REG - Compass Group PLC - Full year results <Origin Href="QuoteRef">CPG.L</Origin> - Part 7
24/11/2015 07:02
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various schemes in existence within the range of 1% to 39% of
pensionable salaries.
The contributions payable for defined contribution schemes of £84 million (2014: £85 million) have been fully expensed against profits in the current year. Disclosures showing the assets and liabilities of the schemes are set out below. These have been calculated on the following assumptions:
UK schemes USA schemes Other schemes
2015 2014 2015 2014 2015 2014
Discount rate 3.8% 4.0% 3.9% 3.9% 2.2% 2.5%
Inflation 3.1% 3.2% 2.1% 2.3% 1.4% 1.7%
CPI inflation 2.35% 2.45% n/a n/a n/a n/a
Rate of increase in salaries 3.1% 3.2% 3.0% 3.0% 1.7% 1.7%
Rate of increase for pensions in payment 3.0% 3.1% 2.1% 2.3% 0.2% 0.3%
Rate of increase for deferred pensions * 2.7% 2.8% 0.0% 0.0% 0.0% 0.0%
* This assumption is now presented as a weighted average.
The mortality assumptions used to value the UK pension schemes are derived from the S1NA generational mortality tables with
improvements in line with the projection model prepared by the Continuous Mortality Investigation of the UK actuarial
profession, with no rating for males and +0.6 year age adjustment for females, with a long-term underpin of 1.25%. These
mortality assumptions take account of experience to date, and assumptions for further improvements in the life expectancy
of scheme members. The Group estimates the average duration of the UK Plan's liabilities to be 18 years (2014: 18 years).
Examples of the resulting life expectancies are as follows:
2015 2014
LIFE EXPECTANCY AT AGE 65 Male Female Male Female
Member aged 65 in 2015 (2014) 22.6 24.5 22.5 24.4
Member aged 65 in 2040 (2039) 24.8 27.0 24.8 26.9
The other demographic assumptions have been set having regard to the latest trends in scheme experience and other relevant data. The assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of pension schemes.
For the overseas schemes, regionally appropriate assumptions have been used where recommended by local actuaries. The mortality assumptions used to value USA schemes are derived from the RP2014 combined healthy table, generational MP2014 scale. Examples of the resulting life expectancies are as follows:
2015 2014
LIFE EXPECTANCY AT AGE 65 Male Female Male Female
Member aged 65 in 2015 (2014) 21.7 23.9 20.9 23.3
Member aged 65 in 2040 (2039) 23.8 26.0 22.9 25.5
Compass Group PLC
Consolidated Financial Statements (continued)
22 POST-EMPLOYMENT OBLIGATIONS CONTINUED
MOVEMENTS IN THE FAIR VALUE OF PLAN ASSETS 2015 2014
UK USA Other Total UK USA Other Total
£m £m £m £m £m £m £m £m
At 1 October 1,944 279 84 2,307 1,772 250 127 2,149
Currency adjustment - 20 (1) 19 - - (6) (6)
Interest income on plan assets 76 11 2 89 78 10 3 91
Return on plan assets, excluding interest income 155 (14) 4 145 122 14 1 137
Employee contributions - 18 2 20 - 15 2 17
Employer contributions 30 32 12 74 30 15 15 60
Benefits paid (68) (29) (11) (108) (58) (24) (14) (96)
Administration expenses paid from plan assets - (2) - (2) - (1) - (1)
Disposals and plan settlements - (15) (7) (22) - - (44) (44)
At 30 September 2,137 300 85 2,522 1,944 279 84 2,307
MOVEMENT IN THE PRESENT VALUE OF DEFINED BENEFIT OBLIGATIONS 2015 2014 Restated1
UK USA Other Total UK USA Other Total
£m £m £m £m £m £m £m £m
At 1 October 1,920 390 167 2,477 1,790 352 210 2,352
Currency adjustment (1) 27 (6) 20 - - (14) (14)
Current service cost 2 8 6 16 2 7 7 16
Past service cost - - - - - 1 (5) (4)
Interest expense on benefit obligations 75 15 4 94 78 14 6 98
Remeasurements - demographic assumptions - 3 2 5 12 9 2 23
Remeasurements - financial assumptions 38 (11) 3 30 96 15 10 121
Remeasurements - experience - - 2 2 - 1 1 2
Employee contributions - 18 2 20 - 15 2 17
Benefits paid (68) (29) (11) (108) (58) (24) (13) (95)
Disposals and plan settlements - (17) (8) (25) - - (40) (40)
Acquisitions - - - - - - 1 1
At 30 September 1,966 404 161 2,531 1,920 390 167 2,477
PRESENT VALUE OF DEFINED BENEFIT OBLIGATIONS 2015 2014 Restated1
UK USA Other Total UK USA Other Total
£m £m £m £m £m £m £m £m
Funded obligations 1,924 310 105 2,339 1,878 301 107 2,286
Unfunded obligations 42 94 56 192 42 89 60 191
Total obligations 1,966 404 161 2,531 1,920 390 167 2,477
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)
22 POST-EMPLOYMENT BENEFIT OBLIGATIONS CONTINUED 2015 POST-EMPLOYMENT 2014 Restated1
BENEFIT OBLIGATIONS RECOGNISED IN THE BALANCE SHEET UK USA Other Total £m
£m £m £m Present value of defined benefit obligations 1,966 404 161
2,531 Fair value of plan assets (2,137) (300) (85) (2,522) Post
-employment benefit obligations recognised in the balance sheet (171) 104
76 9 2014 Restated1 POST-EMPLOYMENT BENEFIT OBLIGATIONS RECOGNISED IN THE
BALANCE SHEET UK USA Other Total £m £m £m £m Present value of defined
benefit obligations 1,920 390 167 2,477 Fair value of plan assets (1,944)
(279) (84) (2,307) Post-employment benefit obligations recognised in the
balance sheet (24) 111 83 170 Certain Group companies have taken out
life insurance policies and invested in mutual funds which will be used
to meet unfunded pension obligations. The current value of these policies
and other assets, £29 million (2014: £27 million), may not be offset
against pension obligations under IAS 19 and is reported within note 13.
2015
POST-EMPLOYMENT BENEFIT OBLIGATIONS RECOGNISED IN THE BALANCE SHEET
UK
USA
Other
Total
£m
£m
£m
£m
Present value of defined benefit obligations
1,966
404
161
2,531
Fair value of plan assets
(2,137)
(300)
(85)
(2,522)
Post-employment benefit obligations recognised in the balance sheet
(171)
104
76
9
2014 Restated1
POST-EMPLOYMENT BENEFIT OBLIGATIONS RECOGNISED IN THE BALANCE SHEET UK USA Other Total
£m £m £m £m
Present value of defined benefit obligations 1,920 390 167 2,477
Fair value of plan assets (1,944) (279) (84) (2,307)
Post-employment benefit obligations recognised in the balance sheet (24) 111 83 170
Certain Group companies have taken out life insurance policies and invested in mutual funds which will be used to meet
unfunded pension obligations. The current value of these policies and other assets, £29 million (2014: £27 million), may
not be offset against pension obligations under IAS 19 and is reported within note 13.
2014 Restated1
AMOUNTS RECOGNISED THROUGH THE INCOME STATEMENT
The amounts recognised through the consolidated income statement within the various captions are as follows
2015 2014 Restated1
UK USA Other Total UK USA Other Total
£m £m £m £m £m £m £m £m
Current service cost 2 8 6 16 2 7 7 16
Past service cost - - - - - 1 (5) (4)
Charged to operating expenses 2 8 6 16 2 8 2 12
Interest expense on benefit obligations 75 15 4 94 78 14 6 98
Interest income on plan assets (76) (11) (2) (89) (78) (10) (3) (91)
Charged to finance costs (1) 4 2 5 - 4 3 7
Total charged in the consolidated income statement 1 12 8 21 2 12 5 19
The Group made total contributions to defined benefit schemes of £74 million in the year (2014: £60 million), including
exceptional advance payments of £nil (2014: £nil) and expects to make total contributions, including UK deficit
contributions, to these schemes of £55 million in 2016.
AMOUNTS RECOGNISED THROUGH THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
The amounts recognised through the consolidated statement of comprehensive income are as follows:
2015 2014 Restated1
£m £m
Remeasurement of post-employment benefit obligations
- Effect of changes in demographic assumptions (5) (23)
- Effect of changes in financial assumptions (30) (121)
- Effect of experience adjustments (2) (2)
Remeasurement of post-employment benefit obligations - loss (37) (146)
Return on plan assets, excluding interest income - gain 145 137
Total recognised in the consolidated statement of comprehensive income 108 (9)
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)
23 SHARE CAPITAL
During the year no options were granted under The
Compass Group Share Option Plan 2010.
During the year the Company purchased 30,086,546 equity
ordinary shares in accordance with its share buyback
programme (2014: 21,752,881). Of these 9,552,807 were
held as Treasury shares. £225 million was paid to
acquire shares that were subsequently cancelled and £103
million was paid to acquire shares that are held as
Treasury shares. The total amount paid to acquire all
the shares was £328 million which has been deducted from
shareholders' equity (2014: £200 million).
756,579 Treasury shares were released in 2015 (2014:
nil), leaving a balance held at 30 September 2015 of
8,796,228 (2014: nil). Proceeds received from the
reissuance of Treasury shares to exercise share options
were £1 million (2014: £nil).
On 14 May 2014, Compass Group PLC announced a Return of
Cash to shareholders of approximately £1 billion by way
of a special dividend. The Return of Cash was
accompanied by a consolidation of the existing ordinary
shares in the ratio of 16 New Ordinary shares for every
17 existing ordinary shares held. Following approval
of the Return of Cash to Shareholders on 11 June 2014,
1,366,745,487 C shares of 0.0001 pence each and
419,413,879 B shares of 56 pence each were issued on 8
July 2014 following partial capitalisation of the share
premium account. On 15 July a dividend of 56 pence per
share was declared on the C shares at a cost of £765
million payable on 29 July 2014 and these shares were
reclassified as deferred shares. On the same day the B
shares were redeemed for 56 pence per share at a cost of
£235 million, payable on 29 July 2014. The deferred
shares were redeemed on 15 July. Following redemption,
the B shares and deferred shares were cancelled. Costs
in relation to the Return of Cash were £2 million.
The on market share buyback programme was resumed on 31
July 2014. During the period to 30 September 2014 a
total of 8,000,000 ordinary shares of 10 5/8 pence each
were repurchased for consideration of £78 million and
cancelled. The Company also contracted to repurchase a
further 200,000 ordinary shares of 10 5/8 pence each
before 30 September 2014 for consideration of £1.9
million which was settled in October 2014.
2015 2014
ALLOTTED SHARE CAPITAL Number of shares £m Number of shares £m
Allotted and fully paid:
New Ordinary shares of 10 5/8p each 1,656,777,382 176 1,673,886,784 178
1,656,777,382 176 1,673,886,784 178
At 1 October 178 180
Ordinary and New Ordinary shares allotted during the year - 1
Repurchase of Ordinary and New Ordinary shares (2) (3)
At 30 September 176 178
24 SHARE-BASED PAYMENTS
SHARE OPTIONS
Full details of The Compass Group Share Option Plan 2010 (CSOP
2010), the Compass Group Share Option Plan (CSOP 2000), the
Compass Group Management Share Option Plan (Management Plan)
(collectively the Executive and Management Share Option Plans)
and the UK Sharesave Plan are set out in prior years' Annual
Reports which are available on the Company's website. The
consolidation of Compass Group PLC shares that took place during
the prior year had no impact on the number of options
outstanding under these plans or on the other terms and
conditions that apply to them other than consideration by the
Remuneration Committee of the impact on the performance targets
that relate to these awards.
25 BUSINESS COMBINATIONS
The Group has completed a number of smaller infill acquisitions in several countries for total consideration of £93 million, of which £76 million was paid in the year. In addition, the Group paid a further £13 million deferred consideration relating to prior years.
Acquisition transaction costs expensed in the year to 30 September 2015 were £2 million (2014: £3 million).
In the period from acquisition to 30 September 2015 the acquisitions contributed revenue of £42 million and operating profit of £6 million to the Group's results.
If the acquisitions had occurred on 1 October 2014, it is estimated that Group revenue for the period would have been £17,884 million and total Group operating profit (including associates) would have been £1,264 million.
Compass Group PLC
Consolidated Financial Statements (continued)
26 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY OPERATIONS
RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED BY CONTINUING OPERATIONS 2015 2014 Restated1
£m £m
Operating profit from continuing operations 1,222 1,184
Adjustments for:
Acquisition transaction costs 2 3
Amortisation of intangible assets 147 128
Amortisation of intangible assets arising on acquisition 26 25
Depreciation of property, plant and equipment 193 189
Loss/(profit) on disposal of property, plant and equipment/intangible assets 3 (1)
Decrease in provisions (56) (64)
Decrease in post-employment benefit obligations (59) (46)
Share-based payments - charged to profits 15 13
Operating cash flows before movement in working capital 1,493 1,431
Increase in inventories (17) (17)
Increase in receivables (128) (152)
Increase in payables 128 155
Cash generated by continuing operations 1,476 1,417
1 2014 has been restated for the change in the accounting treatment for joint ventures in accordance with IFRS11, as detailed in note 15.
Compass Group PLC
Consolidated Financial Statements (continued)
27 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 Derivative Total
Cash and cash Bank Bank and other overdrafts and Finance financial gross Net
NET DEBT equivalents overdrafts borrowings borrowings leases instruments debt debt
£m £m £m £m £m £m £m £m
At 1 October 2013 987 (20) (2,223) (2,243) (21) 66 (2,198) (1,211)
Net decrease in cash and cash equivalents (563) - - - - - - (563)
Cash inflow from issue of bonds - (646) (646) - - (646) (646)
Cash outflow from repayment of loan notes - - 74 74 - - 74 74
Cash inflow from other changes in gross debt - (18) (3) (21) - (4) (25) (25)
Cash outflow from repayment of obligations under finance leases - - - - 5 - 5 5
Increase in net debt as a result of new finance leases taken out - - - (2) - (2) (2)
Currency translation (losses)/gains (16) 1 51 52 1 (24) 29 13
Reclassification1 - - (18) (18) - - (18) (18)
Other non-cash movements - - (21) (21) - 23 2 2
At 30 September 20141,2 408 (37) (2,786) (2,823) (17) 61 (2,779) (2,371)
At 1 October 2014 408 (37) (2,786) (2,823) (17) 61 (2,779) (2,371)
Net decrease in cash and cash equivalents (103) - - - - - - (103)
Cash inflow from issue of loan notes - - (259) (259) - - (259) (259)
Cash outflow from repayment of bonds - - 250 250 - - 250 250
Cash inflow from other changes in gross debt - (21) (15) (36) - (39) (75) (75)
Cash outflow from repayment of obligations under finance leases - - - - 5 - 5 5
Increase in net debt as a result of new finance leases taken out - - - - (2) - (2) (2)
Currency translation (losses)/gains (22) (1) (22) (23) 1 (2) (24) (46)
Other non-cash movements - - (27) (27) - 25 (2) (2)
At 30 September 2015 283 (59) (2,859) (2,918) (13) 45 (2,886) (2,603)
1 2014 has been restated to reflect a reclassification between other payables and short term borrowings.
2 2014 has been restated for the change in the accounting treatment for joint ventures in accordance with IFRS11, as detailed in note 15.
Other non-cash movements are comprised as follows:
OTHER NON-CASH MOVEMENTS IN NET DEBT 2015 2014
£m £m
Amortisation of fees and discount on issuance (1) (2)
Amortisation of the fair value adjustment in respect of the £250 million Sterling Eurobond redeemable in 2014 - 4
Changes in the fair value of bank and other borrowings in a designated fair value hedge (26) (23)
Bank and other borrowings (27) (21)
Changes in the value of derivative financial instruments including accrued income 25 23
Other non-cash movements (2) 2
Compass Group PLC
Consolidated Financial Statements (continued)
28 CONTINGENT LIABILITIES
PERFORMANCE BONDS, GUARANTEES AND INDEMNITIES 2015 2014
£m £m
Performance bonds, guarantees and indemnities (including those 349 392
of associated undertakings) 1
1 Excludes bonds, guarantees and indemnities in respect of self
-insurance liabilities, post-employment obligations and
borrowings (including finance and operating leases) recorded on
the balance sheet or disclosed in note 30.
PERFORMANCE BONDS, GUARANTEES AND INDEMNITITES
The Company and certain subsidiary undertakings have, in the
normal course of business, given guarantees and entered into
counter-indemnities in respect of such guarantees relating to
the Group's own contracts and/or the Group's share of certain
contractual obligations of joint ventures and associates. Where
the Group enters into such arrangements, it does so in order to
provide assurance to the beneficiary that it will fulfil its
existing contractual obligations. The issue of such guarantees
and indemnities does not therefore increase the Group's overall
exposure and the disclosure of such performance bonds,
guarantees and indemnities is given for information purposes
only.
EUREST SUPPORT SERVICE
On 21 October 2005, the Company announced that it had instructed
Freshfields Bruckhaus Deringer to conduct an investigation into
the relationships between Eurest Support Services (ESS) (a
member of the Group), IHC Services Inc. (IHC) and the United
Nations (UN). Ernst & Young assisted Freshfields Bruckhaus
Deringer in this investigation. On 1 February 2006, it was
announced that the investigation had concluded.
The investigation established serious irregularities in
connection with contracts awarded to ESS by the UN. The work
undertaken by Freshfields Bruckhaus Deringer and Ernst & Young
gave no reason to believe that these issues extended beyond a
few individuals within ESS to other parts of ESS or the wider
Compass Group of companies.
The Group settled all outstanding civil litigation against it
in relation to this matter in October 2006, but litigation
continues between competitors of ESS, IHC and other parties
involved in UN procurement.
IHC's relationship with the UN and ESS was part of a wider
investigation into UN procurement activity being conducted by
the United States Attorney's Office for the Southern District of
New York, and with which the Group co-operated fully. The
current status of that investigation is uncertain and a matter
for the US authorities. Those investigators could have had
access to sources unavailable to the Group, Freshfields
Bruckhaus Deringer or Ernst & Young, and further information may
yet emerge which is inconsistent with, or additional to, the
findings of the Freshfields Bruckhaus Deringer investigation,
which could have an adverse impact on the Group. The Group has,
however, not been contacted by, or received further requests for
information from, the United States Attorney's Office for the
Southern District of New York in connection with these matters
since January 2006. The Group has co-operated fully with the UN
throughout.
OTHER LITIGATION AND CLAIMS
The Group is also involved in various other legal proceedings
incidental to the nature of its business and maintains insurance
cover to reduce financial risk associated with claims related to
these proceedings. Where appropriate, provisions are made to
cover any potential uninsured losses.
In addition, the Group is subject to periodic tax audits and
challenges with/by various fiscal authorities covering
corporate, employee and sales taxes in the various jurisdictions
in which it operates. None of these are currently expected to
have a material impact on the Group's financial position.
OUTCOME
Although it is not possible to predict the outcome or quantify
the financial effect of these proceedings, or any claim against
the Group related thereto, in the opinion of the directors, any
uninsured losses resulting from the ultimate resolution of these
matters will not have a material effect on the financial
position of the Group. The timing of the settlement of these
proceedings or claims is uncertain.
29 CAPITAL COMMITMENTS
CAPITAL COMMITMENTS 2015 2014
£m £m
Contracted for but not provided for 230 187
The majority of capital commitments are for intangible assets.
Compass Group PLC
Consolidated Financial Statements (continued)
30 OPERATING LEASE AND CONCESSIONS COMMITMENTS
The Group leases offices and other premises under non-cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group has some leases that include revenue-related rental payments that are contingent on future levels of revenue.
Future minimum rentals payable under non-cancellable operating leases and concessions agreements are as follows:
2015 2014
Operating leases Operating leases
Land and Other Other Land and Other Other
occupancy occupancy
OPERATING LEASE AND CONCESSIONS COMMITMENTS buildings assets rentals buildings assets rentals
£m £m £m £m £m £m
Falling due within 1 year 51 52 51 53 46 55
Falling due between 2 and 5 years 136 75 84 141 63 74
Falling due in more than 5 years 72 9 55 76 6 53
Total 259 136 190 270 115 182
31 RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties of Compass Group PLC:
SUBSIDIARIES
Transactions between the Ultimate Parent Company and its subsidiaries, and between subsidiaries, have been eliminated on consolidation.
JOINT VENTURE
There were no significant transactions between joint ventures or joint venture partners and the rest of the Group during the year.
ASSOCIATES
The balances with associated undertakings are shown in notes 14 and 20. There were no significant transactions with associated undertakings during the year.
KEY MANAGEMENT PERSONNEL
The remuneration of Directors and key management personnel is set out in note 3 of the 2015 Annual Report. During the year there were no other material transactions or balances between the Group and its key management personnel or members of their close family.
32 POST BALANCE SHEET EVENTS
There are no material post balance sheet events.
Compass Group PLC
Consolidated Financial Statements (continued)
33 EXCHANGE RATES
2015 2014
AVERAGE EXCHANGE RATE FOR YEAR 1
Australian Dollar 1.98 1.81
Brazilian Real 4.66 3.80
Canadian Dollar 1.90 1.79
Euro 1.35 1.23
Japanese Yen 184.31 169.92
Norwegian Krone 11.82 10.12
South African Rand 18.60 17.54
Swedish Krona 12.58 11.00
Swiss Franc 1.48 1.49
Turkish Lira 3.96 3.53
UAE Dirham 5.69 6.09
US Dollar 1.55 1.66
CLOSING EXCHANGE RATE AS AT 30 SEPTEMBER 1
Australian Dollar 2.16 1.85
Brazilian Real 6.03 3.97
Canadian Dollar 2.03 1.81
Euro 1.36 1.28
Japanese Yen 181.42 177.83
Norwegian Krone 12.92 10.41
South African Rand 20.94 18.32
Swedish Krona 12.70 11.69
Swiss Franc 1.48 1.55
Turkish Lira 4.59 3.70
UAE Dirham 5.56 5.95
US Dollar 1.51 1.62
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
Constant currency Restates the prior year results to current year's average exchange rates.
Underlying revenue The combined sales of Group and share of equity accounted joint ventures.
Underlying operating profit Includes share of profit after tax of associates and joint ventures but excludes specific adjusting items.
Underlying operating margin Based on underlying revenue and underlying operating profit excluding share of profit after tax of associates.
Underlying net finance cost Excludes hedge accounting ineffectiveness.
Underlying profit before tax Excludes specific adjusting items.
Underlying tax Excludes tax attributable to specific adjusting items.
Underlying effective tax rate Based on underlying tax charge and underlying profit before tax.
Underlying basic earnings per share Excludes specific adjusting items and the tax attributable to those items.
Underlying free cash flow Adjusted for cash restructuring costs in the year relating to the 2012 and 2013 European exceptional programme.
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