REG - Compass Group PLC - Interim Results Announcement <Origin Href="QuoteRef">CPG.L</Origin> - Part 5
15/07/2015 17:19
- Part 5: For the preceding part double click ID:nRSM9844Md
The Group has completed a number of small infill acquisitions in several countries for a total consideration of £52 million. They are not considered material to the Group.
11 Reconciliation of operating profit to cash generated by operations
Year ended
Six months to 31 March 30 September
Reconciliation of operating profit to cash generated by continuing operations 2015 2014 Restated1 2014 Restated1
£m £m £m
Operating profit from continuing operations before share of profit after tax of joint ventures and associates 654 616 1,184
Adjustments for:
Acquisition transaction costs 1 - 3
Amortisation of intangible assets 73 63 128
Amortisation of intangible assets arising on acquisition 13 11 25
Depreciation of property, plant and equipment 98 91 189
Loss/(profit) on disposal of US business 1 - (1)
Decrease in provisions (25) (35) (64)
Decrease in post-employment benefit obligations (23) (22) (46)
Share-based payments - charged to profits 8 7 13
Operating cash flows before movement in working capital 800 731 1,431
Increase in inventories (12) (9) (17)
Increase in receivables (75) (85) (152)
(Decrease)/increase in payables (19) 37 155
Cash generated by continuing operations 694 674 1,417
1 2014 has been restated for joint ventures in accordance with IFRS 11, as detailed in note 16.
Compass Group PLC
Condensed Financial Statements (continued)
12 Reconciliation of net cash flow to movement in net debt
This table is presented as additional information to show movement in net debt, defined as overdrafts, bank and other borrowings, finance leases and derivative financial instruments, net of cash and cash equivalents.
Six months to 31 March
Cash and Bank Total Derivative Net debt Year ended 30 September
cash Bank and other overdrafts and Finance financial Net debt 2014 2014
Net debt equivalents overdrafts borrowings borrowings leases instruments 2015 Restated1 Restated1
£m £m £m £m £m £m £m £m £m
Brought forward 408 (37) (2,768) (2,805) (17) 61 (2,353) (1,211) (1,211)
Net decrease in cash and cash equivalents (76) - - - - - (76) (298) (563)
Cash inflow from issue of bonds - - - - - - - - (646)
Cash outflow from repayment of bonds - - 250 250 - - 250 - -
Cash inflow from issue of loan notes - - (258) (258) - - (258) - -
Cash outflow from repayment of loan notes - - - - - - - - 74
Cash (inflow)/outflow from other changes in gross debt - (7) (119) (126) - 23 (103) 51 (25)
Cash outflow from repayment of obligations under finance leases - - - - 3 - 3 2 5
Increase in net debt as a result of new finance leases taken out - - - - (2) - (2) (1) (2)
Currency translation gains/(losses) 4 (2) (44) (46) 1 (64) (105) 36 13
Other non-cash movements - - (35) (35) - 24 (11) (11) 2
Carried forward 336 (46) (2,974) (3,020) (15) 44 (2,655) (1,432) (2,353)
1 2014 has been restated for joint ventures in accordance with IFRS 11, as detailed in note 16.
Other non-cash movements are comprised as follows:
Year ended
Six months to 31 March 30 September
Other non-cash movements in net debt 2015 2014 2014
£m £m £m
Amortisation of fees and discount on issuance (1) (1) (2)
Amortisation of the fair value adjustment in respect of the £250 million Sterling Eurobond redeemed in 2014 - 2 4
Changes in the fair value of bank and other borrowings in a designated fair value hedge (34) 1 (23)
Bank and other borrowings (35) 2 (21)
Changes in the value of derivative financial instruments including accrued income 24 (13) 23
Other non-cash movements (11) (11) 2
1 2014 has been restated for joint ventures in accordance with IFRS 11, as detailed in note 16.
Compass Group PLC
Condensed Financial Statements (continued)
13 Contingent liabilities
Year ended
As at 31 March 30 September
Performance bonds, guarantees and indemnities 2015 2014 2014
£m £m £m
Performance bonds, guarantees and indemnities (including those of associates) 1 387 409 392
1 Excludes bonds, guarantees and indemnities in respect of self-insurance liabilities, post-employment
obligations and borrowings (including finance and operating leases) recorded on the balance sheet or
disclosed in note 15.
Performance bonds, guarantees and indemnities
The Company and certain subsidiary undertakings have, in the normal course of business, given
guarantees and entered into counter-indemnities in respect of such guarantees relating to the Group's
own contracts and/or the Group's share of certain contractual obligations of joint ventures and
associates. Where the Group enters into such arrangements, it does so in order to provide assurance to
the beneficiary that it will fulfil its existing contractual obligations. The issue of such
guarantees and indemnities does not therefore increase the Group's overall exposure and the disclosure
of such performance bonds, guarantees and indemnities is given for information purposes only.
Eurest Support Services
On 21 October 2005, the Company announced that it had instructed Freshfields Bruckhaus Deringer to
conduct an investigation into the relationships between Eurest Support Services ('ESS') (a member of
the Group), IHC Services Inc. ('IHC') and the United Nations('UN'). Ernst & Young assisted Freshfields
Bruckhaus Deringer in this investigation. On 1 February 2006, it was announced that the investigation
had concluded.
The investigation established serious irregularities in connection with contracts awarded to ESS by
the UN. The work undertaken by Freshfields Bruckhaus Deringer and Ernst & Young gave no reason to
believe that these issues extended beyond a few individuals within ESS to other parts of ESS or the
wider Compass Group of companies.
The Group settled all outstanding civil litigation against it in relation to this matter in October
2006, but litigation continues between competitors of ESS, IHC and other parties involved in UN
procurement.
IHC's relationship with the UN and ESS was part of a wider investigation into UN procurement activity
being conducted by the United States Attorney's Office for the Southern District of New York, and with
which the Group co-operated fully. The current status of that investigation is uncertain and a matter
for the US authorities. Those investigators could have had access to sources unavailable to the Group,
Freshfields Bruckhaus Deringer or Ernst & Young, and further information may yet emerge which is
inconsistent with, or additional to, the findings of the Freshfields Bruckhaus Deringer investigation,
which could have an adverse impact on the Group. The Group has however not been contacted by, or
received further requests for information from, the United States Attorney's Office for the Southern
District of New York in connection with these matters since January 2006. The Group has co-operated
fully with the UN throughout.
Other litigation and claims
The Group is also involved in various other legal proceedings incidental to the nature of its business
and maintains insurance cover to reduce financial risk associated with claims related to these
proceedings. Where appropriate, provisions are made to cover any potential uninsured losses.
In addition, the Group is subject to periodic tax audits and challenges with/by various fiscal
authorities covering corporate, employee and sales taxes in the various jurisdictions in which it
operates. None of these are currently expected to have a material impact on the Group's financial
position.
Outcome
Although it is not possible to predict the outcome or quantify the financial effect of these
proceedings, or any claim against the Group related thereto, in the opinion of the Directors, any
uninsured losses resulting from the ultimate resolution of these matters will not have a material
effect on the financial position of the Group. The timing of the settlement of these proceedings or
claims is uncertain.
Compass Group PLC
Condensed Financial Statements (continued)
14 Capital commitments
Year ended
As at 31 March 30 September
Capital commitments 2015 2014 2014
£m £m £m
Contracted for but not provided for 203 139 187
The majority of capital commitments are for intangible assets.
15 Operating lease and concessions commitments
The Group leases offices and other premises under non-cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group has some leases that include revenue related rental payments that are contingent on future levels of revenue.
There has been no material change to the level of future minimum rentals payable under non-cancellable operating leases and concession agreements since 30 September 2014, details of which can be found in note 31 of the 2014 Annual Report.
Compass Group PLC
Condensed Financial Statements (continued)
16 IFRS 11 Restatement
Comparative financial information for the year ended 30 September 2014 and the six months to 31 March 2014 have been restated for the effects of IFRS 11. The following principal joint arrangements, previously accounted for as jointly controlled entities under IAS 31 are now classified as joint ventures and are equity accounted under the requirements of the revised IAS 28:
- Quadrant Catering Limited
- ADNH-Compass Middle East LLC
- Express Support Services Limitada
The impact of the restatements on the Group's condensed income statement, balance sheet and cash flow statement is as shown below:
Condensed income statement Six months to 31 March 2014 Year ended 30 September 2014
Restated
As published IFRS 11 Unaudited As published IFRS 11 Restated
£m £m £m £m £m £m
Continuing operations
Revenue 8,659 (101) 8,558 17,058 (204) 16,854
Operating costs before goodwill impairment (8,031) 89 (7,942) (15,850) 180 (15,670)
Operating profit 628 (12) 616 1,208 (24) 1,184
Share of profit of joint ventures - 11 11 - 21 21
Share of profit of associates 6 - 6 9 - 9
Total operating profit 634 (1) 633 1,217 (3) 1,214
Profit on disposal of US business - - - 1 - 1
Profit on disposal of interest in associates - - - 13 - 13
Finance income 3 - 3 5 - 5
Finance costs (42) - (42) (91) - (91)
Change in the fair value of investments - - - 2 - 2
Profit before tax 595 (1) 594 1,147 (3) 1,144
Income tax expense (148) 1 (147) (279) 3 (276)
Profit for the year from continuing operations 447 - 447 868 - 868
Discontinued operations
Profit for the year from discontinued operations - - - 3 - 3
Continuing and discontinued operations
Profit for the year 447 - 447 871 - 871
Compass Group PLC
Condensed Financial Statements (continued)
16 IFRS 11 Restatement (continued)
Condensed balance sheet
As at 31 March 2014 Year ended 30 September 2014
Restated
As published IFRS 11 Unaudited As published IFRS 11 Restated
£m £m £m £m £m £m
Non-current assets
Goodwill 3,551 (37) 3,514 3,565 (37) 3,528
Other intangible assets 932 - 932 1,010 - 1,010
Property, plant and equipment 717 (5) 712 729 (5) 724
Interests in joint ventures and associates 84 79 163 114 75 189
Other investments 42 - 42 36 - 36
Trade and other receivables 62 (8) 54 67 3 70
Deferred tax assets* 250 - 250 246 - 246
Derivative financial instruments** 46 - 46 50 - 50
Non-current assets 5,684 29 5,713 5,817 36 5,853
Current assets
Inventories 260 (4) 256 270 (5) 265
Trade and other receivables 2,082 (45) 2,037 2,128 (59) 2,069
Tax recoverable* 40 - 40 32 - 32
Cash and cash equivalents** 699 (27) 672 431 (23) 408
Derivative financial instruments** 11 - 11 16 - 16
Current assets 3,092 (76) 3,016 2,877 (87) 2,790
Total assets 8,776 (47) 8,729 8,694 (51) 8,643
Current liabilities
Short term borrowings** (289) - (289) (297) - (297)
Derivative financial instruments** (2) - (2) (4) - (4)
Provisions (162) - (162) (161) - (161)
Current tax liabilities* (170) - (170) (148) - (148)
Trade and other payables (3,010) 42 (2,968) (3,139) 44 (3,095)
Current liabilities (3,633) 42 (3,591) (3,749) 44 (3,705)
Non-current liabilities
Long term borrowings** (1,866) - (1,866) (2,526) 1 (2,525)
Derivative financial instruments** (4) - (4) (1) - (1)
Post-employment benefit obligations (158) 5 (153) (176) 6 (170)
Provisions (309) - (309) (277) - (277)
Deferred tax liabilities* (39) - (39) (39) - (39)
Trade and other payables (67) - (67) (78) - (78)
Non-current liabilities (2,443) 5 (2,438) (3,097) 7 (3,090)
Total liabilities (6,076) 47 (6,029) (6,846) 51 (6,795)
Net assets 2,700 - 2,700 1,848 - 1,848
Equity
Share capital 178 178 178 178
Share premium account 407 - 407 174 - 174
Capital redemption reserve 57 - 57 293 - 293
Less: Own shares - - - (1) - (1)
Other reserves 4,294 4,294 4,277 4,277
Retained earnings (2,243) - (2,243) (3,082) - (3,082)
Total equity shareholders' funds 2,693 - 2,693 1,839 - 1,839
Non-controlling interests 7 - 7 9 - 9
Total equity 2,700 - 2,700 1,848 - 1,848
* Component of current and deferred taxes. ** Component of net debt.
Compass Group PLC
Condensed Financial Statements (continued)
16 IFRS 11 Restatement (continued)
Condensed cash flow statement Six months to 31 March 2014 Year ended 30 September 2014
Restated As
As published IFRS 11 Unaudited published IFRS 11 Restated
£m £m £m £m £m £m
Cash flow from operating activities
Cash generated from operations 685 (11) 674 1,442 (25) 1,417
Interest paid (38) - (38) (77) - (77)
Tax received 15 - 15 24 - 24
Tax paid (143) 1 (142) (268) 2 (266)
Net cash from operating activities 519 (10) 509 1,121 (23) 1,098
Cash flow from investing activities
Purchase of subsidiary companies and investments in associates1 (76) - (76) (176) - (176)
Proceeds from sale of subsidiary companies and associates - discontinued activities1 - - (1) - (1)
Proceeds from sale of subsidiary companies and associates - continuing activities1 - - 66 - 66
Tax on profits from sale of subsidiary companies and associates - - (4) - (4)
Purchase of intangible assets (93) - (93) (206) - (206)
Purchase of property, plant and equipment2 (122) 1 (121) (263) 2 (261)
Proceeds from sale of property, plant and equipment/intangible assets 12 - 12 22 - 22
Purchase of other investments - - - (2) - (2)
Proceeds from sale of other investments 2 - 2 3 - 3
Dividends received from associates undertakings 5 - 5 7 - 7
Dividends received from joint ventures - 1 1 - 15 15
Interest received 3 - 3 6 - 6
Net cash used in investing activities (269) 2 (267) (548) 17 (531)
Cash flow from financing activities
Proceeds from issue of ordinary share capital 2 - 2 5 - 5
Purchase of own shares3 (200) - (200) (280) - (280)
Net increase in borrowings (51) - (51) 597 - 597
Repayment of obligations under finance leases (2) - (2) (5) - (5)
Return of cash to Compass shareholders - - - (1,000) - (1,000)
Equity dividends paid (287) - (287) (444) - (444)
Dividends paid to non-controlling interests (2) - (2) (5) 2 (3)
Net cash used in financing activities (540) - (540) (1,132) 2 (1,130)
Cash and cash equivalents
Net decrease in cash and cash equivalents (290) (8) (298) (559) (4) (563)
Cash and cash equivalents at beginning of the year 1,006 (19) 987 1,006 (19) 987
Currency translation losses on cash and cash equivalents (17) - (17) (16) - (16)
Cash and cash equivalents at end of the period 699 (27) 672 431 (23) 408
1 Net of cash acquired or disposed and payments received or made under warranties and indemnities.
2 Includes property, plant and equipment purchased under client commitments.
3 Includes stamp duty and brokers' commission.
Compass Group PLC
Condensed Financial Statements (continued)
17 Related party transactions
The following transactions were carried out with related parties of Compass Group PLC:
Subsidiaries
Transactions between the ultimate parent company and its subsidiaries, and between subsidiaries, have been eliminated on consolidation.
Joint Ventures
There were no significant transactions between joint ventures or joint venture partners and the rest of the Group during the period.
Associates
There were no significant transactions with associates during the period.
Key management personnel
During the period there were no other material transactions or balances between the Group and its key management personnel or members of their close family.
18 Post balance sheet events
There have been no material post balance sheet events.
19 Exchange rates Year ended
Six months to 31 March 30 September
2015 2014 2014
Average exchange rate for the period1
Australian Dollar 1.89 1.80 1.81
Brazilian Real 4.18 3.79 3.80
Canadian Dollar 1.85 1.77 1.79
Euro 1.31 1.20 1.23
Japanese Yen 181.31 166.95 169.92
Norwegian Krone 11.32 9.96 10.12
South African Rand 17.83 17.18 17.54
Swedish Krona 12.21 10.63 11.00
Swiss Franc 1.49 1.47 1.49
Turkish Lira
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