REG - Compass Group PLC - Half Year Results
11/05/2022 07:00
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RNS Number : 0198L Compass Group PLC 11 May 2022
Legal Entity Identifier (LEI) No. 2138008M6MH9OZ6U2T68
Half year results announcement for the six months ended 31 March 2022
Underlying(1) results Statutory results
HY 2022 HY 2021 Change HY 2022 HY 2021 Change
Revenue £11.6bn £8.4bn(2) 37.9%(3) £11.5bn £8.4bn 36.3%
Operating profit £673m £287m(2) 134.5%(2) £638m £168m 279.8%
Operating margin 5.8% 3.4% 240bps 5.5% 2.0% 350bps
Earnings per share 26.9p 9.5p(2) 183.2%(2) 26.7p 5.6p 376.8%
Operating cash flow £557m £486m 14.6% £663m £563m 17.8%
Free cash flow £360m £359m 0.3%
Interim dividend per share 9.4p - 9.4p -
Strong growth drives revenue above pre-COVID level(2)
Commencing a £500m share buyback programme
Half year performance summary
• Q2 underlying revenue at 99% of 2019 revenues with run rate now above
our pre-COVID level(2)
• Organic growth of 37.9% driven by strong performance in North America
and Europe
• Excellent net new business growth, total in HY 2022 exceeds entire FY
2021 net new business
• Operating margin of 5.8%, an increase of 240bps on HY 2021
• Leverage further reduced to 1.3x net debt/EBITDA, back within our
target range
• Commencing a share buyback programme with up to £500m this calendar
year
Operational highlights
• Strong growth across all sectors, with notable volume recovery in
Business & Industry and Education
• Record new business wins of £2.5bn(4) over the last 12 months, with
broad based growth across all regions
• Client retention rate at highest ever level of 95.8%
• Net M&A expenditure of £109m, further increasing our presence in
delivered-in solutions
Strategy - positioning for the future
• Capitalising on the significant market growth opportunities in first
time outsourcing
• Continuing to strengthen our competitive advantage in vending, digital
solutions and ESG
• Resilient business model helps mitigate heightened inflation - also a
tailwind to outsourcing
Outlook
• Increasing FY 2022 organic revenue guidance from 20 - 25% to around
30%
• Margin guidance remains unchanged; expect FY 2022 underlying operating
margin to be over 6%, exiting the year at around 7%
Statutory results
• Statutory revenue increased by 36.3% and operating profit was up by
279.8%
1. Reconciliation of statutory to underlying results can be found in notes
2 (segmental analysis) and 12 (non-GAAP measures) of the financial statements.
2. Measured on a constant currency basis.
3. Organic revenue change.
4. Annual revenue of new business wins in the last 12 months.
Business Review
Dominic Blakemore, Group Chief Executive, said:
"We continue to recover strongly from the pandemic and have achieved the
important milestone of revenue exceeding our pre-COVID level on a run rate
basis. We have seen a notable improvement in Business & Industry and
Education as employees return to the office and students to in-person
learning. Net new business growth has been excellent, particularly in North
America and Europe where we have mobilised a significant number of recent wins
and benefited from our highest ever client retention rate.
We are mindful of global inflationary pressures, which have been exacerbated
by the tragic events in Ukraine. Although we expect inflation to increase and
continue at a heightened level in the medium term, we have a resilient
business model to help mitigate this challenge. Inflation also provides a
further impetus to outsourcing as organisations seek savings and we are
capturing this growth opportunity as demonstrated by our record new business
wins.
Given our strong first half performance and positive outlook, we are
increasing our full year organic revenue growth guidance from 20 - 25% to
around 30%. Whilst we are cautious about the inflationary environment, our
margin guidance remains unchanged, with full year underlying operating margin
expected to be over 6%, exiting the year at around 7%.
While investing in future growth, our increasing profit and cash flow continue
to reduce leverage, which is now back within our target range. Our strong
balance sheet and excellent growth prospects give us the confidence to
commence a share buyback programme with up to £500m during this calendar
year.
Looking further ahead, we remain excited about the significant structural
growth opportunities globally, leading to the potential for revenue and profit
growth above historical rates, returning margin to pre-pandemic levels and
rewarding shareholders with further returns."
Results presentation today
A recording of the results presentation for investors and analysts will be
available on the Company's website today, Wednesday 11 May 2022, at 7.00am.
There will be a Q&A session at 9.00am, accessible via the Company's
website, www.compass-group.com (http://www.compass-group.com) , and you will
be able to participate by dialing:
UK Toll Number:
+44 (0) 33 0551 0200
UK Toll-Free Number: 0808 109 0700
US Toll Number: +1 212 999 6659
US Toll-Free Number: +1 866 966 5335
Participant PIN Code: Compass
Please connect to the call at least 10-15 minutes prior to the start time.
Financial calendar
Ex-dividend date for 2022 interim dividend 9 June 2022
Record date for 2022 interim dividend 10 June 2022
Last day for DRIP elections 7 July 2022
Q3 Trading Update 26 July 2022
2022 interim dividend date for payment 28 July 2022
Full year results 22 November 2022
Enquiries
Investors Agatha Donnelly & Simon Bielecki +44 1932 573 000
Press Giles Robinson, Compass Group PLC +44 1932 963 486
Tim Danaher, Brunswick +44 207 404 5959
Website www.compass-group.com (http://www.compass-group.com)
Business Review (continued)
Basis of preparation
Throughout the Half Year Results Announcement, and consistent with prior
periods, underlying and other alternative performance measures are used to
describe the Group's performance alongside statutory measures.
The Executive Committee manages and assesses the performance of the Group
using various underlying and other Alternative Performance Measures (APMs).
These measures are not recognised under International Financial Reporting
Standards (IFRS) or other generally accepted accounting principles (GAAP) and
may not be directly comparable with alternative performance measures used by
other companies. Underlying measures reflect ongoing trading and, therefore,
facilitate meaningful year on year comparison. Management believes that the
Group's underlying and alternative performance measures, together with the
results prepared in accordance with IFRS, provide comprehensive analysis of
the Group's results. Certain of these measures are financial Key Performance
Indicators (KPIs) which measure progress against our strategy.
The Group's APMs are defined in note 12 (non-GAAP measures) and reconciled to
GAAP measures in notes 2 (segmental analysis) and 12 of the financial
statements.
Group overview
Compass continues to recover strongly from the pandemic, having only been
temporarily impacted by the Omicron variant at the beginning of the calendar
year. In the first half, on a constant currency basis, underlying revenue was
98% of its pre-COVID level, with Q2 marginally stronger at 99%. Furthermore,
we are now ahead of our pre-pandemic revenues on a run rate basis, an
important milestone for the Group.
Underlying operating margin for the first six months was 5.8%, in line with
our guidance. Despite re-opening expenses, mobilisation costs due to higher
growth and inflationary pressures, we expect margin improvement to continue in
the second half of the year, with underlying operating margin expected to be
above 6% for the full year, with an exit rate of around 7% by year end.
We are continuing to invest in exciting growth opportunities, with capital
expenditure at 2.6% of underlying revenue and net M&A expenditure of
£109m, mainly in North America, in the first half of the year. Capital
expenditure is expected to increase in the second half of 2022, with the full
year expected to be around 3.5% of underlying revenue. The Group generated
good operating cash flows in the first half and is continuing to reduce
leverage, which is now 1.3x, within our target range, enabling us to commence
a share buyback programme with up to £500m during this calendar year.
Group performance
Revenue
The positive performance trajectory seen through 2021 as our business adapted
to, and the world recovered from, COVID-19 has continued into the first half
of 2022. Our organic revenue growth for the six months was 37.9% reflecting
the lapping of lower revenues in the first half of 2021 and benefiting from
volume recovery in 2022.
Organic revenue change(1) Q3 2021 Q4 2021 Q1 2022 Q2 2022 HY 2022
Business & Industry 20.4% 19.3% 26.9% 40.5% 35.2%
Education 93.7% 41.8% 51.6% 47.9% 49.3%
Healthcare & Senior Living 15.0% 9.3% 11.6% 10.3% 10.5%
Sports & Leisure 412.6% 334.6% 343.8% 228.3% 278.4%
Defence, Offshore & Remote 17.8% 15.0% 8.7% 6.8% 7.9%
Group 36.4% 32.9% 38.6% 37.0% 37.9%
1. Alternative Performance Measure (APM). The Group's APMs are defined in note 12 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 12 of the financial statements.
Business Review (continued)
In terms of our sectors, Healthcare & Senior Living, Education, and
Defence, Offshore & Remote were all trading above pre-pandemic levels
during the first half of the year with Sports & Leisure at 99% of 2019
revenues. Business & Industry has seen a notable improvement in top line
performance since the start of the year, with Q2 now 83% of pre-pandemic
levels, versus 68% in Q4 2021, reflecting the easing of government
restrictions across many markets and the associated return to workplaces.
Education also performed particularly well, increasing to 107% of 2019
revenues in Q2 2022, from 94% in Q4 2021.
Underlying revenue(1) as % of 2019(2) Q3 2021 Q4 2021 Q1 2022 Q2 2022 HY 2022
Business & Industry 60.8% 68.4% 76.6% 82.9% 80.4%
Education 77.7% 93.6% 101.2% 107.3% 103.9%
Healthcare & Senior Living 107.2% 111.3% 114.6% 116.3% 115.0%
Sports & Leisure 48.8% 89.3% 107.3% 93.8% 99.4%
Defence, Offshore & Remote 110.6% 108.8% 116.6% 115.3% 116.1%
Group 76.2% 88.5% 96.9% 99.2% 98.0%
1. Alternative Performance Measure (APM). The Group's APMs are defined in note 12 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 12 of the financial statements.
2. On a constant currency basis. Throughout this report, underlying revenue as a percentage of 2019 is calculated on a constant currency basis.
Client retention rates continued to improve at 95.8% and, encouragingly,
underlying revenue growth from new business wins was 10.3% as contracts
continue to mobilise. Net new business, when rebased to 2019, is around 4.4%,
higher than the historical levels of 3%, a key indication of positive growth
momentum.
On a statutory basis, revenue was £11,499m (2021: £8,435m), an increase of
36% as the business continued to recover from the pandemic.
Operating profit
Underlying operating profit increased by 135% on a constant currency basis, to £673m, and our underlying operating margin was 5.8%, which represents c.80% of our pre-COVID margin levels.
On a statutory basis, operating profit was £638m (2021: £168m), an increase of 280%, mainly reflecting the higher revenue. Statutory operating profit includes non-underlying item charges of £35m (2021: £122m), including acquisition related costs of £33m (2021: £41m). Non-underlying items in the prior period also included COVID-19 resizing costs of £78m.
Capital allocation
Our capital allocation framework is clear and unchanged. Our priority is to
invest in the business to fund growth opportunities, target a strong
investment grade credit rating with a leverage target of around 1x to 1.5x net
debt to EBITDA and pay an ordinary dividend, with any surplus capital being
returned to shareholders.
Growth investment consists of: (i) capital expenditure to support organic
growth in both new business wins and retention of existing contracts; and (ii)
bolt-on M&A opportunities that strengthen our capabilities and broaden our
exposure. We have a proven track record of strong returns from our investment
strategy evidenced by our historical returns on capital employed.
As announced in November 2021, the ordinary dividend has been resumed with the
dividend policy to pay out around 50% of underlying earnings through an
interim and final dividend. The Board has approved an interim dividend of 9.4
pence per share to be payable in July 2022. The Group is also commencing a
share buyback programme with up to £500m during this calendar year.
Business Review (continued)
Regional performance
North America - 65.9% of Group underlying revenue (2021: 60.4%)
Underlying Change(1) Statutory Change
results(1) results
Regional financial summary 2022 2021 Reported rates Constant currency Organic 2022 2021 Reported rates
Revenue £7,657m £5,160m 48.4% 47.6% 47.9% £7,650m £5,150m 48.5%
Operating profit(2) £535m £242m 121.1% 120.2% 121.1% £509m £218m 133.5%
Operating margin 7.0% 4.7% 230bps 6.7% 4.2% 250bps
1. Reconciliation of statutory to underlying results can be found in notes
2 (segmental analysis) and 12 (non-GAAP measures) of the financial statements.
2. 2021 re-presented to reflect the change in the definition of regional
operating profit to include the share of results of associates (£3m loss).
Underlying
During the first half of the year, revenues were 103% of 2019 levels, up from
90% in Q4 2021. All sectors are now operating above or around 100% of 2019
levels, with the exception of Business & Industry. Organic revenue growth
was 48%, with base volumes continuing to recover. Reported new business at
11.2%, with double digit new business growth in Business & Industry and
Sports & Leisure and continued high retention rates at 97%, saw net new
business of 8.2%.
Our Sports & Leisure sector maintained its momentum from the second half
of 2021, continuing to benefit from strong attendance and per capita spend,
although some events continued to be postponed due to COVID-19. Our Education
sector continued to perform well, reflecting higher numbers on campus. The
return to the office has been gradual and our Business & Industry sector
remains impacted by the pandemic, with revenues at 84% of 2019 levels for the
first half, although there has been further improvement during recent months.
Our Healthcare & Senior Living business has been resilient throughout the
pandemic, particularly in support services, with new business strong
especially in community living.
Underlying operating profit of £535m represents 120% growth on a constant
currency basis and an operating margin of 7.0%, a 230bps improvement on the
first half of 2021. The margin has benefited from overhead leverage as volumes
have improved as well as the continued focus on efficiency, cost control and
pricing to mitigate higher levels of inflation and mobilisation costs.
During the period, the Group acquired a number of businesses that complement
the Group's existing footprint, creating opportunities for synergies across
our sectors in the US.
Statutory
Statutory revenue increased by 48.5% to £7,650m as the business continues to
recover from the pandemic.
Statutory operating profit was £509m, a £291m increase, due to stronger
revenue and the improved operating margin.
Business Review (continued)
Europe - 23.8% of Group underlying revenue (2021: 26.4%)
Underlying Change(1) Statutory Change
results(1) results
Regional financial summary 2022 2021 Reported rates Constant currency Organic 2022 2021 Reported rates
Revenue £2,766m £2,260m 22.4% 28.3% 28.3% £2,647m £2,154m 22.9%
Operating profit/(loss)(2) £125m £32m 290.6% 331.0% 342.9% £118m £(57)m 307.0%
Operating margin 4.5% 1.4% 310bps 4.5% (2.6)% 710bps
1. Reconciliation of statutory to underlying results can be found in notes
2 (segmental analysis) and 12 (non-GAAP measures) of the financial statements.
2. 2021 re-presented to reflect the change in the definition of regional
operating profit to include the share of results of associates (£nil).
Underlying
Despite varying levels of national restrictions and changing pandemic guidance
across the countries, all sectors traded above 100% of 2019 revenues with the
exception of Business & Industry, the region's largest sector, which was
76% of 2019 levels. Overall, revenues were 90% of 2019 levels, 6 percentage
points higher than Q4 2021. Organic revenue grew by 28.3%. Momentum in
reported new business growth has continued and was 9.4%, driven by UK&I,
France, Germany and Spain, with client retention showing an improving trend at
94.3%.
The business has continued to resize as government support programmes have
reduced or ceased. As expected, no further non-underlying restructuring
charges have been incurred, but the cash cost in the period was £29m.
Underlying operating profit was £125m, representing 331% growth on a constant
currency basis. Operating margin was 4.5%, a 310bps improvement on the first
half of 2021, reflecting overhead leverage as volumes have improved, with
higher levels of inflation and mobilisation costs being mitigated through cost
control and pricing.
In March, the Group exited the Russian market in response to the war in
Ukraine, with the disposal of the business completing during the period. Based
on FY 2021 revenues, Russia comprised 0.5% and 0.1% of Europe and Group
revenues, respectively.
Statutory
Statutory revenue was £2,647m, with the difference from underlying revenue
being the presentation of the share of results of our joint ventures operating
in the Middle East.
The statutory operating profit of £118m represents a £175m improvement
driven by the trading performance and the higher non-underlying charges in
relation to resizing activity and acquisitions in the prior year.
Business Review (continued)
Rest of World - 10.3% of Group underlying revenue (2021: 13.2%)
Underlying Change(1) Statutory Change
results(1) results
Regional financial summary 2022 2021 Reported rates Constant currency Organic 2022 2021 Reported rates
Revenue £1,202m £1,131m 6.3% 9.6% 9.6% £1,202m £1,131m 6.3%
Operating profit(2) £56m £53m 5.7% 7.7% 7.7% £54m £50m 8.0%
Operating margin 4.7% 4.7% - 4.5% 4.4% 10bps
1. Reconciliation of statutory to underlying results can be found in notes
2 (segmental analysis) and 12 (non-GAAP measures) of the financial statements.
2. 2021 re-presented to reflect the change in the definition of regional
operating profit to include the share of results of associates (£nil).
Underlying
Our Rest of World region had revenues at 90% of 2019 levels, in line with Q4
2021, reflecting ongoing localised lockdowns, especially in Japan which is
weighted to Business & Industry clients. Our more resilient Defence,
Offshore & Remote sector continued to trade above pre-COVID levels, with
over 40% of regional revenue being generated from this sector.
Organic revenue grew by 9.6% reflecting higher volumes and modest net new
business driven by Australia, Japan and Brazil. Client retention was 93.3%.
Underlying operating profit was £56m, which represents 7.7% growth on a
constant currency basis. Operating margin was 4.7%, consistent with the first
half of 2021. The focus on actions to control costs and improve efficiency
offset the adverse impact from localised lockdowns, particularly across APAC,
and rising inflation.
Statutory
Statutory revenue increased by 6.3% to £1,202m. There is no difference
between statutory and underlying revenue.
Statutory operating profit was £54m, an increase of £4m, reflecting the
improved trading performance.
Business Review (continued)
Strategy
The Group's addressable food services market is estimated to be worth at least
£220bn. There is a significant structural growth opportunity from first time
outsourcing, with around half of the market currently self-operated. Roughly
25% of the market is held by regional players with a further opportunity to
take share from other large competitors. As the operating environment becomes
increasingly challenging due to inflationary pressures and operational
complexities, we have a clear strategy to capture the acceleration in first
time outsourcing based on our focus, scale and expertise. This is demonstrated
by our record new business wins of £2.5bn(1) during the last 12 months, with
broad based growth across all regions.
Our strategic focus on food, with some specialised support services, is
particularly relevant and we continue to evolve in line with changing market
conditions. Being the largest global player, our scale in procurement and
focus on cost efficiencies give us competitive advantages that translate into
greater value for clients and consumers. Our sectorised and sub-sectorised
approach enables us to provide a tailored offer to meet changing client
requirements. We recognise the increasing importance of digital and
Environmental, Social and Governance (ESG) in our food offering and are
continuing to invest in our market leading propositions.
We are exiting the COVID-19 pandemic as a stronger and better business,
accelerating new digital and culinary initiatives and adopting a more agile
operating model. As volumes return, we believe the measures we have taken to
increase efficiency will improve the quality of the business over the longer
term.
Our strategic focus on People, Performance and Purpose continues to underpin
all that we do in our ambition to deliver value to all our stakeholders.
People
Our people are at the heart of who we are and what we do. The resilience and
dedication of our people throughout the pandemic has been extraordinary and
has proven to be a vital ingredient in our continued success. It is testament
to them that, despite unprecedented operational challenges, they have
continued to serve our clients, consumers and communities with passion,
creativity and care, whilst maintaining an unwavering focus on health and
safety.
We work hard to build an open culture in which our people can thrive, feeling
safe and valued for who they are and what they bring to Compass. Career growth
is one of our commitments. We want everyone to have the opportunity to develop
their personal and professional skills.
Over the last six months, we have been celebrating the diversity of careers
and people through social media with our Compass Career Stories and announced
the launch of our UK&I Compass Academy in 2023 which will train more than
12,000 people per year in hospitality.
Leadership in Action, our Unit Manager training programme, is delivered in
local languages across 32 countries. Around 4,300 Unit Managers have attended
our programme thus far which embraces the virtual learning environment. We
have also deployed digital learning in our flagship Mapping for Value and
Mapping for Action global training programmes. The new capabilities have
enhanced our reach as we continue to reinforce our use of the Management and
Performance (MAP) framework for all Leadership Team members and Unit Managers.
We continue to invest in supporting our people's mental health and wellbeing
with programmes across the globe that include support funds, employee
counselling and Mental Health First Aiders. Through our programmes, we have
been able to help our colleagues with relatives impacted by the war in Ukraine
to access resources and funds. Many of our people have been fundraising,
volunteering and supporting families directly in their countries. We are
immensely proud of our colleagues' compassion, response and capacity to make a
difference in all our communities.
1. Annual revenue of new business wins in the last 12 months.
Business Review (continued)
Purpose
Sustainability is deeply rooted within our business, from our talented chefs and passionate operators to our inspiring leadership team. We have been leading the charge for nearly two decades, setting industry-leading animal welfare standards, removing unnecessary single-use plastics, addressing food waste and now with our 2050 Net Zero commitment. We pride ourselves on being transparent in reporting on progress in our Annual Report and through the Carbon Disclosure Project.
As the world's largest food services group, operating at the heart of the global food supply chain, we are in a unique position to influence real change while helping to create a more sustainable global food system for all. We inspire change with our day of action, Stop Food Waste Day, with delicious and innovative offerings that enable our clients and consumers to make better choices for their health and the health of our planet. Our strategic approach targets areas that have the potential to deliver the most considerable reductions in our carbon footprint over the coming decades while mitigating the impacts of climate change for the benefit of our colleagues, clients, consumers and other stakeholders.
Compass aims to reach Net Zero greenhouse gas (GHG) emissions across its global operations and value chain by 2050 and to be carbon neutral on its Scope 1 and 2 GHG emissions by 2030. Our targets over the next decade have been validated by the Science Based Targets initiative and are in line with the latest climate science deemed necessary to meet the goals of the Paris Agreement. We will achieve these goals in various ways, such as redesigning our menus, promoting plant-forward ways of eating, reducing food waste, switching to renewable electricity across our controlled operations and electrifying our fleet.
Recognising that we are just part of the solution, we work collaboratively with our partners and suppliers to create a significant impact. Collective innovation, proprietary tools, strategic partnerships and a dedicated vision will usher us into a more sustainable future.
Summary and outlook
The Group is exiting the pandemic strongly and has achieved the important
milestone of revenue exceeding its pre-COVID level on a run rate basis.
Organic growth was strong in the first half of the year as the Group benefited
from like for like volume recovery, high levels of net new business and
pricing. Underlying operating margin was in line with guidance and is expected
to improve in the second half.
While there are global inflationary pressures, which are expected to increase
and continue at a heightened level, we have a resilient business model to help
mitigate this challenge. This environment is also leading to an acceleration
in first time outsourcing as organisations seek cost savings. We have a clear
strategy to capture this growth opportunity based on our scale, expertise and
sectorised market approach. Our value creation model has proven very effective
and remains unchanged. The Group's market leading position combined with a
relevant offer and capability are resulting in record new business wins and
our highest ever client retention rate.
Given our strong first half performance and positive outlook, we are
increasing our full year organic revenue growth guidance from 20 - 25% to
around 30%. Whilst we are cautious about the inflationary environment, our
margin guidance remains unchanged, with full year underlying operating margin
expected to be over 6%, exiting the year at around 7%.
Our disciplined capital allocation framework supports growth whilst ensuring a
robust balance sheet, rewarding shareholders through dividends and additional
shareholder returns. This is demonstrated through the 9.4 pence per share
interim dividend and the share buyback programme announced today with up to
£500m during this calendar year.
Looking further ahead, we remain excited about the significant structural
growth opportunities globally, leading to the potential for revenue and profit
growth above historical rates, returning margin to pre-pandemic levels and
rewarding shareholders with further returns.
Financial Results
Group performance
The Executive Committee manages and assesses the performance of the Group
using various underlying and other Alternative Performance Measures (APMs).
These measures are not recognised under International Financial Reporting
Standards (IFRS) or other generally accepted accounting principles (GAAP) and
may not be directly comparable with alternative performance measures used by
other companies. Underlying measures reflect ongoing trading and, therefore,
facilitate meaningful year on year comparison. Management believes that the
Group's underlying and alternative performance measures, together with the
results prepared in accordance with IFRS, provide comprehensive analysis of
the Group's results. Certain of these measures are financial Key Performance
Indicators (KPIs) which measure progress against our strategy.
The Group's APMs are defined in note 12 (non-GAAP measures) and reconciled to
GAAP measures in notes 2 (segmental analysis) and 12 of the financial
statements.
2022 2021 Change
£m £m
Revenue
Underlying - reported rates(1) 11,625 8,551 35.9%
Underlying - constant currency(1) 11,625 8,442 37.7%
Organic(1) 11,588 8,401 37.9%
Statutory 11,499 8,435 36.3%
Operating profit
Underlying - reported rates(1) 673 290 132.1%
Underlying - constant currency(1) 673 287 134.5%
Organic(1) 673 285 135.8%
Statutory 638 168 279.8%
Operating margin
Underlying - reported rates(1) 5.8% 3.4% 240 bps
Basic earnings per share
Underlying - reported rates(1) 26.9p 9.6p 180.2%
Underlying - constant currency(1) 26.9p 9.5p 183.2%
Statutory 26.7p 5.6p 376.8%
Free cash flow
Underlying - reported rates(1) 360 359 0.3%
Dividend
Interim dividend per share 9.4p - n/a
1. The Group's APMs are defined in note 12 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 12 of the financial statements.
Financial Results (continued)
Segmental performance
Underlying revenue(1) Change(1)
2022 2021 Reported rates Constant currency Organic
£m £m
North America 7,657 5,160 48.4% 47.6% 47.9%
Europe 2,766 2,260 22.4% 28.3% 28.3%
Rest of World 1,202 1,131 6.3% 9.6% 9.6%
Total 11,625 8,551 35.9% 37.7% 37.9%
Underlying operating profit(1) Underlying operating margin(1)
2022 2021(2) 2022 2021(2)
£m £m £m £m
North America 535 242 7.0% 4.7%
Europe 125 32 4.5% 1.4%
Rest of World 56 53 4.7% 4.7%
Unallocated overheads (43) (37)
Total 673 290 5.8% 3.4%
1. The Group's APMs are defined in note 12 (non-GAAP measures) and
reconciled to GAAP measures in notes 2 (segmental analysis) and 12 of the
financial statements.
2. Re-presented to reflect the change in the definition of regional
operating profit to include the share of results of associates (North America:
£3m loss).
Statutory and underlying results
2022 2021
Statutory £m Adjustments £m Underlying(1)£m Statutory £m Adjustments £m Underlying(1) £m
Revenue 11,499 126 11,625 8,435 116 8,551
Operating profit 638 35 673 168 122 290
Net (loss)/gain on sale and closure of businesses (6) 6 - 14 (14) -
Net finance costs - (37) (37) (49) (7) (56)
Profit before tax 632 4 636 133 101 234
Tax expense (152) (1) (153) (33) (30) (63)
Profit for the period 480 3 483 100 71 171
Non-controlling interests (3) - (3) - - -
Attributable profit 477 3 480 100 71 171
Average number of shares 1,784m - 1,784m 1,784m - 1,784m
Basic earnings per share 26.7p 0.2p 26.9p 5.6p 4.0p 9.6p
EBITDA 1,039 670
1. The Group's APMs are defined in note 12 (non-GAAP measures) and
reconciled to GAAP measures in notes 2 (segmental analysis) and 12 of the
financial statements.
Financial Results (continued)
Statutory results
Revenue
On a statutory basis, revenue was £11,499m (2021: £8,435m), an increase of
36% as the business continued to recover from the pandemic.
Operating profit
On a statutory basis, operating profit was £638m (2021: £168m), an increase
of 280%, mainly reflecting the higher revenue. Statutory operating profit
includes non-underlying item charges of £35m (2021: £122m), including
acquisition related costs of £33m (2021: £41m). Non-underlying items in the
prior period also included COVID-19 resizing costs of £78m. A full list of
non-underlying items is included in note 12 (non-GAAP measures).
Gains and losses on sale and closure of businesses
The Group has recognised a net loss of £6m on the sale and closure of
businesses (2021: net gain of £14m), including exit costs of £3m (2021:
£1m). The net loss in the period includes the Group's exit from its
operations in Russia.
Finance costs
Net finance costs decreased to £nil (2021: £49m) mainly due to fair value
gains on unhedged derivatives held to minimise volatility in short term
underlying finance costs, the repayment of a tranche of US Private Placements
in October 2021, lower net interest expense relating to the unhedged
derivatives and termination of the covenant waivers in June 2021.
Tax charge
Profit before tax was £632m (2021: £133m) giving rise to an income tax
expense of £152m (2021: £33m), which is equivalent to an effective tax rate
of 24.1% (2021: 24.8%). The decrease in rate primarily reflects the mix of
profits by country being taxed at different rates.
Earnings per share
Basic earnings per share were 26.7 pence (2021: 5.6 pence), an increase of
377%, reflecting the higher profit for the period.
Underlying results
Revenue
In the first half, on a constant currency basis, underlying revenue was 98% of
its pre-COVID level, with Q2 marginally stronger at 99%.
Our organic revenue growth for the six months was 37.9% reflecting the lapping
of lower revenues in the first half of 2021 and benefiting from volume
recovery in 2022.
Client retention rates continued to improve at 95.8% and, encouragingly,
underlying revenue growth from new business wins was 10.3% as contracts
continue to mobilise. Net new business, when rebased to 2019, is around 4.4%,
higher than the historical levels of 3%, a key indication of positive growth
momentum.
Operating profit
Underlying operating profit increased by 135% on a constant currency basis, to £673m, and our underlying operating margin was 5.8%, which represents c.80% of our pre-COVID margin levels.
Finance costs
Underlying net finance costs decreased to £37m (2021: £56m) mainly due to
the repayment of a tranche of US Private Placements in October 2021, lower net
interest expense relating to the unhedged derivatives and termination of the
covenant waivers in June 2021.
Tax charge
On an underlying basis, the tax charge was £153m (2021: £63m), which is
equivalent to an effective tax rate of 24.0% (2021: 26.9%). The decrease in
rate primarily reflects the mix of profits by country being taxed at different
rates. The tax environment continues to be uncertain, with more challenging
tax authority audits and enquiries globally.
Earnings per share
On a constant currency basis, underlying basic earnings per share increased by
183% to 26.9 pence (2021: 9.5 pence) reflecting the higher profit for the
period.
Financial Results (continued)
Free cash flow
Free cash flow totalled £324m (2021: £233m). In the six months, we made cash
payments of £33m (2021: £126m) in relation to programmes aimed at resizing
the business. Adjusting for this, and acquisition transaction costs of £3m
which are now reported as part of operating cash flows, underlying free cash
flow was £360m (2021: £359m), with underlying free cash flow conversion at
53.5% (2021: 123.8%).
Capital expenditure of £306m (2021: £272m) is equivalent to 2.6% (2021:
3.2%) of underlying revenue.
The working capital outflow, excluding provisions and pensions, was £142m
(2021: £119m inflow). The prior period benefited from VAT and payroll tax
deferral schemes and lower bonus payments.
The net interest outflow reduced to £40m (2021: £52m) consistent with the
lower finance costs in the period.
The net tax paid was £133m (2021: £60m), which is equivalent to an
underlying cash tax rate of 20.9% (2021: 25.6%).
Acquisitions
The total cash spent on the acquisition of subsidiaries during the six months ended 31 March 2022, net of cash acquired, was £115m (2021: £34m), including £15m of deferred and contingent consideration and other payments relating to businesses acquired in previous years and £3m of acquisition transaction costs included in net cash flow from operating activities.
Disposals
The Group received £26m (2021: £1m) in respect of disposal proceeds net of
exit costs, which includes the sale of a further 17% shareholding in the
Japanese Highways business classified as an asset held for sale at 30
September 2021 and tax receipts in respect of prior year business disposals.
Financial position
Liquidity
The Group finances its operations through cash generated by the business and
borrowings from a number of sources, including banking institutions, 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 31 March 2022 shows that the average period to maturity is 3.5
years (30 September 2021: 3.7 years).
The Group has issued US Private Placement (USPP) notes which contain financial
covenants. These consist of a leverage covenant and an interest cover covenant
which are tested semi-annually at 31 March and 30 September. The leverage
covenant test stipulates that consolidated net debt must be less than or equal
to 3.5 times consolidated EBITDA. The interest cover covenant test stipulates
that consolidated EBITDA must be more than or equal to 3 times consolidated
net finance costs. Consolidated EBITDA and net finance costs are based on the
preceding 12 months. The leverage and interest cover ratios were 1.0 times and
27.0 times, respectively, at 31 March 2022. Net debt, consolidated EBITDA and
net finance costs are subject to certain accounting adjustments for the
purposes of the covenant tests.
At 31 March 2022, the Group had access to £3,317m (30 September 2021:
£3,656m) of liquidity, including £2,000m (30 September 2021: £2,000m) of
undrawn committed bank facilities and £1,317m (30 September 2021: £1,656m)
of cash, net of overdrafts. A USPP of $398m (£297m) was repaid on 1 October
2021.
Our credit ratings remain strong investment grade - Standard & Poor's
A/A-1 Long and Short term (outlook Negative) and Moody's A3/P-2 Long and Short
term (outlook Stable).
Net debt
Net debt has remained broadly consistent at £2,530m (30 September 2021:
£2,538m). The Group generated £324m of free cash flow, after investing
£306m in capital expenditure, which was offset by £106m spent on the
acquisition of subsidiaries, joint ventures and associates, net of disposal
proceeds, and the payment of the 2021 final dividend of £250m.
Post employment benefit obligations
The surplus in the Compass Group Pension Plan (UK Plan) increased to £555m
(30 September 2021: £353m) mainly reflecting an increase in the discount
rate, net of inflation, used to measure the liabilities as corporate bond
yields have increased, partly offset by a decrease in the market value of plan
assets as gilt and corporate bond yields have increased. The deficit in the
rest of the Group's defined benefit pension schemes has decreased to £195m
(30 September 2021: £224m).
Financial Results (continued)
Shareholder returns
An interim dividend of 9.4 pence per share (2021: nil) has been declared,
£168m in aggregate, which is payable
on 28 July 2022 to shareholders on the register at the close of business on 10
June 2022. The interim dividend will be paid gross and a Dividend Reinvestment
Plan (DRIP) will be available. The last date for receipt of elections for the
DRIP is 7 July 2022.
The directors have approved a share buyback programme with up to £500m during
this calendar year.
Related party transactions
Details of transactions with related parties are set out in note 10 of the
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.
Going concern
The uncertainty as to the future impact on the financial performance and cash
flows of the Group as a result of COVID-19 has been considered as part of the
Group's adoption of the going concern basis in its financial statements. The
factors considered by the directors in assessing the ability of the Group to
continue as a going concern are discussed on page 25. The Group has access to
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. Based on the assessment, the
directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least the period to 30 September
2023. For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
External audit
The last tender for the external audit was performed with respect to the audit
for financial year 2014. The Audit Committee has therefore commenced planning
for a tender process with respect to the audit for financial year 2024. This
will allow time for the transition of non-audit services ahead of any change
in auditor that may be made.
Risk
Principal risks
The Board continues to take a proactive approach to risk management with the
aim of protecting the Group's employees, clients and consumers, and
safeguarding the interests of the Company and its shareholders in what is a
constantly changing environment.
Risk management is an essential element of business governance and the Group
has risk management policies, processes and procedures in place to ensure that
risks are properly identified, evaluated and managed at the appropriate level.
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 war in Ukraine has been recognised as a new principal risk due to the
national security threat it brings to neighbouring countries in Europe and the
members of the NATO alliance. Details of the other principal risks facing the
Group and mitigating actions are included on pages 73 to 81 of the 2021 Annual
Report. A description of those risks and uncertainties is set out below. The
war in Ukraine has also resulted in the elevation of the existing risks in
respect of the economy, cost inflation, political stability and information
systems and technology.
RISK DESCRIPTION
CLIMATE CHANGE AND SUSTAINABILITY
Climate Change We recognise the impact of climate change on the environment and Compass; for
example the operational impacts of extreme weather events, supply shortages
caused by water scarcity, and transition risks, such as changes in
technologies, markets and regulation.
Social and Ethical Standards We rely on our people to deliver great service to our clients and consumers,
so we recognise that their welfare is the foundation of our culture and
business. We remain vigilant in upholding high standards of business ethics
with regard to human rights and social equality.
HEALTH AND SAFETY
Pandemic COVID-19 The Group's operations have been significantly disrupted due to the ongoing
global COVID-19 pandemic and associated containment initiatives. Further
outbreaks of the virus, or another pandemic, could cause further business
risk.
Health and Safety Compass feeds millions of consumers and employs hundreds of thousands of
people around the world every day. For that reason, setting the highest
standards for food hygiene and safety is paramount.
Health and safety breaches could cause serious business interruption and could
result in criminal and civil prosecution, increased costs and potential damage
to our reputation.
PEOPLE
Recruitment Failure to attract and recruit people with the right skills at all levels
could limit the success of the Group.
The Group faces resourcing challenges in some of its businesses in some key
positions due to a lack of industry experience amongst candidates,
appropriately qualified people, the seasonal nature of some of our businesses
and availability issues related to COVID-19.
Retention and Motivation Retaining and motivating the best people with the right skills, at all levels
of the organisation, is key to the long term success of the Group.
The current economic conditions may increase the risk of attrition at all
levels of the organisation.
Business closures resulting from lockdowns or other social distancing controls
may significantly impact the Group's workforce in affected regions.
CLIENTS AND CONSUMERS
Sales and Retention Our businesses rely on securing and retaining a diverse range of clients.
The potential loss of material client contracts in an increasingly competitive
market is a risk to our businesses.
Reduced office attendance, closure of client sites and fewer site visitors as
a result of COVID-19 may impact revenues in affected sectors.
Risk (continued)
Principal risks (continued)
RISK DESCRIPTION
CLIENTS AND CONSUMERS (CONTINUED)
Service Delivery, Contractual Compliance and Retention The Group's operating companies contract with a large number of clients.
Failure to comply with the terms of these contracts, including proper delivery
of services, could lead to the loss of business and/or claims.
Competition and Disruption We operate in a highly competitive marketplace. The levels of concentration
and outsource penetration vary by country and by sector. Some markets are
relatively concentrated with two or three key players. Others are highly
fragmented and offer significant opportunities for consolidation and
penetration of the self operated market.
Ongoing structural changes in working and education environments may reduce
the number of people in offices and educational establishments.
The emergence of new industry participants and traditional competition using
disruptive technology could adversely affect our business.
ECONOMIC AND POLITICAL ENVIRONMENT
Economy Sectors of our business could be susceptible to adverse changes in economic
conditions and employment levels.
Continued worsening of economic conditions has increased the risk to the
businesses in some jurisdictions.
The full extent of the medium to long term financial impacts of COVID-19 on
economies worldwide is, as yet, unknown.
Cost Inflation Our objective is always to deliver the right level of service in the most
efficient way. An increase in the cost of labour, for example, minimum wages
in the USA and UK, or the cost of food, could constitute a risk to our ability
to do this.
Increases in inflation continue to intensify cost pressures in some locations.
Political Stability We are a global business operating in countries and regions with diverse
economic and political conditions. Our operations and earnings may be
adversely affected by political or economic instability.
Political instability around the world remains a risk as a result of
continuing geopolitical tensions.
COMPLIANCE AND FRAUD
Compliance and Fraud Ineffective compliance management with increasingly complex laws and
regulations, or evidence of fraud, bribery and corruption, anti-competitive
behaviour or other serious misconduct, could have an adverse effect on the
Group's reputation, its performance and/or a reduction in the Company's share
price and/or a loss of business.
A failure to manage these risks could adversely impact the Group's performance
and/or reputation if significant financial penalties are levied or a criminal
action, sanction or other litigation is brought against the Company, its
directors or executive management.
Companies face increased risk of fraud, bribery and corruption,
anti-competitive behaviour and other serious misconduct both internally and
externally, due to financial and/or performance pressures and significant
changes to ways of working.
International Tax The international corporate tax environment remains complex and the sustained
increase in audit activity from tax authorities means that the potential for
tax uncertainties and disputes remains high. The need to raise public finances
to meet the cost of the COVID-19 pandemic is likely to cause governments to
consider increases in tax rates and other potentially adverse changes in tax
legislation, and to renew focus on compliance for large corporates.
Multiple initiatives to assist businesses have been introduced across tax
jurisdictions in response to the COVID-19 pandemic.
INFORMATION SYSTEMS AND TECHNOLOGY
Information Systems and Technology The digital world creates increasing risk for global businesses including, but
not limited to, technology failures, loss of confidential data and damage to
brand reputation through, for example, the increased and instantaneous use of
social media.
Disruption caused by the failure of key software applications, security
controls or underlying infrastructure could delay day to day operations and
management decision making.
The incidence of sophisticated phishing and malware attacks on businesses is
rising with an increase in the number of companies suffering operational
disruption and loss of data.
The increase in remote working has led to an increase in the risk of malware
and phishing attacks across all organisations.
Responsibility statement of the directors in respect of the half yearly
financial report
The Interim Report complies with the Disclosure Guidance and Transparency
Rules (DTR) of the United Kingdom's Financial Conduct Authority in respect of
the requirement to produce a half yearly financial report. The Interim
Management Report is the responsibility of, and has been approved by, the
directors.
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' contained in UK-endorsed
International Financial Reporting Standards (IFRSs) and gives a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Group; and
· the Interim Management Report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
The directors have permitted the auditor to undertake whatever inspections it
considers to be appropriate for the purpose of enabling the auditor to conduct
its review.
On behalf of the Board
Dominic Blakemore Palmer Brown
Group Chief Executive Officer Group Chief Financial Officer
11 May 2022
Compass Group PLC
Independent review report to Compass Group PLC
Conclusion Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
We have been engaged by the company to review the condensed set of financial approved by, the directors. The directors are responsible for preparing the
statements in the half-yearly financial report for the six months ended 31 half-yearly financial report in accordance with the DTR of the UK FCA.
March 2022 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed As disclosed in note 1, the latest annual financial statements of the Group
consolidated statement of changes in equity, the condensed consolidated were prepared in accordance with International Financial Reporting Standards
balance sheet, the condensed consolidated cash flow statement and the related adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
explanatory notes. Union and in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and the next annual financial
Based on our review, nothing has come to our attention that causes us to statements will be prepared in accordance with UK-adopted international
believe that the condensed set of financial statements in the half-yearly accounting standards. The directors are responsible for preparing the
financial report for the six months ended 31 March 2022 is not prepared, in condensed set of financial statements included in the half-yearly financial
all material respects, in accordance with IAS 34 Interim Financial Reporting report in accordance with IAS 34 as adopted for use in the UK.
as adopted for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our responsibility
Scope of review Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
We conducted our review in accordance with International Standard on Review review.
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing The purpose of our review work and to whom we owe our responsibilities
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial This report is made solely to the company in accordance with the terms of our
and accounting matters, and applying analytical and other review procedures. engagement to assist the company in meeting the requirements of the DTR of the
We read the other information contained in the half-yearly financial report UK FCA. Our review has been undertaken so that we might state to the company
and consider whether it contains any apparent misstatements or material those matters we are required to state to it in this report and for no other
inconsistencies with the information in the condensed set of financial purpose. To the fullest extent permitted by law, we do not accept or assume
statements. responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Zulfikar Walji
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
11 May 2022
Compass Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Six months ended 31 March
2022 2021(1)
Notes £m £m £m £m
Revenue 2 11,499 8,435
Net impairment (losses)/gains on trade receivables (4) 3
Other operating costs (10,879) (8,284)
Operating costs (10,883) (8,281)
Operating profit before joint ventures and associates 616 154
Share of results of joint ventures and associates 22 14
Underlying operating profit(2) 673 290
Acquisition related costs(3) (33) (41)
COVID-19 resizing costs(3) 3 - (78)
One-off pension charge(3) - (2)
Tax on share of profit of joint ventures(3) (2) (1)
Operating profit 2 638 168
Net (loss)/gain on sale and closure of businesses(3) 9 (6) 14
Financial income 4 4
Financial expense (41) (60)
Other financing items(3) 37 7
Net finance costs - (49)
Profit before tax 632 133
Income tax expense 4 (152) (33)
Profit for the period 480 100
ATTRIBUTABLE TO
Equity shareholders 477 100
Non-controlling interests 3 -
Profit for the period 480 100
BASIC EARNINGS PER SHARE 5 26.7p 5.6p
DILUTED EARNINGS PER SHARE 5 26.7p 5.6p
1. Re-presented to disaggregate net impairment gains and losses on trade
receivables from operating costs.
2. Operating profit excluding specific adjusting items (acquisition related
costs, COVID-19 resizing costs, one-off pension charge and tax on share of
profit of joint ventures) (see note 12).
3. Specific adjusting item (see note 12).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Six months ended 31 March
2022 2021
£m £m
Profit for the period 480 100
Other comprehensive income
Items that will not be reclassified to the income statement
Remeasurement of post employment benefit assets 2 -
Remeasurement of post employment benefit obligations 316 30
Return on plan assets, excluding interest income (98) (115)
Change in fair value of financial assets at fair value through other (1) 2
comprehensive income
Tax (charge)/credit on items relating to the components of other comprehensive (55) 18
income
164 (65)
Items that may be reclassified to the income statement
Currency translation differences(1) 55 (230)
Reclassification of cumulative currency translation differences on sale of 7 (24)
businesses
62 (254)
Total other comprehensive income/(loss) 226 (319)
Total comprehensive income/(loss) for the period 706 (219)
ATTRIBUTABLE TO
Equity shareholders 703 (219)
Non-controlling interests 3 -
Total comprehensive income/(loss) for the period 706 (219)
1. Includes a loss of £26m in relation to the effective portion of net
investment hedges (six months ended 31 March 2021: gain of £54m).
( )
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Attributable to equity shareholders
Share Share Capital Own Retained earnings/ (losses) Non-controlling Total
capital premium redemption shares Other interests equity
reserve reserves
£m £m £m £m £m £m £m £m
At 1 October 2021 198 189 295 (2) 3,969 242 28 4,919
Profit for the period - - - - - 477 3 480
Other comprehensive income
Remeasurement of post employment benefit assets - - - - - 2 - 2
Remeasurement of post employment benefit obligations - - - - - 316 - 316
Return on plan assets, excluding interest income - - - - - (98) - (98)
Change in fair value of financial assets at fair value through other - - - - - (1) - (1)
comprehensive income
Currency translation differences - - - - 55 - - 55
Reclassification of cumulative currency translation differences on sale of - - - - 7 - - 7
businesses
Tax charge on items relating to the components of other comprehensive income - - - - - (55) - (55)
Total other comprehensive income - - - - 62 164 - 226
Total comprehensive income for the period - - - - 62 641 3 706
Fair value of share-based payments - - - - 20 - - 20
Change in fair value of non-controlling interest put options - - - - (2) - - (2)
Reclassification of non-controlling interest put option reserve on exercise of - - - - 5 - (5) -
put options
Purchase of own shares to satisfy employee share-based payments - - - (5) - - - (5)
Release of share awards settled in existing shares purchased in the market - - - - (4) - - (4)
Transfer(1) - - - - (287) 287 - -
198 189 295 (7) 3,763 1,170 26 5,634
Dividends paid to equity shareholders (note 6) - - - - - (250) - (250)
Dividends paid to non-controlling interests - - - - - - (1) (1)
Cost of shares transferred to employees - - - 4 - - - 4
At 31 March 2022 198 189 295 (3) 3,763 920 25 5,387
1. The share-based payments reserve has been transferred to retained
earnings on the basis that it is more appropriately presented as a component
of retained earnings for equity-settled share-based payment schemes.
Own shares
Own shares held by the Group represent 245,562 ordinary shares in Compass
Group PLC (30 September 2021: 185,228) which are held by the Compass Group PLC
All Share Schemes Trust (ASST). These shares are listed on a recognised stock
exchange and their market value at 31 March 2022 was £4m (30 September 2021:
£3m). The nominal value of the shares held at 31 March 2022 was £27,135
(September 2021: £20,468). ASST is a discretionary trust for the benefit of
employees and the shares held are used to satisfy some of the Group's
liabilities to employees for long term incentive plans.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Attributable to equity shareholders
Share Share Capital Own Other Retained (losses)/ Non-controlling Total
capital premium redemption shares reserves earnings interests equity
reserve
£m £m £m £m £m £m £m £m
At 1 October 2020 198 189 295 (2) 4,145 (35) 23 4,813
Profit for the period - - - - - 100 - 100
Other comprehensive income
Remeasurement of post employment benefit obligations - - - - - 30 - 30
Return on plan assets, excluding interest income - - - - - (115) - (115)
Change in fair value of financial assets at fair value through other - - - - - 2 - 2
comprehensive income
Currency translation differences - - - - (230) - - (230)
Reclassification of cumulative currency translation differences on sale of - - - - (24) - - (24)
businesses
Tax credit on items relating to the components of other comprehensive income - - - - - 18 - 18
Total other comprehensive loss - - - - (254) (65) - (319)
Total comprehensive (loss)/income for the period - - - - (254) 35 - (219)
Fair value of share-based payments - - - - 10 - - 10
Change in fair value of non-controlling - - - - 8 - - 8
interest put options
Purchase of own shares to satisfy employee share-based payments - - - (3) - - - (3)
Release of share awards settled in existing shares purchased in the market - - - - (2) - - (2)
Tax charge on items taken directly to equity - - - - - (2) - (2)
198 189 295 (5) 3,907 (2) 23 4,605
Cost of shares transferred to employees - - - 2 - - - 2
At 31 March 2021 198 189 295 (3) 3,907 (2) 23 4,607
( )
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2022
At 31 March At 30 September
2022 2021
(unaudited) (audited)
Notes £m £m
NON-CURRENT ASSETS
Goodwill 4,620 4,550
Other intangible assets 1,688 1,617
Costs to obtain and fulfil contracts 943 923
Right of use assets 743 759
Property, plant and equipment 840 835
Interests in joint ventures and associates 252 256
Other investments 199 166
Post employment benefit assets 555 353
Trade and other receivables 144 129
Deferred tax assets 212 212
Derivative financial instruments(1) 52 116
Non-current assets 10,248 9,916
CURRENT ASSETS
Inventories 389 327
Trade and other receivables 2,978 2,684
Tax recoverable 78 82
Cash and cash equivalents(1) 1,480 1,840
Derivative financial instruments(1) 38 2
4,963 4,935
Assets held for sale 9 26 17
Current assets 4,989 4,952
Total assets 15,237 14,868
CURRENT LIABILITIES
Borrowings(1) (592) (481)
Lease liabilities(1) (179) (180)
Derivative financial instruments(1) (11) (9)
Provisions (297) (298)
Current tax liabilities (198) (169)
Trade and other payables (4,356) (4,090)
Current liabilities (5,633) (5,227)
NON-CURRENT LIABILITIES
Borrowings(1) (2,611) (3,154)
Lease liabilities(1) (648) (665)
Derivative financial instruments(1) (59) (7)
Post employment benefit obligations (195) (224)
Provisions (304) (283)
Deferred tax liabilities (140) (84)
Trade and other payables (260) (305)
Non-current liabilities (4,217) (4,722)
Total liabilities (9,850) (9,949)
Net assets 5,387 4,919
EQUITY
Share capital 198 198
Share premium 189 189
Capital redemption reserve 295 295
Own shares (3) (2)
Other reserves 3,763 3,969
Retained earnings 920 242
Total equity shareholders' funds 5,362 4,891
Non-controlling interests 25 28
Total equity 5,387 4,919
1. Component of net debt (see note 12).
(
)
( )
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Six months ended 31 March
2022 2021(1)
Notes £m £m
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations 7 839 677
Interest paid (43) (54)
Tax received 12 25
Tax paid (145) (85)
Net cash flow from operating activities 663 563
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of subsidiary companies 9 (112) (34)
Purchase of interests in joint ventures and associates (20) (3)
Net proceeds from sale of subsidiary companies, joint ventures and associates 26 1
net of exit costs(2)
Purchase of intangible assets (65) (78)
Purchase of contract fulfilment assets (96) (97)
Purchase of property, plant and equipment (125) (97)
Proceeds from sale of property, plant and equipment/intangible assets/contract 15 16
fulfilment assets
Purchase of other investments (17) -
Proceeds from sale of other investments 1 2
Dividends received from joint ventures and associates 19 2
Interest received 3 2
Net cash flow from investing activities (371) (286)
CASH FLOW FROM FINANCING ACTIVITIES
Purchase of own shares to satisfy employee share-based payments (5) (3)
Increase in borrowings 1 -
Repayment of borrowings (297) (4)
Net cash flow from derivative financial instruments (20) 5
Repayment of principal under lease liabilities (73) (80)
Dividends paid to equity shareholders 6 (250) -
Dividends paid to non-controlling interests (1) -
Net cash flow from financing activities (645) (82)
CASH AND CASH EQUIVALENTS
Net (decrease)/increase in cash and cash equivalents (353) 195
Cash and cash equivalents at 1 October 1,656 1,388
Currency translation gains/(losses) on cash and cash equivalents 14 (44)
Cash and cash equivalents at 31 March 1,317 1,539
Cash and cash equivalents(3) 1,480 1,674
Bank overdrafts(3) (163) (137)
Cash held for sale(3) - 2
Cash and cash equivalents at 31 March 1,317 1,539
1. Consistent with the change made in the 2021
Annual Report, re-presented to include all bank overdrafts of £137m at 31
March 2021 (30 September 2020: £97m) in cash and cash equivalents and to
disaggregate cash flows from borrowings and derivative financial instruments
in the consolidated cash flow statement. Accordingly, the prior period
increase in borrowings has reduced from £68m to £nil, the prior period
repayment of borrowings has increased from £nil to £4m and a net cash inflow
from derivative financial instruments of £5m has been included. The effect of
including bank overdrafts in cash and cash equivalents in the prior period is
not considered to be material. The change in presentation has no effect on
cash and cash equivalents in the consolidated balance sheet or net cash flow
from operating activities in the consolidated cash flow statement.
2. Includes £15m of tax receipts (six months
ended 31 March 2021: £29m of tax payments) in respect of prior year business
disposals.
3. As per the consolidated balance sheet.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
1 BASIS OF PREPARATION, JUDGEMENTS AND ESTIMATES
The unaudited condensed consolidated financial statements for the six months
ended 31 March 2022 have been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted for
use in the UK.
The annual financial statements of the Group for the year ending 30 September
2022 will be prepared in accordance with UK-adopted international accounting
standards. As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of financial statements has
been prepared applying the accounting policies and presentation that were
applied in the preparation of the Company's published consolidated financial
statements for the year ended 30 September 2021 which were prepared in
accordance with International Financial Reporting Standards (IFRSs) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
('IFRSs as adopted by the EU') and in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006.
The unaudited condensed consolidated financial statements for the six months
ended 31 March 2022, which were approved by the Board on 11 May 2022, and the
comparative information in relation to the half year ended 31 March 2021, do
not comprise statutory accounts for the purpose of Section 434 of the
Companies Act 2006 and should be read in conjunction with the Annual Report
for the year ended 30 September 2021. Those accounts have been reported on by
the Group's auditor and delivered to the Registrar of Companies. The report of
the auditor was unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying its
report and did not contain statements under Section 498 (2) or (3) of the
Companies Act 2006.
Going concern
The interim consolidated financial statements are prepared on a going concern
basis which the directors believe to be appropriate for the reasons stated
below.
At 31 March 2022, the Group's financing arrangements included sterling and
euro bonds (£2,234m) and US dollar US Private Placements (USPP) (£803m). In
addition, the Group had Revolving Credit Facilities of £2,000m (£140m
committed to August 2024 and £1,860m committed to August 2026), which were
fully undrawn, and £1,317m of cash, net of overdrafts. At the date of
approving these interim consolidated financial statements, the liquidity
position of the Group has remained substantially unchanged.
A USPP of $398m (£297m) was repaid on 1 October 2021 and a Eurobond of
€500m (£427m) will mature on 27 January 2023. There are no other debt
maturities in the 18 months to 30 September 2023, with the next maturity on 2
October 2023, a $352m (£269m) USPP.
The USPP debt is subject to leverage and interest cover covenants which are
tested on 31 March and 30 September each year. The Group met both covenants at
31 March 2022. The Group's other financing arrangements do not contain any
financial covenants.
For the purposes of the going concern assessment, the directors have prepared
monthly cash flow projections for the period to 30 September 2023 (the
assessment period). Whilst the extent of the impact of COVID-19 has lessened
as volumes have continued to increase during the period, it continues to
impact our business. We consider 18 months to be a reasonable period for the
going concern assessment and it enables us to consider the potential impact of
the pandemic over an extended period.
The cash flow projections show that the Group has significant headroom against
its committed facilities and meets its financial covenant obligations under
the USPP debt agreements without any refinancing.
In addition to the impact of a potential resurgence of COVID-19, the Group is
exposed to inflation, supply chain disruption and labour shortages caused by
macroeconomic and geopolitical factors. Accordingly, the Group has performed a
stress test against the base case to determine the performance level that
would result in a reduction in headroom against its committed facilities to
nil or a breach of its covenants. The leverage covenant would be breached in
the event that underlying revenue reduced to approximately 55% of 2019 levels.
The directors do not consider this scenario to be likely given the Group's
ability to continue in operation throughout the COVID-19 pandemic (underlying
revenue reduced to 77% of 2019 levels during the year ended 30 September
2021), its recovery in underlying revenue in the first half of the year to 98%
of 2019 levels and the potential for future revenue and profit growth above
historical rates. The stress test assumes no share buyback or new acquisitions
and disposals as mitigating actions. Other mitigating actions available to the
Group include reductions in discretionary capital expenditure and ceasing
dividend payments.
Consequently, the directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least the
period to 30 September 2023 and, therefore, have prepared the interim
consolidated financial statements on a going concern basis.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
1 BASIS OF PREPARATION, JUDGEMENTS AND ESTIMATES (CONTINUED)
New accounting pronouncements to be adopted
There are a number of changes to accounting standards, effective in future
periods, which are not expected to significantly impact the Group's
consolidated results or financial position.
Accounting judgements
There are no judgements that management considers to be critical in the
preparation of these financial statements.
There is a significant judgement in respect of the classification of cash
payments relating to contract fulfilment assets in the cash flow statement.
Contract fulfilment assets originate when payments are made, normally up front
at the start of the client contract, that provide enhanced resources to the
Group over the contract term. The Group classifies additions to contract
fulfilment assets as investing activities in accordance with IAS 7 'Statement
of Cash Flows' as they arise from cash payments in relation to assets that
will generate long term economic benefits.
Estimation uncertainty
Major sources of estimation uncertainty
The Group's major sources of estimation uncertainty are in relation to
goodwill and post employment benefits on the basis that a reasonably possible
change in key assumptions could have a material effect on the carrying amounts
of assets and liabilities in the next 12 months.
- Goodwill
The Group tests at least annually whether goodwill has suffered any impairment
in accordance with IAS 36 'Impairment of Assets'. The recoverable amounts of
the Group's cash-generating units (CGU) are determined based on value in use
calculations which require the use of estimates and assumptions consistent
with the most up-to-date budgets and plans that have been formally approved by
management. The key assumptions used for the value in use calculations and
sensitivity analysis are set out in note 8 of the 2021 Annual Report. No
indicators that the Group's goodwill may be impaired were identified during
the six months ended 31 March 2022.
- Post employment benefits
The Group's defined benefit pension schemes and similar arrangements are
assessed half-yearly in accordance with IAS 19 'Employee Benefits'. The
present value of the defined benefit liabilities is based on assumptions
determined with independent actuarial advice. The size of the net
surplus/deficit is sensitive to the market value of the assets held by the
schemes and to actuarial assumptions, including discount rates, inflation,
pension and salary increases, and mortality and other demographic assumptions.
The Group's net post employment benefit asset has increased by £231m to
£360m at 31 March 2022 mainly reflecting the remeasurement of obligations
driven by an increase in the discount rates used to measure the actuarial
liabilities of the schemes.
Other sources of estimation uncertainty
In addition to the major sources of estimation uncertainty, management has
identified other sources of estimation uncertainty which are summarised below.
These are not considered to be major sources of uncertainty as defined by IAS
1 'Presentation of Financial Statements'.
- Taxes
The Group has operations in 44 countries that are subject to direct and
indirect taxes. The tax position is often not agreed with tax authorities
until sometime after the relevant period end and, if subject to a tax audit,
may be open for an extended period. In these circumstances, the recognition of
tax liabilities and assets requires management estimation to reflect a variety
of factors, including the status of any ongoing tax audits, historical
experience, interpretations of tax law and the likelihood of settlement.
In addition, calculation and recognition of temporary differences giving rise
to deferred tax assets requires estimates and judgements to be made on the
extent to which future taxable profits are available against which these
temporary differences can be utilised.
- COVID-19
Whilst the extent of the impact of COVID-19 has lessened as volumes have
continued to increase during the period, it continues to impact our business
and, therefore, there is additional uncertainty when determining appropriate
assumptions in respect of the recoverability of contract related non-current
assets, the impairment of trade receivables and the requirement for contract
loss provisions in the consolidated financial statements at 31 March 2022. The
recoverability of contract related non-current assets is assessed where there
are indicators of impairment based on forecasts of cash flows over the
remaining life of the contracts. The impairment of trade receivables is based
on assumptions in respect of future expected credit loss rates. The
requirement for provisions which reflect the unavoidable costs arising from
certain contracts is assessed based on the expected costs and the timing of
future cash flows which are dependent on future events and market conditions.
No significant charges were recognised in respect of the impairment of
contract related non-current assets and trade receivables or in relation to
contract loss provisions during the six months ended 31 March 2022.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
1 BASIS OF PREPARATION, JUDGEMENTS AND ESTIMATES (CONTINUED)
- Impact of the war in Ukraine
In March, the Group exited the Russian market in response to the war in
Ukraine, with the disposal of the business completing during the period. As
noted in the principal risks section on page 15, the war in Ukraine has been
recognised as a new principal risk and has also resulted in the elevation of
the existing risks in respect of the economy, cost inflation, political
stability and information systems and technology. The Group has considered the
impact of the war in Ukraine on the reported amounts in the financial
statements, in particular the exacerbation of global inflationary pressures in
its assessment of the carrying value of goodwill, contract related non-current
assets and trade receivables, and on the cash flow projections used for the
purposes of the going concern assessment.
2 SEGMENTAL ANALYSIS
The management of the Group's operations, excluding Central activities, is
organised within three segments: North America, Europe and our Rest of World
markets.
Geographical segments
REVENUE(1,2) North America Rest of World
£m Europe £m Total
£m £m
SIX MONTHS ENDED 31 MARCH 2022
Business & Industry 1,953 1,209 402 3,564
Education 1,923 469 75 2,467
Healthcare & Senior Living 2,511 488 190 3,189
Sports & Leisure 1,157 276 37 1,470
Defence, Offshore & Remote 113 324 498 935
Underlying revenue(3,4) 7,657 2,766 1,202 11,625
Less: Share of revenue of joint ventures (7) (119) - (126)
Revenue 7,650 2,647 1,202 11,499
SIX MONTHS ENDED 31 MARCH 2021
Business & Industry 1,295 1,034 365 2,694
Education 1,230 360 65 1,655
Healthcare & Senior Living 2,271 461 196 2,928
Sports & Leisure 264 106 22 392
Defence, Offshore & Remote 100 299 483 882
Underlying revenue(3,4) 5,160 2,260 1,131 8,551
Less: Share of revenue of joint ventures (10) (106) - (116)
Revenue 5,150 2,154 1,131 8,435
1. There is no inter-segment trading.
2. An analysis of revenue recognised over time and at a point in time is not
provided on the basis that the nature, amount, timing and uncertainty of
revenue and cash flows is considered to be similar.
3. Revenue plus share of revenue of joint ventures.
4. Underlying revenue arising in the UK, the Group's country of domicile, was
£905m (six months ended 31 March 2021: £659m). Underlying revenue arising in
the US region was £7,276m (six months ended 31 March 2021: £4,873m).
Underlying revenue arising in all countries outside the UK from which the
Group derives revenue was £10,720m (six months ended 31 March 2021:
£7,892m).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
2 SEGMENTAL ANALYSIS (CONTINUED)
Geographical segments
PROFIT North America Rest of World Central activities
£m Europe £m £m Total
£m £m
SIX MONTHS ENDED 31 MARCH 2022
Underlying operating profit/(loss) before results of joint ventures and 533 103 56 (43) 649
associates
Add: Share of profit before tax of joint ventures - 15 - - 15
Add: Share of profit of associates 2 7 - - 9
Underlying operating profit/(loss)(1) 535 125 56 (43) 673
Less: Acquisition related costs (26) (5) (2) - (33)
Less: Tax on share of profit of joint ventures - (2) - - (2)
Operating profit/(loss) 509 118 54 (43) 638
Net loss on sale and closure of businesses (6)
Net finance costs -
Profit before tax 632
Income tax expense (152)
Profit for the period 480
1. Operating profit excluding specific adjusting items (acquisition related
costs, COVID-19 resizing costs, one-off pension charge and tax on share of
profit of joint ventures) (see note 12).
Geographical segments
PROFIT North America Rest of World Central activities
£m Europe £m £m Total
£m £m
SIX MONTHS ENDED 31 MARCH 2021
Underlying operating profit/(loss) before results of joint ventures and 243 16 53 (37) 275
associates
Add: Share of profit before tax of joint ventures 2 16 - - 18
Add: Share of loss of associates (3) - - - (3)
Underlying operating profit/(loss)(1) 242 32 53 (37) 290
Less: Acquisition related costs (23) (15) (1) (2) (41)
Less: COVID-19 resizing costs - (74) (2) (2) (78)
Less: One-off pension charge - - - (2) (2)
Less: Tax on share of profit of joint ventures (1) - - - (1)
Operating profit/(loss) 218 (57) 50 (43) 168
Net gain on sale and closure of businesses 14
Net finance costs (49)
Profit before tax 133
Income tax expense (33)
Profit for the period 100
1. Operating profit excluding specific adjusting items (acquisition related
costs, COVID-19 resizing costs, one-off pension charge and tax on share of
profit of joint ventures) (see note 12).
3 OPERATING COSTS
COVID-19 resizing costs
When the pandemic began in March 2020, the Group started to adjust its
business model to the new trading environment and incurred £122m of resizing
costs in the year ended 30 September 2020. A further charge for costs of
£157m was recognised in the year ended 30 September 2021, including £78m in
the first half. These costs are excluded from the Group's underlying results
(see note 12). No COVID-19 resizing costs were recognised during the six
months ended 31 March 2022. A total of £33m (six months ended 31 March 2021:
£126m) has been paid during the period in relation to programmes aimed at
resizing the business.
Government grants and other COVID-19 assistance
During the six months ended 31 March 2022, the Group continued to utilise
government support to mitigate the impact of the COVID-19 pandemic where
appropriate and recognised £35m (six months ended 31 March 2021: £119m) in
respect of temporary support schemes.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
4 TAX
RECOGNISED IN THE CONDENSED CONSOLIDATED INCOME STATEMENT: Six months ended 31 March
INCOME TAX EXPENSE
2022 2021
£m £m
CURRENT TAX
Current period 165 79
Adjustment in respect of prior years (11) (6)
Current tax expense 154 73
DEFERRED TAX
Current period (2) (40)
Deferred tax credit (2) (40)
TOTAL INCOME TAX
Income tax expense 152 33
The UK government enacted an increase in the UK corporation tax rate from 19%
to 25% with effect from 1 April 2023. This change was reflected in the
measurement of deferred tax balances at 30 September 2021.
The increasingly complex international corporate tax environment and an
increase in audit activity from tax authorities means that the potential for
tax uncertainties has increased.
In September 2021, Compass Group Canada Limited and Canteen of Canada Limited
received assessments to additional federal and provincial taxes from the
Canadian Revenue Agency for the year ended 30 September 2015 totalling £66m
(£50m of tax and £16m of interest). This assessment relates to an
intra-group financing arrangement implemented in July 2015. The possibility of
further assessments cannot be ruled out and, in light of this, we have taken
further external advice and have reassessed the provision we hold in respect
of this issue. A range of possible outcomes has been considered and we do not
expect this issue to have a material impact on the Group's financial position.
In March 2022, HM Revenue & Customs (HMRC), the UK tax authority,
indicated that it may seek to challenge aspects of an intra-group refinancing
undertaken in 2013. The challenge relates to the deductibility of interest for
UK corporation tax purposes for the period from June 2013 to December 2016 on
certain loans which formed part of that refinancing. We are expecting further
information in writing from HMRC and, over the next few months, it is likely
that HMRC will decide whether or not to formally challenge the arrangement. We
have calculated our maximum potential liability to be £65m of tax and £12m
of interest. Our current assessment is that no provision is required.
The Group is currently subject to a number of other reviews and audits in
jurisdictions around the world that primarily relate to complex corporate tax
issues. None of these audits is currently expected to have a material impact
on the Group's financial position.
We continue to engage with tax authorities and other regulatory bodies on
payroll and sales tax reviews, and compliance with labour laws and
regulations. The federal tax authorities in Brazil have issued a number of
notices of deficiency relating primarily to the PIS/COFINS treatment of
certain food costs and the corporate income tax treatment of goodwill
deductions which we have formally objected to and which are now proceeding
through the appeals process. At 31 March 2022, the total amount assessed in
respect of these matters is £58m (30 September 2021: £40m). The possibility
of further assessments cannot be ruled out and the judicial process is likely
to take a number of years to conclude. Based on the opinion of our local legal
advisors, we do not currently consider it likely that we will have to settle a
liability with respect to these matters and, on this basis, no provision has
been recorded.
Most of the Group's tax losses and other temporary differences recognised as
deferred tax assets do not have an expiry date. The recognition of net
deferred tax assets is based on the most recent financial budgets and
forecasts approved by management.
Deferred tax assets have not been recognised in respect of tax losses of
£275m (30 September 2021: £267m) and other temporary differences of £21m
(30 September 2021: £21m). These deferred tax assets have not been recognised
as the timing of recovery is uncertain.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
5 EARNINGS PER SHARE
The calculation of earnings per share is based on profit for the period
attributable to equity shareholders and the weighted average number of shares
in issue during the period.
Six months ended 31 March
PROFIT FOR THE PERIOD ATTRIBUTABLE TO EQUITY SHAREHOLDERS 2022 2021
£m £m
Profit for the period attributable to equity shareholders 477 100
Six months ended 31 March
2022 2021
AVERAGE NUMBER OF SHARES Ordinary Ordinary
shares of shares of
11(1/20)p each 11(1/20)p each
millions millions
Average number of shares for basic earnings per share 1,784 1,784
Dilutive share options - -
Average number of shares for diluted earnings per share 1,784 1,784
Six months ended 31 March
EARNINGS PER SHARE 2022 2021
pence pence
Basic 26.7p 5.6p
Diluted 26.7p 5.6p
Underlying earnings per share for the six months ended 31 March 2022 was 26.9p
(six months ended 31 March 2021: 9.6p). Underlying earnings per share is
calculated based on earnings excluding the effect of acquisition related
costs, COVID-19 resizing costs, one-off pension charge, gains and losses on
sale and closure of businesses and other financing items, including hedge
accounting ineffectiveness and change in the fair value of investments,
together with the tax attributable to these amounts (see note 12).
6 DIVIDENDS
The interim dividend of 9.4 pence per share (2021: nil), £168m in
aggregate(1), is payable on 28 July 2022 to shareholders on the register at
the close of business on 10 June 2022. The dividend was approved by the Board
after the balance sheet date and, therefore, it has not been reflected as a
liability in the interim financial statements.
Six months ended 31 March 2022 Six months ended 31 March 2021
DIVIDENDS ON ORDINARY SHARES Dividends £m Dividends £m
per share per share
pence pence
Amounts recognised as distributions to equity shareholders during the period:
Final 2021 14.0p 250 - -
Total 14.0p 250 - -
1. Based on the number of ordinary shares, excluding treasury shares, in
issue at 31 March 2022 (1,784,277,563 shares).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
7 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS
Six months ended 31 March
RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS 2022 2021
£m £m
Operating profit before joint ventures and associates 616 154
Adjustments for:
Acquisition related costs(1) 30 41
COVID-19 resizing costs - 78
One-off pension charge - 2
Amortisation of other intangible assets 44 48
Amortisation of contract fulfilment assets 99 96
Amortisation of contract prepayments 18 13
Depreciation of right of use assets 76 83
Depreciation of property, plant and equipment 129 127
Unwind of costs to obtain contracts 8 8
Impairment losses - contract related non-current assets 1 13
Impairment reversals - contract related non-current assets (1) -
(Gain)/loss on disposal of property, plant and equipment/intangible (5) 16
assets/contract fulfilment assets
Other non-cash changes (1) (3)
Decrease in provisions (2) (99)
Investment in contract prepayments (35) (16)
Increase in costs to obtain contracts(2) (12) (8)
Post employment benefit obligations net of service costs (4) (5)
Share-based payments - charged to profit 20 10
Operating cash flow before movement in working capital 981 558
(Increase)/decrease in inventories (54) 11
(Increase)/decrease in receivables (258) 3
Increase in payables 170 105
Cash generated from operations 839 677
1. The adjustment for acquisition related costs excludes acquisition
transaction costs of £3m and, therefore, acquisition transaction costs are
included in cash flows from operating activities. In the prior period,
acquisition transaction costs of £8m were included in cash flows from
investing activities.
2. Cash payments in respect of contract balances are classified as cash
flows from operating activities, with the exception of contract fulfilment
assets which are classified as cash flows from investing activities as they
arise from cash payments in relation to assets that will generate long term
economic benefits. During the six months ended 31 March 2022, purchase of
contract fulfilment assets in cash flows from investing activities is £96m
(six months ended 31 March 2021: £97m).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
8 FINANCIAL INSTRUMENTS
Financial instruments measured at amortised cost
The carrying amounts of the following financial instruments measured at
amortised cost approximate to their fair values: trade and other receivables;
cash and cash equivalents (excluding money market funds); lease liabilities;
provisions; and trade and other payables. Borrowings are measured at amortised
cost unless they are part of a fair value hedge, in which case amortised cost
is adjusted for the fair value attributable to the risk being hedged. The
carrying amount of borrowings at 31 March 2022 is £3,203m (30 September 2021:
£3,635m). The fair value of borrowings at 31 March 2022, calculated by
discounting future cash flows to net present values at current market rates
for similar financial instruments, is £3,265m (30 September 2021: £3,728m).
Financial instruments measured at fair value
The fair value of a financial instrument is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the balance sheet date.
The fair value measurement hierarchy is as follows:
· Level 1: Quoted prices (unadjusted) in active markets for identical assets
or liabilities
· Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
· Level 3: Inputs for the asset or liability that are not based on observable
market data (i.e. unobservable inputs)
There were no transfers of financial instruments between levels of the fair
value hierarchy in either the six months ended 31 March 2022 or 2021. The
carrying amounts of financial instruments measured at fair value are shown in
the table below:
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE At 31 At 30 September 2021
March
2022
Level £'m £'m
Non-current
Other investments(1) 1 11 18
Life insurance policies and mutual fund investments(1) 2 87 72
Derivative financial instruments - assets 2 52 116
Derivative financial instruments - liabilities 2 (59) (7)
Trade investments(1) 3 101 76
Contingent consideration(2) 3 (4) (63)
Non-controlling interest put options(2) 3 (31) (30)
Current
Money market funds(3) 1 402 506
Derivative financial instruments - assets 2 38 2
Derivative financial instruments - liabilities 2 (11) (9)
Contingent consideration(2) 3 (68) (7)
Non-controlling interest put options(2) 3 - (8)
1. Classified as other investments in the consolidated balance sheet.
2. Classified as trade and other payables in the consolidated balance sheet.
3. Classified as cash and cash equivalents in the consolidated balance sheet
on the basis that they have a maturity of three months or less from the date
of acquisition.
Due to the variability of the valuation factors, the fair values presented at
31 March 2022 may not be indicative of the amounts the Group would expect to
realise in the current market environment. The fair values of financial
instruments at levels 2 and 3 of the fair value hierarchy have been determined
based on the valuation methodologies listed below:
- Level 2
Life insurance policies Cash surrender values provided by third party
insurance providers.
Mutual fund investments Unit trust values provided by third party fund
managers.
Derivative financial instruments Present values determined from future cash
flows discounted at rates derived from market sourced data. The fair values of
derivative financial instruments represent the maximum credit exposure.
- Level 3
Trade investments (primarily a 19% effective interest in Wildlife Holdings,
Inc.) Estimated value using a weighted income and market value approach, with
the income approach based on discounted cash flow projections and the market
value approach on revenue and earnings multiples.
Contingent consideration Estimated amounts payable based on the likelihood of
specified future conditions, such as earnings targets, being met.
Non-controlling interest put options Estimated amounts payable based on the
likelihood of options being exercised by minority shareholders.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
9 ACQUISITION, SALE AND CLOSURE OF BUSINESSES
Acquisition of businesses
The total cash spent on the acquisition of subsidiaries during the six months
ended 31 March 2022, net of cash acquired, was £115m (six months ended 31
March 2021: £34m), including £15m of deferred and contingent consideration
and other payments relating to businesses acquired in previous years and £3m
of acquisition transaction costs included in net cash flow from operating
activities.
There were no individually material acquisitions during the period. A summary
of acquisitions completed during the period is presented in aggregate below:
Six months ended
31 March 2022
Book Fair
value
value
£m
£m
NET ASSETS ACQUIRED
Goodwill - 37
Other intangible assets 16 71
Right of use assets 6 6
Property, plant and equipment 4 4
Inventories 3 3
Trade and other receivables 5 5
Cash and cash equivalents 4 4
Lease liabilities (6) (6)
Provisions (1) (1)
Trade and other payables (9) (9)
Fair value of net assets acquired 114
SATISFIED BY
Cash consideration paid 101
Deferred and contingent consideration payable 13
Total consideration 114
CASH FLOW
Cash consideration 101
Less: Cash acquired (4)
Acquisition transaction costs(1) 3
Net cash outflow arising on acquisition 100
Deferred and contingent consideration and other payments relating to 15
businesses acquired in previous years
Total cash outflow from purchase of subsidiary companies 115
CONSOLIDATED CASH FLOW STATEMENT
Net cash flow from operating activities(1) 3
Net cash flow from investing activities 112
Total cash outflow from purchase of subsidiary companies 115
1. Acquisition transaction costs are included in net cash flow from
operating activities. In the prior period, they were included in net cash flow
from investing activities.
Goodwill increased from £4,550m at 30 September 2021 to £4,620m at 31 March
2022 reflecting business acquisitions (£37m) and exchange translation
(£37m), partially offset by business disposals (£4m).
The fair value adjustments made in respect of acquisitions in the six months
ended 31 March 2022 are provisional and will be finalised within 12 months of
the acquisition date, principally in relation to the valuation of contracts
acquired.
The acquisitions did not have a material impact on the Group's revenue or
profit in the period.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
9 ACQUISITION, SALE AND CLOSURE OF BUSINESSES (CONTINUED)
Sale and closure of businesses
The Group has recognised a net loss of £6m on the sale and closure of
businesses (six months ended 31 March 2021: net gain of £14m), including exit
costs of £3m (six months ended 31 March 2021: £1m). Activity in the period
includes the sale of a further 17% shareholding in Highways Royal Co., Limited
(Japanese Highways) and the Group's exit from its operations in Russia.
The Group's balance sheet includes assets held for sale of £26m (30 September
2021: £17m) which represent a 28% shareholding in Japanese Highways which it
has agreed to sell. The disposal is expected to complete during the next 12
months.
10 RELATED PARTY TRANSACTIONS
Full details of the Group's related party relationships, transactions and
balances are provided in the Group's financial statements for the year ended
30 September 2021. There have been no material changes in these relationships
during the six months ended 31 March 2022 or up to the date of this
announcement. Transactions with related parties have not had, and are not
expected to have, a material effect on the financial performance or position
of the Group.
11 POST BALANCE SHEET EVENTS
With the exception of the proposed dividend (see note 6) and share buyback,
there are no material post balance sheet events.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES
Introduction
The Executive Committee manages and assesses the performance of the Group
using various underlying and other Alternative Performance Measures (APMs).
These measures are not recognised under International Financial Reporting
Standards (IFRS) or other generally accepted accounting principles (GAAP) and
may not be directly comparable with alternative performance measures used by
other companies. Underlying measures reflect ongoing trading and, therefore,
facilitate meaningful year on year comparison. Management believes that the
Group's underlying and alternative performance measures, together with the
results prepared in accordance with IFRS, provide comprehensive analysis of
the Group's results. Certain of these measures are financial Key Performance
Indicators (KPIs) which measure progress against our strategy.
In determining the adjustments to arrive at underlying results, we use a set
of established principles relating to the nature and materiality of individual
items or groups of items, including, for example, events which: (i) are
outside the normal course of business; (ii) are incurred in a pattern that is
unrelated to the trends in the underlying financial performance of our ongoing
business; or (iii) are related to business acquisitions or disposals as they
are not part of the Group's ongoing trading business and the associated cost
impact arises from the transaction rather than from the continuing business.
Definitions
Measure Definition Purpose
INCOME STATEMENT
Underlying revenue Revenue plus share of revenue of joint ventures. Allows management to monitor the sales performance of the Group's subsidiaries
and joint ventures.
Underlying operating profit Operating profit excluding specific adjusting items(2). Provides a measure of Group operating profitability that is comparable over
time.
Underlying operating margin(1) Underlying operating profit divided by underlying revenue. An important measure of the efficiency of our operations in delivering great
food and support services to our clients and consumers.
Organic revenue(1) Current year: Underlying revenue excluding businesses acquired, sold and Embodies our success in growing and retaining our customer base, as well as
closed in the year. Prior year: Underlying revenue including a proforma 12 our ability to drive volumes in our existing business and maintain appropriate
months in respect of businesses acquired in the year and excluding businesses pricing levels in light of input cost inflation.
sold and closed in the year translated at current year exchange rates. Where
applicable, a 53rd week is excluded from the current or prior year.
Organic operating profit Current year: Underlying operating profit excluding businesses acquired, sold Provides a measure of Group operating profitability that is comparable over
and closed in the year. Prior year: Underlying operating profit including a time.
proforma 12 months in respect of businesses acquired in the year and excluding
businesses sold and closed in the year translated at current year exchange
rates. Where applicable, a 53rd week is excluded from the current or prior
year.
Underlying net finance costs Net finance costs excluding specific adjusting items(2). Provides a measure of the Group's cost of financing excluding items outside of
the control of management, such as hedge accounting ineffectiveness and change
in the fair value of investments.
Underlying profit before tax Profit before tax excluding specific adjusting items(2). Provides a measure of profitability that is comparable over time.
Underlying income tax expense Income tax expense excluding tax attributable to specific adjusting items(2). Provides a measure of income tax expense that is comparable over time.
Underlying effective tax rate Underlying income tax expense divided by underlying profit before tax. Provides a measure of the effective tax rate that is comparable over time.
Underlying profit for the year Profit for the year excluding specific adjusting items(2) and tax attributable Provides a measure of profitability that is comparable over time.
to those items.
Underlying earnings per share(1) Earnings per share excluding specific adjusting items(2) and tax attributable Measures the performance of the Group in delivering value to shareholders.
to those items.
Net operating profit after tax (NOPAT) Underlying operating profit excluding the operating profit of non-controlling Provides a measure of Group operating profitability that is comparable over
interests, net of tax at the underlying effective tax rate. time.
Underlying EBITDA Underlying operating profit excluding underlying impairment, depreciation and Provides a measure of Group operating profitability that is comparable over
amortisation of intangible assets, tangible assets and contract related time.
assets.
1. Key Performance Indicator.
2. Specific adjusting items are acquisition related costs, COVID-19 resizing
costs, one-off pension charge, tax on share of profit of joint ventures, gains
and losses on sale and closure of businesses and other financing items,
including hedge accounting ineffectiveness and change in the fair value of
investments.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES (CONTINUED)
Definitions (continued)
Measure Definition Purpose
BALANCE SHEET
Net debt Bank overdrafts, bank and other borrowings, lease liabilities and derivative Allows management to monitor the indebtedness of the Group.
financial instruments, less cash and cash equivalents.
Net debt to EBITDA Net debt divided by underlying EBITDA. Provides a measure of the Group's ability to finance and repay its debt from
its operations.
CASH FLOW
Capital expenditure Purchase of intangible assets, purchase of contract fulfilment assets, Provides a measure of expenditure on long term intangible, tangible and
purchase of property, plant and equipment and investment in contract contract related assets, net of the proceeds from disposal of intangible,
prepayments, less proceeds from sale of property, plant and tangible and contract related assets.
equipment/intangible assets/contract fulfilment assets.
Underlying operating cash flow Net cash flow from operating activities, including purchase of intangible Measures the success of the Group in turning profit into cash through the
assets, purchase of contract fulfilment assets, purchase of property, plant management of working capital and capital expenditure.
and equipment, proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets, repayment of principal under lease
liabilities and share of results of joint ventures and associates, and
excluding interest and net tax paid, post employment benefit obligations net
of service costs, cash payments related to cost action programme and COVID-19
resizing costs and acquisition transaction costs.
Underlying operating cash flow conversion Underlying operating cash flow divided by underlying operating profit. Measures the success of the Group in turning profit into cash through the
management of working capital and capital expenditure.
Free cash flow Net cash flow from operating activities, including purchase of intangible Measures the success of the Group in turning profit into cash through the
assets, purchase of contract fulfilment assets, purchase of property, plant management of working capital and capital expenditure.
and equipment, proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets, purchase of other investments, proceeds
from sale of other investments, dividends received from joint ventures and
associates, interest received, repayment of principal under lease liabilities
and dividends paid to non-controlling interests.
Underlying free cash flow(1) Free cash flow excluding cash payments related to cost action programme and Measures the success of the Group in turning profit into cash through the
COVID-19 resizing costs and acquisition transaction costs. management of working capital and capital expenditure.
Underlying free cash flow conversion Underlying free cash flow divided by underlying operating profit. Measures the success of the Group in turning profit into cash through the
management of working capital and capital expenditure.
Underlying cash tax rate Net tax paid included in net cash flow from operating activities divided by Provides a measure of the cash tax rate that is comparable over time.
underlying profit before tax.
1. Key Performance Indicator.
2. Specific adjusting items are acquisition related costs, COVID-19 resizing
costs, one-off pension charge , tax on share of profit of joint ventures,
gains and losses on sale and closure of businesses and other financing items,
including hedge accounting ineffectiveness and change in the fair value of
investments.
3.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES (CONTINUED)
Reconciliations
INCOME STATEMENT
Underlying revenue and operating profit are reconciled to GAAP measures in
note 2 (segmental analysis).
Geographical segments
ORGANIC REVENUE(1) North America Rest of World Central activities
£m Europe £m £m Total
£m £m
SIX MONTHS ENDED 31 MARCH 2022
Underlying revenue 7,657 2,766 1,202 - 11,625
Organic adjustments (21) (11) (5) - (37)
Organic revenue(1) 7,636 2,755 1,197 - 11,588
SIX MONTHS ENDED 31 MARCH 2021
Underlying revenue 5,160 2,260 1,131 - 8,551
Currency adjustments 29 (104) (34) - (109)
Underlying revenue - constant currency 5,189 2,156 1,097 - 8,442
Organic adjustments (27) (9) (5) - (41)
Organic revenue(1) 5,162 2,147 1,092 - 8,401
48.4% 22.4% 6.3% 35.9%
Increase in underlying revenue at reported rates - %
Increase in underlying revenue at constant currency - % 47.6% 28.3% 9.6% 37.7%
Increase in organic revenue - % 47.9% 28.3% 9.6% 37.9%
1. Current year: Underlying revenue excluding businesses acquired, sold and
closed in the year. Prior year: Underlying revenue including a proforma 12
months in respect of businesses acquired in the year and excluding businesses
sold and closed in the year translated at current year exchange rates. Where
applicable, a 53rd week is excluded from the current or prior year.
Geographical segments
ORGANIC OPERATING PROFIT(1) North America Rest of World Central activities
£m Europe £m £m Total
£m £m
SIX MONTHS ENDED 31 MARCH 2022
Underlying operating profit/(loss) 535 125 56 (43) 673
Underlying operating margin - % 7.0% 4.5% 4.7% 5.8%
Organic adjustments - (1) - - (1)
Organic operating profit/(loss)(1) 535 124 56 (43) 672
SIX MONTHS ENDED 31 MARCH 2021
Underlying operating profit/(loss) 242 32 53 (37) 290
Underlying operating margin - % 4.7% 1.4% 4.7% 3.4%
Currency adjustments 1 (3) (1) - (3)
Underlying operating profit/(loss) - constant currency 243 29 52 (37) 287
Organic adjustments (1) (1) - - (2)
Organic operating profit/(loss)(1) 242 28 52 (37) 285
Increase in underlying operating profit at reported rates - % 121.1% 290.6% 5.7% 132.1%
Increase in underlying operating profit at constant currency - % 120.2% 331.0% 7.7% 134.5%
Increase in organic operating profit - % 121.1% 342.9% 7.7% 135.8%
1. Current year: Underlying operating profit excluding businesses acquired,
sold and closed in the year. Prior year: Underlying operating profit including
a proforma 12 months in respect of businesses acquired in the year and
excluding businesses sold and closed in the year translated at current year
exchange rates. Where applicable, a 53rd week is excluded from the current or
prior year.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES (CONTINUED)
Reconciliations (continued)
Six months ended 31 March
Specific adjusting items
UNDERLYING INCOME STATEMENT 2022 1 2 3 4 5 6 2022
Statutory
Underlying
£m £m £m £m £m £m £m
£m
Operating profit 638 33 - - 2 - - 673
Net loss on sale and closure of businesses (6) - - - - 6 - -
Net finance costs - - - - - - (37) (37)
Profit before tax 632 33 - - 2 6 (37) 636
Income tax expense (152) (11) - - (2) 3 9 (153)
Profit for the period 480 22 - - - 9 (28) 483
Less: Non-controlling interests (3) - - - - - - (3)
Profit attributable to equity shareholders 477 22 - - - 9 (28) 480
Earnings per share (pence) 26.7p 1.3p - - - 0.5p (1.6)p 26.9p
Effective tax rate (%) 24.1% 24.0%
Six months ended 31 March
Specific adjusting items
UNDERLYING INCOME STATEMENT 2021 1 2 3 4 5 6 2021
Statutory £m
Underlying £m
£m £m £m £m £m £m
Operating profit 168 41 78 2 1 - - 290
Net gain on sale and closure of businesses 14 - - - - (14) - -
Net finance costs (49) - - - - - (7) (56)
Profit before tax 133 41 78 2 1 (14) (7) 234
Income tax expense (33) (11) (18) - (1) (2) 2 (63)
Profit attributable to equity shareholders 100 30 60 2 - (16) (5) 171
Earnings per share (pence) 5.6p 1.7p 3.4p 0.1p - (0.9)p (0.3)p 9.6p
Effective tax rate (%) 24.8% 26.9%
Specific adjusting items are as follows:
1. Acquisition related costs
Represent charges in respect of intangible assets acquired through business
combinations, direct costs incurred as part of a business combination or other
strategic asset acquisitions, business integration costs and changes in
consideration in relation to past acquisition activity.
2. COVID-19 resizing costs
Prior period charges related to cost actions taken to adjust our business to
the trading environment in light of the COVID-19 pandemic.
3. One-off pension charge
The £2m charge in the prior period in relation to GMP equalisation was
classified as a specific adjusting item consistent with the classification of
the £12m charge recognised in 2019 following the original High Court hearing.
4. Tax on share of profit of joint ventures
Reclassification of tax on share of profit of joint ventures to income tax
expense.
5. Gains and losses on sale and closure of businesses
Profits and losses on the sale of subsidiaries, joint ventures, associates and
other financial assets.
6. Other financing items
Financing items, including hedge accounting ineffectiveness and change in the
fair value of investments.
Six months ended 31 March
NET OPERATING PROFIT AFTER TAX (NOPAT) 2022 2021
£m £m
Underlying operating profit 673 290
Less: Tax on underlying operating profit at effective tax rate (162) (78)
Less: Operating profit of non-controlling interests net of tax (3) -
NOPAT 508 212
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES (CONTINUED)
Reconciliations (continued)
Six months ended 31 March
UNDERLYING EBITDA 2022 2021
£m £m
Underlying operating profit 673 290
Add back/(deduct):
Depreciation of property, plant and equipment and right of use assets 205 210
Amortisation of other intangible assets, contract fulfilment assets and 161 157
contract prepayments (excluding amortisation of intangibles arising on
acquisition)
Impairment losses - contract related non-current assets 1 13
Impairment reversals - contract related non-current assets (1) -
Underlying EBITDA 1,039 670
BALANCE SHEET
At 31 March
COMPONENTS OF NET DEBT 2022 2021
£m £m
Borrowings (3,203) (3,587)
Lease liabilities (827) (845)
Derivative financial instruments 20 131
Gross debt (4,010) (4,301)
Cash and cash equivalents 1,480 1,674
Net debt (2,530) (2,627)
Six months ended 31 March
NET DEBT RECONCILIATION 2022 2021(1)
£m £m
Net (decrease)/increase in cash and cash equivalents (353) 195
Deduct: Increase in borrowings (1) -
Add back: Repayment of borrowings 297 4
Add back/(deduct): Net cash flow from derivative financial instruments 20 (5)
Add back: Repayment of principal under lease liabilities 73 80
Decrease in net debt from cash flows 36 274
New lease liabilities and amendments (46) (39)
Amortisation of fees and discounts on issue of debt (2) (2)
Changes in fair value of borrowings in a fair value hedge 110 54
Lease liabilities acquired through business acquisitions (6) -
Lease liabilities derecognised on sale and closure of businesses 1 19
COVID-19 rent concessions 1 -
Changes in fair value of derivative financial instruments (68) (34)
Reclassification 3 -
Currency translation (losses)/gains (21) 108
Decrease in net debt 8 380
Net debt at 1 October (2,538) (3,006)
Cash reclassified to held for sale - (1)
Net debt at 31 March (2,530) (2,627)
1. Re-presented to include all bank overdrafts of £137m at 31 March 2021
(31 March 2020: £97m) in cash and cash equivalents and to disaggregate cash
flows from borrowings and derivative financial instruments in the consolidated
cash flow statement (see the condensed consolidated cash flow statement on
page 24).
At 31 March
NET DEBT TO EBITDA 2022 2021
£m £m
Net debt (2,530) (2,627)
Prior year 1,554 1,418
Less: Prior half year (670) (1,227)
Add: Current half year 1,039 670
Underlying EBITDA (last 12 months) 1,923 861
Net debt to EBITDA (times) 1.3 3.0
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES (CONTINUED)
Reconciliations (continued)
CASH FLOW
Six months ended 31 March
CAPITAL EXPENDITURE 2022 2021
£m £m
Purchase of intangible assets 65 78
Purchase of contract fulfilment assets 96 97
Purchase of property, plant and equipment 125 97
Investment in contract prepayments 35 16
Proceeds from sale of property, plant and equipment/intangible assets/contract (15) (16)
fulfilment assets
Capital expenditure 306 272
UNDERLYING OPERATING CASH FLOW Six months ended 31 March
2022 2021
£m £m
Net cash flow from operating activities 663 563
Purchase of intangible assets (65) (78)
Purchase of contract fulfilment assets (96) (97)
Purchase of property, plant and equipment (125) (97)
Proceeds from sale of property, plant and equipment/intangible assets/contract 15 16
fulfilment assets
Repayment of principal under lease liabilities (73) (80)
Share of results of joint ventures and associates 22 14
Add back: Interest paid 43 54
Add back: Net tax paid 133 60
Add back: Post employment benefit obligations net of service costs 4 5
Add back: Cash payments related to cost action programme and COVID-19 resizing 33 126
costs
Add back: Acquisition transaction costs(1) 3 -
Underlying operating cash flow 557 486
1. Acquisition transaction costs of £8m were excluded from net cash flow
from operating activities in 2021 (see note 7).
Six months ended 31 March
UNDERLYING OPERATING CASH FLOW CONVERSION 2022 2021
£m £m
Underlying operating cash flow 557 486
Underlying operating profit 673 290
Underlying operating cash flow conversion (%) 82.8% 167.6%
Six months ended 31 March
FREE CASH FLOW 2022 2021
£m £m
Net cash flow from operating activities 663 563
Purchase of intangible assets (65) (78)
Purchase of contract fulfilment assets (96) (97)
Purchase of property, plant and equipment (125) (97)
Proceeds from sale of property, plant and equipment/intangible assets/contract 15 16
fulfilment assets
Purchase of other investments (17) -
Proceeds from sale of other investments 1 2
Dividends received from joint ventures and associates 19 2
Interest received 3 2
Repayment of principal under lease liabilities (73) (80)
Dividends paid to non-controlling interests (1) -
Free cash flow 324 233
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
12 NON-GAAP MEASURES (CONTINUED)
Reconciliations (continued)
Six months ended 31 March
UNDERLYING FREE CASH FLOW 2022 2021
£m £m
Free cash flow 324 233
Add back: Cash payments related to cost action programme and COVID-19 resizing 33 126
costs
Add back: Acquisition transaction costs(1) 3 -
Underlying free cash flow 360 359
1. Acquisition transaction costs of £8m were excluded from free cash flow
in 2021 (see note 7).
Six months ended 31 March
UNDERLYING FREE CASH FLOW CONVERSION 2022 2021
£m £m
Underlying free cash flow 360 359
Underlying operating profit 673 290
Underlying free cash flow conversion (%) 53.5% 123.8%
Six months ended 31 March
UNDERLYING CASH TAX RATE 2022 2021
£m £m
Tax received 12 25
Tax paid (145) (85)
Net tax paid (133) (60)
Underlying profit before tax 636 234
Underlying cash tax rate (%) 20.9% 25.6%
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
13 EXCHANGE RATES
Six months ended 31 March
2022 2021
AVERAGE EXCHANGE RATE FOR THE PERIOD(1)
Australian Dollar 1.85 1.81
Brazilian Real 7.20 7.44
Canadian Dollar 1.70 1.74
Chilean Peso 1091.06 1,003.19
Euro 1.18 1.13
Japanese Yen 154.55 142.45
Norwegian Krone 11.81 11.94
Swedish Krona 12.18 11.56
Turkish Lira 16.66 10.46
UAE Dirham 4.93 4.95
US Dollar 1.34 1.35
CLOSING EXCHANGE RATE AS AT THE END OF THE PERIOD(1)
Australian Dollar 1.75 1.81
Brazilian Real 6.26 7.79
Canadian Dollar 1.64 1.73
Chilean Peso 1036.11 991.17
Euro 1.18 1.17
Japanese Yen 159.81 152.46
Norwegian Krone 11.51 11.78
Swedish Krona 12.27 12.03
Turkish Lira 19.31 11.42
UAE Dirham 4.84 5.07
US Dollar 1.32 1.38
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.
Forward looking statements
Certain information included in this Announcement is forward looking and
involves risks, assumptions and uncertainties that could cause actual results
to differ materially from those expressed or implied by forward looking
statements. Forward looking statements cover all matters which are not
historical facts and include, without limitation; the direct and indirect
impacts and implications of public health crises such as the coronavirus
COVID-19 on the economy, nationally and internationally, and on the Group, its
operations and prospects, including disruptions and inefficiencies in the
supply chain; UK domestic and global political, economic and business
conditions (such as the UK's exit from the EU); projections relating to
results of operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation, discussions
of expected future revenues, financing plans, expected expenditures and
divestments; risks associated with changes in economic conditions, the
strength of the food and support services markets in the jurisdictions in
which the Group operates; fluctuations in food and other product costs and
labour costs; and prices and changes in exchange and interest rates. Forward
looking statements can be identified by the use of forward looking
terminology, including terms such as 'believes', 'estimates', 'anticipates',
'expects', 'forecasts', 'intends', 'plans', 'projects', 'goal', 'target',
'aim', 'may', 'will', 'would', 'could' or 'should' or, in each case, their
negative or other variations or comparable terminology.
Forward looking statements in this Announcement are not guarantees of future
performance. All forward looking statements in this Announcement are based
upon information known to the Company on the date of this Announcement.
Accordingly, no assurance can be given that any particular expectation will be
met and readers are cautioned not to place undue reliance on forward looking
statements when making their investment decisions. Additionally, forward
looking statements regarding past trends or activities should not be taken as
a representation or warranty that such trends or activities will continue in
the future. Other than in accordance with its legal or regulatory obligations
(including under the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority), the Company undertakes
no obligation to publicly update or revise any forward looking statement,
whether as a result of new information, future events or otherwise. Nothing in
this Announcement shall exclude any liability under applicable laws that
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