Half-year results

Half-year results

Basis of preparation

Regional performance

Strategy

Our strategic focus on People, Performance and Purpose continues to underpin all that we do in our ambition to deliver value to all our stakeholders.

People

Our people are at the heart of who we are and what we do. We are focused on building an open culture in which our people can thrive, feeling safe and valued for who they are and what they bring to Compass.

Purpose

Summary

Our strong cash generation and disciplined capital allocation framework underpin our robust balance sheet. Shareholders will benefit from the interim ordinary dividend of 15.0p, together with a further share buyback of up to £750m to be completed this calendar year.

Looking further ahead, we remain excited about the significant global structural growth opportunities, leading to revenue and profit growth above historical rates. With our established value creation model intact, we will continue rewarding shareholders with compounding returns over the long term.

1. The Group's APMs are defined in note 11 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 11 to the consolidated financial statements.

Income statement

Statutory income statement

Underlying income statement

Balance sheet

Cash flow

Principal risks

Principal risks (continued)

Companies

Latest directors dealings

On a statutory basis, revenue was £15,658m (2022: £11,499m), an increase of 36.2%, reflecting the net new business growth, post-pandemic volume recovery and pricing benefits, together with favourable exchange translation.

Profit

Capital allocation

North America - 67.4% of Group underlying revenue (2022: 65.9%)

Europe - 22.5% of Group underlying revenue (2022: 23.8%)

Rest of World - 10.1% of Group underlying revenue (2022: 10.3%)

Revenue

On a statutory basis, revenue was £15,658m (2022: £11,499m), an increase of 36.2%, reflecting the net new business growth, post-pandemic volume recovery and pricing benefits, together with favourable exchange translation.

Operating profit

Gains and losses on sale and closure of businesses

Finance costs

Finance costs increased to £76m (2022: £nil) mainly due to an increase in interest rates, the cost of the additional debt issued in September 2022 and a partial reversal of the fair value gains on derivatives held to minimise volatility in short-term underlying finance costs in the prior year.

Tax charge

Earnings per share

Revenue

Operating profit

Finance costs

Underlying finance costs increased to £66m (2022: £37m) mainly due to an increase in interest rates and the cost of the additional debt issued in September 2022.

Tax charge

Earnings per share

Liquidity

Net debt

Post-employment benefits

Free cash flow

Acquisition and disposal of businesses

Shareholder returns

Companies

Latest directors dealings

1. Alternative Performance Measure (APM). The Group's APMs are defined in note 11 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 11 to the consolidated financial statements.

UK 100

Conclusion

Basis for conclusion

Conclusions relating to going concern

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Group to cease to continue as a going concern, and the above conclusions are not a guarantee that the Group will continue in operation.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with UK-adopted international accounting standards.

The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the UK.

Our responsibility

The purpose of our review work and to whom we owe our responsibilities

UK 100

Compass Group (CPG)

2 days ago City of London Investment Group
2 days ago Aberdeen Group plc
2 days ago NATWEST GROUP
2 days ago Ondo Insurtech
2 days ago Banco Santander S.A.

All directors dealings today

	Underlying¹ results			Statutory results
	HY 2023	HY 2022	Change	HY 2023	HY 2022	Change
Revenue	£15.8bn	£12.6bn²	24.7%³	£15.7bn	£11.5bn	36.2%
Operating profit	£1,050m	£744m²	41.1%²	£878m	£638m	37.6%
Operating margin	6.6%	5.8%	80bps	5.6%	5.5%	10bps
Earnings per share	42.7p	29.9p²	42.8%²	36.4p	26.7p	36.3%
Operating cash flow	£871m	£557m	56.4%	£944m	£663m	42.4%
Free cash flow	£590m	£360m	63.9%
Interim dividend per share	15.0p	9.4p	59.6%	15.0p	9.4p	59.6%

UK Toll Number:	+44 (0) 33 0551 0200
UK Toll-Free Number:	0808 109 0700
US Toll Number:	+1 786 697 3501
US Toll-Free Number:	+1 866 580 3963
Participant PIN Code:	Compass

Ex-dividend date for 2023 interim dividend	8 June
Record date for 2023 interim dividend	9 June
Last day for DRIP elections	6 July
Q3 Trading Update	25 July
2023 interim dividend date for payment	27 July
Full-year results	20 November

Investors	Agatha Donnelly, Helen Javanshiri & Simon Bielecki	+44 1932 573 000
Press	Giles Robinson, Compass Group PLC	+44 1932 963 486
	Tim Danaher, Brunswick	+44 207 404 5959
Website	www.compass-group.com

	Underlying results¹		Change¹			Statutory results		Change
Regional financial summary	2023	2022	Reported rates	Constant currency	Organic	2023	2022	Reported rates
Revenue	£10,652m	£7,657m	39.1%	23.8%	23.2%	£10,643m	£7,650m	39.1%
Operating profit	£832m	£535m	55.5%	38.4%	38.0%	£795m	£509m	56.2%
Operating margin	7.8%	7.0%	80bps			7.5%	6.7%	80bps

	2023 £m	2022 £m	Change
Revenue
Underlying - reported rates¹	15,796	11,625	35.9%
Underlying - constant currency¹	15,796	12,638	25.0%
Organic¹	15,769	12,642	24.7%
Statutory	15,658	11,499	36.2%
Operating profit
Underlying - reported rates¹	1,050	673	56.0%
Underlying - constant currency¹	1,050	744	41.1%
Organic¹	1,047	742	41.1%
Statutory	878	638	37.6%
Operating margin
Underlying - reported rates¹	6.6%	5.8%	80bps
Basic earnings per share
Underlying - reported rates¹	42.7p	26.9p	58.7%
Underlying - constant currency¹	42.7p	29.9p	42.8%
Statutory	36.4p	26.7p	36.3%
Free cash flow
Underlying - reported rates¹	590	360	63.9%
Dividend
Interim dividend per ordinary share	15.0p	9.4p	59.6%

	Underlying revenue¹		Change¹
	2023	2022	Reported rates	Constant currency	Organic
	£m	£m	Reported rates	Constant currency	Organic
North America	10,652	7,657	39.1%	23.8%	23.2%
Europe	3,549	2,766	28.3%	26.8%	28.2%
Rest of World	1,595	1,202	32.7%	28.7%	27.9%
Total	15,796	11,625	35.9%	25.0%	24.7%

	Underlying operating profit¹		Underlying operating margin¹
	2023	2022	2023	2022
	£m	£m	£m	£m
North America	832	535	7.8%	7.0%
Europe	197	125	5.6%	4.5%
Rest of World	71	56	4.5%	4.7%
Central activities	(50)	(43)
Total	1,050	673	6.6%	5.8%

		2023			2022
	Statutory £m	Adjustments £m	Underlying¹£m	Statutory £m	Adjustments £m	Underlying¹ £m
Revenue	15,658	138	15,796	11,499	126	11,625
Operating profit	878	172	1,050	638	35	673
Net gain/(loss) on sale and closure of businesses	29	(29)	-	(6)	6	-
Finance costs	(76)	10	(66)	-	(37)	(37)
Profit before tax	831	153	984	632	4	636
Tax expense	(189)	(42)	(231)	(152)	(1)	(153)
Profit for the period	642	111	753	480	3	483
Non-controlling interests	(4)	-	(4)	(3)	-	(3)
Attributable profit	638	111	749	477	3	480

Average number of shares	1,753m	-	1,753m	1,784m	-	1,784m
Basic earnings per share	36.4p	6.3p	42.7p	26.7p	0.2p	26.9p
EBITDA			1,470			1,039

RISK	DESCRIPTION
CLIMATE CHANGE AND SUSTAINABILITY
Climate change	The impact of climate change on the environment may lead to issues around food sourcing and supply chain continuity in some of the Group's markets. Issues in these areas could affect the availability of some food products, and potentially may lead to food cost inflation.
Social and ethical standards	Compass relies on its people to deliver great service to its clients and consumers and recognises that the welfare of employees is the foundation of its culture and business. Compass remains vigilant in upholding high standards of business ethics with regard to human rights and social equality.
HEALTH AND SAFETY
Health and safety	Compass feeds millions of consumers and Group companies employ hundreds of thousands of people around the world every day. For that reason, setting the highest standards for food hygiene and safety is paramount. Health and safety breaches could cause serious business interruption and could result in criminal and civil prosecution, increased costs and potential damage to the Company's reputation.
Pandemic COVID-19	The Group's operations were significantly disrupted due to the global COVID-19 pandemic and associated containment measures, but Compass has recovered well and learned from the pandemic. As a result, the risk has declined. Further outbreaks of the virus, or another pandemic, could cause further business risk.
PEOPLE
Recruitment	Failure to attract and recruit people with the right skills at all levels could limit the success of the Group. The Group faces resourcing challenges in some of its businesses in some key positions due to labour shortages and a lack of industry experience amongst candidates, appropriately qualified people and the seasonal nature of some of Compass' businesses.
Retention and motivation	Retaining and motivating the best people with the right skills, at all levels of the organisation, is key to the long-term success of the Group. The current economic conditions may increase the risk of attrition at all levels of the organisation. Potential business closures resulting from further COVID-19 lock downs or other social distancing controls may significantly impact the Group's workforce in affected regions.
CLIENTS AND CONSUMERS
Sales and retention	The Group's businesses rely on securing and retaining a diverse range of clients. The potential loss of material client contracts in an increasingly competitive market is a risk to Compass' businesses. Reduced office attendance, closure of client sites and fewer site visitors as a result of the ongoing impact of COVID-19 and related variants may impact revenues in affected sectors.

RISK	DESCRIPTION
CLIENTS AND CONSUMERS (CONTINUED)
Service delivery, contractual compliance and retention	The Group's operating companies contract with a large number of clients. Failure to comply with the terms of these contracts, including proper delivery of services, could lead to the loss of business and/or claims.
Competition and disruption	The Group operates in a highly competitive marketplace. The levels of concentration and outsource penetration vary by country and by sector. Some markets are relatively concentrated with two or three key players. Others are highly fragmented and offer significant opportunities for consolidation and penetration of the self-operated market. Ongoing structural changes in working and education environments may reduce the number of people in offices and educational establishments. The emergence of new industry participants and traditional competition using disruptive technology could adversely affect the Group's businesses.
ECONOMIC AND POLITICAL ENVIRONMENT
Geopolitical	At the half-year, Compass recognised geopolitical tensions, including the conflict between Russia and Ukraine as a new principal risk. The conflict has heightened national security threats to countries, particularly in Europe and NATO and its disruption to the global energy market has contributed to the elevation of the existing cost inflation, economic and cyber security risks.
Economy	Sectors of Compass' business could be susceptible to adverse changes in economic conditions and employment levels. Continued worsening of economic conditions has increased the risk to the businesses in some jurisdictions.
Cost inflation	At Compass, the objective is always to deliver the right level of service in the most efficient way. An increase in the cost of labour, for example, minimum wages in the US and UK, or the cost of food, could constitute a risk to our ability to do this. Increases in inflation continue to intensify cost pressures in some locations.
Political instability	Compass is a global business operating in countries and regions with diverse economic and political conditions. Operations and earnings may be adversely affected by political or economic instability.
COMPLIANCE AND FRAUD
Compliance and fraud	Ineffective compliance management with increasingly complex laws and regulations, or evidence of fraud, bribery and corruption, anti-competitive behaviour or other serious misconduct, could have an adverse effect on the Group's reputation, its performance and/or a reduction in the Company's share price and/or a loss of business. It could also lead to criminal action, sanction or other litigation being brought against the Company, its directors or Executive management. Companies face increased risk of fraud, bribery and corruption, anti-competitive behaviour and other serious misconduct both internally and externally, due to financial and/or performance pressures and significant changes to ways of working.
International tax	The international corporate tax environment remains complex and the sustained increase in audit activity from tax authorities means that the potential for tax uncertainties and disputes remains high. The need to raise public finances to meet the cost of the COVID-19 pandemic is likely to cause governments to consider increases in tax rates and other potentially adverse changes in tax legislation, and to renew focus on compliance for large corporates.
Information systems and technology	The digital world creates increasing risk for global businesses including, but not limited to, technology failures, loss of confidential data and damage to brand reputation through, for example, the increased and instantaneous use of social media. Disruption caused by the failure of key software applications, security controls or underlying infrastructure could delay day-to-day operations and management decision making. The incidence of sophisticated phishing and malware attacks on businesses is rising with an increase in the number of companies suffering operational disruption and loss of data. The increase in remote working, and the Russia/Ukraine conflict has led to an increase in the risk of malware and phishing attacks across all organisations.


Dominic Blakemore	Palmer Brown
Group Chief Executive Officer	Group Chief Financial Officer

10 May 2023

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2023
		Six months ended 31 March
		2023		2022
	Notes	£m	£m	£m	£m
Revenue	2		15,658		11,499
Operating costs			(14,806)		(10,883)
Operating profit before joint ventures and associates			852		616
Share of results of joint ventures and associates			26		22

Underlying operating profit¹		1,050		673
Acquisition-related charges		(61)		(33)
Charges related to the strategic portfolio review		(99)		-
One-off pension charge		(12)		-
Tax on share of profit of joint ventures		-		(2)
Operating profit	2		878		638
Net gain/(loss) on sale and closure of businesses	8		29		(6)
Finance income		23		4
Finance expense		(89)		(41)
Other financing items		(10)		37
Finance costs			(76)		-
Profit before tax			831		632
Income tax expense	3		(189)		(152)
Profit for the period			642		480

ATTRIBUTABLE TO
Equity shareholders			638		477
Non-controlling interests			4		3
Profit for the period			642		480

BASIC EARNINGS PER SHARE	4		36.4p		26.7p
DILUTED EARNINGS PER SHARE	4		36.4p		26.7p
1. Operating profit excluding specific adjusting items (see note 11).

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2023
	Six months ended 31 March
	2023	2022
	£m	£m
Profit for the period	642	480
Other comprehensive income
Items that will not be reclassified to the income statement
Remeasurement of post-employment benefit obligations	(134)	316
Return on plan assets, excluding interest income	(56)	(98)
Change in asset ceiling, excluding interest income	(1)	2
Change in fair value of financial assets at fair value through other comprehensive income	48	(1)
Tax credit/(charge) on items relating to the components of other comprehensive income	35	(55)
	(108)	164
Items that may be reclassified to the income statement
Currency translation differences¹	(361)	55
Reclassification of cumulative currency translation differences on sale of businesses	(1)	7
	(362)	62
Total other comprehensive (loss)/income	(470)	226
Total comprehensive income for the period	172	706

ATTRIBUTABLE TO
Equity shareholders	168	703
Non-controlling interests	4	3
Total comprehensive income for the period	172	706
1. Includes a gain of £152m in relation to the effective portion of net investment hedges (six months ended 31 March 2022: loss of £26m).

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2023

	Attributable to equity shareholders
	Share capital	Share premium	Capital redemption reserve	Own shares	Other reserves	Retained earnings/ (losses)	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 October 2022	198	189	295	(519)	4,292	1,419	31	5,905
Profit for the period	-	-	-	-	-	638	4	642
Other comprehensive income
Remeasurement of post-employment benefit obligations	-	-	-	-	-	(134)	-	(134)
Return on plan assets, excluding interest income	-	-	-	-	-	(56)	-	(56)
Change in asset ceiling, excluding interest income	-	-	-	-	-	(1)	-	(1)
Change in fair value of financial assets at fair value through other comprehensive income	-	-	-	-	-	48	-	48
Currency translation differences	-	-	-	-	(361)	-	-	(361)
Reclassification of cumulative currency translation differences on sale of businesses	-	-	-	-	(1)	-	-	(1)
Tax credit on items relating to the components of other comprehensive income	-	-	-	-	-	35	-	35
Total other comprehensive loss	-	-	-	-	(362)	(108)	-	(470)
Total comprehensive (loss)/income for the period	-	-	-	-	(362)	530	4	172
Fair value of share-based payments	-	-	-	-	-	23	-	23
Release of share awards settled in existing shares purchased in the market	-	-	-	-	-	(21)	-	(21)
Purchase of own shares - share buyback programme	-	-	-	(252)	-	-	-	(252)
Purchase of own shares - employee share-based payments	-	-	-	(5)	-	-	-	(5)
	198	189	295	(776)	3,930	1,951	35	5,822
Dividends paid to equity shareholders (note 5)	-	-	-	-	-	(387)	-	(387)
Dividends paid to non-controlling interests	-	-	-	-	-	-	(2)	(2)
Cost of shares transferred to employees	-	-	-	21	-	-	-	21
At 31 March 2023	198	189	295	(755)	3,930	1,564	33	5,454

CONDENSED CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2023

	At 31 March 2023 (unaudited)	At 30 September 2022 (audited)
	£m	£m
NON-CURRENT ASSETS
Goodwill	5,004	5,119
Other intangible assets	1,896	1,960
Costs to obtain and fulfil contracts	963	1,106
Right-of-use assets	760	821
Property, plant and equipment	913	948
Interests in joint ventures and associates	264	270
Other investments	801	790
Post-employment benefit assets	469	581
Trade and other receivables	217	162
Deferred tax assets	239	230
Derivative financial instruments	35	76
Non-current assets	11,561	12,063
CURRENT ASSETS
Inventories	542	511
Trade and other receivables	3,891	3,988
Tax recoverable	64	106
Cash and cash equivalents	1,198	1,983
Derivative financial instruments	41	71
	5,736	6,659
Assets held for sale	5	26
Current assets	5,741	6,685
Total assets	17,302	18,748
CURRENT LIABILITIES
Borrowings	(453)	(693)
Lease liabilities	(187)	(194)
Derivative financial instruments	(7)	(6)
Provisions	(281)	(269)
Current tax liabilities	(217)	(245)
Trade and other payables	(5,299)	(5,626)
Current liabilities	(6,444)	(7,033)
NON-CURRENT LIABILITIES
Borrowings	(2,959)	(3,271)
Lease liabilities	(708)	(719)
Derivative financial instruments	(165)	(237)

	Geographical segments
REVENUE^1,2	North America £m	Europe £m	Rest of World £m	Total £m
SIX MONTHS ENDED 31 MARCH 2023
Business & Industry	3,225	1,655	570	5,450
Education	2,538	566	102	3,206
Healthcare & Senior Living	3,096	557	215	3,868
Sports & Leisure	1,645	413	72	2,130
Defence, Offshore & Remote	148	358	636	1,142
Underlying revenue^3,4	10,652	3,549	1,595	15,796
Less: Share of revenue of joint ventures	(9)	(129)	-	(138)
Revenue	10,643	3,420	1,595	15,658
SIX MONTHS ENDED 31 MARCH 2022
Business & Industry	1,953	1,209	402	3,564
Education	1,923	469	75	2,467
Healthcare & Senior Living	2,511	488	190	3,189
Sports & Leisure	1,157	276	37	1,470
Defence, Offshore & Remote	113	324	498	935
Underlying revenue^3,4	7,657	2,766	1,202	11,625
Less: Share of revenue of joint ventures	(7)	(119)	-	(126)
Revenue	7,650	2,647	1,202	11,499

INCOME TAX EXPENSE	Six months ended 31 March
	2023	2022
	£m	£m
CURRENT TAX
Current period	234	165
Adjustment in respect of prior years	(22)	(11)
Current tax expense	212	154
DEFERRED TAX
Current period	(20)	(2)
Adjustment in respect of prior years	(3)	-
Deferred tax credit	(23)	(2)
TOTAL
Income tax expense	189	152

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

6 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2023
		Six months ended 31 March
		2023	2022
	Notes	£m	£m
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations	6	1,228	839
Interest paid		(85)	(43)
Tax received		14	12
Tax paid		(213)	(145)
Net cash flow from operating activities		944	663
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of subsidiary companies	8	(207)	(112)
Purchase of interests in joint ventures and associates		(7)	(20)
Net proceeds from sale of subsidiary companies, joint ventures and associates net of exit costs	8	12	26
Purchase of intangible assets		(88)	(65)
Purchase of contract fulfilment assets		(87)	(96)
Purchase of property, plant and equipment		(179)	(125)
Proceeds from sale of property, plant and equipment/intangible assets/contract fulfilment assets		25	15
Purchase of other investments		(1)	(17)
Proceeds from sale of other investments		2	1
Dividends received from joint ventures and associates		10	19
Interest received		24	3
Net cash flow from investing activities		(496)	(371)
CASH FLOW FROM FINANCING ACTIVITIES
Purchase of own shares - share buyback programme¹		(323)	-
Purchase of own shares - employee share-based payments		(5)	(5)
Increase in borrowings		-	1
Repayment of borrowings		(440)	(297)
Net cash flow from derivative financial instruments		103	(20)
Repayment of principal under lease liabilities		(83)	(73)
Dividends paid to equity shareholders	5	(387)	(250)
Dividends paid to non-controlling interests		(2)	(1)
Net cash flow from financing activities		(1,137)	(645)
CASH AND CASH EQUIVALENTS
Net decrease in cash and cash equivalents		(689)	(353)
Cash and cash equivalents at 1 October		1,732	1,656
Currency translation (losses)/gains on cash and cash equivalents		(16)	14
Cash and cash equivalents at 31 March		1,027	1,317
Cash and cash equivalents²		1,198	1,480
Bank overdrafts²		(171)	(163)
Cash and cash equivalents at 31 March		1,027	1,317

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

1 PREPARATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

1 PREPARATION (CONTINUED)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

2 SEGMENTAL ANALYSIS

	Geographical segments
PROFIT	North America £m	Europe £m	Rest of World £m	Central activities £m	Total £m
SIX MONTHS ENDED 31 MARCH 2023
Underlying operating profit/(loss) before results of joint ventures and associates	827	176	71	(50)	1,024
Add: Share of profit before tax of joint ventures	-	13	-	-	13
Add: Share of results of associates	5	8	-	-	13
Underlying operating profit/(loss)¹	832	197	71	(50)	1,050
Less: Acquisition-related charges²	(37)	(18)	(6)	-	(61)
Less: Charges related to the strategic portfolio review²	-	(99)	-	-	(99)
Less: One-off pension charge²	-	(12)	-	-	(12)
Operating profit/(loss)	795	68	65	(50)	878
Net gain on sale and closure of businesses²					29
Finance costs					(76)
Profit before tax					831
Income tax expense					(189)
Profit for the period					642
1. Operating profit excluding specific adjusting items (see note 11). 2. Specific adjusting item (see note 11).
	Geographical segments
PROFIT	North America £m	Europe £m	Rest of World £m	Central activities £m	Total £m
SIX MONTHS ENDED 31 MARCH 2022
Underlying operating profit/(loss) before results of joint ventures and associates	533	103	56	(43)	649
Add: Share of profit before tax of joint ventures	-	15	-	-	15
Add: Share of results of associates	2	7	-	-	9
Underlying operating profit/(loss)¹	535	125	56	(43)	673
Less: Acquisition-related charges²	(26)	(5)	(2)	-	(33)
Less: Tax on share of profit of joint ventures²	-	(2)	-	-	(2)
Operating profit/(loss)	509	118	54	(43)	638
Net loss on sale and closure of businesses²					(6)
Finance costs					-
Profit before tax					632
Income tax expense					(152)
Profit for the period					480
1. Operating profit excluding specific adjusting items (see note 11). 2. Specific adjusting item (see note 11).

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

3 TAX

	Six months ended 31 March
PROFIT FOR THE PERIOD ATTRIBUTABLE TO EQUITY SHAREHOLDERS	2023	2022
PROFIT FOR THE PERIOD ATTRIBUTABLE TO EQUITY SHAREHOLDERS	£m	£m
Profit for the period attributable to equity shareholders	638	477

	Six months ended 31 March 2023		Six months ended 31 March 2022
DIVIDENDS ON ORDINARY SHARES	Dividends per share	£m	Dividends per share	£m
Amounts recognised as distributions to equity shareholders during the period:
Final 2021	-	-	14.0p	250
Final 2022	22.1p	387	-	-
Total	22.1p	387	14.0p	250

	Six months ended 31 March
RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS	2023	2022
	£m	£m
Operating profit before joint ventures and associates	852	616
Adjustments for:
Acquisition-related charges¹	53	30
Charges related to the strategic portfolio review	99	-
One-off pension charge	12	-
Amortisation - other intangible assets²	53	44
Amortisation - contract fulfilment assets	122	99
Amortisation - contract prepayments	26	18
Depreciation - right-of-use assets	80	76
Depreciation - property, plant and equipment	136	129
Unwind of costs to obtain contracts	10	8
Impairment losses - contract-related non-current assets³	4	1
Impairment reversals - contract-related non-current assets	(1)	(1)
Gain on disposal of property, plant and equipment/intangible assets/contract fulfilment assets	(3)	(5)
Other non-cash changes	(1)	(1)
Decrease in provisions	(13)	(2)
Investment in contract prepayments	(35)	(35)
Increase in costs to obtain contracts⁴	(16)	(12)
Post-employment benefit obligations net of service costs	(4)	(4)
Share-based payments - charged to profit	23	20
Operating cash flow before movements in working capital	1,397	981
Increase in inventories	(69)	(54)
Increase in receivables	(207)	(258)
Increase in payables	107	170
Cash generated from operations	1,228	839

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2023

2 SEGMENTAL ANALYSIS (CONTINUED)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

7 FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE		At 31 March 2023	At 30 September 2022
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE	Level	£'m	£'m
NON-CURRENT
Rabbi Trust investments¹	1	599	566
Mutual fund investments¹	1	48	52
Other investments¹	1	11	12
Life insurance policies¹	2	29	33
Derivative financial instruments - assets	2	35	76
Derivative financial instruments - liabilities	2	(165)	(237)
Trade investments¹	3	114	127
Contingent consideration on business acquisitions²	3	(90)	(39)
Non-controlling interest put options²	3	(37)	(45)
CURRENT
Money market funds³	1	389	474
Derivative financial instruments - assets	2	41	71
Derivative financial instruments - liabilities	2	(7)	(6)
Contingent consideration on business acquisitions²	3	(46)	(30)

	Six months ended 31 March 2023
	Book value £m	Fair value £m
NET ASSETS ACQUIRED
Other intangible assets	1	64
Property, plant and equipment	5	5
Inventories	4	4
Trade and other payables	(1)	(1)
Fair value of net assets acquired		72
Goodwill		43
Total consideration		115

SATISFIED BY
Cash consideration paid		90
Deferred and contingent consideration payable		25
Total consideration		115

		Six months ended 31 March 2023 £m
NET ASSETS DISPOSED
Goodwill		18
Other intangible assets		9
Right-of-use assets		2
Property, plant and equipment		5
Deferred tax assets		1
Trade and other receivables		26
Inventories		4
Cash and cash equivalents		24
Assets held for sale		26
Lease liabilities		(3)
Provisions		(2)
Trade and other payables		(42)
Net assets disposed		68

CONSOLIDATED INCOME STATEMENT
Cash consideration		37
Deferred consideration¹		61
Less: Net assets disposed		(68)
Less: Exit costs		(2)
Add: Reclassification of cumulative currency translation differences on sale of businesses		1
Net gain on sale and closure of businesses		29

CONSOLIDATED CASH FLOW STATEMENT
Cash consideration		37
Exit costs		(1)
Cash and cash equivalents disposed		(24)
Net proceeds from sale of subsidiary companies, joint ventures and associates net of exit costs		12

Measure	Definition	Purpose
INCOME STATEMENT
Underlying revenue	Revenue plus share of revenue of joint ventures.	Allows management to monitor the sales performance of the Group's subsidiaries and joint ventures.
Underlying operating profit	Operating profit excluding specific adjusting items².	Provides a measure of operating profitability that is comparable over time.
Underlying operating margin1	Underlying operating profit divided by underlying revenue.	An important measure of the efficiency of our operations in delivering great food and support services to our clients and consumers.
Organic revenue1	Current year: Underlying revenue excluding businesses acquired, sold and closed in the year. Prior year: Underlying revenue including a proforma 12 months in respect of businesses acquired in the year and excluding businesses sold and closed in the year translated at current year exchange rates. Where applicable, a 53rd week is excluded from the current or prior year.	Embodies our success in growing and retaining our customer base, as well as our ability to drive volumes in our existing business and maintain appropriate pricing levels in light of input cost inflation.
Organic operating profit	Current year: Underlying operating profit excluding businesses acquired, sold and closed in the year. Prior year: Underlying operating profit including a proforma 12 months in respect of businesses acquired in the year and excluding businesses sold and closed in the year translated at current year exchange rates. Where applicable, a 53rd week is excluded from the current or prior year.	Provides a measure of operating profitability that is comparable over time.
Underlying finance costs	Finance costs excluding specific adjusting items².	Provides a measure of the Group's cost of financing excluding items outside of the control of management.
Underlying profit before tax	Profit before tax excluding specific adjusting items².	Provides a measure of Group profitability that is comparable over time.
Underlying income tax expense	Income tax expense excluding tax attributable to specific adjusting items².	Provides a measure of income tax expense that is comparable over time.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2023

11 NON-GAAP MEASURES (CONTINUED) Definitions (continued)
Measure	Definition	Purpose
CASH FLOW (CONTINUED)
Free cash flow	Net cash flow from operating activities, including purchase of intangible assets, purchase of contract fulfilment assets, purchase of property, plant and equipment, proceeds from sale of property, plant and equipment/intangible assets/contract fulfilment assets, purchase of other investments, proceeds from sale of other investments, dividends received from joint ventures and associates, interest received, repayment of principal under lease liabilities and dividends paid to non-controlling interests.	Provides a measure of the success of the Group in turning profit into cash that is comparable over time.
Underlying free cash flow1	Free cash flow excluding cash payments related to the cost action programme and COVID-19 resizing costs, and acquisition transaction costs.	Provides a measure of the success of the Group in turning profit into cash that is comparable over time.
Underlying free cash flow conversion	Underlying free cash flow divided by underlying operating profit.	Provides a measure of the success of the Group in turning profit into cash that is comparable over time.
Underlying cash tax rate	Net tax paid included in net cash flow from operating activities divided by underlying profit before tax.	Provides a measure of the cash tax rate that is comparable over time.
business growth
New business	Current year underlying revenue for the period in which no revenue had been recognised in the prior year.	The measure of incremental revenue in the current year from new business.
Lost business	Prior year underlying revenue for the period in which no revenue has been recognised in the current year.	The measure of lost revenue in the current year from ceased business.
Net new business	New business minus lost business as a percentage of prior year organic revenue.	The measure of net incremental revenue in the current year from business wins and losses.
Retention	100% minus lost business as a percentage of prior year organic revenue.	The measure of our success in retaining business.