Final Results - Pre-tax Profit Up 21.7%, Part 2

Compass Group PLC 9 December 1999 Part 2 COMPASS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 SEPTEMBER 1999 Before goodwill Goodwill Total As restated amortisation amortisation 1999 1998 Notes £m £m £m £m Turnover Continuing operations 4,699.5 - 4,699.5 4,213.8 Acquisitions 115.1 - 115.1 - ------------------------------------------- Total turnover 1 4,814.6 - 4,814.6 4,213.8 Operating costs (4,560.6) (2.6)(4,563.2) (3,999.4) ------------------------------------------- Operating profit Continuing operations 250.1 (0.7) 249.4 214.4 Acquisitions 3.9 (1.9) 2.0 - ------------------------------------------- 254.0 (2.6) 251.4 214.4 ------------------------------------------- Share of profits of associated undertakings Continuing operations 5.5 - 5.5 3.6 Acquisitions 1.9 (1.0) 0.9 - ------------------------------------------- 1 7.4 (1.0) 6.4 3.6 ------------------------------------------- Total operating profit : Group and share of associated undertakings 1 261.4 (3.6) 257.8 218.0 Interest receivable and similar income 8.1 - 8.1 8.3 Interest payable and similar charges 2 (75.9) - (75.9) (67.2) ------------------------------------------- Profit on ordinary activities before taxation 193.6 (3.6) 190.0 159.1 Tax on profit on ordinary activities 3 (48.8) - (48.8) (41.4) ------------------------------------------- Profit on ordinary activities after taxation 144.8 (3.6) 141.2 117.7 Equity minority interests (4.2) - (4.2) (3.2) ------------------------------------------- Profit for the financial year 140.6 (3.6) 137.0 114.5 Equity dividends 4 (42.9) - (42.9) (37.5) ------------------------------------------- Profit for the year retained 13 97.7 (3.6) 94.1 77.0 ====== ====== ====== ====== Basic earnings per ordinary share 5 20.3p 17.2p ====== ====== Basic earnings per ordinary share - excluding goodwill amortisation 5 20.9p 17.2p ====== ====== Diluted earnings per ordinary share 5 19.9p 17.0p ====== ====== Diluted earnings per ordinary share - excluding goodwill amortisation 5 20.4p 17.0p ====== ====== COMPASS GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 1999 As restated 1999 1998 Notes £m £m Fixed assets Intangible assets 6 106.5 - Tangible assets 7 432.0 372.9 Investments 8 94.7 32.2 ------------------- 633.2 405.1 ------------------- Current assets Stocks 100.3 90.0 Debtors:amounts falling due within one year 9 598.1 507.6 amounts falling due after more than one year 9 64.5 53.4 Cash at bank and in hand 121.4 72.8 ------------------- 884.3 723.8 Creditors:amounts falling due within one year 10 (1,043.6) (982.7) ------------------- Net current liabilities (159.3) (258.9) ------------------- Total assets less current liabilities 473.9 146.2 ------------------- Creditors: amounts falling due after more than one year 11 Other creditors (961.2) (714.0) Convertible bond (215.4) (214.9) -------------------- (1,176.6) (928.9) -------------------- Provisions for liabilities and charges 12 (84.6) (93.3) Equity minority interests (10.7) (5.6) -------------------- Net liabilities (798.0) (881.6) ====== ====== Capital and reserves Called up share capital 17.0 16.9 Share premium account 13 823.3 816.5 Profit and loss account 13 (1,638.3) (1,715.0) -------------------- Total equity shareholders' funds (798.0) (881.6) ====== ======= COMPASS GROUP PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 1999 1999 1998 £m £m £m £m Net cash inflow from operating activities (note I) 303.1 257.0 Dividends from associated undertakings 1.5 0.7 Returns on investments and servicing of finance Interest received 9.2 8.0 Interest paid (72.4) (59.2) Interest element of finance lease rental payments (2.4) (1.9) Dividends paid to minority interests (1.0) (0.9) --------- --------- Net cash outflow from returns on investments and servicing of finance (66.6) (54.0) Taxation Tax received 15.3 1.4 Tax paid (37.8) (46.2) --------- --------- Net tax paid (22.5) (44.8) --------- --------- Free cash flow 215.5 158.9 --------- --------- Capital expenditure and financial investment Purchase of tangible fixed assets (137.4) (133.8) Sale of tangible fixed assets 11.9 16.0 Sale/(purchase) of own shares, net 1.8 (1.6) --------- --------- Total capital expenditure and financial investment (123.7) (119.4) Acquisitions and disposals (note IV) Purchase of subsidiary companies and investment in associated undertakings (188.3) (76.4) Sale of subsidiary companies 4.8 14.8 --------- --------- Total acquisitions and disposals (183.5) (61.6) Equity dividends paid (39.0) (33.8) --------- --------- Net cash outflow from investing activities (346.2) (214.8) --------- --------- Net cash outflow before financing (130.7) (55.9) --------- --------- Financing Issue of ordinary share capital 1.8 4.2 Debt due within a year: Decrease in bank loans and loan notes (87.0) (24.5) Debt due after a year: Increase in bank loans and loan notes 278.8 48.4 Capital element of finance lease rentals (9.5) (9.2) --------- --------- Net cash inflow from financing 184.1 18.9 --------- --------- Increase /(decrease) in cash in the year 53.4 (37.0) ===== ===== Reconciliation of net cash flow to movement in net debt (note II) Increase /(decrease) in cash in the year 53.4 (37.0) Cash inflow from increase in debt and lease finance (182.3) (14.7) --------- --------- Change in net debt resulting from cash flows (128.9) (51.7) Changes in finance leases (11.9) (27.7) Effect of foreign exchange rate changes 19.0 12.3 --------- --------- Movement in net debt in the year (121.8) (67.1) Opening net debt (943.8) (876.7) --------- --------- Closing net debt (1,065.6) (943.8) ======= ===== COMPASS GROUP PLC NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 1999 1999 1998 £m £m I Reconciliation of operating profit to net cash inflow from operating activities: Operating profit 257.8 218.0 Depreciation and amortisation 86.0 74.3 Profit on disposal of fixed assets and businesses (4.1) (3.4) Share of profit of associated undertakings (6.4) (3.6) Cash flow relating to provisions for liabilities and charges (10.6) (7.0) Increase in stocks (4.9) (3.4) Increase in debtors (73.5) (41.0) Increase in creditors 58.8 23.1 ---------------------- Net cash inflow from operating activities 303.1 257.0 ====== ====== Other Cash Exchange non-cash 1 Oct 1998 flow movements changes 30 Sep 1999 £m £m £m £m £m II Analysis of net debt: Cash at bank and in hand 72.8 58.2 (9.6) - 121.4 Overdrafts (12.2) (4.8) 1.1 - (15.9) ---------------------------------------------- 60.6 53.4 (8.5) - 105.5 ---------------------------------------------- Debt due within one year (99.5) 87.0 0.3 (13.7) (25.9) Debt due after one year (869.1)(278.8) 25.7 13.7 (1,108.5) Finance leases (35.8) 9.5 1.5 (11.9) (36.7) ---------------------------------------------- (1,004.4)(182.3) 27.5 (11.9) (1,171.1) ---------------------------------------------- Total (943.8)(128.9) 19.0 (11.9) (1,065.6) ===== ===== ===== ===== ======= COMPASS GROUP PLC NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued) 1999 1999 1998 1998 £m £m £m £m Purchases Disposals Purchases Disposals IIIPurchase and disposal of subsidiary companies and investments in associated undertakings: Net assets acquired/(disposed of): Tangible fixed assets 10.9 (0.8) 24.0 (6.2) Investment in associated undertakings 66.8 - 0.2 - Stocks 7.1 (0.1) 4.3 (0.3) Debtors 42.9 (1.7) 36.7 (7.1) Cash 6.6 (1.6) 6.7 (0.9) Bank overdrafts/loans (0.2) - (18.0) - Creditors (54.9) 2.2 (58.9) 8.3 Provisions (1.5) - (1.0) 0.5 Tax 1.6 - (3.5) - Minority interests 0.4 - (2.1) 1.2 Share of net assets already owned - - 4.5 - ------- ------- ------- ------- 79.7 (2.0) (7.1) (4.5) Profit on disposal and costs and liabilities retained - (3.7) - (0.7) Goodwill acquired/(disposed of) 125.7 (5.8) 137.5 (12.0) ------- ------- ------- ------- 205.4 (11.5) 130.4 (17.2) ===== ==== ===== ==== Satisfied by: Cash payable/(receivable) 145.1 (6.4) 73.1 (15.7) Shares - - 35.9 - Deferred consideration payable 60.3 - 21.4 - Deferred consideration receivable - (5.1) - (1.5) ------- ------- ------- ------- 205.4 (11.5) 130.4 (17.2) ===== ==== ===== ==== IV Analysis of net outflow of cash in respect of the purchase and disposal of subsidiary companies and investments in associated undertakings: Cash consideration paid/(received net of liabilities settled) 145.1 (6.4) 73.1 (15.7) Cash (acquired)/disposed of (6.6) 1.6 (6.7) 0.9 Overdrafts acquired 0.2 - 0.1 - ------- ------- ------- ------- 138.7 (4.8) 66.5 (14.8) Deferred consideration and costs relating to previous acquisitions 49.6 - 9.9 - ------- ------- ------- ------- 188.3 (4.8) 76.4 (14.8) ===== ==== ==== ==== COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS 1. Turnover and operating profit Continuing operations Acquisitions 1999 1998 £m £m £m £m Turnover Foodservice: Geographical analysis: United Kingdom 813.2 - 813.2 746.6 Continental Europe and the rest of the world 2,305.9 115.1 2,421.0 2,073.2 North America 1,580.4 - 1,580.4 1,394.0 ---------------------------------------- 4,699.5 115.1 4,814.6 4,213.8 ======= ===== ======= ======= Operating profit (before goodwill amortisation) Foodservice: - The Company and its subsidiary companies 250.1 3.9 254.0 214.4 - Associated undertakings 5.5 1.9 7.4 3.6 ---------------------------------------- 255.6 5.8 261.4 218.0 ---------------------------------------- Geographical analysis: United Kingdom 60.7 - 60.7 54.3 Continental Europe and the rest of the world: - The Company and its subsidiary companies 114.2 3.9 118.1 98.5 - Associated undertakings 5.5 1.9 7.4 3.6 North America 75.2 - 75.2 61.6 ---------------------------------------- 255.6 5.8 261.4 218.0 ---------------------------------------- Amortisation of goodwill: - Continental Europe and the rest of the world (0.6) (2.9) (3.5) - - North America (0.1) - (0.1) - ---------------------------------------- 254.9 2.9 257.8 218.0 ===== ===== ===== ===== Operating profit after goodwill amortisation for the year ended 30 September 1999 relates to foodservice analysed as UK £60.7m, Continental Europe and the rest of the world £122.0m, and North America £75.1m (1998: £54.3m, £102.1m and £61.6m respectively). 2. Interest payable and similar charges 1999 1998 £m £m Bank loans and overdrafts 38.8 32.1 Other loans 37.1 35.1 ---------------- 75.9 67.2 ==== ==== COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Tax on profit on ordinary activities 1999 1998 £m £m UK corporation tax 10.0 16.2 Overseas tax payable 32.4 21.8 ------- ------- 42.4 38.0 ------- ------- UK deferred tax 1.4 3.0 Overseas deferred tax 5.1 4.8 ------- ------- 6.5 7.8 ------- ------- Adjustments in respect of prior years: UK corporation tax 2.1 (6.9) UK deferred tax (4.4) (7.3) Overseas tax payable (0.2) (15.0) Overseas deferred tax 0.3 23.4 ------- ------- (2.2) (5.8) ------- ------- Overseas tax on share of profits of associated undertakings 2.1 1.4 ------- ------- 48.8 41.4 ==== ==== United Kingdom corporation tax has been charged at 30.5% (1998: 31%). The Group tax charge is reduced below this rate since tax is charged at a lower effective rate on overseas earnings. 4. Dividends 1999 1998 Per share £m Per share £m Dividends on ordinary shares of 2.5p each Interim 2.00p 13.6 1.75p 11.8 Proposed final 4.35p 29.5 3.80p 25.7 ---------------------------- 6.35p 43.1 5.55p 37.5 ==== ==== ESOP dividends received (0.2) - ----- ----- 42.9 37.5 ==== ==== The 1998 interim dividend was paid as a Foreign Income Dividend and has been restated following the share sub-division on 12 June 1998. COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 5. Earnings per share Before Including goodwill goodwill amortisation amortisation 1999 1999 1998 £m £m £m Attributable profit for basic earnings per share 140.6 137.0 114.5 Interest on convertible bonds net of tax 8.8 8.8 8.8 ------------------------------ Attributable profit for diluted earnings per share 149.4 145.8 123.3 ===== ===== ===== millions millions millions Average number of shares in issue 677.5 677.5 662.1 Shares to be issued - - 8.9 Average number of shares held by ESOP (3.7) (3.7) (6.2) ------------------------------ Average number of shares for basic earnings per share 673.8 673.8 664.8 Dilutive share options 4.8 4.8 7.3 Conversion of 5.75% convertible bond due 2007 53.0 53.0 53.0 ------------------------------ Average number of shares for diluted earnings per share 731.6 731.6 725.1 ===== ===== ===== Basic earnings per share 20.9p 20.3p 17.2p ===== ===== ===== Diluted earnings per share 20.4p 19.9p 17.0p ===== ===== ===== Earnings per share excluding goodwill amortisation has been shown to disclose the impact of goodwill amortisation on underlying earnings. COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 6. Intangible fixed assets 1999 £m Goodwill Cost At 1 October 1998 - Additions 125.7 Currency adjustment (16.8) ---------- At 30 September 1999 108.9 ---------- Amortisation At 1 October 1998 - Charge for the year 2.6 Currency adjustment (0.2) ---------- At 30 September 1999 2.4 ---------- Net book amount At 30 September 1999 106.5 ====== At 30 September 1998 - ====== At 30 September 1999 the above goodwill primarily relates to the acquisition of 50% of GR SA and the acquisition of P&O Australia. Further information on these acquisitions can be found in note 14. Goodwill on the above acquisitions is being amortised over 20 years which is considered to be its estimated useful life. 7. Tangible fixed assets Freehold Long Short Plant Fixtures land and leasehold leasehold and and buildings property property machinery fittings Total £m £m £m £m £m £m Cost At 1 October 1998 (as restated) 71.2 4.0 38.8 350.9 218.0 682.9 Currency adjustment (1.3) (0.1) 0.5 (4.3) (7.2)(12.4) Additions 15.0 1.1 5.6 76.4 51.2 149.3 Businesses acquired 1.8 - - 17.5 5.2 24.5 Disposals (7.5) (0.1) (1.8) (19.0) (13.4)(41.8) Businesses disposed of (0.9) - - - (2.9) (3.8) Transfer between categories (11.6) 0.2 0.1 2.3 9.0 - -------------------------------------------------- At 30 September 1999 66.7 5.1 43.2 423.8 259.9 798.7 ===== ===== ===== ===== ===== ===== Depreciation At 1 October 1998 (as restated) 8.4 1.3 12.7 177.4 110.2 310.0 Currency adjustment (0.7) - 0.1 (2.9) (3.5) (7.0) Charge for the year 3.8 0.3 2.6 48.3 28.4 83.4 Businesses acquired 0.3 - - 8.7 4.6 13.6 Disposals (0.2) (0.1) (0.4) (16.2) (13.4)(30.3) Businesses disposed of (0.5) - - - (2.5) (3.0) Transfer between categories(3.1) 0.3 - (0.2) 3.0 - ------------------------------------------------- At 30 September 1999 8.0 1.8 15.0 215.1 126.8 366.7 ===== ===== ===== ===== ===== ===== Net book amount At 30 September 1999 58.7 3.3 28.2 208.7 133.1 432.0 ------------------------------------------------- At 30 September 1998 62.8 2.7 26.1 173.5 107.8 372.9 ===== ===== ===== ===== ===== ===== The net book amount of the Group's tangible fixed assets includes, in respect of assets held under finance leases, freehold buildings and long and short leasehold property £1.8m (1998: £10.9m), plant and machinery £21.2m (1998: £18.8m) and fixtures and fittings £8.2m (1998: £5.4m). COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 8. Investments held as fixed assets Investment in associated Own undertakings shares Total £m £m £m Cost At 1 October 1998 17.3 14.9 32.2 Additions 66.8 2.2 69.0 Disposals - (4.0) (4.0) Share of retained profits less losses 5.3 - 5.3 Dividends received (1.5) - (1.5) Goodwill amortisation (1.0) - (1.0) Amortisation - (3.7) (3.7) Currency adjustments/other movements (1.6) - (1.6) ------- ------- ------- At 30 September 1999 85.3 9.4 94.7 ==== ==== ==== Investment in associated undertakings includes £81.1m being the Group's share of the net tangible assets of Selecta Group and £50.4m of goodwill shown net of accumulated amortisation of £1.0m. Additions in the year relate principally to a further 13.3% of Selecta Group for £63.7m including goodwill of £51.4m bringing the Group's total investment in the issued share capital of Selecta Group to 33.3%. Selecta is incorporated in Switzerland, draws up its annual accounts to 31 December each year and its main business is in the operation of vending machines in Europe. Selecta Group is listed on a recognised investment exchange and the market value of the Group's holding was £195.4m at 30 September 1999. Own shares held by the Group represent 2,247,967 (1998: 5,369,914) shares in Compass Group PLC held by the Compass Group Employee Share Trust (ESOP). These shares are listed on a recognised investment exchange and their market value at 30 September 1999 was £13.4m (1998: £29.7m). The nominal value held at 30 September 1999 was £0.1m (1998: £0.1m). The dividends on these shares of £0.2m have been netted against external dividends paid. The ESOP is a discretionary trust for the benefit of employees and the shares held are used to satisfy the Group's liabilities to employees for share options and long term incentive plans. All of the shares held by the ESOP will be required to be made available in this way. The net cost to the Group of these shares is charged to the profit and loss account over the period to which they relate. 9.Debtors As restated 1999 1998 £m £m Amounts falling due within one year: Trade debtors 492.4 408.1 Overseas tax recoverable 2.7 11.4 Other debtors 55.7 48.6 Prepayments and accrued income 47.3 39.5 -------- ------- 598.1 507.6 ===== ===== Amounts falling due after more than one year: Overseas tax recoverable 2.1 1.1 Other debtors 43.6 34.2 Deferred tax 18.8 18.1 ------- ------- 64.5 53.4 ===== ===== COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 9.Debtors (continued) Provided Unprovided 1999 1998 1999 1998 Deferred tax analysis £m £m £m £m Depreciation in excess of capital allowances 1.6 (3.4) - - Other timing differences 9.4 10.3 0.5 - Overseas deferred tax 7.8 11.2 64.4 60.4 ------- ------- ------- ------- 18.8 18.1 64.9 60.4 ==== ==== ==== ==== The analysis of unprovided deferred tax does not include any potential tax liabilities which might arise in the event of the distribution of unappropriated profits or reserves of overseas subsidiary companies as there is no intention to distribute such profits or reserves. £m The movements on deferred tax are as follows: At 1 October 1998 18.1 Arising from acquisitions 3.4 Charged to profit and loss account (2.4) Currency adjustment (0.1) Other movements (0.2) ------- At 30 September 1999 18.8 ==== 10.Creditors As restated 1999 1998 £m £m Amounts falling due within one year: Loan notes 18.2 23.3 Bank loans 7.7 76.2 Bank overdrafts 15.9 12.2 Obligations under finance leases 8.8 8.5 Trade creditors 388.5 325.2 Corporation tax payable 22.3 19.9 Overseas tax 50.7 39.6 Other tax and social security costs 102.1 109.8 Other creditors 93.8 79.3 Deferred consideration 66.2 44.8 Accruals and deferred income 239.9 218.2 Proposed dividend 29.5 25.7 ---------- ---------- 1,043.6 982.7 ====== ====== COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 11. Creditors As restated 1999 1998 £m £m Amounts falling due after more than one year: Sterling bond 200.0 - Loan notes 192.4 209.0 Bank loans 500.7 445.2 Obligations under finance leases 27.9 27.3 Other creditors 38.4 31.0 Deferred consideration 1.8 1.5 --------- --------- 961.2 714.0 Convertible bond 215.4 214.9 ---------- --------- 1,176.6 928.9 ====== ===== All amounts due under bonds, loan notes and bank facilities are shown net of unamortised issue costs. The sterling bond is a fixed term, fixed interest bond redeemable in 2010 and bears interest at a rate of 7.125% per annum. The sterling bond has been swapped to floating rates based on LIBOR plus a margin for the whole term of the bond. The convertible bond is an unsubordinated bond with a coupon of 5.75% maturing in 2007 and convertible into fully paid ordinary shares of 2.5p each at a price of £4.15 per share. The Group has the option from October 2002 to redeem the bond in whole or in part. If the conversion rights attaching to the bond outstanding at 30 September 1999 were exercised, 53,012,048 ordinary shares of 2.5p each would be issued. The Group has fixed term, fixed interest private placements totalling US$377.1m (£227.8m) at interest rates between 7.55% and 8.015%. Of this amount 68% has been swapped to floating rates based on US LIBOR plus a margin. US$185.0m (£111.7m) is repayable in five to twelve years. Maturity of financial liabilities and other creditors falling due after more than one year as at 30 September 1999 is as follows: 1999 1998 Bonds Bank Bonds Bank and loan loans and and loan loans and notes overdrafts Other Total notes overdrafts Other Total £m £m £m £m £m £m £m £m In more than one year but not more than two years 12.9 358.5 21.8 393.2 13.0 10.3 21.2 44.5 In more than two years but not more than five years 82.7 139.8 32.8 255.3 87.7 433.5 19.2 540.4 In more than five years 512.2 2.4 13.5 528.1 323.2 1.4 19.4 344.0 --------------------------------------------------------------- 607.8 500.7 68.1 1,176.6 423.9 445.2 59.8 928.9 In one year or less, or on demand 18.2 23.6 75.0 116.8 23.3 88.4 53.3 165.0 ----------------------------------------------------------------- 626.0 524.3 143.1 1,293.4 447.2 533.6 113.1 1,093.9 ===== ===== ===== ======= ===== ===== ===== ======= COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 11. Creditors (continued) As restated 1999 1998 £m £m Bank loans: Repayable by instalments within five years 11.0 7.2 Repayable otherwise than by instalments within five years 495.0 512.8 Repayable by instalments after five years 0.2 1.3 Repayable otherwise than by instalments after five years 2.2 0.1 ------- ------- 508.4 521.4 Less: amounts falling due within one year 7.7 76.2 -------- ------- Amounts falling due after more than one year 500.7 445.2 ===== ===== 12.Provisions for liabilities and charges Insurance, pensions and Legal other post and employment Onerous other Reorganisation benefits contracts claims provisions Other Total £m £m £m £m £m £m At 1 October 1998 (as restated) 51.0 9.4 12.3 11.5 9.1 93.3 Arising from acquisitions 0.5 1.0 - - - 1.5 Expenditure in the year (3.6) - (2.5) (4.2) (0.3)(10.6) Charged to profit and loss account 4.7 - 1.3 0.5 - 6.5 Credited to profit and loss account - (1.5) - - (3.5) (5.0) Reclassified (0.9) - (0.2) - - (1.1) Currency adjustment 0.1 - (0.1) - - - ------------------------------------------------ At 30 September 1999 51.8 8.9 10.8 7.8 5.3 84.6 ===== ===== ===== ==== ==== ==== Insurance, pensions and other post employment benefits relate to the costs of self funded pension and insurance schemes or statutory retirement benefits principally for overseas subsidiary companies and are essentially long term in nature. Onerous contracts represent the liabilities in respect of leases on non-utilised properties and other contracts. The duration of these contracts ranges from 2 to 17 years. Legal and other claims relate principally to provisions for the cost of litigation in the USA and sundry other claims. The timing of the settlement of these claims is uncertain. Reorganisation provisions are for the committed costs of integration of businesses. Integration is ongoing and is anticipated to be substantially complete within the next two years. COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 13. Reserves Consolidated profit and loss account Share Before premium goodwill Goodwill account written off written off Total £m £m £m £m At 1 October 1998 816.5 420.7 (2,135.7) (1,715.0) Foreign exchange reserve movements - (5.9) - (5.9) Premium on ordinary shares issued, net of expenses 6.8 (3.6) - (3.6) Retained profit for the year - 94.1 - 94.1 Transfer on disposal of subsidiary companies - - 5.8 5.8 Adjustments to goodwill arising on purchase of subsidiary companies and investments in associated undertakings prior to 1 October 1998 - - (13.7) (13.7) -------------------------------------------- At 30 September 1999 823.3 505.3 (2,143.6) (1,638.3) ====== ====== ======= ======= Goodwill Goodwill written off represents the excess of the consideration for the operations acquired prior to 1 October 1998 over the fair value of the net assets acquired. The goodwill has been written off to profit and loss account on consolidation. During the year, the Group contributed £3.6m, net of tax (1998: £2.4m) to the Qualifying Employee Share Ownership Trust ('QUEST') for shares issued during the year. COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 14. Acquisitions Businesses acquired during the year are shown below. They principally relate to the acquisition of 50% of GR SA, funded by £49.8 million in cash, and the acquisition of P&O Australia, funded by £56.6 million in cash, paid 1 November 1999. Other acquisitions represents a number of small businesses and minority interests acquired. Adjustments have been made to reflect the provisional fair value of assets acquired as follows: Accounting Fair value Consideration Net assets Fair value policy of assets and costs acquired adjustments realignment acquired Goodwill £m £m £m £m £m £m GR SA 49.8 8.9 (5.2) (5.4) (1.7) 51.5 P&O Australia 56.6 16.1 (4.9) (1.5) 9.7 46.9 Other acquisitions in the year 32.2 6.1 (0.6) (0.6) 4.9 27.3 ----------------------------------------------------------- Total acquisitions in the year 138.6 31.1 (10.7) (7.5) 12.9 125.7 ===== ===== ===== ===== ===== ===== Net Accounting Fair value assets Fair value policy to the acquired adjustments realignment Group £m £m £m £m Intangible fixed assets 11.2 - (11.2) - Tangible fixed assets 14.6 (2.3) (1.4) 10.9 Stocks 7.1 - - 7.1 Debtors 43.7 (0.8) - 42.9 Deferred tax 2.0 1.4 - 3.4 Cash 6.6 - - 6.6 Bank overdrafts (0.2) - - (0.2) Creditors (45.7) (9.1) (0.1) (54.9) Provisions (0.5) (1.0) - (1.5) Tax (1.0) (0.8) - (1.8) Minority interests (6.7) 1.9 5.2 0.4 ------------------------------------------ 31.1 (10.7) (7.5) 12.9 ===== ===== ===== ===== Fair value and accounting policy realignment adjustments principally relate to:- writing off intangible assets in accordance with Group accounting policy, harmonisation of depreciation policies, and recognising pension commitments and other liabilities not previously recorded. All acquisitions were accounted for under the acquisitions method of accounting. Adjustments made to the fair value of assets are provisional owing to the short period of ownership particularly with respect to P&O Australia which was acquired on 24 September 1999. The contribution of acquisitions to Group profit is shown in note 1. There was no material difference between operating profits arising from acquisitions and cash flows contributed by those acquisitions. COMPASS GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (continued) 15. Exchange rates Exchange rates for major currencies were: 1999 1999 2000 Translation Closing Translation rate rate rate Australian Dollar 2.73 2.53 2.43 Belgian/Luxembourg Franc 59.87 62.42 n/a Canadian Dollar 2.38 2.43 2.36 Danish Krone 11.05 11.50 11.15 Dutch Guilder 3.27 3.41 n/a French Franc 9.73 10.15 n/a German Mark 2.90 3.03 n/a Norwegian Krone 12.19 12.77 12.39 Portuguese Escudo 297.18 310.24 n/a Spanish Peseta 246.38 257.48 n/a Swedish Krona 12.80 13.52 13.15 Swiss Franc 2.41 2.47 2.41 US Dollar 1.63 1.66 1.57 Euro n/a n/a 1.50

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