+ + Our formula for growth Annual Report 2013 Contents Strategic report Corporate governance Financial statements Shareholder information 01 Compass Group PLC 45 Index to corporate 71 Index to financial statements 139 Index to shareholder 02 Our regions governance 72 Directors’ responsibilities information 04 Our sectors 46 Governance and Directors’ 73 Auditor’s report 140 Shareholder information 06 Chairman’s statement Report 75 Consolidated 142 Notice of Annual 08 Our Board 55 Directors’ Remuneration financial statements General Meeting 10 Market perspective Report 132 Parent Company 12 Business model financial statements 14 Our strategy 20 Acting responsibly 30 Chief Executive’s statement 32 Regional reviews 38 Our formula for identifying and managing risk 40 Finance Director’s statement 50 Countries 50,000+ Client locations 500,000+ Great people delivering great service 4bn+ Meals served a year See this Report and our full Corporate Responsibility Report online at www.compass-group.com/ar13 Compass Group PLC Annual Report 2013 Strategic report 1 Compass Group PLC We deliver great food and support services to millions of people around the world every day. We have a clear and consistent formula in place to drive sustainable growth. Revenue Underlying operating margin Underlying basic earnings per share 13 £17,557m 13 7.1% 13 47.7p 12 £16,905m 12 6.9% 12 42.6p 11 £15,833m 11 6.9% 11 39.0p Underlying operating profit Reported profit before tax Dividends per ordinary share 13 £1,265m 13 £721m 13 24.0p 12 £1,178m 12 £789m 12 21.3p 11 £1,091m 11 £958m 11 19.3p 2 Compass Group PLC Annual Report 2013 Strategic report Our regions With differing opportunities and challenges in each geographic region, the Group’s management structure brings an incisive focus to each area. With around 90% of revenue generated outside the UK, Compass is a truly international business with operations in around 50 countries. The business is managed in three regions, with each comprising countries that are at similar stages of development and display similar market dynamics. North America £8,150m 47% Revenue % of Group revenue (2012: £7,517m) (2012: 44%) North America is the core growth engine for the Group. We have a market leading business there, which delivers excellent levels of growth and steady margin expansion. Having first established the business in 1994, we are now the 11th largest private sector employer in the USA and serve around six million meals a day. Find out more on page 32 See page 41 for relevant financial definitions. Compass Group PLC Annual Report 2013 Strategic report 3 Our regions Europe & Japan Fast Growing & Emerging £6,039m 34% £3,368m 19% Revenue % of Group revenue Revenue % of Group revenue (2012: £6,243m) (2012: 37%) (2012: £3,145m) (2012: 19%) Our Europe & Japan region covers 23 countries. Despite The Fast Growing & Emerging region offers excellent difficult economic conditions in Europe, our teams growth potential and is likely to become a larger part of there are doing an excellent job in mitigating the impact the Group as we expand our presence in these markets. and we see good medium term growth opportunities Revenue has doubled and profits quadrupled since 2006 across the region. We continue to see steady progress and we are making significant investment in management in our business in Japan. and infrastructure to support our growth. Find out more on page 34 Find out more on page 36 See page 41 for relevant financial definitions. 4 Compass Group PLC Annual Report 2013 Strategic report Our sectors Our sectorised approach is a key differentiator. In recognition that each sector has specific requirements, we assign specialists to drive tailor made solutions and operating efficiency. For consumers, this means quicker access to sector focused best Business Education practices and market & Industry leading innovations We provide a choice of quality, nutritious From kindergarten to college, we provide and well balanced food for employees fun, nutritious dining solutions that help that are delivered during their working day. In addition, where support academic achievement at clients seek broader service offerings, the the highest levels. Our simple set of by our teams, from Compass Service Framework enables us commitments – Eat, Learn, Live – helps to deliver a range of support services to the us to educate young people about how highest standard, at the best value, on an to have a happy, safe and healthy lifestyle award winning international scale. while contributing to a sustainable world. chefs to service practice experts. Major sector brands Major sector brands 41% 16% Group revenue Group revenue (2012: 42%) (2012: 16%) Compass Group PLC Annual Report 2013 Strategic report 5 Our sectors Healthcare Sports Defence, Offshore & Seniors & Leisure & Remote We are specialists in helping hospitals in Operating at some of the world’s most Through our established health and the public and private sectors on their prestigious sporting and leisure venues, safety culture, we are a market leader journey of managing efficiency and exhibition centres, visitor attractions and in providing food and support services enhancing quality across a range of major events, we have an enviable to major companies in the oil and gas services. With a significant presence in reputation for providing outstanding and mining and construction industries, the growing senior living market, we also hospitality and true service excellence. operating in some of the most demanding provide services to residential homes and environments in the world. For our defence home meal delivery services. sector clients, we are a partner who meets the challenges of running efficient operations outside areas of conflict. Major sector brands Major sector brands Major sector brands 20% 10% 13% Group revenue Group revenue Group revenue (2012: 19%) (2012: 10%) (2012: 13%) 6 Compass Group PLC Annual Report 2013 Strategic report Chairman’s statement Our formula for success Thanks to the dedication of our people, we have grown stronger as a company, delivering consistent results and creating substantial value for our shareholders. 1 year 11.8% 2 years 37.1% Our values 30 3 years 43.8% Openness, trust Position in FTSE 100 Index as at Compass share price performance and integrity 30 September 2013 (2012: 32) vs FTSE 100 Index over the last 3 years Passion for quality Share price Win through teamwork Compass Group share price performance vs the FTSE 100 Index 2012 2013 Can do safely 950 900 Responsibility 850 800 750 700 650 600 S O N D J F M A M J J A S FTSE (rebased) Compass FTSE 100 has been rebased to the Compass Group share price on 28 September 2012 (683.50p) Compass Group PLC Annual Report 2013 Strategic report 7 I am delighted to report, in what is my last Chairman’s statement Leadership for Compass, another successful year in which we have grown revenue During the year, James Crosby stepped down from the Board and and operating profit, delivering a margin of over 7% for the first time. Sir Ian Robinson was appointed both Senior Independent Director This is a remarkable achievement and I am immensely proud of the and Chairman of the Remuneration Committee. Sir Ian has been a hard work and commitment shown by my colleagues around Non-Executive Director of Compass since December 2006 and has the Group. brought a wealth of experience to the Board. Since I joined Compass in 2005, we have faced some extraordinary I am also delighted to welcome Paul Walsh to the Group as my challenges. We first rebuilt the foundations of the business on a successor. Paul will join as a Non-Executive Director from 1 January stronger and more sustainable footing, putting the creation of 2014 and will become Non-Executive Chairman at the conclusion shareholder value as our priority. We implemented new governance of the Annual General Meeting on 6 February 2014. processes and took positive action to rebuild our reputation. We exited non-core businesses and countries to bring a greater focus and Paul has had an extensive career, most recently as Chief Executive discipline to our growth. Our management team, led by Group Chief Officer of Diageo plc. His experience leading one of the UK’s largest Executive Richard Cousins, put in place a consistent, and now proven, international companies through a period of significant global expansion strategy with food at our core allied to a growing support services makes him an excellent addition to our Board and I wish him every business, recognising the attractive structural growth opportunities success in his role as Chairman of Compass. of each. Our business model is robust. The Management and Our Board is supported by the Group’s Executive Board, led by our Performance (MAP) framework introduced process and efficiency and Group Chief Executive Richard Cousins and by strong leadership teams continues to be a key element of our success. Over the years, we have across our geographies. We have worked hard to put in place effective faced significant economic challenges but, thanks in large part to the succession and development programmes and the continued strong dedication of our people, we have grown stronger as a company, results we have achieved are testament to these efforts. delivering consistent results and creating substantial value for our Shareholders. As I prepare to hand over the Chairmanship to my Our people successor, Paul Walsh, I am confident that I am leaving the business in very good shape. Over the years I have spent as Chairman of Compass, it has been my privilege to meet many of our people across the world. I have been Commitment to corporate responsibility consistently impressed by the quality and commitment of our teams. Our people are a key element of our formula for success and, on behalf Corporate responsibility underpins our business, driving our decisions of the Board, I would like to thank them for their continued dedication and enabling us to achieve our strategic goals in a responsible and and add my personal thanks for what we have achieved together.