Preliminary Results - Part 3

Compass Group PLC 28 November 2007 PART 3 25 Reconciliation of movements in equity Attributable to equity shareholders of the Company -------------------------------------------------------- Share Capital Share premium redemption Own Other Retained Minority Reconciliation of capital account reserve shares reserves earnings interests Total movements in equity £m £m £m £m £m £m £m £m ------------------ ------ ------ --- ------ ------ ------ ------ ------ ------ At 1 October 2005 216 94 9 (1) 4,137 (2,204) 27 2,278 Total recognised income and expense - - - - (12) 260 6 254 Issue of shares - 2 - - - - - 2 Fair value of share-based payments (net) - - - - 25 - - 25 Share buy back (6) - 6 - - (149) - (149) Transfer on exercise of put options - - - - 138 3 (10) 131 Other changes - - - 1 - - (6) (5) ------------------ ------ ------ --- ------ ------ ------ ------ ------ ------ 210 96 15 - 4,288 (2,090) 17 2,536 Dividends paid to Compass shareholders (note 9) - - - - - (213) - (213) Dividends paid to minority interest - - - - - - (11) (11) ------------------ ------ ------ --- ------ ------ ------ ------ ------ ------ At 30 September 2006 210 96 15 - 4,288 (2,303) 6 2,312 ------------------ ------ ------ --- ------ ------ ------ ------ ------ ------ At 1 October 2006 210 96 15 - 4,288 (2,303) 6 2,312 Total recognised income and expense - - - - 1 575 19 595 Issue of shares 1 26 - - - - - 27 Fair value of share-based payments (net) - - - - 14 - - 14 Share buy back (18) - 18 - - (575) - (575) Transfer on exercise of put options - - - - 9 - - 9 Other changes - - - (1) - - - (1) ------------------ ------ ------ --- ------ ------ ------ ------ ------ ------ 193 122 33 (1) 4,312 (2,303) 25 2,381 Dividends paid to Compass shareholders (note 9) - - - - - (208) - (208) Dividends paid to minority interest - - - - - - (3) (3) ------------------ ------ ------ --- ------ ------ ------ ------ ------ ------ At 30 September 2007 193 122 33 (1) 4,312 (2,511) 22 2,170 Own shares held by the Group represent 161,012 shares in Compass Group PLC (2006: 161,600 shares). All shares are held by the Compass Group Employee Share Trust ('ESOP'). These shares are listed on a recognised stock exchange and their market value at 30 September 2007 was £0.5 million (2006: £0.4 million). The nominal value held at 30 September 2007 was £16,101 (2006: £16,160). The ESOP is a discretionary trust for the benefit of employees and the shares held are used to satisfy some of the Group's liabilities to employees for share options, share bonus and long-term incentive plans. All of the shares held by the ESOP are required to be made available in this way. The analysis of other reserves is shown below. Equity Share-based adjustment payment Merger Translation Hedging for put Total other Other reserves reserve reserve reserve reserve options reserves £m £m £m £m £m £m ------------------ --- ----- ----- ------- ------- ------- ------ --- ------ --- ------ At 1 October 2005 105 4,170 16 1 (155) 4,137 Total recognised income and expense - - (11) (1) - (12) Fair value of share-based payments 25 - - - - 25 Settled in cash or existing shares - - - - - - (purchased in market) Transfer on exercise of put options - - - - 138 138 ------------------ --- ----- ----- ------- ------- ------- ------ --- ------ --- ------ At 30 September 2006 130 4,170 5 - (17) 4,288 ------------------ --- ----- ----- ------- ------- ------- ------ --- ------ --- ------ At 30 September 2006 130 4,170 5 - (17) 4,288 Total recognised income and expense - - 1 - - 1 Fair value of share-based payments 25 - - - - 25 Settled in cash or existing shares (purchased in market) (11) - - - - (11) Transfer on exercise of put options - - - - 9 9 ------------------ --- ----- ----- ------- ------- ------- ------ --- ------ --- ------ At 30 September 2007 144 4,170 6 - (8) 4,312 ------------------ --- ----- ----- ------- ------- ------- ------ --- ------ --- ------ The merger reserve arose in 2000 following the demerger from Granada Compass plc. The equity adjustment for put options arose on the accounting for the options held by the Group's minority partners requiring the Group to purchase those minority interests. 26 Share-based payments Full details of the Compass Group Share Option Plan ('Option Plan'), the Management Share Option Plan ('Management Plan') and the Savings-related Share Option Scheme can be found in the Company's Annual Report. 27 Business combinations There were no significant acquisitions in the year. 28 Reconciliation of operating profit to cash generated by operations Reconciliation of operating profit to cash generated by operations 2007 2006 £m £m --------------------------------------------- ------ ------ Operating profit from continuing operations 525 455 Adjustments for: Depreciation of property, plant and equipment 142 151 Amortisation of intangible fixed assets 31 37 Loss on disposal of property, plant and equipment 5 5 Increase/(decrease) in provisions 43 (3) Decrease in pensions liability (42) (35) Share-based payments - charged to profits* 23 21 Share-based payments - settled in cash or existing shares** (11) - --------------------------------------------- ------ ------ Operating cash flows before movement in working capital 716 631 (Increase)/decrease in inventories (7) (4) (Increase)/decrease in receivables 8 (33) Increase/(decrease) in payables 36 57 --------------------------------------------- ------ ------ Cash generated by operations 753 651 --------------------------------------------- ------ ------ * £24 million share based payments charge - £1 million credit in respect of cash-settled phantom share options. ** It was originally anticipated these payments would be satisfied by the issue of new shares. 29 Cash flow from discontinued operations Cash flow from discontinued operations 2007 2006 £m £m --------------------------------------------- ------ ------ Net cash from operating activities for discontinued operations Cash generated from discontinued operations (11) 193 Tax paid (7) (15) --------------------------------------------- ------ ------ Net cash from operating activities for discontinued operations (18) 178 --------------------------------------------- ------ ------ Net cash used in investing activities by discontinued operations Purchase of property, plant and equipment (34) (116) Proceeds from sale of property, plant and equipment 4 11 --------------------------------------------- ------ ------ Net cash used in investing activities by discontinued operations (30) (105) --------------------------------------------- ------ ------ Net cash used in financing activities by discontinued operations Dividends paid to minority interests - - --------------------------------------------- ------ ------ Net cash used in financing activities by discontinued operations - - --------------------------------------------- ------ ------ 30 Analysis of net debt This table is presented as additional information to show movement in net debt, defined as derivative financial instruments, overdrafts, bank and other borrowings and finance leases, net of cash and cash equivalents. Cash and Bank and Total Derivative overdrafts Net debt cash Bank other and Finance financial Gross Net equivalents overdrafts borrowing borrowings leases instruments debt debt £m £m £m £m £m £m £m £m --------------- ------ ------ ------- ------ ----- ------ ------ ------ 1 October 2005 281 (33) (2,637) (2,670) (60) 24 (2,706) (2,425) Cash flow 574 (27) 674 647 15 - 662 1,236 Exchange movements (7) 3 71 74 2 - 76 69 Acquisitions and disposals (excluding cash and overdrafts) - 1 (1) - 1 - 1 1 Other non-cash movements - - 52 52 (15) (13) 24 24 --------------- ------ ------ ------- ------ ----- ------ ------ ------ 30 September 2006 848 (56) (1,841) (1,897) (57) 11 (1,943) (1,095) --------------- ------ ------ ------- ------ ----- ------ ------ ------ 1 October 2006 848 (56) (1,841) (1,897) (57) 11 (1,943) (1,095) Cash flow (11) (66) 305 239 15 - 254 243 Exchange movements 2 3 68 71 1 - 72 74 Acquisitions and disposals (excluding cash and overdrafts) - 1 - 1 6 - 7 7 Other non-cash movements - - 33 33 (15) (11) 7 7 --------------- ------ ------ ------- ------ ----- ------ ------ ------ 30 September 2007 839 (118) (1,435) (1,553) (50) - (1,603) (764) --------------- ------ ------ ------- ------ ----- ------ ------ ------ Other non-cash movements includes amortisation of the fair value adjustment in respect of the £250 million sterling Eurobond redeemable in 2014 of £4 million, fair value debt adjustment of £4 million, swap monetisation credit of £25 million and other £1 million. 31 Contingent liabilities Contingent liabilities 2007 2006 £m £m ------------------------------------------- ------ ------ Performance bonds and guarantees and indemnities of associated undertakings 227 203 ------------------------------------------- ------ ------ On 21 October 2005, the Company announced that it had instructed Freshfields Bruckhaus Deringer to conduct an investigation into the relationships between Eurest Support Services ('ESS') (a member of the Group), IHC Services Inc. ('IHC') and the United Nations. Ernst & Young assisted Freshfields Bruckhaus Deringer in this investigation. On 1 February 2006, it was announced that the investigation had concluded. The investigation established serious irregularities in connection with contracts awarded to ESS by the UN. The work undertaken by Freshfields Bruckhaus Deringer and Ernst & Young gave no reason to believe that these issues extended beyond a few individuals within ESS to other parts of ESS or the wider Compass Group of companies. The Group settled all outstanding civil litigation against it, in relation to this matter, in October 2006 but litigation continues between competitors of ESS, IHC and other parties involved in UN procurement. IHC's relationship with the UN and ESS was part of a wider investigation into UN procurement activity being conducted by the United States Attorney's Office for the Southern District of New York, and with which the Group co-operated fully. The current status of that investigation is uncertain and a matter for the US authorities. Those investigators could have had access to sources unavailable to the Group, Freshfields Bruckhaus Deringer or Ernst & Young, and further information may yet emerge which is inconsistent with, or additional to, the findings of the Freshfields Bruckhaus Deringer investigation, which could have an adverse impact on the Group. The Group has however not been contacted by, or received further requests for information from, the United States Attorney's Office for the Southern District of New York in connection with these matters since January 2006. The Group has cooperated fully with the UN throughout. In February 2007, the Group's Portuguese business, Eurest (Portugal) Sociedade Europeia Restaurantes LDA, was visited by the Portuguese Competition Authority (PCA) as part of an investigation into possible past breaches of competition law by the Group and other caterers in the sector. The PCA investigation relates to a part of the Portuguese catering business which services mainly public sector contracts. The Group is cooperating fully with the PCA's ongoing investigation. Revenues of the Portuguese business for the year ended 30 September 2007 were £90 million (€134 million). It is likely that the investigation will take several months to complete and its outcome cannot be predicted at this point. It is not currently possible to quantify any potential liability which may arise in respect of these matters. The directors currently have no reason to believe that any potential liability that may arise would be material to the financial position of the Group. The Group, through a number of its subsidiary undertakings, is, from time to time, party to various other legal proceedings or claims arising from its normal business. Provisions are made as appropriate. None of these proceedings is regarded as material litigation. The Group has provided a guarantee to one of its joint venture partners over the level of profits which will accrue to them in future periods. The maximum amount payable under this guarantee is £35 million, which would be payable in respect of the period from 1 July 2007 to 31 December 2010. Based on the latest management projections, no liability is expected to arise in relation to this guarantee and accordingly, no provision has been recorded at 30 September 2007 (2006: nil). 32 Capital commitments Capital commitments 2007 2006 £m £m -------------------------------------------- ------ ------ Contracted for but not provided for 23 30 -------------------------------------------- ------ ------ 33 Operating lease and concessions commitments The Group leases offices and other premises under non-cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group has some leases that include revenue-related rental payments that are contingent on future levels of revenue. Future minimum rentals payable under non-cancellable operating leases and concessions agreements are as follows: 2007 2006 ---------------- --------------- Operating leases Operating leases ---------- ---------- Land and Other Other Land and Other Other occupancy occupancy Operating lease and concessions buildings assets rentals buildings assets rentals commitments £m £m £m £m £m £m -------------------------- ------ ------ ------- ------ ------ ------- Falling due within 1 year 40 41 26 47 46 43 Falling due between 2 and 5 years 111 54 61 111 51 104 Falling due in more than 5 years 71 5 33 106 6 71 -------------------------- ------ ------ ------- ------ ------ ------- Total 222 100 120 264 103 218 -------------------------- ------ ------ ------- ------ ------ ------- 34 Related party transactions The following transactions were carried out with related parties of Compass Group PLC: Subsidiaries Transactions between the ultimate parent company and its subsidiaries, and between subsidiaries, have been eliminated on consolidation. Joint ventures There were no significant transactions between joint ventures and the rest of the Group during the year. Associates The balances with associated undertakings are shown in notes 16 and 21. There were no significant transactions with associated undertakings during the year. Key management personnel The remuneration of directors and key management personnel is set out in note 3 of the Company's Annual Report. During the year there were no material transactions or balances between the Group and its key management personnel or members of their close family. 35 Post balance sheet events On 1 October 2007 the Group acquired Propoco Inc, a leading regional provider of facilities management services to the US healthcare market, for a total consideration of £38 million. £36 million was paid at closing, with the remaining £2m being deferred for 12 months. On 12 November 2007 the Group made application to the UK Listing Authority and the London Stock Exchange for a block listing of 80,500,000 ordinary shares of 10p each to be admitted to the Official List. These shares will rank pari passu with the existing ordinary shares of the Group and will be issued in connection with the future exercise of options over 30 million shares granted under the terms of the Group's Share Option Plan; 40 million shares granted under the terms of the Group's Management Share Option Plan; 5 million shares under the terms of the Group's Savings-Related Share Option Scheme; and the future release of 5.5 million shares under the Group's Long-Term Incentive Plan. The Group's share buyback programme continued after the balance sheet date. Between 1 October 2007 and 23 November 2007, the Group repurchased for cancellation 34 million ordinary shares for a total consideration of £105 million, bringing the total number of shares repurchased since the buyback programme began to 273 million shares for a total consideration of £825 million (before brokers commission and stamp duty). This information is provided by RNS The company news service from the London Stock Exchange FVLBLDFBFFBB

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