TIDMCPG
RNS Number : 9039T
Compass Group PLC
20 November 2023
Legal Entity Identifier (LEI) No.
2138008M6MH9OZ6U2T68 Annual Results Announcement
Full-year results announcement for the year ended 30 September
2023
Underlying(1) results Statutory results
2023 2022 Change 2023 2022 Change
========= ============ ======== ========= ========= ======
Revenue GBP31.3bn GBP26.4bn(2) 18.8%(3) GBP31.0bn GBP25.5bn 21.6%
Operating profit GBP2,122m GBP1,637m(2) 29.6%(2) GBP1,891m GBP1,500m 26.1%
Operating margin 6.8% 6.2% 60bps 6.1% 5.9% 20bps
Earnings per share 86.1p 65.0p(2) 32.5%(2) 75.4p 62.6p 20.4%
Operating cash flow GBP1,825m GBP1,351m 35.1% GBP2,076m GBP1,596m 30.1%
Free cash flow GBP1,241m GBP890m 39.4%
Annual dividend per
share 43.1p 31.5p 36.8% 43.1p 31.5p 36.8%
========= ============ ======== ========= ========= ======
Strong broad-based performance and ongoing investment in the
business underpins sustainable growth; further share buyback
announced.
Underlying operating profit growth of 30%(2) delivered
through:
-- Organic revenue growth of 19%, balanced across all regions and sectors.
-- Operating margin of 6.8%, up 60bps year on year.
Capitalising on significant market opportunities with strong
focus on growth:
-- Signed GBP2.7bn(4) of new business, with first-time outsourcing accounting for c.50%.
-- Mobilised net new business of 4.6%, with strong client retention rate of 96.5%.
Underlying operating cash generation of GBP1.8bn supports strong
balance sheet and flexibility for capital allocation:
-- Invested GBP1.2bn in the business in capex (2.9% of
underlying revenue) and M&A (net spend c.GBP300m).
-- Returning surplus cash through a further share buyback of up
to $500m, to complete in 2024 subject to M&A activity.
Strategic priorities:
-- Focusing on significant structural growth opportunities in
core markets; exited nine tail countries.
-- Evolving our existing operating model to further enhance our competitive advantages.
-- Investing in future sources of growth through capex and
M&A to enhance our capability and expertise, including
agreement to acquire Hofmann Menü-Manufaktur GmbH in Germany.
2024 outlook :
-- Underlying operating profit growth towards 13%(5) delivered
through high single-digit organic revenue growth and ongoing margin
progression.
Statutory results:
-- Revenue increased by 21.6% reflecting the strong trading
performance and favourable exchange rates.
-- Operating profit, including charges relating to business
acquisitions and reshaping our portfolio which are excluded from
underlying operating profit, increased by 26.1% to GBP1,891m.
1. Reconciliation of statutory to underlying results can be
found in notes 2 (segmental analysis) and 14 (non-GAAP measures) to
the consolidated financial statements.
2. Measured on a constant-currency basis.
3. Organic revenue change.
4. Expected annual revenue from new contracts signed during the year.
5. On a constant-currency basis, including announced disposals,
exits and acquisitions in 2023 and to date in 2024.
Business review
Dominic Blakemore, Group Chief Executive, said:
"2023 was a strong year for Compass. North America continued its
long track record of excellent growth whilst Europe delivered a
second year of net new growth in the 4-5% range. During the year,
we continued to successfully capitalise on the dynamic outsourcing
trends, resulting in another record year of new business wins and
continued strong client retention.
We have a strong, balanced, and sustainable growth model across
the Group. Our size, strength and scale enable us to continue
investing in our operating model, further enhancing our competitive
advantages. We have exited nine tail countries to focus on markets
with the greatest growth opportunities and our strong cash
generation continues to fuel investment in our business through
capex and attractive M&A.
The business is in great shape operationally and financially and
well positioned for a more focused growth phase. Despite some
macroeconomic uncertainty, favourable market dynamics continue and,
with a global market share of less than 15% and around 50% of the
market still self-operated, we have an exciting structural growth
opportunity. We are confident that the focus on our core markets,
the ongoing investment in our market-leading offer and our proven
processes will support high single-digit organic revenue growth in
2024.
Going forward, we expect to sustain mid to high single-digit
organic revenue growth and ongoing margin progression leading to
profit growth ahead of revenue growth and increased cash
generation. We are investing in capex and strategic M&A to
support future growth, returning any surplus cash through the share
buyback programme, and delivering long-term, compounding
shareholder returns."
Results presentation today
Today, 20 November 2023, management will present Compass Group's
Full Year 2023 results.
At 9:00 am (UK time), investors and analysts will be able to
view a video presentation which will stream live on the Compass
Group website at www.compass-group.com . An audio-only telephone
option is available if you are unable to watch the video.
Following the video presentation, management will host a live
Q&A session for investors and analysts. Participants must be
connected by phone to ask a question during the conference
call.
Participant dial in details:
UK +44 (0) 33 0551 0200
UK Toll-Free 0808 109 0700
US +1 786 697 3501
US Toll-Free +1 866 580 3963
Enquiries
Agatha Donnelly, Helen Javanshiri
Investors & 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
Financial calendar
Ex-dividend date for 2023 final dividend 18 January
Record date for 2023 final dividend 19 January
Last day for DRIP elections 8 February
Q1 Trading Update / Annual General Meeting 8 February
Half-year results 15 May
Business review (continued)
Basis of preparation
Throughout this Annual Results Announcement, and consistent with
prior years, underlying and other alternative performance measures
are used to describe the Group's performance alongside statutory
measures (see page 10).
Group performance
The Group continues to perform strongly both in terms of organic
revenue growth, which was 18.8%(1) , and underlying operating
margin, which improved by 60bps to 6.8%(1) . As a result,
underlying operating profit grew by 29.6%(1) on a constant-currency
basis to GBP2,122m(1) (2022: GBP1,637m). Statutory revenue
increased by 21.6% reflecting the strong trading performance and
favourable exchange translation. Statutory operating profit,
including charges relating to business acquisitions and reshaping
our portfolio which are excluded from underlying operating profit,
increased by 26.1% to GBP1,891m.
Capital expenditure was 2.9%(1) of underlying revenue and net
M&A expenditure was GBP304m, which was largely spent on several
bolt-on acquisitions, mainly in the US and UK. Subsequent to the
year-end, the Group agreed to acquire Hofmann Menü-Manufaktur GmbH,
a German producer of high-quality cook and freeze meals, and exited
its small operations in Argentina and Angola. As a result of this
and other disposals, including five countries in Central and
Eastern Europe, Compass has further reduced its countries of
operation to c.35 as it focuses on significant opportunities in its
core markets.
Cash flow remains excellent, with underlying operating cash flow
of GBP1,825m(1) (2022: GBP1,351m) and underlying free cash flow of
GBP1,241m(1) (2022: GBP890m), representing strong conversion rates
of 86.0%(1) and 58.5%(1) , respectively. As a result, leverage (net
debt to EBITDA) reduced further to 1.2x(1) .
Our strong balance sheet provides us with flexibility to invest
in future growth, where we continue to see exciting opportunities,
both in terms of M&A, where we have an attractive pipeline, and
organically, where the market remains buoyant. We therefore expect
capital expenditure to be around 3.5% of underlying revenue in
2024, with net M&A expenditure likely to be higher than in
2023.
Revenue
Organic revenue growth of 18.8%(1) reflects net new business
growth of approximately 5%(1) , above historical levels of
approximately 3%, with like-for-like volume growth and pricing both
at around 7%. Following strong like-for-like volume growth in the
first half of the year, due to the pandemic-impacted comparators,
volume growth normalised in the second half of the year as
anticipated. Pleasingly, organic revenue growth continues to be
broad-based, with all the Group's regions performing strongly.
On a statutory basis, revenue increased by 21.6% to GBP31,028m
(2022: GBP25,512m).
Profit
Underlying operating profit increased by 29.6%(1) on a
constant-currency basis, to GBP2,122m(1) , and our underlying
operating margin was 6.8%(1) (2022: 6.2%), with all regions
achieving significant margin progression. The strong improvement in
margin reflects the benefits of operating leverage, operational
efficiencies and appropriate pricing to manage inflation headwinds,
and is despite mobilisation costs associated with new business
growth.
Statutory operating profit was GBP1,891m (2022: GBP1,500m), an
increase of 26.1%, mainly reflecting the higher revenue and margin
improvement, together with favourable exchange translation.
Statutory profit before tax of GBP1,747m (2022: GBP1,469m)
includes net charges of GBP239m (2022: GBP21m) which are excluded
from underlying profit before tax. During the year, we incurred a
net charge of GBP79m in relation to our ongoing strategic portfolio
review of non-core activities to allow the Group to focus its
resources on our core operations. The net charge comprises the exit
from seven tail countries, including five in Central and Eastern
Europe, and the sale of a business, site closures and contract
renegotiations and terminations in the UK. Subsequent to the
year-end, the Group also exited its businesses in Argentina and
Angola. Acquisition-related charges totalled GBP125m (2022: GBP92m)
and there was a one-off pension charge of GBP7m (2022: GBPnil)
mainly relating to a change in legislation in Türkiye eliminating
the minimum retirement age requirement for certain employees
effective from March 2023. Non-underlying finance costs were GBP28m
(2022: GBP76m credit) reflecting movements in the fair value of
derivatives held to minimise volatility in short-term underlying
finance costs.
1. Alternative Performance Measure (APM). The Group's APMs are
defined in note 14 (non-GAAP measures) and reconciled to GAAP
measures in notes 2 (segmental analysis) and 14 to the consolidated
financial statements.
Business review (continued)
Income statement guidance
The Group expects 2024 underlying operating profit growth
towards 13%(1,2) delivered through high single-digit organic
revenue growth and ongoing margin progression. Underlying finance
costs are expected to be around $225m(1) , with an underlying
effective tax rate of around 25.5%(1) .
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-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
as evidenced by our historical returns on capital employed.
Shareholder returns
Our dividend policy is to pay out around 50% of underlying
earnings through an interim and final dividend, with the interim
dividend reflecting around one-third of the total annual dividend.
The Board has proposed a final dividend of 28.1p which, including
the interim dividend of 15.0p, gives a total dividend of 43.1p for
2023.
The GBP750m share buyback announced in May 2023 was completed in
November 2023. Today, we have announced a further share buyback of
up to $500m (GBP410m), to complete in 2024 subject to M&A
activity.
1. Alternative Performance Measure (APM). The Group's APMs are
defined in note 14 (non-GAAP measures) and reconciled to GAAP
measures in notes 2 (segmental analysis) and 14 to the consolidated
financial statements.
2. On a constant-currency basis, including announced disposals,
exits and acquisitions in 2023 and to date in 2024.
Business review (continued)
Regional performance
North America - 67.4% of Group underlying revenue (2022:
66.5%)
Underlying results
(1) Change Statutory results Change
Regional financial Reported Constant Reported
summary 2023 2022 rates currency Organic 2023 2022 rates
=================== ========== ========== ======== ========= ======= ========== ========== ========
Revenue GBP21,092m GBP17,139m 23.1% 17.9% 17.4% GBP21,073m GBP17,121m 23.1%
Operating profit GBP1,653m GBP1,236m 33.7% 28.0% 28.0% GBP1,581m GBP1,183m 33.6%
Operating margin 7.8% 7.2% 60bps 7.5% 6.9% 60bps
=================== ========== ========== ======== ========= ======= ========== ========== ========
1. Reconciliation of statutory to underlying results can be
found in note 2 (segmental analysis) and note 14 (non-GAAP
measures) to the consolidated financial statements.
Underlying
Operating profit increased by 28.0% on a constant-currency
basis, to GBP1,653m, driven by strong organic revenue growth and
continued margin progression.
Organic revenue growth was 17.4%, with new business wins
benefiting from significant levels of first-time outsourcing,
strong retention rates at 96.9%, appropriate levels of pricing and
like-for-like volume growth underpinned by the scaling of digital
capabilities.
Growth was broad-based across all sectors. Business &
Industry benefited from double-digit net new business growth and
favourable like-for-like volume growth as employees continued to
return to the office. Sports & Leisure benefited from high
participation rates and per capita spend, but also a strong
calendar of events, including basketball, hockey, baseball, music
and convention centres. Our Education and Healthcare & Senior
Living businesses also delivered strong growth from net new
business, like-for-like volume growth and pricing.
Operating margin increased by 60bps to 7.8% in spite of
inflation headwinds driven by management focus on productivity,
cost mitigation and appropriate pricing, in addition to ongoing
scale benefits.
The region invested in several bolt-on acquisitions to
strengthen our capabilities, including the acquisition of Parks
Coffee in the first half of the year, a provider of workplace
refreshments in the US.
Statutory
Statutory revenue increased by 23.1% to GBP21,073m reflecting
the strong organic revenue growth and favourable exchange
translation.
Statutory operating profit was GBP1,581m (2022: GBP1,183m), with
the difference from underlying operating profit being
acquisition-related charges of GBP72m (2022: GBP57m).
Business review (continued)
Regional performance (continued)
Europe - 22.5% of Group underlying revenue (2022: 23.0%)
Underlying results
(1) Change Statutory results Change
Regional financial Reported Constant Reported
summary 2023 2022 rates currency Organic 2023 2022 rates
=================== ========= ========= ======== ========= ======= ========= ========= ========
Revenue GBP7,038m GBP5,935m 18.6 % 19.0% 21.6% GBP6,804m GBP5,694m 19.5%
Operating profit GBP392m GBP299m 31.1% 31.5% 31.6% GBP240m GBP267m (10.1)%
Operating margin 5.6% 5.0% 60bps 3.5% 4.7% (120)bps
=================== ========= ========= ======== ========= ======= ========= ========= ========
1. Reconciliation of statutory to underlying results can be
found in note 2 (segmental analysis) and note 14 (non-GAAP
measures) to the consolidated financial statements.
Underlying
Operating profit was GBP392m, growth of 31.5% on a
constant-currency basis, driven by high levels of revenue growth
and strong margin progression, supported by our investment in
growth initiatives and core processes across the region.
Organic revenue growth of 21.6% was driven by net new business
growth, strong volume growth and pricing. Client retention rates
improved by a further 70bps to 96.0%.
Double-digit organic revenue growth rates were achieved across
all sectors and, most notably, in Business & Industry,
Education and Sports & Leisure, which all benefited from high
levels of net new business, like-for-like volume growth and
pricing. Growth was strong in all major markets, most notably in
the UK, Germany and Türkiye, which all made a significant
contribution to the region.
Margin progression of 60bps, which resulted in an operating
margin of 5.6%, was achieved by controlling costs to maximise
operating leverage and by continuing to work closely with clients
to mitigate the sustained level of inflationary pressures within
the region.
The region invested in bolt-on acquisitions, most notably to
drive additional procurement efficiencies in the UK and to expand
our footprint in the Education sector in Ireland. Since the
year-end, we have agreed to acquire Hofmann Menü-Manufaktur GmbH, a
German producer of high-quality cook and freeze meals, to add new
capability and distribution networks. As part of the Group's
ongoing strategic portfolio review, we exited five businesses in
Central and Eastern Europe (Czech Republic, Hungary, Slovakia,
Romania and Estonia) to focus resources and investment on core
operations.
Statutory
Statutory revenue increased by 19.5% to GBP6,804m, with the
difference from underlying revenue being the presentation of the
share of results of our joint ventures operating in the Middle
East.
Statutory operating profit was GBP240m (2022: GBP267m), with the
difference from underlying operating profit mainly reflecting
charges related to the Group's ongoing strategic portfolio review
of GBP99m (2022: GBPnil), including site closures and contract
reorganisations and terminations in the UK, and acquisition-related
charges of GBP46m (2022: GBP30m).
Business review (continued)
Regional performance (continued)
Rest of World - 10.1% of Group underlying revenue (2022:
10.5%)
Underlying results
(1) Change Statutory results Change
Regional financial Reported Constant Reported
summary 2023 2022 rates currency Organic 2023 2022 rates
=================== ========= ========= ======== ========= ======= ========= ========= ========
Revenue GBP3,151m GBP2,697m 16.8% 21.1% 21.8% GBP3,151m GBP2,697m 16.8%
Operating profit GBP175m GBP141m 24.1% 30.6% 34.1% GBP168m GBP137m 22.6%
Operating margin 5.6% 5.2% 40bps 5.3% 5.1% 20bps
=================== ========= ========= ======== ========= ======= ========= ========= ========
1. Reconciliation of statutory to underlying results can be
found in note 2 (segmental analysis) and note 14 (non-GAAP
measures) to the consolidated financial statements.
Underlying
Operating profit increased to GBP175m, which represents growth
of 30.6% on a constant-currency basis.
Organic revenue growth was 21.8% reflecting high net new
business growth, strong levels of like-for-like volume growth and
pricing. Client retention rates improved by 90bps to 95.4%.
Organic revenue growth was broad-based across all sectors.
Growth was particularly pleasing in our Business & Industry
sector across most markets, notably in India and Japan, as office
attendance levels increased, and in our more defensive Defence,
Offshore & Remote sector, especially in Australia and Chile,
where like-for-like volume growth and net new business levels were
high.
Operating margin increased by 40bps to 5.6% driven by strong
management focus on operational challenges in the region, including
the sustained levels of inflation and labour shortages in certain
markets.
As part of the Group's ongoing strategic portfolio review, we
exited Azerbaijan and Indonesia during the year and, subsequent to
the year-end, our operations in Argentina and Angola.
Statutory
Statutory revenue increased by 16.8% to GBP3,151m. There is no
difference between statutory and underlying revenue.
Statutory operating profit was GBP168m (2022: GBP137m), with the
difference from underlying operating profit being
acquisition-related charges of GBP7m (2022: GBP4m).
Business review (continued)
Strategy
We are a global leader in the provision of food services, our
core offer, complemented by our targeted support services business.
Our addressable food market is estimated to be worth at least
$300bn, in the markets and sectors we currently operate in, with
about half of the market still operated in-house. Heightened client
and consumer expectations and inflation have contributed to the
acceleration of growth, particularly in the conversion of
first-time outsourcing, and we have clear strategic priorities to
capture these opportunities.
Our portfolio of sector-specific brands enables us to
differentiate our offer and leverage our industry expertise by
creating tailored solutions for our clients to align with their own
organisational priorities. This approach helps us become strategic
partners to our clients with shared objectives across a range of
initiatives, such as digital capability, sustainability, people
development and increasingly as a trusted advisor.
Through our strategic pillars of People, Performance and
Purpose, combined with our operational performance and capital
allocation framework, we aim to generate higher compounding value
for all our stakeholders over the long term.
People
At Compass, we know that our success is largely down to the
skills and ingenuity of our chefs and front line teams. They lead
the way in safe and sustainable food at scale, promoting healthier
choices and creating great experiences for the people we serve.
We work to ensure that people who want to pursue a career in the
food and hospitality industry can succeed with Compass. We
encourage new joiners to make use of innovative tools, such as
digital onboarding applications and training programmes, with more
than 1,500 colleagues in our UK & Ireland business signing up
to our landmark training and development scheme, Compass Career
Pathways. Pleasingly, over 50% of those who have completed the
programme have moved or been promoted into a new role.
Having people from diverse backgrounds in Compass is a huge
strength for our businesses. In the US, over 17,000 Compass
employees completed diversity, equity and inclusion training,
whilst our Be the Difference conference in July 2023 was attended
by more than 2,000 colleagues to discuss empowering front line
talent, exploring neurodiversity and the importance of
allyship.
We are also addressing inequalities and opportunity gaps within
the hospitality industry by supporting women chefs with dedicated
training, leadership development programmes and advancement
opportunities. Our Women in Culinary (WiC) programme in the US is
driving cultural change as well as career growth, igniting
executive allyship and fostering kind kitchens.
Talent development and careers remain a key opportunity and is
important for our people. We will continue to build out our Compass
Academy concept and enhance career pathways in our markets with a
particular focus on culinary and leadership skills.
Purpose
Our Planet Promise is Compass Group's global commitment to a
sustainable future for all. It encompasses our values as an
ethical, sustainable and inclusive business, together with our
ambition to positively impact the world. Compass is committed to be
carbon neutral worldwide on its Scope 1 and 2 GHG emissions by
2030, and reach climate net zero GHG emissions across its global
operations and value chain by 2050.
Our ability to demonstrate progress in reducing our carbon
impact and food waste is helping us to attract new clients for whom
sustainability is a major focus. Most have their own ambitious
climate plans and they rely on us as a trusted partner to help them
achieve their sustainability goals. Together with Compass, clients
and consumers in every market can navigate towards a less wasteful,
healthier plant-forward lifestyle.
Reducing food waste is one of the biggest environmental
challenges facing our sector, and therefore one where we have the
greatest potential to make a significant difference. Our culinary
teams and front line staff are instrumental in tackling this
challenge, employing a range of diverse food waste reduction
technology systems across our markets. This year, we made food
waste reduction our top priority. Our target was to adopt food
waste tracking technology in 6,000 locations and, with every region
united in support, we achieved nearly 8,000 locations.
Business review (continued)
Summary
Performance this year has been pleasing across our key metrics
of revenue, profit and cash. Favourable market conditions,
persistent inflation and our flexible operating model continued to
support strong balanced net new business growth across all our
regions, with first-time outsourcing accounting for c.50% of new
wins.
Our large addressable market has a long structural runway for
growth and, with increasing complexity and heightened expectations
from clients and consumers, we expect to sustain growth higher than
our historical average. We have clear strategic priorities to
capture these exciting opportunities by focusing on our core
markets and evolving our operating model.
Strong profit growth and cash generation underpin our robust
balance sheet giving us options for capital allocation. The total
dividend for the year of 43.1p is complemented by a share buyback
of up to $500m (GBP410m), subject to M&A activity, in line with
our recent returns to shareholders. As we continue to create value
from disciplined capital allocation, we continue to explore
attractive M&A opportunities to capture future sources of
growth.
Looking further ahead, we remain excited about the significant
global structural growth opportunities, leading to revenue and
profit growth above historical rates. With our proven model of
value creation through operations and capital allocation, we will
continue rewarding shareholders with compounding returns over the
long term.
Dominic Blakemore
Group Chief Executive Officer
20 November 2023
Financial results
Group performance
We manage and assess the performance of the Group using various
underlying and other Alternative Performance Measures (APMs). These
measures are not defined by International Financial Reporting
Standards (IFRS) or other generally accepted accounting principles
(GAAP) and may not be directly comparable with APMs used by other
companies. Underlying measures reflect ongoing trading and,
therefore, facilitate meaningful year-on-year comparison. The
Group's APMs, together with the results prepared in accordance with
IFRS, provide comprehensive analysis of the Group's results.
Accordingly, the relevant statutory measures are also presented
where appropriate. Certain of the Group's APMs are financial Key
Performance Indicators (KPIs) which measure progress against our
strategy. The Group's APMs are defined in note 14 (non-GAAP
measures) and reconciled to GAAP measures in notes 2 (segmental
analysis) and 14 to the consolidated financial statements.
Underlying results
-- Operating profit growth of 29.6% on a constant-currency basis
delivered through: organic revenue growth of 18.8%, balanced across
all regions and sectors; and operating margin of 6.8%, up 60bps
year on year
-- Return on capital employed of 19.5%, up from 15.8% in 2022
-- Basic underlying earnings per share increased by 32.5% to 86.1p on a constant-currency basis
-- Increased cash generation, with underlying free cash flow up 39.4% to GBP1,241m
Statutory results
-- Revenue increased by 21.6% reflecting the strong trading
performance and favourable exchange translation
-- Operating profit, including charges relating to business
acquisitions and reshaping our portfolio which are excluded from
underlying operating profit, increased by 26.1% to GBP1,891m
-- Basic earnings per share of 75.4p, an increase of 20.4%
2023 2022
GBPm GBPm Change
====================================== ====== ====== ======
Revenue
Underlying - reported rates(1) 31,281 25,771 21.4%
Underlying - constant currency(1) 31,281 26,406 18.5%
Organic(1) 30,983 26,087 18.8%
Statutory 31,028 25,512 21.6%
====================================== ====== ====== ======
Operating profit
Underlying - reported rates(1) 2,122 1,590 33.5%
Underlying - constant currency(1) 2,122 1,637 29.6%
Organic(1) 2,097 1,615 29.8%
Statutory 1,891 1,500 26.1%
====================================== ====== ====== ======
Operating margin
Underlying - reported rates(1) 6.8% 6.2% 60bps
====================================== ====== ====== ======
Return on capital employed (ROCE)
Underlying - reported rates(1) 19.5% 15.8% 370bps
====================================== ====== ====== ======
Basic earnings per share
Underlying - reported rates(1) 86.1p 63.0p 36.7%
Underlying - constant currency(1) 86.1p 65.0p 32.5%
Statutory 75.4p 62.6p 20.4%
====================================== ====== ====== ======
Free cash flow
Underlying - reported rates(1) 1,241 890 39.4%
====================================== ====== ====== ======
Dividend
Full-year dividend per ordinary share 43.1p 31.5p 36.8%
====================================== ====== ====== ======
1. Alternative Performance Measure (APM) (see pages 48 to 55).
Financial results (continued)
Regional performance
Underlying revenue(1) Change
======================= ============================
2023 2022 Reported Constant
GBPm GBPm rates currency Organic
North America 21,092 17,139 23.1% 17.9% 17.4%
Europe 7,038 5,935 18.6% 19.0% 21.6%
Rest of World 3,151 2,697 16.8% 21.1% 21.8%
============== =========== ========== ======== ========= =======
Total 31,281 25,771 21.4% 18.5% 18.8%
============== =========== ========== ======== ========= =======
Underlying operating Underlying operating
profit(1) margin(1)
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
North America 1,653 1,236 7.8% 7.2%
Europe 392 299 5.6% 5.0%
Rest of World 175 141 5.6% 5.2%
Unallocated overheads (98) (86)
====================== ========== ========== ========== ==========
Total 2,122 1,590 6.8% 6.2%
====================== ========== ========== ========== ==========
1. Alternative Performance Measure (APM) (see pages 48 to 55).
Income statement
2023 2022
========= =========== ========== ========= =========== ==========
Statutory Adjustments Underlying Statutory Adjustments Underlying
GBPm GBPm (1) GBPm GBPm (1)
GBPm GBPm
========================== ========= =========== ========== ========= =========== ==========
Revenue 31,028 253 31,281 25,512 259 25,771
========================== ========= =========== ========== ========= =========== ==========
Operating profit 1,891 231 2,122 1,500 90 1,590
Net gain/(loss) on
sale and closure
of businesses 20 (20) - (7) 7 -
Finance costs (164) 28 (136) (24) (76) (100)
========================== ========= =========== ========== ========= =========== ==========
Profit before tax 1,747 239 1,986 1,469 21 1,490
Tax expense (429) (52) (481) (352) (13) (365)
========================== ========= =========== ========== ========= =========== ==========
Profit for the year 1,318 187 1,505 1,117 8 1,125
Non-controlling interests (4) - (4) (4) - (4)
========================== ========= =========== ========== ========= =========== ==========
Attributable profit 1,314 187 1,501 1,113 8 1,121
========================== ========= =========== ========== ========= =========== ==========
Average number of
shares 1,743m - 1,743m 1,779m - 1,779m
Basic earnings per
share 75.4p 10.7p 86.1p 62.6p 0.4p 63.0p
EBITDA 2,964 2,371
========================== ========= =========== ========== ========= =========== ==========
1. Alternative Performance Measure (APM) (see pages 48 to 55).
Financial results (continued)
Statutory income statement
Revenue
On a statutory basis, revenue increased by 21.6% to GBP31,028m
(2022: GBP25,512m).
Operating profit
Statutory operating profit was GBP1,891m (2022: GBP1,500m), an
increase of 26.1%, mainly reflecting the higher revenue and margin
improvement, together with favourable exchange translation.
Statutory operating profit includes non-underlying item charges
of GBP231m (2022: GBP90m), including acquisition-related charges of
GBP125m (2022: GBP92m) and charges related to the strategic
portfolio review of GBP99m (2022: GBPnil) reflecting the impact of
site closures and contract renegotiations and terminations in the
UK. A full list of non-underlying items is included in note 14
(non-GAAP measures).
Net gain or loss on sale and closure of businesses
The Group has recognised a net gain of GBP20m on the sale and
closure of businesses (2022: net loss of GBP7m), including exit
costs of GBP11m (2022: GBP7m), which largely relates to the
strategic portfolio review. As a result of this ongoing review of
non-core activities, the Group exited seven tail countries and sold
a non-core business in the UK during the year. Subsequent to the
year-end, the Group also exited its businesses in Argentina and
Angola.
Finance costs
Finance costs increased to GBP164m (2022: GBP24m) due to an
increase in interest rates, the cost of the additional debt issued
in September 2022 and a partial reversal of the fair value gains on
derivatives held to minimise volatility in short-term underlying
finance costs recognised in the prior year.
T ax expense
Profit before tax was GBP1,747m (2022: GBP1,469m) giving rise to
an income tax expense of GBP429m (2022: GBP352m), equivalent to an
effective tax rate of 24.6% (2022: 24.0%). The increase in rate
primarily reflects the increase in the UK corporate tax rate from
19% to 25% from 1 April 2023 and the impact of non-taxable
non-underlying items, partly offset by the reassessment of risk in
respect of prior year uncertain items.
Earnings per share
Basic earnings per share was 75.4p (2022: 62.6p), an increase of
20.4%, reflecting the higher profit for the year.
Underlying income statement
Revenue
Organic revenue growth of 18.8% reflects net new business growth
of approximately 5%, above historical levels of approximately 3%,
with like-for-like volume growth and pricing both at around 7%.
Following strong like-for-like volume growth in the first half of
the year, due to the pandemic-impacted comparators, volume growth
normalised in the second half of the year as anticipated.
Pleasingly, organic revenue growth continues to be broad-based,
with all the Group's regions performing strongly.
Operating profit
Underlying operating profit increased by 29.6% on a
constant-currency basis, to GBP2,122m, and our underlying operating
margin was 6.8% (2022: 6.2%), with all regions achieving
significant margin progression. The strong improvement in margin
reflects the benefits of operating leverage, operational
efficiencies and appropriate pricing to manage inflation headwinds,
and is despite mobilisation costs associated with new business
growth.
Finance costs
Underlying finance costs increased to GBP136m (2022: GBP100m)
mainly due to an increase in interest rates and the cost of the
additional debt issued in September 2022.
Tax expense
On an underlying basis, the tax charge was GBP481m (2022:
GBP365m), equivalent to an effective tax rate of 24.2% (2022:
24.5%). The decrease in rate primarily reflects the reassessment of
prior year tax estimates and the resolution of open items, partly
offset by the increase in the UK corporate tax rate from 19% to 25%
from 1 April 2023. The tax environment continues to be uncertain,
with more challenging tax authority audits and enquiries
globally.
Financial results (continued)
Earnings per share
On a constant-currency basis, underlying basic earnings per
share increased by 32.5% to 86.1p (2022: 65.0p) reflecting the
higher profit for the year.
Balance sheet
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. A EUR500m (GBP438m)
Eurobond matured and was repaid in January 2023. The maturity
profile of the Group's principal borrowings at 30 September 2023
shows that the average period to maturity is 3.3 years (2022: 3.9
years).
The Group's US Private Placement (USPP) notes contain leverage
and interest cover covenants 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 27.6 times, respectively,
at 30 September 2023. Net debt, consolidated EBITDA and net finance
costs are subject to certain accounting adjustments for the
purposes of the covenant tests.
At 30 September 2023, the Group had access to GBP2,680m (2022:
GBP3,732m) of liquidity, including GBP2,000m (2022: GBP2,000m) of
undrawn bank facilities committed to August 2026 and GBP680m (2022:
GBP1,732m) of cash, net of overdrafts. Our credit ratings remain
strong investment grade: Standard & Poor's A/A-1
long-term/short-term (outlook Stable) and, following a rating
upgrade in October 2023, Moody's A2/P-1 long-term/short-term
(outlook Stable).
Net debt
Net debt has increased by GBP663m to GBP3,653m (2022:
GBP2,990m). The Group generated GBP1,166m of free cash flow, after
investing GBP899m in capital expenditure, which was more than
offset by GBP287m spent on the acquisition of subsidiaries, joint
ventures and associates, net of disposal proceeds, dividends of
GBP648m and the share buyback of GBP929m. Favourable exchange
translation was GBP168m.
The ratio of net debt to market capitalisation of GBP35,708m at
30 September 2023 was 10.2% (2022: 9.3%). At 30 September 2023, the
ratio of net debt to underlying EBITDA was 1.2x (2022: 1.3x). Our
leverage policy is to maintain strong investment-grade credit
ratings and to target net debt to underlying EBITDA in the range of
1x--1.5x.
Post-employment benefits
The Group has continued to review and monitor its pension
obligations throughout the year, working closely with the trustees
and actuaries of all schemes across the Group to ensure appropriate
assumptions are used and adequate provision and contributions are
made.
The accounting surplus in the Compass Group Pension Plan reduced
to GBP430m at 30 September 2023 (2022: GBP581m) mainly reflecting a
decrease in the market value of plan assets, partly offset by an
increase in the discount rate, net of inflation, used to measure
the liabilities. The deficit in the rest of the Group's defined
benefit pension schemes has increased to GBP806m (2022: GBP759m).
The net deficit in these schemes is GBP106m (2022: GBP108m)
including investments of GBP700m (2022: GBP651m) held in respect of
unfunded pension schemes and the US Rabbi Trust which do not meet
the definition of pension assets under IAS 19 Employee
Benefits.
The total pensions operating charge for defined contribution
schemes in the year was GBP208m (2022: GBP175m) and GBP30m (2022:
GBP24m) for defined benefit schemes.
Return on capital employed
Return on capital employed was 19.5% (2022: 15.8%) based on net
underlying operating profit after tax at the underlying effective
tax rate of 24.2% (2022: 24.5%). The increase mainly reflects the
higher profit, partly offset by higher average capital employed.
The average capital employed was GBP8,215m (2022: GBP7,567m).
Financial results (continued)
Cash flow
Free cash flow
Free cash flow totalled GBP1,166m (2022: GBP823m). During the
year, we made cash payments totalling GBP58m (2022: GBP57m) in
relation to restructuring and strategic programmes and the one-off
pension charge. Adjusting for this, and for acquisition transaction
costs of GBP17m (2022: GBP10m) which are reported as part of
operating cash flow, underlying free cash flow was GBP1,241m (2022:
GBP890m), with underlying free cash flow conversion at 58.5% (2022:
56.0%).
Capital expenditure of GBP899m (2022: GBP704m) is equivalent to
2.9% (2022: 2.7%) of underlying revenue. The working capital
outflow, excluding provisions and pensions, was GBP98m (2022:
GBP159m). The net interest outflow increased to GBP120m (2022:
GBP86m) consistent with the higher underlying finance costs in the
year. The net tax paid was GBP441m (2022: GBP332m), which is
equivalent to an underlying cash tax rate of 22.2% (2022:
22.3%).
Acquisition and disposal of businesses
The total cash spent on business acquisitions during the year,
net of cash acquired, was GBP351m (2022: GBP303m), including
GBP285m of bolt-on acquisitions and interests in joint ventures and
associates, GBP49m of deferred and contingent consideration and
other payments relating to businesses acquired in previous years,
and GBP17m of acquisition transaction costs included in net cash
flow from operating activities.
The Group received GBP47m (2022: GBP35m) in respect of disposal
proceeds net of exit costs, which primarily comprises the sale of
businesses in the US and Central and Eastern Europe, together with
a further 28% shareholding in the Japanese Highways business
classified as an asset held for sale at 30 September 2022.
Dividends paid
Dividends paid in 2023 of GBP648m represents the 2022 final
dividend (GBP387m) and the 2023 interim dividend (GBP261m).
Purchase of own shares
There was a GBP78m cash outflow in respect of the completion of
the GBP500m share buyback announced in May 2022, a GBP251m cash
outflow in respect of the completion of the GBP250m share buyback
announced in November 2022 and a GBP600m cash outflow in respect of
the GBP750m share buyback announced in May 2023. The balance of the
GBP750m share buyback was completed in November 2023. In addition,
the Compass Group PLC All Share Schemes Trust spent GBP16m on
purchases of the Company's shares to satisfy some of the Group's
liabilities to employees for long-term incentive plans.
Foreign exchange translation
The GBP168m gain (2022: GBP251m loss) on foreign exchange
translation of net debt primarily arises in respect of the Group's
US dollar-denominated USPP notes.
Other non-cash movements
Other non-cash movements primarily comprises fair value
movements on derivative financial instruments used to manage the
Group's interest rate exposure.
Change in reporting currency
With effect from 1 October 2023, the reporting currency of the
Group was changed from sterling to US dollars. The change in
presentation currency will provide investors and other stakeholders
with greater transparency of the Group's performance and reduce
foreign exchange volatility on earnings given that approximately
three-quarters of the Group's underlying operating profit
originates in US dollars.
Shareholder returns
Our dividend policy is to pay out around 50% of underlying
earnings through an interim and final dividend, with the interim
dividend reflecting around one-third of the total annual
dividend.
In determining the level of dividend in any year, the Board
considers a number of factors, which include but are not limited
to:
-- the level of available distributable reserves in the Parent Company
-- future cash commitments and investment requirements to
sustain the long-term growth prospects of the business
-- potential strategic opportunities
-- the level of dividend cover
Financial results (continued)
Further surpluses, after considering the matters set out above,
may be distributed to shareholders over time by way of special
dividend payments, share repurchases or a combination of both.
Compass Group PLC, the Parent Company of the Group, is a
non-trading investment holding company which derives its
distributable reserves from dividends paid by subsidiary companies.
The level of distributable reserves in the Parent Company is
reviewed annually and the Group aims to maintain distributable
reserves that provide adequate cover for shareholder returns. The
distributable reserves of the Parent Company include the
distributable portion of retained earnings and the own shares
reserve totalling GBP2,379m at 30 September 2023 (2022:
GBP2,969m).
An interim dividend of 15.0p per share (2022: 9.4p per share),
GBP261m in aggregate, was paid in July 2023. It is proposed that a
final dividend of 28.1p per share (2022: 22.1p per share), GBP482m
in aggregate, be paid on 29 February 2024 to shareholders on the
register on 19 January 2024. This will result in a total dividend
for the year of 43.1p per share (2022: 31.5p per share), GBP743m in
aggregate (2022: GBP555m). The dividend is covered 2.0 times on an
underlying earnings basis.
The final dividend of 28.1p will be paid gross and a Dividend
Reinvestment Plan (DRIP) will be available. The last date for
receipt of elections for the DRIP will be 8 February 2024.
The Group is in a strong position to fund its dividend, which is
well covered by cash generated by the business. Details of the
Group's going concern assessment can be found on page 33. The
ability of the Board to maintain its future dividend policy will be
influenced by a number of the principal risks identified on pages
21 to 26 that could adversely impact the performance of the Group,
although we believe we have the ability to mitigate those risks as
outlined on pages 21 to 26.
The GBP250m share buyback announced in November 2022 was
completed in March 2023. The GBP750m share buyback announced in May
2023 was completed in November 2023. We have announced a further
share buyback of up to $500m (GBP410m), to complete in 2024 subject
to M&A activity.
Treasury
The Group manages its liquidity, foreign currency exposure and
interest rate risk in accordance with the policies set out
below.
The Group's financial instruments comprise cash, borrowings,
receivables and payables that are used to finance the Group's
operations. The Group also uses derivatives, principally interest
rate swaps, forward currency contracts and cross currency swaps, to
manage interest rate and currency risks arising from the Group's
operations. The Group does not trade in financial instruments. The
Group's treasury policies are designed to mitigate the impact of
fluctuations in interest rates and exchange rates and to manage the
Group's financial risks. The Board approves any changes to the
policies.
Foreign currency risk
The Group's policy is to balance its principal projected cash
flows by currency with actual or effective borrowings in the same
currency. As currency cash flows are generated, they are used to
service and repay debt in the same currency. Where necessary to
implement this policy, forward currency contracts and cross
currency swaps are taken out which, when applied to the actual
currency borrowings, convert these to the required currency.
The borrowings in each currency can give rise to foreign
exchange differences on translation into sterling. Where the
borrowings are either less than, or equal to, the net investment in
overseas operations, these exchange rate movements are treated as
movements on reserves and recorded in the consolidated statement of
comprehensive income rather than in the consolidated income
statement.
Non-sterling earnings streams are translated at the average rate
of exchange for the year. Fluctuations in exchange rates have
given, and will continue to give, rise to translation differences.
The Group is only partially protected against the impact of such
differences through the matching of cash flows to currency
borrowings.
Interest rate risk
As set out above, the Group has effective borrowings in a number
of currencies and its policy is to ensure that, in the short term,
it is not materially exposed to fluctuations in interest rates in
its principal currencies. The Group implements this policy either
by borrowing fixed rate debt or by using interest rate swaps so
that the interest rates on at least 80% of the Group's projected
debt are fixed for one year. For the second and third year,
interest rates are fixed within ranges of 30% to 70% and 0% to 40%
of projected debt, respectively.
Financial results (continued)
Tax
As a Group, we are committed to creating long-term shareholder
value through the responsible, sustainable and efficient delivery
of our key business objectives. This will enable us to grow the
business and make significant investments in the Group and its
operations.
We adopt an approach to tax that supports this strategy and also
balances the various interests of our stakeholders, including
shareholders, governments, employees and the communities in which
we operate. Our aim is to pursue a principled and sustainable tax
strategy that has strong commercial merit and is aligned with our
business strategy. We believe this will enhance shareholder value
whilst protecting our reputation.
In doing so, we act in compliance with the relevant local and
international laws and disclosure requirements, and we conduct an
open and transparent relationship with the relevant tax authorities
that fully complies with the Group's Code of Business Conduct and
Business Integrity Policy.
After many years of operation, the Group has numerous legacy
subsidiaries across the world. Whilst some of these entities are
incorporated in low-tax territories, Compass does not seek to avoid
tax through the use of tax havens.
In an increasingly complex international corporate tax
environment, a degree of tax risk and uncertainty is, however,
inevitable. Tax risk can arise from unclear regulations and
differences in interpretation but, most significantly, where tax
authorities apply diverging standards in assessing intra-group
cross-border transactions. This is the situation for many
multinational organisations. We manage and control these risks in a
proactive manner and, in doing so, exercise our judgement and seek
appropriate advice from relevant professional firms. Tax risks are
assessed as part of the Group's formal governance process and are
reviewed by the Board and the Audit Committee on a regular
basis.
Risks and uncertainties
The Board takes a proactive approach to risk management aimed at
protecting the Group's employees, clients and consumers and
safeguarding the interests of the Company and its shareholders in a
constantly changing environment.
The principal risks and uncertainties facing the business, and
the activities the Group undertakes to mitigate these, are set out
on pages 21 to 26.
Related party transactions
Details of transactions with related parties are set out in note
12 to the consolidated financial statements. These transactions
have not had, and are not expected to have, a material effect on
the financial performance or position of the Group.
Going concern
The factors considered by the directors in assessing the ability
of the Group to continue as a going concern are discussed on page
33.
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 discussed on page 33, the directors have
a reasonable expectation that the Group has adequate resources to
continue in operational existence for at least the period to 31
March 2025. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
Financial results (continued)
Viability statement
In accordance with provision 31 of the UK Corporate Governance
Code 2018, the directors have assessed the Group's viability,
considering its current trading performance, financial position,
financing, strategic plan and principal risks.
Business prospects
The Board has considered the long-term prospects of the Group
based on its business model, strategy and markets. Compass is a
global leader in food services and the geographical and sector
diversification of the Group's operations helps to minimise the
risk of serious business interruption or catastrophic damage to its
reputation. The Group's business model is structured so that it is
not reliant on one group of clients or sector. The Group's largest
client constitutes 2% of underlying revenue, with the top 10
clients accounting for 9%.
Assessment
The directors have determined that a three-year period to 30
September 2026 is an appropriate period over which to provide the
Group's viability statement on the basis that it is the period
reviewed by the Board in its strategic planning process and is
aligned to the typical length of the Group's contracts (three to
five years). The directors believe that this presents the Board and
readers of the Annual Report with a reasonable degree of confidence
over this longer-term outlook.
The Board's assessment of the Group's viability comprises the
following business processes:
-- Risk management process
The Group operates a formal risk management process under which
the Group's principal risks are assessed and prioritised
biannually. Risks and corresponding controls and mitigations are
reviewed by country and regional leadership teams on an ongoing
basis. The findings of the risk reviews, including the principal
risks and any developing trends, are reported to the Board twice a
year. In making its viability assessment, the Board carried out a
robust evaluation of the emerging and principal risks facing the
Group (see pages 21 to 26), including those that would threaten its
business model, future performance, solvency or liquidity.
-- Strategic planning process
The Board considers annually a three-year, bottom-up strategic
plan and a more detailed budget which is prepared for the following
year. Current-year business performance is reforecast during the
year. The plan is reviewed and approved by the Board, with
involvement throughout from the Group CEO, Group CFO and the
Executive team. The Board's role is to consider the appropriateness
of key assumptions, taking into account the external environment
and business strategy. The most recent three-year plan was approved
by the Board in November 2023.
-- Headroom and covenant analysis
At 30 September 2023, the Group had GBP2.0bn of undrawn
committed bank facilities, which mature in August 2026, and
GBP0.7bn of cash net of overdrafts. Term debt maturities in the
three-year period total GBP1.8bn, of which GBP0.3bn was
pre-financed with bond issues in September 2022. Based on the
forecast cash flows in the strategic plan, the remainder of the
maturing debt is expected to be refinanced during the three-year
period to 30 September 2026 to maintain the desired level of
headroom. The GBP2.0bn of committed bank facilities are expected to
be refinanced during 2025. The Group's long-term (A/A2) and
short-term (A-1/P-1) credit ratings and well-established presence
in the debt capital markets provide the directors with confidence
that the Group could refinance the maturing debt and facilities as
required.
A reverse stress test has been undertaken to identify the
circumstances that would cause the Group to breach the headroom
against its committed facilities or the financial covenants on its
USPP debt. The reverse stress test, which removes discretionary
M&A expenditure and share buybacks as mitigating actions, shows
that underlying operating profit(1) would have to reduce by more
than 80% of the strategic plan level throughout the three-year
assessment period before the leverage covenant is reached. The
refinancing requirement is not accelerated in the reverse stress
test as a mitigating action given the strong liquidity position of
the Group.
1. Alternative Performance Measure (APM). The Group's APMs are
defined in note 14 (non-GAAP measures) and reconciled to GAAP
measures in notes 2 (segmental analysis) and 14 to the consolidated
financial statements.
Financial results (continued)
The principal risks that would have the most significant impact
on the Group's business model, future performance, solvency or
liquidity are further outbreaks of COVID-19 or another pandemic and
associated containment measures, geopolitical tensions, economic
conditions and food and labour cost inflation and these, together
with the other principal risks identified on pages 21 to 26, have
been considered as part of the viability assessment. Specific
scenarios based on the principal risks have not been modelled on
the basis that the level of headroom to absorb the occurrence of
such risks is substantial and there is a range of other actions
available that could be implemented to mitigate the potential
impact.
Substantial mitigating actions were identified and implemented
as part of the Group's COVID-19 pandemic response in 2020,
including reducing capital expenditure, resizing the cost base,
renegotiating client contracts, pausing M&A activity and
shareholder returns, raising equity, negotiating covenant waivers
and securing additional committed funding. These actions illustrate
the flexibility the Group has to mitigate the impact of adverse
events.
In the event that the financial covenants were to come under
pressure, mitigating actions include repaying the loan notes from
available liquidity, or refinancing, in advance of their maturity
or negotiating covenant waivers.
Conclusion
Based on the results of this analysis, the Board has a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
three-year period to 30 September 2026.
Palmer Brown
Group Chief Financial Officer
20 November 2023
Risk management
The Board takes a proactive approach to risk management aimed at
protecting the Group's employees, clients and consumers and
safeguarding the interests of the Company and its shareholders in a
constantly changing environment.
Risk management is an essential element of business governance.
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 those 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.
In compliance with provision 28 of the UK Corporate Governance
Code 2018 (the Code), the Board has conducted a robust assessment
of the Company's emerging and principal risks. The following pages
set out the Board's approach to assessing and mitigating risk, the
principal risks of the Company, and the procedures in place to
identify emerging risks.
Risk management framework
The Board has overall responsibility for risk management. This
includes establishing policies and procedures to manage risk,
overseeing the internal control framework, reviewing the nature and
extent of the principal risks, setting risk appetite and embedding
a culture of risk management throughout the business.
The Board has approved a Risk Management Policy. The Group
operates a formal risk management process in accordance with this
policy, under which the Group's principal risks (set out on pages
21 to 26) are assessed and prioritised biannually. In accordance
with the FRC's Guidance on Risk Management, Internal Control and
Related Financial Business Reporting 2014 and in the Code, this
process has been in place for the financial year under review.
These systems are designed to manage rather than eliminate the risk
of failure to achieve the Group's strategic objectives, safeguard
the Group's assets against material loss, fairly report the Group's
performance and position, and ensure compliance with relevant
legislation, regulation and best practice including that related to
social, environmental and ethical matters. These systems provide
reasonable, but not absolute, assurance against material
misstatement or loss.
The Board delegates aspects of risk management, with the
Executive Committee responsible for the day-to-day management of
significant risk, and the Audit Committee responsible for the
oversight of Compass' risk management systems and internal
financial controls. The Group Director of Risk and Internal Audit
maintains the risk management framework including the Risk
Management Policy. The Audit Committee annually reviews the
effectiveness of the Group's approach to risk management and any
changes to the Risk Management Policy and recommends the principal
risks and uncertainties disclosures made in the Annual Report and
Accounts to the Board for approval.
Risks and the corresponding controls and mitigations are
reviewed by country and regional leadership teams on an ongoing
basis. Risk updates are integral to periodic management reviews and
are regularly reviewed by the Regional Governance Committees (RGCs)
and the Executive Committee. A critical component of the risk
review process is the dynamic identification of emerging and
developing risks at a country, regional and Group level. This
bottom-up and top-down approach provides a comprehensive assessment
of the key risks facing the Group. The findings of the risk
reviews, including the principal risks and any developing trends,
are reported to and considered by the Board twice a year.
Risks are considered at gross and net levels. This allows the
impact of each risk and likelihood of its occurrence both before
and after controls and mitigations to be assessed. Risk management
plans are developed for all significant risks. They include a clear
description of the nature of the risk, quantification of the
potential impact and likelihood of occurrence, the owners for each
risk, and details of the controls and mitigations in place,
proportionate to the risk, and in line with the Company's business.
The identification and assessment of climate-related risks and
opportunities are incorporated within the risk management process.
All country operating units are mandated to consider
climate-related risks and opportunities. These are assessed in
terms of percentage profit before interest and tax (PBIT) impact in
accordance with the criteria set out in the Board-approved Risk
Management Policy. All country and Group-level risks are assigned
risk owners and, together with the mitigations, are recorded in the
central risk reporting system.
Group companies also submit biannual risk and internal control
assurance letters to the Group CFO on internal control and risk
management issues, with comments on the control environment within
their operations. The Chair of the Audit Committee reports to the
Board on any matters arising from the Committee's review of how the
risk management and internal control processes have been
applied.
The Audit Committee keeps under review the adequacy and
effectiveness of the Company's and Group's internal financial
controls and risk management systems.
Risk management (continued)
Risk appetite
The Board interprets risk appetite as the level of risk that the
Company is willing to take to meet its strategic objectives. The
Board's attitude to and appetite for risk are communicated to the
Group's businesses through the strategy planning process and the
internal risk governance and control frameworks. In determining its
risk appetite, the Board recognises that a prudent and robust
approach to risk mitigation must be carefully balanced with a
degree of flexibility so that the entrepreneurial spirit that has
greatly contributed to the Group's success is not inhibited.
In assessing risk appetite, the Board reviews the three-year
business plan and associated strategic risks. Risk appetite for
specific financial risks such as funding and liquidity, credit,
counter-party, foreign exchange and interest rate risk are set out
in the Board approved treasury policies. Compliance with legal and
regulatory requirements, such as those contained in the Companies
Act, health and safety and other risk-specific legislation, is
mandatory.
New and emerging risks
The Board has established processes for identifying emerging
risks, and horizon scanning for risks that may arise over the
medium to long term. Emerging and potential changes to the Group's
risk profile are identified through the Group's risk management
framework and through direct feedback from management, including in
regard to changing operating conditions, and market and consumer
trends.
The democratisation of generative artificial intelligence (AI)
has given widespread access to powerful online AI services for
content creation. This opportunity presents several risks including
breach of data confidentiality and data privacy. In response, to
mitigate these risks, Compass has implemented principle-based rules
that apply globally, and we are currently developing a framework
for the responsible use of AI in all our markets.
The escalating tensions in the Middle East and the ongoing
Russia-Ukraine conflict have elevated geopolitical risks and while
we do not operate directly in those countries currently affected,
we do have interests elsewhere in Europe and the Middle East. We
continue to monitor these situations closely with the safety and
security of the Group's employees front of mind.
Our principal risks
The principal risks and uncertainties facing the business at the
date of this Announcement, and any changes to the status of these
risks since last year, are set out on pages 21 to 26. These have
been subject to robust assessment and review.
They do not, however, comprise all the risks that the Group may
face and are not listed in any order of priority. Additional risks
and uncertainties not presently known to management, or which are
considered to be remote or are deemed to be less material at the
date of this Announcement, may also have an adverse effect on the
Group.
Other principal risks
The Group faces a number of operational risks on an ongoing
basis, such as litigation and financial risks, as well as some
wider risks, for example, environmental, information security,
cyber and reputational.
All risks disclosed in previous years can be found in the annual
reports available on our website, www.compass-group.com . These
risks remain important to the business and are kept under regular
review. However, the disclosures on pages 21 to 26 focus on risks
currently considered to be more significant to the Group.
Principal risks
Key Link to
Increased risk MAP 1: Client sales
and marketing
Static risk MAP 2: Consumer sales
and marketing
Decreasing risk MAP 3: Cost of food
New risk MAP 4: In-unit costs
MAP 5: Above-unit overheads
Risk and description Mitigation
Climate change and sustainability
Climate change The Group continues to focus on evaluating
its exposure to climate change and
2023 2022 seeks to identify potential future
Strategic pillar link: People/Performance/Purpose issues early so that sourcing and operations
The impact of climate change can be adjusted, and menus adapted
on the environment may lead to appropriately. Work continues with
issues around food sourcing and clients and suppliers to propose, execute
supply chain continuity in some and measure solutions to support their
of the Group's markets. Issues efforts and those of Compass in reducing
in these areas could affect the greenhouse gas (GHG) emissions. Compass
availability of some food products, has targeted climate net zero GHG emissions
and potentially may lead to food by 2050 alongside validated science-based
cost inflation. targets to reduce emissions by 2030
(from a 2019 base year) in line with
the 2015 Paris Agreement.
================================================== =============================================
Social and ethical standards To enhance its ability to counter risks
to its businesses and supply chains
2023 2022 from modern slavery, Compass has focused
Strategic pillar link: People/Performance/Purpose on the areas where its human rights
Compass relies on its people strategy can have the greatest impact.
to deliver great service to its This has been done through the Human
clients and consumers and recognises Rights Working Group, the engagement
that the welfare of employees of external specialist advisers, the
is the foundation of its culture Group's modern slavery e-learning tools
and business. Compass remains and ongoing work to strengthen and
vigilant in upholding high standards improve the Group's human rights due
of business ethics with regard diligence through supplier evaluation
to human rights and social equality. and labour agency reviews.
Health and safety
Health and safety Management meetings throughout the
Group feature a health and safety update
2023 2022 as one of their first substantive agenda
Strategic pillar link: People/Performance/Purpose items.
Compass feeds millions of consumers Health and safety improvement KPIs
every day and its companies employ are included in the annual bonus plans
hundreds of thousands of people for each of the businesses' management
around the world. For that reason, teams. The Group has policies, procedures
setting the highest standards and standards in place to ensure compliance
for food hygiene and safety is with legal obligations and industry
paramount. standards.
Health and safety breaches could The safety and quality of the Group's
cause serious business interruption global supply chain are assured through
and could result in criminal compliance with a robust set of standards
and civil prosecution, increased which are regularly reviewed, audited
costs and potential damage to and upgraded as necessary to improve
the Company's reputation. supply chain visibility and product
integrity.
Further mitigations in place include
our Global Operational Safety Standards,
Global Supply Chain Integrity Standards
and a Global Allergen Management Plan.
================================================== =============================================
Principal risks (continued)
Key Link to
Increased risk MAP 1: Client sales
and marketing
Static risk MAP 2: Consumer sales
and marketing
Decreasing risk MAP 3: Cost of food
New risk MAP 4: In-unit costs
MAP 5: Above-unit
overheads
Risk and description Mitigation
Health and safety (continued)
Pandemic Operations and working practices have
been adjusted to retain the skills
2023 2022 and experience of colleagues and provide
Strategic pillar link: People/Performance/Purpose flexibility in the event of another
The Group's operations were significantly pandemic which leads to a resumption
disrupted due to the global COVID-19 of containment measures.
pandemic and associated containment To protect the Group's employees, clients
measures. Compass has recovered and consumers, enhanced health and
well and learned from the pandemic, safety protocols and personal protective
and as a result this risk has equipment requirements and guidelines,
declined. Further outbreaks of hygiene requirements and site layout
the virus, or another pandemic, solutions developed in consultation
could cause further business with expert advisers and with our clients,
risk. have been adopted.
Careful management of the Group's cost
base and robust measures to protect
the Group's liquidity position have
ensured that we remain resilient and
well placed to take advantage of appropriate
opportunities as they arise.
Robust incident management and business
continuity plans are in place and are
monitored for effectiveness and regularly
reviewed to ensure they reflect evolving
best practice.
People
Recruitment The Group aims to mitigate this risk
by efficient and time-critical resource
2023 2022 management, mobilisation of existing
Strategic pillar link: People/Performance experienced employees within the organisation,
Failure to attract and recruit improved use of technology such as
people with the right skills apps and social media, targeted recruitment,
at all levels could limit the and training and development programmes.
success of the Group.
The Group faces resourcing challenges
in some of its businesses in
some key positions due to labour
shortages and a lack of industry
experience amongst candidates,
appropriately qualified people,
and the seasonal nature of some
of Compass' businesses.
================================================== ===============================================
Retention and motivation The Group has established tools, training,
development, performance management
2023 2022 and reward programmes to help retain,
Strategic pillar link: People/Performance develop, motivate and support its people.
Retaining and motivating the The Group has a number of well-established
best people with the right skills, initiatives which help to monitor levels
at all levels of the organisation, of engagement and to respond to the
is key to the long-term success needs of employees. Specifically, Compass
of the Group. has increased its local focus and employee
Changes to economic conditions support on mental health awareness,
may increase the risk of attrition stress management and resilience to
at all levels of the organisation. better equip its people in times of
Potential business closures resulting uncertainty and change.
from further COVID--19 or other To protect its workforce, Compass applies
pandemic-related lockdowns or measures available to it to retain
other social distancing controls as many of its skilled workforce as
could significantly impact the possible, including redeployment.
Group's workforce in affected
regions.
================================================== ===============================================
Principal risks (continued)
Key Link to
Increased risk MAP 1: Client sales
and marketing
Static risk MAP 2: Consumer sales
and marketing
Decreasing risk MAP 3: Cost of food
New risk MAP 4: In-unit costs
MAP 5: Above-unit
overheads
Risk and description Mitigation
Clients and consumers
Sales and retention Compass has strategies based on quality,
value and innovation that strengthen
2023 2022 its long-term relationships with its
Strategic pillar link: People/Performance clients and consumers.
The Group's businesses rely on The Group's business model is structured
securing and retaining a diverse so that it is not reliant on one particular
range of clients. sector or group of clients.
The potential loss of material Technology is used to support the delivery
client contracts in an increasingly of efficiencies and to contribute to
competitive market is a risk growth through, for example, cashierless
to Compass' businesses. and cashless payment systems and the
use of artificial intelligence. This
is beneficial to clients and consumers
and positively impacts retention and
new business wins.
Compass continues to focus on financial
security and safety. In today's environment,
these are key strengths for clients.
Contracts may be renegotiated. There
is continued focus on retention and
new sales and the use of technology
and innovative client solutions.
=========================================== =============================================
Service delivery, contractual Processes are in place to ensure that
compliance and retention the services delivered to clients are
of an appropriate standard and comply
2023 2022 with the required contract terms and
Strategic pillar link: People/Performance conditions.
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 Compass aims to minimise this risk
and to respond to new market and consumer
2023 2022 food services trends by continuing
Strategic pillar link: Performance to promote its differentiated propositions
The Group operates in a highly and by focusing on its strengths, such
competitive marketplace. The as flexibility in its cost base, quality,
levels of concentration and outsource value of service and innovation.
penetration vary by country and Harnessing knowledge and experience
by sector. Some markets are relatively and continuing to invest in technology
concentrated with two or three helps to counter any potential risk
key players. Others are highly and to capitalise on the opportunities
fragmented and offer significant created.
opportunities for consolidation Compass continues to evolve its offer
and penetration of the self-operated to increase participation rates and
market. service sites of different sizes.
Ongoing structural changes in The businesses are able to adapt to
working and education environments changes in the service provision environment
may reduce the number of people and where possible take advantage of
in offices and educational establishments. changes in the market. By leveraging
The emergence of new industry its expertise and technology Compass
participants and traditional is able to differentiate its food services
competition using disruptive offer. For example, investments in
technology could adversely affect SmartQ and EAT Club have given Compass
the Group's businesses. platforms that allow it to pivot food
operations according to changing client
and consumer demands.
=========================================== =============================================
Principal risks (continued)
Key Link to
Increased risk MAP 1: Client sales
and marketing
Static risk MAP 2: Consumer sales
and marketing
Decreasing risk MAP 3: Cost of food
New risk MAP 4: In-unit costs
MAP 5: Above-unit
overheads
Risk and description Mitigation
Economic and political environment
Geopolitical As a Group, Compass is monitoring the
situation closely with the safety and
2023 2022 security of the Group's employees front
Strategic pillar link: People/Performance/Purpose of mind.
The escalating tensions in the Whilst we do not operate in Israel
Middle East and the ongoing Russia-Ukraine or the Palestinian territories, we
conflict have elevated geopolitical do have interests elsewhere in the
risks, heightened national security Middle East. Last year, Compass permanently
threats to countries in those exited the Russian market and moved
regions and disrupted the global away from all known Russian suppliers.
energy market, which have contributed The Group continues to manage inflation
to cost inflation, and economic risks by sharing best practice across
and cyber-security risks. the Group to drive greater efficiencies
through menu management, supplier rationalisation,
labour scheduling, and productivity
through the increased use of technology.
Cost indexation in our contracts also
gives Compass the contractual right
to review pricing with clients.
================================================== ===================================================
Economy As part of Compass' strategy, the Group
is focused on productivity and purchasing
2023 2022 initiatives which help to manage the
Strategic pillar link: People/Performance/Purpose cost base. During adverse conditions,
Sectors of Compass' business if necessary actions can be taken to
could be susceptible to adverse reduce labour costs and action plans
changes in economic conditions have been implemented to protect profitability
and employment levels. and liquidity.
Continued worsening of economic
conditions has increased the
risk to the businesses in some
jurisdictions.
================================================== ===================================================
Cost inflation As part of the MAP framework, and by
sharing best practice across the Group,
2023 2022 Compass seeks to manage inflation by
Strategic pillar link: People/Performance continuing to drive greater efficiencies
At Compass, our objective is through menu management, supplier rationalisation,
always to deliver the right level labour scheduling and productivity,
of service in the most efficient and through the increased use of technology.
way. An increase in the cost Cost indexation in our contracts also
of labour, for example, minimum gives Compass the contractual right
wages in the US and UK, or the to review pricing with clients.
cost of food, could constitute Cost action programmes and the continued
a risk to our ability to do this. oversight of supply chain costs are
also mitigating the risks in this area.
================================================== ===================================================
Political instability The Group remains alert to future changes
presented by emerging markets or fledgling
2023 2022 administrations and tries to anticipate
Strategic pillar link: People/Performance/Purpose and contribute to important changes
Compass is a global business in public policy.
operating in countries and regions Where possible, Compass seeks to absorb
with diverse economic and political price increases through operational
conditions. Operations and earnings efficiencies. Cost indexation in our
may be adversely affected by contracts also gives Compass the contractual
political or economic instability. right to review pricing with clients.
Recruitment and retention strategies
are also in place to mitigate any impact
on labour supply.
Compass remains vigilant to changes
in political stability in local jurisdictions
and retains the flexibility to take
appropriate mitigating action as necessary.
================================================== ===================================================
Principal risks (continued)
Key Link to
Increased risk MAP 1: Client sales
and marketing
Static risk MAP 2: Consumer sales
and marketing
Decreasing risk MAP 3: Cost of food
New risk MAP 4: In-unit costs
MAP 5: Above-unit
overheads
Risk and description Mitigation
Compliance and fraud
Compliance and fraud The Group's zero-tolerance-based Code
of Business Conduct (CBC) and Business
2023 2022 Integrity Policy (BIP), govern all
Strategic pillar link: People/Performance/Purpose aspects of its relationships with its
Ineffective compliance management stakeholders. Compass operates a continuous
with increasingly complex laws improvement process as part of the
and regulations, or evidence Group's Ethics and Integrity programme
of fraud, bribery and corruption, to enhance and strengthen its culture
anti-competitive behaviour or of integrity, sharing insights and
other serious misconduct, could emerging trends between regional and
have an adverse effect on the country management teams.
Group's reputation or on its The Group undertakes a robust risk
performance and/or lead to a management assessment that helps identify
reduction in the Company's share major risks and ensures the internal
price and/or a loss of business. control framework remains effective
It could also lead to criminal through regular monitoring, testing
proceedings, sanctions or other and review. Regulatory and compliance
litigation being brought against risks are included in this process
the Company, its directors or to enable visibility and planning to
executive management. address them.
Companies face increased risk A strong culture of integrity is promoted
of fraud, bribery and corruption, through Compass' Ethics and Integrity
anti-competitive behaviour and programme and its independently operated
other serious misconduct both Speak Up, We're Listening helpline
internally and externally, due and web platform. All alleged breaches
to financial and/or performance of the CBC and the BIP, including any
pressures and significant changes allegations of fraud, bribery and corruption,
to ways of working. anti-competitive behaviour and other
serious misconduct, are followed up,
investigated and dealt with appropriately.
Regulation and compliance risk is also
considered as part of the annual business
planning process.
Our Ethics and Integrity e-learning
platform provides increased engagement
on key regulatory and ethics and integrity
topics for Group employees and clear
communication of standards and expectations.
Internal Audit regularly reviews internal
controls and analyses financial transactions
to mitigate the risk of error or fraud.
================================================== ==============================================
Principal risks (continued)
Key Link to
Increased risk MAP 1: Client sales
and marketing
Static risk MAP 2: Consumer sales
and marketing
Decreasing risk MAP 3: Cost of food
New risk MAP 4: In-unit costs
MAP 5: Above-unit
overheads
Risk and description Mitigation
Compliance and fraud (continued)
International tax Compass seeks to plan and manage its
tax affairs efficiently in the jurisdictions
2023 2022 in which the Group's businesses operate.
Strategic pillar link: Performance Compass acts in compliance with relevant
The international corporate tax laws and disclosure requirements.
environment remains complex and Compass manages and controls these
the sustained increase in audit risks in a proactive manner and in
activity from tax authorities doing so exercises judgement and seeks
means that the potential for appropriate advice from reputable professional
tax uncertainties and disputes firms. Tax risks are assessed as part
remains high. The need to raise of the Group's formal governance process
public finances is likely to and are reviewed by the Board and the
cause governments to consider Audit Committee on a regular basis.
increases in tax rates and other The Group proactively manages its tax
potentially adverse changes in arrangements in accordance with various
tax legislation, and to renew government-led initiatives and ensures
focus on compliance for large compliance is achieved by putting robust
corporates. processes and controls in place, including
third-party support and review.
========================================== =================================================
Information systems, technology Compass continually assesses its cyber
and cyber risk, and monitors and manages the
maturity of its enterprise infrastructure,
2023 2022 platforms and security controls to
Strategic pillar link: People/Performance ensure that it can effectively prevent,
The digital world creates increasing detect and respond to current or future
risk for global businesses including, cyber-attacks.
but not limited to, technology Appropriate crisis management procedures
failures, loss of confidential are in place to manage issues in the
data, data privacy breaches and event of a cyber incident occurring.
damage to brand reputation through, Our response protocols are supported
for example, the increased threat by using industry-standard tooling,
of cyber-attacks, and use and experienced IT and security professionals,
instantaneous nature of social and external partners to mitigate potential
media. impacts. Assurance is provided by regular
Disruption caused by the failure compliance monitoring of our key information
of key software applications, technology control framework, which
security controls, or underlying is designed to prevent and defend against
infrastructure, or disruption cyber threats and other risks.
caused by cyber-attacks could The Group relies on a variety of digital
impact day-to-day operations and technology platforms to manage
and management decision-making, and deliver services and communicate
or result in a regulatory fine with its people, clients, consumers
or other sanction and/or third and suppliers. Compass' decentralised
party claims. model and infrastructure help to mitigate
The incidence of sophisticated propagation of attacks across the Group's
phishing and malware attacks technology estate.
(including ransomware) on businesses Compass continues to be focused on
is rising with an increase in the need to maximise the effectiveness
the number of companies suffering of its information systems and technology
operational disruption, unauthorised as a business enabler. As such, the
access to and/or loss of data, Group continues to invest in technology
including confidential, commercial, and specialist resources in order to
and personal identifiable data. further strengthen its platforms, cyber-security
A combination of increased geopolitical, defences and controls to prevent and
economic instability and accessibility detect cyber threats and respond to
of sophisticated artificial intelligence attacks in order to mitigate the risk
(AI) enabled tools and techniques of operational disruption, technology
have contributed to a significant failure, unauthorised access to and/or
increase in the risk of phishing loss of data.
and malware attacks including The Group has implemented configuration
ransomware across all industries. changes designed to block phishing
The democratisation of generative emails, increased awareness campaigns,
AI has given widespread access and provided cyber training to help
to powerful online AI services employees identify these kind of attacks.
for content creation. This opportunity In response to the potential risks
presents several risks including posed by AI, Compass has implemented
to data privacy and confidentiality. principle-based rules that apply globally,
and we are currently developing a framework
for the responsible use of AI in all
our markets.
Information system, technology and
cybersecurity controls and risks are
assessed as part of the Group's formal
governance processes and are reviewed
by the Audit Committee on a regular
basis.
========================================== =================================================
Compass Group PLC
Consolidated Financial Statements
Consolidated income statement
For the year ended 30 September 2023
2023 2022
=============== ===============
Notes GBPm GBPm GBPm GBPm
==================================== ===== ===== ======== ===== ========
Revenue 2 31,028 25,512
Operating costs (29,193) (24,057)
==================================== ===== ===== ======== ===== ========
Operating profit before joint
ventures and associates 1,835 1,455
Share of results of joint ventures
and associates 2 56 45
==================================== ===== ===== ======== ===== ========
Underlying operating profit1 2,14 2,122 1,590
Acquisition-related charges 3,14 (125) (92)
Charges related to the strategic
portfolio review 3,14 (99) -
Other(2) 14 (7) 2
Operating profit 2 1,891 1,500
Net gain/(loss) on sale and closure
of businesses 10,14 20 (7)
===== =====
Finance income 48 11
Finance expense (184) (111)
Other financing items 14 (28) 76
===== =====
Finance costs (164) (24)
==================================== ===== ===== ======== ===== ========
Profit before tax 1,747 1,469
Income tax expense 4 (429) (352)
==================================== ===== ===== ======== ===== ========
Profit for the year 1,318 1,117
==================================== ===== ===== ======== ===== ========
Attributable to
Equity shareholders 1,314 1,113
Non-controlling interests 4 4
==================================== ===== ===== ======== ===== ========
Profit for the year 1,318 1,117
==================================== ===== ===== ======== ===== ========
Basic earnings per share 5 75.4p 62.6p
==================================== ===== ===== ======== ===== ========
Diluted earnings per share 5 75.3p 62.6p
==================================== ===== ===== ======== ===== ========
1. Operating profit excluding specific adjusting items (see note
14).
2. Other specific adjusting items include COVID-19 resizing
credit, one-off pension charge and tax on share of profit of joint
ventures (see note 14).
Compass Group PLC
Consolidated Financial Statements
Consolidated statement of comprehensive income
For the year ended 30 September 2023
2023 2022
Notes GBPm GBPm
===================================================== ===== ===== =====
Profit for the year 1,318 1,117
===================================================== ===== ===== =====
Other comprehensive income
Items that will not be reclassified to the income
statement
Remeasurement of post-employment benefit obligations 27 1,038
Return on plan assets, excluding interest income (271) (668)
Change in asset ceiling, excluding interest income 5 3
Change in fair value of financial assets at fair
value through other comprehensive income 94 (133)
Tax credit/(charge) on items relating to the
components of other comprehensive income 30 (65)
===================================================== ===== ===== =====
(115) 175
===================================================== ===== ===== =====
Items that may be reclassified to the income
statement
Currency translation differences1 (335) 591
Reclassification of cumulative currency translation
differences on sale of businesses 10 (1) 7
Tax credit on items relating to the components
of other comprehensive income 3 -
===================================================== ===== ===== =====
(333) 598
===================================================== ===== ===== =====
Total other comprehensive (loss)/income for the
year (448) 773
===================================================== ===== ===== =====
Total comprehensive income for the year 870 1,890
===================================================== ===== ===== =====
Attributable to
Equity shareholders 866 1,886
Non-controlling interests 4 4
===================================================== ===== ===== =====
Total comprehensive income for the year 870 1,890
===================================================== ===== ===== =====
1. Includes a gain of GBP166m in relation to the effective
portion of net investment hedges (2022: GBP190m loss).
Compass Group PLC
Consolidated Financial Statements
Consolidated statement of changes in equity
For the year ended 30 September 2023
Attributable to equity
shareholders
=============================
Share Share Other Retained Non-controlling Total
capital premium reserves earnings interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm
======================================== ===== ======== ======== ========= ========= =============== =======
At 1 October 2022 198 189 4,068 1,419 31 5,905
======================================== ===== ======== ======== ========= ========= =============== =======
Profit for the year - - - 1,314 4 1,318
======================================== ===== ======== ======== ========= ========= =============== =======
Other comprehensive income
Remeasurement of post-employment
benefit obligations - - - 27 - 27
Return on plan assets, excluding
interest income - - - (271) - (271)
Change in asset ceiling, excluding - - - 5 - 5
interest income
Change in fair value of financial
assets at fair value through
other comprehensive income - - - 94 - 94
Currency translation differences - - (335) - - (335)
Reclassification of cumulative
currency translation differences
on sale of businesses - - (1) - - (1)
Tax credit on items relating
to the components of other
comprehensive income - - 3 30 - 33
======================================== ===== ======== ======== ========= ========= =============== =======
Total other comprehensive
loss for the year - - (333) (115) - (448)
======================================== ===== ======== ======== ========= ========= =============== =======
Total comprehensive (loss)/income
for the year - - (333) 1,199 4 870
======================================== ===== ======== ======== ========= ========= =============== =======
Fair value of share-based
payments - - - 44 - 44
Change in fair value of non-controlling
interest put options - - 13 - - 13
Changes to non-controlling - - (2) - 2 -
interests due to acquisitions
and disposals
Reclassification of non-controlling - - 6 - (6) -
interest put options reserve
on exercise of put options
Cost of shares transferred
to employees - - 26 (26) - -
Purchase of own shares - share
buybac k1 - - (1,004) - - (1,004)
Purchase of own shares - employee
share-based payments - - (16) - - (16)
Tax credit on items taken - - - 3 - 3
directly to equity
198 189 2,758 2,639 31 5,815
Dividends paid to equity shareholders 6 - - - (648) - (648)
Dividends paid to non-controlling
interests - - - - (6) (6)
At 30 September 2023 198 189 2,758 1,991 25 5,161
======================================== ===== ======== ======== ========= ========= =============== =======
1. Including stamp duty and brokers' commission.
Compass Group PLC
Consolidated Financial Statements
Consolidated statement of changes in equity
For the year ended 30 September 2023
Attributable to equity
shareholders
===========================================
Share Share Other Retained Non-controlling Total
capital premium reserves(1) earnings interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm
====================================== ===== ======== ======== ============ ========= =============== =======
At 1 October 2021 198 189 4,262 242 28 4,919
====================================== ===== ======== ======== ============ ========= =============== =======
Profit for the year - - - 1,113 4 1,117
====================================== ===== ======== ======== ============ ========= =============== =======
Other comprehensive income
Remeasurement of post-employment
benefit obligations - - - 1,038 - 1,038
Return on plan assets, excluding
interest income - - - (668) - (668)
Change in asset ceiling, excluding
interest income - - - 3 - 3
Change in fair value of financial
assets at fair value through
other comprehensive income - - - (133) - (133)
Currency translation differences - - 591 - - 591
Reclassification of cumulative
currency translation differences
on sale of businesses - - 7 - - 7
Tax charge on items relating
to the components of other
comprehensive income - - - (65) - (65)
====================================== ===== ======== ======== ============ ========= =============== =======
Total other comprehensive
income for the year - - 598 175 - 773
====================================== ===== ======== ======== ============ ========= =============== =======
Total comprehensive income
for the year - - 598 1,288 4 1,890
====================================== ===== ======== ======== ============ ========= =============== =======
Fair value of share-based
payments - - 34 - - 34
Change in fair value of
non-controlling
interest put options - - (2) - - (2)
Changes to non-controlling
interests due to acquisitions
and disposals - - (7) - 8 1
Purchase of non-controlling
interests - - - (7) (1) (8)
Reclassification of non-controlling
interest put options reserve
on exercise of put options - - 5 - (5) -
Release of share awards settled
in existing shares purchased
in the market - - (4) - - (4)
Purchase of own shares - share
buybac k2 - - (502) - - (502)
Purchase of own shares - employee
share-based payments - - (6) - - (6)
Transfer - - (314) 314 - -
====================================== ===== ======== ======== ============ ========= =============== =======
198 189 4,064 1,837 34 6,322
Dividends paid to equity shareholders 6 - - - (418) - (418)
Dividends paid to non-controlling
interests - - - - (3) (3)
Cost of shares transferred
to employees - - 4 - - 4
====================================== ===== ======== ======== ============ ========= =============== =======
At 30 September 2022 198 189 4,068 1,419 31 5,905
====================================== ===== ======== ======== ============ ========= =============== =======
1. Other reserves include the capital redemption and own shares
reserves which were shown separately in 2022.
2. Including stamp duty and brokers' commission.
Compass Group PLC
Consolidated Financial Statements
Consolidated balance sheet
At 30 September 2023
30 September
==================
2023 2022
Notes GBPm GBPm
=========================================== ===== ======== ========
Non-current assets
Goodwill 7 5,002 5,119
Other intangible assets 2,032 1,960
Costs to obtain and fulfil contracts 1,078 1,106
Right-of-use assets 813 821
Property, plant and equipment 955 948
Interests in joint ventures and associates 244 270
Other investments 860 790
Post-employment benefit assets 430 581
Trade and other receivables 253 162
Deferred tax assets 193 230
Derivative financial instruments 45 76
=========================================== ===== ======== ========
Non-current assets 11,905 12,063
=========================================== ===== ======== ========
Current assets
Inventories 567 511
Trade and other receivables 4,174 3,988
Tax recoverable 89 106
Cash and cash equivalents 843 1,983
Derivative financial instruments 18 71
=========================================== ===== ======== ========
5,691 6,659
Assets held for sale 10 4 26
=========================================== ===== ======== ========
Current assets 5,695 6,685
=========================================== ===== ======== ========
Total assets 17,600 18,748
=========================================== ===== ======== ========
Current liabilities
Borrowings (1,087) (693)
Lease liabilities (194) (194)
Derivative financial instruments (37) (6)
Provisions (233) (269)
Current tax liabilities (214) (245)
Trade and other payables (5,870) (5,626)
=========================================== ===== ======== ========
Current liabilities (7,635) (7,033)
=========================================== ===== ======== ========
Non-current liabilities
Borrowings (2,283) (3,271)
Lease liabilities (751) (719)
Derivative financial instruments (207) (237)
Post-employment benefit obligations (806) (759)
Provisions (286) (310)
Deferred tax liabilities (108) (160)
Trade and other payables (363) (354)
=========================================== ===== ======== ========
Non-current liabilities (4,804) (5,810)
=========================================== ===== ======== ========
Total liabilities (12,439) (12,843)
=========================================== ===== ======== ========
Net assets 5,161 5,905
=========================================== ===== ======== ========
Equity
Share capital 198 198
Share premium 189 189
Other reserves(1) 2,758 4,068
Retained earnings 1,991 1,419
=========================================== ===== ======== ========
Total equity shareholders' funds 5,136 5,874
Non-controlling interests 25 31
=========================================== ===== ======== ========
Total equity 5,161 5,905
=========================================== ===== ======== ========
1. Other reserves include the capital redemption and own shares
reserves which were shown separately in 2022.
Approved by the Board of Directors on 20 November 2023 and
signed on its behalf by:
Dominic Blakemore , Director
Palmer Brown, Director
Compass Group PLC
Consolidated Financial Statements
Consolidated cash flow statement
For the year ended 30 September 2023
2023 2022
Notes GBPm GBPm
=============================================================== ===== ======= =====
Cash flow from operating activities
Cash generated from operations 8 2,687 2,024
Interest paid (170) (96)
Tax received 25 31
Tax paid (466) (363)
=============================================================== ===== ======= =====
Net cash flow from operating activities 2,076 1,596
=============================================================== ===== ======= =====
Cash flow from investing activities
Purchase of subsidiary companies (319) (263)
Purchase of interests in joint ventures and associates (7) (28)
Net proceeds from sale of subsidiary companies,
joint ventures and associates net of exit costs(1) 47 35
Purchase of intangible assets (215) (177)
Purchase of contract fulfilment assets (311) (218)
Purchase of property, plant and equipment (365) (282)
Proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets 64 37
Purchase of other investments (3) (42)
Proceeds from sale of other investments 3 3
Dividends received from joint ventures and associates 49 51
Interest received 50 10
=============================================================== ===== ======= =====
Net cash flow from investing activities (1,007) (874)
=============================================================== ===== ======= =====
Cash flow from financing activities
Purchase of own shares - share buyback (929) (425)
Purchase of own shares - employee share-based
payments (16) (6)
Increase in borrowings 1 677
Repayment of borrowings (438) (297)
Net cash flow from derivative financial instruments 127 (67)
Repayment of principal under lease liabilities (176) (152)
Purchase of non-controlling interests (8) (2)
Dividends paid to equity shareholders 6 (648) (418)
Dividends paid to non-controlling interests (6) (3)
=============================================================== ===== ======= =====
Net cash flow from financing activities (2,093) (693)
=============================================================== ===== ======= =====
Cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents (1,024) 29
Cash and cash equivalents at 1 October 1,732 1,656
Currency translation (losses)/gains on cash and
cash equivalents (28) 47
=============================================================== ===== ======= =====
Cash and cash equivalents at 30 September 680 1,732
=============================================================== ===== ======= =====
Cash and cash equivalents(2) 843 1,983
Bank overdrafts(2) (163) (251)
=============================================================== ===== ======= =====
Cash and cash equivalents at 30 September 680 1,732
=============================================================== ===== ======= =====
1. 2022 includes GBP15m of tax receipts in respect of prior year
business disposals.
2. As per the consolidated balance sheet.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
1 Basis of preparation
Introduction
The consolidated financial statements of Compass Group PLC (the
Company) have been prepared on a going concern basis, as discussed
below, in accordance with UK-adopted International Accounting
Standards. The consolidated financial statements have been prepared
under the historical cost convention, as modified by the
revaluation of certain financial instruments.
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 30 September 2023
or 2022, but is derived from those accounts. Statutory accounts for
2022 have been delivered to the Registrar of Companies and those
for 2023 will be delivered following the Company's Annual General
Meeting. The auditor has reported on those accounts. The reports of
the auditor were unqualified, did not draw attention to any matters
by way of emphasis without qualifying its reports and did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006.
Going concern
The directors consider it appropriate to prepare the financial
statements on a going concern basis for the reasons stated
below.
At 30 September 2023, the Group's financing arrangements
included sterling and Euro bonds (GBP2,353m) and US dollar US
Private Placement (USPP) notes (GBP851m). In addition, the Group
had Revolving Credit Facilities of GBP2,000m, committed to August
2026, which were fully undrawn, and GBP680m of cash, net of
overdrafts. At the date of approving these consolidated financial
statements, the liquidity position of the Group has remained
substantially unchanged.
For the purposes of the going concern assessment, the directors
have prepared monthly cash flow projections for the period to 31
March 2025 (the assessment period) from the most recent three-year
strategic plan approved by the Board in November 2023. We consider
18 months to be a reasonable period for the going concern
assessment as it enables us to consider the potential impact of
macroeconomic and geopolitical factors over an extended period.
Debt maturities in the going concern period include a $352m
(GBP288m) USPP note in October 2023, a EUR750m (GBP651m) Eurobond
in July 2024 and a $100m (GBP82m) USPP note in December 2024.
The USPP notes are subject to leverage and interest cover
covenants which are tested on 31 March and 30 September each year.
The Group met both covenants at 30 September 2023. The Group's
other financing arrangements do not contain any financial
covenants.
The cash flow projections show that the Group has significant
headroom against its committed facilities and meets its financial
covenant obligations under the USPP notes without any
refinancing.
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 Group's committed facilities would be reached in the
event that underlying operating profit reduced by more than 60% of
the strategic plan level. The directors do not consider this
scenario to be likely. The stress test assumes no share buybacks or
new business acquisitions as mitigating actions, with the exception
of the acquisition of Hofmann Menü-Manufaktur GmbH which was agreed
on 2 November 2023 subject to regulatory approval (see note
13).
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 31 March 2025 and, therefore,
have prepared the financial statements on a going concern
basis.
Changes in accounting policies
There were no new accounting standards or amendments to existing
standards effective in the current year that had a significant
impact on the Group's consolidated financial statements. There are
a number of changes to accounting standards, effective in future
years, which are not expected to significantly impact the Group's
consolidated financial statements.
Judgements
The preparation of the consolidated financial statements
requires management to make judgements in respect of the
application of its accounting policies which impact the reported
amounts of assets, liabilities, income and expenses.
Whilst 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.
With the exception of contract fulfilment assets, cash payments
in respect of contract balances are classified as cash flows from
operating activities. The Group classifies additions to contract
fulfilment assets 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 year, the purchase of
contract fulfilment assets in cash flows from investing activities
was GBP311m (2022: GBP218m).
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
1 Basis of preparation (continued)
Estimates
The preparation of the consolidated financial statements
requires management to make estimates which impact the reported
amounts of assets, liabilities, income and expenses. These
estimates are based on historical experience and other factors that
are believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
Major sources of estimation uncertainty
The Group's major sources of estimation uncertainty are in
relation to goodwill in the UK cash-generating unit and
post-employment benefit obligations 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.
Other sources of estimation uncertainty
In addition to the major sources of estimation uncertainty, tax
has been identified as another source of estimation uncertainty.
Whilst this is not considered to be a major source of uncertainty
as defined by IAS 1 Presentation of Financial Statements, the
recognition and measurement of certain material assets and
liabilities are based on assumptions and/or are subject to
longer-term uncertainties (see note 4).
Climate change
Climate change is identified as a principal risk as its impact
on the environment may lead to issues around food sourcing and
supply chain continuity in some of the Group's markets (see page
21). The potential impact of climate change has been assessed with
scenario analysis conducted in line with the Task Force on
Climate-Related Financial Disclosures (TCFD) recommendations. In
October 2021, the Group announced a commitment to reach climate net
zero greenhouse gas (GHG) emissions across its global operations
and value chain by 2050.
The potential impact of climate change and the Group's net zero
commitments on the following areas has been considered:
-- going concern and viability assessments
-- tax
-- goodwill
-- other intangible assets
-- post-employment benefits
There was no impact on the reported amounts in the financial
statements as a result of this review.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
2 Segmental analysis
Geographical segments
=========================
North Rest of
America Europe World Total
Revenue by sector and geographical segment1,2 GBPm GBPm GBPm GBPm
============================================== ======== ====== ======= ======
Year ended 30 September 2023
Business & Industry 6,612 3,262 1,113 10,987
Education 4,486 1,014 210 5,710
Healthcare & Senior Living 6,077 1,107 424 7,608
Sports & Leisure 3,609 919 133 4,661
Defence, Offshore & Remote 308 736 1,271 2,315
============================================== ======== ====== ======= ======
Underlying revenue3,4 21,092 7,038 3,151 31,281
Less: Share of revenue of joint ventures (19) (234) - (253)
============================================== ======== ====== ======= ======
Revenue 21,073 6,804 3,151 31,028
============================================== ======== ====== ======= ======
Year ended 30 September 2022
Business & Industry 4,805 2,660 936 8,401
Education 3,782 874 173 4,829
Healthcare & Senior Living 5,437 1,001 404 6,842
Sports & Leisure 2,854 738 89 3,681
Defence, Offshore & Remote 261 662 1,095 2,018
============================================== ======== ====== ======= ======
Underlying revenue3,4 17,139 5,935 2,697 25,771
Less: Share of revenue of joint ventures (18) (241) - (259)
============================================== ======== ====== ======= ======
Revenue 17,121 5,694 2,697 25,512
============================================== ======== ====== ======= ======
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 are 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 GBP2,386m (2022: GBP1,975m). Underlying revenue
arising in the US region was GBP20,018m (2022: GBP16,274m).
Underlying revenue arising in all countries outside the UK from
which the Group derives revenue was GBP28,895m (2022:
GBP23,796m).
Geographical segments
===========================
North Rest Central
America Europe of World activities Total
Profit by geographical segment GBPm GBPm GBPm GBPm GBPm
======================================= ======== ====== ========= =========== =====
Year ended 30 September 2023
Underlying operating profit/(loss)
before results of joint ventures
and associates 1,638 351 175 (98) 2,066
Add: Share of profit before tax
of joint ventures 1 29 - - 30
Add: Share of results of associates 14 12 - - 26
======================================= ======== ====== ========= =========== =====
Underlying operating profit/(loss)1 1,653 392 175 (98) 2,122
Less: Acquisition-related charges2 (72) (46) (7) - (125)
Less: Charges related to the strategic
portfolio review(2) - (99) - - (99)
Less: One-off pension charge2 - (7) - - (7)
======================================= ======== ====== ========= =========== =====
Operating profit/(loss) 1,581 240 168 (98) 1,891
======================================= ======== ====== ========= ===========
Net gain on sale and closure of
businesses2 20
Finance costs (164)
======================================= ======== ====== ========= =========== =====
Profit before tax 1,747
Income tax expense (429)
======================================= ======== ====== ========= =========== =====
Profit for the year 1,318
======================================= ======== ====== ========= =========== =====
1. Operating profit excluding specific adjusting items (see note
14).
2. Specific adjusting item (see note 14).
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
2 Segmental analysis (continued)
Geographical segments
=========================
North Rest of Central
America Europe World activities Total
Profit by geographical segment GBPm GBPm GBPm GBPm GBPm
==================================== ======== ====== ======= =========== =====
Year ended 30 September 2022
Underlying operating profit/(loss)
before results of joint ventures
and associates 1,226 262 141 (86) 1,543
Add: Share of profit before tax
of joint ventures 1 28 - - 29
Add: Share of results of associates 9 9 - - 18
==================================== ======== ====== ======= =========== =====
Underlying operating profit/(loss)1 1,236 299 141 (86) 1,590
Less: Acquisition-related charges2 (57) (30) (4) (1) (92)
Add/(less): Other3 4 (2) - - 2
=====
Operating profit/(loss) 1,183 267 137 (87) 1,500
==================================== ======== ====== ======= ===========
Net loss on sale and closure of
businesses2 (7)
Finance costs (24)
==================================== ======== ====== ======= =========== =====
Profit before tax 1,469
Income tax expense (352)
==================================== ======== ====== ======= =========== =====
Profit for the year 1,117
==================================== ======== ====== ======= =========== =====
1. Operating profit excluding specific adjusting items (see note
14).
2. Specific adjusting item (see note 14).
3. Other specific adjusting items include COVID-19 resizing
credit and tax on share of profit of joint ventures (see note
14).
3 Operating costs
Acquisition-related charges
Represent amortisation and impairment charges in respect of
intangible assets acquired through business combinations, direct
costs incurred through business combinations or other strategic
asset acquisitions, business integration costs and changes in
consideration in relation to past acquisition activity.
2023 2022
Acquisition-related charges GBPm GBPm
=============================================== ===== =====
Amortisation - acquisition intangibles 100 91
Impairment losses - goodwill 5 -
Acquisition transaction costs 17 10
Adjustment to contingent consideration payable
on business acquisitions 3 (9)
================================================ ===== =====
Total 125 92
================================================ ===== =====
Charges related to the strategic portfolio review
Represent charges in respect of an ongoing strategic review of
the Group's portfolio of non-core activities which, during 2023,
relate to site closures and contract renegotiations and
terminations in the UK.
2023 2022
Charges related to the strategic portfolio review GBPm GBPm
================================================== ===== =====
Impairment - right-of-use assets 44 -
Write-off - other receivables 21 -
Onerous contracts and other costs - provisions 20 -
Other costs - other payables 8 -
Impairment - property, plant and equipment 6 -
=================================================== ===== =====
Total 99 -
=================================================== ===== =====
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
4 Tax
2023 2022
Income tax expense GBPm GBPm
========================================= ===== =====
Current tax
Current year 485 322
Adjustment in respect of prior years (39) 28
========================================= ===== =====
Current tax expense 446 350
========================================= ===== =====
Deferred tax
Current year (10) 39
Impact of changes in statutory tax rates (1) 2
Adjustment in respect of prior years (6) (39)
========================================= ===== =====
Deferred tax (credit)/charge (17) 2
========================================= ===== =====
Total 429 352
========================================= ===== =====
The income tax expense for the year is based on the effective UK
statutory rate of corporation tax for the period of 22% (2022:
19%). Overseas tax is calculated at the rates prevailing in the
respective jurisdictions.
The global nature of the Group's operations gives rise to
various factors which could affect the future tax rate. These
include the mix of profits, changes to overseas statutory tax rates
or tax legislation and the foreign exchange rates applicable when
those profits are translated into sterling. The UK government
enacted an increase in the UK corporation tax rate from 19% to 25%
with effect from 1 April 2023. In addition, the future tax charge
may be affected by the impact of acquisitions, disposals or other
restructuring activities and the resolution of open issues with tax
authorities.
The Group has operations in approximately 35 countries. The tax
position in each country is often not agreed with the tax
authorities until some time 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 historical experience, interpretations of tax law and the
likelihood of settlement.
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.
Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact
the results in the year in which such determination is made. In
addition, the calculation and recognition of temporary differences
giving rise to deferred tax assets requires estimates to be made of
the extent to which future taxable profits are available against
which these temporary differences can be utilised.
Uncertain tax positions
Tax risk can arise from unclear regulations and differences in
interpretation but, most significantly, where tax authorities apply
diverging standards in assessing intra-group cross-border
transactions. The Group has recognised provisions in respect of
uncertain tax positions, none of which is individually material. In
determining such liabilities, the Group assesses the range of
potential outcomes and estimates whether additional tax may be
due.
The Group is currently subject to audits and reviews in a number
of countries that primarily relate to complex corporate tax
issues.
In March 2022, 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
have continued discussions with the tax authority and the
provision, based on a range of possible outcomes, remains
unchanged. Our maximum potential liability is GBP62m of tax and
GBP17m of interest.
The Canadian Revenue Agency's enquiry into an intra-group
financing arrangement has been resolved during the year consistent
with the provision previously held.
The Group does not currently anticipate any material changes to
the amounts recorded at 30 September 2023.
Deferred tax assets
Deferred tax assets of GBP193m (2022: GBP230m) include GBP84m
(2022: GBP95m) relating to the carry forward of unused tax losses.
It is considered probable that sufficient taxable profits over a
period of between one and five years will be available against
which the unused tax losses can be utilised. In evaluating whether
sufficient taxable profits will be available in the future,
forecasts have been derived from the most recent three-year
strategic plan approved by management adjusted for the effect of
applicable tax laws and regulations relevant to those future
taxable profits. No reasonably possible change in any of the key
assumptions would result in a significant reduction in projected
taxable profits such that the recognised deferred tax assets would
not be realised.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
4 Tax (continued)
Regulatory developments
In December 2021, the OECD released a framework for Pillar Two
Model Rules which will introduce a global minimum corporate tax
rate of 15% applicable to multinational enterprise groups with
global revenue over EUR750m. The legislation implementing the rules
in the UK will apply from the financial year ending 30 September
2025. The Group is reviewing this legislation and also monitoring
the status of implementation of the model rules worldwide. The
impact is not expected to be material. The Group has applied the
temporary exception under IAS 12 Income Taxes in relation to the
accounting for deferred taxes arising from the implementation of
the Pillar Two Model Rules.
5 Earnings per share
2023 2022
Profit for the year attributable to equity shareholders GBPm GBPm
======================================================== ===== =====
Profit for the year attributable to equity shareholders 1,314 1,113
======================================================== ===== =====
2022
2023 Ordinary
Ordinary shares
shares of
of 111/20p 111/20p
Weighted average number of ordinary shares each millions each millions
======================================================= ============== ==============
Weighted average number of ordinary shares for basic
earnings per share 1,743 1,779
Dilutive effect of share-based payment plans 2 -
======================================================= ============== ==============
Weighted average number of ordinary shares for diluted
earnings per share 1,745 1,779
======================================================= ============== ==============
2023 2022
Earnings per share pence pence
=================== ====== ======
Basic 75.4p 62.6p
Diluted 75.3p 62.6p
=================== ====== ======
Underlying earnings per share for the year ended 30 September
2023 was 86.1p (2022: 63.0p). Underlying earnings per share is
calculated based on earnings excluding the effect of
acquisition-related charges, charges related to the strategic
portfolio review, COVID-19 resizing credit, one-off pension charge,
gains and losses on sale and closure of businesses and other
financing items, together with the tax attributable to these
amounts (see note 14).
6 Dividends
A final dividend in respect of 2023 of 28.1p per share, GBP482m
in aggregate 1 , has been proposed, giving a total dividend in
respect of 2023 of 43.1p per share (2022: 31.5p per share). The
proposed final dividend is subject to approval by shareholders at
the Annual General Meeting to be held on 8 February 2024.
2023 2022
================ ================
Dividends Dividends
per share per share
Dividends on ordinary shares pence GBPm pence GBPm
======================================= ========== ==== ========== ====
Amounts recognised as distributions to
equity shareholders during the year
Final 2021 - - 14.0 250
Interim 2022 - - 9.4 168
Final 2022 22.1 387 - -
Interim 2023 15.0 261 - -
======================================= ========== ==== ========== ====
Total 37.1 648 23.4 418
======================================= ========== ==== ========== ====
1. Based on the number of ordinary shares in issue at 30
September 2023 excluding shares held in treasury and the Compass
Group PLC All Share Schemes Trust (1,715m shares).
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
7 Goodwill
2023 2022
Goodwill GBPm GBPm
=============================== ===== =====
Cost
At 1 October 5,664 5,058
Business acquisitions 184 122
Sale and closure of businesses (27) (5)
Currency adjustment (292) 489
=============================== ===== =====
At 30 September 5,529 5,664
=============================== ===== =====
Impairment
At 1 October 545 508
Impairment 5 -
Currency adjustment (23) 37
=============================== ===== =====
At 30 September 527 545
=============================== ===== =====
Net carrying amount
At 30 September 5,002 5,119
=============================== ===== =====
2023 2022
Goodwill by business segment GBPm GBPm
============================= ===== =====
US 2,367 2,498
Canada 217 219
============================= ===== =====
North America 2,584 2,717
============================= ===== =====
UK(1) 1,538 1,481
Finland 124 125
Other 493 506
============================= ===== =====
Europe 2,155 2,112
============================= ===== =====
Japan 95 107
Other 168 183
============================= ===== =====
Rest of World 263 290
============================= ===== =====
Total 5,002 5,119
============================= ===== =====
1. Includes GBP1.3bn which arose in 2000 on the Granada
transaction.
Goodwill is tested annually for impairment and is carried at
cost less any accumulated impairment losses. Goodwill is allocated
to the cash-generating units (CGUs) or groups of CGUs that are
expected to benefit from the acquisition which is usually the
geographical location of the operations of the Group. Goodwill is
subsequently monitored and tested for impairment at the level at
which it is allocated. The recoverable amount of a CGU is
determined based on value-in-use calculations.
Impairment testing
The key assumptions used in the value-in-use calculations are
operating cash flow forecasts from the most recent three-year
strategic plan approved by management adjusted to remove the
expected benefits of future restructuring activities and
improvements to assets, externally-derived long-term growth rates
and pre-tax discount rates.
The strategic plan is based on expectations of future outcomes
taking into account past experience, adjusted for anticipated
revenue growth, from both new business and like-for-like growth,
and taking into consideration macroeconomic and geopolitical
factors, including the impact of inflation.
Cash flows beyond the three-year period covered by the plan are
extrapolated using estimated growth rates based on local expected
economic conditions and do not exceed the long-term average growth
rate for the country. Cash flow forecasts for a period of up to
five years are used by exception to reflect the medium-term
prospects of the business if the initial level of headroom in the
impairment test for a country is low, with cash flows beyond five
years extrapolated using estimated growth rates that do not exceed
the long-term average growth rate for that country.
The pre-tax discount rates are based on the Group's Weighted
Average Cost of Capital (WACC) adjusted for specific risks relating
to the country in which the CGU operates. The beta and gearing
ratio assumptions used in the calculation of the Group's WACC
represent market participant measures based on the averages of a
number of companies with similar assets.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
7 Goodwill (continued)
2023 2022
============= ============= ============
Pre-tax Pre-tax
Long-term discount Long-term discount
Growth and discount rates growth rates rates growth rates rates
========================== ============= ============= ============= ============
US 2.1% 11.3% 2.2% 9.2%
Canada 2.1% 11.8% 2.0% 9.6%
UK 2.1% 11.7% 2.3% 9.5%
Finland 2.0% 9.4% 1.4% 8.3%
Rest of Europe1 1.2% - 16.4% 10.7% - 31.3% 0.8% - 14.4% 8.2% - 27.5%
Japan 1.0% 10.6% 0.9% 8.2%
Rest of World 1.8% - 4.3% 10.6% - 20.2% 1.3% - 4.4% 7.9% - 16.1%
========================== ============= ============= ============= ============
1. Rest of Europe includes Türkiye which has residual growth
rate and pre-tax discount rate assumptions of 16.4% (2022: 14.4%)
and 31.3% (2022: 27.5%), respectively. Excluding Türkiye, the
residual growth rate and pre-tax discount rate assumptions for Rest
of Europe range from 1.2% to 2.5% (2022: 0.8% to 2.7%) and 10.7% to
14.6% (2022: 8.2% to 11.7%), respectively.
During the first half of the year, a charge of GBP5m was
recognised to fully impair the goodwill held in respect of the
Group's business in China.
Consistent with prior years, the goodwill impairment testing was
performed as at 31 July. Whilst the forecast performance of the
Group's CGUs has improved, the level of headroom in each CGU has
been impacted by an increase in discount rates which reflect the
higher market interest rates this year. Subsequent to 31 July,
management has considered whether there have been any indicators
that the goodwill may be impaired. There was no impact on the
reported amounts of goodwill as a result of this review.
Sensitivity analysis
The Group has performed a sensitivity analysis based on changes
in key assumptions considered to be reasonably possible by
management. There was no impact on the reported amounts of goodwill
as a result of this review.
The UK CGU is sensitive to reasonably possible changes in key
assumptions. Most of the UK goodwill arose in 2000 on the Granada
transaction. The estimated recoverable amount of the Group's
operations in the UK exceeds its carrying value by GBP186m (2022:
GBP535m). The associated impact of changes in key assumptions on
the impairment assessment is presented in the table below. The
sensitivity analysis presented is prepared on the basis that a
change in each key assumption would not have a consequential impact
on other assumptions used in the impairment review.
UK CGU
============
2023 2022
Decrease in recoverable amount GBPm GBPm
============================================== ===== =====
Increase in pre-tax discount rate by 1% (199) (286)
Decrease in projected operating profit by 3% (63) (70)
Decrease in the long-term growth rate by 0.1% (19) (29)
============================================== ===== =====
In order for the recoverable amount to be equal to the carrying
value, the pre-tax discount rate would have to be increased by 0.9%
(2022: 2.1%), projected operating profit decreased by 9% (2022:
23%) or the long-term growth rate decreased to 1.0% (2022: decline
of 0.1%). The directors consider that changes in key assumptions of
this magnitude are reasonably possible in the current
environment.
Other than as disclosed above, the directors do not consider
that any reasonably possible changes in the key assumptions would
cause the value in use of the net operating assets of the
individually significant CGUs disclosed above to fall below their
carrying values.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
8 Reconciliation of operating profit to cash generated from
operations
Reconciliation of operating profit to cash generated 2023 2022
from operations GBPm GBPm
============================================================= ===== =====
Operating profit before joint ventures and associates 1,835 1,455
Adjustments for:
Acquisition-related charges1 108 82
Charges related to the strategic portfolio review 99 -
COVID-19 resizing credit - (4)
One-off pension charge 7 -
Amortisation - other intangible assets(2) 110 100
Amortisation - contract fulfilment assets 231 214
Amortisation - contract prepayments 54 40
Depreciation - right-of-use assets 163 156
Depreciation - property, plant and equipment 276 260
Unwind of costs to obtain contracts 22 18
Impairment losses - non-current assets(3) 10 15
Impairment reversals - non-current assets (2) (4)
Gain on disposal of property, plant and equipment/intangible
assets/contract fulfilment assets (3) -
Other non-cash changes (1) (4)
Decrease in provisions (41) (77)
Investment in contract prepayments (72) (64)
Increase in costs to obtain contracts4 (37) (31)
Post-employment benefit obligations net of service costs (18) (7)
Share-based payments - charged to profit 44 34
============================================================= ===== =====
Operating cash flow before movements in working capital 2,785 2,183
Increase in inventories (97) (122)
Increase in receivables (557) (876)
Increase in payables 556 839
============================================================= ===== =====
Cash generated from operations 2,687 2,024
============================================================= ===== =====
1. Includes amortisation and impairment of acquisition
intangibles. Excludes acquisition transaction costs of GBP17m
(2022: GBP10m) as acquisition transaction costs are included in net
cash flow from operating activities.
2. Excludes amortisation of acquisition intangibles.
3. In 2023, excludes impairment losses of GBP50m included in
charges related to the strategic portfolio review.
4. 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 out of cash payments in relation
to assets that will generate long-term economic benefits. During
the year, the purchase of contract fulfilment assets in cash flows
from investing activities was GBP311m (2022: GBP218m).
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
9 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 30 September 2023 is GBP3,370m
(2022: GBP3,964m). The fair value of borrowings at 30 September
2023, calculated by discounting future cash flows to net present
values at current market rates for similar financial instruments
(Level 2 inputs), is GBP3,384m (2022: GBP3,920m).
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 year ended 30 September
2023 or 2022. The carrying amounts of financial instruments
measured at fair value are shown in the table below:
Financial instruments measured at fair 2023 2022
value Level GBPm GBPm
=============================================== ===== ===== =====
Non-current
Rabbi Trust investments(1,) 1 623 566
Mutual fund investments(1) 1 48 52
Other investments1 1 12 12
Life insurance policies(1) 2 29 33
Derivative financial instruments - assets 2 45 76
Derivative financial instruments - liabilities 2 (207) (237)
Trade investments1 3 148 127
Contingent consideration payable on business
acquisitions(2) 3 (80) (39)
Non-controlling interest put options2 3 (18) (45)
================================================ ===== ===== =====
Current
Money market funds3 1 418 474
Derivative financial instruments - assets 2 18 71
Derivative financial instruments - liabilities 2 (37) (6)
Contingent consideration payable on business
acquisitions(2) 3 (50) (30)
================================================ ===== ===== =====
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 30 September 2023 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.
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.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
9 Financial instruments (continued)
Level 3
Trade investments Estimated values using income and market value
approaches.
Contingent consideration payable on business acquisitions
Estimated amounts payable based on the likelihood of specified
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.
Interest rate benchmark reform
The Group and all its derivative counterparties are party to the
International Swaps and Derivatives Association (ISDA) fallback
protocols which automatically convert derivatives from IBOR to the
relevant alternative reference rate when an IBOR rate ceases. As
USD LIBOR ceased on 30 June 2023, there is no longer any
uncertainty around derivatives which reference USD LIBOR and,
therefore, the Group has adopted the IBOR Reform Phase 2 amendments
in respect of these derivatives and redocumented its hedges to
incorporate the change from USD LIBOR to USD SOFR. The Group's
interest rate benchmark reform process is now complete.
10 Acquisition, sale and closure of businesses
Acquisition of businesses
The total cash spent on the acquisition of subsidiaries during
the year, net of cash acquired, was GBP336m (2022: GBP273m),
including GBP41m of deferred and contingent consideration and other
payments relating to businesses acquired in previous years and
GBP17m of acquisition transaction costs included in net cash flow
from operating activities.
On 20 March 2023, the Group acquired the trade and assets of
Parks Coffee, a provider of workplace refreshments in the US, for
an initial consideration of $108m (GBP90m). Total consideration
includes $6m (GBP5m) payable in 2024 and an estimated $23m (GBP20m)
payable in 2025 contingent on the operation of an earn-out. The
goodwill in relation to the assets acquired is GBP43m. This
goodwill represents the premium the Group paid to acquire the
business that complements its existing businesses and creates
significant opportunities and other synergies.
The following table summarises the recognised amounts of assets
acquired and liabilities assumed at the date of acquisition of
Parks Coffee:
2023
======================
Book value Fair value
GBPm GBPm
============================================== ========== ==========
Net assets acquired
Other intangible assets 1 64
Property, plant and equipment 5 5
Inventories 4 4
Trade and other payables (1) (1)
============================================== ========== ==========
Fair value of net assets acquired 72
Goodwill 43
============================================== ========== ==========
Total consideration 115
============================================== ========== ==========
Satisfied by
Cash consideration paid 90
Deferred and contingent consideration payable 25
============================================== ========== ==========
Total consideration 115
============================================== ========== ==========
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
10 Acquisition, sale and closure of businesses (continued)
In addition to the acquisition set out above, the Group also
completed a number of other acquisitions during the year. A summary
of all acquisitions completed during the year is presented in
aggregate below:
2023 2022
====================== ======================
Book value Fair value Book value Fair value
GBPm GBPm GBPm GBPm
=============================================== ========== ========== ========== ==========
Net assets acquired
Other intangible assets 5 221 17 140
Right-of-use assets - - 7 7
Property, plant and equipment 23 23 7 7
Trade and other receivables 15 15 36 36
Inventories 11 11 6 6
Cash and cash equivalents 11 11 - -
Lease liabilities - - (7) (7)
Provisions - - (2) (2)
Current tax liabilities (2) (2) - -
Deferred tax liabilities (1) (19) (6) (6)
Trade and other payables (16) (16) (36) (36)
Fair value of net assets acquired 244 145
Less: Step acquisitions (24) -
Less: Non-controlling interests (2) (8)
Goodwill 184 122
=============================================== ========== ========== ========== ==========
Total consideration 402 259
=============================================== ========== ========== ========== ==========
Satisfied by
Cash consideration paid 289 193
Contingent consideration payable 100 66
Deferred consideration payable 13 -
Total consideration 402 259
=============================================== ========== ========== ========== ==========
Cash flow
Cash consideration paid 289 193
Less: Cash and cash equivalents acquired (11) -
Acquisition transaction costs1 17 10
=============================================== ========== ========== ========== ==========
Net cash outflow arising on acquisition 295 203
Deferred and contingent consideration
and other payments relating to businesses
acquired in previous years(2) 41 70
Total cash outflow from purchase of subsidiary
companies 336 273
=============================================== ========== ========== ========== ==========
Consolidated cash flow statement
Net cash flow from operating activities(1) 17 10
Net cash flow from investing activities 319 263
=============================================== ========== ========== ========== ==========
Total cash outflow from purchase of subsidiary
companies 336 273
=============================================== ========== ========== ========== ==========
1. Acquisition transaction costs are included in net cash flow
from operating activities.
2. 2022 includes contingent consideration paid in respect of the
acquisition of Fazer Food Services in January 2020.
Contingent consideration is an estimate at the date of
acquisition of the amount of additional consideration that will be
payable in the future. The actual amount paid can vary from the
estimate depending on the terms of the transaction and, for
example, the actual performance of the acquired business.
The fair value adjustments made in respect of acquisitions in
the year to 30 September 2023 are provisional and will be finalised
within 12 months of the acquisition date, principally in relation
to the valuation of contracts acquired.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
10 Acquisition, sale and closure of businesses (continued)
The goodwill arising on the acquisition of the businesses
represents the premium the Group has paid to acquire companies
which complement its existing businesses and create significant
opportunities for cross-selling and other synergies. The goodwill
arising is not expected to be deductible for tax purposes.
The acquisitions did not have a material impact on the Group's
revenue or profit for the year.
Sale and closure of businesses
The Group has recognised a net gain of GBP20m on the sale and
closure of businesses (2022: net loss of GBP7m), including exit
costs of GBP11m (2022: GBP7m). Activity in the year includes the
exit from seven tail countries, together with the sale of
businesses in the US and UK, and a further 28% shareholding in
Highways Royal Co., Limited (Japanese Highways).
A summary of business disposals completed during the year is
presented in aggregate below:
2023 2022
GBPm GBPm
========================================================= ===== =====
Net assets disposed
Goodwill 27 5
Other intangible assets 17 1
Right-of-use assets 8 -
Property, plant and equipment 18 1
Deferred tax assets 1 1
Trade and other receivables 27 2
Inventories 9 -
Cash and cash equivalents 29 1
Assets held for sale 26 16
Lease liabilities (9) (1)
Provisions (2) (2)
Trade and other payables (41) (5)
Post-employment benefit liabilities - (2)
========================================================= ===== =====
Net assets disposed 110 17
========================================================= ===== =====
Consolidated income statement
Cash consideration 83 24
Deferred consideration(1) 57 -
Less: Net assets disposed (110) (17)
Less: Exit costs (11) (7)
Add/(less): Reclassification of cumulative currency
translation differences on sale of businesses(2) 1 (7)
========================================================= ===== =====
Net gain/(loss) on sale and closure of businesses 20 (7)
========================================================= ===== =====
Consolidated cash flow statement
Cash consideration 83 24
Exit costs (7) (3)
Cash and cash equivalents disposed (29) (1)
Tax receipts in respect of prior year business disposals - 15
========================================================= ===== =====
Net proceeds from sale of subsidiary companies, joint
ventures and associates net of exit costs 47 35
========================================================= ===== =====
1. Includes GBP56m translated at the exchange rate on the date
of disposal in respect of the sale of four businesses in Central
and Eastern Europe receivable over four years from the date of
disposal in October 2022.
2. 2023 comprises the reclassification of cumulative currency
translation gains of GBP4m, partly offset by cumulative currency
translation losses on net investment hedges of GBP3m.
Assets held for sale
The Group's balance sheet includes interests in joint ventures
and associates held for sale of GBP4m (2022: GBP26m) which
represent the final 5% shareholding in Japanese Highways which it
has agreed to sell. The non-recurring fair value measurement of the
business held for sale is categorised as a Level 3 fair value and
is based on the agreed sale price.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
11 Contingent liabilities
Litigation and claims
The Group is involved in various 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.
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.
The Group is currently subject to audits and reviews in a number
of countries 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 notices of
deficiency in respect of 2014 and 2017 relating primarily to the
PIS/COFINS treatment of certain food costs which we have formally
objected to and which are now proceeding through the appeals
process. At 30 September 2023, the total amount assessed in respect
of these matters is GBP72m, including interest and penalties. The
possibility of further notices of deficiency for subsequent years
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 advisers, 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.
In addition, there are a number of other ongoing tax cases in
Brazil. None of these cases is individually significant and,
therefore, we do not currently expect any of these issues to have a
material impact on the Group's financial position.
Food safety
In the ordinary course of business, food safety incidents are
identified from time to time and our businesses' operations receive
external reviews of their food hygiene and safety practices, both
on a periodic basis and in connection with identified incidents. At
any point, a number of reviews will be ongoing. Although it is not
possible to predict the outcome or quantify the financial effect of
the outcome of these reviews, or any claim against Group companies
related thereto, in the opinion of the directors, any uninsured
losses resulting from the ultimate resolution of these ongoing
reviews are not expected to have a material effect on the financial
position of the Group. The timing of the outcome of these reviews
is generally uncertain.
12 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
year.
Associates
There were no significant transactions with associated
undertakings during the year.
Key management personnel
The remuneration of directors and key management personnel is
set out in note 4 to the consolidated financial statements in the
2023 Annual Report. During the year, there were no other material
transactions or balances between the Group and its key management
personnel or members of their close families.
Post-employment benefit schemes
Details of the Group's post-employment benefit schemes are set
out in note 24 to the consolidated financial statements in the 2023
Annual Report.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
13 Post-balance sheet events
With effect from 1 October 2023, the reporting currency of the
Group was changed from sterling to US dollars.
On 2 October 2023, the Group sold its business in Argentina. The
net assets of the business at 30 September 2023 were not material.
The disposal will be recognised in 2024 and include a GBP44m charge
in respect of cumulative currency translation differences.
On 2 November 2023, the Group entered into an agreement to
acquire Hofmann Menü-Manufaktur GmbH, a German producer of
high-quality cook and freeze meals, subject to regulatory approval
which we expect to receive during the first half of the 2024
financial year.
In the period from 1 October to 14 November 2023, 6,357,210
shares were repurchased for a total price, including transaction
costs, of GBP131m under the share buyback announced in May 2023. In
November 2023, we announced a further share buyback of up to $500m
(GBP410m), to complete in 2024 subject to M&A activity.
On 20 November 2023, a final dividend in respect of 2023 of
28.1p per share, GBP482m in aggregate, was proposed.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 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 defined by
International Financial Reporting Standards (IFRS) or other
generally accepted accounting principles (GAAP) and may not be
directly comparable with APMs used by other companies. Underlying
measures reflect ongoing trading and, therefore, facilitate
meaningful year-on-year comparison. The Group's APMs, together with
the results prepared in accordance with IFRS, provide comprehensive
analysis of the Group's results. Accordingly, the relevant
statutory measures are also presented where appropriate. Certain of
the Group's APMs 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 th e continuing business.
Definitions
Measure Definition Purpose
==================== ======================================= ==============================
Income statement
==================== ======================================= ==============================
Underlying revenue Revenue plus share of revenue Allows management to
of joint ventures. monitor the sales performance
of the Group's subsidiaries
and joint ventures.
==================== ======================================= ==============================
Underlying Operating profit excluding specific Provides a measure of
operating profit adjusting items(2) . operating profitability
that is comparable over
time.
==================== ======================================= ==============================
Underlying Underlying operating profit divided An important measure
operating margin1 by underlying revenue. of the efficiency of
our operations in delivering
great food and support
services to our clients
and consumers.
==================== ======================================= ==============================
Organic revenue1 Current year: Underlying revenue Embodies our success
excluding businesses acquired, in growing and retaining
sold and closed in the year. our customer base, as
Prior year: Underlying revenue well as our ability to
including a proforma 12 months drive volumes in our
in respect of businesses acquired existing businesses and
in the year and excluding businesses maintain appropriate
sold and closed in the year translated pricing levels in light
at current year exchange rates. of input cost inflation.
Where applicable, a 53rd week
is excluded from the current
or prior year.
==================== ======================================= ==============================
Organic operating Current year: Underlying operating Provides a measure of
profit profit excluding businesses acquired, operating profitability
sold and closed in the year. that is comparable over
Prior year: Underlying operating time.
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.
==================== ======================================= ==============================
Underlying finance Finance costs excluding specific Provides a measure of
costs adjusting items(2) . the Group's cost of financing
excluding items outside
of the control of management.
==================== ======================================= ==============================
Underlying profit Profit before tax excluding specific Provides a measure of
before tax adjusting items(2) . Group profitability that
is comparable over time.
==================== ======================================= ==============================
Underlying income Income tax expense excluding Provides a measure of
tax expense tax attributable to specific income tax expense that
adjusting items(2) . is comparable over time.
==================== ======================================= ==============================
Underlying effective Underlying income tax expense Provides a measure of
tax rate divided by underlying profit the effective tax rate
before tax. that is comparable over
time.
==================== ======================================= ==============================
1. Key Performance Indicator.
2. See page 52 for definitions of the specific adjusting items
and a reconciliation from the statutory to the underlying income
statement.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Definitions (continued)
Measure Definition Purpose
======================= ============================================= ===============================
Income statement
(continued)
======================= ============================================= ===============================
Underlying profit Profit for the year excluding Provides a measure of
for the year specific adjusting items(2) and Group profitability that
tax attributable to those items. is comparable over time.
======================= ============================================= ===============================
Underlying profit Profit for the year attributable Provides a measure of
attributable to equity shareholders excluding Group profitability that
to equity shareholders specific adjusting items(2) and is comparable over time.
(underlying tax attributable to those items.
earnings)
======================= ============================================= ===============================
Underlying earnings Earnings per share excluding Measures the performance
per share1 specific adjusting items(2) and of the Group in delivering
tax attributable to those items. value to shareholders.
======================= ============================================= ===============================
Net operating Underlying operating profit excluding Provides a measure of
profit after the operating profit of non-controlling Group operating profitability
tax (NOPAT) interests, net of tax at the that is comparable over
underlying effective tax rate. time.
======================= ============================================= ===============================
Underlying EBITDA Underlying operating profit excluding Provides a measure of
underlying impairment, depreciation Group operating profitability
and amortisation of intangible that is comparable over
assets, tangible assets and contract-related time.
assets.
======================= ============================================= ===============================
Balance sheet
======================= ============================================= ===============================
Net debt Bank overdrafts, bank and other Allows management to
borrowings, lease liabilities monitor the indebtedness
and derivative financial instruments, of the Group.
less cash and cash equivalents.
======================= ============================================= ===============================
Net debt to Net debt divided by underlying Provides a measure of
EBITDA EBITDA. the Group's ability to
finance and repay its
debt from its operations.
======================= ============================================= ===============================
Capital employed Total equity shareholders' funds, Provides a measure of
excluding: net debt; post-employment the Group's efficiency
benefit assets and obligations; in allocating its capital
and investments held to meet to profitable investments.
the cost of unfunded post-employment
benefit obligations.
======================= ============================================= ===============================
Return on Capital NOPAT divided by 12-month average ROCE demonstrates how
Employed (ROCE)(1) capital employed. we have delivered against
the various investments
we make in the business,
be it operational expenditure,
capital expenditure or
bolt-on acquisitions.
======================= ============================================= ===============================
Cash flow
======================= ============================================= ===============================
Capital expenditure Purchase of intangible assets, Provides a measure of
purchase of contract fulfilment expenditure on long-term
assets, purchase of property, intangible, tangible
plant and equipment and investment and contract-related
in contract prepayments, less assets, net of the proceeds
proceeds from sale of property, from disposal of intangible,
plant and equipment/intangible tangible and contract-related
assets/contract fulfilment assets. assets.
======================= ============================================= ===============================
Underlying operating Net cash flow from operating Provides a measure of
cash flow activities, including purchase the success of the Group
of intangible assets, purchase in turning profit into
of contract fulfilment assets, cash that is comparable
purchase of property, plant and over time.
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 the cost action programme
and COVID-19 resizing costs,
strategic portfolio review and
one-off pension charge, and acquisition
transaction costs.
======================= ============================================= ===============================
1. Key Performance Indicator.
2. See page 52 for definitions of the specific adjusting items
and a reconciliation from the statutory to the underlying income
statement.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Definitions (continued)
Measure Definition Purpose
===================== ======================================== ==============================
Cash flow (continued)
===================== ======================================== ==============================
Underlying operating Underlying operating cash flow Provides a measure of
cash flow conversion divided by underlying operating the success of the Group
profit. in turning profit into
cash that is comparable
over time.
===================== ======================================== ==============================
Free cash flow Net cash flow from operating activities, Provides a measure of
including purchase of intangible the success of the Group
assets, purchase of contract fulfilment in turning profit into
assets, purchase of property, cash that is comparable
plant and equipment, proceeds over time.
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 Free cash flow excluding cash Provides a measure of
cash flow1 payments related to the cost action the success of the Group
programme and COVID-19 resizing in turning profit into
costs, strategic portfolio review cash that is comparable
and one-off pension charge, and over time.
acquisition transaction costs.
===================== ======================================== ==============================
Underlying free Underlying free cash flow divided Provides a measure of
cash flow conversion by underlying operating profit. the success of the Group
in turning profit into
cash that is comparable
over time.
===================== ======================================== ==============================
Underlying cash Net tax paid included in net cash Provides a measure of
tax rate flow from operating activities the cash tax rate that
divided by underlying profit before is comparable over time.
tax.
===================== ======================================== ==============================
Business growth
===================== ======================================== ==============================
New business Current year underlying revenue The measure of incremental
for the period in which no revenue revenue in the current
had been recognised in the prior year from new business.
year.
===================== ======================================== ==============================
Lost business Prior year underlying revenue The measure of lost
for the period in which no revenue revenue in the current
has been recognised in the current year from ceased business.
year.
===================== ======================================== ==============================
Net new business New business minus lost business The measure of net incremental
as a percentage of prior year revenue in the current
organic revenue. year from business wins
and losses.
===================== ======================================== ==============================
Retention 100% minus lost business as a The measure of our success
percentage of prior year organic in retaining business.
revenue.
===================== ======================================== ==============================
1. Key Performance Indicator.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Reconciliations
Income statement
Underlying revenue and operating profit are reconciled to GAAP
measures in note 2 (segmental analysis).
Geographical segments
=========================
North Rest of Central
America Europe World activities Total
Organic revenue GBPm GBPm GBPm GBPm GBPm
======================================= ======== ====== ======= =========== =======
Year ended 30 September 2023
Underlying revenue 21,092 7,038 3,151 - 31,281
Organic adjustments (127) (134) (37) - (298)
======================================= ======== ====== ======= =========== =======
Organic revenue 20,965 6,904 3,114 - 30,983
======================================= ======== ====== ======= =========== =======
Year ended 30 September 2022
Underlying revenue 17,139 5,935 2,697 - 25,771
Currency adjustments 753 (23) (95) - 635
======================================= ======== ====== ======= =========== =======
Underlying revenue - constant currency 17,892 5,912 2,602 - 26,406
Organic adjustments (41) (233) (45) - (319)
======================================= ======== ====== ======= =========== =======
Organic revenue 17,851 5,679 2,557 - 26,087
======================================= ======== ====== ======= =========== =======
Increase in underlying revenue at
reported rates - % 23.1% 18.6% 16.8% 21.4%
Increase in underlying revenue at
constant currency - % 17.9% 19.0% 21.1% 18.5%
Increase in organic revenue - % 17.4% 21.6% 21.8% 18.8%
======================================= ======== ====== ======= =========== =======
Geographical segments
=========================
North Rest of Central
America Europe World activities Total
Organic operating profit GBPm GBPm GBPm GBPm GBPm
=================================== ======== ====== ======= =========== =====
Year ended 30 September 2023
Underlying operating profit/(loss) 1,653 392 175 (98) 2,122
=================================== ======== ====== ======= =========== =====
Underlying operating margin - % 7.8% 5.6% 5.6% 6.8%
=================================== ======== ====== ======= =========== =====
Organic adjustments (10) (9) (6) - (25)
=================================== ======== ====== ======= =========== =====
Organic operating profit/(loss) 1,643 383 169 (98) 2,097
=================================== ======== ====== ======= =========== =====
Year ended 30 September 2022
Underlying operating profit/(loss) 1,236 299 141 (86) 1,590
=================================== ======== ====== ======= =========== =====
Underlying operating margin - % 7.2% 5.0% 5.2% 6.2%
=================================== ======== ====== ======= =========== =====
Currency adjustments 55 (1) (7) - 47
=================================== ======== ====== ======= =========== =====
Underlying operating profit/(loss)
- constant currency 1,291 298 134 (86) 1,637
Organic adjustments (7) (7) (8) - (22)
=================================== ======== ====== ======= =========== =====
Organic operating profit/(loss) 1,284 291 126 (86) 1,615
=================================== ======== ====== ======= =========== =====
Increase in underlying operating profit
at reported rates - % 33.7% 31.1% 24.1% 33.5%
Increase in underlying operating profit
at constant currency - % 28.0% 31.5% 30.6% 29.6%
Increase in organic operating profit
- % 28.0% 31.6% 34.1% 29.8%
======================================== ===== ===== ===== =====
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Reconciliations (continued)
Specific adjusting items
================================
2023 2023
Statutory Underlying
Underlying income statement GBPm 1 2 3 4 5 6 GBPm
=============================== ========== ====== ===== ===== ===== ===========
Operating profit 1,891 125 - 7 - 99 - 2,122
Net gain on sale and closure
of businesses 20 - - - - (20) - -
Finance costs (164) - - - - - 28 (136)
============================== ========== ====== ===== ===== ===== ===========
Profit before tax 1,747 125 - 7 - 79 28 1,986
Income tax expense (429) (26) - (1) - (18) (7) (481)
============================== ========== ====== ===== ===== ===== ===========
Profit for the year 1,318 99 - 6 - 61 21 1,505
Less: Non-controlling
interests (4) - - - - - - (4)
============================== ========== ====== ===== ===== ===== ===========
Profit attributable to
equity shareholders 1,314 99 - 6 - 61 21 1,501
=============================== ========== ====== ===== ===== ===== ===========
Earnings per share (p) 75.4p 5.7p - 0.3p - 3.5p 1.2p 86.1p
============================== ========== ====== ===== ===== ===== ===========
Effective tax rate (%) 24.6% 24.2%
============================== ========== ====== ===== ===== ===== ===========
Specific adjusting items
================================
2022 2022
Statutory Underlying
Underlying income statement GBPm 1 2 3 4 5 6 GBPm
=============================== ========== ==== ====== === ==== ====== ===========
Operating profit 1,500 92 (4) - 2 - - 1,590
Net loss on sale and closure
of businesses (7) - - - - 7 - -
Finance costs (24) - - - - - (76) (100)
=============================== ========== ==== ====== === ==== ====== ===========
Profit before tax 1,469 92 (4) - 2 7 (76) 1,490
Income tax expense (352) (25) (1) -(2) (3) 18 (365)
=============================== ========== ==== ====== === ==== ====== ===========
Profit for the year 1,117 67 (5) - - 4 (58) 1,125
Less: Non-controlling
interests (4) - - - - - - (4)
=============================== ========== ==== ====== === ==== ====== ===========
Profit attributable to equity
shareholders 1,113 67 (5) - - 4 (58) 1,121
=============================== ========== ==== ====== === ==== ======
Currency adjustments 35
=============================== ========== ==== ====== === ==== ====== ===========
Profit attributable to equity
shareholders - constant
currency 1,156
=============================== ========== ==== ====== === ==== ====== ===========
Earnings per share (p) 62.6p 3.8p (0.3)p - - 0.2p (3.3)p 63.0p
=============================== ========== ==== ====== === ==== ====== ===========
Earnings per share -
constant currency (p) 65.0p
=============================== ========== ==== ====== === ==== ====== ===========
Effective tax rate (%) 24.0% 24.5%
=============================== ========== ==== ====== === ==== ====== ===========
Specific adjusting items are as follows:
1. Acquisition-related charges
Represent amortisation and impairment charges in respect of
intangible assets acquired through business combinations, direct
costs incurred through business combinations or other strategic
asset acquisitions, business integration costs and changes in
consideration in relation to past acquisition activity (see note
3).
2. COVID-19 resizing credit
Reversal of surplus provisions recognised in previous years
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
Mainly represents a past service cost following a change in
legislation in Türkiye eliminating the minimum retirement age
requirement for certain employees effective from March 2023.
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 and
charges related to the strategic portfolio review
Profits and losses on the sale of subsidiaries, joint ventures
and associates, exit costs on closure of businesses (see note 10)
and charges in respect of an ongoing strategic review of the
Group's portfolio of non-core activities which, during 2023, relate
to site closures and contract renegotiations and terminations in
the UK.
6. Other financing items
Financing items, including hedge accounting ineffectiveness,
change in the fair value of derivatives held for economic hedging
purposes, change in the fair value of investments and financing
items relating to post-employment benefits.
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Reconciliations (continued)
2023 2022
Net operating profit after tax (NOPAT) GBPm GBPm
======================================================= ===== =====
Underlying operating profit 2,122 1,590
Deduct:
Tax on underlying operating profit at effective tax
rate (513) (390)
Operating profit of non-controlling interests net of
tax (4) (4)
======================================================= ===== =====
NOPAT 1,605 1,196
======================================================= ===== =====
2023 2022
Underlying EBITDA GBPm GBPm
================================================================= ===== =====
Underlying operating profit 2,122 1,590
Add back/(deduct):
Depreciation of property, plant and equipment and right-of-use
assets 439 416
Amortisation of other intangible assets, contract fulfilment
assets and contract prepayments(1) 395 354
Impairment losses - non-current assets(2) 10 15
Impairment reversals - non-current assets (2) (4)
================================================================= ===== =====
Underlying EBITDA 2,964 2,371
================================================================= ===== =====
1. Excludes amortisation of acquisition intangibles.
2. In 2023, excludes impairment losses of GBP50m included in
charges related to the strategic portfolio review.
Balance sheet
2023 2022
Components of net debt GBPm GBPm
================================= ======= =======
Borrowings (3,370) (3,964)
Lease liabilities (945) (913)
Derivative financial instruments (181) (96)
================================= ======= =======
Gross debt (4,496) (4,973)
Cash and cash equivalents 843 1,983
================================= ======= =======
Net debt (3,653) (2,990)
================================= ======= =======
2023 2022
Net debt reconciliation GBPm GBPm
========================================================== ======= =======
Net (decrease)/increase in cash and cash equivalents
(Deduct)/add back: (1,024) 29
Increase in borrowings (1) (677)
Repayment of borrowings 438 297
Net cash flow from derivative financial instruments (127) 67
Repayment of principal under lease liabilities 176 152
========================================================== ======= =======
Increase in net debt from cash flows (538) (132)
New lease liabilities and amendments (264) (139)
Amortisation of fees and discounts on issue of debt (4) (3)
Fees and discounts accrued on issue of debt - 1
Changes in fair value of borrowings in a fair value
hedge (26) 320
Lease liabilities acquired through business acquisitions - (7)
Lease liabilities derecognised on sale and closure of
businesses 9 1
COVID-19 rent concessions - 2
Reclassification - 7
Changes in fair value of derivative financial instruments (8) (251)
Currency translation gains/(losses) 168 (251)
========================================================== ======= =======
Increase in net debt (663) (452)
Net debt at 1 October (2,990) (2,538)
========================================================== ======= =======
Net debt at 30 September (3,653) (2,990)
========================================================== ======= =======
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Reconciliations (continued)
2023 2022
Net debt to EBITDA GBPm GBPm
=========================== ===== =====
Net debt 3,653 2,990
Underlying EBITDA 2,964 2,371
Net debt to EBITDA (times) 1.2 1.3
=========================== ===== =====
2023 2022
Return on capital employed (ROCE) GBPm GBPm
================================== ===== =====
NOPAT 1,605 1,196
Average capital employed 8,215 7,567
ROCE (%) 19.5% 15.8%
================================== ===== =====
Cash flow
2023 2022
Capital expenditure GBPm GBPm
=============================================================== ===== =====
Purchase of intangible assets 215 177
Purchase of contract fulfilment assets 311 218
Purchase of property, plant and equipment 365 282
Investment in contract prepayments 72 64
Proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets (64) (37)
=============================================================== ===== =====
Capital expenditure 899 704
=============================================================== ===== =====
2023 2022
Underlying operating cash flow GBPm GBPm
=============================================================== ===== =====
Net cash flow from operating activities 2,076 1,596
Purchase of intangible assets (215) (177)
Purchase of contract fulfilment assets (311) (218)
Purchase of property, plant and equipment (365) (282)
Proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets 64 37
Repayment of principal under lease liabilities (176) (152)
Share of results of joint ventures and associates 56 45
Add back:
Interest paid 170 96
Net tax paid 441 332
Post-employment benefit obligations net of service costs(1) 10 7
Cash payments related to the cost action programme and
COVID-19 resizing costs 29 57
Cash payments related to the strategic portfolio review 20 -
Cash payments related to the one-off pension charge 9 -
Acquisition transaction costs 17 10
=============================================================== ===== =====
Underlying operating cash flow 1,825 1,351
=============================================================== ===== =====
1. 2023 excludes GBP8m of cash payments related to the one-off
pension charge.
2023 2022
Underlying operating cash flow conversion GBPm GBPm
============================================== ===== =====
Underlying operating cash flow 1,825 1,351
Underlying operating profit 2,122 1,590
Underlying operating cash flow conversion (%) 86.0% 85.0%
============================================== ===== =====
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
14 Non-GAAP measures (continued)
Reconciliations (continued)
2023 2022
Free cash flow GBPm GBPm
=============================================================== ===== =====
Net cash flow from operating activities 2,076 1,596
Purchase of intangible assets (215) (177)
Purchase of contract fulfilment assets (311) (218)
Purchase of property, plant and equipment (365) (282)
Proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets 64 37
Purchase of other investments (3) (42)
Proceeds from sale of other investments 3 3
Dividends received from joint ventures and associates 49 51
Interest received 50 10
Repayment of principal under lease liabilities (176) (152)
Dividends paid to non-controlling interests (6) (3)
=============================================================== ===== =====
Free cash flow 1,166 823
=============================================================== ===== =====
2023 2022
Underlying free cash flow GBPm GBPm
========================================================== ===== =====
Free cash flow 1,166 823
Add back:
Cash payments related to the cost action programme and
COVID-19 resizing costs 29 57
Cash payments related to the strategic portfolio review 20 -
Cash payments related to the one-off pension charge 9 -
Acquisition transaction costs 17 10
========================================================== ===== =====
Underlying free cash flow 1,241 890
========================================================== ===== =====
2023 2022
Underlying free cash flow conversion GBPm GBPm
========================================= ===== =====
Underlying free cash flow 1,241 890
Underlying operating profit 2,122 1,590
Underlying free cash flow conversion (%) 58.5% 56.0%
========================================= ===== =====
2023 2022
Underlying cash tax rate GBPm GBPm
========================================= ===== =====
Tax received 25 31
Tax paid (466) (363)
========================================= ===== =====
Net tax paid (441) (332)
========================================= ===== =====
Underlying profit before tax 1,986 1,490
Underlying cash tax rate (%) 22.2% 22.3%
========================================= ===== =====
Business growth
2023 2022
Net new business GBPm GBPm
================================ ====== ======
New business less lost business 1,205 1,398
Prior year organic revenue 26,087 18,617
Net new business (%) 4.6% 7.5%
================================ ====== ======
Compass Group PLC
Consolidated Financial Statements
Notes to the consolidated financial statements
For the year ended 30 September 2023
15 Exchange rates
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.
2023 2022
====================================== ====== ======
Average exchange rate for the year
Australian dollar 1.84 1.80
Brazilian real 6.22 6.72
Canadian dollar 1.65 1.64
Euro 1.15 1.18
Japanese yen 171.13 158.27
Turkish lira 26.28 18.45
UAE dirham 4.49 4.70
US dollar 1.22 1.28
Closing exchange rate at 30 September
Australian dollar 1.89 1.74
Brazilian real 6.11 6.04
Canadian dollar 1.65 1.53
Euro 1.15 1.14
Japanese yen 182.14 161.58
Turkish lira 33.46 20.69
UAE dirham 4.48 4.10
US dollar 1.22 1.12
====================================== ====== ======
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 future 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; risks associated with changes
in environmental scenarios and related regulations including
(without limitation) the evolution and development of the global
transition to a low carbon economy (including increasing societal
and investor expectations); disruptions and inefficiencies in
supply chains (such as resulting from the wars in Ukraine and the
Middle East); future domestic and global political, economic and
business conditions (such as inflation or 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 and expected expenditures and
divestments; risks associated with changes in economic conditions,
levels of economic growth and 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;
prices and changes in exchange and interest rates; and the impacts
of technological advancements. 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 cannot be excluded
in accordance with such laws.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FLFSDLALALIV
(END) Dow Jones Newswires
November 20, 2023 02:00 ET (07:00 GMT)
Compass (LSE:CPG)
Gráfico Histórico do Ativo
De Abr 2024 até Mai 2024
Compass (LSE:CPG)
Gráfico Histórico do Ativo
De Mai 2023 até Mai 2024
