Sustainable growth 2011 Report Annual Compass Group PLC Annual Report 2011 www.compass-group.com/annualreport11 Find this Report online at Fax 569 +44 956 1932 Tel +44 1932 573 000 573 +44 1932 Tel Registered in England and Wales No. 4083914 United Kingdom Surrey KT16 Surrey9BQ KT16 Chertsey Guildford Street Compass House Compass Group PLC Our business 50 We operate in around 50 countries 470,000 We have more than 470,000 great people delivering great service every day 45 ,000 We operate in over 45,000 client locations 4bn This Report is printed on a combination of Revive 100 White Silk and Revive 100 Premium White Uncoated. Revive 100 White Silk is produced using 100% recycled We serve more than waste, the pulp is bleached using a Totally Chlorine Free (TCF) process. Revive 100 Premium White Uncoated is produced using 100% de-inked post-consumer waste, 4 billion meals a year the pulp is bleached using an Elemental Chlorine Free (ECF) process. Both materials are Forest Stewardship Council® (FSC) certified and are produced at mills that hold the ISO 14001 environmental management standard. Printed in the UK by Pureprint Group using vegetable inks and their and printing technology. Pureprint Group is ISO 9001:2000, ISO 14001, EMAS and FSC certified. Compass Group PLC Focusing on sustainable growth Millions of people around the world rely on us every day to provide their breakfasts, lunches and dinners. As more and more organisations are choosing to outsource their food and support services to us, we retain our focus on disciplined, sustainable growth to meet their needs. Contents 1 Compass Group PLC 4 Performance highlights See this Report and our full Corporate 8 Our sectors Responsibility Report online at: 10 Chairman’s statement www.compass-group.com/ 14 Chief Executive’s statement annualreport11 24 Business review 32 Corporate responsibility 42 Board of Directors 43 Index to Report 44 Governance 61 Consolidated financial statements 118 Parent Company financial statements 126 Shareholder information 135 Index to the financial statements Compass Group PLC Annual Report 2011 1 Sustainable growth Creating memorable experiences We’re all about great food. We provide a wide choice of high quality, nutritious and well balanced food to meet the needs of our consumers throughout their day. Wellness and nutrition We offer our customers healthier choices and give them easy to understand nutritional information, for example, with our newly launched ‘Whole+Sum’ concept. Developed by our own dieticians, in partnership with external experts, it offers consumers the opportunity to create their own meal with a perfect balance of vegetables, whole grains and protein, giving them a consistent and healthy nutritional profile regardless of the combination they choose. So, whatever they fancy, their meal won’t exceed a certain calorie count and fat content, ensuring they can enjoy their choice of our food without having to worry about its nutritional value. They also don’t lose out on flavour with recipes featuring dishes from across the world, including the Mediterranean, the Middle East, Latin America and Asia, ensuring we always offer varied and delicious meals. 2 Compass Group PLC Annual Report 2011 As well as serving food that tastes great, it’s important to serve food that makes people feel great. 20m+ consumers served every day Compass Group PLC Annual Report 2011 3 Performance highlights Highlights 2011 Group performance On a constant currency basis, underlying operating profit Revenues increased by £86 million (8.6%) from the following key areas: 9.2% revenue growth on a constant currency basis 11 £15,833m 10 £14,468m £40m £23m 09 £13,444m from net new business from our existing base estate Total underlying operating profit 8.6% increase in underlying operating profit on a constant currency basis 11 £1,091m 10 £1,003m £4m £19m 09 £884m of above unit cost savings from acquisitions net of restructuring costs Compass has had another good year, despite the headwinds of high food cost inflation, a mixed economic backdrop and the impact of the tragic events in Japan. We have delivered further progress in operating profit and strong free cash flow generation. Regional performance North America Revenue £6,849m (2010: £6,369m) Underlying operating profit £538m North America (2010: £491m) Continental Europe UK & Ireland % of Group revenue Rest of the World 43% (2010: 44%) 1 Constant currency restates the prior year results to 2011’s 3 Underlying operating profit by region excludes share of 4 Underlying operating margin is based on revenue and average exchange rates. profit of associates, UK re-organisation, amortisation of operating profit excluding share of profit of associates, 2 Total underlying operating profit includes share of profit of intangibles arising on acquisition, acquisition transaction UK re-organisation, amortisation of intangibles arising on associates but excludes UK re-organisation, amortisation costs, adjustment to contingent consideration on acquisition, acquisition transaction costs, adjustment to of intangibles arising on acquisition, acquisition transaction acquisition and share-based payments expense – contingent consideration on acquisition and share-based costs, adjustment to contingent consideration on acquisition non-controlling interest call option. payments expense – non-controlling interest call option. and share-based payments expense – non-controlling interest call option. 4 Compass Group PLC Annual Report 2011 Underlying operating margin Dividends per ordinary share Operating with scale in 6.9% consistent with last year 10.3% increase in the full year dividend per ordinary share around 50 countries in 11 6.9% 11 19.3p both developed and, 10 6.9% 10 17.5p increasingly, emerging 09 6.5% 09 13.2p markets, we are well placed Reported profit before tax Free cash flow to benefit from the growing 4.9% increase in reported profit 6.9% decrease in free cash flow before tax outsourcing opportunity in 11 £958m 11 £693m food and support services, 10 £913m 10 £744m delivering an efficient and 09 £773m 09 £593m cost-effective solution to the Underlying basic earnings per share multi-service requirements 9.2% increase in underlying basic earnings per share of our local, regional and 11 39.0p multinational clients. 10 35.7p 09 30.0p Continental Europe UK & Ireland Rest of the World Revenue Revenue Revenue £3,717m £1,951m £3,316m (2010: £3,506m) (2010: £1,782m) (2010: £2,811m) Underlying operating profit Underlying operating profit Underlying operating profit £259m £114m £234m (2010: £248m) (2010: £114m) (2010: £204m) % of Group revenue % of Group revenue % of Group revenue 24% 12% 21% (2010: 24%) (2010: 12%) (2010: 20%) 5 Underlying basic earnings per share excludes UK 6 Organic growth is calculated by adjusting for acquisitions 7 Unless stated otherwise, all figures in this document re-organisation, amortisation of intangibles arising on (excluding current year acquisitions and including a full relate to the year ended 30 September 2011. acquisition, acquisition transaction costs, adjustment to year in respect of prior year acquisitions), disposals 8 The data shown on pages 4, 5 and 18 to 21 relates contingent consideration on acquisition and share-based (excluded from both periods) and exchange rate to the continuing business only. payments expense – non-controlling interest call option, movements (translating the prior year at current year hedge accounting ineffectiveness, the change in the fair exchange rates) and compares the current year results value of investments and non-controlling interest put against the prior year. options, gain on remeasurement of joint venture interest on acquisition of control and the tax attributable to these amounts. Compass Group PLC Annual Report 2011 5 Sustainable growth Broadening our offer 192% growth in our multi-service Increasingly, organisations are revenue since 2006 relying on us to provide a range of soft support services such as cleaning, reception services and building maintenance, in addition to our core foodservice. Compass Service Our delivery Framework model is based on The ‘Compass Service Framework’ is our ‘self-performance’ ‘support services toolkit’ which outlines the services we offer, how we provide them meaning that and the management processes we have in place to ensure our services are meeting wherever possible, our clients’ expectations. There are many benefits from the ‘Compass Service our people are looking Framework’ for both us and our clients. It is a proven method of capturing after your people. innovations from around the world and sharing and implementing these across 6 Compass Group PLC Annual Report 2011 our support services clients globally. ‘Continuous improvement’ is not a one-off project for us; it is an integral part of how we operate. It provides us with a way of auditing and checking that we are meeting the demands made of us and ensures that we are providing a consistently great service. It also enables us to deploy new services or new contracts, giving our clients the best possible service as quickly as possible. Compass Group PLC Annual Report 2011 7 Our sectors Our sectors Continuing to build on our sector expertise, while recognising that each of them has specific requirements, is a key driver of differentiation for our clients and fully underpins our drive for innovation and operating efficiency. Business Education For consumers, this means speedier access & Industry to sector focused best practices and Group revenue 2011 Group revenue