Final Results

Compass Group PLC 11 December 2001 PART 1 PRESS RELEASE 11 December 2001 COMPASS GROUP PLC PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2001 Compass Group reports a strong performance for the year ended 30 September 2001. All divisions have demonstrated strong organic growth and margin improvement which has continued into the new financial year. The Group remains well placed for future growth in a marketplace which continues to grow. Financial Highlights * Strong like for like turnover growth - UK +6% - North America +8% - Continental Europe & rest of the world +9% Total +8% * Free cash flow improved to £357 million (2000: £231 million). * Operating profit before goodwill and exceptionals up 90% to £676 million (2000: £356 million). * Earnings per share 20.0 pence, up 45%. * Final dividend per share 3.8 pence, total for year 5.7 pence per share. Operational Highlights * Contract retention at 95%. * Forte Hotels successfully sold. * Rebranding of motorway service areas to Moto. * New Little Chef concept. Compass Group is pleased to announce today new contract wins including: UK * A 10 year contract with British Airways to be the sole provider of the airline's employee restaurant and vending services in the UK, and all passenger lounge catering services in the UK, USA and Canada. North America * A US$21 million per annum contract with Aetna, North America's leading healthcare and benefits organisation. * A 5 year, US$10 million per annum contract with Agilent. International * A US$ 29 million per annum contract with American Express in eight countries. Francis Mackay - Chairman - said 'The markets in which Compass Group operates offer significant growth potential as the trends to outsourcing and the further consolidation of the industry continue. Compass Group is in a very strong position to take advantage of these trends given its market leading position and strong balance sheet.' Michael J Bailey - Chief Executive - said 'Our consistent run of impressive, high profile contract gains demonstrates the inherent strength of our business as the leading global foodservice provider. Clearly, large companies and organisations increasingly recognise the benefits of outsourcing their catering needs to us. 'Since the events of September 11, the global economic environment has become more uncertain with general activity slowing across a number of regions. However, we remain confident that Compass Group will continue to perform well, achieving market share gains that will drive organic sales growth within our target range of between six and nine percent, together with increased margins, in 2002.' Enquiries: 11 December 2001 Francis Mackay Chairman Compass Group PLC 020 7404 5959 Michael J Bailey Chief Executive Compass Group PLC 020 7404 5959 Andrew LynchFinance Director Compass Group PLC 020 7404 5959 Timothy Grey/Simon Sporborg Brunswick Group Ltd 020 7404 5959 Thereafter Francis Mackay Compass Group PLC 01932 573 000 Michael J Bailey Compass Group PLC 01932 573 000 Andrew Lynch Compass Group PLC 01932 573 000 Website www.compass-group.com TRADING REPORT ______________ We are pleased to report that the Group has enjoyed a very successful year in 2001 as a focused foodservice business. This has been achieved through excellent like for like sales growth and margin improvement in all divisions, together with the benefit of acquisitions. Financial Performance _____________________ The figures below demonstrate the successful financial performance in 2001. 2001 2000 Increase Turnover £8,716m £5,770m 51% Profit before interest, tax and depreciation £846m £461m 83% (PBITDA) Basic earnings per share 20.0p 13.8p 45% Free cash flow £357m £231m 54% The significant year on year growth rates above are driven by the impact of acquisitions, including Granada Restaurants, Morrison and Selecta, and by strong organic growth. Geographic Analysis ___________________ The results for the year ended 30 September 2001, analysed by geographic division, are set out below. Reported Like for like 2001 2000 increase increase % % Turnover (£m) United Kingdom 2,877 1,200 140 6 Continental Europe & 3,013 2,758 9 9 rest of the world North America 2,826 1,812 56 8 _____ _____ ___ _______ 8,716 5,770 51 8 _____ _____ ___ _______ Operating Profit (£m) United Kingdom 377 120 214 6 Continental Europe & 153 136 13 13 rest of the world North America 139 89 56 10 _____ _____ ___ _______ 669 345 94 8 Associates 7 11 (36) _____ _____ ___ 676 356 90 _____ _____ ___ Operating Margin (%) United Kingdom 13.1 10.0 Continental Europe & 5.1 4.9 rest of the world North America 4.9 4.9 _____ _____ 7.7 6.0 _____ _____ Goodwill amortisation and exceptional items are excluded from the tables above. Strong performances were delivered in each of our geographic regions with overall like for like turnover increasing by 8%. Turnover growth for the UK was 6%. This growth rate has been achieved despite the impact of the foot and mouth outbreak and the rail disruption earlier in the year which is estimated to have held back turnover growth by 1%. Turnover in Continental Europe & rest of the world and in North America has been particularly strong, at 9% and 8% respectively. Operating profit before goodwill amortisation and exceptional items was up 90% at £676 million (2000: £356 million) when compared to last year. On a like for like basis, operating profit was 8% up, and adjusted basic earnings per share (before exceptional items and goodwill amortisation) increased to 20.0 pence, a 45% increase (2000: 13.8 pence). Underlying margins in all operating divisions improved. Business Performance ____________________ i) Business and Industry (B&I) Major developments during the year include: International A major international contract has been won to provide services for American Express in eight countries with a turnover of US$29 million per annum. UK Eurest is the largest part of the Group's business in the UK serving almost 4,000 client companies. During the year, the merger integration was completed with the migration to the Eurest brand name at sites previously branded Eurest Sutcliffe and Shaw Summit. Major contract gains for Eurest included: * Sainsbury's: a five year contract, with £40 million annual turnover, to provide catering services for 150,000 staff at 427 Sainsbury's stores in the UK; * Royal Bank of Scotland: a £28 million annual turnover contract to be the sole provider of catering at 51 offices, with 37,500 staff across the UK and Ireland; * Lloyds TSB: a £24 million annual turnover contract extension to include new sites. Other significant B&I contract wins included Merrill Lynch, Halifax Direct, Credit Suisse First Boston, Powergen, RTE-Dublin, Scottish Widows, Bristol & West, Glaxo SmithKline, Sun Microsystems, Mori, ITV Digital, Reckitt Benckiser, AC Nielsen, npower, the Royal Mint, Norwich Union Healthcare, Thomson Travel, Van den Burg and Britvic. The business continues to benefit from shared skills and expertise across our international operations. A Restaurant Associates team from our US division has been set up to focus on the development of our premier fine dining and City contracts in the UK. This is reinforcing our relationship with leading chefs and restauranteurs Prue Leith and Albert Roux and builds on our success in this area in the USA. France Although France has seen a part year effect from the introduction of a reduced working week and changes in the minimum wage, we have still seen growth in the year. Major contract awards included Nortel, Printemps, Alstom and Le Monde. North America The USA market offers a sizeable growth opportunity for our Eurest team, supported by our unique capability in Canteen Vending which enables us to combine high quality vending in addition to foodservice. Highlights during the year included the appointment of Eurest to provide Motorola's foodservice in North America which was previously self operated. Under the agreement we will manage foodservice operations at 37 Motorola sites in North America and Mexico, serving 67,000 meals daily. This is in addition to the existing contracts to provide foodservice for Motorola in Europe, China, Argentina and Australia. Raytheon, a world leader in defence, government and commercial electronics and special mission aircraft, has renewed its foodservice contract with Eurest for a further ten years. Eurest and Canteen Vending will feed more than 45,000 Raytheon employees in 30 cities. ii)Remote Sites - Eurest Support Services (ESS) ESS is the market leader in the remote site, offshore and defence market. The recent record of exceptional growth has been continued, with substantial increases during the year. This growth has been delivered across all sectors, and includes: A strategically important defence contract for NATO, in Kosovo and Macedonia. A large multi-activity remote-site contract for Bechtel, in Algeria. The provision of a range of services on board a number of offshore installations for Transocean. The expansion of our worldwide contract with the US Navy Exchange Command (NEXCOM) for the installation of a range of branded foodservice concepts continues apace, with the gaining of both the Pentagon and Washington Navy Yard contracts and with the construction of several TGI Friday restaurants in Italy and new food courts in Guam, Bahrain and Spain. iii)Motorways and Roadside UK The UK division operates motorway service areas in 33 locations with 47 sites and manages the Little Chef roadside brand (at over 400 locations) and Travelodge - the budget hotel brand which is an integral part of the roadside division. The rebranding of the Granada motorway services business to Moto was a high profile event in 2001, heralding a fresh approach to customer service and good food. The rebranding of all the Group's Motorway Service Area (MSA) sites in the UK under the Moto name was completed within 8 weeks thanks to the hard work of all our staff in those sites. Prompted awareness of the European-style brand is already over 40% and 67% of customers positively rate their experience at the sites compared with other UK MSA sites. Moto has introduced Compass Group's own brands Upper Crust, Ritazza and Stopgap and has harnessed the Group's worldwide expertise to introduce improved quality hot food in its Fresh Express Restaurants. Little Chef is Britain's favourite roadside restaurant, trading on major trunk roads throughout the UK. A new development tested during the year included the updating of Little Chef to provide 'grab and go' choices of Upper Crust and Ritazza products as well as offering customers takeaway choices from the Harry Ramsden's and Little Chef menus. This has been designed to provide a service to meet the demands of our customers for a more modern environment that builds on the Little Chef's traditional values. The service range has been extended so that customers can select Little Chef for an evening meal, have food to takeaway or just 'grab and go'. This concept has proved very successful and is now being introduced to other Little Chef sites in 2002. The Travelodge business continues to expand with the opening of its 208th hotel during the year. The Travelodge estate now offers more than 11,000 rooms. Overseas The Group currently has less extensive overseas operations in motorway service areas in Portugal, Austria, Belgium and Luxembourg. These differ from the UK business in that they are less capital intensive and operate in a very similar way to our concession business in other markets. We are currently exploring significant future opportunities for further expansion of the Group's roadside business into Continental Europe following the concession model. iv)Healthcare - Medirest Through Medirest, Morrison and Crothall, we provide foodservice and support services throughout the healthcare sector worldwide - from acute care hospitals to long term care and senior living. We have invested significantly in this market during the year, which is the world's fastest growing market in our sector portfolio. Major events in this year include: UK Aggregate new contract wins for Medirest totalled £34 million turnover and included Kingston Hospital, Hammersmith Hospitals, Black Country Mental Health, Mid-Essex and Bedford and Luton NHS Trusts. The Group is also working to introduce a restaurant experience to hospital patients, as part of the Government's Better Food in Hospitals programme. North America The Group's relatively small position in the North American healthcare foodservice market has been addressed by the acquisitions of Morrison Management Specialists and Crothall Services Group during the year. Morrison Management Specialists, the second-largest US healthcare and senior living/retirement foodservice company, was acquired in April for US$563 million. The Morrison management team is now responsible for all the USA business in this sector, which operates from over 500 locations. Crothall Services Group, a Pennsylvania-based healthcare facilities management company, was acquired in August for an initial consideration of US$170 million. Crothall serves more than 250 hospitals across the US and Canada, employs 8,500 people and has been the fastest growing company in the industry, securing a 9% market share position in less than 10 years. Major contract gains during the year include: - Sentara Hospital System, Virginia, with managed volumes of over US $10 million per annum. - University Medical Center, Las Vegas, Nevada, with managed volume of almost US $6 million per annum. - Methodist Health System, Tennessee - seven hospitals with aggregate managed volume of US $13 million per annum. France Contracts have been won with two significant groups during the year: Medica, France and GDP Vendome. Two large hospital contracts have also been obtained: The Polyclinique du Grand Sud and Polyclinique de Vauban. Germany Major contract awards in the year include: - The University Hospital Eppendorf providing for 1,450 beds and staff foodservice; and - Five Evangeline hospitals in Berlin providing for 1,500 beds and staff foodservice. Brazil Contracts signed within the last 12 months include: - Associacao de Apoio a Crianca Defeituoso (Physically Handicapped Children's Association); - The Kidney Hospital - linked to the Federal University of Brazil; - The Alvorada Hospital - a general hospital linked to health plans in the city of Sao Paulo; - APAE - Associacao de Pais e Amigos dos Excepcionais (Parents and Friends Association of the Physically Handicapped); and - The Ipanema Children's Clinic. Australia In Australia the Group has won A$6 million of residential business from one of Australia's largest providers of senior care services, the Salvation Army. Spread across three states the wins included the country's largest senior care site located in Perth. South Africa In June 2001 we were awarded strategic partnership with the Afrox Healthcare Group Ltd. They are the second largest group of hospitals in Africa with 45 hospitals. v) Education - Scolarest Scolarest provides foodservice to education establishments throughout the world, from kindergartens through to higher education establishments in universities and colleges. UK During the year, all the UK's education business was rebranded under Scolarest, as part of the continued integration of the former Granada business. Major contract wins by the business included a £2.4 million turnover contract for Barnsley schools, and a multi-site contract with Torfaen Borough Council in Wales to provide foodservice to over 7,000 pupils in the region. North America Major awards include a contract to provide foodservice for the Loop and Lincoln Park campuses of DePaul University in Chicago, Illinois. DePaul is the largest Catholic institution in the US and comprises eight campuses accommodating 20,000 students. Other contracts awarded include the Trinity College, Sunnyside I.S.D. (Independent School District), Pontiac P.S. (Public School) and Pender County P.S. (Public School). Other Contracts that have been awarded across the Group include: - China with the international schools in Shanghai and Beijing; - South Africa contracts with the University of Witwatersrand, Kingswood College and Edgewood College; and - France with Valence and Palaiseau, also with central kitchens opened at Clichy Montfermeil and Sedan. vi)Retail and Concession Catering - Select Service Partner (SSP) The global retail and concession market continues to grow and consolidate and Compass Group is well positioned to benefit from the opportunities that this presents. SSP has further strengthened its position over the year as the leading supplier of food and beverage to the travel market, with significant business gains in both its core markets of airports and rail. Highlights during the year have been: UK SSP continued to lead the retail and travel market in the UK with over 30 new outlets opened during the year. New business with Stena Line Ferries included the first Burger King to be introduced on-board a Stena vessel. SSP also entered into a joint initiative with Marks & Spencer to trial M&S Simply Food convenience stores at major railway stations. Rest of the world Airports New contracts have been won in Zurich, Sydney, Reno, Basle-Mulhouse, Charles de Gaulle, Dresden and New York JFK, with important contract extensions at Oslo and Stockholm. vii)Sports and Events Compass Group caters for a number of sporting events throughout the world - from Arsenal and Liverpool football clubs in the UK, Flushing Meadows tennis and Ryder Cup golf on both sides of the Atlantic to numerous international cricket, football, horse racing and other sporting events. We were caterers at the Sydney Olympics, the 1998 football World Cup and will be catering for the Winter Olympics at Salt Lake City in 2002. Our position in the market was significantly enhanced with the investment in Levy Restaurants in North America last year, which brings a new dimension in quality and innovation to our business. With contracts in sports stadia, arenas, convention facilities and music and performance venues across the US they brought to the Group a number of important venues for baseball, American football and basketball and created dining experiences for prestigious events such as the Grammy awards. Highlights for the year in this division include the following contract gains: - In Australia, the contract for the Sydney football stadium and cricket ground. - For Letheby & Christopher in the UK the Rockingham Motor Speedway contract. - For Levy Restaurants in the USA a foodservice contract at Churchill Downs, home of the Kentucky Derby. - In the USA, a US$40 million per annum contract with Speedway Motorsports, Inc. New Contract Awards New business gains across the group continue to be strong and we are pleased to announce today the following major contract gains. UK - British Airways - A 10 year contract to be the sole provider of the employee restaurants and vending services in the UK, and all passenger lounge catering services in the UK, USA and Canada. USA - A US$21 million per annum contract with Aetna, North America's leading healthcare and benefits organisation. A US$10 million per annum contract with Agilent. International - American Express - international contract to provide foodservice in eight countries, turnover US$29 million annually. Brazil - A new 10 year contract worth US$10 million per annum to operate foodservice in the bus terminals in Sao Paulo. France - Printemps - a fifteen year contract to operate the catering at their flagship Paris store, annual value £1.5 million. Australia - Sydney Convention and Exhibition Centre - in partnership with Accor a contract over three, five year terms. - David Jones - a contract to operate 45 outlets in 29 stores for Australia's leading department store chain. A ten year contract worth A$20 million per annum has been awarded. Recent contract gains announced include: - BBC, a ten year contract with Land Securities Trillium for all BBC sites in London and Scotland. - Speedway Motorsports Inc: a US$40 million annual turnover contract. Disposals Following the announcement by the Group in October 2000 of the proposed sale of the Forte Hotels division, the sale process for the major brands was concluded in May 2001 with the announcement of the sale of Le Meridien. To date the Group has already received, in cash, £2,806 million of the net proceeds of the sale. Investments There have been a number of notable investments during the year. (i) Vending In May 2001 we acquired the 66.7% of Selecta (the Swiss based vending group operating in a number of our European markets) not already owned by Compass Group in a recommended cash offer of CHF901 million. Clients are increasingly seeking the choice of a combined foodservice and vending offer. This move brought our number one vending company in North America together with the number one vending company in Europe - combining the expertise of Canteen Vending with Selecta. Our position in the vending market was further strengthened in July with the acquisition of Vendepac, the UK vending group, for £84 million. Vendepac is the UK market leader with a 9% market share and together with Canteen and Selecta makes us the world's largest food and beverage vending provider. (ii)Healthcare In April we acquired Morrison Management Specialists Inc., the second Largest US healthcare and senior living/retirement foodservice company, for US$563 million. This gave us a market-leading position in the US healthcare sector, complementing our existing healthcare business worldwide. In August we acquired Crothall Services Group, the US healthcare services management company specialising in housekeeping, portering and laundry services, for an initial consideration of US$170 million. Crothall is an important addition to our business as it supports Morrison in building and strengthening our presence in the healthcare market. Our focus continues to be on foodservice but Crothall helps us meet the specific additional needs of this market sector. (iii)Other Investments Other investments in the year include a small but strategically important investment in Japan, and the acquisition of Au Bon Pain in the USA, which was announced with our preliminary results last year. We also announced in February the formation of a joint venture in the Middle East with ADNH, creating a market leadership position in this US$1.3 billion market. A further investment was in Canada, where Beaver Foods was acquired in November 2000 for C$150 million. Beaver Foods has tripled the volume of business for Compass Group in Canada, positioning us as the leader in education and remote site foodservice within that marketplace. Cash flow The business continues to demonstrate strong cash generation. The 2001 net cash flow from operating activities before exceptional items was £748 million, up £395 million, 112% from 2000. The working capital movement in the year was an outflow of £51 million (2000: outflow £71 million). Cash paid in respect of provisions for liabilities and charges was £33 million (2000: £17 million). Interest and tax payments absorbed £344 million (2000: £118 million). Free cash flow for the year was £357 million (2000: £231 million), an increase of 54%. Free cash flow for the year is lower than would otherwise be expected since cash generated from operations excludes any contribution from Forte Hotels whereas free cash flow is after net interest paid of £245 million, including interest on debt subsequently repaid out of the hotel disposal proceeds. Net capital expenditure was £325 million, (excluding £20 million purchased under finance lease contracts), an increase of £150 million over 2000. The Group has in place stringent controls on capital expenditure which are monitored centrally. There are fixed authority limits in place at each subsidiary company and internal rate of return criteria which each project must achieve to obtain approval. The majority of the capital expenditure is of a project nature and is therefore discretionary. It includes expenditure which relates to the further development of the Group's concession activities and the continuing process of brand roll out. Development expenditure for 2001 was approximately £259 million (UK: £130 million, Continental Europe & rest of the world: £47 million and North America: £82 million). The payment of a dividend to Granada Compass plc absorbed £121 million. Acquisition payments were £1,337 million, comprising £1,248 million in respect of current year acquisitions (excluding £53 million of loans and finance lease obligations in the companies when acquired) and £89 million of deferred consideration, costs in respect of acquisitions made in prior years and costs paid relating to the merger and demerger. Disposal proceeds generated £2,831 million in 2001. Net debt as at 30 September 2001 was £2,390 million, a decrease of £1,306 million over the previous year end, primarily as a result of the hotel proceeds received net of payments in respect of acquisitions. Exceptional items and goodwill amortisation An exceptional item of £95 million, net of taxation, relates to the UK integration of Granada Restaurants and includes integration costs of £52 million (2000: £8 million). The Group is confident of not exceeding the total integration cash cost of £65 million predicted at the time of the merger. The exceptional item also includes the non-cash write off of duplicate assets of £44 million and the 2001 cost of the Commitment Plan of £28 million entered into to retain senior employees. The plan is payable in Compass Group shares which may be issued in January 2002. The goodwill amortisation charge for the year was £205 million. Taxation The overall Group taxation charge is £92 million comprising a £121 million charge relating to ordinary activities and a £29 million credit relating to exceptional items. The overall taxation rate on ordinary activities is 20.7% of profit before exceptional items, goodwill amortisation and taxation. This rate benefits from the inclusion of £127 million of non-taxable imputed interest income in profit before tax, without which the effective taxation rate is 26.5%. Dividend A final dividend of 3.8 pence per share is being recommended. This will bring the total dividend for the year to 5.7 pence. Outlook Our consistent run of impressive, high profile contract gains demonstrate the inherent strength of our business as the leading global foodservice provider. Clearly, large companies and organisations increasingly recognise the benefits of outsourcing their catering needs to us. Since the events of September 11, the global economic environment has become more uncertain with general activity slowing across a number of regions. However, we remain confident that Compass Group will continue to perform well, achieving market share gains that will drive organic sales growth within our target range of between six and nine percent, together with increased margins, in 2002. MJ Bailey FH Mackay Chief Executive Chairman NOTES (a) Compass Group PLC was incorporated on 29 September 2000. On 2 February 2001, Granada Compass plc transferred its hospitality business to Compass Group PLC in exchange for the issue of shares by Compass Group PLC to the Granada Compass plc shareholders. This hospitality business was created on 27 July 2000 when the former Compass Group PLC ('Former Compass') merged with Granada Group PLC. On that date, the management of Former Compass took Effective control of Granada's foodservice activities ('Granada restaurants') and its hotels activities ('Forte Hotels'). On 16 October 2000 the intention to dispose of Forte Hotels was announced. Accordingly the financial information for Compass Group PLC has been Prepared as follows: * Former Compass has been combined with Compass Group PLC using the principles of merger accounting; * Granada Restaurants has been consolidated with effect from 27 July 2000, using the principles of acquisition accounting; and * Forte Hotels has been included as a current asset investment at the net present value of the anticipated net proceeds from its disposal. (b) The results of Compass Group PLC for the year ended 30 September 2001 have been prepared on the basis of the accounting policies previously adopted by Former Compass as set out on pages 30 and 31 of the Introduction to the Official List circulated to Granada Compass plc shareholders on 18 December 2000. (c) The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 30 September 2001 or 30 September 2000 but is derived from those accounts. The statutory accounts for the year ended 30 September 2001 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. (d) The timetable for the proposed final dividend of 3.80p per share is as follows: Record date: 1 March 2002 Payment date: 5 April 2002 (e) To provide the Group with additional flexibility, it is our intention to seek authority from shareholders at the forthcoming AGM to purchase up to 10% of the Ordinary Share Capital of the Company. (f) Presentation and Teleconference * A presentation to analysts will take place at 9.30am (GMT) on Tuesday 11 December 2001 at: The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. * A teleconference with investors, including a webcast of the presentation slides will start at 9.30am (GMT) on Tuesday 11 December 2001. * To participate in the teleconference dial: +44 (0)20 8240 8242 or +44 (0)20 8240 8243 By dialling this number you will be requesting participation in any discussion of the matters referred to in the analyst's presentation and of any other matters raised at the presentation (including matters raised in questions or referred to in the answers to questions). * To access the web presentation: http://62.210.134.37/minisites/compass/11122001/default.htm * A conference call for US analysts and investors will take place at 16:45 (GMT) / 11:45 New York time on Tuesday 11 December 2001. To participate in the teleconference dial: +1 952 556 2801. By dialling this number you will be requesting participation in any discussion of the matters referred to in the analyst's presentation and of any other matters raised at the presentation (including matters raised in questions or referred to in the answers to questions). Synchronised slides can be accessed on the internet at: http://62.210.134.37/minisites/compass/11122001pm/default.htm Enquiries: 11 December 2001 Francis Mackay ChairmanCompass Group PLC 020 7404 5959 Michael J Bailey Chief ExecutiveCompass Group PLC 020 7404 5959 Andrew Lynch Finance DirectorCompass Group PLC 020 7404 5959 Timothy Grey/Simon Sporborg Brunswick Group Ltd 020 7404 5959 Thereafter Francis Mackay Compass Group PLC 01932 573 000 Michael J Bailey Compass Group PLC 01932 573 000 Andrew Lynch Compass Group PLC 01932 573 000 Website www.compass-group.com CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 September 2001 Before goodwill Goodwill amortisation amortisation and exceptional and exceptional Total items items 2001 Notes £m £m £m _________________________________________________ Turnover Continuing 8,088 - 8,088 operations Acquisitions 628 - 628 _________________________________________________ Total turnover 1 8,716 - 8,716 Operating costs (8,047) (327) (8,374) _________________________________________________ Operating profit Continuing 640 (299) 341 operations Acquisitions 29 (28) 1 _________________________________________________ 669 (327) 342 Share of profits of associated undertakings Continuing 1 7 (2) 5 operations _________________________________________________ Total operating 1 676 (329) 347 profit: Group and share of associated undertakings _________________________________________________ Reversal of 11 127 - 127 discounting of net proceeds from disposal of businesses to net present value Other interest 17 - 17 receivable and similar income _________________________________________________ Total interest 144 - 144 receivable and similar income Interest payable 3 (237) - (237) and similar charges _________________________________________________ Net interest (93) - (93) _________________________________________________ Profit on ordinary 583 (329) 254 activities before taxation Tax on profit on 4 (121) 29 (92) ordinary activities _________________________________________________ Profit on ordinary 462 (300) 162 activities after taxation Equity minority (16) - (16) interests _________________________________________________ Profit for the 446 (300) 146 financial year Equity dividends 5 (126) - (126) _________________________________________________ Profit for the 15 320 (300) 20 year retained _________________________________________________ Basic earnings 6 6.6p per ordinary share ____ Basic earnings 6 20.0p per ordinary share - excluding goodwill amortisation and exceptional items ______ Diluted earnings 6 6.5p per ordinary share ____ Diluted earnings 6 19.8p per ordinary share - excluding goodwill amortisation and exceptional items ______ CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 September 2001 Before goodwill Goodwill amortisation amortisation and exceptional and exceptional Total items items 2000 Notes £m £m £m _________________________________________________ Turnover Continuing 5,770 - 5,770 operations Acquisitions - - - _________________________________________________ Total turnover 1 5,770 - 5,770 Operating costs (5,425) (44) (5,469) _________________________________________________ Operating profit Continuing 345 (44) 301 operations Acquisitions - - - _________________________________________________ 345 (44) 301 Share of profits of associated undertakings Continuing 1 11 (3) 8 operations _________________________________________________ Total operating 1 356 (47) 309 profit: Group and share of associated undertakings _________________________________________________ Reversal of 11 32 - 32 discounting of net proceeds from disposal of businesses to net present value Other interest 17 - 17 receivable and similar income _________________________________________________ Total interest 49 - 49 receivable and similar income Interest payable 3 (127) - (127) and similar charges _________________________________________________ Net interest (78) - (78) _________________________________________________ Profit on 278 (47) 231 ordinary activities before taxation Tax on profit on 4 (61) 3 (58) ordinary activities _________________________________________________ Profit on 217 (44) 173 ordinary activities after taxation Equity minority (4) - (4) interests _________________________________________________ Profit for the 213 (44) 169 financial year Equity dividends 5 (137) - (137) _________________________________________________ Profit for the 15 76 (44) 32 year retained _________________________________________________ Basic earnings 6 11.0p per ordinary share ____ Basic earnings 6 13.8p per ordinary share - excluding goodwill amortisation and exceptional items ______ Diluted earnings 6 10.9p per ordinary share ____ Diluted earnings 6 13.7p per ordinary share - excluding goodwill amortisation and exceptional items ______ CONSOLIDATED BALANCE SHEET As at 30 September 2001 Notes 2001 2000 £m £m _____ _____ Fixed assets Intangible assets 7 4,254 3,113 Tangible assets 8 2,081 1,756 Investments 9 27 160 _____ _____ 6,362 5,029 _____ _____ Current assets Stocks 181 130 Debtors: amounts falling due within one year 10 1,178 968 amounts falling due after more than one year 10 238 198 Businesses held for resale 11 75 2,754 Investments 12 - Cash at bank and in hand 692 583 _____ _____ 2,376 4,633 Creditors: amounts falling due within one year 12 (2,838) (3,421) _____ _____ Net current (liabilities)/assets (462) 1,212 _____ _____ Total assets less current liabilities 5,900 6,241 Creditors: amounts falling due after more than 13 (2,699) (3,053) one year Provisions for liabilities and charges 14 (377) (362) Equity minority interests (35) (28) _____ _____ Net assets 2,789 2,798 _____ _____ Capital and reserves Called up share capital 222 221 Shares to be issued 32 4 Share premium account 15 11 - Merger reserve 15 4,170 4,158 Profit and loss account 15 (1,646) (1,585) _____ _____ Total equity shareholders' funds 2,789 2,798 _____ _____ CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 2001 2001 2000 _______________ ______________________ £m £m £m £m Net cash inflow from 748 353 operating activities before exceptional items (note I) Exceptional (44) (4) reorganisation costs ____ ___ Net cash inflow after 704 349 exceptional items Dividends from associated 2 1 undertakings Returns on investments and servicing of finance Interest received 16 23 Interest paid (258) (112) Interest element of (3) (3) finance lease rental payments Dividends paid to (5) (1) minority interests ____ _____ Net cash outflow from (250) (93) returns on investments and servicing of finance ____ ___ Taxation Tax received 19 10 Tax paid (118) (36) ____ _____ Net tax paid (99) (26) ____ ___ Free cash flow 357 231 ____ ___ Capital expenditure and financial investment Purchase of tangible (355) (185) fixed assets Sale of tangible fixed 30 10 assets Sale/(purchase) of own 1 (6) shares, net ____ _____ Total capital expenditure (324) (181) and financial investment Acquisitions and disposals (note IV) Purchase of subsidiary (1,337) (98) companies and investments in associated undertakings Net proceeds from hotel 2,806 - disposal Sale of subsidiary 25 (3) companies ____ _____ Total acquisitions and 1,494 (101) disposals Equity dividends paid (121) (45) ____ ___ Net cash inflow/(outflow) 1,049 (327) from investing activities _____ ___ Net cash inflow/(outflow) 1,406 (96) before financing Financing Issue of ordinary share 24 6 capital Debt due within a year: Decrease in bank loans (430) (209) and loan notes Debt due after a year: (Decrease)/increase in (440) 301 bank loans and loan notes Capital element of (15) (9) finance lease rentals ____ _____ Net cash (outflow)/inflow (861) 89 from financing ____ ___ Increase / (decrease) in 545 (7) cash in the year ____ ___ Reconciliation of net cash flow to movement in net debt (note II) Increase / (decrease) in 545 (7) cash in the year Cash outflow/(inflow) 885 (83) from change in debt and lease finance ____ ___ Change in net debt 1,430 (90) resulting from cash flows Changes in finance (73) (2,543) leases, loans acquired with subsidiaries and other non-cash changes Effect of foreign (51) 3 exchange rate changes ____ ___ Movement in net debt in 1,306 (2,630) the year Opening net debt (3,696) (1,066) ______ _____ Closing net debt (2,390) (3,696) ______ _____ NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 2001 I RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES: 2001 2000 £m £m Operating profit before goodwill amortisation and 676 356 exceptional items Depreciation 170 105 ______ ______ EBITDA 846 461 Profit on disposal of fixed assets and businesses (7) (9) Share of profits of associated undertakings (7) (11) Decrease in provisions for liabilities and charges (33) (17) Increase in stocks (8) (9) Increase in debtors (153) (143) Increase in creditors 110 81 ______ ______ Net cash inflow from operating activities before 748 353 exceptional items ______ ______ II Analysis of net debt: 1 October Cash Exchange Acquisitions Other 30 2000 flow movements (excluding non-cash September £m £m £m cash and changes 2001 overdrafts) £m £m £m Cash at 583 114 (5) - - 692 bank and in hand Overdrafts (480) 431 2 - - (47) ________ ______ ________ ____________ ________ ________ 103 545 (3) - - 645 ________ ______ ________ ____________ ________ ________ Debt due (800) 430 - - (67) (437) within one year Debt due (2,957) 440 (49) (48) 67 (2,547) after one year Finance (42) 15 1 (5) (20) (51) leases ________ ______ ________ ____________ ________ ________ (3,799) 885 (48) (53) (20) (3,035) ________ ______ ________ ____________ ________ ________ Total (3,696) 1,430 (51) (53) (20) (2,390) ________ ______ ________ ____________ ________ ________ NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued) For the year ended 30 September 2001 III Purchase and disposal of subsidiary companies and investments in associated undertakings: 2001 2001 2000 2000 £m £m £m £m Purchases Disposals Purchases Disposals Net assets acquired/ (disposed of): Tangible fixed assets 197 - 1,227 (1) Investment in associated undertakings 8 - 66 - Businesses held for resale - - 2,722 - Stocks 45 - 21 (4) Debtors 180 - 182 (15) Investments 12 - - - Cash 22 - 445 (3) Bank overdrafts (22) - (300) - Loans (48) - (2,748) - Leases (5) - (1) - Creditors (314) - (664) 19 Provisions (42) - (291) - Tax (9) - (109) 1 Minority interests 2 - (14) - Share of net assets already owned (39) - - - ___________ __________ __________ ___________ (13) - 536 (3) Profit on disposal and costs and liabilities - - - (11) retained Goodwill acquired/(disposed of) 1,281 - 3,026 (11) ___________ __________ __________ ___________ 1,268 - 3,562 (25) ___________ __________ __________ ___________ Satisfied by: Cash payable 1,248 - 175 - Shares - - 3,298 - Deferred consideration payable 20 - 89 - Deferred consideration receivable - - - (25) ___________ __________ __________ ___________ 1,268 - 3,562 (25) ___________ __________ __________ ___________ IV Analysis of net outflow of cash in respect of the purchase and disposal of subsidiary companies and investments in associated undertakings: 2001 2001 2000 2000 £m £m £m £m Purchases Disposals Purchases Disposals Cash consideration paid 1,248 - 175 - Cash (22) - (445) 3 (acquired)/disposed of Overdrafts acquired 22 - 300 - _________ _________ _________ ___________ 1,248 - 30 3 Deferred consideration 89 (25) 68 - and costs relating to previous acquisitions/(disposals) _________ _________ _________ ___________ 1,337 (25) 98 3 _________ _________ _________ ___________ MORE TO FOLLOW

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