REG - Compass Group PLC - Half Year Results Announcement
15/05/2024 07:00
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RNS Number : 4420O Compass Group PLC 15 May 2024
Legal Entity Identifier (LEI) No. 2138008M6MH9OZ6U2T68
Half Year Results Announcement for the six months ended 31 March 2024
Underlying(1) results Statutory results
HY 2024 Restated(2) Change HY 2024 Restated(2) Change
HY 2023 HY 2023
Revenue $20.9bn $18.8bn(3) 11.2%(4) $20.7bn $18.7bn 11.2%
Operating profit $1,474m $1,242m(3) 18.7%(3) $1,420m $1,046m 35.8%
Operating margin 7.1% 6.6% 50bps 6.8% 5.6% 120bps
Earnings per share 59.0c 50.4c(3) 17.1%(3) 50.4c 43.4c 16.1%
Operating cash flow $1,114m $1,038m 7.3% $1,330m $1,125m 18.2%
Free cash flow $704m $703m 0.1%
Interim dividend per share 20.7c 17.9c 15.6% 20.7c 17.9c 15.6%
Double-digit organic revenue growth across all regions.
Raising 2024 underlying operating profit growth guidance.
Strong underlying operating profit growth of 18.7%(3) delivered through:
• Balanced organic revenue growth of 11.2% and underlying operating
margin up 50bps year on year to 7.1%.
Invested in growth, further refined our portfolio and returned surplus capital
to shareholders:
• Invested $693m in capex (3.3% of underlying revenue) supporting
growth and generating strong returns.
• Spent $373m on M&A, including the acquisition of HOFMANN(s).
CH&CO completed in April 2024.
• Exited four countries during the period and agreed to exit Brazil
subject to regulatory approval.
• Completed half of the $500m share buyback announced in November
2023.
Strategic priorities:
• Focusing on our core markets; capitalising on significant structural
growth opportunities.
• Investing in capex and strategic in-fill M&A to support future
growth through sectorisation and flexible operating models.
• Nurturing talent and developing leaders to support our long-term
growth ambitions.
2024 outlook:
• Now expect underlying operating profit growth towards 15%(5) with
organic revenue growth towards 10%.
Statutory results:
• Revenue increased by 11.2% reflecting the strong trading
performance.
• Operating profit, including charges relating to business
acquisitions and reshaping our portfolio which are excluded from underlying
operating profit, increased by 35.8% to $1,420m.
1. Reconciliation of statutory to underlying results can be found in
notes 2 (segmental analysis) and 12 (non-GAAP measures) to the consolidated
financial statements.
2. With effect from 1 October 2023, the reporting currency of the Group
was changed from sterling to US dollars. The results for the six months ended
31 March 2023 have been restated in US dollars.
3. Measured on a constant-currency basis.
4. Organic revenue change.
5. On a constant-currency basis, including announced acquisitions,
disposals and exits in 2023 and to date in 2024.
Business review
Dominic Blakemore, Group Chief Executive, said:
"The Group has delivered a strong set of results, with balanced double-digit
organic revenue growth and good underlying operating margin progression across
all regions, leading to underlying operating profit growth of 19% on a
constant-currency basis.
Europe is building a strong track record of growth, having benefited from
investment and best practice sharing. We have completed the acquisitions of
HOFMANN(s) in Germany and CH&CO in the UK and Ireland(1), increasing
operational flexibility as well as further strengthening our unique sectorised
approach to the market.
Our results are driving strong cash generation which in turn gives us the
flexibility to invest capital back in the business through capex and strategic
in-fill M&A, to support future growth through sectorisation and flexible
operating models, both of which generate excellent returns.
We have continued to refine our portfolio and increase focus on our core
markets where we see significant growth opportunities. The Group has built
strong competitive advantages over the past few decades which are being
replicated across all our regions.
As a result of our strong first-half performance and positive outlook, we are
raising guidance for underlying operating profit growth to towards 15%(2) for
the full year. Beyond 2024, we expect to sustain mid to high single-digit
organic revenue growth, ongoing margin progression and profit growth ahead of
revenue growth. We will continue to reinvest in the business to support future
growth, with any surplus capital returned to shareholders, as we maintain our
strong track record of delivering long-term, compounding shareholder returns."
Results presentation today
Today, 15 May 2024, management will present Compass Group's Half Year 2024
results.
At 9:00am (UK time), investors and analysts will be able to view a video
presentation which will stream live on the Compass Group website at
www.compass-group.com (http://www.compass-group.com) . An audio-only telephone
option is available if you are unable to watch the video.
Following the video presentation, management will host a live Q&A session
for the analyst community. Participants must be connected by phone to ask a
question during the conference call.
Participant dial in details:
UK +44 (0) 33 0551 0200
UK Toll-Free 0808 109 0700
US +1 786 697 3501
US Toll-Free +1 866 580 3963
Enquiries
Investors Agatha Donnelly, Helen Javanshiri & Simon Bielecki +44 1932 573 000
Press Tim Danaher, Brunswick +44 207 404 5959
Website www.compass-group.com (http://www.compass-group.com)
Financial calendar
Ex-dividend date for 2024 interim dividend 13 June
Record date for 2024 interim dividend 14 June
Last day for dividend currency elections 1 July
Last day for DRIP elections 4 July
Sterling equivalent of 2024 interim dividend announced 9 July
Q3 trading update 23 July
2024 interim dividend date for payment 25 July
Procurement deep dive 12 September
Full-year results 26 November
1. The acquisition of CH&CO completed on 30 April 2024 (see note 11
to the consolidated financial statements).
2. On a constant-currency basis, including announced acquisitions,
disposals and exits in 2023 and to date in 2024.
Business review (continued)
Basis of preparation
With effect from 1 October 2023, the reporting currency of the Group was
changed from sterling to US dollars. The change in presentation currency
provides investors and other stakeholders with greater transparency of the
Group's performance and reduces foreign exchange volatility on earnings given
that approximately three-quarters of the Group's underlying operating profit
originates in US dollars. The amounts for prior periods have been translated
into US dollars at average exchange rates for the relevant periods for income
statements and cash flows, with spot rates used for significant transactions,
and at the exchange rates at the relevant balance sheet dates for assets and
liabilities.
Throughout the Half Year Results Announcement, and consistent with prior
periods, underlying and other alternative performance measures are used to
describe the Group's performance alongside statutory measures (see page 7).
Group performance
Compass delivered a strong first-half performance, with broad-based
double-digit organic revenue growth and good margin progression across all
regions. Underlying operating profit grew by 18.7%(1) on a constant-currency
basis, to $1,474m(1) (2023: $1,242m), driven by organic revenue growth of
11.2%(1) and a 50bps improvement in underlying operating margin to 7.1%(1).
Capital expenditure was 3.3%(1) of underlying revenue, as it normalises to its
pre-pandemic rate, and net M&A expenditure was $373m, the majority of
which was spent on HOFMANN(s) in Germany. In addition, during the period, the
Group acquired several small businesses mainly in vending in the US. The
acquisition of CH&CO in the UK and Ireland completed in April 2024.
There are many exciting opportunities for growth, both in terms of M&A,
where we have a strong pipeline, and organically, where the market remains
buoyant, and we expect capital expenditure to be c.3.5%(1) of underlying
revenue in 2024.
Compass is continuing to refine its country portfolio and has exited four
countries during the period, those being Argentina and Angola (as announced in
our 2023 full-year results), mainland China and the United Arab Emirates. We
have also agreed to exit Brazil, which is yet to complete as the disposal is
subject to regulatory approval.
Cash flow generation remains strong, with underlying operating cash flow of
$1,114m(1) (2023: $1,038m) and underlying free cash flow of $704m(1) (2023:
$703m). Leverage (net debt to EBITDA) remains well within the Group's guided
range at 1.4x(1) as at 31 March 2024.
Revenue
Organic revenue growth of 11.2%(1) comprises net new business growth of
3.7%(1), with pricing at around 5% and like-for-like volume growth of around
2.5%. Volume growth is expected to moderate as we lap strong comparatives
across the rest of the year. Client retention rates remained strong at 95.8%.
On a statutory basis, revenue increased by 11.2% to $20,744m (2023: $18,655m).
Profit
Underlying operating profit increased by 18.7%(1) on a constant-currency
basis, to $1,474m(1), with underlying operating margin at 7.1%(1) (2023:
6.6%). All regions achieved good margin progression reflecting continued
operational efficiencies and appropriate levels of pricing to mitigate the
sustained inflation headwinds.
Statutory operating profit was $1,420m (2023: $1,046m), an increase of 35.8%,
with statutory operating margin of 6.8% (2023: 5.6%).
Statutory profit before tax of $1,195m (2023: $990m) includes net charges of
$168m (2023: $182m) which are excluded from underlying profit before tax.
During the period, we incurred a net charge of $94m (2023: $83m) in relation
to our strategic portfolio review of non-core activities to allow the Group to
focus its resources on our core operations. The net charge includes the exit
from four countries. In the prior period, the net charge included the exit
from six tail countries and the sale of a business, site closures and contract
renegotiations and terminations in the UK. Acquisition-related charges
totalled $49m (2023: $73m).
1. Alternative Performance Measure (APM). The Group's APMs are defined
in note 12 (non-GAAP measures) and reconciled to GAAP measures in notes 2
(segmental analysis) and 12 to the consolidated financial statements.
Business review (continued)
2024 guidance
The Group expects 2024 underlying operating profit growth towards 15%(1) with
organic revenue growth towards 10%. We expect underlying finance costs to be
around $235m and an underlying effective tax rate of around 25.5%.
Capital allocation
Our capital allocation framework is clear and unchanged. Our priority is to
invest in the business to fund growth opportunities, target a strong
investment-grade credit rating with a leverage target of around 1x-1.5x net
debt to EBITDA and pay an ordinary dividend, with any surplus capital being
returned to shareholders.
Growth investment consists of: (i) capital expenditure to support organic
growth in both new business wins and retention of existing contracts; and (ii)
bolt-on M&A opportunities that strengthen our capabilities and broaden our
exposure. We have a proven track record of strong returns from our investment
strategy as evidenced by our historical returns on capital employed.
Shareholder returns
Our dividend policy is to pay out around 50% of underlying earnings through an
interim and final dividend, with the interim dividend reflecting around
one-third of the total annual dividend. The Board has approved an interim
dividend of 20.7c per share representing an increase of 15.6% on the prior
year's interim dividend.
Shareholders appearing on the Register of Members or holding their shares
through CREST will automatically receive their dividends in sterling, but have
the option to elect to receive their dividends in US dollars. Details on how
to elect to receive the interim dividend in US dollars are provided in note 5
to the consolidated financial statements.
The $500m share buyback announced in November 2023 is ongoing and due to be
completed during this calendar year. As at the date of this Announcement, we
had completed half of this buyback.
1. On a constant-currency basis, including announced acquisitions,
disposals and exits in 2023 and to date in 2024.
Business review (continued)
Strategy
Our strategic focus is on food, with targeted support services. The
addressable food services market where we operate is estimated to be worth at
least $300bn, of which we estimate our market share is less than 15%. There
remains a significant structural long-term growth opportunity with
self-operators accounting for around half of the market and around a quarter
of the market in the hands of regional players. In addition, the Group has
further opportunities for growth in vending and targeted support services,
which are not included in this market size estimate.
The operating environment for food services is increasingly complex. The
combination of macroeconomic pressures, operational complexity and increased
client and consumer demands plays to our strengths. Growth helps deepen our
competitive advantages of sectorisation, flexibility and scale, particularly
compared to the self-operators and regional players.
Our sectorised approach enables us to provide a tailored offer to clients and
our flexible operating model enables us to meet more demanding client and
consumer requirements. We are continuing to invest in our market-leading
proposition through capex and M&A to drive future growth. As the largest
global player, our scale in food procurement and ability to leverage
overheads, translate into greater value for both clients and consumers,
helping us to secure new business and retain existing customers.
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 our business and our chefs and operational
colleagues are driving inspirational transformation across the globe,
supporting our sustainability strategy. We value having diverse and inclusive
teams at all levels of the organisation and we are determined to support our
people to break through traditional gender, ethnicity and socio-economic
barriers that might exist in society.
We continue to celebrate our chefs who cook sustainable and safe food at
scale, promoting healthier choices and creating great experiences for the
people we serve. Recently, we launched the Global Culinary Forum to champion
our Planet Promise, using food to connect people and communities to one
another and the environment.
We attract and retain talent from diverse backgrounds. The more our people
reflect the diversity of our local communities and consumers, the better
equipped we are to service their needs and achieve our aims. To provide
opportunities for all our workforce around the world, Compass runs development
programmes that identify and nurture diverse talent. Across the Group, we are
working hard to remove any barriers to women's progression whilst developing
female talent and creating community groups and networks such as Women in
Culinary. These forums facilitate the career development of talented women,
helping them grow into positions of responsibility and leadership.
We promote a workplace where our people can speak up and feel heard and, in
creating this environment, we continue to foster a culture of openness, trust
and integrity by encouraging our people to always do what is right. Our goal
is for integrity to guide the decisions made by our people and business
partners.
Purpose
Our Planet Promise is Compass Group's global commitment to a sustainable
future for all. It encompasses the Company's values as an ethical, sustainable
and inclusive business, together with our ambition to positively impact the
world. As well as being the right thing to do, this mission is also key to our
growth aspirations as sustainability is a critical issue for many of Compass'
clients.
Our people are making lots of incremental changes across thousands of units
and sharing these best practices around the Group. Our commitment and thought
leadership are continuing to inspire our clients, consumers, employees and
suppliers to help find collective solutions and accelerate delivery to reach
our target of climate net zero by 2050.
Our decarbonisation strategy is based on four key levers: driving reductions
in food waste; collaborating with suppliers; working with chefs to reformulate
menus; and steering consumer behavioural changes. We are making good progress
in our journey to reach climate net zero.
Business review (continued)
Sustainability is also a competitive advantage. It helps us win new business
both from first-time outsourcers and from other larger and regional players
and our businesses are continuously evolving their offer to remain relevant by
serving their consumers what they want whilst offering insights into the
environmental impacts of certain foods. This is highly valued by our clients
for whom our businesses are trusted advisers in this area creating mutually
beneficial, long-term partnerships.
Summary
The Group delivered another strong first-half performance with good progress
on all its key financial metrics, enabling us to raise underlying operating
profit guidance for the full year. This performance continues to be broad
based, with all our regions delivering double-digit organic revenue growth and
good margin progression. The step change in our European business has
continued as it benefits from additional investment, growth initiatives and
the transfer of best practice.
We have continued to refine our portfolio and increase focus on our core
markets where we see significant growth opportunities. Our sector and
sub-sector approach remains a key competitive advantage. We are continuing to
develop our brand portfolio, particularly in Europe, and are also increasing
investment in more flexible operating models with compelling financial
returns.
Our strong levels of cash generation and disciplined capital allocation
framework underpin our ability to invest in growth, both through capital
investment and M&A, and return capital to shareholders, whilst maintaining
a strong balance sheet.
Looking further ahead, we remain excited about the significant global
structural growth opportunities, leading to profit growth ahead of revenue
growth. Our established value creation model and financial discipline will
continue to deliver earnings growth rewarding shareholders with compounding
returns over the long term.
Financial review
Group performance
We manage and assess the performance of the Group using various underlying and
other Alternative Performance Measures (APMs). These measures are not defined
by International Financial Reporting Standards (IFRS) or other generally
accepted accounting principles (GAAP) and may not be directly comparable with
APMs used by other companies. Underlying measures reflect ongoing trading and,
therefore, facilitate meaningful year-on-year comparison. The Group's APMs,
together with the results prepared in accordance with IFRS, provide
comprehensive analysis of the Group's results. Accordingly, the relevant
statutory measures are also presented where appropriate. Certain of the
Group's APMs are financial Key Performance Indicators (KPIs) which measure
progress against our strategy. The Group's APMs are defined in note 12
(non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental
analysis) and 12 to the consolidated financial statements.
Restated(1)
2024 2023 Change
$m $m %
Revenue
Underlying - reported rates(2) 20,887 18,819 11.0%
Underlying - constant currency(2) 20,887 18,802 11.1%
Organic(2) 20,626 18,545 11.2%
Statutory 20,744 18,655 11.2%
Operating profit
Underlying - reported rates(2) 1,474 1,251 17.8%
Underlying - constant currency(2) 1,474 1,242 18.7%
Organic(2) 1,451 1,227 18.3%
Statutory 1,420 1,046 35.8%
Operating margin
Underlying - reported rates(2) 7.1% 6.6% 50bps
Statutory 6.8% 5.6% 120bps
Basic earnings per share
Underlying - reported rates(2) 59.0c 50.9c 15.9%
Underlying - constant currency(2) 59.0c 50.4c 17.1%
Statutory 50.4c 43.4c 16.1%
Free cash flow
Underlying - reported rates(2) 704 703 0.1%
Dividend
Interim dividend per ordinary share 20.7c 17.9c 15.6%
1. With effect from 1 October 2023, the reporting currency of the Group
was changed from sterling to US dollars. The results for the six months ended
31 March 2023 have been restated in US dollars.
2. Alternative Performance Measure (APM) (see pages 37 to 44).
Financial review (continued)
Income statement
Restated(1)
2023
2024
Statutory Adjustments Underlying(2) Statutory Adjustments Underlying(2)
$m $m $m $m $m $m
Revenue 20,744 143 20,887 18,655 164 18,819
Operating profit 1,420 54 1,474 1,046 205 1,251
Net (loss)/gain on sale and closure of businesses (94) 94 - 35 (35) -
Finance costs (131) 20 (111) (91) 12 (79)
Profit before tax 1,195 168 1,363 990 182 1,172
Tax expense (327) (21) (348) (225) (50) (275)
Profit for the period 868 147 1,015 765 132 897
Non-controlling interests (7) - (7) (5) - (5)
Attributable profit 861 147 1,008 760 132 892
Average number of shares 1,709m - 1,709m 1,753m - 1,753m
Basic earnings per share 50.4c 8.6c 59.0c 43.4c 7.5c 50.9c
EBITDA 2,030 1,751
1. With effect from 1 October 2023, the reporting currency of the Group was
changed from sterling to US dollars. The results for the six months ended 31
March 2023 have been restated in US dollars.
2. Alternative Performance Measure (APM) (see pages 37 to 44).
Statutory income statement
Revenue
On a statutory basis, revenue increased by 11.2% to $20,744m (2023: $18,655m).
Operating profit
Statutory operating profit was $1,420m (2023: $1,046m), an increase of 35.8%,
with statutory operating margin of 6.8% (2023: 5.6%). Statutory operating
profit includes non-underlying item charges of $54m (2023: $205m), including
acquisition-related charges of $49m (2023: $73m). The prior period also
included charges related to the strategic portfolio review of $118m reflecting
the impact of site closures and contract renegotiations and terminations in
the UK. A full list of non-underlying items is included in note 12 (non-GAAP
measures).
Net loss or gain on sale and closure of businesses
The Group has recognised a net loss of $94m on the sale and closure of
businesses (2023: net gain of $35m), including exit costs of $17m and a charge
of $76m in respect of the reclassification of cumulative currency translation
differences. As a result of its review of non-core activities, the Group
exited four countries during the period. In March, the Group agreed the sale
of its business in Brazil subject to regulatory approval.
Finance costs
Finance costs increased to $131m (2023: $91m) mainly reflecting the higher
interest rates during the period.
Tax expense
Profit before tax was $1,195m (2023: $990m) giving rise to an income tax
expense of $327m (2023: $225m), equivalent to an effective tax rate of 27.4%
(2023: 22.7%). The increase in rate primarily reflects the increase in the UK
corporate tax rate from 19% to 25% from 1 April 2023 and the impact of
non-taxable non-underlying items.
Earnings per share
Basic earnings per share was 50.4c (2023: 43.4c), an increase of 16.1%,
reflecting the higher profit for the period.
Financial review (continued)
Underlying income statement
Revenue
Organic revenue growth of 11.2% comprises net new business growth of 3.7%,
with pricing at around 5% and like-for-like volume growth of around 2.5%.
Volume growth is expected to moderate as we lap strong comparatives across the
rest of the year. Client retention rates remained strong at 95.8%.
Operating profit
Underlying operating profit increased by 18.7% on a constant-currency basis,
to $1,474m, with underlying operating margin at 7.1% (2023: 6.6%). All regions
achieved good margin progression reflecting continued operational efficiencies
and appropriate levels of pricing to mitigate the sustained inflation
headwinds.
Finance costs
Underlying finance costs increased to $111m (2023: $79m) mainly reflecting the
higher interest rates during the period.
Tax expense
On an underlying basis, the tax charge was $348m (2023: $275m), equivalent to
an effective tax rate of 25.5% (2023: 23.5%). The increase in rate primarily
reflects the increase in the UK corporate tax rate from 19% to 25% from 1
April 2023. The tax environment continues to be uncertain, with more
challenging tax authority audits and enquiries globally.
Earnings per share
On a constant-currency basis, underlying basic earnings per share increased by
17.1% to 59.0c (2023: 50.4c) reflecting the higher profit for the period.
Balance sheet
Liquidity
The Group finances its operations through cash generated by the business and
borrowings from a number of sources, including banking institutions, the
public and the private placement markets. The Group has developed long-term
relationships with a number of financial counterparties with the balance sheet
strength and credit quality to provide credit facilities as required.
The Group seeks to avoid a concentration of debt maturities in any one period
to spread its refinancing risk. A $352m US Private Placement (USPP) note
matured and was repaid in October 2023. In February 2024, the Group issued a
€750m ($810m) fixed-rate sustainable bond maturing in February 2031. The new
bond effectively pre-finances the maturity of a €750m ($810m) bond in July
2024. The maturity profile of the Group's principal borrowings at 31 March
2024 shows that the average period to maturity is 3.8 years (30 September
2023: 3.3 years).
The Group's USPP notes contain leverage and interest cover covenants which are
tested semi-annually at 31 March and 30 September. The leverage covenant test
stipulates that consolidated net debt must be less than or equal to 3.5 times
consolidated EBITDA. The interest cover covenant test stipulates that
consolidated EBITDA must be more than or equal to 3 times consolidated net
finance costs. Consolidated EBITDA and net finance costs are based on the
preceding 12 months. The leverage and interest cover ratios were 1.1 times and
25.5 times, respectively, at 31 March 2024. Net debt, consolidated EBITDA and
net finance costs are subject to certain accounting adjustments for the
purposes of the covenant tests.
At 31 March 2024, the Group had access to $3,163m (30 September 2023: $3,271m)
of liquidity, including $2,526m (30 September 2023: $2,441m) of undrawn bank
facilities committed to August 2026 and $637m (30 September 2023: $830m) of
cash, net of overdrafts. Our credit ratings remain strong investment grade:
Standard & Poor's A/A-1 long-term/short-term (outlook Stable); and Moody's
A2/P-1 long-term/short-term (outlook Stable).
Net debt
Net debt has increased by $836m to $5,295m (30 September 2023: $4,459m). The
Group generated $675m of free cash flow, after capital expenditure of $693m,
which was more than offset by $357m spent on the acquisition of subsidiaries,
joint ventures and associates, net of disposal proceeds, dividends of $606m
and share buybacks of $377m. Adverse exchange translation was $24m and cash
net of lease liabilities of $22m in Brazil has been reclassified to held for
sale in the Group's balance sheet at 31 March 2024.
Financial review (continued)
At 31 March 2024, the ratio of net debt to underlying EBITDA was 1.4x (30
September 2023: 1.2x). Our leverage policy is to maintain strong
investment-grade credit ratings and to target net debt to underlying EBITDA in
the range of 1x‑1.5x.
Post-employment benefits
The accounting surplus in the Compass Group Pension Plan is $513m at 31 March
2024 (30 September 2023: $525m). The deficit in the rest of the Group's
defined benefit pension schemes has increased to $1,167m (30 September 2023:
$983m). The net deficit in these schemes is $143m (30 September 2023: $130m)
including investments of $1,024m (30 September 2023: $853m) held in respect of
unfunded pension schemes and the US Rabbi Trust which do not meet the
definition of pension assets under IAS 19 Employee Benefits.
Cash flow
Free cash flow
Free cash flow totalled $675m (2023: $673m). In the six months, we made cash
payments totalling $13m (2023: $20m) in relation to restructuring and
strategic programmes and the one-off pension charge. Adjusting for this, and
for acquisition transaction costs of $16m (2023: $10m) which are reported as
part of operating cash flow, underlying free cash flow was $704m (2023:
$703m), with underlying free cash flow conversion at 47.8% (2023: 56.2%).
Capital expenditure of $693m (2023: $434m) is equivalent to 3.3% (2023: 2.3%)
of underlying revenue as it normalises to its pre-pandemic rate. The working
capital outflow, excluding provisions and pensions, was $167m (2023: $201m).
The net interest outflow increased to $98m (2023: $73m) consistent with the
higher underlying finance costs in the period. The net tax paid was $301m
(2023: $237m), which is equivalent to an underlying cash tax rate of 22.1%
(2023: 20.2%).
Acquisition and disposal of businesses
The total cash spent on business acquisitions during the six months, net of
cash acquired, was $387m (2023: $270m), including $342m of bolt-on
acquisitions and interests in joint ventures and associates, $29m of deferred
and contingent consideration and other payments relating to businesses
acquired in previous years, and $16m of acquisition transaction costs included
in net cash flow from operating activities.
The Group received $14m (2023: $14m) in respect of disposal proceeds net of
exit costs.
Dividends paid
Dividends paid represent the 2023 final dividend of $606m.
Purchase of own shares
The cash outflow in respect of share buybacks totalled $377m during the
period, which comprises a $185m cash outflow in respect of the completion of
the share buyback announced in May 2023 and a $192m cash outflow in respect of
the share buyback announced in November 2023.
Foreign exchange translation
The $24m loss (2023: $144m) on foreign exchange translation of net debt
primarily arises in respect of the Group's sterling and Euro denominated debt.
Related party transactions
Details of transactions with related parties are set out in note 10 to the
consolidated financial statements. These transactions have not had, and are
not expected to have, a material effect on the financial performance or
position of the Group.
Going concern
The factors considered by the directors in assessing the ability of the Group
to continue as a going concern are discussed on pages 23 and 24.
The Group has access to considerable financial resources, together with
longer-term contracts with a number of clients and suppliers across different
geographic areas and industries. As a consequence, the directors believe that
the Group is well placed to manage its business risks successfully.
Based on the assessment discussed on pages 23 and 24, the directors have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for at least the period to 30 September 2025. For this
reason, they continue to adopt the going concern basis in preparing the
financial statements.
Regional review
Underlying revenue(1) Change Statutory revenue Change
2024 Restated(2) Reported Constant Organic 2024 Restated(2) Reported
$m
$m
2023 rates currency % 2023 rates
$m % % $m %
North America 14,127 12,691 11.3% 11.3% 10.9% 14,114 12,680 11.3%
Europe 4,801 4,228 13.6% 12.0% 12.4% 4,671 4,075 14.6%
Rest of World 1,959 1,900 3.1% 7.4% 10.6% 1,959 1,900 3.1%
Total 20,887 18,819 11.0% 11.1% 11.2% 20,744 18,655 11.2%
Underlying operating profit(1) Change Underlying operating margin(1) Statutory operating profit Statutory operating margin
2024 Restated(2) Constant 2024 2023 2024 Restated(2) 2024 2023
$m
%
%
$m
%
%
2023 currency 2023
$m
$m
%
North America 1,165 991 17.6% 8.2% 7.8% 1,157 947 8.2% 7.5%
Europe 278 235 17.8% 5.8% 5.6% 232 82 5.0% 2.0%
Rest of World 103 85 32.1% 5.3% 4.5% 103 77 5.3% 4.1%
Unallocated overheads (72) (60) (72) (60)
Total 1,474 1,251 18.7% 7.1% 6.6% 1,420 1,046 6.8% 5.6%
1. Alternative Performance Measure (APM) (see pages 37 to 44).
2. With effect from 1 October 2023, the reporting currency of the Group was
changed from sterling to US dollars. The results for the six months ended 31
March 2023 have been restated in US dollars.
North America - 67.6% of Group underlying revenue (2023: 67.4%)
Underlying
Operating profit growth was 17.6% on a constant-currency basis, with operating
profit increasing to $1,165m, driven by strong organic revenue growth and an
increase in operating margin.
Organic revenue growth was 10.9%, benefiting from net new business growth,
appropriate levels of pricing and continued like-for-like volume growth.
Growth was balanced across all sectors, but strongest in Business &
Industry, which benefited from high levels of net new business and increased
like-for-like volumes from the continued return to office trend. Across our
other sectors, Sports & Leisure and Education benefited from high
participation levels and a strong calendar of events, while our Healthcare
& Senior Living business benefited from a continued recovery in retail
sales to visitors to our sites.
Operating margin increased by 40bps to 8.2% driven by continued management
focus on productivity, cost mitigation and appropriate pricing as inflation
remains above historic levels.
The region continued to invest in several bolt-on acquisitions to strengthen
our capabilities and broaden exposure within our existing sectors.
Statutory
Statutory revenue increased by 11.3% to $14,114m reflecting the strong organic
revenue growth.
Statutory operating profit was $1,157m (2023: $947m), with the difference from
underlying operating profit being acquisition-related charges of $8m (2023:
$44m).
Regional review (continued)
Europe - 23.0% of Group underlying revenue (2023: 22.5%)
Underlying
Operating profit was $278m, growth of 17.8% on a constant-currency basis,
achieved via double-digit organic revenue growth and continued margin
progression. This was underpinned by our ongoing investment in growth
initiatives and core processes across the region.
Organic revenue growth of 12.4% comprised net new business growth, volume
growth and pricing. Strong organic growth rates were achieved across all
sectors, with double-digit increases in Business & Industry, Education and
Defence, Offshore & Remote. Growth remains broad based across the region
and all major markets, including the UK, France, Germany, Spain and Türkiye.
Operating margin progression of 20bps resulted in an operating margin of 5.8%
reflecting the benefit of operational efficiencies and appropriate levels of
pricing to mitigate the sustained inflation headwinds across the region.
We continue to invest in acquisitions and reshape our portfolio to capitalise
on significant structural growth opportunities within the region. During the
period, we completed the acquisition of HOFMANN(s) in Germany and, in April,
we completed the acquisition of CH&CO in the UK and Ireland. As the Group
continues to increase its focus on core markets, it exited its business in the
United Arab Emirates during the period.
Statutory
Statutory revenue increased by 14.6% to $4,671m, with the difference from
underlying revenue being the presentation of the share of results of our joint
ventures operating in the Middle East.
Statutory operating profit was $232m (2023: $82m), with the difference from
underlying operating profit mainly reflecting acquisition-related charges of
$41m (2023: $21m) and, in 2023, charges related to the Group's strategic
portfolio review ($118m).
Rest of World - 9.4% of Group underlying revenue (2023: 10.1%)
Underlying
Operating profit grew by 32.1% on a constant-currency basis, to $103m, driven
by double-digit organic revenue growth and significant margin progression.
Organic revenue growth was 10.6%, with favourable trends across all sectors
reflecting net new business growth, strong levels of like-for-like volume
growth and pricing. Growth was strongest in our Business & Industry
sector, particularly in India, driven by high levels of net new business
growth and the continued return to office trend.
Operating margin increased by 80bps to 5.3% reflecting the benefits of
management focus on operational challenges in the region, including the
sustained levels of inflation and labour shortages in certain markets.
As the Group continues to increase its focus on core markets, it exited its
operations in Argentina, Angola and mainland China during the period.
Additionally, we have agreed to exit our operations in Brazil subject to
regulatory approval.
Statutory
Statutory revenue increased by 3.1% to $1,959m. There is no difference between
statutory and underlying revenue.
Statutory operating profit was $103m (2023: $77m), with the difference from
underlying operating profit in 2023 being acquisition-related charges of $8m.
Risk management
The Board takes a proactive approach to risk management aimed at protecting
the Group's employees, clients and consumers and safeguarding the interests of
the Company and its shareholders in a constantly changing environment.
Risk management is an essential element of business governance. The Group has
risk management policies, processes and procedures in place to ensure that
risks are properly identified, evaluated and managed at the appropriate level.
The identification of risks and opportunities, the development of action plans
to manage those risks and maximise the opportunities, and the continual
monitoring of progress against agreed key performance indicators (KPIs) are
integral parts of the business process and core activities throughout the
Group.
Principal risks
Details of the principal risks facing the Group and mitigating actions are
included on pages 24 to 30 of the 2023 Annual Report. A description of those
risks and uncertainties is set out below.
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 every day and its companies employ
hundreds of thousands of people around the world. 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 The Group's operations were significantly disrupted due to the global COVID-19
pandemic and associated containment measures. Compass has recovered well and
learned from the pandemic, and as a result this 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.
Changes to economic conditions may increase the risk of attrition at all
levels of the organisation.
Potential business closures resulting from further COVID-19 or other
pandemic-related lockdowns or other social distancing controls could
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.
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.
Risk management (continued)
Principal risks (continued)
Risk Description
Economic and political environment
Geopolitical The escalating tensions in the Middle East and the ongoing Russia-Ukraine
conflict have elevated geopolitical risks, heightened national security
threats to countries in those regions and disrupted the global energy market,
which have contributed to cost inflation, and 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, our 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.
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 or on its performance and/or lead to a reduction in the
Company's share price and/or a loss of business. It could also lead to
criminal proceedings, sanctions 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
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, technology and cyber The digital world creates increasing risk for global businesses including, but
not limited to, technology failures, loss of confidential data, data privacy
breaches and damage to brand reputation through, for example, the increased
threat of cyber-attacks, and use and instantaneous nature of social media.
Disruption caused by the failure of key software applications, security
controls, or underlying infrastructure, or disruption caused by cyber-attacks
could impact day-to-day operations and management decision-making, or result
in a regulatory fine or other sanction and/or third party claims.
The incidence of sophisticated phishing and malware attacks (including
ransomware) on businesses is rising with an increase in the number of
companies suffering operational disruption, unauthorised access to and/or loss
of data, including confidential, commercial, and personal identifiable data.
A combination of increased geopolitical, economic instability and
accessibility of sophisticated artificial intelligence (AI) enabled tools and
techniques have contributed to a significant increase in the risk of phishing
and malware attacks including ransomware across all industries. The
democratisation of generative AI has given widespread access to powerful
online AI services for content creation. This opportunity presents several
risks including to data privacy and confidentiality.
Responsibility statement of the directors in respect of the half-yearly
financial report
The Interim Report complies with the Disclosure Guidance and Transparency
Rules (DTR) of the United Kingdom's Financial Conduct Authority in respect of
the requirement to produce a half-yearly financial report. The Interim
Management Report is the responsibility of, and has been approved by, the
directors.
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted for use in the
UK and gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group; and
· the Interim Management Report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
The directors have permitted the auditor to undertake whatever inspections it
considers to be appropriate for the purpose of enabling the auditor to conduct
its review.
On behalf of the Board
Dominic Blakemore Petros Parras
Group Chief Executive Officer Group Chief Financial Officer
15 May 2024
Compass Group PLC
Independent review report to Compass Group PLC
Conclusion Directors' responsibilities
We have been engaged by Compass Group PLC ("the Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 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.
31 March 2024 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with UK-adopted international accounting standards.
statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and the related explanatory notes. 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.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for In preparing the condensed set of financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
the six months ended 31 March 2024 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and the Our responsibility
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.
Basis for conclusion The purpose of our review work and to whom we owe our responsibilities
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent
This report is made solely to the Company in accordance with the terms of our
Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons engagement to assist the Company in meeting the requirements of the DTR of the
responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly UK FCA. Our review has been undertaken so that we might state to the Company
financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial those matters we are required to state to it in this report and for no other
statements. purpose. To the fullest extent permitted by law, we do not accept or assume
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain responsibility to anyone other than the Company for our review work, for this
assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. report, or for the conclusions we have reached.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has
come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have
identified material uncertainties relating to going concern that have not been appropriately disclosed.
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.
Jonathan Downer
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
15 May 2024
Compass Group PLC
Condensed Consolidated Financial Statements
Condensed consolidated income statement
For the six months ended 31 March 2024
Six months ended 31 March
2024 Restated(1)
2023
Notes $m $m $m $m
Revenue 2 20,744 18,655
Operating costs (19,354) (17,640)
Operating profit before joint ventures and associates 1,390 1,015
Share of results of joint ventures and associates 30 31
Underlying operating profit2 2,12 1,474 1,251
Acquisition-related charges 2,12 (49) (73)
Charges related to the strategic portfolio review 2,12 - (118)
Other(3) 12 (5) (14)
Operating profit 2 1,420 1,046
Net (loss)/gain on sale and closure of businesses 8,12 (94) 35
Finance income 18 27
Finance expense (129) (106)
Other financing items 12 (20) (12)
Finance costs (131) (91)
Profit before tax 1,195 990
Income tax expense 3 (327) (225)
Profit for the period 868 765
Attributable to
Equity shareholders 861 760
Non-controlling interests 7 5
Profit for the period 868 765
Basic earnings per share 4 50.4c 43.4c
Diluted earnings per share 4 50.4c 43.4c
1. See note 1.
2. Operating profit excluding specific adjusting items (see note 12).
3. Other specific adjusting items include one-off pension charge and tax on
share of profit of joint ventures (see note 12).
Compass Group PLC
Condensed Consolidated Financial Statements
Condensed consolidated statement of comprehensive income
For the six months ended 31 March 2024
Six months ended 31 March
Restated(1)
2023
$m
Notes 2024
$m
Profit for the period 868 765
Other comprehensive income
Items that will not be reclassified to the income statement
Remeasurement of post-employment benefit obligations (259) (160)
Return on plan assets, excluding interest income 101 (67)
Change in asset ceiling, excluding interest income - (1)
Change in fair value of financial assets at fair value through other 204 57
comprehensive income(2)
Tax (charge)/credit on items relating to the components of other comprehensive (16) 42
income
30 (129)
Items that may be reclassified to the income statement
Currency translation differences(3) 82 269
Change in fair value of financial assets at fair value through other 5 -
comprehensive income(2)
Reclassification of cumulative currency translation differences on sale of 8 76 (1)
businesses
163 268
Total other comprehensive income for the period 193 139
Total comprehensive income for the period 1,061 904
Attributable to
Equity shareholders 1,054 899
Non-controlling interests 7 5
Total comprehensive income for the period 1,061 904
1. See note 1.
2. The credit totalling $209m from the change in fair value of financial
assets at fair value through other comprehensive income in 2024 includes $108m
in respect of assets held by the Rabbi Trust and $101m in respect of trade and
other investments in the US.
3. Includes a gain of $96m in relation to the effective portion of net
investment hedges (2023: $181m).
Compass Group PLC
Condensed Consolidated Financial Statements
Condensed consolidated statement of changes in equity
For the six months ended 31 March 2024
Attributable to equity shareholders
Notes Share capital Share premium Other reserves Retained earnings Non-controlling interests Total equity
$m $m $m $m $m $m
At 1 October 2023 (restated(1)) 346 317 4,582 1,018 37 6,300
Profit for the period - - - 861 7 868
Other comprehensive income
Remeasurement of post-employment benefit obligations - - - (259) - (259)
Return on plan assets, excluding interest income - - - 101 - 101
Change in fair value of financial assets at fair value through other - - - 209 - 209
comprehensive income
Currency translation differences - - 82 - - 82
Reclassification of cumulative currency translation differences on sale of 8 - - 76 - - 76
businesses
Tax charge on items relating to the components of other comprehensive income - - - (16) - (16)
Total other comprehensive income for the period - - 158 35 - 193
Total comprehensive income for the period - - 158 896 7 1,061
Fair value of share-based payments - - - 34 - 34
Change in fair value of non-controlling interest put options - - 7 - - 7
Cost of shares transferred to employees - - 62 (62) - -
Purchase of own shares - share buyback2 - - (253) - - (253)
346 317 4,556 1,886 44 7,149
Dividends paid to equity shareholders 5 - - - (606) - (606)
Dividends paid to non-controlling interests - - - - (4) (4)
At 31 March 2024 346 317 4,556 1,280 40 6,539
1. See note 1.
2. The difference between the $253m charged to other reserves during the
period and the $377m cash outflow in respect of share buybacks (see page 22)
reflects a $60m creditor at 31 March 2024 in respect of the share buyback
announced in November 2023, less a $184m creditor at 30 September 2023 in
respect of the share buyback announced in May 2023.
Compass Group PLC
Condensed Consolidated Financial Statements
Condensed consolidated statement of changes in equity
For the six months ended 31 March 2024
Attributable to equity shareholders
Notes Share capital Share premium Other reserves Retained earnings Non-controlling interests Total equity
$m $m $m $m $m $m
At 1 October 2022 (restated(1)) 346 317 5,559 325 44 6,591
Profit for the period - - - 760 5 765
Other comprehensive income
Remeasurement of post-employment benefit obligations - - - (160) - (160)
Return on plan assets, excluding interest income - - - (67) - (67)
Change in asset ceiling, excluding interest income - - - (1) - (1)
Change in fair value of financial assets at fair value through other - - - 57 - 57
comprehensive income
Currency translation differences - - 269 - - 269
Reclassification of cumulative currency translation differences on sale of - - (1) - - (1)
businesses
Tax credit on items relating to the components of other comprehensive income - - - 42 - 42
Total other comprehensive income/(loss) for the period - - 268 (129) - 139
Total comprehensive income for the period - - 268 631 5 904
Fair value of share-based payments - - - 27 - 27
Release of share awards settled in existing shares purchased in the market - - - (29) - (29)
Purchase of own shares - share buyback - - (308) - - (308)
Purchase of own shares - employee share-based payments - - (7) - - (7)
346 317 5,512 954 49 7,178
Dividends paid to equity shareholders 5 - - - (462) - (462)
Dividends paid to non-controlling interests - - - - (2) (2)
Cost of shares transferred to employees - - 29 - - 29
At 31 March 2023 (restated(1)) 346 317 5,541 492 47 6,743
1. See note 1.
Compass Group PLC
Condensed Consolidated Financial Statements
Condensed consolidated balance sheet
At 31 March 2024
Restated(1)
At 30 September
2023
$m
Notes At 31 March 2024
$m
Non-current assets
Goodwill 6,263 6,105
Other intangible assets 2,762 2,480
Costs to obtain and fulfil contracts 1,373 1,316
Right-of-use assets 1,067 992
Property, plant and equipment 1,289 1,166
Interests in joint ventures and associates 202 298
Other investments 1,320 1,049
Post-employment benefit assets 513 525
Trade and other receivables 383 309
Deferred tax assets 220 237
Derivative financial instruments 16 55
Non-current assets 15,408 14,532
Current assets
Inventories 714 692
Trade and other receivables 5,221 5,094
Tax recoverable 27 109
Cash and cash equivalents 695 1,029
Derivative financial instruments 61 22
6,718 6,946
Assets held for sale 8 321 5
Current assets 7,039 6,951
Total assets 22,447 21,483
Current liabilities
Borrowings (965) (1,327)
Lease liabilities (248) (237)
Derivative financial instruments (32) (45)
Provisions (316) (284)
Current tax liabilities (238) (261)
Trade and other payables (6,999) (7,166)
(8,798) (9,320)
Liabilities held for sale 8 (191) -
Current liabilities (8,989) (9,320)
Non-current liabilities
Borrowings (3,643) (2,787)
Lease liabilities (984) (916)
Derivative financial instruments (195) (253)
Post-employment benefit obligations (1,167) (983)
Provisions (330) (349)
Deferred tax liabilities (184) (132)
Trade and other payables (416) (443)
Non-current liabilities (6,919) (5,863)
Total liabilities (15,908) (15,183)
Net assets 6,539 6,300
Equity
Share capital 346 346
Share premium 317 317
Other reserves 4,556 4,582
Retained earnings 1,280 1,018
Total equity shareholders' funds 6,499 6,263
Non-controlling interests 40 37
Total equity 6,539 6,300
1. See note 1.
Compass Group PLC
Condensed Consolidated Financial Statements
Condensed consolidated cash flow statement
For the six months ended 31 March 2024
Six months ended 31 March
Restated(1)
2023
$m
Notes 2024
$m
Cash flow from operating activities
Cash generated from operations 6 1,749 1,463
Interest paid (118) (101)
Tax received 3 17
Tax paid (304) (254)
Net cash flow from operating activities 1,330 1,125
Cash flow from investing activities
Purchase of subsidiary companies 8 (366) (252)
Purchase of interests in joint ventures and associates (5) (8)
Net proceeds from sale of subsidiary companies, joint ventures and associates 8 14 14
net of exit costs
Purchase of intangible assets (151) (105)
Purchase of contract fulfilment assets (202) (104)
Purchase of property, plant and equipment (263) (213)
Proceeds from sale of property, plant and equipment/intangible assets/contract 35 30
fulfilment assets
Purchase of other investments (1) (1)
Proceeds from sale of other investments 1 2
Dividends received from joint ventures and associates 18 12
Interest received 20 28
Loans to third parties (26) -
Net cash flow from investing activities (926) (597)
Cash flow from financing activities
Purchase of own shares - share buyback (377) (387)
Purchase of own shares - employee share-based payments - (7)
Increase in borrowings 806 -
Repayment of borrowings (352) (545)
Net cash flow from derivative financial instruments 51 125
Repayment of principal under lease liabilities (108) (99)
Dividends paid to equity shareholders 5 (606) (462)
Dividends paid to non-controlling interests (4) (2)
Net cash flow from financing activities (590) (1,377)
Cash and cash equivalents
Net decrease in cash and cash equivalents (186) (849)
Cash and cash equivalents at 1 October 830 1,934
Currency translation gains on cash and cash equivalents 18 185
662 1,270
Cash reclassified to held for sale 8 (25) -
Cash and cash equivalents at 31 March 637 1,270
Cash and cash equivalents(2) 695 1,481
Bank overdrafts(2) (58) (211)
Cash and cash equivalents at 31 March 637 1,270
1. See note 1.
2. As per the consolidated balance sheet.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
1 Basis of preparation
Introduction
The unaudited condensed consolidated financial statements for the six months
ended 31 March 2024:
• have been prepared in accordance with UK-adopted International
Accounting Standard (IAS) 34 Interim Financial Reporting and the Disclosure
Guidance and Transparency Rules sourcebook of the UK's Financial Conduct
Authority;
• apply the accounting policies and presentation that were applied in
the preparation of the Company's published consolidated financial statements
for the year ended 30 September 2023, with the exception of the change in the
Group's presentation currency (see below);
• do not comprise statutory accounts for the purpose of Section 434 of
the Companies Act 2006;
• should be read in conjunction with the Annual Report for the year
ended 30 September 2023; and
• were approved by the Board on 15 May 2024.
The comparative figures for the year ended 30 September 2023, restated to
reflect the change in the Group's presentation currency (see below), are not
the Group's statutory accounts for that financial year. Those financial
statements have been reported on by the Group's auditor and delivered to the
Registrar of Companies. The report of the auditor was unqualified, did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying its report and did not contain statements under
Section 498 (2) or (3) of the Companies Act 2006.
With effect from 1 October 2023, the reporting currency of the Group was
changed from sterling to US dollars. The change in presentation currency
provides investors and other stakeholders with greater transparency of the
Group's performance and reduces foreign exchange volatility on earnings given
that approximately three-quarters of the Group's underlying operating profit
originates in US dollars. The amounts for prior periods have been translated
into US dollars at average exchange rates for the relevant periods for income
statements and cash flows, with spot rates used for significant transactions,
and at the exchange rates at the relevant balance sheet dates for assets and
liabilities. Share capital, share premium and other equity items have been
translated into US dollars at historical exchange rates either at 1 October
2004, the date of transition to International Financial Reporting Standards
(IFRS), or on the date of each relevant transaction.
The annual financial statements of the Group will be prepared in US dollars in
accordance with UK-adopted International Accounting Standards.
Going concern
The directors consider it appropriate to prepare the financial statements on a
going concern basis for the reasons stated below.
At 31 March 2024, the Group's financing arrangements included sterling and
Euro bonds ($3,854m) and US dollar US Private Placement (USPP) notes ($691m).
In addition, the Group had Revolving Credit Facilities of $2.5bn, committed to
August 2026, which were fully undrawn, and $637m of cash, net of overdrafts.
With the exception of a $600m initial payment to acquire CH&CO in April
2024 (see note 11), the liquidity position of the Group has remained
substantially unchanged at the date of approving these consolidated financial
statements.
For the purposes of the going concern assessment, the directors have prepared
monthly cash flow projections for the period to 30 September 2025 (the
assessment period) based on the latest forecast for 2024 and the second year
of the three-year strategic plan approved by the Board in November 2023. The
directors consider 18 months to be a reasonable period for the going concern
assessment as it enables them to consider the potential impact of
macroeconomic and geopolitical factors over an extended period.
Debt maturities in the going concern period include a €750m ($810m) Eurobond
in July 2024, which was effectively pre-financed by the €750m ($810m)
sustainable bond issued in February 2024, a $100m USPP note in December 2024,
and a £250m ($316m) Eurobond and $300m USPP note in September 2025. No
additional refinancing of debt is assumed in the going concern assessment.
The USPP notes are subject to leverage and interest cover covenants which are
tested on 31 March and 30 September each year. The Group met both covenants at
31 March 2024. The Group's other financing arrangements do not contain any
financial covenants.
The cash flow projections show that the Group has significant headroom against
its committed facilities and meets its financial covenant obligations under
the USPP notes without any refinancing.
The Group has performed a stress test against the base case to determine the
performance level that would result in a reduction in headroom against its
committed facilities to nil or a breach of its covenants. The Group's
committed facilities would be reached in the event that underlying operating
profit reduced by more than 55% of the base case. The directors do not
consider this scenario to be likely. The stress test assumes no share buybacks
or new business acquisitions (with the exception of the acquisition of
CH&CO in April 2024) as mitigating actions.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
1 Basis of preparation (continued)
Going concern (continued)
Consequently, the directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least the
period to 30 September 2025 and, therefore, have prepared the financial
statements on a going concern basis.
Changes in accounting policies
There are a number of changes to accounting standards, effective in future
years, which are not expected to significantly impact the Group's consolidated
financial statements.
Judgements
The preparation of the consolidated financial statements requires management
to make judgements in respect of the application of its accounting policies
which impact the reported amounts of assets, liabilities, income and expenses.
Whilst there are no judgements that management considers to be critical in the
preparation of these financial statements, there is a significant judgement in
respect of the classification of cash payments relating to contract fulfilment
assets in the cash flow statement.
With the exception of contract fulfilment assets, cash payments in respect of
contract balances are classified as cash flows from operating activities. The
Group classifies additions to contract fulfilment assets as cash flows from
investing activities as they arise from cash payments in relation to assets
that will generate long-term economic benefits. During the period, the
purchase of contract fulfilment assets in cash flows from investing activities
was $202m (2023: $104m).
Estimates
The preparation of the consolidated financial statements requires management
to make estimates which impact the reported amounts of assets, liabilities,
income and expenses. These estimates are based on historical experience and
other factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Major sources of estimation uncertainty
The Group's major sources of estimation uncertainty are in relation to
goodwill in the UK cash-generating unit and post-employment benefit
obligations on the basis that a reasonably possible change in key assumptions
could have a material effect on the carrying amounts of assets and liabilities
in the next 12 months.
Other sources of estimation uncertainty
In addition to the major sources of estimation uncertainty, tax has been
identified as another source of estimation uncertainty. Whilst this is not
considered to be a major source of uncertainty as defined by IAS 1
Presentation of Financial Statements, the recognition and measurement of
certain material assets and liabilities are based on assumptions and/or are
subject to longer-term uncertainties (see note 3).
Climate change
Climate change is identified as a principal risk as its impact on the
environment may lead to issues around food sourcing and supply chain
continuity in some of the Group's markets. The Group is committed to reach
climate net zero greenhouse gas (GHG) emissions across its global operations
and value chain by 2050. The potential impact of climate change and the
Group's net zero commitments on the following areas has been considered: going
concern; tax; goodwill; other intangible assets; and post-employment benefits.
There was no impact on the reported amounts in the financial statements as a
result of this review.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
2 Segmental analysis
Geographical segments
Revenue by sector and geographical segment1,2 North America Europe Rest of World Total
$m
$m
$m
$m
Six months ended 31 March 2024
Business & Industry 4,727 2,286 711 7,724
Education 3,292 747 130 4,169
Healthcare & Senior Living 3,926 737 265 4,928
Sports & Leisure 2,008 540 97 2,645
Defence, Offshore & Remote 174 491 756 1,421
Underlying revenue3,4 14,127 4,801 1,959 20,887
Less: Share of revenue of joint ventures (13) (130) - (143)
Revenue 14,114 4,671 1,959 20,744
Six months ended 31 March 2023 (restated(5))
Business & Industry 3,842 1,972 679 6,493
Education 3,024 674 122 3,820
Healthcare & Senior Living 3,689 663 256 4,608
Sports & Leisure 1,960 492 86 2,538
Defence, Offshore & Remote 176 427 757 1,360
Underlying revenue3,4 12,691 4,228 1,900 18,819
Less: Share of revenue of joint ventures (11) (153) - (164)
Revenue 12,680 4,075 1,900 18,655
1. There is no inter-segment trading.
2. An analysis of revenue recognised over time and at a point in time is not
provided on the basis that the nature, amount, timing and uncertainty of
revenue and cash flows are considered to be similar.
3. Revenue plus share of revenue of joint ventures.
4. Underlying revenue arising in the UK, the Group's country of domicile,
was $1,519m (2023: $1,378m). Underlying revenue arising in the US region was
$13,391m (2023: $12,030m). Underlying revenue arising in all countries outside
the UK from which the Group derives revenue was $19,368m (2023: $17,441m).
5. See note 1.
Geographical segments
Profit by geographical segment North America Europe Rest of World Central activities Total
$m
$m
$m
$m
$m
Six months ended 31 March 2024
Underlying operating profit/(loss) before results of joint ventures and 1,154 257 103 (72) 1,442
associates
Add: Share of profit before tax of joint ventures 1 14 - - 15
Add: Share of results of associates 10 7 - - 17
Underlying operating profit/(loss)1 1,165 278 103 (72) 1,474
Less: Acquisition-related charges2 (8) (41) - - (49)
Less: One-off pension charge(2) - (3) - - (3)
Less: Tax on share of profit of joint ventures(2) - (2) - - (2)
Operating profit/(loss) 1,157 232 103 (72) 1,420
Net loss on sale and closure of businesses2 (94)
Finance costs (131)
Profit before tax 1,195
Income tax expense (327)
Profit for the period 868
1. Operating profit excluding specific adjusting items (see note 12).
2. Specific adjusting item (see note 12).
3.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
2 Segmental analysis (continued)
Geographical segments
Profit by geographical segment North America Europe Rest of World Central activities Total
$m
$m
$m
$m
$m
Six months ended 31 March 2023 (restated(1))
Underlying operating profit/(loss) before results of joint ventures and 985 210 85 (60) 1,220
associates
Add: Share of profit before tax of joint ventures - 15 - - 15
Add: Share of results of associates 6 10 - - 16
Underlying operating profit/(loss)2 991 235 85 (60) 1,251
Less: Acquisition-related charges3 (44) (21) (8) - (73)
Less: Charges related to the strategic portfolio review(3) - (118) - - (118)
Less: One-off pension charge(3) - (14) - - (14)
Operating profit/(loss) 947 82 77 (60) 1,046
Net gain on sale and closure of businesses3 35
Finance costs (91)
Profit before tax 990
Income tax expense (225)
Profit for the period 765
1. See note 1.
2. Operating profit excluding specific adjusting items (see note 12).
3. Specific adjusting item (see note 12).
Acquisition-related charges
Represent amortisation and impairment charges in respect of intangible assets
acquired through business combinations of $68m (2023: $62m), direct costs
incurred through business combinations or other strategic asset acquisitions
and business integration costs of $16m (2023: $10m) and net changes in
consideration in relation to past acquisition activity of $nil (2023: $1m),
partially offset by gains on bargain purchases of $35m (2023: $nil).
Charges related to the strategic portfolio review
Charges related to the strategic portfolio review in the six months ended 31
March 2023 of $118m were in respect of site closures and contract
renegotiations and terminations in the UK.
One-off pension charge
The one-off pension charge in the six months ended 31 March 2023 of $14m
represented an estimated past service cost following a change in legislation
in Türkiye eliminating the minimum retirement age requirement for certain
employees effective from March 2023.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
3 Tax
Six months ended 31 March
Restated(1)
2023
$m
Income tax expense 2024
$m
Current tax
Current period 349 279
Adjustment in respect of prior years (18) (26)
Current tax expense 331 253
Deferred tax
Current period (4) (24)
Adjustment in respect of prior years - (4)
Deferred tax credit (4) (28)
Total 327 225
1. See note 1.
The income tax expense for the period is based on the effective UK statutory
rate of corporation tax for the period of 25% (2023: 22%). Overseas tax is
calculated at the rates prevailing in the respective jurisdictions.
The tax position in each country in which the Group operates is often not
agreed with the tax authorities until some time after the relevant period end
and, if subject to a tax audit, may be open for an extended period. In these
circumstances, the recognition of tax liabilities and assets requires
management estimation to reflect a variety of factors, including historical
experience, interpretations of tax law and the likelihood of settlement.
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. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such
differences will impact the results in the year in which such determination is
made. In addition, the calculation and recognition of temporary differences
giving rise to deferred tax assets requires estimates to be made of the extent
to which future taxable profits are available against which these temporary
differences can be utilised.
The Group is currently subject to audits and reviews in a number of countries
that primarily relate to complex corporate tax issues.
The UK tax authority's enquiry into an intra-group refinancing has been
resolved during the period consistent with the provision previously held.
Most of the Group's tax losses and other temporary differences recognised as
deferred tax assets do not have an expiry date. The recognition of net
deferred tax assets is based on the most recent financial budgets and
forecasts approved by management.
Deferred tax assets have not been recognised in respect of tax losses of $127m
(30 September 2023: $129m) and other temporary differences of $23m (30
September 2023: $26m). These deferred tax assets have not been recognised as
the timing of recovery is uncertain.
The legislation implementing the Pillar Two Model Rules in the UK will apply
from the financial year ending 30 September 2025. The Group is reviewing this
legislation and also monitoring the status of implementation of the model
rules worldwide. The impact is not expected to be material. The Group has
applied the temporary exception under IAS 12 Income Taxes in relation to the
accounting for deferred taxes arising from the implementation of the Pillar
Two Model Rules.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
4 Earnings per share
Six months ended 31 March
Profit for the period attributable to equity shareholders 2024 Restated(1)
$m
2023
$m
Profit for the period attributable to equity shareholders 861 760
Six months ended 31 March
Weighted average number of ordinary shares 2024 2023
Ordinary shares of 111/20p each millions
Ordinary shares of
111/20p each millions
Weighted average number of ordinary shares for basic earnings per share 1,709 1,753
Dilutive effect of share-based payment plans - -
Weighted average number of ordinary shares for diluted earnings per share 1,709 1,753
Six months ended 31 March
Earnings per share 2024 Restated(1)
cents
2023
cents
Basic 50.4c 43.4c
Diluted 50.4c 43.4c
1. See note 1.
Underlying earnings per share for the six months ended 31 March 2024 was 59.0c
(2023: 50.9c). Underlying earnings per share is calculated based on earnings
excluding the effect of acquisition-related charges, charges related to the
strategic portfolio review, one-off pension charge, gains and losses on sale
and closure of businesses and other financing items, together with the tax
attributable to these amounts (see note 12).
5 Dividends
The interim dividend of 20.7c per share (2023: 17.9c per share), $353m in
aggregate(1), is payable on 25 July 2024 to shareholders on the register at
the close of business on 14 June 2024. Other important dates to note are shown
on page 2. The dividend will be paid gross and a Dividend Reinvestment Plan
(DRIP) will be available. The dividend was approved by the Board after the
balance sheet date and, therefore, it has not been reflected as a liability in
the interim financial statements.
Restated(2)
Six months ended 31 March 2024 Six months ended 31 March 2023
Dividends on ordinary shares Dividends $m Dividends $m
per share
per share
cents
cents
Amounts recognised as distributions to equity shareholders during the period
Final 2022 - - 27.7c 462
Final 2023 34.7c 606 - -
Total 34.7c 606 27.7c 462
1. Based on the number of ordinary shares in issue at 31 March 2024
excluding shares held in treasury and the Compass Group PLC All Share Schemes
Trust (1,704m shares).
2. See note 1.
Shareholders appearing on the Register of Members or holding their shares
through CREST will automatically receive their dividends in sterling, but have
the option to elect to receive their dividends in US dollars. The closing date
for the receipt of dividend currency elections is 1 July 2024. The sterling
equivalent of the 2024 interim dividend will be announced on 9 July 2024.
For shares held in certificated form on the register, US dollar elections can
be made by downloading the currency election form. This can be found on the
dividend page on the Compass Group website at www.compass-group.com
(http://www.compass-group.com) or by contacting our share registrar, Link
Group.
Shareholders who hold their shares through CREST and wish to receive their
dividend in US dollars, must do so by following the CREST elections process.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
6 Reconciliation of operating profit to cash generated from operations
Six months ended 31 March
Restated(1)
2023
$m
Reconciliation of operating profit to cash generated from operations 2024
$m
Operating profit before joint ventures and associates 1,390 1,015
Adjustments for:
Acquisition-related charges2 33 63
Charges related to the strategic portfolio review - 118
One-off pension charge 3 14
Amortisation - other intangible assets(3) 74 63
Amortisation - contract fulfilment assets 147 145
Amortisation - contract prepayments 45 31
Depreciation - right-of-use assets 106 95
Depreciation - property, plant and equipment 177 162
Unwind of costs to obtain contracts 16 12
Impairment losses - non-current assets(4) 7 5
Impairment reversals - non-current assets - (1)
Gain on disposal of property, plant and equipment/intangible assets/contract (9) (4)
fulfilment assets
Other non-cash changes - (1)
Increase/(decrease) in provisions 21 (14)
Investment in contract prepayments (112) (42)
Increase in costs to obtain contracts5 (21) (19)
Post-employment benefit obligations net of service costs 5 (5)
Share-based payments - charged to profit 34 27
Operating cash flow before movements in working capital 1,916 1,664
Increase in inventories (23) (82)
Increase in receivables (226) (246)
Increase in payables 82 127
Cash generated from operations 1,749 1,463
1. See note 1.
2. Includes amortisation and impairment of acquisition intangibles. Excludes
acquisition transaction costs of $16m (2023: $10m) as acquisition transaction
costs are included in net cash flow from operating activities.
3. Excludes amortisation of acquisition intangibles.
4. In the six months ended 31 March 2023, excludes impairment losses of $60m
included in charges related to the strategic portfolio review.
5. Cash payments in respect of contract balances are classified as cash
flows from operating activities, with the exception of contract fulfilment
assets which are classified as cash flows from investing activities as they
arise out of cash payments in relation to assets that will generate long-term
economic benefits. During the six months ended 31 March 2024, the purchase of
contract fulfilment assets in cash flows from investing activities was $202m
(2023: $104m).
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
7 Financial instruments
Certain of the Group's financial instruments are held at fair value.
The fair value of a financial instrument is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the balance sheet date.
The fair value measurement hierarchy is as follows:
• Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities
• Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
• Level 3: Inputs for the asset or liability that are not based on
observable market data (i.e. unobservable inputs)
There were no transfers of financial instruments between levels of the fair
value hierarchy in either the six months ended 31 March 2024 or 2023. The
carrying amounts of financial instruments measured at fair value are shown in
the table below:
Restated(1)
( ) At 30 September 2023
$m
Financial instruments measured at fair value Level At 31
March
2024
$m
Non-current
Rabbi Trust investments(2) 1 928 760
Mutual fund investments(2) 1 59 58
Other investments2 1 16 15
Life insurance policies(2) 2 37 35
Derivative financial instruments - assets 2 16 55
Derivative financial instruments - liabilities 2 (195) (253)
Trade investments2 3 280 181
Contingent consideration payable on business acquisitions(3) 3 (92) (97)
Non-controlling interest put options3 3 (15) (22)
Current
Money market funds4 1 163 510
Derivative financial instruments - assets 2 61 22
Derivative financial instruments - liabilities 2 (32) (45)
Contingent consideration payable on business acquisitions(3) 3 (51) (61)
1. See note 1.
2. Classified as other investments in the consolidated balance sheet.
3. Classified as trade and other payables in the consolidated balance sheet.
4. Classified as cash and cash equivalents in the consolidated balance sheet
on the basis that they have a maturity of three months or less from the date
of acquisition.
Due to the variability of the valuation factors, the fair values presented at
31 March 2024 may not be indicative of the amounts the Group would expect to
realise in the current market environment. The fair values of financial
instruments at levels 2 and 3 of the fair value hierarchy have been determined
based on the valuation methodologies listed below:
Level 2
Life insurance policies Cash surrender values provided by third-party
insurance providers.
Derivative financial instruments Present values determined from future cash
flows discounted at rates derived from market-sourced data. The fair values of
derivative financial instruments represent the maximum credit exposure.
Level 3
Trade investments Estimated values using income and market value approaches.
Contingent consideration payable on business acquisitions Estimated amounts
payable based on the likelihood of specified conditions, such as earnings
targets, being met.
Non-controlling interest put options Estimated amounts payable based on the
likelihood of options being exercised by minority shareholders.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
7 Financial instruments (continued)
A reconciliation from opening to closing balances for Level 3 financial
instruments is as follows:
Six months ended 31 March 2024 Six months ended 31 March 2023 (restated(1))
Level 3 financial instruments Trade investments Contingent consideration payable on business acquisitions Non- Trade investments Contingent consideration payable on business acquisitions Non-
$m
$m
$m
$m
controlling interest put options
controlling interest put options
$m
$m
At 1 October 181 (158) (22) 142 (77) (50)
Change in fair value recognised in the income statement - - - - (1) -
Change in fair value recognised in the statement of comprehensive income 100 - - - - -
Change in fair value recognised in the statement of changes in equity - - 7 - - -
Additions - (8) - - (102) -
Payments relating to businesses acquired in previous years - 27 - - 18 4
Net present value adjustments - (3) - - - -
Currency translation (1) (1) - - (6) -
At 31 March 280 (143) (15) 142 (168) (46)
1. See note 1.
The directors do not consider that any reasonably possible changes in the key
assumptions would cause the fair value of the Level 3 financial instruments to
be materially higher or lower.
With the exception of borrowings, the carrying amounts of financial
instruments measured at amortised cost approximate to their fair values.
Borrowings are measured at amortised cost unless they are part of a fair value
hedge, in which case amortised cost is adjusted for the fair value
attributable to the risk being hedged. The carrying amount of borrowings at
31 March 2024 is $4,608m (30 September 2023: $4,114m). The fair value of
borrowings at 31 March 2024, calculated by discounting future cash flows to
net present values at current market rates for similar financial instruments
(Level 2 inputs), is $4,642m (30 September 2023: $4,131m).
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
8 Acquisition, sale and closure of businesses
Acquisition of businesses
The total cash spent on the acquisition of subsidiaries during the six months
ended 31 March 2024, net of cash acquired, was $382m (2023: $262m), including
$29m of deferred and contingent consideration and other payments relating to
businesses acquired in previous years and $16m of acquisition transaction
costs included in net cash flow from operating activities.
On 19 December 2023, the Group acquired 100% of the issued share capital of
Hofmann-Menü Holdings GmbH (HOFMANN(s)), a German producer of high-quality
cook and freeze meals, for cash consideration of €94m ($103m) net of cash
acquired. The cash consideration represents the enterprise value of €270m
($297m), less third-party debt settled on acquisition of €168m ($185m) and
purchase price adjustments of €8m ($9m). The preliminary goodwill represents
the premium the Group has paid to acquire a company that complements its
existing businesses and creates significant opportunities for synergies. In
particular, the ability to offer additional services to the Group's existing
customers and to leverage cross-selling opportunities with customers of
HOFMANN(s) will deliver significant economies of scale.
The acquisition did not have a material impact on the Group's revenue or
profit for the period. If the acquisition had occurred on 1 October 2023, it
would not have had a material impact on the Group's revenue or profit for the
period.
The following table summarises the recognised amounts of assets acquired and
liabilities assumed at the date of acquisition of HOFMANN(s):
Book value Fair value
$m
$m
Net assets acquired
Other intangible assets 5 197
Right-of-use assets 5 5
Property, plant and equipment 30 30
Trade and other receivables 13 13
Inventories 18 18
Cash and cash equivalents 41 41
Borrowings (185) (185)
Lease liabilities (5) (5)
Current tax liabilities (18) (18)
Trade and other payables (23) (23)
Deferred tax liabilities - (52)
Fair value of net assets acquired 21
Goodwill 123
Total consideration 144
Satisfied by
Cash consideration paid 144
Total consideration 144
Cash flow
Cash consideration paid 144
Less: Cash and cash equivalents acquired (41)
Add: Settlement of acquired borrowings 185
Add: Acquisition transaction costs(1) 6
Total cash outflow from purchase of subsidiary companies 294
Consolidated cash flow statement
Net cash flow from operating activities(1) 6
Net cash flow from investing activities 288
Total cash outflow from purchase of subsidiary companies 294
1. Acquisition transaction costs are included in net cash flow from
operating activities.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
8 Acquisition, sale and closure of businesses (continued)
Acquisition of businesses (continued)
In addition to the acquisition set out above, the Group also completed a
number of other acquisitions during the six months ended 31 March 2024. A
summary of all acquisitions completed during the period is presented in
aggregate below:
Book value Fair value
$m
$m
Net assets acquired
Other intangible assets 7 269
Costs to obtain and fulfil contracts 4 4
Right-of-use assets 26 26
Property, plant and equipment 61 61
Trade and other receivables 15 15
Inventories 19 19
Cash and cash equivalents 46 46
Borrowings (185) (185)
Lease liabilities (26) (26)
Current tax liabilities (18) (18)
Trade and other payables (33) (33)
Deferred tax liabilities - (49)
Fair value of net assets acquired 129
Less: Step acquisitions (30)
Less: Gains on bargain purchases (35)
Goodwill 151
Total consideration 215
Satisfied by
Cash consideration paid 198
Deferred and contingent consideration payable 9
Non-cash consideration 8
Total consideration 215
Cash flow
Cash consideration paid 198
Less: Cash and cash equivalents acquired (46)
Add: Settlement of acquired borrowings 185
Add: Acquisition transaction costs1 16
Net cash outflow arising on acquisition 353
Deferred and contingent consideration and other payments relating to 29
businesses acquired in previous years
Total cash outflow from purchase of subsidiary companies 382
Consolidated cash flow statement
Net cash flow from operating activities(1) 16
Net cash flow from investing activities 366
Total cash outflow from purchase of subsidiary companies 382
1. Acquisition transaction costs are included in net cash flow from
operating activities.
Goodwill increased from $6,105m at 30 September 2023 to $6,263m at 31 March
2024 reflecting business acquisitions ($151m) and favourable exchange
translation ($72m), partially offset by a transfer to held for sale ($64m) and
business disposals ($1m).
Contingent consideration is an estimate at the date of acquisition of the
amount of additional consideration that will be payable in the future. The
actual amount paid can vary from the estimate depending on the terms of the
transaction and, for example, the actual performance of the acquired business.
The fair value adjustments made in respect of acquisitions in the six months
ended 31 March 2024 are provisional and will be finalised within 12 months of
the acquisition date, principally in relation to the valuation of contracts
acquired.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
8 Acquisition, sale and closure of businesses (continued)
Acquisition of businesses (continued)
The goodwill arising on the acquisition of the businesses represents the
premium the Group has paid to acquire companies that complement its existing
businesses and create significant opportunities for synergies. The goodwill
arising is not expected to be deductible for tax purposes.
The acquisitions did not have a material impact on the Group's revenue or
profit for the period. If the acquisitions had occurred on 1 October 2023,
they would not have had a material impact on the Group's revenue or profit for
the period.
Sale and closure of businesses
The Group has recognised a net loss of $94m on the sale and closure of
businesses (2023: net gain of $35m), including exit costs of $17m (2023: $2m).
Activity in the period includes the sale of the Group's businesses in
Argentina, mainland China and the United Arab Emirates, exit from Angola and
sale of the final 5% shareholding in Highways Royal Co., Limited (Japanese
Highways).
A summary of business disposals completed during the period is presented in
aggregate below:
$m
Net assets disposed
Goodwill 1
Other intangible assets 4
Right-of-use assets 1
Property, plant and equipment 3
Interests in joint ventures and associates 61
Trade and other receivables 37
Inventories 3
Tax recoverable 1
Cash and cash equivalents 9
Assets held for sale 5
Lease liabilities (1)
Trade and other payables (39)
Net assets disposed 85
Consolidated income statement
Cash consideration 34
Deferred consideration 51
Less: Net assets disposed (85)
Less: Exit costs (17)
Less: Loss on step acquisitions (1)
Less: Reclassification of cumulative currency translation differences on sale (76)
of businesses
Net loss on sale and closure of businesses (94)
Consolidated cash flow statement
Cash consideration received 34
Less: Exit costs paid (11)
Less: Cash and cash equivalents disposed (9)
Net proceeds from sale of subsidiary companies, joint ventures and associates 14
net of exit costs
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
8 Acquisition, sale and closure of businesses (continued)
Assets and liabilities held for sale
In March 2024, the Group agreed the sale of its business in Brazil for
approximately $250m subject to regulatory approval. The disposal is expected
to complete in the second half of the year. Accordingly, the assets and
liabilities of the Group's business in Brazil are classified as held for sale
at 31 March 2024.
Carrying
amount
$m
Assets held for sale
Goodwill 64
Other intangible assets 10
Right-of-use assets 3
Property, plant and equipment 22
Trade and other receivables 166
Deferred tax assets 13
Inventories 18
Cash and cash equivalents 25
Total 321
Liabilities held for sale
Lease liabilities (3)
Provisions (14)
Current tax liabilities (11)
Trade and other payables (163)
Total (191)
At 31 March 2024, cumulative currency translation losses included in other
comprehensive income are $177m.
9 Contingent liabilities
Litigation and claims
The Group is involved in various legal proceedings incidental to the nature of
its business and maintains insurance cover to reduce financial risk associated
with claims related to these proceedings. Where appropriate, provisions are
made to cover any potential uninsured losses.
Although it is not possible to predict the outcome or quantify the financial
effect of these proceedings, or any claim against the Group related thereto,
in the opinion of the directors, any uninsured losses resulting from the
ultimate resolution of these matters will not have a material effect on the
financial position of the Group. The timing of the settlement of these
proceedings or claims is uncertain.
The Group is currently subject to audits and reviews in a number of countries
that primarily relate to complex corporate tax issues. None of these audits is
currently expected to have a material impact on the Group's
financial position.
We continue to engage with tax authorities and other regulatory bodies on
payroll and sales tax reviews, and compliance with labour laws and
regulations.
The federal tax authorities in Brazil have issued notices of deficiency in
respect of 2014 and 2017 relating primarily to the PIS/COFINS treatment of
certain food costs which we have formally objected to and which are now
proceeding through the appeals process. At 31 March 2024, the total amount
assessed in respect of these matters is $90m, including interest and
penalties. The possibility of further notices of deficiency for subsequent
years cannot be ruled out and the judicial process is likely to take a number
of years to conclude. Based on the opinion of our local legal advisers, we do
not currently consider it likely that we will have to settle a liability with
respect to these matters and, on this basis, no provision has been recorded.
In addition, there are a number of other ongoing tax cases in Brazil. None of
these cases is individually significant and, therefore, we do not currently
expect any of these issues to have a material impact on the financial position
of the Group.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
9 Contingent liabilities (continued)
Food safety
In the ordinary course of business, food safety incidents are identified from
time to time and our businesses' operations receive external reviews of their
food hygiene and safety practices, both on a periodic basis and in connection
with identified incidents. At any point, a number of reviews will be ongoing.
Although it is not possible to predict the outcome or quantify the financial
effect of the outcome of these reviews, or any claim against Group companies
related thereto, in the opinion of the directors, any uninsured losses
resulting from the ultimate resolution of these ongoing reviews are not
expected to have a material effect on the financial position of the Group. The
timing of the outcome of these reviews is generally uncertain.
10 Related party transactions
Full details of the Group's related party relationships, transactions and
balances are provided in the Group's financial statements for the year ended
30 September 2023. There have been no material changes in these relationships
during the six months ended 31 March 2024 or up to the date of this
Announcement. Transactions with related parties have not had, and are not
expected to have, a material effect on the financial performance or position
of the Group.
11 Post-balance sheet events
In January 2024, the Group signed an agreement to acquire 100% of the issued
share capital of Orchestra Topco Limited (trading as CH&CO), a provider of
premium contract and hospitality services in the UK and Ireland, for an
initial enterprise value of £475m ($600m) subject to regulatory approval. The
acquisition of the business completed on 30 April 2024. Additional
consideration is payable in 2025 and 2026 contingent on the operation of an
earn-out, which is dependent on the profit growth of the business. If the
acquisition had occurred on 1 October 2023, it would not have had a material
impact on the Group's revenue or profit for the six months ended 31 March
2024. Given the proximity of the completion date to the date of this
Announcement, certain elements of the acquisition accounting are not yet
available. Full disclosures will be provided in the 2024 Annual Results
Announcement and Annual Report.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures
Introduction
The Executive Committee manages and assesses the performance of the Group
using various underlying and other Alternative Performance Measures (APMs).
These measures are not defined by International Financial Reporting Standards
(IFRS) or other generally accepted accounting principles (GAAP) and may not be
directly comparable with APMs used by other companies. Underlying measures
reflect ongoing trading and, therefore, facilitate meaningful year-on-year
comparison. The Group's APMs, together with the results prepared in accordance
with IFRS, provide comprehensive analysis of the Group's results. Accordingly,
the relevant statutory measures are also presented where appropriate. Certain
of the Group's APMs are financial Key Performance Indicators (KPIs) which
measure progress against our strategy.
In determining the adjustments to arrive at underlying results, we use a set
of established principles relating to the nature and materiality of individual
items or groups of items, including, for example, events which: (i) are
outside the normal course of business; (ii) are incurred in a pattern that is
unrelated to the trends in the underlying financial performance of our ongoing
business; or (iii) are related to business acquisitions or disposals as they
are not part of the Group's ongoing trading business and the associated cost
impact arises from the transaction rather than from the continuing business.
Definitions
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 excluding specific adjusting items(2). Provides a measure of operating profitability that is comparable over time.
operating profit
Underlying Underlying operating profit divided by underlying revenue. An important measure of the efficiency of our operations in delivering great
operating margin1 food and support services to our clients and consumers.
Organic revenue1 Current year: Underlying revenue excluding businesses acquired, sold and Embodies our success in growing and retaining our customer base, as well as
closed in the year. Prior year: Underlying revenue including a proforma 12 our ability to drive volumes in our existing businesses and maintain
months in respect of businesses acquired in the year and excluding businesses appropriate pricing levels in light of input cost inflation.
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.
Organic operating profit Current year: Underlying operating profit excluding businesses acquired, sold Provides a measure of operating profitability that is comparable over time.
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.
Underlying finance costs Finance costs excluding specific adjusting items(2). 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 items(2). Provides a measure of Group profitability that is comparable over time.
Underlying income tax expense Income tax expense excluding tax attributable to specific adjusting items(2). Provides a measure of income tax expense that is comparable over time.
Underlying effective Underlying income tax expense divided by underlying profit before tax. Provides a measure of the effective tax rate that is comparable over time.
tax rate
1. Key Performance Indicator.
2. See page 41 for definitions of the specific adjusting items and a
reconciliation from the statutory to the underlying income statement.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Definitions (continued)
Measure Definition Purpose
Income statement
(continued)
Underlying profit for the year Profit for the year excluding specific adjusting items(2) and tax attributable Provides a measure of Group profitability that is comparable over time.
to those items.
Underlying profit attributable to equity shareholders (underlying earnings) Profit for the year attributable to equity shareholders excluding specific Provides a measure of Group profitability that is comparable over time.
adjusting items(2) and tax attributable to those items.
Underlying earnings Earnings per share excluding specific adjusting items(2) and tax attributable Measures the performance of the Group in delivering value to shareholders.
per share1 to those items.
Underlying EBITDA Underlying operating profit excluding underlying impairment, depreciation and Provides a measure of Group operating profitability that is comparable over
amortisation of intangible assets, tangible assets and contract-related time.
assets.
Balance sheet
Net debt Bank overdrafts, bank and other borrowings, lease liabilities and derivative Allows management to monitor the indebtedness of the Group.
financial instruments, less cash and cash equivalents.
Net debt to EBITDA Net debt divided by underlying EBITDA. Provides a measure of the Group's ability to finance and repay its debt from
its operations.
Cash flow
Capital expenditure Purchase of intangible assets, purchase of contract fulfilment assets, Provides a measure of expenditure on long-term intangible, tangible and
purchase of property, plant and equipment and investment in contract contract-related assets, net of the proceeds from disposal of intangible,
prepayments, less proceeds from sale of property, plant and tangible and contract-related assets.
equipment/intangible assets/contract fulfilment assets.
Underlying operating cash flow Net cash flow from operating activities, including purchase of intangible Provides a measure of the success of the Group in turning profit into cash
assets, purchase of contract fulfilment assets, purchase of property, plant that is comparable over time.
and equipment, proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets, repayment of principal under lease
liabilities and share of results of joint ventures and associates, and
excluding interest and net tax paid, post-employment benefit obligations net
of service costs, cash payments related to the cost action programme and
COVID-19 resizing costs, strategic portfolio review and one-off pension
charge, and acquisition transaction costs.
Underlying operating cash flow conversion Underlying operating 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.
Free cash flow Net cash flow from operating activities, including purchase of intangible Provides a measure of the success of the Group in turning profit into cash
assets, purchase of contract fulfilment assets, purchase of property, plant that is comparable over time.
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.
1. Key Performance Indicator.
2. See page 41 for definitions of the specific adjusting items and a
reconciliation from the statutory to the underlying income statement.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Definitions (continued)
Measure Definition Purpose
Cash flow (continued)
Underlying free Free cash flow excluding cash payments related to the cost action programme Provides a measure of the success of the Group in turning profit into cash
cash flow1 and COVID-19 resizing costs, strategic portfolio review and one-off pension that is comparable over time.
charge, and acquisition transaction costs.
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 Net tax paid included in net cash flow from operating activities divided by Provides a measure of the cash tax rate that is comparable over time.
tax rate underlying profit before tax.
Business growth
New business Current year underlying revenue for the period in which no revenue had been The measure of incremental revenue in the current year from new business.
recognised in the prior year.
Lost business Prior year underlying revenue for the period in which no revenue has been The measure of lost revenue in the current year from ceased business.
recognised in the current year.
Net new business New business minus lost business as a percentage of prior year organic The measure of net incremental revenue in the current year from business wins
revenue. and losses.
Retention 100% minus lost business as a percentage of prior year organic revenue. The measure of our success in retaining business.
1. Key Performance Indicator.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Reconciliations
Income statement
Underlying revenue and operating profit are reconciled to GAAP measures in
note 2 (segmental analysis).
Geographical segments
Organic revenue North America Europe Rest of World Central activities Total
$m
$m
$m
$m
$m
Six months ended 31 March 2024
Underlying revenue 14,127 4,801 1,959 - 20,887
Organic adjustments (16) (186) (59) - (261)
Organic revenue 14,111 4,615 1,900 - 20,626
Six months ended 31 March 2023
Underlying revenue (restated(1)) 12,691 4,228 1,900 - 18,819
Currency adjustments 2 57 (76) - (17)
Underlying revenue - constant currency 12,693 4,285 1,824 - 18,802
Organic adjustments 28 (179) (106) - (257)
Organic revenue 12,721 4,106 1,718 - 18,545
Increase in underlying revenue at reported rates - % 11.3% 13.6% 3.1% 11.0%
Increase in underlying revenue at constant currency - % 11.3% 12.0% 7.4% 11.1%
Increase in organic revenue - % 10.9% 12.4% 10.6% 11.2%
1. See note 1.
Geographical segments
Organic operating profit North America Europe Rest of World Central activities Total
$m
$m
$m
$m
$m
Six months ended 31 March 2024
Underlying operating profit/(loss) 1,165 278 103 (72) 1,474
Underlying operating margin - % 8.2% 5.8% 5.3% 7.1%
Organic adjustments 3 (23) (3) - (23)
Organic operating profit/(loss) 1,168 255 100 (72) 1,451
Six months ended 31 March 2023
Underlying operating profit/(loss) (restated(1)) 991 235 85 (60) 1,251
Underlying operating margin - % 7.8% 5.6% 4.5% 6.6%
Currency adjustments - 1 (7) (3) (9)
Underlying operating profit/(loss) - constant currency 991 236 78 (63) 1,242
Organic adjustments 3 (13) (5) - (15)
Organic operating profit/(loss) 994 223 73 (63) 1,227
Increase in underlying operating profit at reported rates - % 17.6% 18.3% 21.2% 17.8%
Increase in underlying operating profit at constant currency - % 17.6% 17.8% 32.1% 18.7%
Increase in organic operating profit - % 17.5% 14.3% 37.0% 18.3%
1. See note 1.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Reconciliations (continued)
Six months ended 31 March 2024
Specific adjusting items
Underlying income statement Statutory 1 2 3 4 5 Underlying
$m
$m
$m $m $m $m $m
Operating profit 1,420 49 3 2 - - 1,474
Net loss on sale and closure of businesses (94) - - - 94 - -
Finance costs (131) - - - - 20 (111)
Profit before tax 1,195 49 3 2 94 20 1,363
Income tax expense (327) (12) (1) (2) - (6) (348)
Profit for the period 868 37 2 - 94 14 1,015
Less: Non-controlling interests (7) - - - - - (7)
Profit attributable to equity shareholders 861 37 2 - 94 14 1,008
Earnings per share (c) 50.4c 2.2c 0.1c - 5.5c 0.8c 59.0c
Effective tax rate (%) 27.4% 25.5%
Restated(1)
Six months ended 31 March 2023
Specific adjusting items
Underlying income statement Statutory 1 2 3 4 5 Underlying
$m
$m
$m $m $m $m $m
Operating profit 1,046 73 14 - 118 - 1,251
Net gain on sale and closure of businesses 35 - - - (35) - -
Finance costs (91) - - - - 12 (79)
Profit before tax 990 73 14 - 83 12 1,172
Income tax expense (225) (17) (3) - (26) (4) (275)
Profit for the period 765 56 11 - 57 8 897
Less: Non-controlling interests (5) - - - - - (5)
Profit attributable to equity shareholders 760 56 11 - 57 8 892
Currency adjustments (8)
Profit attributable to equity shareholders - constant currency 884
Earnings per share (c) 43.4c 3.2c 0.6c - 3.2c 0.5c 50.9c
Earnings per share - constant currency (c) 50.4c
Effective tax rate (%) 22.7% 23.5%
1. See note 1.
Specific adjusting items are as follows:
1. Acquisition-related charges
Represent amortisation and impairment charges in respect of intangible assets
acquired through business combinations, direct costs incurred through business
combinations or other strategic asset acquisitions, business integration
costs, changes in consideration in relation to past acquisition activity and
other acquisition-related items (see note 2).
2. One-off pension charge
Mainly reflects a past service cost following a change in legislation in
Türkiye eliminating the minimum retirement age requirement for certain
employees effective from March 2023.
3. Tax on share of profit of joint ventures
Reclassification of tax on share of profit of joint ventures to income tax
expense.
4. Gains and losses on sale and closure of businesses and charges related to
the strategic portfolio review
Profits and losses on the sale of subsidiaries, joint ventures and associates,
exit costs on closure of businesses (see note 8) and charges in respect of a
strategic review of the Group's portfolio of non-core activities which, during
2023, related to site closures and contract renegotiations and terminations in
the UK.
5. Other financing items
Financing items, including hedge accounting ineffectiveness, change in the
fair value of derivatives held for economic hedging purposes, change in the
fair value of investments and financing items relating to post-employment
benefits.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Reconciliations (continued)
Six months ended 31 March
Restated(1)
2023
$m
Underlying EBITDA 2024
$m
Underlying operating profit 1,474 1,251
Add back/(deduct):
Depreciation of property, plant and equipment and right-of-use assets 283 257
Amortisation of other intangible assets, contract fulfilment assets and 266 239
contract prepayments(2)
Impairment losses - non-current assets(3) 7 5
Impairment reversals - non-current assets - (1)
Underlying EBITDA 2,030 1,751
1. See note 1.
2. Excludes amortisation of acquisition intangibles.
3. In 2023, excludes impairment losses of $60m included in charges related
to the strategic portfolio review.
Balance sheet
At 31 March
Restated(1)
2023
$m
Components of net debt 2024
$m
Borrowings (4,608) (4,219)
Lease liabilities (1,232) (1,106)
Derivative financial instruments (150) (119)
Gross debt (5,990) (5,444)
Cash and cash equivalents 695 1,481
Net debt (5,295) (3,963)
1. See note 1.
Six months ended 31 March
Restated(1)
2023
$m
Net debt reconciliation 2024
$m
Net decrease in cash and cash equivalents (186) (849)
(Deduct)/add back:
Increase in borrowings (806) -
Repayment of borrowings 352 545
Net cash flow from derivative financial instruments (51) (125)
Repayment of principal under lease liabilities 108 99
Increase in net debt from cash flows (583) (330)
New lease liabilities and amendments (155) (141)
Amortisation of fees and discounts on issue of debt (3) (2)
Changes in fair value of borrowings in a fair value hedge (103) (67)
Lease liabilities acquired through business acquisitions (26) -
Lease liabilities derecognised on sale and closure of businesses 1 4
Changes in fair value of derivative financial instruments 79 54
Currency translation losses (24) (144)
Increase in net debt (814) (626)
Net debt at 1 October (4,459) (3,337)
Cash and lease liabilities reclassified to held for sale (22) -
Net debt at 31 March (5,295) (3,963)
1. See note 1.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Reconciliations (continued)
At 31 March
Restated(1)
2023
$m
Net debt to EBITDA 2024
$m
Net debt (5,295) (3,963)
Prior year 3,620 3,033
Less: Prior half-year (1,751) (1,394)
Add: Current half-year 2,030 1,751
Underlying EBITDA (last 12 months) 3,899 3,390
Net debt to EBITDA (times) 1.4 1.2
1. See note 1.
Cash flow
Six months ended 31 March
Restated(1)
Capital expenditure 2024 2023
$m
$m
Purchase of intangible assets 151 105
Purchase of contract fulfilment assets 202 104
Purchase of property, plant and equipment 263 213
Investment in contract prepayments 112 42
Proceeds from sale of property, plant and equipment/intangible assets/contract (35) (30)
fulfilment assets
Capital expenditure 693 434
1. See note 1.
Six months ended 31 March
Restated(1)
2023
$m
Underlying operating cash flow 2024
$m
Net cash flow from operating activities 1,330 1,125
Purchase of intangible assets (151) (105)
Purchase of contract fulfilment assets (202) (104)
Purchase of property, plant and equipment (263) (213)
Proceeds from sale of property, plant and equipment/intangible assets/contract 35 30
fulfilment assets
Repayment of principal under lease liabilities (108) (99)
Share of results of joint ventures and associates 30 31
Add back/(deduct):
Interest paid 118 101
Net tax paid 301 237
Post-employment benefit obligations net of service costs (5) 5
Cash payments related to the cost action programme and COVID-19 resizing costs 5 20
Cash payments related to the strategic portfolio review 4 -
Cash payments related to the one-off pension charge 4 -
Acquisition transaction costs 16 10
Underlying operating cash flow 1,114 1,038
1. See note 1.
Six months ended 31 March
Restated(1)
2023
$m
Underlying operating cash flow conversion 2024
$m
Underlying operating cash flow 1,114 1,038
Underlying operating profit 1,474 1,251
Underlying operating cash flow conversion (%) 75.6% 83.0%
1. See note 1.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
12 Non-GAAP measures (continued)
Reconciliations (continued)
Six months ended 31 March
Restated(1)
2023
$m
Free cash flow 2024
$m
Net cash flow from operating activities 1,330 1,125
Purchase of intangible assets (151) (105)
Purchase of contract fulfilment assets (202) (104)
Purchase of property, plant and equipment (263) (213)
Proceeds from sale of property, plant and equipment/intangible assets/contract 35 30
fulfilment assets
Purchase of other investments (1) (1)
Proceeds from sale of other investments 1 2
Dividends received from joint ventures and associates 18 12
Interest received 20 28
Repayment of principal under lease liabilities (108) (99)
Dividends paid to non-controlling interests (4) (2)
Free cash flow 675 673
1. See note 1.
Six months ended 31 March
Restated(1)
2023
$m
Underlying free cash flow 2024
$m
Free cash flow 675 673
Add back:
Cash payments related to the cost action programme and COVID-19 resizing costs 5 20
Cash payments related to the strategic portfolio review 4 -
Cash payments related to the one-off pension charge 4 -
Acquisition transaction costs 16 10
Underlying free cash flow 704 703
1. See note 1.
Six months ended 31 March
Restated(1)
2023
$m
Underlying free cash flow conversion 2024
$m
Underlying free cash flow 704 703
Underlying operating profit 1,474 1,251
Underlying free cash flow conversion (%) 47.8% 56.2%
1. See note 1.
Six months ended 31 March
Restated(1)
2023
$m
Underlying cash tax rate 2024
$m
Tax received 3 17
Tax paid (304) (254)
Net tax paid (301) (237)
Underlying profit before tax 1,363 1,172
Underlying cash tax rate (%) 22.1% 20.2%
1. See note 1.
Business growth
Six months ended 31 March
Restated(1)
2023
$m
Net new business 2024
$m
New business less lost business 680 789
Prior period organic revenue 18,545 15,061
Net new business (%) 3.7% 5.2%
1. See note 1.
Compass Group PLC
Condensed Consolidated Financial Statements
Notes to the condensed consolidated financial statements
For the six months ended 31 March 2024
13 Exchange rates
Average rates are used to translate the income statement and cash flow
statement. Closing rates are used to translate the balance sheet. Only the
most significant currencies are shown.
Six months ended 31 March
2024 2023
Average exchange rate
Australian dollar 1.53 1.50
Brazilian real 4.96 5.22
Canadian dollar 1.35 1.36
Euro 0.93 0.96
Japanese yen 148.06 137.55
Pound sterling 0.80 0.84
Turkish lira 29.73 18.77
At 31 March
2024 2023
Closing exchange rate
Australian dollar 1.53 1.49
Brazilian real 5.01 5.07
Canadian dollar 1.35 1.35
Euro 0.93 0.92
Japanese yen 151.35 133.09
Pound sterling 0.79 0.81
Turkish lira 32.35 19.20
Forward-looking statements
Certain information included in this Announcement is forward looking and
involves risks, assumptions and uncertainties that could cause actual results
to differ materially from those expressed or implied by forward-looking
statements. Forward-looking statements cover all matters which are not
historical facts and include, without limitation, the direct and indirect
future impacts and implications of: public health crises such as the
coronavirus COVID-19 on the economy, nationally and internationally, and on
the Group, its operations and prospects; risks associated with changes in
environmental scenarios and related regulations including (without limitation)
the evolution and development of the global transition to a low carbon economy
(including increasing societal and investor expectations); disruptions and
inefficiencies in supply chains (such as resulting from the wars in Ukraine
and the Middle East); future domestic and global political, economic and
business conditions (such as inflation or the UK's exit from the EU);
projections relating to results of operations and financial conditions and the
Company's plans and objectives for future operations, including, without
limitation, discussions of expected future revenues, financing plans and
expected expenditures and divestments; risks associated with changes in
economic conditions, levels of economic growth and the strength of the food
and support services markets in the jurisdictions in which the Group operates;
fluctuations in food and other product costs and labour costs; prices and
changes in exchange and interest rates; and the impacts of technological
advancements. Forward-looking statements can be identified by the use of
forward-looking terminology, including terms such as 'believes', 'estimates',
'anticipates', 'expects', 'forecasts', 'intends', 'plans', 'projects', 'goal',
'target', 'aim', 'may', 'will', 'would', 'could' or 'should' or, in each case,
their negative or other variations or comparable terminology.
Forward-looking statements in this Announcement are not guarantees of future
performance. All forward-looking statements in this Announcement are based
upon information known to the Company on the date of this Announcement.
Accordingly, no assurance can be given that any particular expectation will be
met and readers are cautioned not to place undue reliance on forward-looking
statements when making their investment decisions. Additionally,
forward-looking statements regarding past trends or activities should not be
taken as a representation or warranty that such trends or activities will
continue in the future. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules and the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority), the Company
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
Nothing in this Announcement shall exclude any liability under applicable laws
that cannot be excluded in accordance with such laws.
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