically the enactment into law in the UK of the OECD BEPS legislation, and the impact of exchange rate movements. Our current expectations for the 2018 tax rate are to be around 1.0% higher than 2017. As previously noted, we are likely to see a continuing period of significant uncertainty in the international corporate tax environment.
Underlying basic earnings per share
On a constant currency basis, the underlying basic earnings per share were 72.3 pence (2016: 68.4 pence), an increase of 5.7%.
Dividends
Our dividend policy is to grow the dividend in line with growth in underlying constant currency earnings per share.
In determining the level of dividend in any year in accordance with the policy, the Board also considers a number of other factors that influence the proposed dividend, which include but are not limited to:
-- the level of available distributable reserves in the Parent Company;
-- future cash commitments and investment needs to sustain the long-term growth prospects of the business;
-- potential strategic opportunities; and -- the level of dividend cover.
Further surpluses, after considering the matters set out above, are distributed to shareholders over time by way of special dividend payments, share repurchases or a combination of both.
Compass Group PLC, the Parent Company of the Group, is a non-trading investment holding company which derives its distributable reserves from dividends paid by subsidiary companies. The level of distributable reserves in the Parent Company is reviewed annually and the Group aims to maintain distributable reserves that provide adequate cover for dividend payments. The distributable reserves of the Parent Company include the balance on the profit and loss account reserve, which at 30 September 2017 amounted to GBP1,127 million.
The Group is currently in a strong position to continue to fund its dividend which continues to be well covered by cash generated by the business. Details on the Group's going concern assessment can be found on page 16.
The ability of the Board to maintain its future dividend policy will be influenced by a number of the principal risks identified on pages 17 to 20 that could adversely impact the performance of the Group although we believe we have the ability to mitigate those risks as outlined on pages 17 to 20.
It is proposed that a final dividend of 22.3 pence per share be paid on 26 February 2018 to shareholders on the register on 19 January 2018. This will result in a total dividend for the year of 33.5 pence per share (2016: 31.7 pence per share), a year on year increase of 5.7%. The dividend is covered 2.2 times on an underlying earnings basis and 1.8 times on a cash basis.
The final dividend of 22.3 pence will be paid gross and a Dividend Reinvestment Plan (DRIP) will be available. The last date for receipt of elections for the DRIP will be 5 February 2018.
Special dividend
On 7 June 2017, shareholder approval was given at a General Meeting for a return of 61.0 pence per share to shareholders, which was equivalent to GBP1 billion in aggregate and was accompanied by a Share Capital Consolidation. The special dividend was paid on 17 July 2017 to shareholders on the register on 26 June 2017.
Purchase of own shares
During the year, the Group purchased shares for a consideration of GBP19 million (2016: GBP100 million).
Shareholder return
The market price of the Group's ordinary shares at the close of the financial year was 1,583.00 pence per share (2016: 1,495.00 pence per share).
Business Review (continued)
Free cash flow
Free cash flow totalled GBP974 million (2016: GBP899 million). In 2016, we made cash payments of GBP9 million related to the European exceptional programme. Adjusting for this, free cash flow on an underlying basis would have grown by GBP66 million or 7.3%. Free cash flow conversion was 57% (2016: 63%).
Gross capital expenditure of GBP717 million (2016: GBP580 million), including assets purchased under finance leases of GBP2 million (2016: GBP2 million), is equivalent to 3.1% of underlying revenues (2016: 2.9% of underlying revenues). We continue to deliver strong returns on our capital expenditure across all regions. In 2018 we expect capital expenditure to be just over 3% of revenue, which includes an investment in a long term partnership with the LA Dodgers in the US.
The working capital outflow, excluding provisions and pensions, was GBP62 million (2016: GBP12 million inflow). In 2018 we expect a small underlying outflow which will be offset by a positive inflow of around GBP70 million due to the timing of our payroll run in September. This payroll inflow is a reversal of the outflow which occurred in 2016.
The GBP14 million outflow (2016: GBP39 million) in respect of post employment benefit obligations reflects the reduction in regular payments agreed with trustees of the UK defined benefit pension scheme as a result of the funding surplus following the triennial valuation in April 2016. We now continue to expect a total outflow for the Group of around GBP20 million per annum.
The net interest outflow was GBP97 million (2016: GBP94 million).
The underlying cash tax rate was in line with expectations at 21% (2016: 18%).
Acquisition payments
The total cash spent on acquisitions in the year, net of cash acquired, was GBP96 million (2016: GBP180 million), comprising GBP72 million of infill acquisitions, GBP1 million of acquisition transaction costs net of cash acquired and GBP23 million of contingent consideration relating to prior years' acquisitions.
Disposals
The Group received GBP19 million (2016: GBP2 million) in respect of the disposal of some non core businesses.
Post employment benefit obligations
The Group has continued to review and monitor its pension obligations throughout the period working closely with the trustees and members of all schemes around the Group to ensure proper and prudent assumptions are used and adequate provision and contributions are made.
The Group's net pension surplus, calculated in accordance with IAS 19, for all Group defined benefit schemes was GBP28 million (2016: GBP21 million deficit).
The total pensions charge for defined benefit contribution schemes in the year was GBP123 million (2016: GBP100 million) and GBP20 million (2016: GBP17 million) for defined benefit schemes.
Return on capital employed
Return on capital employed was 20.3% (2016: 19.4%) based on net operating profit after tax at the underlying effective tax rate of 25.4% (2016: 24.5%). The average capital employed was GBP6,218 million (2016: GBP5,565 million).
On a constant currency basis, the increase in return on capital employed was 10 basis points.
Related party transactions
Details of transactions with related parties are set out in note 29 of the consolidated financial statements. These transactions have not had, and are not expected to have, a material effect on the financial performance or position of the Group.
Business Review (continued)
Financial position
The ratio of net debt to market capitalisation of GBP25,035 million as at 30 September 2017 was 13.8% (2016: 12%).
Net debt increased to GBP3,446 million (2016: GBP2,874 million). The ratio of net debt to underlying EBITDA was 1.6x, slightly above the target ratio due to the funding of the GBP1 billion special dividend. Our leverage policy is to maintain strong investment grade credit ratings, returning any surplus cash to shareholders to target net debt to underlying EBITDA of around 1.5x.
The Group generated GBP974 million of free cash flow (2016: GBP899 million), including investing GBP683 million in net capital expenditure, and spent GBP77 million on acquisitions net of disposal proceeds. GBP347 million was paid in respect of the final dividend for the financial year 2016, GBP184 million was paid for the interim 2017 dividend, GBP1,003 million in relation to the special dividend and GBP19 million returned to shareholders through share buybacks.
The remaining GBP84 million movement in net debt related predominantly to foreign currency translation.
Liquidity risk
The Group finances its borrowings from a number of sources including the bank, the public and the private placement markets. The Group has developed long term relationships with a number of financial counterparties with the balance sheet strength and credit quality to provide credit facilities as required. The Group seeks to avoid a concentration of debt maturities in any one period to spread its refinancing risk.
The maturity profile of the Group's principal borrowings at 30 September 2017 shows that the average period to maturity is 5.6 years (2016: 5.0 years).
The Group's undrawn committed bank facilities at 30 September 2017 were GBP1,387 million (2016: GBP1,000 million).
Financial management
The Group continues to manage its interest rate and foreign currency exposure in accordance with the policies set out below.
The Group's financial instruments comprise cash, borrowings, receivables and payables that are used to finance the Group's operations. The Group also uses derivatives, principally interest rate swaps, forward currency contracts and cross currency swaps, to manage interest rate and currency risks arising from the Group's operations. The Group does not trade in financial instruments. The Group's treasury policies are designed to mitigate the impact of fluctuations in interest rates and exchange rates and to manage the Group's financial risks. The Board approves any changes to the policies. These policies have not changed in the year.
Foreign currency risk
The Group's policy is to match as far as possible its principal projected cash flows by currency to actual or effective borrowings in the same currency. As currency cash flows are generated, they are used to service and repay debt in the same currency. Where necessary, to implement this policy, forward currency contracts and cross currency swaps are taken out which, when applied to the actual currency borrowings, convert these to the required currency.
The borrowings in each currency can give rise to foreign exchange differences on translation into sterling. Where the borrowings either are less than, or equate to, the net investment in overseas operations, these exchange rate movements are treated as movements on reserves and recorded in the consolidated statement of comprehensive income rather than in the income statement.
Non-sterling earnings streams are translated at the average rate of exchange for the year. Fluctuations in exchange rates have given, and will continue to give, rise to translation differences. The Group is only partially protected from the impact of such differences through the matching of cash flows to currency borrowings.
Business Review (continued)
Interest rate risk
As set out above, the Group has effective borrowings in a number of currencies and its policy is to ensure that, in the short term, it is not materially exposed to fluctuations in interest rates in its principal currencies. The Group implements this policy either by borrowing fixed rate debt or by using interest rate swaps so that the interest rates on at least 80% of the Group's projected debt are fixed for one year, reducing to 60% fixed for the second year and 40% fixed for the third year.
Group tax policy
As a Group, we are committed to creating long term shareholder value through the responsible, sustainable and efficient delivery of our key business objectives. This will enable us to grow the business and make significant investments into the Group and its operations.
We therefore adopt an approach to tax that supports this strategy and also balances the various interests of our stakeholders including shareholders, governments, employees and the communities in which we operate. Our aim is to pursue a principled and sustainable tax strategy that has strong commercial merit and is aligned with our business strategy. We believe this will enhance shareholder value whilst protecting Compass' reputation.
In doing so, we act in compliance with the relevant local and international laws and disclosure requirements, and we conduct an open and transparent relationship with the relevant tax authorities that fully complies with the Group's Code of Business Conduct and Code of Ethics.
In an increasingly complex international environment, a degree of tax risk and uncertainty is, however, inevitable. We manage and control these risks in a proactive manner and in doing so, exercise our judgement and seek appropriate advice from relevant professional firms. Tax risks are assessed as part of the Group's formal governance process and are reviewed by the Board and the Audit Committee on a regular basis.
Risks and uncertainties
The Board takes a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Group, its shareholders, employees, clients, consumers and all other stakeholders.
The principal risks and uncertainties that face the business and the activities the Group undertakes to mitigate these are set out on pages 17 to 20.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review, as is the financial position of the Group, its cash flows, liquidity position, and borrowing facilities.
The Group has considerable financial resources together with longer term contracts with a number of clients and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months from the date of approval of the Annual Report. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Johnny Thomson
Group Finance Director
21 November 2017
Focus on Risk
Identifying and managing risk
The Board continues to take a proactive approach to recognising, assessing and mitigating risk with the aim of protecting its employees and consumers and safeguarding the interests of the Company and its shareholders in the constantly changing environment in which it operates.
As set out in the Corporate Governance section within the Annual Report, the Group has policies and procedures in place to ensure that risks are properly identified, evaluated and managed at the appropriate level within the business.
The identification of risks and opportunities, the development of action plans to manage the risks and maximise the opportunities, and the continual monitoring of progress against agreed key performance indicators (KPIs) are integral parts of the business process and core activities throughout the Group.
The table on pages 18 to 20 sets out the principal risks and uncertainties facing the business at the date of this announcement. These have been subject to robust assessment and review. They do not comprise all of the risks that the Group may face and are not listed in any order of priority. Additional risks and uncertainties not presently known to management, or deemed to be less material at the date of this announcement, may also have an adverse effect on the Group. These include risks resulting from the UK's decision to leave the EU and the potential for US tax reform which could adversely affect the risks noted under the 'economic and political environment' section of the table on the following pages as well as affecting financial risks such as liquidity and credit. The Board views the potential impact of Brexit as an integral part of its principal risks rather than a stand-alone risk. However, there is still significant uncertainty about the withdrawal process, its timeframe, and the outcome of negotiations about future arrangements between the UK and the EU, and the period for which existing EU laws for member states will continue to apply to the UK. Therefore, although the risks related to Brexit have been discussed by the Board, it remains too early to properly understand the impact on the business whilst negotiations continue to take place. The Board will continue to assess the risk to the business as the Brexit process evolves.
The Group has significant operations and a substantial employee base in the USA where the new administration has signalled broad policy changes. Some of these potential changes in policy are in respect of trade and tax, none of which are clear at this stage. We are closely monitoring developments from the new administration and will continue to assess the impact of any changes and the extent to which they will be enacted.
In accordance with the provisions of the UK Corporate Governance Code, the Board has taken into consideration the principal risks in the context of determining whether to adopt the going concern basis of accounting and when assessing the prospects of the Company for the purpose of preparing the Viability Statement. The Going Concern and Viability Statement can be found in the Strategic Report in the Annual Report.
The Group faces a number of operational risks on an ongoing basis such as litigation and financial (including liquidity and credit) risk and some wider risks, for example, environmental and reputational. Additionally, there are risks (such as those relating to the eurozone economy, pensions, and acquisitions and investments) which vary in importance depending on changing conditions. All risks disclosed in previous years can be found in the annual reports available on our website at www.compass-group.com. We recognise that these risks remain important to the business and they are kept under review. However, we have focused the disclosures on pages below on those risks that are currently considered to be more significant to the Group.
Focus on Risk (continued)
Principal risks
-- Increased risk Consistent risk RISKS DESCRIPTION EXAMPLES OF MITIGATION HEALTH AND SAFETY Health and Health and safety All management meetings safety is our number one throughout the Group operational priority. feature a health and We are focused on safety update as their protecting people's first substantive wellbeing, as well agenda item. as avoiding serious business interruption and potential damage to our reputation. Compass feeds millions of consumers and employs thousands of people around the world every day. Therefore, setting the highest standards for food hygiene and safety is paramount. 2017 Health and safety improvement KPIs are included in the annual bonus plans for each of the business' management teams. 2016 The Group has policies, procedures and standards in place to ensure compliance with legal obligations and industry standards. The safety and quality of our global supply chain are assured through compliance against a robust set of standards which are regularly reviewed, audited and upgraded as necessary to improve supply chain visibility and product integrity. CLIENTS AND CONSUMERS Client and Our business relies We have strategies consumer sales on securing and retaining which strengthen our retention a diverse range of long term relationships clients. with our clients and consumers based on quality, value and innovation. 2017 Our business model is structured so that we are not reliant on one particular sector, geography or group of clients. 2016 ---------------- ------------------------------- --------------------------------- Bidding Each year, the Group A rigorous tender could bid for a large review process is number of opportunities. in place, which includes a critical assessment of contracts to identify potential risks (including social and ethical risks) and rewards, prior to approval at an appropriate level in the organisation. 2017 2016 ---------------- ------------------------------- --------------------------------- Service delivery The Group's operating Processes are in place and contractual companies contract to ensure that the compliance with a large number services delivered 2017 of clients. Failure to clients are of 2016 to comply with the an appropriate standard terms of these contracts, and comply with the including proper delivery required contract of services, could terms and conditions. lead to loss of business. ---------------- ------------------------------- --------------------------------- Competition We operate in a highly We aim to minimise competitive marketplace. this by continuing The levels of concentration to promote our differentiated and outsource penetration propositions and by vary by country and focusing on our points by sector. Some markets of strength, such are relatively concentrated as flexibility in with two or three our cost base, quality key players. Others and value of service are highly fragmented and innovation. and offer significant opportunities for consolidation and penetration of the self-operated market. Aggressive pricing from our competitors could cause a reduction in our revenues and margins. 2017 2016
Focus on Risk (continued)
RISKS DESCRIPTION EXAMPLES OF MITIGATION PEOPLE Recruitment Failure to attract The Group aims to and recruit people mitigate this risk with the right skills by efficient, time at all levels could critical resource limit the success management, mobilisation of the Group. The of existing, experienced Group faces resourcing employees within the challenges in some organisation, improved of its businesses use of technology due to a lack of industry and through offering experience amongst training and development candidates and appropriately programmes. qualified people, and the seasonal nature of some of our business. 2017 2016 --------------- -------------------------------- ---------------------------- Retention Retaining and motivating The Group has established and motivation the best people with training, development, the right skills, performance management at all levels of the and reward programmes organisation, is key to retain, develop to the long term success and motivate our best of the Group. people. 2017 The Group has a well established employee engagement initiative, Your Voice, which helps us to monitor, understand and respond to our employees' needs. 2016
ECONOMIC AND POLITICAL ENVIRONMENT
Economy Some sectors of our With the variable business could be and flexible nature susceptible to adverse of our cost base, changes in economic it is generally possible conditions and employment to contain the impact levels. of these adverse conditions. 2017 2016 -------------- --------------------------------- ---------------------------------- Cost inflation Our objective is always As part of our MAP to deliver the right framework, we seek level of service in to manage inflation the most efficient by continuing to drive way. An increase in greater efficiencies the cost of labour, through menu management, for example, minimum supplier rationalisation, wages in the USA and labour scheduling UK, or food, especially and productivity. in countries such Cost indexation in as Brazil, could constitute our contracts also a risk to our ability gives us the contractual to do this. right to review pricing with our clients. 2017 2016 -------------- --------------------------------- ---------------------------------- Political We are a global business The Group remains stability operating in countries vigilant to future and regions with diverse changes presented economic and political by emerging markets conditions. Our operations or fledgling administrations and earnings may be and we try to anticipate adversely affected and contribute to by political or economic important changes instability caused, in public policy. for example, by the UK's decision to leave the EU. 2017 2016 COMPLIANCE AND FRAUD Compliance Ineffective compliance The Group's zero tolerance and fraud management with increasingly based Codes of Business complex laws and regulations, Conduct and Ethics or evidence of fraud, continue to govern could have an adverse all aspects of our effect on the Group's relationships with reputation and could our stakeholders. result in an adverse All alleged breaches impact on the Group's of the Codes, including performance if significant any allegations of financial penalties fraud, are investigated. are levied or a criminal action is brought against the Company or its directors. 2017 The Group's procedures include regular operating reviews, underpinned by a continual focus on ensuring the effectiveness of internal controls. 2016 Regulation and compliance risk is also considered as part of our annual business planning process. -------------- --------------------------------- ----------------------------------
Focus on Risk (continued)
RISKS DESCRIPTION EXAMPLES OF MITIGATION COMPLIANCE AND FRAUD Tax compliance As a Group, we seek We manage and control to plan and manage these risks in a proactive our tax affairs efficiently manner and in doing in the jurisdictions so exercise our judgement in which we operate. and seek appropriate In doing so, we act advice from reputable in compliance with professional firms. the relevant laws Tax risks are assessed and disclosure requirements. as part of the Group's formal governance process and are reviewed by the Board and the Audit Committee on a regular basis. 2017 However, in an increasingly complex international corporate tax environment, a degree of uncertainty is inevitable and we note in particular the policy efforts being led by the EU and the OECD which may have a material impact on the taxation of all international businesses. 2016 INFORMATION SYSTEMS AND TECHNOLOGY Information The digital world We seek to assess systems and creates many risks and manage the maturity technology for a global business of our enterprise including technology risk and security failures, loss of infrastructure and confidential data our ability to effectively and damage to brand defend against current reputation, through, and future cyber risks for example, the use by using analysis of social media. tools and experienced professionals to evaluate and mitigate potential impacts. 2017 The Group relies on a variety of IT systems in order to manage and deliver services and communicate with our clients, consumers, suppliers and employees. 2016 We are focused on the need to maximise the effectiveness of our information systems and technology as a business enabler and to reduce both cost and exposure as a result. ============== ================================ ==============================
Compass Group PLC
Consolidated Financial Statements
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 30 SEPTEMBER 2017 Total Total 2017 2016 Notes GBPm GBPm Combined sales of Group and share of equity accounted joint ventures 2 22,852 19,871 Less: share of sales of equity accounted joint ventures (284) (266) ======================================================================== ========== ========= ========= Revenue 22,568 19,605 Operating costs (20,945) (18,235) ======================================================================== ========== ========= ========= Operating costs, excluding Emerging Markets and Offshore & Remote restructuring (20,945) (18,210) Emerging Markets and Offshore & Remote restructuring - (25)
======================================================================== ========== ========= ========= Operating profit before joint ventures and associates 1,623 1,370 Share of profit after tax of joint ventures and associates 42 39 ======================================================================== ========== ========= ========= Operating profit 1,665 1,409 ======================================================================== ========== ========= ========= Underlying operating profit(1) 2 1,705 1,445 Amortisation of intangibles arising on acquisition (39) (31) Acquisition transaction costs (2) (2) Adjustment to contingent consideration on acquisition 3 - Share-based payments expense - non-controlling interest call option - (1) Tax on share of profit of joint ventures (2) (2) ======================================================================== ========== ========= ========= Profit on disposal of businesses - 1 Finance income 6 4 Finance costs (120) (105) Other financing items 9 12 Profit before tax 1,560 1,321 Income tax expense 3 (389) (319) ======================================================================== ========== ========= ========= Profit for the year 1,171 1,002 ======================================================================== ========== ========= ========= ATTRIBUTABLE TO Equity shareholders of the Company 1,161 992 Non-controlling interests 10 10 ======================================================================== ========== ========= ========= Profit for the year 1,171 1,002 ======================================================================== ========== ========= ========= BASIC EARNINGS PER SHARE (PENCE) 4 71.3p 60.4p ======================================================================== ========== ========= ========= DILUTED EARNINGS PER SHARE (PENCE) 4 71.3p 60.3p ======================================================================== ========== ========= ========= 5 (1) Underlying operating profit excludes amortisation of intangibles arising on acquisition, acquisition transaction costs, adjustment to contingent consideration on acquisition and share-based payments expense relating to non-controlling interest call options, but includes share of profit after tax of associates and operating profit of joint ventures.
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 30 SEPTEMBER 2017 2017 2016 ============================================== === GBPm GBPm ================================================= === ====== ====== Profit for the year 1,171 1,002 ================================================= === ====== ====== Other comprehensive income Items that are not reclassified subsequently to profit or loss Remeasurement of post employment benefit obligations - gain / (loss) 125 (500) Return on plan assets, excluding interest income - gain / (loss) (96) 480 Tax on items relating to the components of other comprehensive income (8) 6 ================================================= === ====== ====== 21 (14) ================================================= === ====== ====== Items that may be reclassified subsequently to profit or loss Currency translation differences (47) 158 ================================================= === ====== ====== (47) 158 ================================================= === ====== ====== Total other comprehensive (loss)/income for the year (26) 144 ================================================= === ====== ====== Total comprehensive income for the year 1,145 1,146 ================================================= === ====== ====== ATTRIBUTABLE TO Equity shareholders of the Company 1,135 1,136 Non-controlling interests 10 10 ================================================= === ====== ====== Total comprehensive income for the year 1,145 1,146 ================================================= === ====== ======
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30 SEPTEMBER 2017 Attributable to equity shareholders of the Company ========================================================= Share Capital Share premium redemption Other Retained Non-controlling capital account reserve reserves earnings interests Total GBPm GBPm GBPm GBPm GBPm GBPm GBPm ================== ======== ======== =========== ============= ========= ================ =========== At 1 October 2016 176 182 295 4,359 (2,507) 15 2,520 Profit for the year - - - - 1,161 10 1,171 ================== ======== ======== =========== ============= ========= ================ =========== Other comprehensive income Currency translation differences - - - (47) - - (47) Remeasurement of post employment benefit obligations - gain - - - - 125 - 125 Return on plan assets, excluding interest income - loss - - - - (96) - (96) Tax on items relating to the components of other comprehensive income - - - (1) (7) - (8) ================== ======== ======== =========== ============= ========= ================ =========== Total other comprehensive (loss)/income - - - (48) 22 - (26) ================== ======== ======== =========== ============= ========= ================ =========== Total comprehensive (loss)/income for the year - - - (48) 1,183 10 1,145 Fair value of share-based payments - - - 21 - - 21 Use of treasury shares to satisfy employee share scheme awards - - - (3) - - (3) Tax on items taken directly to equity - - - - 3 - 3 Share buyback(1) - - - - (19) - (19) Other changes - - - (9) (1) 10 - ================== ======== ======== =========== ============= ========= ================ =========== 176 182 295 4,320 (1,341) 35 3,667 Dividends paid to Compass shareholders (note 5) - - - - (1,534) - (1,534) Dividends paid to non-controlling interests - - - - - (13) (13) ================== ======== ======== =========== ============= ========= ================ ===========
At 30 September 2017 176 182 295 4,320 (2,875) 22 2,120 ================== ======== ======== =========== ============= ========= ================ =========== ==== (1) Including stamp duty and brokers' commission. Adjustment for non-controlling Share-based interest Total payment Merger Revaluation Translation put options other reserve reserve reserve reserve reserve Reserves OTHER RESERVES GBPm GBPm GBPm GBPm GBPm GBPm =========================== ============= ======== ============ ============ ===================== ========= At 1 October 2016 193 4,170 7 (5) (6) 4,359 =========================== ============= ======== ============ ============ ===================== ========= Other comprehensive income Currency translation differences - - - (47) - (47) Tax on items relating to the components of other comprehensive income - - - (1) - (1) =========================== ============= ======== ============ ============ ===================== ========= Total other comprehensive loss - - - (48) - (48) =========================== ============= ======== ============ ============ ===================== ========= Fair value of share-based payments 21 - - - - 21 Use of treasury shares to satisfy employee share scheme awards (3) - - - - (3) Other changes - - - - (9) (9) =========================== ============= ======== ============ ============ ===================== ========= At 30 September 2017 211 4,170 7 (53) (15) 4,320 =========================== ============= ======== ============ ============ ===================== =========
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30 SEPTEMBER 2017 Attributable to equity shareholders of the Company =============================================================================== Share Capital Share premium redemption Own Other Retained Non-controlling capital account reserve shares reserves earnings interests Total GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm ================== ========= ========= =========== ============ ============ ================ ================ ====== At 1 October 2015 176 182 295 (1) 4,189 (2,904) 13 1,950 Profit for the year - - - - - 992 10 1,002 ================== ========= ========= =========== ============ ============ ================ ================ ====== Other comprehensive income Currency translation differences - - - - 158 - - 158 Remeasurement of post employment benefit obligations - loss - - - - - (500) - (500) Return on plan assets, excluding interest income - gain - - - - - 480 - 480 Tax on items relating to the components of other comprehensive income - - - - (2) 8 - 6 ================== ========= ========= =========== ============ ============ ================ ================ ====== Total other comprehensive income/(loss) - - - - 156 (12) - 144 ================== ========= ========= =========== ============ ============ ================ ================ ====== Total comprehensive income for the year - - - - 156 980 10 1,146 Fair value of share-based payments - - - 1 16 1 - 18 Release of LTIP award settled by issue of shares - - - - (2) - - (2) Tax on items taken directly to equity - - - - - 9 - 9 Share buyback(1) - - - - - (100) - (100) Issue of treasury shares to satisfy employee share scheme awards exercised - - - - - 3 - 3 Other changes - - - - - - 1 1 ================== ========= ========= =========== ============ ============ ================ ================ ====== 176 182 295 - 4,359 (2,011) 24 3,025 Dividends paid to Compass shareholders (note 5) - - - - - (496) - (496) Dividends paid to non-controlling interests - - - - - - (9) (9) ================== ========= ========= =========== ============ ============ ================ ================ ====== At 30 September 2016 176 182 295 - 4,359 (2,507) 15 2,520 ================== ========= ========= =========== ============ ============ ================ ================ ====== 1 Including stamp duty and brokers' commission. Adjustment for non-controlling Share-based interest Total payment Merger Revaluation Translation put options other reserve reserve reserve reserve reserve reserves OTHER RESERVES GBPm GBPm GBPm GBPm GBPm GBPm =================== ==================== =========== ============ ============ ================ ======================== At 1 October 2015 179 4,170 7 (161) (6) 4,189 =================== ==================== =========== ============ ============ ================ ======================== Other comprehensive income Currency translation differences - - - 158 - 158 Tax on items relating to the components of other comprehensive income - - - (2) - (2) =================== ==================== =========== ============ ============ ================ ======================== Total other comprehensive income - - - 156 - 156 =================== ==================== =========== ============ ============ ================ ======================== Fair value of share-based payments 16 - - - - 16 Release of LTIP award settled by issue of shares (2) - - - - (2) =================== ==================== =========== ============ ============ ================ ======================== At 30 September
2016 193 4,170 7 (5) (6) 4,359 =================== ==================== =========== ============ ============ ================ ========================
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2017 2017 2016 Notes GBPm GBPm ==================================================== ======= ======== ======== NON-CURRENT ASSETS Goodwill 3,994 4,050 Other intangible assets 1,537 1,469 Property, plant and equipment 1,000 953 Interests in joint ventures and associates 220 222 Other investments 63 50 Post employment benefit assets(1) 259 244 Trade and other receivables 104 97 Deferred tax assets* 132 149 Derivative financial instruments** 7 139 184 ==================================================== ======= ======== ======== Non-current assets 7,448 7,418 ==================================================== ======= ======== ======== CURRENT ASSETS Inventories 353 347 Trade and other receivables 2,701 2,596 Tax recoverable* 86 77 Cash and cash equivalents** 7 387 346 Derivative financial instruments** 7 4 2 ==================================================== ======= ======== ======== Current assets 3,531 3,368 ==================================================== ======= ======== ======== Total assets 10,979 10,786 ==================================================== ======= ======== ======== CURRENT LIABILITIES Short term borrowings** 7 (20) (321) Derivative financial instruments** 7 (6) (9) Provisions (132) (143) Current tax liabilities* (227) (195) Trade and other payables (3,892) (3,851) ==================================================== ======= ======== ======== Current liabilities (4,277) (4,519) ==================================================== ======= ======== ======== NON-CURRENT LIABILITIES Long term borrowings** 7 (3,939) (3,075) Derivative financial instruments** 7 (11) (1) Post employment benefit obligations (231) (265) Provisions (266) (280) Deferred tax liabilities* (48) (40) Trade and other payables (87) (86) ==================================================== ======= ======== ======== Non-current liabilities (4,582) (3,747) ==================================================== ======= ======== ======== Total liabilities (8,859) (8,266) ==================================================== ======= ======== ======== Net assets 2,120 2,520 ==================================================== ======= ======== ======== EQUITY Share capital 176 176 Share premium account 182 182 Capital redemption reserve 295 295 Other reserves 4,320 4,359 Retained earnings (2,875) (2,507) Total equity shareholders' funds 2,098 2,505 Non-controlling interests 22 15 ==================================================== ======= ======== ======== Total equity 2,120 2,520 ==================================================== ======= ======== ======== * Component of current and deferred taxes. ** Component of net debt. (1) Represented to reclassify GBP244 million of post employment defined benefit pension schemes in a net surplus position included within post employment benefit obligations for the year ended 30 September 2016. As a result, non-current assets and non-current liabilities have increased by the same amount. Approved by the Board of Directors on 21 November 2017 and signed on their behalf by RICHARD COUSINS, Director JOHNNY THOMSON, Director
Compass Group PLC
Consolidated Financial Statements (continued)
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARED 30 SEPTEMBER 2017 2017 2016 Notes GBPm GBPm ===================================================== ====== ======== ====== CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operations 6 2,068 1,768 Interest paid (103) (98) Tax received 25 17 Tax paid (357) (263) ===================================================== ====== ======== ====== Net cash from operating activities 1,633 1,424 ===================================================== ====== ======== ====== CASH FLOW FROM INVESTING ACTIVITIES Purchase of subsidiary companies and investments in associated undertakings(1) (96) (180) Purchase of additional interest joint operations (5) - Proceeds from sale of subsidiary companies and associated undertakings(1) 19 2 Purchase of intangible assets (339) (267) Purchase of property, plant and equipment(2) (376) (311) Proceeds from sale of property, plant and equipment/intangible assets 32 29 Purchase of other investments (8) (6) Proceeds from sale of other investments - 2 Dividends received from joint ventures and associates 39 33 Interest received 6 4 ===================================================== ====== ======== ====== Net cash used in investing activities (728) (694) ===================================================== ====== ======== ====== CASH FLOW FROM FINANCING ACTIVITIES Purchase of own shares(3) (19) (100) Receipts from issue of treasury shares to satisfy employee share scheme awards exercised - 3 Increase in borrowings 1,290 194 Repayment of borrowings (571) (309) Repayment of obligations under finance leases (6) (3) Equity dividends paid 5 (1,534) (496) Dividends paid to non-controlling interests (13) (9) ===================================================== ====== ======== ====== Net cash used in financing activities (853) (720) ===================================================== ====== ======== ====== CASH AND CASH EQUIVALENTS Net increase in cash and cash equivalents 52 10 Cash and cash equivalents at beginning of the year 346 283 Currency translation gains/(losses) on cash and cash equivalents (11) 53 ===================================================== ====== ======== ====== Cash and cash equivalents at end of the year 387 346 ===================================================== ====== ======== ====== (1) Net of cash acquired or disposed and payments received or made under warranties and indemnities. (2) Includes property, plant and equipment purchased under client commitments. (3) Includes stamp duty and brokers' commission.
Compass Group PLC
Consolidated Financial Statements (continued)
RECONCILIATION OF FREE CASH FLOW FOR THE YEARED 30 SEPTEMBER 2017 2017 2016 GBPm GBPm Net cash from operating activities 1,633 1,424 Purchase of intangible assets (339) (267) Purchase of property, plant and equipment (376) (311) Proceeds from sale of property, plant and equipment/intangible assets 32 29 Purchase of other investments (8) (6) Proceeds from sale of other investments - 2 Dividends received from joint ventures and associates 39 33 Interest received 6 4 Dividends paid to non-controlling interests (13) (9) Free cash flow 974 899 Add back: Europe & Japan cash restructuring costs in the year - 9 ================================================ === ====== ====== Underlying free cash flow 974 908 ================================================ === ====== ======
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 1 BASIS OF PREPARATION
The financial information included within this announcement has been prepared using accounting policies in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and adopted for use in the European Union (EU), and in accordance with the Disclosure Guidance and Transparency Rules (DGTR) of the Financial Conduct Authority.
The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2017 or 2016, but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; its Reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying its Report and did not contain statements under s498(2) or (3) Companies Act 2006.
2 SEGMENTAL REPORTING Geographical segments ======================================== North Rest America Europe of Total GBPm GBPm World GBPm REVENUE(1) GBPm ================================ ============ ========== ============= =========== ============ ======== YEARED 30 SEPTEMBER 2017 Combined sales of Group and share of equity accounted joint ventures(2,3) 13,322 5,911 3,619 22,852 ========================================================== ============= =========== ============ ======== YEARED 30 SEPTEMBER 2016 Combined sales of Group and share of equity accounted joint ventures(2,3) 11,198 5,458 3,215 19,871 Sectors ================================================================== Defence, Business Healthcare Sports Offshore & Industry Education & Seniors & Leisure & Remote Total REVENUE(1) GBPm GBPm GBPm GBPm GBPm GBPm ================================ ============ ========== ============= =========== ============ ======== YEARED 30 SEPTEMBER 2017 Combined sales of Group and share of equity accounted joint ventures 8,847 4,124 5,264 2,820 1,797 22,852 ================================ ============ ========== ============= =========== ============ ======== YEARED 30 SEPTEMBER 2016 Combined sales of Group and share of equity accounted joint ventures 7,602 3,621 4,472 2,416 1,760 19,871 ================================ ============ ========== ============= =========== ============ (1) There is no inter-segmental trading. (2) This is the revenue measure considered by the chief operating decision maker. (3) Underlying revenue from external customers arising in the UK, the Group's country of domicile, was GBP2,070 million (2016: GBP1,981 million). Underlying revenue from external customers arising in the US was GBP12,449 million (2016: GBP10,350 million). Underlying revenue from external customers arising in all foreign countries from which the Group derives revenue was GBP20,782 million (2016: GBP17,890 million). Geographical segments North Rest Central America Europe of Activities Total GBPm GBPm World GBPm GBPm OPERATING PROFIT GBPm ================================ ============ ========== ============= =========== ============ ======== YEARED 30 SEPTEMBER 2017 Underlying operating profit before joint ventures and associates 1,079 428 224 (70) 1,661 Add: Share of profit before tax of joint ventures 3 - 24 - 27 ================================ ============ ========== ============= =========== ============ ======== Regional underlying operating profit(1) 1,082 428 248 (70) 1,688 Add: Share of profit of associates 12 5 - - 17 ============ ========== ============= =========== ============ ======== Group underlying operating profit(1) 1,094 433 248 (70) 1,705 ================================ ============ ========== ============= =========== ============ ======== (1) Underlying operating profit is the profit measure considered by the chief operating decision maker.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 Geographical segments =========================================== North Rest Central America Europe of Activities Total GBPm GBPm World GBPm GBPm OPERATING PROFIT GBPm YEARED 30 SEPTEMBER 2016 Underlying operating profit before joint ventures and associates and Emerging Markets and Offshore & Remote restructuring 906 394 194 (65) 1,429 Add: Share of profit before tax of joint ventures 2 - 24 - 26 ================================================ ========= ========= ======= ============ ========== Regional underlying operating profit(2) 908 394 218 (65) 1,455 Add: Share of profit of associates 10 5 - - 15 Less: Emerging Markets and Offshore & Remote restructuring(1) - (6) (19) - (25) Group underlying operating profit(2) 918 393 199 (65) 1,445 ================================================ ========= ========= ======= ============ ========== (1) The Group incurred charges resulting from the restructuring and downturn in the trading conditions of its Emerging Markets and Offshore & Remote activities which include headcount reductions (GBP22 million) and other expenses (GBP3 million). (2) Underlying operating profit is the profit measure considered by the chief operating decision maker. 3 TAX RECOGNISED IN THE INCOME STATEMENT: INCOME TAX EXPENSE 2017 2016
=============================================================================== GBPm GBPm ========================================= === ========= ========= ======= CURRENT TAX Current year 424 315 Adjustment in respect of prior years (47) (38) ========================================== === ============================= ============ ======== Current tax expense 377 277 ========================================== === ============================= ============ ======== DEFERRED TAX Current year 7 27 Impact of changes in statutory tax rates 2 6 Adjustment in respect of prior years 3 9 ========================================== === ============================= ======== Deferred tax expense 12 42 TOTAL INCOME TAX Income tax expense 389 319
Deferred tax assets have not been recognised in respect of tax losses of GBP54 million (2016: GBP101 million) and other temporary differences of GBP23 million (2016: GBP16 million). Of the total tax losses, GBP44 million (2016: GBP92 million) will expire at various dates between 2018 and 2022. These deferred tax assets have not been recognised as the timing of recovery is uncertain.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 4 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 year. The underlying earnings per share figures have been calculated based on earnings excluding the effect of the amortisation of intangibles arising on acquisition, acquisition transaction costs, adjustment to contingent consideration on acquisition, non-controlling interest put options, gains and losses on disposal of businesses, hedge accounting ineffectiveness, change in fair value of investments and the tax attributable to these amounts. These items are excluded in order to show the underlying trading performance of the Group. 2017 2016 ATTRIBUTABLE PROFIT GBPm GBPm Profit for the period attributable to equity shareholders of the Company 1,161 992 Adjustments stated net of tax: Amortisation of intangible assets arising on acquisition 25 20 Acquisition transaction costs 2 2 Adjustment to contingent consideration on acquisition (3) - Gain on disposal of businesses - (1) Gain from other financing items including hedge accounting ineffectiveness (8) (10) Non-controlling interest call options - 1 Underlying attributable profit for the year from operations 1,177 1,004 2017 2016 Ordinary Ordinary shares of shares of AVERAGE NUMBER OF SHARES (MILLIONS OF ORDINARY SHARES) 11(1/20) p each millions(1) 10(5/8) p each millions Average number of shares for basic earnings per share 1,628 1,643 Dilutive share options 1 3 Average number of shares for diluted earnings per share 1,629 1,646 (1) On 26 June 2017 shareholders received 25 shares of 11(1/20) pence in return for 26 shares of 10(5/8) pence. 2017 2016 Earnings Earnings per share per share pence pence BASIC EARNINGS PER SHARE From operations 71.3 60.4 Adjustments stated net of tax: Amortisation of intangible assets arising on acquisition 1.5 1.2 Acquisition transaction costs 0.1 0.1 Adjustment to contingent consideration on acquisition (0.2) - Gain on disposal of businesses - (0.1) Gain from other financing items including hedge accounting ineffectiveness (0.4) (0.6) Non-controlling interest call options - 0.1 From underlying operations 72.3 61.1
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017
4 EARNINGS PER SHARE CONTINUED
2017 2016 Earnings Earnings per share per share pence pence DILUTED EARNINGS PER SHARE From operations 71.3 60.3 Adjustments stated net of tax: Amortisation of intangible assets arising on acquisition 1.5 1.2 Acquisition transaction costs 0.1 0.1 Adjustment to contingent consideration on acquisition (0.2) - Gain on disposal of businesses - (0.1) Gain from other financing items including hedge accounting ineffectiveness (0.4) (0.6) Non-controlling interest call options - 0.1 From underlying operations 72.3 61.0
5 DIVIDS
A final dividend in respect of 2017 of 22.3 pence per share, GBP353 million in aggregate(1) , has been proposed, giving a total dividend in respect of 2017 of 33.5 pence per share (2016: 31.7 pence per share). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting to be held on 8 February 2018 and has not been included as a liability in these financial statements.
2017 2016 Dividends per share Dividends per share DIVIDS ON ORDINARY SHARES pence GBPm pence GBPm Amounts recognised as distributions to equity shareholders during the year: Final 2015 - - 19.6 322 Interim 2016 - - 10.6 174 Final 2016 21.1 347 - - Interim 2017 11.2 184 - - Total dividends 32.3 531 30.2 496 (1) Based on the number of ordinary shares, excluding treasury shares, in issue at 30 September 2017 (1,582 million shares).
In addition, a special dividend of 61.0 pence per share, GBP1,003 million in aggregate, was paid to shareholders on 17 July 2017.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 6 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS 2017 2016 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY OPERATIONS GBPm GBPm Operating profit from operations 1,623 1,370 Adjustments for: Acquisition transaction costs 2 2 Amortisation of intangible assets 221 179 Amortisation of intangible assets arising on acquisition 39 31 Share-based payments expense - non-controlling interest call option - 1 Depreciation of property, plant and equipment 262 216 Profit on disposal of property, plant and equipment/intangible assets - (1) Decrease in provisions (24) (19) Decrease in post employment benefit obligations (14) (39) Share-based payments - charged to profits 21 16 Operating cash flows before movement in working capital 2,130 1,756 Increase in inventories (11) (13) Increase in receivables (152) (93) Increase in payables 101 118 Cash generated by operations 2,068 1,768
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 7 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. Gross debt Total Cash and Bank and overdrafts Derivative cash Bank other and Finance financial Total gross equivalents overdrafts borrowings borrowings leases instruments debt Net debt NET DEBT GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm At 1 October 2015 283 (59) (2,859) (2,918) (13) 45 (2,886) (2,603) Net increase in cash and cash equivalents 10 - - - - - - 10 Cash outflow from repayment of bank loans - - 195 195 - - 195 195 Cash outflow from repayment of loan notes - - 114 114 - - 114 114 Cash (inflow)/outflow from other changes in gross debt - 42 (378) (336) - 142 (194) (194) Cash outflow from repayments of obligations under finance leases - - - - 3 - 3 3 Increase in net debt as a result of new finance leases taken out - - - - (2) - (2) (2) Currency translation gains/(losses) 53 (10) (402) (412) (2) (34) (448) (395) Other non-cash movements - - (25) (25) - 23 (2) (2) At 30 September 2016 346 (27) (3,355) (3,382) (14) 176 (3,220) (2,874) Net increase in cash and cash equivalents 52 - - - - - - 52 Cash outflow from repayment of bank loans - - 536 536 - - 536 536 Cash inflow from borrowing of bank loans - - (301) (301) - - (301) (301) Cash outflow from repayment of loan notes - - 35 35 - - 35 35 Cash inflow from issue of bonds - - (942) (942) - - (942) (942) Cash (inflow)/outflow from other changes in gross debt - 16 1 17 - (64) (47) (47) Cash outflow from repayments of obligations under finance leases - - - - 6 - 6 6 Increase in net debt as a result of new finance leases - - - - (2) - (2) (2) Currency translation gains/(losses) (11) 3 17 20 - 80 100 89 Other non-cash movements - - 68 68 - (66) 2 2 At 30 September 2017 387 (8) (3,941) (3,949) (10) 126 (3,833) (3,446) Other non-cash movements are comprised as follows: 2017 2016 OTHER NON-CASH MOVEMENTS IN NET DEBT GBPm GBPm Amortisation of fees and discount on issuance (3) (1) Changes in the fair value of bank and other borrowings in a designated fair value hedge 71 (24) Bank and other borrowings 68 (25) Changes in the value of derivative financial instruments including accrued income (66) 23 Other non-cash movements 2 (2)
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 8 STATUTORY AND UNDERLYING RESULTS Adjustments 2017 2017 Statutory Underlying Notes GBPm 1 2 3 4 5 6 7 GBPm Operating profit 1,665 39 2 (3) 2 - - - 1,705 Profit on disposal of businesses - - - - - - - - - Net finance cost (105) - - - - - (9) - (114) Finance income 6 - - - - - - - 6 Finance costs (120) - - - - - - - (120) Other financing items 9 - - - - - (9) - - Profit before tax 1,560 39 2 (3) 2 - (9) - 1,591 Income tax expense (389) (14) - - (2) - 1 - (404) Tax rate 24.9% - - - - - - - 25.4% Profit for the year 1,171 25 2 (3) - - (8) - 1,187 Non-controlling interests (10) - - - - - - - (10) Profit attributable to equity shareholders of the Company 1,161 25 2 (3) - - (8) - 1,177 Average number of shares 1,628 - - - - - - - 1,628 BASIC EARNINGS PER SHARE (PENCE) 4 71.3 1.5 0.1 (0.2) - - (0.4) - 72.3 Adjustments 2016 2016 Statutory Underlying Notes GBPm 1 2 3 4 5 6 7 GBPm Operating profit 1,409 31 2 - 2 - - 1 1,445 Profit on disposal of businesses 1 - - - - (1) - - - Net finance cost (89) - - - - - (12) - (101) Finance income 4 - - - - - - - 4
Finance costs (105) - - - - - - - (105) Other financing items 12 - - - - - (12) - - Profit before tax 1,321 31 2 - 2 (1) (12) 1 1,344 Income tax expense (319) (11) - - (2) - 2 - (330) Tax rate 24.1% - - - - - - - 24.5% Profit for the year 1,002 20 2 - - (1) (10) 1 1,014 Non-controlling interests (10) - - - - - - - (10) Profit attributable to equity shareholders of the Company 992 20 2 - - (1) (10) 1 1,004 Average number of shares 1,643 - - - - - - - 1,643 BASIC EARNINGS PER SHARE (PENCE) 4 60.4 1.2 0.1 - - (0.1) (0.6) 0.1 61.1 Adjustments: 1. Amortisation of intangibles arising on acquisition. 2. Acquisition transaction costs. 3. Adjustment to contingent consideration on acquisition. 4. Tax on share of profit of joint ventures. 5. Gain on disposal of businesses. 6. Other financing items including hedge accounting ineffectiveness. 7. Share-based payments expense - non-controlling interest call option.
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 9 ORGANIC REVENUE AND ORGANIC PROFIT Geographical segments North America Europe Rest of World Other Group GBPm GBPm GBPm GBPm GBPm 2017 Combined sales of Group and share of equity accounted joint ventures 13,322 5,911 3,619 - 22,852 % growth reported rates 19.0% 8.3% 12.6% - 15.0% % growth constant currency 6.7% 1.5% (2.5%) - 3.8% Organic adjustments (57) (3) - - (60) Organic revenue 13,265 5,908 3,619 - 22,792 % growth organic 7.1% 1.6% (2.5%) - 4.0% 2016 Combined sales of Group and share of equity accounted joint ventures 11,198 5,458 3,215 - 19,871 Currency adjustments 1,286 364 496 - 2,146 Constant currency underlying revenue 12,484 5,822 3,711 - 22,017 Organic adjustments (97) (5) - - (102) Organic revenue 12,387 5,817 3,711 - 21,915 2017 Regional underlying operating profit 1,082 428 248 (70) 1,688 Share of profit of associates 12 5 - - 17 Group underlying operating profit 1,094 433 248 (70) 1,705 Underlying operating margin 8.1% 7.2% 6.9% - 7.4% % growth reported rates 19.2% 8.6% 13.8% - 18.0% % growth constant currency 6.9% 1.2% (2.0%) - 5.6% Organic adjustments (4) - - - (4) Organic profit 1,090 433 248 (70) 1,701 % growth organic 7.4% 1.2% (2.0%) - 5.9% 2016 Regional underlying operating profit 908 394 218 (65) 1,455 Share of profit of associates 10 5 - - 15 EM & OR restructuring - (6) (19) - (25) Group underlying operating profit 918 393 199 (65) 1,445 Underlying operating margin 8.1% 7.2% 6.8% - 7.2% Currency adjustments 105 29 35 - 169 Constant currency underlying profit 1,023 422 234 (65) 1,614 Organic adjustments (8) - - - (8) Organic profit 1,015 422 234 (65) 1,606
Compass Group PLC
Consolidated Financial Statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 30 SEPTEMBER 2017 10 POST BALANCE SHEET EVENTS There are no material post balance sheet events. 11 EXCHANGE RATES 2017 2016 AVERAGE EXCHANGE RATE FOR THE YEAR(1) Australian Dollar 1.67 1.94 Brazilian Real 4.09 5.19 Canadian Dollar 1.68 1.88 Chilean Peso 837.69 972.94 Euro 1.15 1.28 Japanese Yen 141.38 159.94 New Zealand Dollar 1.78 2.08 Norwegian Krone 10.55 12.00 Turkish Lira 4.44 4.16 UAE Dirham 4.69 5.22 US Dollar 1.28 1.42 CLOSING EXCHANGE RATE AS AT 30 SEPTEMBER(1) Australian Dollar 1.71 1.70 Brazilian Real 4.24 4.22 Canadian Dollar 1.68 1.71 Chilean Peso 857.49 855.93 Euro 1.13 1.16 Japanese Yen 151.02 131.54 New Zealand Dollar 1.86 1.79 Norwegian Krone 10.68 10.38 Turkish Lira 4.77 3.90 UAE Dirham 4.93 4.77 US Dollar 1.34 1.30 1 Average rates are used to translate the income statement and cash flow statement. Closing rates are used to translate the balance sheet. Only the most significant currencies are shown.
Glossary of terms
Capital employed Total equity shareholders' funds adjusted for net debt, post employment benefit obligations net of associated deferred tax, amortised intangibles arising on acquisition, impaired goodwill and excluding the Group's non-controlling partners' share of net assets and net assets of discontinued operations. Constant currency Restates the prior year results to the current year's average exchange rates. EM & OR restructuring Emerging Markets and Offshore & Remote restructuring Free cash flow Calculated by adjusting operating profit for non-cash items in profit, cash movements in provisions, post employment benefit obligations and working capital, cash purchases and proceeds from
disposal of non-current assets, net cash interest, net cash tax, dividends received from joint ventures and associated undertakings, and dividends paid to non-controlling interests Free cash flow conversion Underlying free cash flow expressed as a percentage of underlying operating profit. Like for like revenue growth Calculated by adjusting organic revenue growth for new business wins and lost business. Net debt Bank overdrafts, bank and other borrowings, finance leases and derivative financial instruments, net of cash and cash equivalents. Net debt to EBITDA Net debt divided by underlying EBITDA. NOPAT Net operating profit after tax (NOPAT) is calculated as underlying operating profit from continuing operations less operating profit of non-controlling interests before tax, net of income tax at the underlying rate of the year. Organic profit growth Calculated by adjusting underlying operating profit for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates) and compares the current year results against the prior year. In addition, where applicable, a 53rd week has been excluded from the prior year's underlying operating profit. Organic profit Calculated by adjusting underlying operating profit for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates). Organic revenue Calculated by adjusting underlying revenue for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates). Organic revenue growth Calculated by adjusting underlying revenue for acquisitions (excluding current year acquisitions and including a full period in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior period at current year exchange rates) and compares the current year results against the prior year. In addition, where applicable, a 53rd week has been excluded from the prior year's underlying revenue. ROCE Return on capital employed (ROCE) divides NOPAT by the 12 month average capital employed. Specific adjusting items acquisition transaction costs; adjustment to contingent consideration on acquisition; amortisation of intangibles arising on acquisition; change in the fair value of investments; other financing items including hedge accounting ineffectiveness; profit/(loss) on disposal of businesses; share-based payments expense relating to non-controlling interest call options; tax on share of profit of joint ventures. Underlying basic earnings per share Excludes specific adjusting items and the tax attributable to those items. Underlying cash tax rate Based on underlying cash tax and underlying profit before tax. Underlying depreciation and amortisation Excludes specific adjusting items. Underlying EBITDA Based on underlying operating profit, adding back underlying depreciation and amortisation. Underlying effective tax rate Based on underlying tax charge and underlying profit before tax. Underlying free cash flow Free cash flow adjusted for cash restructuring costs in the year relating to the 2012 and 2013 European exceptional programme. Underlying net finance cost Excludes specific adjusting items.
Glossary of terms (continued)
Underlying operating margin - Group Based on underlying revenue and underlying operating profit excluding share of profit after tax of associates. Underlying operating margin - Region Based on underlying revenue and underlying operating profit excluding share of profit after tax of associates and EM & OR restructuring. Underlying operating profit - Group Includes share of profit after tax of associates and profit before tax of equity accounted joint ventures but excludes the specific adjusting items. Underlying operating profit - Region Includes share of profit before tax of equity accounted joint ventures but excludes the specific adjusting items profit after tax of associates and EM & OR restructuring. Underlying profit before tax Excludes specific adjusting items. Underlying revenue The combined sales of Group and share of equity accounted joint ventures. Underlying tax charge Excludes tax attributable to specific adjusting items.
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November 21, 2017 03:32 ET (08:32 GMT)
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