1st Mar 2006 07:02
Compass Group PLC01 March 2006 COMPASS GROUP PLC ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS") PRELIMINARY RESTATEMENT OF 2005 FINANCIAL INFORMATION Compass Group PLC ("Compass") has adopted International Financial ReportingStandards ("IFRS") with effect from 1 October 2005. IFRS is the requiredreporting basis for all EC listed companies for financial years commencing on orafter 1 January 2005. In line with best practice and to facilitate comparison offuture results with prior periods, Compass has today issued its results for theyear to 30 September 2005 and the six months to 31 March 2005 prepared underIFRS. These results were announced previously under UK GAAP. Under IFRS, the underlying operating profit for the year to 30 September 2005(excluding goodwill amortisation, goodwill impairment and UK GAAP exceptionalitems) is £654 million compared to £711 million under UK GAAP. The reduction isprimarily due to the share-based payments charge and proportionate consolidationof certain joint ventures partly offset by the reduced pension service charge. Under IFRS, net assets at 30 September 2005 are £2,278 million compared to£2,284 million under UK GAAP. The inclusion of the full pension fund deficit andthe liability in respect of put options held by certain minority shareholdersare largely offset by the reversal of the goodwill amortisation charge for 2005and reversal of the proposed dividend accrual. The change to IFRS has a minimal impact on free cash flow generation. Compass will report solely under IFRS for the six months to 31 March 2006 andpresent its first Annual Report under IFRS for the year ending 30 September2006. FULL YEAR Reported Restated Year ending 30 September 2005 UK GAAP IFRSRevenue £12,704m £12,394m Operating profit- After goodwill amortisation and exceptional items £302m £501m- Before goodwill amortisation and exceptional items £711m £654m Profit attributable to equity holders of the Company- After goodwill amortisation and exceptional items £1m £195m- Before goodwill amortisation and exceptional items £411m £345m Basic earnings per share- After goodwill amortisation and exceptional items 0.0p 9.0p- Before goodwill amortisation and exceptional items 19.1p 16.0p SUMMARY OF CHANGESIncome Statement Year ending 30 September 2005 Operating profit Attributable earnings (before goodwill (before goodwill amortisation and amortisation and exceptional items) exceptional items) £m £mUnder UK GAAP 711 411Share-based payments charge (46) (46)Joint venture accounting (27) -Pension charge 15 1Financial instruments - (10)Income tax (other than tax on joint ventures) - (11)Other 1 -Under IFRS 654 345 IFRS requires the Group to record a charge for share-based payments equivalentto the fair value of the award as at the date of grant. Under UK GAAP, no chargearose on shares granted under the Group's share option plans or SAYE orequivalent overseas schemes. The Group has interests in a number of companies where it shares control withpartners. Under UK GAAP, the Group consolidated 100% of the turnover, results,assets and liabilities where the Group actually exercised dominant influence,with the partner's share being shown as minority interest. Under IFRS, the Groupis required to follow the legal form of the agreements and will in certaininstances consolidate only its share of turnover, results, assets andliabilities. This has no impact on attributable earnings due to elimination ofthe minority interest's share of profits. The movement in the operating charge for pensions reflects the change in servicecharge for defined benefit pension schemes of £15 million. This is mostly offsetby an increase in net finance costs in relation to pensions scheme assets andliabilities of £14 million. The effect of IAS 39 Financial Instruments is disclosed for the first time andthere is no material impact on either the Group's net assets or net debt at 30September 2005. The IFRS income statement for the year to 30 September 2005reflects an additional interest cost of £6 million relating to the unwinding ofthe discount on put option liabilities and £4 million for exchange losses onforeign currency borrowings that did not qualify as hedges under IAS 39 in theperiod. Under IAS 12 certain temporary timing differences that previously were notrecognised under UK GAAP will be recognised. In addition, IAS 12 does not allowdiscounting of deferred tax balances, previously adopted by the Group under UKGAAP. Balance Sheet As at 30 September 2005 Net assets £mNet assets under UK GAAP 2,284Share-based payments 16Pension provision and related adjustments (283)Joint ventures (45)Financial instruments (10)Put options (163)Income tax 11Minority interest 73Goodwill amortisation and impairment 260Proposed dividend 140Other (5)Net assets under IFRS 2,278 The pension adjustments arise from the recognition of the full pension funddeficit on the balance sheet at the end of the year. The underlying actuarialassumptions remain unchanged. The Group has entered into arrangements with minority shareholders giving themthe right to require the Group to potentially acquire their interests at somepoint in the future. The present value of these 'put' options is recorded as afinancial liability, and is reflected as a deduction from equity. It is expectedthat the majority of the remaining liability for put options will be eliminatedduring the year to 30 September 2006 on completion of the acquisition of theremaining interest in Levy Restaurants in the United States. The movement on goodwill represents reversal of the UK GAAP amortisation charge,together with an increase in the impairment charge made under UK GAAP. UnderIFRS, goodwill is subject to annual impairment reviews rather than amortisedover its estimated life. Dividends declared after the balance sheet date are no longer recognised as aliability in the financial statements, as there is no obligation at the balancesheet date. HALF YEAR Reported RestatedSix months ending 31 March 2005 UK GAAP IFRSRevenue £6,191m £6,043m Operating profit- After goodwill amortisation and exceptional items £192m £300m- Before goodwill amortisation and exceptional items £328m £300m Profit before tax- After goodwill amortisation and exceptional items £41m £155m- Before goodwill amortisation and exceptional items £177m £155m Basic earnings per share- After goodwill amortisation and exceptional items 1.9p 7.2p- Before goodwill amortisation and exceptional items 8.2p 7.2p SUMMARY OF CHANGESIncome Statement Six months ending 31 March 2005 Operating profit Attributable earnings (before goodwill (before goodwill amortisation and amortisation and exceptional items) exceptional items) £m £mUnder UK GAAP 328 177Share-based payments (23) (22)Joint venture accounting (12) -Pension charge 6 (3)Financial instruments - 5Income tax (other than tax on joint ventures) - (3)Other 1 1Under IFRS 300 155 The IFRS income statement for the six months to 31 March 2005 includes anadditional interest cost of £3 million relating to the unwinding of the discounton put option liabilities and £7 million for exchange gains on foreign currencyborrowings that did not qualify as hedges under IAS 39 in the period. Balance Sheet As at 31 March 2005 Net assets £mNet assets under UK GAAP 2,447Share-based payments 16Pension provision and related adjustments (160)Joint ventures (44)Financial instruments (12)Put options (153)Income tax 17Minority interest 69Goodwill amortisation 136Proposed dividend 71Other (4)Net assets under IFRS 2,383 SEGMENT REPORTINGPRIMARY SEGMENT ALLOCATION OF IFRS ADJUSTMENTSYear ending 30 September 2005 Unallocated North United Continental Rest of corporate America Kingdom Europe the world overheads Total £m £m £m £m £m £mREVENUEExternal revenueAs reported UK GAAP 3,937 3,292 3,587 1,888 12,704Joint venture accounting - (38) (59) (213) (310)IFRS basis 3,937 3,254 3,528 1,675 12,394 Operating profit(beforegoodwill amortisation andexceptional items)As reported UK GAAP 207 207 190 107 - 711Central overheads 13 9 24 6 (52) - 220 216 214 113 (52) 711IFRS adjustmentsShare-based payments (11) (14) (9) (6) (6) (46)Joint venture accounting - (7) (1) (19) - (27)Pension charge 8 4 3 - - 15Other adjustments (1) 1 2 (1) - 1 (4) (16) (5) (26) (6) (57)IFRS basis 216 200 209 87 (58) 654 DETAILED IFRS RESTATEMENT AND PRESENTATION A document setting out full details of the Group's income statement, statementof recognised income and expense, balance sheet and cash flow statement for theyear ended 30 September 2005 and the six months ended 31 March 2005 on arestated IFRS basis can be found in the Investor Relations section of ourcorporate website www.compass-group.com. This document includes: - Summary of significant differences between UK GAAP and IFRS- Restated IFRS information- Reconciliation of restated financial information from UK GAAP to IFRS- Presentation of information prepared under UK GAAP in IFRS format. The detailed document is accompanied by a short presentation explaining the mainchanges arising from the move to UK GAAP from IFRS. NOTES (a) Forward looking statements This Preliminary Statement Press Release contains forward looking statementswithin the meaning of Section 27A of the Securities Act 1933, as amended, andSection 21E of the Securities Exchange Act 1934, as amended. These statementsare subject to a number of risks and uncertainties and actual results and eventscould differ materially from those currently being anticipated as reflected insuch forward looking statements. The terms 'expect', 'should be', 'will be', 'islikely to' and similar expressions identify forward looking statements. Factorswhich may cause future outcomes to differ from those foreseen in forward lookingstatements include, but are not limited to: general economic conditions andbusiness conditions in Compass Group's markets; exchange rate fluctuations;customers' and clients' acceptance of its products and services; the actions ofcompetitors; and legislative, fiscal and regulatory developments. (b) A presentation for analysts and investors will take place at 11:30 am (GMT/London) on Wednesday 1 March 2006 at the King Edward Hall, Merrill Lynch, 2 KingEdward Street, London, EC1A 1HQ. The live presentation can also be accessed via a webcast starting at 11:30 am: • To view the presentation slides and/or listen to a live audio webcast of the presentation, go to www.compass-group.com or www.cantos.com. • Please note that remote listeners will not be able to ask questions during the Q&A session. • A webcast replay of the presentation will be available for six months, at www.compass-group.com and www.cantos.com. Enquiries: Compass Group PLC + 44 (0) 1932 573000Investor/Analysts: Andrew MartinMedia: Paul Kelly Websitewww.compass-group.com. Compass Group is the world's largest foodservice company with annual revenues ofover £12 billion. Compass Group has some 400,000 employees working in more than90 countries around the world. For more information visit www.compass-group.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Compass Group