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Compass Group PLC (CPG)

  Print      Mail a friend       Annual reports

Wednesday 25 November, 2009

Compass Group PLC

Final Results

RNS Number : 0323D
Compass Group PLC
25 November 2009
 


Compass Group PLC

Annual Results Announcement

For The Year Ended 30 September 2009

    


Excellent Performance in a Challenging Environment


 

 
 
·    Revenue £13.4 billion
é 17.5% (constant currency +1.3%, organic flat)
    
·    Underlying operating profit £884 million
é 34% (constant currency +13%)
 
 
·    Underlying operating margin 6.5%
é 70 basis points (constant currency +60 basis points)
 
 
·    Underlying earnings per share 30.0 pence
é 36% (constant currency +15%)
 
 
·    Total dividend 13.2 pence
é 10%
 
 
·    Free cash flow £593 million
é 14%
 
 

 




Richard Cousins, Chief Executive, said:


"Compass has delivered an excellent performance in a challenging environment. Consistently high levels of net new business and a step change in operating efficiency, generating £161 million of savings, have contributed to a further £100 million of profit growth and 60 basis points of margin growth. Whilst in the short term the prevailing economic conditions are likely to continue to impact organic revenue growth, the pipeline of new business looks strong. Furthermore, the considerable potential to deliver ongoing efficiencies underpins our expectation of further progress in the margin."



Sir Roy Gardner, Chairman, said:


"The Group's core strategy remains focused on foodservice and our fast growing support services business. We have excellent future revenue growth opportunities - strong market positions in our key geographies are allowing us to benefit from structural growth in both food and support services. Our continued focus on operating efficiency, whilst making significant investments to drive future growth is making us ever more competitive. Strong cash flow and increasing financial headroom give us the flexibility to make value-creating acquisitions and to reward shareholders through progressive dividends. With this in mind we are increasing the final dividend for the year by 10% to 8.8 pence."


  Chief Executive's Statement


Delivering our strategy.


This year we delivered an excellent performance in a challenging environment, driving a step change in operating efficiency.


Group overview 


Reported revenue has grown by 17.5% in the year, or 1.3% on a constant currency basis. Adjusting for the impact of acquisitions and disposals, organic revenue growth was flat. Very encouragingly, the Group has continued to win high levels of good quality new business, at levels consistent with last year. As expected, in the more cyclical Business & Industry and Sports & Leisure sectors, like for like volumes continue to be impacted by lower headcounts on site and reduced spend on event catering and corporate hospitality. Like for like volumes in the Education, Healthcare and Defence, Offshore and Remote Site sectors have remained solid throughout the year. 


The continued application of the MAP framework and our ability to manage our largely variable cost base has enabled us to quickly flex costs in line with changes in demand and to deliver significant underlying profit growth of 34% (13% on a constant currency basis) with an improvement in our underlying operating margin of 70 basis points (60 basis points on a constant currency basis). Excellent operational management through MAP has this year delivered £100 million of constant currency operating profit growth as follows: 


£27 million of net new business growth 


The continuous investment in our offer and our sales organisation has once again enabled us to secure revenue growth of 8.5% from new business. In addition to the strong growth in foodservice, we have won significant new multi service business. We continue to win new international clients as well as extend our relationships with existing clients. The pipeline of new business looks encouraging. 

 

While core retention has remained stable, we have had one percentage point impact from the tougher economy, mainly from a slightly higher level of business and site closures, and as a result, overall retention was 93%


£30 million of base estate profit growth 


We have continued to generate sustainable growth in our base estate. Across the business we have achieved a sensible level of price increases given the input cost inflation we experienced.


Like for like growth 


Flat organic revenue has primarily been driven by the reduction in like for like volume, from an increase of 1% in 2008 to a decrease of 3% in 2009. The rate of like for like volume decline evolved quickly over the year, moving from an increase of 1% in the first quarter to a decrease of 5% in the third quarter. However, the volume decline of 6% in the fourth quarter seems to indicate that the pace of decline has slowed significantly and this trend has continued into the new financial year.


We have made good progress with MAP 2 Consumer Sales and Marketing. Our "Core Concepts" range of menus has been successful in bringing greater choice and consistency to the food offer, whilst targeted promotions, loyalty schemes and our value range have been growing in popularity in a cost conscious consumer environment. Innovations in technology, such as cashless payment systems and desktop ordering, are delivering the speed and convenience increasingly demanded by consumers.


Cost efficiencies


We have delivered unit productivity and efficiency savings estimated at £130 million, £60 million from food cost and £70 million from unit overheadsOver the past four years, despite periods of significant food cost inflation, our focus on MAP 3 Cost of Food has enabled us to deliver a 60 basis point improvement in the gross margin, and there are still considerable opportunities to drive further improvements across all countries. Within the £1.8 billion of unit overheads, we have also started to make some real savings, but this is just the start of a journey. 

 

£31 million of above unit cost savings


We continue to make excellent progress in MAP 5 Above Unit Costs, driven mainly by streamlining back office procedures and processes. This has allowed us to redeploy resources away from administration and more towards investing in operations and growing the businessWe have reduced our above unit costs by a further £31 million in the year. Our aspiration is to contain the above unit cost and perhaps even reduce it further, whilst continuing to grow the revenue


£9 million from acquisitions net of disposals


This relates mainly to the incremental operating profit from the acquisitions of Medi-Dyn and Kimco in the USA, Plural in Germany, the remaining 50% of the shares in GR SA in Brazil and a number of McColls retail outlets in the UK.


Strategy


Our core strategy is to focus on foodservice and to build on the fast growth in our support services business. Our scale within countries enables us to drive efficiencies; our global reach and capability allows us to take advantage of the significant outsourcing opportunities around the world and to serve multinational clients. Sectorisation is a fundamental part of our strategy and we have built big businesses in all of the key market sectors.


Our primary focus is organic revenue growth. Over recent years, the Group has had a consistent track record of around 6% organic revenue growth and it is envisaged that, over time, as economic conditions recover there should be a return to this trend. The foodservice opportunity is significant, with outsource penetration rates of under 50% and our share of the total market estimated at just 7%. The soft support services market is larger and less penetrated. Combining the two suggests an available global self operated market of well over £200 billion and we will continue to capitalise on this vast opportunity. Innovation in our consumer offer should position us to benefit from a cyclical upswing in demand and drive increased participation and spend. The roll out of best practice in retention should result in further improvement in this area.


Support services are becoming an ever more important part of our business. The delivery of multi services, that is bundled food and support services, now accounts for 18% of Group revenues (comprising 5% foodservice and 13% support services). Our support services offer, which originated in the Defence, Offshore and Remote Site sector, has now extended to the Healthcare sector and increasingly to the Business & Industry sector where the outsourcing of support services is growing quickly. In 2009 we signed over £200 million of new multi service Business & Industry contracts, more than half coming from cross-selling to existing clients. For example, earlier in the year we extended our international contract with Royal Dutch Shell plc ('Shell') across Europe and we have now further extended our contract to include the Americas. Furthermore, we were delighted that in June, jointly with Shellwe won the Partners Across Borders category of the prestigious European FM Awards. The Compass Service Framework, our platform to deliver support services across all our major countries, is widely acclaimed by our clients. Continuous investment in developing this platform, both organically and through selected acquisitions, should deliver significant future growth. 


MAP has brought real discipline to the way we evaluate infill acquisitions. We have a very rigorous process that covers strategic, financial and management criteria. Our recent acquisitions: Professional Services and Medi-Dyn, two Healthcare support services businesses in the USA; Kimco, a support services business within Business & Industry in the USA; a number of McColls retail outlets in the UK; and Plural, a support services business in Germany, have been successfully integrated and have delivered (or are on target to deliver) against the Group's strict criteria. We now have increasing financial headroom to acquire both food and support service businesses in our core countries as well as continuing to build on our existing presence in emerging markets.


Over the past three years we have delivered 200 basis points of margin growth across all five MAP components. We believe we have significant further potential from the continued application of best practice across the business. Whilst we have made good progress to date, there is still much more to go for.

Outlook


The Group's core strategy remains focused on food and increasingly support services. Whilst in 2010 the prevailing economic conditions are expected to lead to broadly flat organic revenue growth, we are very encouraged by the pipeline of new business. In the medium term the Group is set to enjoy the combination of structural growth in outsourcing and, as the global economies recover, a cyclical upswing in demand. In parallel, the continuing management of the flexible cost base and the ongoing focus on MAP should deliver further cost efficiencies and margin progression. In addition to this, the strength of the cash flow and balance sheet is enabling us to continue to reward shareholders and to accelerate growth through value creating infill acquisitions.


Richard Cousins

Group Chief Executive

25 November 2009

   Business Review


A strong financial performance.


We have demonstrated our ability to manage the cost base containing the impact on profit of the like for like volume declines and delivering significant further efficiencies. We are in a strong position to support the significant growth opportunities.


Financial Summary




2009


2008


Increase








Continuing operations








Revenue







Constant currency


£13,444m


£13,270m


1.3%

Reported


£13,444m


£11,440m


17.5%








Total operating profit







Constant currency


£884m


£784m


12.8%

Underlying


£884m


£662m


33.5%

Reported


£877m


£659m


33.1%








Operating margin







Constant currency


6.5%


5.9%


60bps

Underlying


6.5%


5.8%


70bps

Reported


6.5%


5.7%


80bps








Profit before tax







Underlying


£784m


£589m


33.1%

Reported


£773m


£566m


36.6%








Basic earnings per share







Underlying


30.0p


22.0p


36.4%

Reported


29.5p


20.9p


  41.1%








Free cash flow







Reported


£593m


£520m


14.0%








Total Group including discontinued operations








Basic earnings per share


31.7p


23.7p


33.8%








Total dividend per ordinary share


 13.2p


12.0p


10.0%


(1)

Constant currency restates the prior year results to 2009's average exchange rates.

(2)

Total operating profit includes share of profit of associates.

(3)

Underlying operating profit excludes the amortisation of intangibles arising on acquisition.

(4)

Operating margin is based on revenue and operating profit excluding share of profit of associates.

(5)

Underlying profit before tax excludes the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the change in fair value of minority interest put options.

(6)

Underlying basic earnings per share excludes the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the change in fair value of minority interest put options and the tax attributable to these amounts.


  Segmental Performance




Revenue


Revenue Growth



2009

2008



Constant




£m

£m


Reported

Currency

Organic









Continuing operations
















North America


5,871

4,553


28.9%

3.6%

1.6%

Continental Europe


3,429  

3,021


13.5%

0.1%

(1.1)%

United Kingdom & Ireland


1,829

1,926


(5.0)%

(5.0)%

(5.4)%

Rest of the World


2,315

1,940


19.3%

2.9%

2.3%









Total


13,444

11,440


17.5%

1.3%

0.0%











Operating Profit


Margin




2009

2008


2009

2008




£m

£m


%

%










Continuing operations
















North America


441

311


7.5%

6.8%


Continental Europe


232

197


6.8%

6.5%


United Kingdom & Ireland


114

108


6.2%

5.6%


Rest of the World


148

104


6.4%

5.4%


Unallocated overheads


(58)

(62)


-

-










Excluding associates


877

658


6.5%

5.8%










Associates


7

4


-

-










Underlying 


884

662


6.5%

5.8%










Amortisation of 

fair value intangibles

(7)

(3)













Total


877

659






(1)

Constant currency restates the prior year results to 2009's average exchange rates.

(2)

Operating profit includes share of profit of associates.

(3)

Underlying operating profit and margin excludes the amortisation of intangibles arising on acquisition.

(4)

Operating margin is based on revenue and operating profit excluding share of profit of associates.

(5)

Organic growth is calculated by adjusting for acquisitions (excluding current year acquisitions and including a full year in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior year at current year exchange rates) and compares the current year results against the prior year.

  Revenue

Overall, organic revenue growth was flat, comprising new business of 8.5%, retention of 93% and a like for like decline of 1.5%. Acquisitions less disposals increased revenue by 1.3% and the significant weakening of Sterling, in particular against the Euro and US Dollar, increased reported revenues by 16.2%, resulting in reported revenue growth of 17.5%.


Operating Profit


Underlying operating profit from continuing operations, including associates but excluding the amortisation of intangibles arising on acquisition, was £884 million (2008: £662 million), an increase of 33.5% on a reported basis over the prior year. Underlying operating profit increased by £100 million, 12.8% on a constant currency basis. This represents a 70 basis points improvement in margin to 6.5% (2008: 5.8%), or 60 basis points on constant currency basis.


Operating profit after the amortisation of intangibles arising on acquisition of £7 million (2008: £3 million) was £877 million (2008: £659 million).


North America

43.7% Group revenue (2008: 39.8%)    


Our North American business (which includes our operations in the USACanada and Mexico) has delivered an excellent performance. Revenues were £5.9 billion (2008: £4.6 billion), with organic growth of 1.6%. Operating profit increased by £49 million, or 12.5% on a constant currency basis, to £441 million (2008: £392 million on a constant currency basis).  A focus on driving efficiencies, particularly through the purchasing, logistics and production processes and initiatives to reduce overheads, contributed to a full year margin improvement of 60 basis points on a constant currency basis. 


The Business & Industry sector has had another year of strong new business gains, including the World Bank Group.  Despite the like for like pressures on volume, consumer demand for value offers and "grab and go" increased. This, together with more focused promotions, has helped drive participation and spend. Tight cost management and further efficiency gains has enabled the sector to deliver another year of strong profit and margin growth. The acquisition of Kimco earlier in the year has enhanced our support services capability in this sector, enabling us to better serve our existing clients by offering a combined food and support services package.


In Healthcare, the ongoing integration of our recent acquisitions of Professional Services and Medi-Dyn, both specialist healthcare support service providers, has strengthened our support services offers and contributed to the delivery of strong revenue growth and excellent retention rates. For example, we have recently been appointed to provide support services to The Mount Sinai Hospital in Manhattan, one of the USA's oldest and largest teaching hospitals.


We have seen good like for like volume growth in Education, driven by increasing enrolments and take up of board plans throughout the year. New business also remained very strong and we have delivered double digit organic revenue growth. We have recently won a contract with The University of North Carolina at Greensboro to provide both dining and vending services as well as contracts with Duval County Public Schools, the University of Pennsylvania and Bowling Green University. 


In Levy, our Sports & Leisure business, our ability to quickly flex costs in line with demand and the delivery of further efficiencies has enabled us to improve margins.  We continue to see a strong pipeline for new business opportunities and have had some exciting wins including a significant contract with the Palace of Auburn Hills (home to the Detroit Pistons of the NBA) as well as the United Center (home to the Chicago Bulls and Chicago Blackhawks).


In Canada, we have recently entered into an agreement with Suncor Energy to provide catering and support services to the new Firebag Village site. We have been partnered with Suncor Energy since 1967, when they started their first operations in the Oil Sands.

Continental Europe

25.5% Group revenue (2008: 26.4%)


Revenue in Continental Europe totalled £3.4 billion (2008: £3.0 billion) with organic revenue 1.1% lower than last year.  However, management of the flexible cost base and further efficiency gains resulted in a robust operating profit performance of £232 million, an increase of 4% on constant currency basis, and margin improvement of 30 basis points to 6.8%. 


Across the geography we have seen a consistent and encouraging rate of new contract wins. For example, we have extended our relationship with Shell and now provide a wide variety of services across many countries. In Continental Europe this now includes GermanyAustriaSwitzerland and Italy amongst others. 


In Germany, we have successfully integrated the recent acquisitions of Plural, a support service specialist, and LPS and are already seeing the benefits of new business opportunities through cross-selling. The Education sector has developed significantly this year with our largest ever contract win for public schools in Offenberg, Baden-Wuerttemberg, as well as other exciting new wins in both the public and private sectors. 


The Nordic region, where high levels of organic growth have been maintained through the year, has seen strong new business wins in both food and multi services, including AstraZeneca, Sweco and Volvo in Sweden and Statoil in Norway.


The turnaround plan in Italy continues to deliver good results, with solid margin improvement. Following recent wins in support services, such as the large contract with Trenitalia (Italian Railways)we are seeing encouraging signs regarding the cross-selling potential. Our Education business is continuing to generate good levels of new business and like for like growth, with contract wins across the country (including Rome and Turin)


The Spanish business has also performed extremely well and had a particularly strong year in Healthcare. This has been driven by new business gains, with both public and private hospitals (for example, Pius Hospital de Valls) as well as in the senior living market. The management team has simplified the structure to increase efficiency and has improved purchasing and logistics processes providing a solid base for future growth.


UK & Ireland

13.6% Group revenue (2008: 16.8%)        


Revenues were £1.8 billion (2008: £1.9 billion). We have continued to work hard in the UK & Ireland, streamlining the back office and improving productivity. This has enabled us to significantly improve our margins by 60 basis points, despite the difficult economic conditions, with a good increase in operating profit to £114 million (2008: £108 million). 


In the Business & Industry sector we continue to win high quality new business, in both catering and support services. Notably, Compass has been awarded contract with the Lloyds Banking Group to provide catering to the Group's 78 UK sites for the next five years. The new Royal Institute of Chartered Surveyors contract requires us to provide staff dining, reception services and hospitality catering.  During the year we have also won important new business with BSkyB and National Grid as well as renewing contracts with Heinz and JohnsonDiversey. Continued flexing of labour costs in line with demand and tight control of discretionary spend has enabled us to move the margin forward strongly


Growth in the Healthcare sector has been driven by new business and good like for like volume growth. The newly acquired food and retail outlets from McColls have contributed to the good progress we continue to make in extending our retail offer, with over 55 new outlets opened since the start of the year taking the total to over 100 We have secured good quality new business such as the Southend NHS Foundation Trust where we have extended our relationship to feed 1,000 patients and 4,000 employees using our advanced Steamplicity concept


We are making good progress in the Education sector and are really starting to see the benefits of our work over the last few years. We believe we now have the right offer for primary and secondary school meals and are in a strong position to grow this part of the businessWe have recently also won new contracts in higher education with Warwick Universitythe largest university campus in the UK, as well as extending our existing contracts with Oxford Brookes UniversityRoehampton University and De Montfort University. We have made excellent progress on productivity, where a focus on labour hours and unit overheads has driven margin growth of over 100 basis points compared to the previous year.


We have had success in winning new business in the Sports & Leisure sector. For example we have won contracts with Hampshire Cricket Club's Rose Bowl and the 2010 Ryder Cup, where we will again provide the hospitality and catering for officials, guests and spectators, as well as our landmark deal with the Jockey Club where we now provide foodservice to all of their 14 racecourses.  A focus on flexing labour and other costs has minimised the impact on profit of the decline in hospitality revenues in the sector.


Rest of the World

17.2% Group revenue (2008: 17.0%)    


Our Rest of the World businesses have delivered solid organic revenue growth of 2.3%. Operating profit increased by £27 million, or 22% on a constant currency basis, to £148 million (2008: £121 million on a constant currency basis). The acquisition of the remaining 50% of the shares of GR S.A. in Brazil, completed in March 2008, contributed strongly to this growth. The margin has increased by 100 basis points overall on a constant currency basis to 6.4%.


We are continuing to see good levels of new business wins across most countries in the region, including new contracts with HSBC in both China and Argentina and Coca Cola in China. In Brazil we have won Monsanto and Cia Muller de Bebidas, a leading beverage manufacturer. The drive for overhead efficiencies, coupled with restructuring programs, has contributed to the excellent margin progression. 


In Australia we have seen good organic revenue growth driven by the Defence, Offshore and Remote site sector which comprises the majority of the business. Chevron recently awarded us a very significant contract to provide food and a full range of support services at its facilities in Western AustraliaThe Healthcare sector grew by nearly 20% in the year and continues to provide excellent opportunities for future growth. Already one of the more efficient businesses in the Group, Australia has delivered further margin improvement by focusing on all areas of cost.


The large Business & Industry and Sports & Leisure sectors in Japan mean that organic revenue growth has been a challenge. However, excellent progress on overhead control and driving efficiencies in the supply chain have delivered a further 100 basis points improvement in the margin, moving Japan a step closer to the Group average. 


In Brazil new business wins have been very strong. They include contracts with PetrobrasBrazil's largest energy company, and Noble, marking our entry into the offshore market thereThe management team has been quick to react to market changes by managing the cost base and continuing to deliver cost efficiencies. The margins have increased and the recently strengthened management team is now well placed to grow our business across all sectors in this exciting market. 


Our UAE based joint venture has seen strong organic revenue growth and excellent like for like volumes in our remote site business. We have seen particularly strong growth in support services and the pipeline of new business looks encouraging.


Our businesses serving the energy and extraction sectors have delivered solid double digit organic revenue growth and have excellent retention rates. We continue to benefit from the very high levels of activity in these sectors, particularly the construction of liquid natural gas production, storage and export facilities worldwide.


Unallocated Overheads


Unallocated overheads for the year were £58 million (2008: £62 million), reflecting delivery of further efficiencies in the central overhead structure.

 


Finance Costs 


Underlying net finance cost, excluding hedge accounting ineffectiveness and the impact of revaluing investments and minority interest put options, was £100 million (2008: £73 million). This reflects the impact of exchange rates on the interest payable on US Dollar and Euro denominated debt and the lower interest rates receivable on cash deposits. It also reflects an increased charge in relation to pensions of £11 million (2008: credit of £2 million). We currently expect the underlying net finance cost for 2010 to be around £85 million at current exchange rates.


Other Gains and Losses


Other gains and losses include a £7 million (2008: £4 million) cost of hedge accounting ineffectiveness and a £3 million credit (2008: £16 million costfrom revaluing investments and minority interest put options.


Profit Before Tax


Profit before tax from continuing operations was £773 million (2008: £566 million). 


On an underlying basis, excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the impact of revaluing investments and minority interest put options, profit before tax from continuing operations increased by 33.1% to £784 million (2008: £589 million).


Income Tax Expense


Income tax expense from continuing operations was £221 million (2008: £169 million). 


On an underlying basis, excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the impact of revaluing investments and minority interest put options, the tax charge on continuing operations was £224 million (2008: £171 million), equivalent to an effective tax rate of 29% (2008: 29%). Based on current corporate tax rates applicable to our major countries of operation, we expect the tax rate to average out around the 27% level in the short to medium term.


Discontinued Operations


The profit after tax from discontinued operations was £40 million (2008: £53 million). 


Basic Earnings per Share


Basic earnings per share, including discontinued operations, were 31.7 pence (2008: 23.7 pence). 


On an underlying basis, excluding discontinued operations, the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the impact of revaluing investments and minority interest put options, and the tax attributable to these amounts, the basic earnings per share from continuing operations were 30.0 pence (200822.0 pence).




Attributable


Basic Earnings

Profit

Per Share



2009

2008


2009

2008

Change


£m

£m

pence

pence

%









Reported


586

443


31.7

23.7

33.8

Discontinued operations


(40)

(53)


(2.2)

(2.8)


Other adjustments


8

21


0.5

1.1


Underlying


554

411


30.0

22.0

36.4

 

Dividends


It is proposed that a final dividend of 8.8 pence per share will be paid on 1 March 2010 to shareholders on the register on 30 January 2010. This will result in a total dividend for the year of 13.2 pence per share (2008: 12.0 pence per share), a year on year increase of 10.0%. The dividend was covered 2.3 times on an underlying earnings basis and 2.6 times on a free cash basis.


Free Cash Flow


Free cash flow from continuing operations totalled £593 million (2008: £520 million). The major factors contributing to the increase were: £219 million increase in underlying operating profit before associates offset by £93 million higher net capital expenditure and £38 million lower working capital inflow.


Gross capital expenditure of £287 million (2008: £200 million), including amounts purchased by finance lease of £4 million (2008: £8 million), is equivalent to 2.1% of revenues (2008: 1.7% of revenues). We currently expect the level of gross capital expenditure for 2010 to be at a similar level. Proceeds from the sale of assets were £24 million and we expect these will be minimal in 2010.


Working capital continues to be well managed, delivering an overall £8 million working capital inflow in the year. We believe that there remains further scope for improvement.


The cash tax rate for the year was 21% (2008: 25%), based on underlying profit before tax for the continuing operations, benefiting from a few large refunds relating to prior years. Wcurrently expect the cash tax rate to average out towards the 27% level for the short to medium term.


The net interest outflow for the year was £100 million (2008: £81 million).


Acquisition Payments


The acquisition spend in the year totalled £165 million. This includes £115 million of infill acquisitions (including £52 million on Kimco and £8 million on Lackmans in the USA, £17 million on Plural in Germany and £21 million on McColls retail site leases in the UK) and £35 million on the buyout of minority interests (including £11 million to take our shareholding in Seiyo Foods, our Japanese business, from 95% to 100%).


Disposals


Payments made in respect of businesses disposed or discontinued in prior years totalled £31 million.


Purchase of Own Shares


The Group spent cash of £12 million (2008: £355 million) on the purchase of its shares in the year.


Return on Capital Employed 


Return on capital employed (ROCE) was 18.7% (200815.2%) based on continuing business before exceptional items, excluding the Group's minority partners' share of total operating profit, net of tax at 28.6% and using an average capital employed for the year of £3,350 million (2008: £3,073 million) calculated from the IFRS balance sheet.


Pensions 


The Group has continued to review and monitor its pension obligations throughout the year working closely with the Trustees and members of schemes around the Group to ensure proper and prudent assumptions are used and adequate provision and contributions are made. 


The Group's total pension fund deficit at 30 September 2009 was £335 million (2008: £131 million), with the increase principally resulting from lower discount rates. The total pensions charge for defined contribution schemes in the year was £27 million (2008: £28 million) and £34 million (2008: £19 million) for defined benefit schemes. Included in the defined benefit scheme costs was a £11 million charge to net finance cost (2008: £2 million credit).

 

Risks and Uncertainties


The Board takes a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Company and its shareholders.


The principal risks and uncertainties facing the business and the activities the Group undertakes to mitigate these are set out in the section headed 'Managing Risk' below.


Shareholder Return


The market price of the Group's ordinary shares at the close of the financial year was 382 pence per share (2008: 344 pence per share).


Related Party Transactions


Details of transactions with related parties are set out in Note 34. These transactions have not, and are not expected to have, a material effect on the financial performance or position of the Group.


Financial Position


The ratio of net debt to market capitalisation of £7,082 million as at 30 September 2009 was 13% (2008: 16%).


During the year net debt reduced to £943 million (2008: £1,005 million) including a negative impact from foreign exchange translation of £118 million and cash spent on share buy backs totalling £12 million.


At 30 September 2009, the Group had cash reserves of £588 million. In addition, the Group had an undrawn bank facility of £756 million committed through to 2012. Taking account of cash required for day to day operations, the Group estimates it currently has headroom of around £1 billion.


Looking forward, £200 million of Sterling denominated bonds are due for repayment in January 2010 and it is currently envisaged that this will be paid out of surplus cash. With strong ongoing free cash flow generation, the Group believes that it is in a strong financial position. 


The EBIT to net interest ratio has increased from 3.2 times in 2006 to 8.8 times in 2009, excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the change in fair value of minority interest put options and discontinued operations. EBITDA to net interest has increased from 5.6 times to 11.1 times in the same period, including discontinued operations but excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the change in fair value of minority interest put options. The Group remains committed to maintaining strong investment grade credit ratings.


 

Going Concern


The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review, as is the financial position of the Group, its cash flows, liquidity position, and borrowing facilities. In addition, Note 20 includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit risk and liquidity risk.


The Group has considerable financial resources together with longer term contracts with a number of customers 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 despite the current uncertain economic outlook.


After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.




Andrew D Martin 

Group Finance Director


  Managing Risk


The Board takes a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Company and its shareholders. The Group has policies and procedures in place to ensure that risks are properly evaluated and managed at the appropriate level within the business. 


The identification of risks and opportunities; the development of action plans to manage the risks and exploit the opportunities; and the continual monitoring of progress against agreed KPIs is an integral part of the business process, and a core activity throughout the Group.


Control is exercised at Group and business level through the Group's Management and Performance framework, monthly monitoring of performance by comparison with budgets and forecasts and through regular Business Reviews with the Group Chief Executive and the Group Finance Director.  


This is underpinned by a formal major risk assessment process which is an integral part of the annual business cycle. As part of the process, each of the Group's businesses is required to identify and document major risks and appropriate mitigating activities and controls; and monitor and report to management on the effectiveness of these controls on a biannual basis. Senior managers are also required to sign biannual confirmations of compliance with key procedures and to report any breakdowns in, or exceptions to, these procedures. The results are reviewed by the Executive Committee and the Board.


The Group also has formal procedures in place, with clearly designated levels of authority, for approving acquisitions and other capital investments. This is supported by a post investment review process for selected acquisitions and major items of capital expenditure.


The table below sets out the principal risks and uncertainties facing the business at the date of this report and the systems and processes the Group has in place to manage and mitigate these risks.


Risk



Mitigation





Health, safety and environment

Food safety


Compass feeds millions of consumers around the world every day, therefore setting the highest standards for food hygiene and safety is paramount. The Group has appropriate policies, processes and training procedures to ensure full compliance with legal obligations.


Health and safety


Health and safety remains our number one operational priority. All management meetings throughout the Group feature a Health and Safety update as one of their first agenda items.


Environment


Everyday, everywhere, we look to make a positive contribution to the health and wellbeing of our customers, the communities we work in and the world we live in. Our Corporate Responsibility statement in the Annual Report describes our approach in more detail.

Clients and

consumers

Client retention


We aim to build long-term relationships with our clients based on quality and value. Our business model is structured so that we are not reliant on one particular sector, geography or group of clients.


Consolidation of food and support services


We have developed a range of support services to complement our existing foodservice offer. These services are underpinned by the Compass Service Framework, our standard operating platform for support services, which gives us the capability to deliver to the same consistent world-class standard globally. 


Bidding risk


The Group's operating companies bid selectively for large numbers of contracts each year and a more limited number of concession opportunities. Tenders are developed in accordance with a thorough process which identifies both the potential risks (including social and ethical risks) and rewards, and are subject to approval at an appropriate level of the organisation.


Credit risk


There is limited concentration of credit risk with regard to trade receivables given the diverse and unrelated nature of the Group's client base.


Service delivery and compliance with contract terms and conditions


The Group's operating companies contract with a large number of clients. Processes are in place to ensure that the services delivered to clients are of an appropriate standard and comply with the appropriate contract terms and conditions.    



Risk



Mitigation






Changes in consumer

preferences


We strive to meet consumer demand for quality, choice and value by developing innovative and nutritious food offers which suit the lifestyle and tastes of our consumers.

People

People retention

and motivation


The recruitment and retention of skilled employees is a challenge faced by the industry at large. The Group has established training and development programmes, succession planning and performance management programmes which are designed to align rewards with our corporate objectives and to retain and motivate our best people.

Supply Chain

Suppliers


The Group constantly strives to find the right balance between building long-term supply relationships based on the compatibility of values and behaviour with the requirements of the Group as well as quality and price. The Group seeks to avoid over-reliance on any one supplier.


Traceability


To reduce risk we are focusing on traceability, clear specification of our requirements to nominated suppliers and the improvement of purchasing compliance by unit managers.

Economic risk

Economy


Around 50% of our business, the Healthcare, Education and Defence, Offshore and Remote Site sectors, are less susceptible to economic downturns. Revenues in the remaining 50%, the Business & Industry and Sports & Leisure sectors, are more susceptible to the economy and employment levels. However, with the variable and flexible nature of our cost base, it is generally possible to contain the impact of like for like volume declines.


Food cost inflation


As part of our MAP programme we seek to manage food price inflation through: cost indexation in our contracts, giving us the contractual right to review pricing with our clients; menu management to substitute ingredients in response to any forecast shortages and cost increases; and continuing to drive greater purchasing efficiencies through supplier rationalisation and compliance.


Labour cost inflation


Our objective is always to deliver the right level of service in the most efficient way. As part of our MAP programme we have been deploying tools and processes to optimise labour productivity and exercise better control over other labour costs such as absenteeism, overtime and third party agency spend; and to improve our management of salary and benefit costs and control labour cost inflation.

Regulatory,

political and

competitive

environment

Political stability

    


Compass is a global company operating in countries and regions with diverse economic and political conditions. Our operations and earnings may be adversely affected by political or economic instability. However, we remain aware of these risks and look to mitigate them wherever possible. We have also taken the strategic decision to withdraw from a number of countries (and had completed most of these withdrawals by the date of this report) where we consider the risks outweigh the rewards.


Regulation


Changes to laws or regulations could adversely affect our performance. We engage with governmental and non-governmental organisations directly or through trade associations to ensure that our views are represented.


Competition


Compass operates in a competitive market place. The level of concentration and outsource penetration varies by country. Some markets are relatively concentrated with two or three key players, others are highly fragmented and offer significant opportunities for consolidation and penetration into the self-operated market. Aggressive pricing from our competitors could cause a reduction in our revenues and margins. We aim to minimise this by building long term relationships with our clients based on quality and value.

Acquisitions 

and

investments

Acquisition risk


Potential acquisitions are identified by the operating companies and subject to appropriate levels of due diligence and approval by Group management. Post acquisition integration and performance is closely managed and subject to regular review.


Investment risk


Capital investments are subject to appropriate levels of scrutiny and

approval by Group management. 


Joint ventures


In some countries we operate through joint ventures. Procedures are in place to ensure that joint venture partners bring skills, experience and resources that complement and add to those provided from within the Group.

  

Risk



Mitigation





Information

technology and

infrastructure



The Group relies on a variety of IT systems in order to manage and deliver services and communicate with its customers, suppliers and employees. There is minimal inter-country dependence on IT systems, and all of the Group's major operating companies have appropriate disaster recovery plans in place.

Fraud and

compliance



The Group's zero tolerance based Code of Ethics governs all aspects of our relationship with our stakeholders. All alleged breaches of the Code are investigated. The Group's procedures include regular operating reviews, underpinned by a continual focus on ensuring the effectiveness of internal controls.

Litigation



Though we do not operate in a litigious industry, we have in place policies and processes in all of our main operating companies to report, manage and mitigate against third-party litigation.

Reputation risk



Our brands are amongst the most successful and best established in our industry. They represent a key element of the Group's overall marketing and positioning. In the event that our brand or reputation is damaged this could adversely impact the Group's performance.  The Group's zero tolerance based Code of Ethics is designed to safeguard the Company's assets, brands and reputation.

Financial risk

Overview


Compass Group's financial risk management strategy is based upon sound economic objectives and good corporate practice. The main financial risks concern the availability of funds to meet our obligations (liquidity risk), movements in exchange rates (foreign currency risk), movements in interest rates (interest rate risk), and counterparty credit risk. Derivative and other financial instruments are used to manage interest rate and foreign currency risks. Further details of our financial risks and the ways in which we mitigate them are set out below.


Liquidity Risk



The Group finances its borrowings from a number of sources including banks, the public markets and the private placement markets.  The maturity profile of the Group's principal borrowings at 30 September 2009 shows the average period to maturity is 3.1 years. The Group's undrawn committed bank facilities at 30 September 2009 were £756 million (2008: £689 million).


Financial Instruments



The Group continues to manage its foreign currency and interest rate exposure 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 ratecurrency swaps and forward currency contracts, 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 match as far as possible its principal projected cash flows by currency to 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. To implement this policy, forward currency contracts or currency swaps are taken out which, when applied to the actual currency liabilities, convert these to the required currency. A reconciliation of the 30 September 2009 actual currency liabilities to the effective currency borrowed is set out in note 20 of the consolidated financial statements.  The borrowings in each currency give rise to foreign exchange differences on translation into Sterling. Where the borrowings are either less than, or equate, to the net investment in overseas operations, these exchange rate movements are treated as movements on reserves and recorded in the statement of recognised income and expense rather than in the income statement. Non-Sterling earnings streams are translated at the average rate of exchange for the year. This results in differences in the Sterling value of currency earnings from year to year. The table in note 36 of the consolidated financial statements sets out the exchange rates used to translate the income statements, balance sheets and cash flows of non-Sterling denominated entities.


Interest Rate Risk



As detailed 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 at least 80% of its projected net debt is fixed for one year, reducing to 60% fixed for the second year and 40% fixed for the third year.

  

Risk



Mitigation





Pensions risk



The Group's defined benefit pension schemes are closed to new entrants other than for transfers under public sector contracts in the UK where the Company is obliged to provide final salary benefits to transferring employees. Steps have been taken to reduce the investment risk in these schemes. Further information is set out in note 23 of the consolidated financial statements.

Tax risk



As a Group, we seek to plan and manage our tax affairs efficiently in the jurisdictions in which we operate. In doing so, we aim to act in compliance with the relevant laws and disclosure requirements. In an increasingly complex international tax environment, a degree of uncertainty is inevitable in estimating our tax liabilities. We exercise our judgement, and seek appropriate professional advice, in assessing the amounts of tax to be paid and the level of provision required. The effective rate of tax may be influenced by a number of factors, including changes in laws and accounting standards, which could increase the rate.




  Consolidated Financial Statements


Directors' responsibilities


The financial information set out below does not constitute the company's statutory accounts for the years ended 30 September 2009 or 2008, but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s237(2) or (3) Companies Act 1985 /  s498(2) or (3) Companies Act 2006.



The annual report and accounts complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of the requirement to produce an annual financial report. The annual report and accounts is the responsibility of, and has been approved by, the directors. We confirm that to the best of our knowledge: 


  • the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards('IFRS'); 

  • the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

  • the annual report and accounts includes a review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.


On behalf of the Board






Mark J White

General Counsel and Company Secretary

25 November 2009





The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards ('IFRS'). Company law requires the directors to prepare such financial statements in accordance with IFRS, the Companies Act 2006 and Article 4 of the IAS Regulation.


International Accounting Standard 1 requires that financial statements present fairly for each financial year the Group's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expense set out in the International Accounting Standards Board's 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards. 


Directors are also required to:


  • properly select and apply accounting policies;

  • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

  • provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.


The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors' report and directors' remuneration report which comply with the requirements of the Companies Act 2006. The directors, having prepared the financial statements, have permitted the auditors to take whatever steps and undertake whatever inspections they consider to be appropriate for the purpose of enabling them to give their audit opinion.


The directors are also responsible for the maintenance and integrity of the Compass Group PLC website. 


Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


  

Consolidated income statement







for the year ended 30 September 2009


















2009


2008



Notes


 £m


 £m








Continuing operations







Revenue


1


13,444


11,440

Operating costs


2


(12,574)


(10,785)

Operating profit


1


870


655

Share of profit of associates


1, 13


7


4

Total operating profit


1


877


659

Finance income


4


14


27

Finance costs


4


(114)


(100)

Hedge accounting ineffectiveness


4


(7)


(4)

Change in fair value of investments and minority interest put options


4


3


(16)

Profit before tax




773


566

Income tax expense


5


(221)


(169)

Profit for the year from continuing operations


1


552


397








Discontinued operations







Profit for the year from discontinued operations


6


40


53








Continuing and discontinued operations







Profit for the year




592


450








Attributable to







Equity shareholders of the Company




586


443

Minority interest




6


7

Profit for the year




592


450








Basic earnings per share (pence)







From continuing operations


8


29.5p


20.9p

From discontinued operations


8


2.2p


2.8p

From continuing and discontinued operations


8


31.7p


23.7p








Diluted earnings per share (pence)







From continuing operations


8


29.4p


20.8p

From discontinued operations


8


2.2p


2.8p

From continuing and discontinued operations


8


31.6p


23.6p















Analysis of operating profit







for the year ended 30 September 2009


















2009


2008





 £m


 £m








Continuing operations














Operating profit before associates 

and amortisation of intangibles arising on acquisition




877


658

Share of profit of associates




7


4

Operating profit before amortisation of intangibles arising on acquisition




884


662

Amortisation of intangibles arising on acquisition




(7)


(3)

Total operating profit  




877


659


  

Consolidated statement of recognised income and expense  

for the year ended 30 September 2009








































Movements in equity









Retained

Revaluation

Translation

Minority


Total


Total





earnings

reserve

reserve

interest


2009


2008



Notes


£m

£m

£m

£m


£m


£m













Net income/(expense) recognised in equity












Currency translation differences




-

-

85

4


89


67

Actuarial gains/(losses) 

on post-retirement employee benefits

23


(206)

-

-

-


(206)


15

Tax on items taken directly to equity


5


61

-

9

-


70


5

Other




-

(1)

-

-


(1)


(1)

Net income/(expense) 

recognised directly in equity




(145)

(1)

94

4


(48)


86













Profit for the year












Profit for the year




586

-

-

6


592


450





 

 

 

 





Total recognised income and expense 

for the year


25


441

(1)

94

10


544


536





 

 

 

 





Attributable to












Equity shareholders of the Company




441

(1)

94

-


534


526

Minority interest




-

-

-

10


10


10

Total recognised income and expense 

for the year


25


441

(1)

94

10


544


536


  

Consolidated balance sheet







as at 30 September 2009


















2009


2008



Notes


 £m


 £m








Non-current assets







Goodwill


10


3,580


3,290

Other intangible assets


11


493


393

Property, plant and equipment


12


530


463

Interests in associates


13


32


28

Other investments


14


32


17

Trade and other receivables


16


64


66

Deferred tax assets*


5


300


256

Derivative financial instruments**


20


60


19

Non-current assets




5,091


4,532





 



Current assets







Inventories


17


230


213

Trade and other receivables


16


1,680


1,577

Tax recoverable*




25


19

Cash and cash equivalents**


18


588


579

Derivative financial instruments**


20


27


1

Current assets




2,550


2,389





 



Total assets




7,641


6,921








Current liabilities







Short-term borrowings**


19


(323)


(382)

Derivative financial instruments**


20


(15)


(4)

Provisions


22


(123)


(113)

Current tax liabilities*




(260)


(234)

Trade and other payables


21


(2,378)


(2,235)

Current liabilities




(3,099)


(2,968)





 



Non-current liabilities







Long-term borrowings**


19


(1,277)


(1,212)

Derivative financial instruments**


20


(3)


(6)

Post-employment benefit obligations


23


(335)


(131)

Provisions


22


(342)


(341)

Deferred tax liabilities*


5


(11)


(24)

Trade and other payables


21


(29)


(33)

Non-current liabilities




(1,997)


(1,747)





 



Total liabilities




(5,096)


(4,715)








Net assets




2,545


2,206








Equity







Share capital


24, 25


185


184

Share premium account


25


215


178

Capital redemption reserve


25


44


44

Less: Own shares


25


(2)


(4)

Other reserves


25


4,489


4,401

Retained earnings


25


(2,395)


(2,616)

Total equity shareholders' funds




2,536


2,187








Minority interests


25


9


19





 



Total equity




2,545


2,206








* Component of current and deferred taxes ** Component of net debt














Approved by the Board of directors on 25 November 2009 and signed on their behalf by








Richard J Cousins, Director







Andrew D Martin, Director








  

Consolidated cash flow statement







for the year ended 30 September 2009











2009


2008



Notes 


 £m


 £m








Cash flow from operating activities







Cash generated from operations


28


1,114


915

Interest paid




(111)


(104)

Interest element of finance lease rentals




(3)


(2)

Tax received




22


16

Tax paid




(188)


(165)

Net cash from/(used in) operating activities of continuing operations




834


660

Net cash from/(used in) operating activities of discontinued operations


29


(1)


2

Net cash from/(used in) operating activities




833


662





 



Cash flow from investing activities







Purchase of subsidiary companies and investments in associates(1)


27


(165)


(181)

Proceeds from sale of subsidiary companies and associatediscontinued activities(1)


6


(34)


(17)

Proceeds from sale of subsidiary companies and associates - other activities(1)




-


12

Tax on profits from sale of subsidiary companies and associated undertakings




3


45

Purchase of intangible assets and investments




(117)


(73)

Purchase of property, plant and equipment




(166)


(119)

Proceeds from sale of property, plant and equipment / intangibles




24


26

Purchase of other investments




(3)


-

Proceeds from sale of other investments




5


1

Dividends received from associated undertakings




4


5

Interest received




14


25

Net cash from/(used in) investing activities by continuing operations




(435)


(276)

Net cash from/(used in) investing activities by discontinued operations


29


-


-

Net cash from/(used in) investing activities




(435)


(276)








Cash flow from financing activities







Proceeds from issue of ordinary share capital


25


28


58

Purchase of own shares(2)




(12)


(355)

Net increase/(decrease) in borrowings - excluding new leases / repayments


30


(178)


(141)

Repayment of obligations under finance leases


30


(15)


(11)

Equity dividends paid


9, 25


(229)


(209)

Dividends paid to minority interests


25


(3)


(4)

Net cash from/(used in) financing activities by continuing operations




(409)


(662)

Net cash from/(used in) financing activities by discontinued operations


29


-


-

Net cash from/(used in) financing activities




(409)


(662)








Cash and cash equivalents







Net increase/(decrease) in cash and cash equivalents


30


(11)


(276)

Cash and cash equivalents at beginning of the year


30


579


839

Currency translation gains/(losses) on cash and cash equivalents


30


20


16

Cash and cash equivalents at end of the year


30


588


579








   

(1) Net of cash acquired or disposed and payments received or made under warranties and indemnities.







(2) Share buy-back and increase/(decrease) in own shares held to satisfy employee share-based payments. 














Reconciliation of free cash flow from continuing operations








for the year ended 30 September 2009











2009


2008





 £m


 £m








Net cash from operating activities of continuing operations




834


660

Purchase of intangible assets and investments




(117)


(73)

Purchase of property, plant and equipment




(166)


(119)

Proceeds from sale of property, plant and equipment / intangibles




24


26

Purchase of other investments




(3)


-

Proceeds from sale of other investments




5


-

Dividends received from associated undertakings




4


5

Interest received




14


25

Dividends paid to minority interests




(3)


(4)

Other




1


-

Free cash flow from continuing operations




593


520



Notes to the consolidated financial statements

for the year ended 30 September 2009























1 Segmental reporting






































Geographical segments







North

Continental

UK &


Rest of

Intra-







America

 Europe

Ireland


the World

Group


Total



Revenues


£m

£m

£m


£m

£m


£m















Year ended 30 September 2009












Total revenue


5,871

3,429

1,829


2,318

-


13,447



Less: Discontinued operations


-

-

-

 

(3)

-


(3)



External revenue - continuing


5,871

3,429

1,829

-

2,315

-


13,444















Year ended 30 September 2008












Total revenue


4,553

3,021

1,926


1,947

-


11,447



Less: Discontinued operations


-

-

-

 

(7)

-


(7)



External revenue - continuing


4,553

3,021

1,926

 

1,940

-

 

11,440









































Products and services: Sectors

















 

 

Business

 

Healthcare

 

Sports

Offshore

 

 



Revenues

 

& Industry

Education

& Seniors

 

& Leisure

& Remote

 

Total




 

£m

£m

£m

 

£m

£m

 

£m



 

 

 

 

 

 

 

 

 

 



Year ended 30 September 2009

 

 

 

 

 

 

 

 

 



External revenue

 

6,153

2,038

2,529

 

1,449

1,278

 

13,447



Less: Discontinued operations

 

-

-

-

 

-

(3)

 

(3)



External revenue - continuing

 

6,153

2,038

2,529

 

1,449

1,275

 

13,444



 

 

 

 

 

 

 

 

 

 



Year ended 30 September 2008

 

 

 

 

 

 

 

 

 



External revenue

 

5,432

1,632

1,997

 

1,194

1,192

 

11,447



Less: Discontinued operations

 

-

-

-

 

-

(7)

 

(7)



External revenue - continuing


5,432

1,632

1,997


1,194

1,185


11,440



(1) There is no inter-segmental trading.

(2) Continuing revenues from external customers arising in the UK, the Group's country of domicile, were £1,749 million (2008:£1,855 million). Continuing revenues from external customers arising in all foreign countries from which the Group derives revenues were £11,695 million (2008:£9,585 million).  
















Geographical segments







North

Continental

UK &


Rest of

Central







America

 Europe

Ireland


the World

activities


Total



Result


£m

£m

£m


£m

£m


£m















Year ended 30 September 2009












Total operating profit before associates and amortisation

of intangibles arising on acquisition

441

232

114


147

(58)


876



Less: Discontinued operations


-

-

-


1

-


1



Operating profit before associates and amortisation

of intangibles arising on acquisition - continuing

441

232

114


148

(58)


877



Less: Amortisation of intangibles arising on acquisition


(1)

-

(1)


(4)

(1)


(7)



Operating profit before associates - continuing


440

232

113


144

(59)


870



Add: Share of profit of associates 


3

-

4


-

-


7



Operating profit - continuing


443

232

117


144

(59)


877















Finance income









14



Finance costs









(114)



Hedge accounting ineffectiveness









(7)



Change in the fair value of investments and minority interest put options









3















Profit before tax









773















Income tax expense









(221)












 



Profit for the year from continuing operations









552















Year ended 30 September 2008












Total operating profit before associates and amortisation

of intangibles arising on acquisition

311

197

108


103

(62)


657



Less: Discontinued operations


-

-


1

-


1



Operating profit before associates and amortisation

of intangibles arising on acquisition - continuing

311

197

108


104

(62)


658



Less: Amortisation of intangibles arising on acquisition


-

-

-


(3)

-


(3)



Operating profit before associates - continuing


311

197

108


101

(62)


655



Add: Share of profit of associates 


2

-

2


-

-


4



Operating profit - continuing


313

197

110


101

(62)


659















Finance income









27



Finance costs









(100)



Hedge accounting ineffectiveness









(4)



Change in the fair value of investments and minority interest put options









(16)















Profit before tax









566















Income tax expense









(169)















Profit for the year from continuing operations









397



























  

2 Operating costs












2009


2008

Operating costs


£m


£m






Cost of food and materials:










Cost of inventories consumed


4,415


3,776






Labour costs:










Employee remuneration (note 3)


5,968


5,083






Overheads:










Depreciation - owned property, plant and equipment


125


115

Depreciation - leased property, plant and equipment


11


10

Amortisation - owned intangible assets


89


81






Property lease rentals


61


50

Other occupancy rentals - minimum guaranteed rent


56


39

Other occupancy rentals - rent in excess of minimum guaranteed rent


12


10

Other asset rentals


77


58






Audit and non-audit services 


5


5






Other expenses


1,748


1,555











Operating costs before amortisation of intangibles arising on acquisition


12,567


10,782






Amortisation - intangible assets arising on acquisition


7


3






Total continuing operations


12,574


10,785






(1) Impairment of goodwill and inventories and net foreign exchange gains/losses recorded in income statement £nil (2008: £nil).






  

3 Employees 












2009


2008

Average number of employees, including directors and part-time employees


Number


Number






North America


145,591


136,853

Continental Europe


84,537


78,570

UK & Ireland


62,809


64,146

Rest of the World 


93,231


108,591

Total continuing operations


386,168


388,160

Discontinued operations


2


21

Total continuing and discontinued


386,170


388,181








2009


2008

Aggregate remuneration of all employees including directors


£m


£m






Wages and salaries 


4,989


4,297

Social security costs 


925


723

Share-based payments


4


14

Pension costs - defined contribution plans 


27


28

Pension costs - defined benefit plans


23


21

Total continuing operations


5,968


5,083

Discontinued operations


-


1

Total continuing and discontinued


5,968


5,084






In addition to the pension cost shown in operating costs above, there is a pensions-related net charge to finance costs of £11 million (2008: credit of £2 million).


  

4 Financing and other gains/losses










Finance income and costs are recognised in the income statement in the period in which they are earned or incurred.










2009


2008

Finance income and costs


 £m 


 £m






Finance income





Bank interest


14


25

Expected return on pension scheme assets net of amount charged to scheme liabilities (note 23)


-


2

Total finance income


14


27






Finance costs





Bank loans and overdrafts 


8


14

Other loans


90


84

Finance lease interest 


3


2

Interest on bank loans, overdrafts, other loans and finance leases


101


100

Unwinding of discount on put options held by minority shareholders


1


-

Unwinding of discount on provisions


1



Amount charged to pension scheme liabilities net of expected return on scheme assets (note 23)


11


-

Total finance costs


114


100






Finance costs by defined IAS 39(1) category





Fair value through profit or loss (unhedged derivatives)


13


4

Derivatives in a fair value hedge relationship


(22)


7

Derivatives in a net investment hedge relationship


-


(10)

Other financial liabilities


110


99

Interest on bank loans, overdrafts, other loans and finance leases


101


100

Fair value through profit or loss (put options held by minority interests)


2


-

Outside of the scope of IAS 39 (pension scheme charge)


11


-

Total finance costs


114


100






(1) IAS 39 'Financial Instruments: Recognition and Measurement'.










The Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge the risks associated with changes in foreign exchange rates and interest rates. As explained in section Q of the Group's accounting policies, which are set out in the Annual Report, such derivative financial instruments are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates. For derivative financial instruments that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement in the period.


The Group has a small number of outstanding put options which enable minority shareholders to require the Group to purchase the minority interest shareholding at an agreed multiple of earnings. These options are treated as derivatives over equity instruments and are recorded in the balance sheet at fair value which is re-evaluated at each period end. Fair value is based on the present value of expected cash outflows. The movement in fair value is recognised as income or expense within the income statement.








2009


2008

Other (gains)/losses


 £m 


 £m






Hedge accounting ineffectiveness 





Unrealised net (gains)/losses on unhedged derivative financial instruments (1)


6


4

Unrealised net (gains)/losses on derivative financial instruments in a designated fair value hedge (2)


(59)


(11)

Unrealised net (gains)/losses on the hedged item in a designated fair value hedge


60


11

Unhedged translation losses on foreign currency borrowings


-


-

Total hedge accounting ineffectiveness (gains)/losses


7


4






Change in the fair value of investments and minority interest put options





Change in the fair value of investments (1), (3)


-


-

Change in the fair value of minority interest put options (credit)/charge (1)


(3)


16

Total


(3)


16






(1) Categorised as 'fair value through profit or loss' (IAS 39).





(2) Categorised as derivatives that are designated and effective as hedging instruments carried at fair value (IAS 39).





(3) Life insurance policies used by overseas companies to meet the cost of unfunded post-employment benefit obligations included in note 23.





5 Tax


































Recognised in the income statement: 








2009


2008

Income tax expense on continuing operations







£m 


£m














Current tax













Current year










202


176

Adjustment in respect of prior years










(9)


(3)

Current tax expense/(credit)










193


173











 



Deferred tax 













Current year 










24


(8)

Impact of changes in statutory tax rates










-


(1)

Adjustment in respect of prior years










4


5

Deferred tax expense/(credit)










28


(4)














Total income tax













Income tax expense/(credit) on continuing operations 








221


169














The income tax expense for the year is based on the United Kingdom statutory rate of corporation tax for the period of 28% (2008: 29%). In 2008 the effective rate resulted from the reduction in the UK corporation tax rate from 30% to 28% with effect from 1 April 2008. Overseas tax is calculated at the rates prevailing in the respective jurisdictions.



































2009


2008

Reconciliation of the income tax expense on continuing operations





£m 


£m














Profit before tax from continuing operations before exceptional items






773


566














Notional income tax expense at the UK statutory rate of 28% (200829%) on profit before tax



216


164

Effect of different tax rates of subsidiaries operating in other jurisdictions




39


22

Impact of changes in statutory tax rates










-


(1)

Permanent differences










(4)


3

Impact of share-based payments










(1)


(5)

Tax on profit of associates










(1)


(1)

Losses and other temporary differences not previously recognised





(29)


(25)

Unrelieved current year tax losses 










6


11

Prior year items










(5)


2

Other










-


(1)

Income tax expense on continuing operations










221


169














  
























2009


2008

Tax credited/(charged) to equity










£m


£m














Deferred tax credit/(charge) on actuarial gains/losses on post-employment benefits




61


(5)

Other current and deferred tax credits










-


2

Total tax credit/(charge) on actuarial gains/losses and other items recognised in equity




61


(3)

Current tax credit on foreign exchange movements recognised in equity





9


8

Tax credit/(charge) on items recognised in equity










70


5



















Pensions



Self-


Net








and post-



funded


short-term





Tax



employment



insurance


temporary



Movement in net deferred tax 


depreciation 


Intangibles

benefits

Tax losses


 provisions


differences


Total

asset/(liability)


£m


 £m 

£m

£m


£m


£m


£m














At 1 October 2007


17


(22)

96

9


30


105


235

Credit/(charge) to income


28


(19)

(25)

(4)


7


13


-

Credit/(charge) to equity


-


(7)

(5)

-


-


1


(11)

Transfer from/(to) current tax


-


-

-

-


-


-


-

Business acquisitions


-


(17)

-

-


-


5


(12)

Business disposals


-


9

-

-


-


-


9

Other movements


-


(1)

1

-


-


(2)


(2)

Exchange adjustment


(2)


(7)

7

2


5


8


13

At 30 September 2008


43


(64)

74

7


42


130


232














At 1 October 2008


43


(64)

74

7


42


130


232

Credit/(charge) to income


(7)


(21)

(19)

(5)


5


11


(36)

Credit/(charge) to equity


-


(8)

61

4


-


3


60

Transfer from/(to) current tax


-


-

-

-


-


3


3

Business acquisitions


-


16

-

-


-


-


16

Business disposals


-


-

-

-


-


(1)


(1)

Other movements


1


(5)

2

(1)


(1)


4


-

Exchange adjustment


(2)

 

(9)

7

-

 

5

 

14


15

At 30 September 2009


35

 

(91)

125

5

 

51

 

164


289














Net short-term temporary differences relate principally to provisions and other liabilities of overseas subsidiaries.


After netting off balances within countries, the following are the deferred tax assets and liabilities recognised in the consolidated balance sheet:












2009


2008

Net deferred tax balance










£m 


£m














Deferred tax assets










300


256

Deferred tax liabilities










(11)


(24)

Net deferred tax asset/(liability)










289


232














Unrecognised deferred tax assets in respect of tax losses and other temporary differences amount to £67 million (2008: £56 million). Of the total, tax losses of £21 million will expire at various dates between 2010 and 2018. These deferred tax assets have not been recognised as the timing of recovery is uncertain.


As a result of change to UK tax legislation, overseas dividends received on or after 1 July 2009 will be largely exempt from UK tax but may be subject to foreign withholding taxes. The unremitted earnings of those overseas subsidiaries affected by such taxes is £174 million (2008: £2,616 million as calculated under the previous rules prior to the change in legislation). No deferred tax liability is recognised on these temporary differences as the Group is able to control the timing of reversal and it is probable that this will not take place in the foreseeable future.

  

6 Discontinued operations














Year ended 30 September 2009


The profit for the year from discontinued operations comprises the release of surplus provisions of £23 million and accruals of £20 million relating to prior period disposals, additional proceeds of £2 million and a loss after tax from trading activities of £1 million.











Year ended 30 September 2008


The profit for the year from discontinued operations of £53 million is comprised of the profit arising on the sale of two properties formerly occupied by Selecta, the European vending business, which was disposed of in July 2007, of £nil; an adjustment to deferred tax liabilities forming part of the net assets of businesses disposed of in prior years of £9 million; the release of surplus provisions of £38 million and accruals relating to prior year disposals of £11 million; and a loss after tax from trading activities of £1 million.













2009

2008

Net assets disposed and disposal proceeds




£m

£m







Property, plant and equipment




-

2

Gross assets disposed of




-

2







Tax




-

(9)

Gross liabilities disposed of




-

(9)







Net assets/(liabilities) disposed of




-

(7)







Increase/(decrease) in retained liabilities (1) (2)




(79)

(68)

Profit/(loss) on disposal before tax




45

58







Consideration, net of costs




(34)

(17)







Consideration deferred to future periods




-

-

Cash disposed of




-

-







Cash inflow/(outflow) from current year disposals




(34)

(17)







Deferred consideration and other payments relating to previous disposals




-

-







Cash inflow/(outflow) from disposals




(34)

(17)











(1) Including the release of surplus provisions of £23 million and surplus accruals of £20 million, and the utilisation of accruals/provisions in respect of purchase price adjustments, warranty claims and other indemnities of £36 million in the year ended 30 September 2009. Total £79 million

(2) Including the release of surplus provisions of £38 million; and surplus accruals of £11 million; the utilisation of provisions in respect of purchase price adjustments; warranty claims and other indemnities of £25 million and the collection of other amounts totalling £6 million in the year ended 30 September 2008. Total £68 million.




















2009

2008

Financial performance of discontinued operations




£m

£m







Trading activities of discontinued operations(1)






External revenue




3

7

Total revenue




3

7

Operating costs




(4)

(8)

Trading activities of discontinued operations before exceptional costs




(1)

(1)

Exceptional operating costs (note 7)




-

-

Profit before tax




(1)

(1)

Income tax (expense)/credit




-

-

Loss after tax




(1)

(1)













Exceptional items: Disposal of net assets and 

other adjustments relating to discontinued operations






Profit on disposal of net assets of discontinued operations




2

9

Release of surplus provisions and accruals related to discontinued operations  (2), (3)




43

49

Profit on disposal before tax




45

58

Income tax (expense)/credit




(4)

(4)

Total profit after tax




41

54







Profit for the year from discontinued operations






Profit/(loss) for the year from discontinued operations




40

53







(1) The trading activity in the years ended 30 September 2008 and 30 September 2009 relates to the final run-off of activity in businesses earmarked for closure.


(2) Released surplus provisions of £23 million and surplus accruals of £20 million, total £43 million, in the year ended 30 September 2009


(3) Released surplus provisions of £38 million and the release of surplus accruals of £11 million, total £49 million, in the year ended 30 September 2008.









Exceptional items: Income tax on disposal of net assets and

other adjustments relating to discontinued operations




Current tax 




4

-

Deferred tax




(8)

(4)

Income tax (expense)/credit on disposal of net assets of discontinued operations




(4)

(4)







Total tax income from discontinued operations






Total income tax (expense)/credit from discontinued operations




(4)

(4)









 


7 Exceptional items 










Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to clearly explain the financial performance of the Group. Items reported as exceptional are material items of income or expense that have been shown separately due to the significance of their nature or amount.


All of the exceptional items occurring in both the current and the prior year relate to discontinued operations and are described in more detail in note 6.








2009


2008

Exceptional items


£m 


£m






Continuing operations










Continuing operations 


-


-






Discontinued operations










Profit on disposal of net assets and other adjustments relating to discontinued operations net of tax (note 6)


41


54

Discontinued operations


41


54






Continuing and discontinued operations





Total


41


54


  

8 Earnings per share










The calculation of earnings per share is based on earnings after tax and the weighted average number of shares in issue during the year. The adjusted earnings per share figures have been calculated based on earnings excluding the effect of discontinued operations, the amortisation of intangible assets arising on acquisition, hedge accounting ineffectiveness, and the change in the fair value of investments and minority interest put options and the tax attributable to these amounts. These items are excluded in order to show the underlying trading performance of the Group.








2009


2008



Attributable


Attributable



profit


profit

Attributable profit


£m


£m






Profit for the year attributable to equity shareholders of the Company


586


443

Less: Profit for the year from discontinued operations


(40)


(53)

Attributable profit for the year from continuing operations


546


390

Add back: Amortisation of intangible assets arising on acquisition (net of tax)


6


2

Add back: Loss/(profit) from hedge accounting ineffectiveness (net of tax)


5


3

Add back: Change in the fair value of investments and minority interest put options (net of tax)


(3)


16

Underlying attributable profit for the year from continuing operations 


554


411








2009


2008



Ordinary shares


Ordinary shares



of 10p each


 of 10p each

Average number of shares (millions of ordinary shares of 10p each)


millions


millions






Average number of shares for basic earnings per share


1,848


1,868

Dilutive share options


7


13

Average number of shares for diluted earnings per share


1,855


1,881








2009


2008



Earnings


Earnings



per share


per share



pence


pence






Basic earnings per share (pence)





From continuing and discontinued operations


31.7


23.7

From discontinued operations


(2.2)


(2.8)

From continuing operations 


29.5


20.9

Amortisation of intangible assets arising on acquisition (net of tax)


0.3


0.1

Hedge accounting ineffectiveness (net of tax)


0.3


0.2

Change in the fair value of investments and minority interest put options (net of tax)


(0.1)


0.8

From underlying continuing operations


30.0


22.0






Diluted earnings per share (pence)





From continuing and discontinued operations


31.6


23.6

From discontinued operations


(2.2)


(2.8)

From continuing operations


29.4


20.8

Amortisation of intangible assets arising on acquisition (net of tax)


0.3


0.1

Hedge accounting ineffectiveness (net of tax)


0.3


0.2

Change in the fair value of investments and minority interest put options (net of tax)


(0.1)


0.8

From underlying continuing operations


29.9


21.9


  

9 Dividends














A final dividend in respect of 2009 of 8.8 pence per share, £165 million in aggregate(1) , has been proposed giving a total dividend in respect of 2009 of 13.2 pence per share (2008: 12.0 pence per share). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 5 February 2010 and has not been included as a liability in these financial statements.










2009


2008



Dividends



Dividends




per share



per share


Dividends on ordinary shares of 10p each


pence

£m


pence

£m








Amounts recognised as distributions to equity shareholders during the year:







Final dividend for the prior year 


8.0p

148


7.2p

135

Interim dividend for the current year


4.4p

81


4.0p

74

Total dividends


12.4p

229


11.2p

209


  (1) Based on the number of shares in issue at 30 September 2009.



10 Goodwill 


























During the year the group made a number of acquisitions. See note 27 for more details.















Goodwill












£m














Cost













At 1 October 2007












3,092

Additions












155

Reclassified












(2)

Business disposals - other activities












(2)

Currency adjustment












154

At 30 September 2008












3,397














At 1 October 2008












3,397

Additions












104

Reclassified












-

Business disposals - other activities












(1)

Currency adjustment












187

At 30 September 2009












3,687














Impairment













At 1 October 2007












107

Impairment charge recognised in the year












-

At 30 September 2008












107













 

At 1 October 2008












107

Impairment charge recognised in the year












-

At 30 September 2009












107













 

Net book value













At 30 September 2008












3,290

At 30 September 2009












3,580




  

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units ('CGUs') that are expected to benefit from that business combination. A summary of goodwill allocation by business segment is shown below.





































2009


2008

Goodwill by business segment










£m


£m














USA










1,124


939

Rest of North America










102


93

Total North America










1,226


1,032

Continental Europe










214


170

UK & Ireland










1,739


1,734

Rest of the World










401


354

Total  










3,580


3,290



























The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of a CGU has been determined from value in use calculations. The key assumptions for these calculations are long-term growth rates and pre-tax discount rates and use cash flow forecasts derived from the most recent financial budgets and forecasts approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates based on local expected economic conditions and do not exceed the long-term average growth rate for that country. The pre-tax discount rates are based on the Group's weighted average cost of capital adjusted for specific risks relating to the country in which the CGU operates.




















2009


2008







Residual 


Pre-tax 


Residual 


Pre-tax 

Growth and discount rates






growth rates


discount rates


growth rates


discount rates














USA






2.5%


7.9%


4.6%


11.8%

Rest of North America






2.5%


8.4%


2.4%


9.6%

Continental Europe






2.5 - 7.3%


6.8 - 10.6%


2.4 - 4.5%


8.5 - 12.6%

UK & Ireland






2.5%


10.1%


3.8%


10.3%

Rest of the World






2.5 - 7.1%


7.7 - 23.3%


1.7 - 11.5%


9.4 - 20.6%















Given the current economic climate, a sensitivity analysis has been performed in assessing recoverable amounts of goodwill. This has been based on changes in key assumptions considered to be possible by management. In the United Kingdom, an increase in the discount factor of 1.4% and a decrease in the long-term growth rate of 1.8% would eliminate any headroom under each scenario. There are no other CGUs that are sensitive to changes in key assumptions.  

11 Other intangible assets




















Contract and other intangibles




Computer


Arising on






software


 acquisition

Other


Total

Other intangible assets


 £m 


£m

£m


£m









Cost








At 1 October 2007


150


-

363


513

Additions 


15


-

59


74

Disposals 


(25)


-

(45)


(70)

Business acquisitions


3


65

-


68

Reclassified


3


-

3


6

Currency adjustment 


14


-

48


62

At 30 September 2008


160


65

428


653









At 1 October 2008


160


65

428


653

Additions 


15


-

102


117

Disposals


(5)


(1)

(38)


(44)

Business acquisitions


-


28

-


28

Reclassified


27


-

3


30

Currency adjustment 


18


10

49


77

At 30 September 2009


215


102

544


861









Amortisation








At 1 October 2007


71


-

141


212

Charge for the year 


24


3

57


84

Disposals


(25)


-

(41)


(66)

Business acquisitions


1


-

-


1

Reclassified


2


-

-


2

Currency adjustment


7


-

20


27

At 30 September 2008


80


3

177


260









At 1 October 2008


80


3

177


260

Charge for the year 


21


7

68


96

Disposals 


(3)


(1)

(32)


(36)

Business acquisitions


-


-

-


-

Reclassified


18


-

-


18

Currency adjustment 


10


-

20


30

At 30 September 2009


126


9

233


368









Net book value








At 30 September 2008


80


62

251


393

At 30 September 2009


89


93

311


493









Contract-related intangible assets result from payments made by the Group in respect of client contracts and generally arise where it is economically more efficient for a client to purchase assets used in the performance of the contract and the Group fund these purchases.

   

12 Property, plant and equipment
















Land and

Plant and

Fixtures and





buildings

 machinery

 fittings


Total

Property, plant and equipment


£m

£m

£m


£m








Cost







At 1 October 2007


210

531

400


1,141

Additions(1)


17

69

40


126

Disposals 


(19)

(57)

(47)


(123)

Business acquisitions


-

9

8


17

Business disposals - discontinued activities


(2)

-

-


(2)

Business disposals - other activities


-

(1)

(2)


(3)

Reclassified


2

(1)

-


1

Currency adjustment 


27

64

34


125

At 30 September 2008


235

614

433


1,282








At 1 October 2008


235

614

433


1,282

Additions(1)


12

93

65


170

Disposals


(14)

(59)

(41)


(114)

Business acquisitions 


4

6

1


11

Business disposals - discontinued activities


-

-

-


-

Business disposals - other activities


(2)

(1)

-


(3)

Reclassified


5

14

(19)


-

Currency adjustment 


34

76

47


157

At 30 September 2009


274

743

486


1,503








Depreciation







At 1 October 2007


97

366

242


705

Charge for the year 


17

66

42


125

Disposals


(10)

(47)

(42)


(99)

Business acquisitions


-

3

3


6

Business disposals - discontinued activities


-

-

-


-

Business disposals - other activities


-

(1)

(1)


(2)

Reclassified 


13

(28)

18


3

Currency adjustment


13

46

22


81

At 30 September 2008


130

405

284


819








At 1 October 2008


130

405

284


819

Charge for the year 


19

67

50


136

Disposals


(11)

(52)

(32)


(95)

Business acquisitions 


-

-

-


-

Business disposals - discontinued activities


-

-

-


-

Business disposals - other activities


(1)

(1)

-


(2)

Reclassified 


4

19

(10)


13

Currency adjustment


21

49

32


102

At 30 September 2009


162

487

324


973








(1) Includes leased assets of £4 million (2008: £8 million).














Net book value







At 30 September 2008


105

209

149


463

At 30 September 2009


112

256

162


530

  

The net book amount of the Group's property, plant and equipment includes assets held under finance leases as follows:










Land and

Plant and

Fixtures and





buildings

machinery

fittings


Total

Property, plant and equipment held under finance leases


£m

£m

£m


£m

 







At 30 September 2008


2

32

5


39

At 30 September 2009


5

26

4


35










13 Interests in associates 
























2009


2008

Principal associates


Country of incorporation


% ownership


% ownership










Twickenham Experience Ltd


England & Wales


40%


40%

Oval Events Limited


England & Wales


25%


25%

Thompson Hospitality Services LLC


USA


49%


49%

























2009


2008

Interests in associates






£m


£m










Net book value









At 1 October 






28


25

Additions






-


4

Share of profits less losses (net of tax)






7


4

Dividends received 






(4)


(5)

Reclassified to investments (note 14)






-


(1)

Currency and other adjustments 

 

 

 

 


1


1

At 30 September






32


28











The Group's share of revenues and is included below:
















2009


2009

Associates






£m


£m










Share of revenue and profits









Revenue






27


25

Expenses / taxation(1)

 

 

 

 


(20)


(21)

Profit after tax for the year 

 

 

 

 


7


4










Share of net assets









Goodwill






25