REG - Compass Group PLC - Full year results <Origin Href="QuoteRef">CPG.L</Origin> - Part 4
24/11/2015 07:02
- Part 4: For the preceding part double click ID:nRSX7239Gc
assets arising on acquisition 26 25
Acquisition transaction costs 2 3
Adjustment to contingent consideration on acquisition 5 -
Total continuing operations 16,368 15,670
1 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11, as detailed in note 15.
2 Operating costs excludes costs relating to Emerging Markets and Offshore & Remote restructuring, which comprise £17 million employee remuneration, £2 million depreciation owned property, plant and equipment, £1 million property lease rentals and £6 million other expenses (2014: £nil).
Compass Group PLC
Consolidated Financial Statements (continued)
3 EMPLOYEES
AVERAGE NUMBER OF EMPLOYEES, INCLUDING DIRECTORS AND PART-TIME EMPLOYEES 2015 2014 Restated 1
Number Number
North America 226,618 214,511
Europe & Japan 150,816 150,847
Fast Growing & Emerging 138,430 138,179
Total continuing operations 515,864 503,537
AGGREGATE REMUNERATION OF ALL EMPLOYEES INCLUDING DIRECTORS 2015 2 2014 Restated 3
£m £m
Wages and salaries 6,708 6,444
Social security costs 1,136 1,164
Share-based payments 15 15
Pension costs - defined contribution plans 84 85
Pension costs - defined benefit plans 16 12
Total continuing operations 7,959 7,720
1 2014 has been restated to reflect the average number of employees on a consistent basis with current year.
2 Aggregate remuneration of all employees including directors excludes Emerging Markets and Offshore & Remote restructuring costs of £17 million.3 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11.
Compass Group PLC
Consolidated Financial Statements (continued)
4 FINANCE INCOME, COSTS AND RELATED (GAINS)/LOSSES
Finance income and costs are recognised in the income statement in the period in
which they are earned or incurred.
FINANCE INCOME AND COSTS 2015 2014
£m £m
FINANCE INCOME
Bank interest 3 5
Total finance income 3 5
FINANCE COST
Interest on bank loans and overdrafts 13 11
Interest on other loans 82 69
Finance lease interest 1 1
Interest on bank loans, overdrafts, other loans and finance leases 96 81
Unwinding of discount on provisions 6 3
Interest on net post-employment benefit obligations (note 22) 5 7
Total finance costs 107 91
ANALYSIS OF FINANCE COSTS BY DEFINED IAS 39¹ CATEGORY
Fair value through profit or loss(unhedged derivatives) 5 4
Derivatives in a fair value hedge relationship (23) (28)
Derivatives in a net investment hedge relationship 5 3
Other financial liabilities 109 102
Interest on bank loans, overdrafts, other loans and finance leases 96 81
Fair value through profit or loss (unwinding of discount on provisions) 6 3
Outside of the scope of IAS 39 (net pension scheme charge) 5 7
Total finance costs 107 91
1 IAS 39 'Financial Instruments: Recognition and Measurement'.
The Group uses derivative financial instruments such as forward currency contracts,
cross currency swaps and interest rate swaps to hedge the risks associated with
changes in foreign currency exchange rates and interest rates. As explained in
section Q of the Group's accounting policies in the 2015 Annual Report, such
derivative financial instruments are initially measured at fair value on the contract
date, and areremeasured to fair value at subsequent reporting dates. For derivative
financial instruments that do not qualify for hedge accounting, any gains or losses
arising from changes in fair value are taken directly to the income statement in the
period.
FAIR VALUE MEASUREMENT
All derivative financial instruments are shown at fair value in the balance sheet.
All the derivatives held by the Group at fair value are considered to have fair
values determined by Level 2 inputs as defined by the fair value hierarchy of IFRS 13
'Fair value measurement'. The fair values of derivative financial instruments
represent the maximum credit exposure.
2015 2014
FINANCING RELATED (GAINS)/LOSSES £m £m
HEDGE ACCOUNTING INEFFECTIVENESS
Unrealised net losses on unhedged derivative financial instruments1 3 -
Unrealised net gains on derivative financial instruments in a designated fair value hedge2 (32) (23)
Unrealised net losses on the hedged item in a designated fair value hedge 26 23
Total hedge accounting ineffectiveness (3) -
CHANGE IN THE FAIR VALUE OF INVESTMENTS
Gain from the changes in the fair value of investments1,3 - (2)
1 Categorised as derivatives that are designated and effective as hedging instruments carried at fair value (IAS 39).
2 Categorised as 'fair value through profit or loss' (IAS 39).
3 Life insurance policies used by overseas companies to meet the cost of unfunded post-employment benefit obligations included in note 22.
Compass Group PLC
Consolidated Financial Statements (continued)
5 TAX
RECOGNISED IN THE INCOME STATEMENT: 2015 2014 Restated 1
INCOME TAX EXPENSE ON CONTINUING OPERATIONS £m £m
CURRENT TAX
Current year 284 269
Adjustment in respect of prior years (24) 1
Current tax expense 260 270
DEFERRED TAX
Current year 12 9
Impact of changes in statutory tax rates 1 1
Adjustment in respect of prior years 9 (4)
Deferred tax expense 22 6
TOTAL INCOME TAX
Income tax expense on continuing operations 282 276
1 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11, as detailed in note 15.
The income tax expense for the year is based on the effective UK statutory rate of corporation tax for the period of 20.5%
(2014: 22.0%). The impact of changes in statutory rates in the prior year related principally to the reduction of the UK
corporation tax rate from 21% to 20% from 1 April 2015. In the Budget on 8 July 2015, the Chancellor announced additional
planned reductions in the UK corporation tax rate to 18% by 2020. We expect the new rates to reduce the current tax charge
in future years, however as they were not substantively enacted at the balance sheet date, they have not been brought into
account in calculating the deferred tax asset at 30 September 2015. Overseas tax is calculated at the rates prevailing in
the respective jurisdictions.
2014
2015 Restated 1
£m £m
Profit before tax from continuing operations 1,159 1,144
Notional income tax expense at the effective UK statutory rate of 20.5% (2014: 22.0%) on profit before tax 238 252
Effect of different tax rates of subsidiaries operating in other jurisdictions 136 116
Impact of changes in statutory tax rates 1 1
Permanent differences (74) (83)
Impact of share-based payments 1 1
Tax on profit of associates and equity accounted joint ventures (3) (4)
Losses and other temporary differences not previously recognised (6) (7)
Unrelieved current year tax losses 4 3
Prior year items (15) (3)
Income tax expense on continuing operations 282 276
2015 2014
TAX (CHARGED)/CREDITED TO OTHER COMPREHENSIVE INCOME £m £m
Current and deferred tax (charges)/credits on actuarial and other movements on post-employment benefits (19) 6
Current and deferred tax (charges) on foreign exchange movements (1) (3)
Tax (charge)/credit on items recognised in other comprehensive income (20) 3
2015 2014
Tax credited to equity £m £m
Current and deferred tax credits in respect of share-based payments 2 6
Tax credit on items recognised in equity 2 6
1 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11, as
detailed in note 15.
Compass Group PLC
Consolidated Financial Statements (continued)
5 TAX CONTINUED
MOVEMENT IN NET DEFERRED TAX ASSET/(LIABILITY) Tax depreciation Intangibles Pensions and post-employment benefits Tax losses Self-funded insurance provisions Net short-term temporary differences Total Restated1
£m £m £m £m £m £m £m
At 1 October 2013 9 (183) 136 21 64 180 227
Credit/(charge) to income 4 (7) 7 1 3 (14) (6)
(Charge)/credit to equity/other comprehensive income - - (6) - - 1 (5)
Business acquisitions - (6) - - - 1 (5)
Other movements - - - 1 - (1) -
Exchange adjustment - 5 (1) (2) - (6) (4)
At 30 September 20141 13 (191) 136 21 67 161 207
At 1 October 2014 13 (191) 136 21 67 161 207
(Charge)/credit to income (4) (13) 3 1 (1) (8) (22)
Charge to equity/other comprehensive income - - (28) - - (3) (31)
Business acquisitions - (4) - - - 1 (3)
Other movements - (1) - 1 - (1) (1)
Exchange adjustment (2) 1 7 (2) 5 (5) 4
At 30 September 2015 7 (208) 118 21 71 145 154
1 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11, as
detailed in note 15.
Net short term temporary differences relate principally to provisions and other liabilities of overseas subsidiaries.
After netting off balances within countries, the following are the deferred tax assets and liabilities recognised in the
consolidated balance sheet:
2015 2014
NET DEFERRED TAX BALANCE £m £m
Deferred tax assets 182 246
Deferred tax liabilities (28) (39)
Net deferred tax asset 154 207
Unrecognised deferred tax assets in respect of tax losses and other temporary differences amount to £39 million (2014: £42 million). Of the total, £25 million relates to tax losses which will expire at various dates between 2015 and 2022. These deferred tax assets have not been recognised as the timing of recovery is uncertain.
The Group does not recognise any deferred tax liability on temporary differences relating to potentially taxable unremitted earnings of overseas subsidiaries totalling £370 million (2014: £448 million) because it is able to control the timing of reversal of these differences. It is probable that no reversal will take place in the foreseeable future.
Compass Group PLC
Consolidated Financial Statements (continued)
6 DISCONTINUED OPERATIONS
The profit for the year from discontinued operations was £nil (2014: £3 million).
FINANCIAL PERFORMANCE OF DISCONTINUED OPERATIONS 2015 2014
£m £m
TRADING ACTIVITIES OF DISCONTINUED OPERATIONS
Operating costs - -
Loss before tax - -
Income tax credit - 3
Profit after tax - 3
PROFIT FOR THE YEAR FROM DISCONTINUED OPERATIONS
Profit for the year from discontinued operations - 3
INCOME TAX FROM DISCONTINUED OPERATIONS 2015 2014
£m £m
INCOME TAX ON TRADING ACTIVITIES OF DISCONTINUED OPERATIONS AND ON DISPOSAL OF NET ASSETS AND OTHER ADJUSTMENTS RELATING TO DISCONTINUED OPERATIONS
Current tax - 3
Deferred tax - -
Income tax credit on discontinued operations - 3
Net assets disposed and disposal proceeds 2015 2014
£m £m
Decrease in retained liabilities1 - (1)
Consideration (net of costs) - (1)
Cash outflow from disposals - (1)
1 Includes the utilisation of disposal provisions of £1 million in the year ended 30 September 2014.
Compass Group PLC
Consolidated Financial Statements (continued)
7 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 adjusted earnings per share
figures have been calculated based on earnings excluding the effect of discontinued
operations, the amortisation of intangible assets arising on acquisition, acquisition
transaction costs, adjustment to contingent consideration on acquisition, European
exceptional, 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.
2015 2014
Attributable Attributable
ATTRIBUTABLE PROFIT profit profit
£m £m
Profit for the year attributable to equity shareholders of the Company 869 865
Less: Profit for the year from discontinued operations - (3)
Attributable profit for the year from continuing operations 869 862
Amortisation of intangible assets arising on acquisition (net of tax) 20 18
Acquisition transaction costs (net of tax) 1 2
Adjustment to contingent consideration on acquisition (net of tax) 3 1
European exceptional (net of tax) - (7)
Loss/(profit) on disposal of US businesses (net of tax) 1 (1)
Profit on disposal of interest in associate (net of tax) - (13)
Hedge accounting ineffectiveness (net of tax) (2) -
Profit from change in the fair value of investments (net of tax) - (2)
Underlying attributable profit for the year from continuing operations 892 860
2015 2014
Ordinary shares Ordinary shares
AVERAGE NUMBER OF SHARES (MILLIONS OF ORDINARY SHARES) of 10 5/8p each of 10 5/8p each
millions millions
Average number of shares for basic earnings per share 1,662 1,766
Dilutive share options 4 5
Average number of shares for diluted earnings per share 1,666 1,771
Compass Group PLC
Consolidated Financial Statements (continued)
7 EARNINGS PER SHARE CONTINUED 2015 2014
Earnings Earnings
per share per share
pence pence
BASIC EARNINGS PER SHARE (PENCE)
From continuing and discontinued operations 52.3 49.0
From discontinued operations - (0.2)
From continuing operations 52.3 48.8
Amortisation of intangible assets arising on acquisition (net of tax) 1.2 1.0
Acquisition transaction costs (net of tax) 0.1 0.1
Adjustment to contingent consideration on acquisition (net of tax) 0.2 0.1
European exceptional (net of tax) - (0.4)
Loss/(profit) on disposal of US businesses (net of tax) 0.1 (0.1)
Profit on disposal of interest in associate (net of tax) - (0.7)
Hedge accounting ineffectiveness (net of tax) (0.2) -
Profit from change in the fair value of investments (net of tax) - (0.1)
From underlying continuing operations 53.7 48.7
DILUTED EARNINGS PER SHARE (PENCE)
From continuing and discontinued operations 52.2 48.9
From discontinued operations - (0.2)
From continuing operations 52.2 48.7
Amortisation of intangible assets arising on acquisition (net of tax) 1.2 1.0
Acquisition transaction costs (net of tax) 0.1 0.1
Adjustment to contingent consideration on acquisition (net of tax) 0.2 0.1
European exceptional (net of tax) - (0.4)
Loss/(profit) on disposal of US Corrections businesses (net of tax) 0.1 (0.1)
Profit on disposal of interest in associate (net of tax) - (0.7)
Hedge accounting ineffectiveness (net of tax) (0.2) -
Profit from change in the fair value of investments (net of tax) - (0.1)
From underlying continuing operations 53.6 48.6
Compass Group PLC
Consolidated Financial Statements (continued)
8 DIVIDENDS
A final dividend in respect of 2015 of 19.6 pence per share, £323 million in aggregate1, has been proposed, giving a total dividend in respect of 2015 of 29.4 pence per share (2014: 26.5 pence per share). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 4 February 2016 and has not been included as a liability in these financial statements.
2015 2014
Dividends Dividends
DIVIDENDS ON ORDINARY SHARES per share per share
pence £m pence £m
Amounts recognised as distributions to equity shareholders during the year:
Final 2013 - 16.0p per share - - 16.0p 287
Interim 2014 - 8.8p per share - - 8.8p 157
Final 2014 - 17.7p per share 17.7p 295 - -
Interim 2015 - 9.8p per share 9.8p 162 - -
Total dividends 27.5p 457 24.8p 444
1 Based on the number of ordinary shares, excluding Treasury shares, in issue at 30 September 2015 (1,648 million shares).
In addition, a Return of Cash of £1 billion was paid to shareholders in 2014 and is described in more detail in note 23.
9 GOODWILL
During the year the Group made a number of acquisitions. See note 25 for more details.
GOODWILL
£m
COST
At 1 October 2013 4,071
Additions 39
Disposals (13)
Currency adjustment (87)
At 30 September 20141 4,010
At 1 October 2014 4,010
Additions 25
Currency adjustment (13)
At 30 September 2015 4,022
IMPAIRMENT
At 1 October 2013 488
Disposals (6)
At 30 September 2014 482
At 1 October 2014 482
Currency adjustment 2
At 30 September 2015 484
NET BOOK VALUE
At 30 September 20141 3,528
At 30 September 2015 3,538
1 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11, as
detailed in note 15.
Compass Group PLC
Consolidated Financial Statements (continued)
9 GOODWILL CONTINUED
GOODWILL BY BUSINESS SEGMENT 2015 2014 Restated1
£m £m
USA 1,316 1,211
Canada 125 138
Total North America 1,441 1,349
UK 1,433 1,433
Japan 124 127
Rest of Europe & Japan 282 296
Total Europe & Japan 1,839 1,856
Turkey 70 87
Rest of Fast Growing & Emerging 188 236
Total 3,538 3,528
1 2014 has been restated for the change in the accounting treatment of joint ventures in accordance with IFRS11, as detailed in note 15.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be
impaired. The recoverable amount of a CGU is determined from value in use calculations. The key assumptions for these
calculations are long term growth rates and pre-tax discount rates and use cash flow forecasts derived from the most recent
financial budgets and forecasts approved by management covering a five year period. Budgets and forecasts are based on
expectations of future outcomes taking into account past experience, adjusted for anticipated revenue growth, from both new
business and like for like growth and taking into consideration external economic factors. Cash flows beyond the five year
period are extrapolated using estimated growth rates based on local expected economic conditions and do not exceed the long
term average growth rate for that country. The pre-tax discount rates are based on the Group's weighted average cost of
capital adjusted for specific risks relating to the country in which the CGU operates.
2015 2014
GROWTH AND DISCOUNT RATES Residual Pre-tax Residual Pre-tax
growth rates discount rates growth rates discount rates
USA 2.0% 10.0% 2.5% 8.5%
Rest of North America 2.0% 8.2% 2.0% 7.9%
UK 2.0% 8.2% 2.0% 8.0%
Rest of Europe & Japan 1.3-2.6% 7.6-16.0% 1.3-2.8% 7.4-16.5%
Turkey 5.1% 14.0% 4.0% 12.8%
Rest of Fast Growing & Emerging 1.9-5.7% 8.1-15.9% 1.9-7.8% 7.8-17.5%
Given the current economic climate, a sensitivity analysis has been performed in assessing recoverable
amounts of goodwill for all CGUs. This has been based on changes in key assumptions considered to be
reasonably possible by management. With the exception of Turkey, the directors do not consider that
any reasonably possible changes in the key assumptions would cause the value in use of the net
operating assets of the individually significant CGUs disclosed above to fall below their carrying
values.
The book value of goodwill attributable to Turkey is £70 million with a value in use of £97 million
based on management's estimates reflecting the recent downturn in Turkey's economy. Given the limited
headroom of £27 million, reasonably possible changes in the key assumptions would cause the value in
use of the CGU attributable to this country to fall below the carrying value of its net assets. Such
changes include: a reduction in the level of cash generation of 16% as a result of, for example a
decrease of 2 percentage points in the revenue growth assumptions; or an increase in the assumed
discount rate of 1.5%.
Compass Group PLC
Consolidated Financial Statements (continued)
10 OTHER INTANGIBLE ASSETS
Contract and other intangibles1
Computer software Arising on
acquisition Other Total
£m £m £m £m
COST
At 1 October 2013 224 401 842 1,467
Additions 22 - 184 206
Disposals (5) - (59) (64)
Business acquisitions - 89 9 98
Business disposals - (3) - (3)
Reclassified (2) 3 4 5
Currency adjustment (7) (17) (7) (31)
At 30 September 2014 232 473 973 1,678
At 1 October 2014 232 473 973 1,678
Additions 31 - 191 222
Disposals
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