TIDMCPG
RNS Number : 2928Y
Compass Group PLC
12 May 2021
Half year results announcement for the six months ended 31 March
2021
Underlying(1) results Statutory results
HY 2021 HY 2020 Change HY 2021 HY 2020(2) Change
GBP12.2bn
Revenue GBP8.6bn (3) (30.4)%(4) GBP8.4bn GBP12.5bn (32.4)%
GBP817m
Operating profit GBP290m (3) (64.5)%(3) GBP168m GBP775m (78.3)%
Operating margin 3.4% 6.7% (330)bps
Earnings per share 9.6p 35.9p (3) (73.3)%(3) 5.6p 36.7p (84.7)%
Free cash flow GBP359m GBP186m 93.0%
Operating cash flow GBP563m GBP545m 3.3%
========= ========== =========== ========= =========== ========
1. Reconciliation of statutory to underlying results can be
found on pages 32 to 34 .
2. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
3. Measured on a constant currency basis.
4. Organic revenue growth.
Margin recovery continues; looking ahead with confidence
Performance summary
-- Q2 operating margin at 4. 2 %, 20bps ahead of our pre close
trading update and an increase of 150bps from Q1
-- Restored more than half of our pre COVID margin during Q2,
despite volumes being 72% of 2019 revenue
-- Continued strong retention of 95.6%
-- New business wins increased by about 20%(1) with first time
outsourcing now accounting for around 50%, up from a third
historically
-- Strong underlying free cashflow of GBP359m driven by efficient working capital management
-- Gross capex was 3.4% of underlying revenue as we continue to invest in growth opportunities
-- Peak net debt to EBITDA ratio of 3.0 times
Strategy - positioning for the future
-- Committed to the wellbeing of our people, clients, consumers and the communities we serve
-- Focusing on reopening existing and new client sites safely
-- Adapting our operating model to be more agile, digitally
enabled and relevant to clients' changing expectations
-- Excellent pipeline of new business as well as significant
market opportunities from first time outsourcing
-- Investing in attractive organic and inorganic opportunities
to grow the business and support our recovery
Outlook
-- Anticipate gradual improvement in revenue in Q3
-- Expect Q3 margin to be between 4.5% and 5.0% absorbing the
impact of reopenings and mobilisations
-- Remain confident in rebuilding the Group underlying margin to
above 7% before we return to pre COVID volumes
Statutory results
-- Statutory revenue decreased by 32.4% as a result of the
pandemic. Operating profit decreased by 78.3 % due to the adverse
impact of COVID and related actions to resize the business and
adjust our cost base.
1. Annual revenues of new business wins compared with 2019.
Business Review
Dominic Blakemore, Group Chief Executive, said:
"During the first half of this financial year, by controlling
the controllable, we delivered continued margin progression, strong
cashflow and excellent client retention. This was despite further
lockdowns and limited volume recovery.
With the gathering pace of vaccination rollouts across our major
markets, we are working closely with our clients to prepare to
reopen their sites safely, although the picture across the world
remains mixed . Whilst we expect any revenue recovery to be
gradual, we remain confident in our ability to return to a Group
underlying margin above 7% before we return to pre COVID
volumes.
Over the last six months, the "flight to trust" continued as
clients sought quality partners with health and safety expertise,
supply chain resilience, and financial stability. As a result, new
business wins have increased due to the acceleration of first time
outsourcing, which now accounts for about half of our growth. We
remain committed to supporting future growth by investing in
attractive opportunities to enhance our competitive advantages and
further consolidate our position as the industry leader in food
services.
Throughout the pandemic, we continued to develop our digital
culinary platforms. These concepts complement the traditional
on-site restaurant and now provide us with a variety of solutions
from which to create a truly bespoke client offer. Along with
digital innovation, COVID has also heightened client focus on
diversity and inclusion and decarbonisation initiatives, reflecting
and reinforcing our own strategic framework of People, Performance
and Purpose. In the past week our UK and Ireland region has
announced its commitment to be Net Zero by 2030, while today we are
also announcing that the Board has decided to repay the funds our
employees benefited from in the half year under the UK Government's
Coronavirus Job Retention Scheme .
We are now a stronger, more agile business with new client
propositions, improved digital capability and a more flexible cost
structure. These factors, underpinned by a robust balance sheet,
have created a strong platform from which the business will
continue to recover and grow. In the longer term, we remain excited
about the significant structural growth opportunities globally, the
potential for further revenue and profit growth and shareholder
returns over time."
Results presentation today
A recording of the results presentation for investors and
analysts will be available on the Company's website today,
Wednesday 12 May 2021, at 7.00 am. There will be a question and
answer session at 8.00 am, accessible via the Company's website,
www.compass-group.com , and you will be able to participate by
dialing :
UK Toll Number: +44 330 336 9105
UK Toll-Free Number: 0800 358 6377
US Toll Number: +1 323 794 2093
US Toll-Free Number: +1 866 548 4713
Participant PIN Code: 3024541
Please connect to the call at least 10-15 minutes prior to the
start time.
Enquiries
Investors Agatha Donnelly & Helen Javanshiri +44 1932 573 000
Tim Danaher & Fiona Micallef-Eynaud,
Press Brunswick +44 2074 045 959
Website www.compass-group.com
Business Review (continued)
Basis of preparation
Throughout the half year results announcement, and consistent
with prior years, underlying and other alternative performance
measures are used to describe the Group's performance. These are
not recognised under International Financial Reporting Standards
(IFRS) or other generally accepted accounting principles
(GAAP).
The Executive Committee of the Group manages and assesses the
performance of the business on these measures and believes they are
representative of ongoing trading, facilitate meaningful period on
period comparisons, and hence provide useful information to
shareholders. Underlying and other alternative performance measures
are defined in the glossary of terms on pages 37 and 38 .
A summary of the adjustments from statutory results to
underlying results is shown in note 1 1 on pages 32 to 34 and
further detailed in the condensed consolidated income statement
(page 17 ), reconciliation of free cash flow (page 23), note 2
segmental reporting (page 26 ) and note 12 organic revenue and
organic profit (page 35 ).
Group overview
The pandemic has had a dramatic effect on Compass. Our people
are at the heart of our business and the commitment shown by our
colleagues around the world, many of whom have been on the front
line, has been extraordinary. Compass has not been immune from the
tragic consequences of the pandemic and we extend our deepest
sympathies to the families of those colleagues that have lost their
lives to COVID.
As expected, COVID continued to negatively affect our
performance during the first six months of the year. Revenue
remained at around 71% of our 2019 revenues as containment measures
were extended over the winter months. Despite limited volume
growth, we focused on controlling the controllable by continuing to
manage our cost base, resize our workforce and evolve and adapt our
operations. As a result, we improved our operating margins quarter
on quarter and are now more than half way to recovering our pre
COVID margin.
As restrictions start to ease, our priority is to help clients
reopen safely as they restore operations and welcome consumers back
to their premises. Whilst our focus is always on clients,
throughout the pandemic we have continued to manage the business
through the framework of People, Performance and Purpose to ensure
that we continue to protect the interests of all our
stakeholders.
Looking ahead, the pipeline of new business wins and client
retention continues to be strong. We remain focused on sustainable
margin recovery in line with our commitment to rebuild our Group
underlying margin above 7% before we return to pre COVID
volumes.
Performance
Our results reflect the dramatic impact COVID has had on our
business. Our revenue for the six months declined by 30.4% on an
organic basis as a result of the pandemic . This performance was in
line with our expectations, given the protracted lockdown measures
to contain the virus during the winter months. Retention during the
first half has been strong at 95.6% as clients maintained their
trusted food service provider during the pandemic and
encouragingly, our new business wins were 5.4%.
Organic revenue
% organic change Q3 2020 Q4 2020 Q1 2021 Q2 2021 HY 2021
============================ ======== ======== ======== ======== ========
Business & Industry (50.7)% (44.1)% (43.4)% (41.5)% (42.5)%
Education (60.2)% (35.1)% (37.0)% (25.6)% (32.0)%
Healthcare & Senior Living (5.1)% 0.2% 0.8% 3.1% 1.9%
Sports & Leisure (89.9)% (78.9)% (76.5)% (66.6)% (72.2)%
Defence, Offshore & Remote (8.8)% (7.6)% (1.2)% 2.5% 0.7%
============================ ======== ======== ======== ======== ========
Group (44.3)% (34.1)% (33.7)% (26.8)% (30.4)%
============================ ======== ======== ======== ======== ========
Business Review (continued)
Underlying revenue as % of 2019(1) Q3 2020 Q4 2020 Q1 2021 Q2 2021 HY 2021
==================================== ======== ======== ======== ======== ========
Business & Industry 50.6% 57.4% 61.5% 57.8% 59.7%
Education 40.1% 66.0% 66.9% 72.0% 69.4%
Healthcare & Senior Living 95.1% 100.7% 105.2% 105.2% 105.2%
Sports & Leisure 9.5% 20.4% 24.7% 28.3% 26.4%
Defence, Offshore & Remote 93.9% 94.5% 107.1% 108.6% 107.8%
==================================== ======== ======== ======== ======== ========
Group 56.4% 66.5% 71.1% 71.7% 71.3%
==================================== ======== ======== ======== ======== ========
1. On a constant currency basis.
In the first half of the year we have been operating at c.71% of
our 2019 revenues with little overall change since the start of the
financial year. Between Q1 and Q2 we saw small fluctuations in
Business & Industry as lockdown measures were imposed and
relaxed as well as in Education where schools in the UK reopened
during March and higher education establishments in North America
saw some increase in student numbers on campus.
On a statutory basis, revenue decreased by 32.4%, reflecting
lower trading volumes as a result of COVID.
Operating profit and operating margin
When the pandemic hit in March 2020, we immediately took actions
to reduce our food (MAP 3) costs, in unit labour and in unit
overheads (MAP 4) and our above unit (MAP 5) costs to offset the
impact of lower volumes and to adjust our business model to the new
trading environment.
We have continued to resize the cost base and increase labour
flexibility during the first half of the year and have incurred an
additional GBP78m COVID-19 resizing charge. These actions, along
with continued contract renegotiations, a focus on procurement and
purchasing compliance, as well as general cost control, have
allowed our margin to rebuild quarter on quarter despite subdued
volumes.
Underlying operating profit decreased by 64.5% to GBP290m on a
constant currency basis and our underlying operating margin was
3.4%. With our Q2 margin at 4.2% we have now restored our
profitability to more than half of our pre COVID margin levels.
On a statutory basis, operating profit decreased by 78.3%,
reflecting lower trading volumes as a result of COVID.
Capital allocation
Our priority is to invest in growth opportunities, target a
strong investment grade credit rating and restore our leverage
ratio back to our target range of 1-1.5x net debt to EBITDA. 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 evidenced by
our historical returns on capital employed. At the appropriate time
we will resume the ordinary dividend and, with any surplus cash,
additional shareholder returns.
Business Review (continued)
Regional performance
North America - 60.4% Group revenue (2020: 64.0%)
Underlying Change
Reported Constant
Regional financial summary 2021 2020 rates currency Organic
============================ ========== ========== ========= ========== ========
Revenue GBP5,160m GBP8,080m (36.1)% (33.0)% (32.8)%
Regional operating profit GBP245m GBP654m (62.5)% (60.7)% (60.6)%
Regional operating margin 4.7% 8.1% (340)bps
============================ ========== ========== ========= ========== ========
The continued impact of COVID on the business resulted in an
organic revenue decline of 32.8% and revenues are around 70% of
2019 levels, an increase of 6% from Q4 2020. New business growth is
5.2%, with around 55% of new business wins in the first six months
coming from first time outsourcing, and retention continues to be
excellent at around 96.6%.
Our Sports & Leisure business has remained subdued
throughout the first half of the year although some events towards
the end of the period started to cautiously welcome a limited
number of spectators. Our Education sector continues to see a mixed
approach to reopening with hybrid curriculum delivery, especially
across higher education, and has continued to be impacted by
localised lockdowns. With the weighting towards 'business' our
Business & Industry sub sectors continue to be significantly
impacted by COVID with the return to offices being gradual. Our
Healthcare & Senior Living business continued to expand with
double digit new business growth and all sub sectors delivering
organic revenue growth, which was especially strong in support
services. Our remaining laundries business was disposed of during
the period.
Underlying operating profit was GBP245m, a decrease of 62.5% due
to the impact of COVID. The actions taken to mitigate the volume
decline on margin, including resizing and purchasing compliance, as
well as our focus on cost control, have allowed us to improve the
margin quarter on quarter resulting in an operating margin for the
half year of 4.7%, an increase of 180bps from Q4 2020, with Q2 at
5.6%.
Business Review (continued)
Europe - 26.4% Group revenue (2020(1) : 25.3%)
Underlying Change
Reported Constant
Regional financial summary 2021 2020(1) rates currency Organic
============================ ========== ========== ========= ========== ========
Revenue GBP2,260m GBP3,185m (29.0)% (28.9)% (32.8)%
Regional operating profit GBP32m GBP165m (80.6)% (80.4)% (83.0)%
Regional operating margin 1.4% 5.2% (380)bps
============================ ========== ========== ========= ========== ========
1. Prior year comparatives have reclassified Middle East from
our Rest of World region into our Europe region.
Organic revenue declined by 32.8% for the half year with
revenues around 71% of 2019 levels, which is a modest 3% higher
than Q4 2020. With exposure to the sectors most impacted by the
pandemic, namely Business & Industry, Education and Sports
& Leisure, as well as national and local lockdowns across the
region, volumes were broadly unchanged from the second half of
2020. Encouragingly, new business growth is over 5% driven by the
UK and Turkey. Around 40% of new business wins in the period are
first time outsourcing, especially in the Business & Industry
and Defence, Offshore & Remote sectors. Retention has continued
to improve slightly since 2020 and is now at around 93.5%.
Governments across Europe continued to provide ongoing support
for employees during the pandemic and, where appropriate, we
utilised these schemes. We ceased participation in the UK
Government's Coronavirus Job Retention Scheme and the Board has
decided to repay the funds our employees benefited from in the half
year.
With the current trading environment remaining uncertain and the
pace of vaccinations slow across mainland Europe, we have continued
with our resizing actions to adjust our cost base, which is a key
driver of margin progression.
Underlying operating profit was GBP32m, a decrease of 80.6% due
to the impact of COVID. The actions we have taken, including
resizing, continued contract renegotiations and the focus on cost
control, have resulted in operating margin for the half year of
1.4%, 580bps higher than Q4 2020, continuing the positive trend of
quarter on quarter margin progression, with Q2 at 1.7%.
Business Review (continued)
Rest of World - 13.2% Group revenue (2020(1) : 10.7%)
Underlying Change
Reported Constant
Regional financial summary 2021 2020(1) rates currency Organic
============================ ========== ========== ========= ========== ========
Revenue GBP1,131m GBP1,350m (16.2)% (11.2)% (9.4)%
Regional operating profit GBP53m GBP74m (28.4)% (24.3)% (22.1)%
Regional operating margin 4.7% 5.5% (80)bps
============================ ========== ========== ========= ========== ========
1. Prior year comparatives have reclassified Middle East from
our Rest of World region into our Europe region.
Organic revenue declined by 9.4% as modest growth in Australia
was more than offset by volume declines elsewhere, especially in
Japan, which is weighted towards Business & Industry and
continues to see localised lockdowns. As we saw in 2020, the region
has not been as impacted by the pandemic given over 50% of its
revenues are derived from the more resilient Defence, Offshore
& Remote and Healthcare & Senior Living sectors. Revenues
are around 82% of 2019 levels, a modest 3% improvement on Q4
2020.
Double digit new business growth in Australia and Chile driven
by Offshore & Remote resulted in regional new business growth
of 7.0%. Nearly 40% of new business wins came from first time
outsourcing and a similar proportion from contracts previously held
by smaller regional players. Continuing the improving trend,
retention rates were 94.5% in the first half of the year.
Underlying operating profit was GBP53m, a decrease of 28.4% due
to the impact of COVID. The actions taken to mitigate the volume
decline on margin have allowed us to improve the margin quarter on
quarter resulting in an operating margin for the half year of 4.7%,
with Q2 at 5.4%.
Business Review (continued)
Strategy
Compass' addressable food service market is estimated to be at
least GBP220bn. There remains a significant structural growth
opportunity from first time outsourcing, as just over half the
market is currently outsourced, as well as taking share from
regional and large competitors. In recent months we have seen
encouraging trends in the self- operated more defensive sectors,
such as Healthcare & Senior Living , Education and Defence,
Offshore & Remote.
Our strategic focus on food, with some specialised support
services, remains relevant as food is our core competency. Being
the largest global player, our procurement scale and focus on cost
efficiencies, give us competitive advantages which translate into
greater value for clients. Our sectorised and sub sectorised
approach enables us to provide tailor made food services which meet
their needs.
The pandemic has had a lasting effect on our operations and
processes. In particular, it has proved to be an accelerant for new
digital and culinary initiatives. During the COVID disruption, we
adapted and refined these new models and have a complementary suite
of solutions from which to create a truly bespoke offer. Clients
are increasingly looking to us as an integral service partner at
the heart of their reopening and recovery plans. These factors,
combined with greater in unit labour flexibility and lower above
unit costs, are evolving our operating model and improving the
quality of the business.
With our focus on People and Purpose, combined with the evolving
operating model and capital allocation priorities, we will continue
to recover and drive performance, working towards creating
sustainable long term value for all our stakeholders.
People
People are our greatest asset. Over the course of the pandemic
the resilience, commitment and adaptability of our colleagues has
been extraordinary. We truly believe our people and culture
differentiate us from our competitors through our excellent service
and proactive entrepreneurial approach and, on behalf of the Board,
we would like to express our personal gratitude to everyone for
their exceptional service during this testing period.
The safety and wellbeing of our teams has been our top priority.
We used our expertise in specialist cleaning to train many of our
colleagues in contamination prevention and in personal protection.
Across all of our operations, we provided assistance and support to
promote our colleagues' wellbeing and to help them deal with
anxiety and uncertainty. We continue to invest in skills
development to enable our colleagues to adapt to new circumstances
as we prepare to reopen more sites.
One of the lasting and positive effects of the pandemic is the
heightened focus on social mobility. We welcome people with varied
experience from every type of background. In adopting this
approach, we believe we are uniquely positioned to drive meaningful
social change across the breadth of our operations in all sectors
and geographies . We are committed to hiring, developing and
retaining our diverse talent to ensure we have a truly engaged,
high performing and fulfilled workforce and one which reflects the
diverse communities we serve.
To demonstrate our resolve, we have invested time training the
members of our Group Executive Committee on inclusive leadership,
both to help them to challenge views and perspectives and to
enhance their cultural awareness as we consider the broader
ambitions of our diversity and inclusion agenda. We have made good
progress on female representation at a leadership level; however,
we recognise that we can still do more to champion women and
support them to reach their full potential.
Business Review (continued)
Purpose
The Purpose part of our strategy is focused around
sustainability, underpinned by a safety culture. Our sustainability
framework is comprised of three pillars: health and wellbeing,
environmental game changers and how we can make the world a better
place through our wider reach through communities and supply
chains.
Safety has always been a top priority but during the pandemic,
this became paramount to keep our employees, clients and consumers
safe. We implemented enhanced hygiene protocols and operating
procedures and, as we now pivot to reopening more sites,
pre-opening and retraining programmes are underway.
Regarding sustainability, to focus our efforts we prioritised
three initiatives (i) reducing food waste by rolling out food waste
management tools and training to progress towards our goal to halve
food waste by 2030; (ii) targeting our environmental impact
including taking actions against climate change including reducing
carbon emissions; and (iii) responsible sourcing through resilient
and sustainable supply chains, including increasing our purchases
of sustainable ingredients such as palm oil and fish and seafood,
as well as high welfare animal products including cage free eggs
and higher welfare chicken.
To play our part in fighting climate change, Compass Group has
committed to reducing its carbon emissions in line with the 2015
Paris agreement and our target will be certified by the Science
Based Targets Initiative in the coming months. Furthermore, Compass
UK and Ireland have recently committed to net zero emissions, with
work continuing around the Group to follow their lead in due
course.
Summary and outlook
After a year of unparalleled disruption, we started to see the
benefits from the decisive actions we took during the early months
of the pandemic come through during the first six months of this
year. With our focus on controlling the controllable, by
renegotiating temporary client contracts, managing costs and
resizing the business, we have delivered continued margin
progression despite limited volume recovery.
With vaccination rollout underway in our major markets, we are
encouraged by the easing of restrictions so we can now focus on
working alongside clients to safely reopen their organisations. Our
new agile operating model is even more relevant for clients and
consumers seeking greater flexibility and convenience as we adapt
to a new normal. The pipeline of new business has accelerated and
our retention remains strong.
The Compass value creation model has proven very effective and
remains unchanged. Our market leading position gives us benefits of
scale which, combined with our focus on operational excellence and
new business growth, drives organic revenue and underlying margin
improvement. These factors are complemented by our disciplined
capital allocation framework which supports growth, delivers
attractive capital returns, ensures a robust balance sheet and
rewards shareholders through dividends and additional shareholder
returns.
We have created a strong platform from which to recover in the
short term. Looking ahead, we remain very confident in the medium
to long term growth potential as well as the exciting significant
structural market opportunity globally.
Financial Results
Statutory and underlying results
2021 2020(1)
Statutory Adjustments Underlying(2) Statutory Adjustments Underlying(2)
GBPm GBPm GBPm GBPm GBPm GBPm
========== ============ ============== ========== ============ ==============
Revenue 8,435 116 8,551 12,476 139 12,615
============================ ========== ============ ============== ========== ============ ==============
Operating profit 168 122 290 775 79 854
Net gain on sale
and closure of businesses 14 (14) - 80 (80) -
Net finance costs (49) (7) (56) (68) 3 (65)
Profit before tax 133 101 234 787 2 789
Tax (33) (30) (63) (201) 12 (189)
============================ ========== ============ ============== ========== ============ ==============
Profit after tax 100 71 171 586 14 600
Non-controlling
interests - - - (3) - (3)
Attributable profit 100 71 171 583 14 597
============================ ========== ============ ============== ========== ============ ==============
Average number of
shares (millions) 1,784 - 1,784 1,588 - 1,588
Basic earnings per
share 5.6p 4.0p 9.6p 36.7p 0.9p 37.6p
============================ ========== ============ ============== ========== ============ ==============
EBITDA 670 1,227
Gross capex 288 420
Free cash flow 359 186
============================ ========== ============ ============== ========== ============ ==============
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
2. Definitions and reconciliations of underlying measures of
performance can be found on pages 32 to 34, 37 and 38 .
Statutory results
Revenue
On a statutory basis, revenue was GBP8,435m (2020: GBP12,476m),
a decline of 32.4% due to the negative impact of COVID.
Operating profit
Operating profit was GBP168m (2020(1) : GBP775m), a decrease of
78.3%, mainly reflecting the negative impact of COVID and also
driven by the costs associated with the programmes aimed at
resizing the business, partially offset by the savings related to
these programmes.
Statutory operating profit includes non-underlying item charges
of GBP122m (2020(1) : GBP79m), including COVID-19 resizing costs of
GBP78m (2020: GBPnil) and acquisition related costs of GBP41m
(2020: GBP41m). A full list of non-underlying items is included in
note 11.
Net gain on sale and closure of businesses
As a result of the strategic review of the business, the Group
has continued to sell or exit its operations in a number of
countries, sectors or businesses to simplify its portfolio.
Activity in the period has included the sale of our remaining US
laundries business. A net gain of GBP15m on the sale of businesses
(2020: GBP113m gain) is offset by GBP1m of exit costs (2020:
GBP33m).
Finance costs
Net finance costs decreased to GBP49m (2020: GBP68m), mainly due
to a reduction in net debt following the placing of shares in May
2020, the lower interest rates compared to the prior period and
gains in unhedged derivatives.
Tax charge
Profit before tax was GBP 133 m (2020(1) : GBP787m), giving rise
to an income tax expense of GBP33m (2020: GBP201m), equivalent to
an effective tax rate of 24.8 % (2020(1) : 25.5%). The decrease in
rate primarily reflects the effective tax rate on the sale and
closure of businesses and mix of profits by country taxed at
different rates.
Earnings per share
Basic earnings per share were 5.6p (2020(1) : 36.7p), a decrease
of 84.7%, mainly as a result of the negative impact of COVID and an
increase in the number of ordinary shares in issue following the
placing of shares in May 2020 .
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
Financial Results (continued)
Underlying results
We track our performance against underlying and other
alternative performance measures, which we believe better reflect
our strategic priorities of growth, efficiency and shareholder
returns.
A summary of the adjustments from statutory results to
underlying results is shown in note 11 on pages 32 to 34 and
further detailed in the condensed consolidated income statement
(page 17 ), reconciliation of free cash flow (page 23 ), note 2
segmental reporting (page 26 ) and note 12 organic revenue and
organic profit (page 35 ).
Revenue
On an organic basis, revenue decreased by 30.4%, reflecting the
negative impact of COVID on our geographies and sectors since March
2020, as governments took steps to contain the spread of the
virus.
Retention was excellent at 95.6% as clients maintained their
trusted food service provider during the pandemic and new business
growth was 5.4 %.
In the first half of the year we have been operating at c.71% of
our 2019 revenues. Although we saw small fluctuations between Q1
and Q2 in Business & Industry, as lockdown measures were
imposed and relaxed, and Education, where schools in the UK
reopened during March and higher education establishments in North
America saw some increase in student numbers on campus, the overall
Group position was broadly unchanged.
Operating profit and margin
With little volume recovery our strong mitigating actions across
all MAP areas, which have included resizing the cost base,
increasing levels of labour flexibility, contract renegotiations
and improving procurement practises, have allowed our margin to
rebuild quarter on quarter.
Underlying operating profit was GBP290m (2020: GBP854m), a
decrease of 66%, reflecting the impact from COVID and the resulting
lower volumes. On a constant currency basis, underlying operating
profit has decreased by GBP527m, or 64.5% and our underlying
operating margin was 3.4%. With our Q2 margin at 4.2% we have now
restored profitability to more than half of our pre COVID margin
levels.
Finance costs
The underlying net finance costs decreased to GBP56m (2020:
GBP65m), mainly due to a reduction in net debt following the
placing of shares in May 2020 and the lower interest rates compared
to the prior year.
Tax charge
On an underlying basis, the tax charge was GBP 63 m (2020:
GBP189m), equivalent to an effective tax rate of 26.9% (2020:
24.0%). The increase in rate primarily reflects the mix of profits
by country being taxed at different rates and the impact of non tax
deductible expenses against a lower profit base. The tax
environment continues to be uncertain, with more challenging tax
authority audits and enquiries globally.
Earnings per share
On a constant cu rrency basis, underlying basic earnings per
share declined by 73.3% to 9.6p (2020: 35.9p). The decrease is
driven by the negative impact of COVID and an increase in the
number of ordinary shares in issue following the placing of shares
in May 2020 .
Free cash flow
Free cash flow totalled GBP233m (2020: GBP145m). In the six
months, we made cash payments of GBP126m (2020: GBP41m) in relation
to the programmes aimed at resizing the business. Adjusting for
this, underlying free cash flow was GBP359m (2020: GBP186m), a 93%
or GBP173m increase with u nderlying free cash flow conversion at
124 % (2020: 22%).
With our focus on cash management we have improved collection
processes, and where appropriate have taken advantage of indirect
and payroll tax deferrals, some of which fall due in the second
half of the year. Capex investments in the first half reflect
delayed openings due to the pandemic as client locations remained
closed and new business mobilisations were postponed.
Gross capital expenditure of GBP288m (2020: GBP420m) is
equivalent to 3.4% (2020: 3.3%) of underlying revenue.
The working capital inflow, excluding provisions and pensions,
was GBP119m (2020: GBP303m outflow).
The net interest outflow was GBP52m (2020: GBP61m) .
The underlying cash tax rate was 25.6 % (2020: 27.0%). The
decrease is largely due to the reallocation of instalment payments
made in respect of pre COVID periods offset against current year
liabilities and the effect of tax losses arising in some
jurisdictions.
Financial Results (continued)
Acquisitions and disposals
The total cash spent on acquisitions in the first half of the
year, net of cash acquired, was GBP37m (2020: GBP446m), comprising
GBP16m of bolt-on acquisitions and investments in associates,
GBP13m of contingent consideration relating to prior years'
acquisitions and GBP8m of transaction costs.
The Group has continued to simplify its portfolio and has sold
its remaining US laundries business during the period. The Group
received GBP 1 m (2020: GBP39m) in respect of disposal proceeds net
of exit costs.
Financial position
Liquidity
The Group finances its operations through cash generated by the
business and borrowings from a number of sources including the
bank, 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. The maturity profile of the Group's principal
borrowings at 31 March 2021 shows that the average period to
maturity is 4.2 years (2020: 4.1 years).
The Group has issued US Private Placement notes which contain
financial covenants. These consist of a leverage covenant test and
an interest cover covenant test which are tested semi-annually at
30 September and 31 March. The leverage covenant test stipulates
that consolidated net debt must be below 3.5 times consolidated
EBITDA and can be increased to 4 times without breach for a limited
period of time subject to an additional coupon step up being paid.
The Group had a waiver for the leverage covenant test for the
period ended 31 March 2021. The interest cover covenant test
stipulates that consolidated EBITDA must be above 3 times
consolidated net finance costs and can be reduced to 2.5 times for
a limited period subject to an additional coupon step up being
paid. Consolidated EBITDA and consolidated interest costs are
normally based on the preceding twelve months, but for the period
ending 31 March 2021 have been reset to a six month pro forma
basis. The interest cover ratio was 12.5 times for the pro forma
period to 31 March
2021 (2020: 20.5). As noted in the glossary on pages 37 and 38 ,
net debt, consolidated EBITDA and net finance costs are subject to
certain accounting adjustments.
Standard & Poor reviewed the ratings on 21 December 2020 and
the A/A-1 long and short term ratings and Negative Outlook remained
unchanged. Moody's reviewed the ratings on 17 December 2020 and the
A3/P-2 long and short term credit ratings and Stable Outlook
remained unchanged.
As of 31 March 2021, the Group had access to GBP4,337m in total
liquidity, including GBP2,800m (2020: GBP2,000m) in undrawn
committed bank facilities, of which GBP800m matured on 3 April
2021, and GBP1,537m in cash net of overdrafts. Our solid financial
position will allow us to weather the pandemic whilst continuing to
invest in the business to strengthen our competitive advantages and
support our long term growth prospects.
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. This,
together with the resilience of the Group to a range of possible
downside scenarios including those relating to the potential
impacts of the COVID pandemic, provides the directors with a
reasonable expectation that the Group has adequate resources to
continue in operational existence for at least 12 months from the
date of approval of the financial statements. Further details are
set out in note 1 on page 24.
Net debt
Net debt decreased to GBP2,627m (2020 FY: GBP3,006m) . The Group
generated GBP359m of underlying free cash flow, after investing
GBP272m in net capital expenditure, and spent GBP36m on
acquisitions net of disposal proceeds. The remaining GBP56m
reduction in net debt related predominantly to cash spent in
relation to the cost action programme and COVID-19 resizing costs
(GBP126m), partially offset by other non-cash movements and
favourable currency translation (GBP182m).
Post employment benefit obligations
The decrease in the Compass Group Pension Plan ( UK) surplus to
GBP340m (2020 FY: GBP441m) and the reduction in the deficit in the
rest of the Group's defined benefit pension schemes to GBP221m
(2020 FY: GBP251m) reflect the actuarial gains and losses that
occurred since the prior year IAS 19 actuarial valuation. The
Compass Group Pension Plan (UK) surplus reduced mainly due to a
decrease in the market value of plan assets as gilt and corporate
bond yields have increased.
Focus on Risk
Our principal risks
The Board continues to take a proactive approach to recognising
and mitigating risk with the aim of protecting its employees and
consumers and safeguarding the interests of the Group and its
shareholders in the changing environment in which it operates.
The identification of risks and opportunities, the development
of action plans to manage the 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. In addition, the
geographic, sector and contract diversification of the Group helps
to minimise the impact of individual risks on its consolidated
results.
Details of the principal risks facing the Group and mitigating
actions are included on pages 41 to 49 of the 2020 Annual Report
and remain largely unchanged, with the exception of climate change
related risks and those associated with maintaining high social and
ethical standards in our operations, which are recognised as new
risks.
A post-Brexit deal on trade and other issues was agreed in
December 2020 between the UK and the EU. While there is clearly
more for the UK and EU to work through, we believe that the deal as
agreed, coupled with our own contingency planning, means we do not
expect any material financial or operational impact resulting from
Brexit. We are confident that we can continue supporting and
delivering great services for our UK and international clients and
consumers.
Whilst the Group's operations continue to be disrupted by the
COVID pandemic, we have successfully implemented action plans to
mitigate a significant proportion of our cost base to preserve the
profitability and liquidity of the Group. Our priority has also
continued to be the health, safety and wellbeing of our employees,
clients and consumers. Sites that are open are operating with
enhanced health and safety protocols. Personal protective equipment
requirements are in line with local government and public health
guidance and there is a continued focus on mental health
awareness.
A summary of the principal risks and uncertainties is set out
below:
-- Health and safety
o The COVID pandemic and associated containment initiatives have
significantly disrupted the Group's operations and further waves of
the virus, or another pandemic, could cause further business
risk.
o Health and safety - Compass feeds millions of consumers and
employs hundreds of thousands of people around the world every day.
For that reason, setting the highest food hygiene and safety
standards is of paramount importance and focus.
-- People
o Recruitment, retention and motivation - failure to attract,
recruit, retain and motivate people with the right skills at all
levels could limit the success of the Group.
-- Clients and Consumers
o 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 loss of
business and/or claims.
o Competition and disruption - we operate in a highly
competitive marketplace where aggressive pricing from our
competitors could cause a reduction in our revenues and margins.
Also, the emergence of new industry participants using disruptive
technology could adversely affect our business.
-- Economic and Political Environment
o Some sectors of our business could be susceptible to adverse
changes in economic conditions and employment levels. Increases in
labour or food costs could also hamper our ability to deliver the
right level of service in the most efficient way and impact
margins. As a global business, our operations and earnings may be
adversely affected by political or economic instability.
-- Compliance and Fraud
o Compliance and fraud - ineffective compliance management or
evidence of fraud, bribery and corruption could have an adverse
effect on the Group's reputation and performance.
o The international corporate tax environment remains complex
and an increase in audit activity from tax authorities means that
the potential for tax uncertainties and disputes remains high. We
note, in particular, the policy efforts being led by the EU and the
OECD which may have a material impact on the taxation of all
international businesses.
o Information systems and technology - the digital world creates
increasing risks for global businesses such as technology failures,
cyber attacks and data breaches which can disrupt operations and
cause reputational damage.
Focus on Risk (continued)
-- Climate change
o We recognise the impact of climate change to the environment
and Compass; for example the operational impacts of extreme weather
events, supply shortages caused by water scarcity and transition
risks such as changes in technologies, markets and regulation. We
are continually evaluating macroeconomic trends and insights from
employees, clients, consumers and industry experts to develop and
adapt our sustainability strategy which takes into consideration
the forces that are impacting the global food system, our industry
and our operations.
-- Social and ethical standards
o We rely on our people to deliver great service to our clients
and consumers, so we recognise their welfare is the foundation of
our culture and business. We remain vigilant in upholding the
highest standards of business ethics with regards to human rights
and social equality. To enhance our ability to counter the risks to
our businesses and supply chains represented by Modern Slavery, we
have focussed on the areas where our Human Rights strategy can have
the greatest impact. This has been through our Human Rights Working
Group, our Modern Slavery eLearning and ongoing work to strengthen
and improve our human rights due diligence as part of our supplier
evaluation and labour agency reviews.
Compass Group PLC
Condensed Consolidated Financial Statements
Directors' responsibilities
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' adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Group;
-- 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 Karen Witts
Group Chief Executive Officer Group Chief Financial Officer
12 May 2021
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
Independent review report to Compass Group PLC
Conclusion Directors' responsibilities
We have been engaged by the Company The half yearly financial report
to review the condensed set of financial is the responsibility of, and has
statements in the half yearly financial been approved by, the directors.
report for the six months ended The directors are responsible for
31 March 2021 which comprises the preparing the half yearly financial
condensed consolidated income statement, report in accordance with the DTR
the condensed consolidated statement of the UK FCA.
of comprehensive income, the condensed
consolidated statement of changes As disclosed in note 1, the latest
in equity, the condensed consolidated annual financial statements of the
balance sheet, the condensed consolidated Group were prepared in accordance
cash flow statement and the related with International Financial Reporting
explanatory notes. Standards as adopted by the EU and
the next annual financial statements
Based on our review, nothing has will be prepared in accordance with
come to our attention that causes International Financial Reporting
us to believe that the condensed Standards adopted pursuant to Regulation
set of financial statements in the (EC) No 1606/2002 as it applies
half yearly financial report for in the European Union and in accordance
the six months ended 31 March 2021 with international accounting standards
is not prepared, in all material in conformity with the requirements
respects, in accordance with IAS of the Companies Act 2006. The directors
34 Interim Financial Reporting adopted are responsible for preparing the
pursuant to Regulation (EC) No 1606/2002 condensed set of financial statements
as it applies in the European Union included in the half yearly financial
and the Disclosure Guidance and report in accordance with IAS 34
Transparency Rules ("the DTR") of adopted pursuant to Regulation (EC)
the UK's Financial Conduct Authority No 1606/2002 as it applies in the
("the UK FCA"). European Union.
Scope of review Our responsibility
We conducted our review in accordance Our responsibility is to express
with International Standard on Review to the Company a conclusion on the
Engagements (UK and Ireland) 2410 condensed set of financial statements
Review of Interim Financial Information in the half yearly financial report
Performed by the Independent Auditor based on our review.
of the Entity issued by the Auditing
Practices Board for use in the UK. The purpose of our review work and
A review of interim financial information to whom we owe our responsibilities
consists of making enquiries, primarily This report is made solely to the
of persons responsible for financial Company in accordance with the terms
and accounting matters, and applying of our engagement to assist the
analytical and other review procedures. Company in meeting the requirements
We read the other information contained of the DTR of the UK FCA. Our review
in the half yearly financial report has been undertaken so that we might
and consider whether it contains state to the Company those matters
any apparent misstatements or material we are required to state to it in
inconsistencies with the information this Report and for no other purpose.
in the condensed set of financial To the fullest extent permitted
statements. by law, we do not accept or assume
responsibility to anyone other than
A review is substantially less in the Company for our review work,
scope than an audit conducted in for this Report, or for the conclusions
accordance with International Standards we have reached.
on Auditing (UK) and consequently
does not enable us to obtain assurance
that we would become aware of all
significant matters that might be Zulfikar Walji
identified in an audit. Accordingly, for and on behalf of KPMG LLP
we do not express an audit opinion. Chartered Accountants
15 Canada Square
London
E14 5GL
12 May 2021
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 31 MARCH 2021
Six months to
31 March
======================
2021 2020(1)
Unaudited Unaudited
Notes GBPm GBPm
Revenue 2 8,435 12,476
Operating costs (8,281) (11,721)
============================================================ ====== ========== ==========
Operating profit before joint ventures and associates 154 755
Share of profit after tax of joint ventures and associates 14 20
============================================================ ====== ========== ==========
Operating profit 168 775
============================================================ ====== ========== ==========
2,
Underlying operating profit(2) 11 290 854
Acquisition related costs (41) (41)
One-off pension charge (2) -
Cost action programme and COVID-19 resizing costs 3 (78) (38)
Tax on share of profit of joint ventures (1) -
============================================================ ====== ========== ==========
Net gain on sale and closure of businesses 10 14 80
Finance income 4 2
Finance costs (60) (67)
Other financing items gain/(loss) 7 (3)
Profit before tax 133 787
Income tax expense 4 (33) (201)
============================================================ ====== ========== ==========
Profit for the period 100 586
============================================================ ====== ========== ==========
ATTRIBUTABLE TO
Equity shareholders of the Company 100 583
Non-controlling interests - 3
============================================================ ====== ========== ==========
Profit for the period 100 586
============================================================ ====== ========== ==========
BASIC EARNINGS PER SHARE (PENCE) 5 5.6p 36.7p
============================================================ ====== ========== ==========
DILUTED EARNINGS PER SHARE (PENCE) 5 5.6p 36.7p
============================================================ ====== ==========
1. Prior period comparatives have been restated as required by IFRS
5 'Non-current assets held for sale and discontinued operations' to
account for joint ventures and associates using the equity method retrospectively
when they cease to be classified as held for sale. Additional information
is included in note 10.
2. Underlying operating profit excludes acquisition related costs, one-off
pension charge, cost action programme and COVID-19 resizing costs, but
includes share of profit after tax of associates and operating profit
before tax of joint ventures. The reconciliation between statutory and
underlying results is provided in note 11.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 31 MARCH 2021
Six months to
31 March
=======================
2021 2020(1)
Unaudited Unaudited
GBPm GBPm
Profit for the period 100 586
================================================================ =========== ==========
Other comprehensive income
Items that are not subsequently reclassified to the
income statement
Remeasurement of post employment benefit obligations
- gain 30 390
Return on plan assets, excluding interest income
- loss (115) (200)
Tax credit/(charge) on items relating to the components
of other comprehensive income 18 (47)
Change in fair value of financial assets at fair 2 -
value through other comprehensive income
(65) 143
=============================================================== =========== ==========
Items that are or may be subsequently reclassified
to the income statement
Currency translation differences(2) (230) (85)
Reclassification adjustment for movements in foreign
exchange on sale of businesses (24) (13)
(254) (98)
=============================================================== =========== ==========
Total other comprehensive (loss)/income for the period (319) 45
================================================================ =========== ==========
Total comprehensive (loss)/income for the period (219) 631
================================================================ =========== ==========
ATTRIBUTABLE TO
Equity shareholders of the Company (219) 628
Non-controlling interests - 3
Total comprehensive (loss)/income for the period (219) 631
================================================================ ===========
1. Prior period comparatives have been restated as required by IFRS
5 'Non-current assets held for sale and discontinued operations' to
account for joint ventures and associates using the equity method retrospectively
when they cease to be classified as held for sale. Additional information
is included in note 10.
2. Includes gain of GBP54m in relation to the effective portion of the
net investment hedge (six months to 31 March 2020: gain of GBP18m).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX
MONTHSED
31 MARCH 2021
Attributable to equity shareholders
of the Company
Share Capital
Share premium redemption Own Other Retained Non-controlling
capital account reserve shares reserves earnings interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ========= ========== ============= ======== =========== ========== ================= ======
At 1 October 2020 198 189 295 (2) 4,145 (35) 23 4,813
================== ========= ========== ============= ======== =========== ========== ================= ======
Profit for the
period - - - - - 100 - 100
================== ========= ========== ============= ======== =========== ========== ================= ======
Other
comprehensive
income
Currency
translation
differences - - - - (230) - - (230)
Remeasurement of
post employment
benefit
obligations -
gain - - - - - 30 - 30
Return on plan
assets,
excluding
interest income
- loss - - - - - (115) - (115)
Tax on items
relating to
the components
of other
comprehensive
income - - - - - 18 - 18
Reclassification
adjustment
for movements in
foreign
exchange on sale
of businesses - - - - (24) - - (24)
Change in fair
value of
financial assets
at fair
value through
other
comprehensive
income - - - - - 2 - 2
================== ========= ========== ============= ======== =========== ========== ================= ======
Total other
comprehensive
loss - - - - (254) (65) - (319)
================== ========= ========== ============= ======== =========== ========== ================= ======
Total
comprehensive
(loss)/income
for the period - - - - (254) 35 - (219)
================== ========= ========== ============= ======== =========== ========== ================= ======
Fair value of
share-based
payments - - - - 10 - - 10
Tax on items
taken directly
to equity - - - - - (2) - (2)
Change in the
fair value
of
non-controlling
interest put
options - - - - 8 - - 8
Purchase of own
shares to
satisfy employee
share-based
payments - - - (3) - - - (3)
Release of share
awards
settled in
existing shares
purchased in the
market - - - - (2) - - (2)
================== ========= ========== ============= ======== =========== ========== ================= ======
198 189 295 (5) 3,907 (2) 23 4,605
Own shares issued
under
share schemes - - - 2 - - - 2
================== ========= ========== ============= ======== =========== ========== ================= ======
At 31 March 2021 198 189 295 (3) 3,907 (2) 23 4,607
================== ========= ========== ============= ======== =========== ========== ================= ======
Non-controlling
interest
Share-based put Total
payment Merger Revaluation Translation options other
reserve reserve reserve reserve(1) reserve reserves
OTHER RESERVES GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ============ ========= ============ ============ ================ ==========
At 1 October 2020 254 4,170 7 (215) (71) 4,145
=================================== ============ ========= ============ ============ ================ ==========
Other comprehensive income
Currency translation differences - - - (230) - (230)
Reclassification adjustment for
movements
in foreign exchange on sale of
businesses - - - (24) - (24)
Total other comprehensive loss - - - (254) - (254)
=================================== ============ ========= ============ ============ ================ ==========
Fair value of share-based payments 10 - - - - 10
Change in the fair value of
non-controlling
interest put options - - - - 8 8
Release of share awards settled in
existing shares purchased in the
market (2) - - - - (2)
=================================== ============ ========= ============ ============ ================ ==========
At 31 March 2021 262 4,170 7 (469) (63) 3,907
=================================== ============ ========= ============ ============ ================ ==========
1. Includes loss of GBP567m (30 September 2020: loss of GBP621m)
in relation to the balance remaining in the foreign currency
translation reserve from net investment hedging relationships for
which hedge accounting continues to apply.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX
MONTHSED
31 MARCH 2021
Attributable to equity shareholders
of the Company
=======================================================================
Share Capital
Share premium redemption Own Other Retained Non-controlling
capital account reserve shares reserves earnings interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ========= ========== ============= ======== =========== ========== ================= ======
At 30 September
2019(1) 176 182 295 (4) 4,362 (1,676) 27 3,362
Restate equity
accounting(1) - - - - - 25 - 25
At 1 October
2019,
restated(1) 176 182 295 (4) 4,362 (1,651) 27 3,387
================== ========= ========== ============= ======== =========== ========== ================= ======
Profit for the
period(1) - - - - - 583 3 586
================== ========= ========== ============= ======== =========== ========== ================= ======
Other
comprehensive
income
Currency
translation
differences - - - - (85) - - (85)
Remeasurement of
post employment
benefit
obligations -
gain - - - - - 390 - 390
Return on plan
assets,
excluding
interest income
- loss - - - - - (200) - (200)
Tax on items
relating to
the components
of other
comprehensive
income - - - - - (47) - (47)
Reclassification
adjustment
for movements in
foreign
exchange on sale
of businesses - - - - (13) - - (13)
================== ========= ========== ============= ======== =========== ========== ================= ======
Total other
comprehensive
(loss)/income - - - - (98) 143 - 45
================== ========= ========== ============= ======== =========== ========== ================= ======
Total
comprehensive
(loss)/income
for the period - - - - (98) 726 3 631
================== ========= ========== ============= ======== =========== ========== ================= ======
Fair value of
share-based
payments - - - - 14 - - 14
Tax on items
taken directly
to equity - - - - - (2) - (2)
Change in the
fair value
of
non-controlling
interest put
options - - - - 2 - - 2
Release of share
awards
settled in
existing shares
purchased in the
market - - - - (3) - - (3)
================== ========= ========== ============= ======== =========== ========== ================= ======
176 182 295 (4) 4,277 (927) 30 4,029
Dividends paid to
shareholders
(note 6) - - - - - (427) - (427)
Dividends paid to
non-controlling
interests - - - - - - (3) (3)
Own shares issued
under
share schemes - - - 3 - - - 3
================== ========= ========== ============= ======== =========== ========== ================= ======
At 31 March
2020(1) 176 182 295 (1) 4,277 (1,354) 27 3,602
================== ========= ========== ============= ======== =========== ========== ================= ======
Non-controlling
interest
Share-based put Total
payment Merger Revaluation Translation options other
reserve reserve reserve reserve(2) reserve reserves
OTHER RESERVES GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ============ ========= ============ ============ ================ ==========
At 1 October 2019 259 4,170 7 5 (79) 4,362
=================================== ============ ========= ============ ============ ================ ==========
Other comprehensive income
Currency translation differences - - - (85) - (85)
Reclassification adjustment for
movements
in foreign exchange on sale of
businesses - - - (13) - (13)
=================================== ============ ========= ============ ============ ================ ==========
Total other comprehensive loss - - - (98) - (98)
=================================== ============ ========= ============ ============ ================ ==========
Fair value of share-based payments 14 - - - - 14
Change in the fair value of
non-controlling
interest put options - - - - 2 2
Release of share awards settled in
existing shares purchased in the
market (3) - - - - (3)
=================================== ============ ========= ============ ============ ================ ==========
At 31 March 2020 270 4,170 7 (93) (77) 4,277
=================================== ============ ========= ============ ============ ================ ==========
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
2. Includes a loss of GBP650m (30 September 2019: loss of
GBP668m) in relation to the balance remaining in the foreign
currency translation reserve from net investment hedging
relationships for which hedge accounting continues to apply.
Own shares held by the Group represent 233,252 ordinary shares
in Compass Group PLC (31 March 2020: 30,111 ordinary shares, 30
September 2020: 147,058 ordinary shares) and are held by the
Compass Group PLC All Share Schemes Trust (ASST). These shares are
listed on a recognised stock exchange and their market value at 31
March 2021 was GBP3.4m (31 March 2020: GBP0.4m, 30 September 2020:
GBP1.7m). The nominal value held at 31 March 2021 was GBP25,774 (31
March 2020: GBP3,327, 30 September 2020: GBP16,250).
ASST is a discretionary trust for the benefit of employees and
the shares held are used to satisfy some of the Group's liabilities
to employees for long term incentive plans.
The merger reserve arose in 2000 following the demerger from
Granada Compass plc.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2021
At 31 March
At 30
September
2021 2020(1) 2020
Unaudited Unaudited
=============================================== ========
Notes GBPm GBPm GBPm
=============================================== ======== ========== ========== ===========
NON-CURRENT ASSETS
Goodwill 4,487 4,751 4,669
Other intangible assets 1,585 1,705 1,678
Contract fulfilment assets and contract costs 898 1,018 972
Right of use assets 766 882 860
Property, plant and equipment 843 1,049 970
Interests in joint ventures and associates 10 261 394 345
Other investments 141 84 75
Post employment benefit assets 340 625 441
Trade and other receivables 117 108 99
Deferred tax assets 162 58 146
8,
Derivative financial instruments(2) 9 133 211 237
=============================================== ======== ========== ========== ===========
Non-current assets 9,733 10,885 10,492
=============================================== ======== ========== ========== ===========
CURRENT ASSETS
Inventories 260 409 310
Trade and other receivables 2,167 2,845 2,319
Tax recoverable 100 80 111
Cash and cash equivalents(2) 8 1,674 732 1,484
8,
Derivative financial instruments(2) 9 5 25 5
=============================================== ======== ========== ========== ===========
4,206 4,091 4,229
Assets held for sale 10 27 94 13
=============================================== ======== ========== ========== ===========
Current assets 4,233 4,185 4,242
=============================================== ======== ========== ========== ===========
Total assets 13,966 15,070 14,734
=============================================== ======== ========== ========== ===========
CURRENT LIABILITIES
Short term borrowings(2) 8 (429) (1,026) (106)
Short term lease liabilities(2) 8 (179) (191) (197)
8,
Derivative financial instruments(2) 9 (4) (16) (9)
Provisions (274) (202) (337)
Current tax liabilities (199) (209) (228)
Trade and other payables (3,498) (4,340) (3,615)
=============================================== ======== ========== ========== ===========
(4,583) (5,984) (4,492)
Liabilities directly associated with assets
held for sale 10 (6) (40) (7)
=============================================== ======== ========== ========== ===========
Current liabilities (4,589) (6,024) (4,499)
=============================================== ======== ========== ========== ===========
NON-CURRENT LIABILITIES
Long term borrowings(2) 8 (3,158) (3,870) (3,673)
Long term lease liabilities(2) 8 (666) (738) (745)
8,
Derivative financial instruments(2) 9 (3) (3) (2)
Post employment benefit obligations (221) (238) (251)
Provisions (299) (237) (300)
Deferred tax liabilities (84) (208) (120)
Trade and other payables (339) (150) (331)
=============================================== ======== ========== ========== ===========
Non-current liabilities (4,770) (5,444) (5,422)
=============================================== ======== ========== ========== ===========
Total liabilities (9,359) (11,468) (9,921)
=============================================== ======== ========== ========== ===========
Net assets 4,607 3,602 4,813
=============================================== ======== ========== ========== ===========
EQUITY
Share capital 198 176 198
Share premium account 189 182 189
Capital redemption reserve 295 295 295
Own shares (3) (1) (2)
Other reserves 3,907 4,277 4,145
Retained earnings (2) (1,354) (35)
=============================================== ======== ========== ========== ===========
Total equity shareholders' funds 4,584 3,575 4,790
Non-controlling interests 23 27 23
=============================================== ======== ========== ========== ===========
Total equity 4,607 3,602 4,813
=============================================== ======== ========== ========== ===========
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
2. Component of net debt.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 31 MARCH 2021
Six months to
31 March
======================
2021 2020
Unaudited Unaudited
Notes GBPm GBPm
================================================================ ====== ========== ==========
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations 7 677 821
Interest paid (54) (63)
Tax received 25 -
Tax paid (85) (213)
================================================================ ====== ========== ==========
Net cash from operating activities 563 545
================================================================ ====== ========== ==========
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of subsidiary companies(1) 10 (34) (431)
Purchase of additional interest in joint ventures
and associates (3) (15)
Proceeds from sale of subsidiary companies, joint
ventures and associates net of exit costs(1) 1 39
Purchase of intangible assets (78) (80)
Purchase of contract fulfilment assets (97) (146)
Purchase of property, plant and equipment (97) (171)
Proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets 16 18
Proceeds from sale of other investments 2 12
Dividends received from joint ventures and associates 2 45
Interest received 2 2
================================================================ ====== ========== ==========
Net cash from investing activities (286) (727)
================================================================ ====== ========== ==========
CASH FLOW FROM FINANCING ACTIVITIES
Purchase of own shares to satisfy employee share-based (3) -
payments(2)
Increase in borrowings 8 68 2,133
Repayment of borrowings 8 - (1,108)
Repayment of principal under lease liabilities 8 (80) (77)
Equity dividends paid 6 - (427)
Dividends paid to non-controlling interests - (3)
================================================================ ====== ========== ==========
Net cash from financing activities (15) 518
================================================================ ====== ========== ==========
CASH AND CASH EQUIVALENTS
Net increase in cash and cash equivalents 262 336
Cash and cash equivalents at beginning of the period(3) 1,485 399
Currency translation losses on cash and cash equivalents 8 (71) (3)
================================================================ ====== ========== ==========
Cash and cash equivalents at end of the period(3) 1,676 732
================================================================ ====== ========== ==========
1. Net of cash acquired or disposed and payments received or
made under warranties and indemnities.
2. Including stamp duty and brokers' commission.
3. Includes cash and cash equivalents as presented in the
consolidated balance sheet of GBP1,674m (31 March 2020: GBP732m, 30
September 2020: GBP1,484m) and cash and cash equivalents presented
in assets held for sale of GBP2m (31 March 2020: GBPnil, 30
September 2020: GBP1m).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
RECONCILIATION OF FREE CASH FLOW
FOR THE SIX MONTHSED 31 MARCH 2021
Six months to
31 March
======================
2021 2020
Unaudited Unaudited
GBPm GBPm
================================================================ ========== ==========
Net cash from operating activities 563 545
Purchase of intangible assets (78) (80)
Purchase of contract fulfilment assets (97) (146)
Purchase of property, plant and equipment (97) (171)
Repayment of principal under lease liabilities (80) (77)
Proceeds from sale of property, plant and equipment/intangible
assets/contract fulfilment assets 16 18
Proceeds from sale of other investments 2 12
Dividends received from joint ventures and associates 2 45
Interest received 2 2
Dividends paid to non-controlling interests - (3)
================================================================= ========== ==========
Free cash flow 233 145
Add back: cash related to cost action programme and
COVID-19 resizing costs 126 41
================================================================= ========== ==========
Underlying free cash flow 359 186
================================================================= ========== ==========
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
1 BASIS OF PREPARATION
The unaudited condensed consolidated financial statements for
the six months ended 31 March 2021 have been prepared in accordance
with International Accounting Standard 34 'Interim Financial
Reporting' (IAS 34) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
The unaudited condensed consolidated financial statements for
the six months ended 31 March 2021, which were approved by the
Board on 12 May 2021, and the comparative information in relation
to the half year ended 31 March 2020, do not comprise statutory
accounts for the purpose of Section 434 of the Companies Act 2006,
and should be read in conjunction with the Annual Report for the
year ended 30 September 2020. Those accounts have been reported
upon 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 their report and
did not contain statements under Section 498 (2) or (3) of the
Companies Act 2006.
The annual financial statements of the Group for the year ended
30 September 2021 will be prepared in accordance with International
Financial Reporting Standards (IFRS) adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
Going concern
The interim consolidated financial statements are prepared on a
going concern basis which the directors believe to be appropriate
for the reasons stated below.
At 31 March 2021, the Group's financing arrangements included
sterling and Euro bonds (GBP2,361m) and USD US Private Placements
(USPP) (GBP1,086m). In addition, the Group has Revolving Credit
Facilities of GBP2,800m (GBP800m matured on 3 April 2021, GBP140m
committed to August 2024 and GBP1,860m committed to August 2025),
which were fully undrawn and GBP1,537m in cash net of overdrafts.
At the date of approving these interim consolidated financial
statements, the funding position of the Group has remained
unchanged and the cash position is not materially different.
The next term debt maturity is a USPP of $398m on 1 October 2021
and there are no other debt maturities in the 18 months to 30
September 2022.
The USPPs are subject to certain financial covenants, which are
usually tested on 31 March and 30 September every year. In May
2020, USPP noteholders agreed to waive the leverage covenant test
as at 31 March 2021. The interest cover covenant test was also
rebased on a six month proforma basis as at 31 March 2021. The
Group's other financing arrangements do not contain any financial
covenants.
The directors have prepared projected cash flow information for
the period to 30 September 2022. The directors have considered the
impact of COVID on future financial performance and cash flows with
the key judgements being the likely time period of any further
global wave of infections, the extent to which government enforced
restrictions would impact volumes and the extent to which
performance would recover subsequent to these restrictions being
lifted.
In the base case scenario, the businesses that have been closed
are assumed to continue reopening in a phased manner with a gradual
recovery. In this base case scenario, the directors consider that
the Group will continue to operate within its available committed
facilities with significant headroom and meet its financial
covenant obligations under its USPP debt agreements.
In a severe but plausible downside scenario, the directors have
assumed that global COVID infections and government enforced
restrictions remain and trading patterns will not recover through
the period to 30 September 2022. The scenario mirrors the
experience of the six month period to 31 March 2021. It has also
been assumed that no additional debt is raised during the
assessment period. This scenario also assumes a temporary cessation
of M&A activity and no dividend payments as mitigating
actions.
In this severe but plausible downside scenario modelled by the
directors the Group continues to retain sufficient headroom and
meets the financial covenant obligations under its USPP debt
agreements.
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 2022 and therefore
have prepared the interim consolidated financial statements on a
going concern basis.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
1 BASIS OF PREPARATION (CONTINUED)
Judgements and estimates
The preparation of the condensed consolidated financial
statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. These
estimates, judgements and assumptions are based on historical
experience and other factors that are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates. The critical accounting judgements and the major sources
of estimation uncertainty were the same as those described in the
last annual financial statements for the year ended 30 September
2020. Details of the estimates and judgements are included on pages
184 to 186 of the 2020 Annual Report.
The uncertainty that the COVID pandemic continues to have on the
future financial performance of the Group requires critical
judgement when deciding whether there is a material uncertainty in
relation to events or conditions that may cast significant doubt on
its ability to continue as a going concern. The condensed
consolidated financial statements are prepared on a going concern
basis and management have determined that there are no material
uncertainties relating to events or conditions that may cast
significant doubt upon the Group's ability to continue as a going
concern over the period assessed. Additional information on the
judgement management has applied in adopting the going concern
assumption is included on page 24.
Management has further considered the impact of the continued
uncertainty and disruption caused by COVID on the recoverable
amount of goodwill and the contract related non-current assets
(contract fulfilment assets and contract costs, right of use
assets, property, plant and equipment and other intangible assets),
as well as the value of provisions for onerous contracts.
Management perform an impairment assessment, taking into
consideration the latest trading performance and the most recent
management forecasts. Further details in relation to the impairment
assessment are provided in note 3.
The accounting policies adopted in the preparation of these
unaudited condensed consolidated financial statements are
consistent with the policies applied by the Group in its
consolidated financial statements for the year ended 30 September
2020 which were prepared in accordance with IFRS as adopted by the
EU.
New accounting pronouncements adopted
Accounting standards, interpretations and amendments that have
been adopted by the Group in the current period:
-- Amendments to references to the conceptual framework in IFRS
standards
-- Amendments to IFRS 3 'Definition of a business'
-- Amendments to IAS 1 and IAS 8 'Definition of material'
There is no significant impact on these condensed consolidated
financial statements as a result of adopting these new
standards.
New accounting pronouncements to be adopted
The following accounting standards, interpretations and
amendments that are applicable to the Group have been issued by the
IASB but were not yet effective at 31 March 2021. The Group is
currently analysing the impact these standards would have on its
consolidated results and financial position.
-- Amendments to IFRS 9, IAS 39 and IFRS 7 'Interest rate
benchmark reform' - phase 2
-- Amendments to IAS 37 'Onerous contracts - cost of fulfilling
a contract'
-- Amendments to IAS 16 'Property, plant and equipment: proceeds
before intended use'
-- Amendments to IFRS 3 'Reference to conceptual framework'
-- Amendments to IAS 1 'Classification of liabilities as current
or non-current'
-- Annual improvements to IFRS standards 2018-2020 cycle
The Group has further considered the impact of IBOR reform on
its hedge accounting, please refer to note 9 for the details of the
impact on the Group condensed consolidated financial
statements.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
2 SEGMENTAL REPORTING
The management of the Group's operations, excluding Central
activities, is organised within three segments: North America,
Europe and our Rest of World markets. The following table presents
Group revenues disaggregated by geographical segment and
sector:
Geographical segments
================================
North Rest
America Europe of World Total
REVENUE(1) GBPm GBPm GBPm GBPm
================================================ ========= ========= ========== ========
SIX MONTHSED 31 MARCH 2021
Business & Industry 1,295 1,034 365 2,694
Education 1,230 360 65 1,655
Healthcare & Senior Living 2,271 461 196 2,928
Sports & Leisure 264 106 22 392
Defence, Offshore & Remote 100 299 483 882
================================================== ========= ========= ========== ========
Combined sales of Group and share of equity
accounted joint ventures (2,3) 5,160 2,260 1,131 8,551
Less: share of sales of equity accounted joint
ventures (10) (106) - (116)
================================================== ========= ========= ========== ========
Revenue 5,150 2,154 1,131 8,435
================================================== ========= ========= ========== ========
SIX MONTHSED 31 MARCH 2020(4)
Business & Industry 2,573 1,640 569 4,782
Education 1,968 459 75 2,502
Healthcare & Senior Living 2,319 487 203 3,009
Sports & Leisure 1,096 298 62 1,456
Defence, Offshore & Remote 124 301 441 866
================================================== ========= ========= ========== ========
Combined sales of Group and share of equity
accounted joint ventures (2,3) 8,080 3,185 1,350 12,615
Less: share of sales of equity accounted joint
ventures (10) (129) - (139)
================================================== ========= ========= ========== ========
Revenue 8,070 3,056 1,350 12,476
================================================== ========= ========= ========== ========
1. There is no inter-segmental trading.
2. This is the underlying revenue measure considered by the
chief operating decision maker.
3. Underlying revenue from external customers arising in the UK,
the Group's country of domicile, was GBP659m (six months to 31
March 2020: GBP1,024m). Underlying revenue from external customers
arising in the US region was GBP4,873m (six months to 31 March
2020: GBP7,586m). Underlying revenue from external customers
arising in all countries outside the UK from which the Group
derives revenue was GBP7,892m (six months to 31 March 2020:
GBP11,591m).
4. The revenue relating to the Group's geographical segments of
Europe and Rest of World has been reclassified to reflect a change
in the way those segments are managed by the chief operating
decision maker: Middle East is now part of the Europe segment.
Revenue of GBP124m has been reclassified from Rest of World to
Europe for the six months ended 31 March 2020.
Geographical
segments
==============================
Rest
North of Central
America Europe World activities Total
OPERATING PROFIT GBPm GBPm GBPm GBPm GBPm
SIX MONTHSED 31 MARCH 2021
Underlying operating profit before joint ventures
and associates 243 16 53 (37) 275
Add: Share of profit before tax of joint ventures 2 16 - - 18
=================================================== ========== ========= ======= ============ ========
Regional underlying operating profit(1) 245 32 53 (37) 293
Add: Share of loss of associates (3) - - - (3)
=================================================== ========== ========= ======= ============ ========
Group underlying operating profit(1) 242 32 53 (37) 290
=================================================== ========== ========= ======= ============ ========
Geographical
segments
Rest
North of Central
America Europe World activities Total
OPERATING PROFIT GBPm GBPm GBPm GBPm GBPm
=================================================== ========== ========= ======= ============ ========
SIX MONTHSED 31 MARCH 2020(2)
Underlying operating profit before joint ventures
and associates 654 148 74 (42) 834
Add: Share of profit before tax of joint ventures - 17 - - 17
=================================================== ========== ========= ======= ============ ========
Regional underlying operating profit(1) 654 165 74 (42) 851
Add: Share of profit of associates - 3 - - 3
=================================================== ========== ========= ======= ============ ========
Group underlying operating profit(1) 654 168 74 (42) 854
=================================================== ========== ========= ======= ============ ========
1. Underlying operating profit is the profit measure considered
by the chief operating decision maker.
2. The underlying operating profit relating to the Group's
geographical segments of Europe and Rest of World has been
reclassified to reflect a change in the way those segments are
managed by the chief operating decision maker: Middle East is now
part of the Europe segment. Regional underlying operating profit of
GBP17m has been reclassified from Rest of World to Europe for the
six months ended 31 March 2020.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH
2021
3 OPERATING COSTS
Impairment loss
The Group has considered any potential impairment triggers for
goodwill and non-current assets (contract fulfilment assets and
contract costs, right of use assets, property, plant and equipment
and other intangible assets) as at 31 March 2021.
The continued spread of COVID and the reintroduction of
lockdowns as some of our major markets experience second and third
waves of infections, impacted profitability of certain contracts
although as a result of the mitigating actions undertaken by
management the Group's overall performance remained resilient and
profitability and cashflows were largely delivered in line with our
expectations. Whilst there remains some uncertainty around the
timing of the recovery from the pandemic there are no indicators of
impairment that were identified in the period that has led to a
change in our medium to longer term outlook for the business,
therefore no impairment has been recorded in respect of goodwill
for the six months to 31 March 2021.
There were no material changes during the six months to 31 March
2021 for onerous contract losses and contract related non-current
assets impairment.
Government grants and other COVID assistance
The Group continues to utilise government support in light of
the impact of COVID pandemic across the business, including the
deferral of tax payments and furloughing staff during the period of
protracted national lockdowns. During the six months to 31 March
2021, the Group has recognised GBP119m of labour related government
support groupwide.
The Board has decided to repay the funds our employees benefited
from through the UK Government's Coronavirus Job Retention Scheme
in the half year.
Government grants compensating for expenses incurred are
recognised as a deduction of the related expenses in the
consolidated income statement on a systematic basis in the same
periods in which the expenses are incurred.
COVID-19 resizing costs
When the pandemic hit in March 2020, the Group started to adjust
its business model to the new trading environment and incurred
GBP122m of resizing costs in the year ended 30 September 2020. The
Group continues to take cost actions and a further charge for costs
of GBP78m has been recognised during the six months to 31 March
2021 and further costs are expected in the second half of the year.
Actions taken to date continue to deliver the savings initially
anticipated. These costs are excluded from the Group's underlying
results, please refer to note 11.
4 TAX
Six months to
31 March
2021 2020
RECOGNISED IN THE CONDENSED CONSOLIDATED INCOME STATEMENT:
INCOME TAX EXPENSE GBPm GBPm
=======
Current Tax
Current year 79 193
Adjustment in respect of prior years (6) 1
========================================================================= ======= =========
Current tax expense 73 194
========================================================================= ======= =========
Deferred tax
Current year (40) 13
Impact of changes in statutory tax
rates - (6)
========================================================================= ======= =========
Deferred tax (credit)/expense (40) 7
========================================================================= ======= =========
Total income tax
Income tax expense 33 201
========================================================================= ======= =========
At 30 September 2020, the Group disclosed a contingent liability
with a maximum potential liability of GBP113m in respect of the
European Commission's conclusion that part of the UK's Controlled
Foreign Company legislation was in breach of EU State Aid rules.
Subsequently, Compass has been notified by HMRC and the European
Commission that the Group has not been a beneficiary of any such
State Aid. Therefore, no contingent liability is disclosed in
respect of this matter at 31 March 2021.
The UK Government has announced an increase in the UK
corporation tax rate to 25% from 19% with effect from 1 April 2023.
This has not been reflected in the measurement of deferred tax
balances in the current period. If the rate change were applied to
the deferred tax balance at 31 March 2021, the impact would be
GBP17m, represented by an income statement credit of GBP12m and a
GBP29m charge arising in other comprehensive income.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS/
FOR THE SIX MONTHSED 31 MARCH
2021
4 TAX (CONTINUED)
The increasingly complex international corporate tax environment
and an increase in audit activity from tax authorities means that
the potential for tax uncertainties has increased. The Group is
currently subject to a number of reviews and audits in
jurisdictions around the world 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.
In addition, 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 a number of notices of deficiency
relating primarily to the PIS/COFINS treatment of certain food
costs and the corporate income tax treatment of goodwill deductions
which we have formally objected to and which are now proceeding
through the appeals process. At 31 March 2021, the total amount
assessed in respect of these matters is GBP34m (31 March 2020:
GBP52m). The possibility of further assessments 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 advisors, 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. We therefore do not currently expect
any of these issues to have a material impact on the Group's
financial position.
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 GBP267m (six months to 31 March 2020: GBP232m, year ended
30 September 2020: GBP263m) and other temporary differences of
GBP28m (six months to 31 March 2020: GBP24m, year ended 30
September 2020: GBP28m). These deferred tax assets have not been
recognised as the timing of recovery is uncertain.
5 EARNINGS PER SHARE
The calculation of earnings per share is based on earnings after
tax and the weighted average number of shares in issue during the
period. The underlying earnings per share figures have been
calculated based on earnings excluding the effect of the
acquisition related costs, one-off pension charge, cost action
programme and COVID-19 resizing costs, gains and losses on sale and
closure of businesses, hedge accounting ineffectiveness, change in
fair value of investments and the tax attributable to these
amounts. These items are excluded in order to show the underlying
trading performance of the Group.
Six months to
31 March
2021 2020(1)
ATTRIBUTABLE PROFIT GBPm GBPm
==================================================================== ====== ========
Profit for the period attributable to equity shareholders
of the Company 100 583
Adjustments stated net of tax:
Acquisition related costs 30 33
One-off pension charge 2 -
Cost action programme and COVID-19 resizing costs 60 28
Net gain on sale and closure of businesses (16) (49)
Other financing items including hedge accounting ineffectiveness
and change in the fair value of investments (5) 2
Underlying profit for the period from operations 171 597
==================================================================== ====== ========
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
Six months to
31 March
========================
2021 2020
Ordinary Ordinary
shares shares
of of
11(1/20) 11(1/20)
p each p each
AVERAGE NUMBER OF ORDINARY SHARES millions millions
=============================================== =========== ===========
Average number of shares for basic earnings
per share 1,784 1,588
Dilutive share options - 1
================================================= =========== ===========
Average number of shares for diluted earnings
per share 1,784 1,589
================================================= =========== ===========
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH
2021
5 EARNINGS PER SHARE (CONTINUED)
Basic earnings Diluted earnings
per share per share
======================
2021 2020(1) 2021 2020(1)
Earnings Earnings Earnings Earnings
=============================================
per share per share per share per share
BASIC EARNINGS PER SHARE pence pence pence pence
============================================= ========== ========== ========== ==========
From operations 5.6 36.7 5.6 36.7
Adjustments stated net of tax:
Acquisition related costs 1.7 2.1 1.7 2.1
One-off pension charge 0.1 - 0.1 -
Cost action programme and COVID-19 resizing
costs 3.4 1.8 3.4 1.8
Net gain on sale and closure of businesses (0.9) (3.1) (0.9) (3.1)
Other financing items including hedge
accounting ineffectiveness and change
in the fair value of investments (0.3) 0.1 (0.3) 0.1
============================================= ========== ========== ========== ==========
From underlying operations 9.6 37.6 9.6 37.6
============================================= ========== ========== ========== ==========
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
6 DIVIDS
The Board has decided not to recommend an interim dividend for
the six months ended 31 March 2021 (2020: nil).
Six months Six months
to 31 March to 31 March
2021 2020
=================== =================
Dividends Dividends
per per
share share
DIVIDS ON ORDINARY SHARES pence GBPm pence GBPm
=============================================== =========== ====== ========== =====
Amounts recognised as distributions to equity
shareholders during the period:
Final 2019 - - 26.9 427
Total dividends - - 26.9 427
=============================================== =========== ====== ========== =====
The Board recognises the importance of dividends to the
Company's shareholders and will keep future dividends under review
and will restart payments when it is appropriate to do so.
7 RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS
Six months to
31 March
================
2021 2020
=====================================================================
RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED
FROM OPERATIONS GBPm GBPm
===================================================================== ======= =======
Operating profit before joint ventures and associates 154 755
Adjustments for:
Acquisition related costs 41 41
One-off pension charge 2 -
Cost action programme and COVID-19 resizing costs 78 38
Amortisation of intangible assets 48 43
Amortisation of contract fulfilment assets 96 97
Amortisation of contract prepayments 13 12
Depreciation of property, plant and equipment 127 143
Depreciation of right of use assets 83 78
Unwind of costs to obtain contracts 8 7
Impairment losses - contract related 13 -
Loss/(gain) on disposal of property, plant and equipment/intangible
assets/contract fulfilment assets 16 (3)
Other non-cash changes (3) -
Decrease in provisions (99) (58)
Investment in contract prepayments (16) (23)
Increase in costs to obtain contracts (8) (14)
Post employment benefit obligations net of service costs (5) (6)
Share-based payments - charged to profits 10 14
===================================================================== ======= =======
Operating cash flows before movement in working capital 558 1,124
Decrease/(increase) in inventories 11 (7)
Decrease in receivables 3 158
Increase/(decrease) in payables 105 (454)
===================================================================== ======= =======
Cash generated from operations 677 821
===================================================================== ======= =======
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH
2021
8 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
This table is presented as additional information to show
movement in net debt, defined as overdrafts, bank and other
borrowings, lease liabilities and derivative financial instruments,
net of cash and cash equivalents.
Six months to 31 March
Year
Bank Total Derivative Cash ended
and and Net Net 30
Bank other overdrafts Lease financial cash debt debt September
and
overdrafts borrowings borrowings liabilities instruments equivalents 2021 2020 2020
NET DEBT GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=================== =========== =========== =========== ============ ============ ============ ======== ======== ==========
At 1 October (97) (3,682) (3,779) (942) 231 1,484 (3,006) (3,272) (3,272)
Implementation of
IFRS 16(1) - - - - - - - (995) (995)
=================== =========== =========== =========== ============ ============ ============ ======== ======== ==========
At 1 October, as
adjusted(1) (97) (3,682) (3,779) (942) 231 1,484 (3,006) (4,267) (4,267)
Net increase in
cash and cash
equivalents - - - - - 262 262 337 1,091
Cash outflow from
repayment of bank
loans - - - - - - - 1,038 1,578
Cash inflow from
borrowing bank
loans - - - - - - - (1,228) (1,578)
Cash outflow from
repayment of loan
notes - - - - - - - - 156
Cash outflow from
repayment of
commercial
paper - - - - - - - 70 815
Cash inflow from
issuance of
commercial
paper - - - - - - - (875) (815)
Cash
(inflow)/outflow
from other
changes
in gross debt (67) 4 (63) - (5) - (68) (30) (48)
Cash outflow from
repayment of
obligations
under lease
liabilities - - - 80 - - 80 77 152
New lease
liabilities
and amendments - - - (39) - - (39) (85) (174)
Reclassified to
held for sale - - - - - (1) (1) 87 (1)
Currency
translation
gains/(losses) 27 176 203 37 (61) (71) 108 24 40
Other non-cash
movements - 52 52 19 (34) - 37 (24) 45
=================== =========== =========== =========== ============ ============ ============ ======== ======== ==========
Carried forward (137) (3,450) (3,587) (845) 131 1,674 (2,627) (4,876) (3,006)
=================== =========== =========== =========== ============ ============ ============ ======== ======== ==========
1. Adjusted as a result of the Group's adoption of IFRS 16
'Leases' on 1 October 2019.
Six months to
31 March
================
Year ended
30 September
2021 2020 2020
========================================================
OTHER NON-CASH MOVEMENTS IN NET DEBT GBPm GBPm GBPm
======================================================== ======= ======= ==============
Amortisation of fees and discount on issuance (2) (1) (5)
Changes in the fair value of bank and other borrowings
in a designated fair value hedge 54 - (12)
======================================================== ======= ======= ==============
Bank and other borrowings 52 (1) (17)
======================================================== ======= ======= ==============
Leases acquired through business acquisition - (24) (22)
Leases derecognised on sale and closure of businesses 19 - 75
COVID lease payment reductions - - 3
======================================================== ======= ======= ==============
Lease liabilities 19 (24) 56
======================================================== ======= ======= ==============
Changes in the value of derivative financial
instruments including accrued income (34) 1 6
======================================================== ======= ======= ==============
Other non-cash movements 37 (24) 45
======================================================== ======= ======= ==============
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH
2021
9 FINANCIAL INSTRUMENTS
The Group held certain financial instruments at fair value at 31
March 2021.
The fair values have been determined by reference to Level 2
inputs as defined by the fair values hierarchy of IFRS 13 'Fair
value measurements'. There were no transfers between levels in the
current and comparative periods.
All derivative financial instruments are shown at fair value on
the balance sheet and are present values determined from future
cashflows discounted at rates derived from market sourced data. The
fair values of derivative financial instruments represent the
maximum credit exposure.
At 31 March 2021
Current Non-current Current Non-current
assets assets liabilities liabilities
DERIVATIVE FINANCIAL INSTRUMENTS GBPm GBPm GBPm GBPm
================================== ======== ============ ============= =============
Interest rate swaps
Fair value hedges(1) - 89 - -
Not in a hedging relationship(2) - 3 (2) (1)
Cross currency swaps
Fair value hedges(1) - 41 - (2)
Forward currency contracts
Net investment hedges(3) 3 - - -
Not in a hedging relationship(2) 2 - (2) -
================================== ======== ============ ============= =============
Total 5 133 (4) (3)
================================== ======== ============ ============= =============
At 31 March 2020
====================================================
Current Non-current Current Non-current
assets assets liabilities liabilities
DERIVATIVE FINANCIAL INSTRUMENTS GBPm GBPm GBPm GBPm
================================== ======== ============ ============= =============
Interest rate swaps
Fair value hedges(1) - 121 - -
Not in a hedging relationship(2) - 2 (9) (3)
Cross currency swaps
Fair value hedges(1) - 88 - -
Forward currency contracts
Net investment hedges(3) 4 - - -
Not in a hedging relationship(2) 21 - (7) -
================================== ======== ============ ============= =============
Total 25 211 (16) (3)
================================== ======== ============ ============= =============
At 30 September 2020
Current Non-current Current Non-current
assets assets liabilities liabilities
DERIVATIVE FINANCIAL INSTRUMENTS GBPm GBPm GBPm GBPm
================================== ======== ============ ============= =============
Interest rate swaps
Fair value hedges(1) - 122 - -
Not in a hedging relationship(2) 2 - (9) (2)
Cross currency swaps
Fair value hedges(1) - 115 - -
Forward currency contracts
Net investment hedges(3) 3 - - -
================================== ======== ============ ============= =============
Total 5 237 (9) (2)
================================== ======== ============ ============= =============
1. Derivatives that are designated and effective as hedging
instruments carried at fair value (IFRS 9).
2. Derivatives carried at 'fair value through profit or loss'
(IFRS 9).
3. Derivatives that are designated and effective in net
investment hedges carried at fair value (IFRS 9).
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH
2021
9 FINANCIAL INSTRUMENTS (CONTINUED)
Amendments to IFRS 9, IAS 39 and IFRS 7 'Interest rate benchmark
reform'
A Group treasury led project is in progress to manage the
transition to alternative benchmark rates. Discussions are expected
to begin shortly with the syndicate banks regarding the GBP2,000m
borrowing facility. With regard to the derivative contracts, the
Group and all of its derivative counterparties have adopted the
ISDA 2020 IBOR Fallbacks Protocol. This protocol amends the
fallback provisions incorporated in the derivative contracts so
that when a particular IBOR rate ceases to exist or to represent
the underlying market, it will be replaced by an applicable risk
free rate plus a spread on the next reset date.
10 ACQUISITIONS AND SALE AND CLOSURE OF BUSINESSES
Acquisitions
There were no material acquisitions for the six months ended 31
March 2021. The total cash spent on acquisitions in the first half,
net of cash acquired, was GBP34m (six months to 31 March 2020:
GBP431m).
Sale and closure of businesses
As a result of the strategic review of the business, the Group
has continued to sell or exit its operations in a number of
countries, sectors or businesses in order to simplify its
portfolio. Activity in the period has included the sale of the
remaining US laundries business. The Group has recognised a net
gain of GBP15m on the sale of businesses (six months to 31 March
2020: GBP113m gain) offset by GBP1m exit costs (six months to 31
March 2020: GBP33m).
As at 31 March 2021, the Group has assets and liabilities
classified as held for sale in relation to certain businesses in
our Rest of the World region, as these disposals are highly
probable and expected to be completed within 12 months. The Group's
condensed consolidated balance sheet includes assets of GBP27m (31
March 2020: GBP94m) and liabilities of GBP6m (31 March 2020:
GBP40m) in respect of these businesses.
The sale process for some businesses in the Europe region that
were held for sale at 31 March 2020 was paused in the second half
of 2020. As a result, these businesses were no longer classified as
held for sale at 30 September 2020 and prior period comparatives
were restated as required by IFRS 5 'Non-current assets held for
sale and discontinued operations' to account for the relevant joint
ventures and associates using the equity method as they ceased to
be classified as held for sale.
As a result, the Group has restated prior period comparatives as
follows:
-- to reclassify the GBP33m carrying value of interests in joint
ventures and associates included within assets held for sale to the
Group's interests in joint ventures and associates; and
-- to recognise a GBP16m share of profit of joint ventures and
associates for the six months to 31 March 2020 and further GBP25m
for the year ended 30 September 2019 with the corresponding
increase in the Group's interests in joint ventures and associates.
This change has not impacted the Group's underlying results, which
already included these profits. As a result, as at 31 March 2020
interests in joint ventures and associates has increased to GBP394m
(GBP320m previously reported), assets held for sale has decreased
to GBP94m (GBP127m previously reported) and share of profit of
joint ventures and associates has increased to GBP20m (GBP4m
previously reported) for the six months to 31 March 2020.
11 STATUTORY AND UNDERLYING RESULTS
Six months to 31 March 2021
===================================================================
Adjustments
========================================
2021 2021
Statutory Underlying
Notes GBPm 1 2 3 4 5 6 GBPm
=================================== ======== =========== ===== ==== ===== ==== ====== ====== ============
Operating profit 168 41 2 78 1 - - 290
Net gain on sale and closure of
businesses 10 14 - - - - (14) - -
Net finance cost (49) - - - - - (7) (56)
=================================== ======== =========== ===== ==== ===== ==== ====== ====== ============
Finance income 4 - - - - - - 4
Finance costs (60) - - - - - - (60)
Other financing items 7 - - - - - (7) -
=================================== ======== =========== ===== ==== ===== ==== ====== ====== ============
Profit before tax 133 41 2 78 1 (14) (7) 234
Income tax expense (33) (11) - (18) (1) (2) 2 (63)
Tax rate 24.8% 26.9%
=================================== ======== =========== ===== ==== ===== ==== ====== ====== ============
Profit for the period 100 30 2 60 - (16) (5) 171
Profit attributable to equity
shareholders
of the Company 100 30 2 60 - (16) (5) 171
=================================== ======== =========== ===== ==== ===== ==== ====== ====== ============
Average number of shares
(millions) 1,784 1,784
BASIC EARNINGS PER SHARE (PENCE) 5 5.6 1.7 0.1 3.4 - (0.9) (0.3) 9.6
=================================== ======== =========== ===== ==== ===== ==== ====== ====== ============
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
11 STATUTORY AND UNDERLYING RESULTS (CONTINUED)
Six months to 31 March 2020
Adjustments
2020(1) 2020
Statutory Underlying
Notes GBPm 1 2 3 4 5 6 GBPm
============================================ ======== =========== ==== ===== ====== ==== ============
Operating profit 775 41 - 38 - - - 854
Net gain on sale and closure of
businesses 10 80 - - - - (80) - -
Net finance cost (68) - - - - - 3 (65)
============================================ ======== =========== ==== ===== ====== ==== ============
Finance income 2 - - - - - - 2
Finance costs (67) - - - - - - (67)
Other financing items (3) - - - - - 3 -
============================================ ======== =========== ==== ===== ====== ==== ============
Profit before tax 787 41 - 38 - (80) 3 789
Income tax expense (201) (8) - (10) - 31 (1) (189)
Tax rate 25.5% 24.0%
============================================ ======== =========== ==== ===== ====== ==== ============
Profit for the period 586 33 - 28 - (49) 2 600
Non-controlling interests (3) - - - - - - (3)
============================================ ======== =========== ==== ===== ====== ==== ============
Profit attributable to equity shareholders
of the Company 583 33 - 28 - (49) 2 597
============================================ ======== =========== ==== ===== ====== ==== ============
Average number of shares (millions) 1,588 1,588
BASIC EARNINGS PER SHARE (PENCE)(2) 5 36.7 2.1 - 1.8 - (3.1) 0.1 37.6
============================================ ======== =========== ==== ===== ====== ==== ============
1. Prior period comparatives have been restated as required by
IFRS 5 'Non-current assets held for sale and discontinued
operations' to account for joint ventures and associates using the
equity method retrospectively when they cease to be classified as
held for sale. Additional information is included in note 10.
2. Underlying constant currency earnings per share is based on a
Group constant currency profit attributable to equity shareholders
of the Company and includes negative constant currency adjustment
of GBP27m.
The Executive Committee manages and assesses the performance of
the Group using various underlying and other alternative
performance measures. These measures are not recognised under
EU-adopted IFRS and may not be directly comparable with alternative
performance measures used by other companies. Underlying and other
alternative performance measures are defined in the glossary of
terms on pages 37 and 38. Underlying operating profit is considered
to better reflect ongoing trading, facilitate meaningful year on
year comparison and hence provides financial measures that,
together with the results prepared in accordance
with adopted IFRS, provide better analysis of the results of the
Group. 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 group 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. Adjustments
from statutory to underlying results are explained further
below.
1. Acquisition related costs
Represent charges in respect of intangible assets acquired
through business combinations, direct costs incurred as part of a
business combination or other strategic asset acquisitions,
business integration costs and changes in consideration in relation
to past acquisition activity.
2. One-off pension charge
One-off pension charge in relation to GMP equalisation.
3. Cost action programme and COVID-19 resizing costs
Charges related to actions taken to adjust our cost base and
further cost actions taken to adjust our business to the new
trading environment in light of the COVID pandemic, see note 3 for
additional details.
4. Tax on share of profit of joint ventures
Reclassification of tax on share of profit of joint ventures to
income tax expense.
5. (Loss)/gain on sale and closure of businesses
These represent profits and losses on the sale of subsidiaries,
joint ventures, associates and other financial assets. See note 10
for additional details.
6. Other financing items including hedge accounting ineffectiveness
Represent financing items including hedge accounting
ineffectiveness and change in the fair value of investments.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
11 STATUTORY AND UNDERLYING RESULTS (CONTINUED)
Six months to
31 March
================
2021 2020
==========================================================
UNDERLYING EBITDA GBPm GBPm
========================================================== ======= =======
Underlying operating profit 290 854
Depreciation of property, plant and equipment and right
of use assets 210 221
Amortisation of intangible assets, contract fulfilment
assets and contract prepayments (excluding amortisation
of intangibles arising on acquisition) 157 152
Impairment losses - contract related 13 -
========================================================== ======= =======
Underlying EBITDA 670 1,227
========================================================== ======= =======
Six months to
31 March
================
2021 2020
===========================================
GROSS CAPEX GBPm GBPm
=========================================== ======= =======
Purchase of intangible assets 78 80
Purchase of contract fulfilment assets 97 146
Purchase of property, plant and equipment 97 171
Investment in contract prepayments 16 23
=========================================== ======= =======
Gross capex 288 420
=========================================== ======= =======
Six months to
31 March
================
2021 2020
=============================
FREE CASH FLOW CONVERSION GBPm GBPm
============================= ======= =======
Underlying free cash flow 359 186
Underlying operating profit 290 854
============================= ======= =======
Free cash flow conversion 124% 22%
============================= ======= =======
31 March
==================
2021 2020
=======================================================
NET DEBT TO EBITDA GBPm GBPm
======================================================= ======== ========
Underlying EBITDA for the prior year 1,418 2,459
Less: underlying EBITDA for the prior first half year (1,227) (1,234)
======================================================= ======== ========
Underlying EBITDA for the prior second half year 191 1,225
Underlying EBITDA for the current half year 670 1,227
12 months underlying EBITDA 861 2,452
======================================================= ======== ========
Net debt 2,627 4,876
======================================================= ======== ========
Net debt to EBITDA ratio (times) 3.0 2.0
======================================================= ======== ========
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
12 ORGANIC REVENUE AND ORGANIC
PROFIT
Geographical segments
North Rest Central
America Europe of World Activities Group
GBPm GBPm GBPm GBPm GBPm
====================================== ====================== ======== ========== ============ ========
SIX MONTHS TO 31 MARCH 2021
Combined sales of Group and share of
equity
accounted joint ventures 5,160 2,260 1,131 - 8,551
% decrease reported rates (36.1)% (29.0)% (16.2)% - (32.2)%
% decrease constant currency (33.0)% (28.9)% (11.2)% - (29.6)%
Organic adjustments (35) - (1) - (36)
Organic revenue 5,125 2,260 1,130 - 8,515
% organic change (32.8)% (32.8)% (9.4)% - (30.4)%
====================================== ====================== ======== ========== ============ ========
SIX MONTHS TO 31 MARCH 2020 (1)
Combined sales of Group and share of
equity
accounted joint ventures 8,080 3,185 1,350 - 12,615
Currency adjustments (378) (7) (76) - (461)
Constant currency underlying revenue 7,702 3,178 1,274 - 12,154
Organic adjustments (71) 186 (27) - 88
Organic revenue 7,631 3,364 1,247 - 12,242
====================================== ====================== ======== ========== ============ ========
SIX MONTHS TO 31 MARCH 2021
Regional underlying operating profit 245 32 53 (37) 293
Share of loss of associates (3) - - - (3)
Group underlying operating profit 242 32 53 (37) 290
Underlying operating margin
(excluding associates) 4.7% 1.4% 4.7% - 3.4%
% decrease reported rates (62.5)% (80.6)% (28.4)% - (66.0)%
% decrease constant currency (60.7)% (80.4)% (24.3)% - (64.5)%
Organic adjustments (1) - - - (1)
Regional underlying organic operating
profit
(excluding associates) 244 32 53 (37) 292
Group underlying organic operating
profit
(including associates) 241 32 53 (37) 289
% organic change (60.6)% (83.0)% (22.1)% - (65.4)%
====================================== ====================== ======== ========== ============ ========
SIX MONTHS TO 31 MARCH 2020 (1)
Regional underlying operating profit 654 165 74 (42) 851
Share of profit of associates - 3 - - 3
Group underlying operating profit 654 168 74 (42) 854
Underlying operating margin
(excluding associates) 8.1% 5.2% 5.5% - 6.7%
Currency adjustments (31) (2) (4) - (37)
Regional constant currency underlying
operating
profit (excluding associates) 623 163 70 (42) 814
Group constant currency underlying
operating
profit (including associates) 623 166 70 (42) 817
Organic adjustments (4) 25 (2) - 19
Regional underlying organic operating
profit
(excluding associates) 619 188 68 (42) 833
Share of profit from associates -
constant
currency - 3 - - 3
Group underlying organic operating
profit
(including associates) 619 191 68 (42) 836
====================================== ====================== ======== ========== ============ ========
1. Prior period comparatives have reclassified Middle East from
Rest of World region into Europe region.
Compass Group PLC
Condensed Consolidated Financial Statements (continued)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31 MARCH 2021
13 RELATED PARTY DISCLOSURES
Full details of the Group's related party relationships,
transactions and balances are given in the Group's financial
statements for the year ended 30 September 2020. There have been no
material changes in these relationships for the six months to 31
March 2021 or up to the date of this report. 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.
14 POST BALANCE SHEET EVENTS
There are no material post balance sheet events.
15 EXCHANGE RATES
Six months to
31 March
====================
2021 2020
====================================================== ========= =========
AVERAGE EXCHANGE RATE FOR THE PERIOD(1)
Australian Dollar 1.81 1.93
Brazilian Real 7.44 5.56
Canadian Dollar 1.74 1.71
Chilean Peso 1,003.19 1,008.04
Euro 1.13 1.16
Japanese Yen 142.45 139.03
New Zealand Dollar 1.93 2.02
Norwegian Krone 11.94 11.99
Turkish Lira 10.46 7.67
UAE Dirham 4.95 4.71
US Dollar 1.35 1.28
CLOSING EXCHANGE RATE AS AT THE OF THE PERIOD(1)
Australian Dollar 1.81 2.03
Brazilian Real 7.79 6.43
Canadian Dollar 1.73 1.76
Chilean Peso 991.17 1,056.84
Euro 1.17 1.13
Japanese Yen 152.46 133.86
New Zealand Dollar 1.97 2.09
Norwegian Krone 11.78 13.02
Turkish Lira 11.42 8.17
UAE Dirham 5.07 4.55
US Dollar 1.38 1.24
====================================================== ========= =========
1. 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.
Glossary of terms
Capital employed Total equity shareholders' funds adjusted for net
debt, post employment benefit obligations net of
associated deferred tax, amortised intangibles arising
on acquisition, impaired goodwill and excluding
the Group's non-controlling partners' share of net
assets and net assets of discontinued operations.
Constant currency Restates the prior year results to the current year's
average exchange rates.
============================================================
Free cash flow Calculated by adjusting operating profit for non-cash
items in profit, cash movements in provisions, contract
prepayments and costs to obtain client contracts,
post employment benefit obligations and working
capital, cash purchases and proceeds from disposal
of non-current assets, net cash interest, net cash
tax, payment of lease principal amounts, dividends
received from joint ventures and associated undertakings
and dividends paid to non-controlling interests.
============================================================
Free cash flow conversion Underlying free cash flow expressed as a percentage
of underlying operating profit.
============================================================
Gross capital expenditure Includes the purchase of intangible assets, contract
fulfilment assets, property, plant and equipment
and investment in contract prepayments.
============================================================
Interest cover covenant The ratio of EBITDA to net finance costs after certain
test accounting adjustments.
============================================================
Leverage covenant test The ratio of net debt to EBITDA after certain accounting
adjustments.
============================================================
Like for like revenue Calculated by adjusting organic revenue growth for
growth new business wins and lost business.
============================================================
Net capital expenditure Gross capital expenditure less proceeds from sale
of property, plant and equipment, intangible assets
and cash proceeds from derecognition of contract
fulfilment assets and contract prepayments.
============================================================
Net debt Bank overdrafts, bank and other borrowings, lease
liabilities and derivative financial instruments,
net of cash and cash equivalents.
============================================================
Net debt to EBITDA Net debt divided by 12 months underlying EBITDA.
============================================================
NOPAT Net operating profit after tax (NOPAT) is calculated
as underlying operating profit from continuing operations
less operating profit of non-controlling interests
before tax, net of income tax at the underlying
rate of the year.
============================================================
Organic profit growth Calculated by adjusting underlying operating profit
for acquisitions (excluding current year acquisitions
and including a full period in respect of prior
year acquisitions), sale and closure of businesses
(excluded from both periods) and exchange rate movements
(translating the prior period at current year exchange
rates) and compares the current year results against
the prior year. In addition, where applicable, a
53rd week has been excluded from the prior year's
underlying operating profit.
============================================================
Organic profit Calculated by adjusting underlying operating profit
for acquisitions (excluding current year acquisitions
and including a full period in respect of prior
year acquisitions), sale and closure of businesses
(excluded from both periods) and exchange rate movements
(translating the prior period at current year exchange
rates).
============================================================
Organic revenue Calculated by adjusting underlying revenue for acquisitions
(excluding current year acquisitions and including
a full period in respect of prior year acquisitions),
sale and closure of businesses (excluded from both
periods) and exchange rate movements (translating
the prior period at current year exchange rates).
============================================================
Organic revenue growth Calculated by adjusting underlying revenue for acquisitions
(excluding current year acquisitions and including
a full period in respect of prior year acquisitions),
sale and closure of businesses (excluded from both
periods) and exchange rate movements (translating
the prior period at current year exchange rates)
and compares the current year results against the
prior year. In addition, where applicable, a 53rd
week has been excluded from the prior year's underlying
revenue.
============================================================
ROCE Return on capital employed (ROCE) divides NOPAT
by the 12 month average capital employed.
============================================================
Specific adjusting o acquisition related costs
items o one-off pension charge
o cost action programme and COVID-19 resizing costs
o tax on share of profit of joint ventures
o gain/(loss) on sale and closure of businesses
o other financing items including hedge accounting
ineffectiveness and change in the fair value of
investments
============================================================
Underlying basic earnings Excludes specific adjusting items and the tax attributable
per share to those items.
============================================================
Underlying cash tax Based on underlying cash tax and underlying profit
rate before tax.
============================================================
Underlying depreciation Excludes specific adjusting items.
and amortisation
============================================================
Underlying EBITDA Based on underlying operating profit, adding back
underlying impairment, depreciation and amortisation
of intangible assets and contract prepayments.
============================================================
Underlying effective Based on underlying tax charge and underlying profit
tax rate before tax.
============================================================
Glossary of terms (continued)
Underlying free cash Free cash flow adjusted for the cost action programme
flow and COVID-19 resizing costs.
Underlying net finance Excludes specific adjusting items.
cost
===========================================================
Underlying operating Based on underlying revenue and underlying operating
margin profit excluding share of profit after tax of associates.
===========================================================
Underlying operating Includes share of profit after tax of associates
profit - Group and profit before tax of joint ventures, but excludes
the specific adjusting items.
===========================================================
Underlying operating Includes share of profit before tax of joint ventures,
profit - Region but excludes the specific adjusting items and profit
after tax of associates.
===========================================================
Underlying profit before Excludes specific adjusting items.
tax
===========================================================
Underlying revenue The combined sales of Group and share of joint ventures.
===========================================================
Underlying tax charge Excludes tax attributable to specific adjusting
items.
===========================================================
Important Notices
Certain statements contained in this Announcement constitute
"forward-looking statements" with respect to the financial
condition, performance, strategic initiatives, objectives, results
of operations and business of the Company. All statements other
than statements of historical facts included in this Announcement
are, or may be deemed to be, forward-looking statements. Without
limitation, any statements preceded or followed by or that include
the words "targets", "plans", "believes", "expects", "aims",
"intends", "anticipates", "estimates", "projects", "will", "may",
"would", "could" or "should", or words or terms of similar
substance or the negative thereof, are forward-looking statements.
Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial
condition, dividend policy, losses and future prospects; and (ii)
business and management strategies and the expansion and growth of
the Company's operations. Such forward-looking statements involve
risks and uncertainties that could significantly affect expected
results and are based on certain key assumptions. Many factors
could cause actual results, performance or achievements to differ
materially from those projected or implied in any forward-looking
statements. The important factors that could cause the Company's
actual results, performance or achievements to differ materially
from those in the forward-looking statements include, among others,
the macroeconomic and other impacts of COVID, economic and business
cycles, the terms and conditions of the Company's financing
arrangements, foreign currency rate fluctuations, competition in
the Company's principal markets, acquisitions or disposals of
businesses or assets and trends in the Company's principal
industries. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date hereof. In light of
these risks, uncertainties and assumptions, the events described in
the forward-looking statements in this Announcement may not occur.
The forward-looking statements contained in this Announcement speak
only as of the date of this Announcement. The Company and its
directors expressly disclaim any obligation or undertaking to
update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise, unless
required to do so by applicable law or regulation, the Listing
Rules, the Market Abuse Regulation, the Disclosure Guidance and
Transparency Rules, the rules of the London Stock Exchange or the
FCA.
This information is provided by RNS, the news service of the
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END
IR ZZGMKNMRGMZM
(END) Dow Jones Newswires
May 12, 2021 02:00 ET (06:00 GMT)
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