Final Results

26th Nov 2008 07:00

Compass Group PLC

Annual Results Announcement

For The Year Ended 30 September 2008

Another Excellent Year

Revenue £11.4 billion	5.9% organic growth
Underlying operating profit £662 million	19% constant currency growth
Margin 5.8%	70 basis points
Underlying earnings per share 22.0p	45%
Total dividend 12.0p	11%
Free cash flow £520 million	46%

Richard Cousins, Chief Executive Officer, said:

"I am delighted with the excellent progress the Group has made over the last twelve months, which has been driven by strong operational management and MAP, the performance framework we introduced two years ago.

The new financial year has started well and the visibility we have on the sales pipeline is encouraging. We are continuing to deliver good organic revenue growth and operating efficiency. In the context of a more challenging economic environment we are not complacent. We have considerable flexibility in the cost base and further significant scope for cost reduction. Together with the scale of the market opportunity and ongoing demand for outsourced services, this gives us confidence that we can continue to deliver."

Sir Roy Gardner, Chairman, said:

"We are pleased with the results delivered in the last financial year against a background of weakening economic conditions. We have a clear and focused strategy, an internationally diversified and transparent business model and we are the market leader in an industry that has potential for significant structural growth. We see good opportunities to continue to grow revenue and to further improve operating efficiency. Our cash flow and balance sheet are strong. The strengths of the business that are highlighted in these results support the Board's view that 2009 will be another year of progress for the company."

Financial Summary		2008		2007		Increase/(Decrease)
Continuing operations
Revenue
Constant currency		£11,440m		£10,765m		6.3%
Reported		£11,440m		£10,268m		11.4%
Total operating profit
Constant currency		£662m		£558m		18.6%
Underlying		£662m		£529m		25.1%
Reported		£659m		£529m		24.6%
Operating margin
Underlying		5.8%		5.1%		70bps
Profit before tax
Underlying		£589m		£442m		33.3%
Reported		£566m		£436m		29.8%
Basic earnings per share
Underlying		22.0p		15.2p		44.7%
Reported		20.9p		15.0p		39.3%
Free cash flow
Reported		£520m		£357m		45.7%
Total Group including discontinued operations
Basic earnings per share		23.7p		25.6p		(7.4)%
Total dividend per ordinary share		12.0p		10.8p		11.1%

(1)	Constant currency restates the prior year results to 2008's average exchange rates.
(2)	Total operating profit includes share of profit of associates.
(3)	Underlying operating profit excludes the amortisation of intangibles arising on acquisition.
(4)	Operating margin is based on revenue and operating profit excluding share of profit of associates.
(5)	Underlying profit before tax excludes the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the change in fair value of minority interest put options.
(6)	Underlying basic earnings per share excludes the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the change in fair value of minority interest put options and the tax attributable to these amounts.
(7)	Organic growth is calculated by adjusting for acquisitions (excluding current year acquisitions and including a full year in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior year at current year exchange rates) and compares the current year results against the prior year.

Management and Performance (MAP)

The Group's operating framework, MAP, is being used ever more widely across the Group. It is fundamental to driving more consistent performance across the business and is helping us deliver a balance of disciplined revenue growth and greater efficiencies. To maintain the momentum, we have this year launched 'Mapping for Value', a two day intensive training course for our top 400 managers, and this is now being rolled out to a further 5,000 managers across the Group. With better trained staff and the sharing of best practice across the businesses, the benefits of a more structured approach are showing signs of success. A combination of excellent operational management and MAP has this year enabled us to deliver £104 million of constant currency operating profit growth as follows:

£28 million from net new business: We have had another year of strong growth in most countries, delivering 8.5% of new business with overall retention levels remaining stable at 94%. 

We have seen good levels of growth in all our core sectors. In the Business & Industry sector, we have secured contracts with SAP in Germany, Indesit Company in Italy, a new Nokia factory in Romania and Abbey in the UK. Our ability to offer multi services, that is foodservice and support services, is helping drive new business in the Healthcare and increasingly the Business & Industry sectors, for example our international client Pfizer, where we have added support services to our existing foodservice contract. Other examples include Vodacom and Siemens in South Africa and in Healthcare, Inova Health System in the USA is one of the largest combined foodservice and support services contracts we have won in the sector. In the Education sector, we have won new business with the Cornwall County Council which covers over 170 primary and secondary schools and extended one of the largest outsourced Education contracts in Italy, Turin schools, which serves 27,000 students in 340 schools. We have won our first Sports & Leisure contract in Brazil at the Sao Paulo Stadium and continue to win new business in the USA: the St Louis Blues (National Hockey League) and Real Salt Lake (Major League Soccer). 

We believe there is further scope over time to improve retention across the Group. Where we have focused on retention levels and built dedicated retention teams to date, we have been able to deliver improved performance.

£57 million from like for like growth: The majority of our profit growth was delivered through sustainable growth in our base estate. The two drivers of this are like for like revenue growth and cost efficiency. 

We have continued to work hard to increase like for like revenue growth to 3.5% through the continued development of both our client and consumer offers and greater structure and discipline in pricing. We seek to increase the participation and spend of consumers by offering all day service, retail stores and coffee shops alongside countrywide promotions and we continue to extend the client offer to include support services in addition to foodservice. 

 

We continue to see good progress in menu planning, the rationalization of purchasing and the supply chain. These initiatives, together with the roll out of waste management programmes across the Group, should over time produce further benefits. Food cost inflation was a significant issue for us throughout the year, but we have been able to contain the impact through these actions in the year and deliver an improvement in the gross margin. We continue to see good opportunities in labour costs to improve productivity and reduce ancillary costs. Much of the unit cost efficiency in the year has come from savings in unit overheads such as uniforms and cleaning products. Whilst we have made good progress in driving out cost from the business, there are still significant opportunities to further improve efficiencies and, with a predominantly flexible cost base, to adapt to varying levels of demand. 

£6 million from above unit overhead savings: While growing the revenue by 6%, we have further leveraged our above unit overheads with a £21 million reduction in real terms, more than offsetting the £15 million inflationary impact.

£13 million from acquisitions/disposals: This comprises £7 million of trading profit from the acquisition of Professional Services in the US and the remaining 50% of the shares in GR S.A. in Brazil partly offset by the disposal of some Japanese concessions businesses and £6 million of disposal profit arising from country exits.

Geographic and Sector Diversity

The Group has a very broad spread of business; geographically, where we are present in some 55 countries; across clients, with no one client accounting for more than one percent of revenue; and across the multiple sectors and sub sectors in our portfolio. We have a well balanced exposure to Healthcare, Education and Business & Industry and the diversity of customers we serve considerably spreads our risk profile. For example, within the Business & Industry sector we deliver a broad range of foodservice and support services to the pharmaceutical industry, IT and software industries, communications, entertainment, government, manufacturing and banks and other financial and professional service organisations. We provide a wide range of services to clients, from fine dining through to our value foodservice propositions and from grounds maintenance to reception services. This gives us the flexibility to tailor our offer to client needs.

In Education, our clients are private and public schools, both primary and secondary, and further education facilities. We provide a diverse range of services from retail to full service meals.

 

In Healthcare, we feed not only patients, but staff and visitors, as well as the fast growing senior living sector, in both public and private institutions. Our services include full service meals, vending, grab and go, retail stores, cleaning, house-keeping and laundry services. 

Strategy

We believe that key to creating shareholder value is the delivery of strong cash flow. Our aim is to deliver this through revenue growth and operating efficiency, supported by disciplined use of capital expenditure and working capital. The delivery of strong cash flow provides us with the opportunity to re-invest that cash to grow the business and to reward shareholders. We spent a total of £352 million cash during the year on share buy backs and £65 million was spent on the current phase of the buy back, which is ongoing. Together with the proposed 11% increase in the final dividend, this illustrates our commitment to reward shareholders.

 

Our strategy over the last two years has been to develop our foodservice and support services businesses, building scale within countries to drive efficiency and having global reach to serve multinational institutions. Sectorisation has been a fundamental part of our strategy and we have built big businesses in all of the key sectors.

 

There is significant opportunity to grow revenue. We estimate the global foodservice market, in which we are the global leader, to be around £150 billion. This market is approximately 45% outsourced and we only have a 7% share of the total. The support services market is even bigger and less penetrated. We will continue to build our market presence by growing revenues organically, and where it makes sense we will invest intelligently in either organic growth and/or value-creating infill acquisitions. 

 

We will continue to improve efficiency in our main categories of cost; food, labour and overheads. Whilst good progress has been made, there are many significant opportunities. In the context of a more challenging macro economic environment, the ability to flex the cost base is important. We believe our key costs of food, labour and overheads are largely flexible, which gives us the ability to align our cost base to any variation in the level of demand. In the last two years, the strength of our operational management teams and the MAP framework have been integral to driving the turnaround in performance and in successfully managing the effects of input cost inflation. These will remain a focus as we continue to move through the challenging macro economic environment. 

Notes: 

(a)  Compass Group is the world's largest foodservice company with annual revenue of over £11 billion operating in 55 countries. 

(b) MAP is a simple, but clearly defined Group operating framework. MAP focuses on five key value drivers, enabling the businesses to deliver disciplined, profitable growth with the focus more on organic growth and like for like growth.

The five key value drivers are:

MAP 1: Client sales and marketing

MAP 2: Consumer sales and marketing

MAP 3: Cost of food

MAP 4: Unit costs

MAP 5: Above unit overheads

(c) The timetable for payment of the final dividend of 8.0p per share is as follows:

Ex dividend date:	28 January 2009
Record date:	30 January 2009
Payment date:	2 March 2009

(d) The Annual Results Announcement was approved by the Directors on 26 November 2008 and has been derived from the Company's Annual Report and Accounts for the year ended 30 September 2008. The Auditors' Report on these accounts was unqualified and did not contain statements under section 237(2) or 237(3) of the Companies Act 1985. 

The 2008 Annual Report and Accounts will be published on 5 January 2009.

A copy of the report will be disseminated via the London Stock Exchange Regulatory News Service (RNS) and will be published on the Group's website (www.compass-group.com).

A copy will also be lodged with the UK Listing Authority's Document Viewing Facility which is situated at: Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. Telephone: 020 7676 1000. 

Printed copies of the report will be mailed to shareholders and other interested parties who have not opted-in to the Company's electronic communication programme. 

The Annual Results Announcement does not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985.

(e) Forward looking statements

This Annual Results Announcement contains forward looking statements within the meaning of Section 27A of the Securities Act 1933, as amended, and Section 21E of the Securities Exchange Act 1934, as amended. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such forward looking statements. The terms 'expect', 'should be', 'will be', 'is likely to' and similar expressions identify forward looking statements. Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic conditions and business conditions in Compass Group's markets; exchange rate fluctuations; customers' and clients' acceptance of its products and services; the actions of competitors; and legislative, fiscal and regulatory developments.

(f) A presentation for analysts and investors will take place at 9:30 a.m. (GMT/London) on Wednesday 26 November 2008 at Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ.

The live presentation can also be accessed via both a teleconference and webcast:

To listen to the live presentation via teleconference, dial +44 (0) 1296 311 600, passcode 715136.

To view the presentation slides and/or listen to a live 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 replay recording of the presentation will also be available via teleconference and webcast:

A teleconference replay of the presentation will be available from 3:00 p.m. (GMT/London) on Wednesday 26 November 2008 for seven days. To hear the replay, dial +44 (0) 207 136 9233, passcode 15919284. 

A webcast replay of the presentation will be available for six months, at www.compass-group.com and www.cantos.com

Enquiries:
Investors/Analysts	Andrew Martin	+44 (0) 1932 573000
Media	Chris King	+44 (0) 1932 573116

Website:

www.compass-group.com

Business Review

Compass Group today announces its full year results for the year ended 30 September 2008. 

Financial Summary		2008		2007		Increase/(Decrease)
Continuing operations
Revenue
Constant currency		£11,440m		£10,765m		6.3%
Reported		£11,440m		£10,268m		11.4%
Total operating profit
Constant currency		£662m		£558m		18.6%
Underlying		£662m		£529m		25.1%
Reported		£659m		£529m		24.6%
Operating margin
Underlying		5.8%		5.1%		70bps
Profit before tax
Underlying		£589m		£442m		33.3%
Reported		£566m		£436m		29.8%
Basic earnings per share
Underlying		22.0p		15.2p		44.7%
Reported		20.9p		15.0p		39.3%
Free cash flow
Reported		£520m		£357m		45.7%
Total Group including discontinued operations
Basic earnings per share		23.7p		25.6p		(7.4)%
Total dividend per ordinary share		12.0p		10.8p		11.1%

(1)	Constant currency restates the prior year results to 2008's average exchange rates.
(2)	Total operating profit includes share of profit of associates.
(3)	Underlying operating profit excludes the amortisation of intangibles arising on acquisition.
(4)	Operating margin is based on revenue and operating profit excluding share of profit of associates.
(5)	Underlying profit before tax excludes the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the change in fair value of minority interest put options.
(6)	Underlying basic earnings per share excludes the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the change in fair value of minority interest put options and the tax attributable to these amounts.

The table below summarises the performance of the Group's continuing operations by geographic segment.

		Revenue			Revenue Growth
		2008	2007			Constant
		£m	£m		Reported	Currency	Organic
Continuing operations
North America		4,553	4,206		8.3%	7.3%	7.1%
Continental Europe		3,021	2,553		18.3%	5.2%	5.4%
United Kingdom		1,926	1,931		(0.3)%	(0.3)%	(0.3)%
Rest of the World		1,940	1,578		22.9%	12.9%	10.6%
Total		11,440	10,268		11.4%	6.3%	5.9%
		Operating Profit			Margin
		2008	2007		2008	2007
		£m	£m		%	%
Continuing operations
North America		311	264		6.8%	6.3%
Continental Europe		197	151		6.5%	5.9%
United Kingdom		108	107		5.6%	5.5%
Rest of the World		104	61		5.4%	3.9%
Unallocated overheads		(62)	(58)		-	-
Excluding associates		658	525		5.8%	5.1%
Associates		4	4		-	-
Underlying		662	529		5.8%	5.1%
Amortisation of  fair value intangibles		(3)	-
Total		659	529

(1)	Constant currency restates the prior year results to 2008's average exchange rates.
(2)	Operating profit includes share of profit of associates.
(3)	Underlying operating profit and margin excludes the amortisation of intangibles arising on acquisition.
(4)	Operating margin is based on revenue and operating profit excluding share of profit of associates.
(5)	Organic growth is calculated by adjusting for acquisitions (excluding current year acquisitions and including a full year in respect of prior year acquisitions), disposals (excluded from both periods) and exchange rate movements (translating the prior year at current year exchange rates) and compares the current year results against the prior year.

Revenue

Overall, organic revenue growth was 5.9%, comprising new business of 8.5%, retention of 94% and like for like growth of 3.5%. The significant weakening of Sterling, in particular against the Euro, increased reported revenues by 5.1%, resulting in reported revenue growth of 11.4%.

Operating Profit

Underlying operating profit from continuing operations, including associates but excluding the amortisation of intangibles arising on acquisition, was £662 million (2007: £529 million), an increase of 25% on a reported basis over the prior year. Underlying operating profit increased by £104 million, or 19%, on a constant currency basis. This represents a 70 basis points improvement in margin to 5.8% (2007: 5.1%).

Operating profit after the amortisation of intangibles arising on acquisition of £3 million (2007: £nil) was £659 million (2007: £529 million).

North America - 39.8% Group revenue (2007: 40.9%)

North America has had another strong year with organic revenue growth of 7.1%. We are continuing to win good quality new business across all sectors, for example Nortel and Exxon in the Business & Industry sector, in the Education sector feeding over 27,000 students in St Louis Public Schools and the workers' camps for the TransCanada Pathfinder Pipeline project in the Remote sector. The slight acceleration in the rate of organic revenue growth has been driven by increased like for like revenue growth. By applying retail thinking to our business, we are getting better at pricing and we are continuing to strengthen our offer. In the Business & Industry sector, our 'Outtakes' grab and go concept has helped deliver 6% organic revenue growth. The integration of the recently acquired Professional Services and Medi-Dyn businesses has helped to drive another good year of growth in both foodservice and support services in the Healthcare sector and in Education, strong enrolments and an increasing take up of school meal and board plans have resulted in very good like for like revenue growth. Levy, our Sports & Leisure business, has continued to grow whilst driving excellent efficiencies in both food and unit costs. In Canada, the Remote Site business performed well and we are making good progress in growing the other sectors.

Operating profit increased by £45 million, or 17%, on a constant currency basis to £311 million (2007: £266 million on a constant currency basis). The margin improvement seen in the first half has continued throughout the second half, with a full year 50 basis points improvement taking the overall margin to 6.8%. We have been very successful in fighting food cost inflation and have delivered good efficiency gains, both in and above units.

Continental Europe - 26.4% Group revenue (2007: 24.9%)

In Continental Europe the organic revenue growth rate has continued to improve to 5.4%, driven by increased levels of new business wins and continued strong like for like revenue growth across the whole geography. Significant contract wins and renewals in the year have included extending our relationship with Continental in Germany, Vestel City, Europe's largest industrial complex, is one of the largest foodservice contracts ever awarded in Turkey, the Petz Aladár Hospital, one of the biggest hospitals in Hungary, and some 120 new schools across Spain.

In France organic revenue growth has moved forward significantly to 4%, reflecting a real turnaround in new business wins. A focus on like for like revenue growth and overhead efficiencies has continued to help advance margins.

Germany continues to lead the Group in operational efficiency. In particular, this year we have seen a reduction in the labour cost of 40 basis points as a percentage of revenues. 

The ongoing strength of the offshore business in the Nordic region, together with new business from multi services has driven organic revenue growth of 15%. This has converted to strong margin growth through the successful restructuring of the region.

Whilst margins are still modest, our Italian business has delivered a good improvement in performance this year. Going forward, the focus will be on cost reduction to bring margins more into line with the rest of the Group. 

The Spanish business is dominated by Education and Healthcare. We have seen excellent organic revenue growth of 10% overall, reflecting a good balance of net new business and like for like revenue growth. 

Overall, operating profit in Continental Europe was £197 million (2007: £172 million on a constant currency basis), an increase of 15%. We have added a further 60 basis points of margin improvement to the 100 basis points improvement in 2007, delivering an overall margin of 6.5%.

UK - 16.8% Group revenue (2007: 18.8%)

In the UK, operating profit was £108 million (2007: £107 million). As expected, we have achieved a similar level of profitability and margin to last year. Major contract wins and renewals have included the Bank of England, ASDA, our contract to provide foodservice to Royal Mail employees through Quadrant, our joint venture with the Royal Mail Group and Wellingborough Independent School.

There has been an enormous amount of activity during this period. The new executive team is in place, we have either fixed or exited most loss making and low margin contracts, much improved and tightened the sales process, refreshed and re-launched the client and consumer offer, completely re-organised middle management, driven significant cost reduction and improved cash control. The re-structuring we have seen in the business over recent years is beginning to show benefits.

Rest of the World - 17.0% Group revenue (2007: 15.4%)

The Rest of the World has delivered very strong organic revenue growth of 10.6% through excellent new business wins and improved like for like revenue growth throughout the geography. There have been contract wins with Anglo American for the Barro Alto nickel plant construction in Brazil, a food service and support service contract with De Beers in South Africa and Takeda Pharmaceutical and Oracle Corporation in Japan. We have exited 30 countries and are focused on a core 28 where we believe there are good opportunities to grow. By streamlining the business and removing duplication from the organisational structures, we have been able to take out significant overhead and now have the business much more focused on cost efficiency, allowing us to leverage the revenue growth.

Australia continues to make good progress. The energy and extraction industries have provided good opportunities and we are successfully developing our other sectors, for example Healthcare where this year we have seen growth of 19%.

Japan continues to improve. A renewed focus on client and consumer pricing combined with rigorous attention to the cost base is working. Margins improved by 100 basis points in 2008 and are now close to the Group average.

 

This year we acquired the remaining 50% of our business in Brazil making it one of our top ten countries. The focus continues to be on growth and we have made excellent progress, increasing revenue organically by some 21%.

The Remote Site business is now focused on five countries, where we operate with major blue chip international companies. The business is performing well and we are seeing good revenue growth as our new and existing clients continue to expand their operations.

Finally, the UAE has seen excellent organic revenue growth of around 30%, with all sectors growing strongly.

Overall, operating profit in the Rest of the World has increased by £36 million, or 53%, on a constant currency basis, to £104 million (2007: £68 million on a constant currency basis), in part through the acquisition of the remaining 50% of the shares of GR S.A. in Brazil and £6 million of disposal profits arising on country exits. The margin has increased by 150 basis points to 5.4% which is now close to the Group average. Excluding the impact of the £6 million disposal profit, the margin would have been 5.1%, an increase of 120 basis points.

Unallocated Overheads

Unallocated overheads for the year were £62 million (2007: £58 million), reflecting tight control over cost while at the same time strengthening certain of the central functions.

Finance Costs 

Underlying net finance cost, excluding hedge accounting ineffectiveness and the impact of revaluing minority interest put options, was £73 million (2007: £87 million). We currently expect the underlying net finance cost for 2009 to be around £95 million, reflecting the impact of the weakening of Sterling against each of the US Dollar, Euro and Yen which comprise the bulk of the Group's net borrowings.

Other Gains and Losses

Other gains and losses include a £4 million (2007: £6 million) cost of hedge accounting ineffectiveness (revaluation gains and losses on swaps and hedging instruments) and a £16 million (2007: £nil) cost of revaluing minority interest put options, reflecting the underlying improvement in performance of the related business.

Profit Before Tax

Profit before tax from continuing operations was £566 million (2007: £436 million). 

On an underlying basis, excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the impact of revaluing minority interest put options, profit before tax from continuing operations increased by 33% to £589 million (2007: £442 million).

Income Tax Expense

Income tax expense from continuing operations was £169 million (2007: £124 million). 

On an underlying basis, excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the impact of revaluing minority interest put options, the tax charge on continuing operations was £171 million (2007: £126 million), equivalent to an effective tax rate of 29% (2007: 29%). Based on current corporate tax rates applicable to our major countries of operation, we expect a similar rate for 2009. 

Discontinued Operations

The profit after tax from discontinued operations was £53 million (2007: £212 million). 

Basic Earnings per Share

Basic earnings per share, including discontinued operations, were 23.7 pence (2007: 25.6 pence). 

On an underlying basis, excluding discontinued operations, the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the impact of revaluing minority interest put options and the tax attributable to these amounts, the basic earnings per share from continuing operations were 22.0 pence (2007: 15.2 pence).

		Attributable			Basic Earnings
		Profit			Per Share
		2008	2007		2008	2007	Change
		£m	£m		pence	pence	%
Reported		443	515		23.7	25.6	(7.4)
Discontinued operations		(53)	(212)		(2.8)	(10.6)
Other adjustments		21	4		1.1	0.2
Underlying		411	307		22.0	15.2	44.7

Dividends

It is proposed that a final dividend of 8.0 pence per share will be paid on 2 March 2009 to shareholders on the register on 30 January 2009. This will result in a total dividend for the year of 12.0 pence per share (2007: 10.8 pence per share), a year on year increase of 11%. The dividend was covered 1.8 times on an underlying earnings basis and 2.5 times on a free cash basis.

Free Cash Flow

Free cash flow from continuing operations totalled £520 million (2007: £357 million). The major factors contributing to the increase were: £133 million increase in underlying operating profit before associates and £46 million lower net interest payments, offset in part by £32 million higher net tax payments.

Gross capital expenditure of £200 million (2007: £195 million), including amounts purchased by finance lease of £8 million (2007: £15 million), is equivalent to 1.7% of revenues (2007: 1.9% of revenues). We currently expect the level of gross capital expenditure for 2009 to be around 2% of revenues. Proceeds from the sale of assets were £26 million and we expect these will be minimal in 2009.

There has been a continued focus on all areas of working capital management, delivering an overall £46 million working capital inflow in the year. We believe that there remains further scope for improvement.

The cash tax rate for the year was 25% (2007: 26%), based on underlying profit before tax for the continuing operations, and we continue to expect the cash tax rate to be in the mid to high 20s range for 2009.

The net interest outflow of £81 million (2007: £127 million) continues to reflect the impact of the 2004 swap monetisation. The cash interest will be around £10 million more than in the Income Statement in 2009, and then the numbers should converge for 2010 onwards. 

Acquisition Payments

The acquisition spend in the year totalled £181 million, comprising £74 million of infill acquisitions (including £36 million on Professional Services and £23 million on Medi-Dyn in the USA), £102 million on the buyout of minority interests (including £87 million on the remaining 50% of our Brazilian business and £14 million to take our shareholding in Seiyo Foods, our Japanese business, from 86% to 95%) and £5 million of deferred consideration relating to previous acquisitions.

Disposal Proceeds

Proceeds received in the year, mainly relating to the prior year disposal of businesses, totalled £41 million (2007: £767 million).

Share Buy Back

The Group spent cash of £352 million (2007: £575 million) on buying back shares in the year, of which £65 million relates to the current phase of the buy back, which is ongoing. In addition the Group spent £3 million (2007: £1 million) to satisfy employee share based payments in the year.

Return on Capital Employed 

Return on capital employed (ROCE) was 14.9% (2007: 12.5%) based on the continuing business before exceptional items, excluding the Group's minority partner's share of total operating profit, net of tax at 30% and using an average capital employed for the year of £3,073 million (2007: £2,914 million) calculated from the IFRS balance sheet.

Under UK GAAP, goodwill previously written off to reserves, now extinguished under IFRS, and goodwill amortised prior to 30 September 2004, the date at which the net book value of goodwill was frozen under IFRS, was included within average capital employed. Including these adjustments, average capital employed for the year (for the continuing businesses) would have been £6,058 million (2007: £5,899 million) and ROCE for the continuing business would have been 7.9% (2007: 6.5%).

Financial Targets

The Group's three year targets for the continuing business for 2006 to 2008 have been achieved:

• 220 basis point improvement in UK GAAP ROCE, against the 100 basis point target, and

• £1,142 million of free cash flow generated from continuing operations (which included £53 million for Selecta in 2006), against the £850 million target.

Pensions 

The Group has continued to review and monitor its pension obligations throughout the year working closely with the Trustees and members of schemes around the Group to ensure proper and prudent assumptions are used and adequate provision and contributions are made. 

The Group's total pension deficit at 30 September 2008 was £131 million (2007: £162 million), a significant improvement from the £555 million deficit in 2005. The total pensions charge for defined contribution schemes in the year was £28 million (2007: £36 million) and £19 million (2007: £22 million) for defined benefit schemes. Included in the defined benefit scheme costs was a £2 million credit to net finance cost (2007: £2 million charge).

Financial Position

The ratio of net debt to market capitalisation of £6,336 million as at 30 September 2008 was 16% (2007: 13%).

Net debt increased to £1,005 million (2007: £764 million) including a negative impact from foreign exchange translation of £121 million and cash spent on share buy backs totalling £352 million.

At 30 September 2008, the Group had cash reserves of £579 million and in October 2008 raised a further £185 million in the private placement market. In addition, the Group has an undrawn bank facility of £689 million committed through to 2012. Taking account of cash required for day to day operations and the repayment of around £325 million of debt maturing in 2009, the Group estimates it currently has headroom of around £900 million.

Looking ahead over the next three years, £225 million of debt is due for repayment in 2010 and £75 million in 2011. With three years of free cash flow and the proceeds of any further refinancing during this period, the Group believes that it is in a very strong financial position. 

The EBIT to net interest ratio has increased from 3.2 times in 2006 to 9.1 times in 2008, excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness, the change in fair value of minority interest put options and discontinued operations. EBITDA to net interest has increased from 5.6 times to 11.9 times in the same period, including discontinued operations but excluding the amortisation of intangibles arising on acquisition, hedge accounting ineffectiveness and the change in fair value of minority interest put options. The Group remains committed to maintaining strong investment grade credit ratings.

Risks and Uncertainties

The Board takes a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Company and its shareholders.

The principal risks and uncertainties facing the business and the activities the Group undertakes to mitigate these are set-out in the section headed 'Managing Risk' below.

Shareholder Return

The market price of the Group's ordinary shares at the close of the financial year was 344 pence per share (2007: 302 pence).

Going Concern

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Outlook

We are pleased with the results delivered in the last financial year against a background of weakening economic conditions. We have a clear and focused strategy, an internationally diversified and transparent business model and we are the market leader in an industry that has potential for significant structural growth. We see good opportunities to continue to grow revenue and to further improve operating efficiency. Our cash flow and balance sheet are strong. The strengths of the business that are highlighted in these results support the Board's view that 2009 will be another year of progress for the Company.

Richard Cousins Chief Executive

Sir Roy Gardner  Chairman

Managing Risk

The Board takes a proactive approach to risk management with the aim of protecting its employees and customers and safeguarding the interests of the Company and its shareholders. The Group has policies and procedures in place to ensure that risks are properly evaluated and managed at the appropriate level within the business. 

The identification of risks and opportunities; the development of action plans to manage the risks and exploit the opportunities; and the continual monitoring of progress against agreed KPIs is an integral part of the business process, and a core activity throughout the Group.

Control is exercised at Group and business level through the Group's Management and Performance framework, monthly monitoring of performance by comparison with budgets and forecasts and through regular Business Reviews with the Group Chief Executive and the Group Finance Director.

This is underpinned by a formal major risk assessment process which is an integral part of the annual business cycle. As part of the process, each of the Group's businesses is required to identify and document major risks and appropriate mitigating activities and controls; and monitor and report to management on the effectiveness of these controls on a biannual basis. Senior managers are also required to sign biannual confirmations of compliance with key procedures and to report any breakdowns in, or exceptions to, these procedures. The results are reviewed by the Executive Committee and the Board.

The Group also has formal procedures in place, with clearly designated levels of authority, for approving acquisitions and other capital investments. This is supported by a post investment review process for selected acquisitions and major items of capital expenditure.

The table below sets out the principal risks and uncertainties facing the business at the date of this report and the systems and processes the Group has in place to manage and mitigate these risks.

Risk			Mitigation
Health, safety and environment	Food safety		Compass feeds millions of consumers around the world every day, therefore setting the highest standards for food hygiene and safety is paramount. The Group has appropriate policies, processes and training procedures to ensure full compliance with legal obligations.
	Health and safety		Health and safety remains our number one operational priority. All management meetings throughout the Group feature a Health and Safety update as one of their first agenda items.
	Environment		Everyday, everywhere, we look to make a positive contribution to the health and wellbeing of our customers, the communities we work in and the world we live in. Our Corporate Responsibility statement in the Annual Report describes our approach in more detail.
Clients and consumers	Client retention		We aim to build long-term relationships with our clients based on quality and value. Our business model is structured so that we are not reliant on one particular sector, geography or group of clients.
	Consolidation of food and support services		We have developed a range of support services to complement our existing foodservice offer. These services are underpinned by the Compass Service Framework, our standard operating platform for support services, which gives us the capability to deliver to the same consistent world-class standard globally.
	Bidding risk		The Group's operating companies bid selectively for large numbers of contracts each year and a more limited number of concession opportunities. Tenders are developed in accordance with a thorough process which identifies both the potential risks (including social and ethical risks) and rewards, and are subject to approval at an appropriate level of the organisation.
	Credit risk		There is limited concentration of credit risk with regard to trade receivables given the diverse and unrelated nature of the Group's client base.
	Service delivery and compliance with contract terms and conditions		The Group's operating companies contract with a large number of clients. Processes are in place to ensure that the services delivered to clients are of an appropriate standard and comply with the appropriate contract terms and conditions.
	Changes in consumer preferences		We strive to meet consumer demand for quality, choice and value by developing innovative and nutritious food offers which suit the lifestyle and tastes of our consumers.
People	People retention and motivation		The recruitment and retention of skilled employees is a challenge faced by the industry at large. The Group has established training and development programmes, succession planning and performance management programmes which are designed to align rewards with our corporate objectives and to retain and motivate our best people.
Supply Chain	Suppliers		The Group constantly strives to find the right balance between building long-term supply relationships based on the compatibility of values and behaviour with the requirements of the Group as well as quality and price. The Group seeks to avoid over-reliance on any one supplier.
	Traceability		To reduce risk we are focusing on traceability, clear specification of our requirements to nominated suppliers and the improvement of purchasing compliance by unit managers.
Economic risk	Economy		The recent turmoil in the world economy has not had a notable effect on current year sales. Our direct exposure to investment banking clients is between 2-3% of global revenues. Although we start the new financial year facing a more challenging economic environment and a slowing global GDP growth, we see good opportunities to continue to grow revenues and to further improve operating efficiency, supported by our strong financial position.
	Food cost inflation		As part of our MAP programme we seek to manage food price inflation through: cost indexation in our contracts, giving us the contractual right to review pricing with our clients; menu management to substitute ingredients in response to any forecast shortages and cost increases; and continuing to drive greater purchasing efficiencies through supplier rationalisation and compliance.
	Labour cost inflation		Our objective is always to deliver the right level of service in the most efficient way. As part of our MAP programme we have been deploying tools and processes to optimise labour productivity and exercise better control over other labour costs such as absenteeism, overtime and third party agency spend; and to improve our management of salary and benefit costs and control labour cost inflation.
Regulatory, political and competitive environment	Political stability		Compass is a global company operating in countries and regions with diverse economic and political conditions. Our operations and earnings may be adversely affected by political or economic instability. However, we remain aware of these risks and look to mitigate them wherever possible. We have also taken the strategic decision to withdraw from a number of countries (and had completed most of these withdrawals by the date of this report) where we consider the risks outweigh the rewards.
	Regulation		Changes to laws or regulations could adversely affect our performance. We engage with governmental and non-governmental organisations directly or through trade associations to ensure that our views are represented.
	Competition		Compass operates in a competitive market place. The level of concentration and outsource penetration varies by country. Some markets are relatively concentrated with two or three key players, others are highly fragmented and offer significant opportunities for consolidation and penetration into the self-operated market. Aggressive pricing from our competitors could cause a reduction in our revenues and margins. We aim to minimise this by building long term relationships with our clients based on quality and value.
Acquisitions  and investments	Acquisition risk		Potential acquisitions are identified by the operating companies and subject to appropriate levels of due diligence and approval by Group management. Post acquisition integration and performance is closely managed and subject to regular review.
	Investment risk		Capital investments are subject to appropriate levels of scrutiny and approval by Group management.
	Joint ventures		In some countries we operate through joint ventures. Procedures are in place to ensure that joint venture partners bring skills, experience and resources that complement and add to those provided from within the Group.
Information technology and infrastructure			The Group relies on a variety of IT systems in order to manage and deliver services and communicate with its customers, suppliers and employees. There is minimal inter-country dependence on IT systems, and all of the Group's major operating companies have appropriate disaster recovery plans in place.
Fraud and compliance			The Group's zero tolerance based Code of Ethics governs all aspects of our relationship with our stakeholders. All alleged breaches of the Code are investigated. The Group's procedures include regular operating reviews, underpinned by a continual focus on ensuring the effectiveness of internal controls.
Litigation			Though we do not operate in a litigious industry, we have in place policies and processes in all of our main operating companies to report, manage and mitigate against third-party litigation.
Reputation risk			Our brands are amongst the most successful and best established in our industry. They represent a key element of the Group's overall marketing and positioning. In the event that our brand or reputation is damaged this could adversely impact the Group's performance. The Group's zero tolerance based Code of Ethics is designed to safeguard the Company's assets, brands and reputation.
Financial risk	Overview		Compass Group's financial risk management strategy is based upon sound economic objectives and good corporate practice. The main financial risks concern the availability of funds to meet our obligations (liquidity risk), movements in exchange rates (foreign currency risk), movements in interest rates (interest rate risk), and counterparty credit risk. Derivative and other financial instruments are used to manage interest rate and foreign currency risks. Further details of our financial risks and the ways in which we mitigate them are set out below.
	Liquidity Risk		The Group finances its borrowings from a number of sources including banks, the public markets and the private placement markets.  The maturity profile of the Group's principal borrowings at 30 September 2008 shows the average period to maturity is 3.1 years. Following the year end the Group raised a total of £185 million in the private placement market through the issue of five, seven and eight year loan notes. This has further strengthened the Group's balance sheet and extended the average life of the Group's borrowings to 3.4 years. The Group's undrawn committed bank facilities at 30 September 2008 were £689 million (2007: £630 million).
	Financial Instruments		The Group continues to manage its foreign currency and interest rate exposure in accordance with the policies set out below. The Group's financial instruments comprise cash, borrowings, receivables and payables that are used to finance the Group's operations. The Group also uses derivatives, principally interest rate, currency swaps and forward currency contracts, to manage interest rate and currency risks arising from the Group's operations. The Group does not trade in financial instruments. The Group's treasury policies are designed to mitigate the impact of fluctuations in interest rates and exchange rates and to manage the Group's financial risks. The Board approves any changes to the policies.
	Foreign Currency Risk		The Group's policy is to match as far as possible its principal projected cash flows by currency to actual or effective borrowings in the same currency. As currency cash flows are generated, they are used to service and repay debt in the same currency. To implement this policy, forward currency contracts or currency swaps are taken out which, when applied to the actual currency liabilities, convert these to the required currency. A reconciliation of the 30 September 2008 actual currency liabilities to the effective currency borrowed is set out in note 20 of the consolidated financial statements. The borrowings in each currency give rise to foreign exchange differences on translation into Sterling. Where the borrowings are either less than, or equate, to the net investment in overseas operations, these exchange rate movements are treated as movements on reserves and recorded in the statement of recognised income and expense rather than in the income statement. Non-Sterling earnings streams are translated at the average rate of exchange for the year. This results in differences in the Sterling value of currency earnings from year to year. The table in note 36 of the consolidated financial statements sets out the exchange rates used to translate the income statements, balance sheets and cash flows of non-Sterling denominated entities.
	Interest Rate Risk		As detailed above, the Group has effective borrowings in a number of currencies and its policy is to ensure that, in the short-term, it is not materially exposed to fluctuations in interest rates in its principal currencies. The Group implements this policy either by borrowing fixed rate debt or by using interest rate swaps so that at least 80% of its projected net debt is fixed for one year, reducing to 60% fixed for the second year and 40% fixed for the third year.
Pensions risk			The Group's defined benefit pension schemes are closed to new entrants other than for transfers under public sector contracts in the UK where the Company is obliged to provide final salary benefits to transferring employees. In addition, over the last three years substantial one-off contributions have been made to reduce the deficit in the UK schemes. Steps have also been taken to reduce the investment risk in these schemes. Further information is set out in note 23 of the consolidated financial statements.
Tax risk			As a Group, we seek to plan and manage our tax affairs efficiently in the jurisdictions in which we operate. In doing so, we aim to act in compliance with the relevant laws and disclosure requirements. In an increasingly complex international tax environment, a degree of uncertainty is inevitable in estimating our tax liabilities. We exercise our judgement, and seek appropriate professional advice, in assessing the amounts of tax to be paid and the level of provision required. The effective rate of tax may be influenced by a number of factors, including changes in laws and accounting standards, could increase the rate.

Consolidated Financial Statements

Directors' responsibilities

The consolidated financial statements set-out on the following pages have been extracted from the Annual Report of Compass Group PLC and are an abridged version of the full financial statements, not all of which are reproduced in this announcement.

The annual report and accounts complies with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of the requirement to produce an annual financial report. The annual report and accounts is the responsibility of, and has been approved by, the directors. We confirm that to the best of our knowledge:  the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards('IFRS');  the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and the annual report and accounts includes a review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. On behalf of the Board Mark J White General Counsel and Company Secretary 26 November 2008

The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards ('IFRS'). Company law requires the directors to prepare such financial statements in accordance with IFRS, the Companies Act 1985 and Article 4 of the IAS Regulation. International Accounting Standard 1 requires that financial statements present fairly for each financial year the Group's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expense set out in the International Accounting Standards Board's 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.  Directors are also required to: properly select and apply accounting policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and prepare the accounts on a going concern basis unless, having assessed the ability of the Group to continue as a going concern, management either intends to liquidate the entity or to cease trading, or have no realistic alternative but to do so. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors' report and directors' remuneration report which comply with the requirements of the Companies Act 1985. The directors, having prepared the financial statements, have permitted the auditors to take whatever steps and undertake whatever inspections they consider to be appropriate for the purpose of enabling them to give their audit opinion. The directors are also responsible for the maintenance and integrity of the Compass Group PLC website.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Independent auditors' report to the members of Compass Group PLC

The audit report set-out below has been extracted from the Annual Report of Compass Group PLC and expresses 

the auditor's opinion on the full financial statements, not all of which are reproduced in this announcement.

Introduction We have audited the Group financial statements of Compass Group PLC for the year ended 30 September 2008 which comprise the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash flow statement, the accounting policies and the related notes 1 to 37. These Group financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described as having been audited. We have reported separately on the parent company financial statements of Compass Group PLC for the year ended 30 September 2008. This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the Group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Group financial statements give a true and fair view, whether the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation and whether the part of the Directors' Remuneration Report described as having been audited has been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the Group financial statements.  In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We review whether the Corporate governance statement reflects the company's compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group's corporate governance procedures or its risk and control procedures.

We read the other information contained in the Annual Report as described in the contents section and consider whether it is consistent with the audited Group financial statements.  We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any further information outside the Annual Report. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Group financial statements and the part of the Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Group financial statements and the part of the Directors' Remuneration Report to be audited. Opinion In our opinion: the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group's affairs as at 30 September 2008 and of its profit for the year then ended; the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation;  the part of the Directors' Remuneration Report described as having been audited has been properly prepared in accordance with the Companies Act 1985; and the information given in the Directors' Report is consistent with the Group financial statements. Deloitte & Touche LLP Chartered Accountants and Registered Auditors  London 26 November 2008

Consolidated income statement
for the year ended 30 September 2008
				2008		2007
		Notes		£m		£m
Continuing operations
Revenue		1		11,440		10,268
Operating costs		2		(10,785)		(9,743)
Operating profit		1		655		525
Share of profit of associates		1, 13		4		4
Total operating profit		1		659		529
Finance income		4		27		28
Finance costs		4		(100)		(115)
Hedge accounting ineffectiveness		4		(4)		(6)
Change in fair value of minority interest put options		4		(16)		-
Profit before tax				566		436
Income tax expense		5		(169)		(124)
Profit for the year from continuing operations		1		397		312
Discontinued operations
Profit for the year from discontinued operations		6		53		212
Continuing and discontinued operations
Profit for the year				450		524
Attributable to
Equity shareholders of the Company				443		515
Minority interest				7		9
Profit for the year				450		524
Basic earnings per share (pence)
From continuing operations		8		20.9p		15.0p
From discontinued operations		8		2.8p		10.6p
From continuing and discontinued operations		8		23.7p		25.6p
Diluted earnings per share (pence)
From continuing operations		8		20.8p		15.0p
From discontinued operations		8		2.8p		10.4p
From continuing and discontinued operations		8		23.6p		25.4p
Analysis of operating profit
for the year ended 30 September 2008
				2008		2007
				£m		£m
Continuing operations
Operating profit before associates  and amortisation of intangibles arising on acquisition				658		525
Share of profit of associates				4		4
Operating profit before amortisation of intangibles arising on acquisition				662		529
Amortisation of intangibles arising on acquisition				(3)		-
Total operating profit				659		529

Consolidated statement of recognised income and expense
for the year ended 30 September 2008
				Movements in equity
				Retained	Revaluation	Translation	Minority		Total		Total
				earnings	reserve	reserve	interest		2008		2007
		Notes		£m	£m	£m	£m		£m		£m
Net income/(expense) recognised in equity
Currency translation differences				-	-	64	3		67		(12)
Actuarial gains/(losses)  on post-retirement employee benefits		23		15	-	-	-		15		38
Tax on items taken directly to equity		5		(3)	-	8	-		5		8
Recognition of deferred tax asset relating to currency translation differences in prior years		5		-	-	-	-		-		37
Other				-	(1)	-	-		(1)		-
Net income/(expense)  recognised directly in equity				12	(1)	72	3		86		71
Profit for the financial year
Profit for the financial year				443	-	-	7		450		524
Total recognised income and expense  for the year		25		455	(1)	72	10		536		595
Attributable to
Equity shareholders of the Company				455	(1)	72	-		526		576
Minority interest				-	-	-	10		10		19
Total recognised income and expense  for the year		25		455	(1)	72	10		536		595

Consolidated balance sheet
as at 30 September 2008
				2008		2007
		Notes		£m		£m
Non-current assets
Goodwill		10		3,290		2,985
Other intangible assets		11		393		301
Property, plant and equipment		12		463		436
Interests in associates		13		28		25
Other investments		14		17		12
Trade and other receivables		16		66		47
Deferred tax assets*		5		256		240
Derivative financial instruments**		20		19		13
Non-current assets				4,532		4,059
Current assets
Inventories		17		213		179
Trade and other receivables		16		1,577		1,343
Tax recoverable*				19		10
Cash and cash equivalents**		18		579		839
Derivative financial instruments**		20		1		2
Current assets				2,389		2,373
Total assets				6,921		6,432
Current liabilities
Short-term borrowings**		19		(382)		(151)
Derivative financial instruments**		20		(4)		-
Provisions		22		(113)		(86)
Current tax liabilities*				(234)		(171)
Trade and other payables		21		(2,235)		(1,833)
Current liabilities				(2,968)		(2,241)
Non-current liabilities
Long-term borrowings**		19		(1,212)		(1,452)
Derivative financial instruments**		20		(6)		(15)
Post-employment benefit obligations		23		(131)		(162)
Provisions		22		(341)		(351)
Deferred tax liabilities*		5		(24)		(5)
Trade and other payables		21		(33)		(36)
Non-current liabilities				(1,747)		(2,021)
Total liabilities				(4,715)		(4,262)
Net assets				2,206		2,170
Equity
Share capital		24, 25		184		193
Share premium account		25		178		122
Capital redemption reserve		25		44		33
Less: Own shares		25		(4)		(1)
Other reserves		25		4,401		4,312
Retained earnings		25		(2,616)		(2,511)
Total equity shareholders' funds				2,187		2,148
Minority interests		25		19		22
Total equity				2,206		2,170
* Component of current and deferred taxes ** Component of net debt
Approved by the Board of directors on 26 November 2008 and signed on their behalf by
Richard J Cousins, Director
Andrew D Martin, Director

Consolidated cash flow statement
for the year ended 30 September 2008
				2008		2007
		Notes		£m		£m
Cash flow from operating activities
Cash generated from operations (1)		28		915		756
Interest paid				(104)		(152)
Interest element of finance lease rentals				(2)		(3)
Tax received				16		4
Tax paid				(165)		(121)
Net cash from/(used in) operating activities of continuing operations				660		484
Net cash from/(used in) operating activities of discontinued operations		29		2		(18)
Net cash from/(used in) operating activities				662		466
Cash flow from investing activities
Purchase of subsidiary companies and investments in associates (2)		27		(181)		(31)
Proceeds from sale of subsidiary companies and associates - discontinued activities(2)		6		(17)		782
Proceeds from sale of subsidiary companies and associates - other activities(2)				12		32
Proceeds from sale of other investments				1		4
Tax on profits from sale of subsidiary companies and associates				45		(51)
Contribution of disposal proceeds to pension plans				-		(45)
Purchase of intangible assets and investments(1)				(73)		(74)
Purchase of property, plant and equipment(1)				(119)		(106)
Proceeds from sale of property, plant and equipment / intangibles				26		22
Dividends received from associated undertakings				5		6
Interest received				25		28
Net cash from/(used in) investing activities by continuing operations				(276)		567
Net cash from/(used in) investing activities by discontinued operations		29		-		(30)
Net cash from/(used in) investing activities				(276)		537
Cash flow from financing activities
Proceeds from issue of ordinary share capital		25		58		27
Purchase of own shares(3)				(355)		(576)
Net increase/(decrease) in borrowings - excluding new leases / repayments		30		(141)		(239)
Repayment of obligations under finance leases		30		(11)		(15)
Equity dividends paid		9, 25		(209)		(208)
Dividends paid to minority interests		25		(4)		(3)
Net cash from/(used in) financing activities by continuing operations				(662)		(1,014)
Net cash from/(used in) financing activities by discontinued operations		29		-		-
Net cash from/(used in) financing activities				(662)		(1,014)
Cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents		30		(276)		(11)
Cash and cash equivalents at beginning of the year		30		839		848
Currency translation gains/(losses) on cash and cash equivalents		30		16		2
Cash and cash equivalents at end of the year		30		579		839

(1) Certain contract-related assets previously included in property, plant and equipment, and other receivables have been reclassified as intangible assets. The 2007 cash flow has been restated
accordingly. There is no impact on the income statement.
(2) Net of cash acquired or disposed and payments received or made under warranties and indemnities.
(3) Share buy-back and increase/(decrease) in own shares held to satisfy employee share-based payments.
Reconciliation of free cash flow from continuing operations
for the year ended 30 September 2008
				2008		2007
				£m		£m
Net cash from operating activities of continuing operations				660		484
Purchase of intangible assets and investments				(73)		(74)
Purchase of property, plant and equipment				(119)		(106)
Proceeds from sale of property, plant and equipment / intangibles				26		22
Dividends received from associated undertakings				5		6
Interest received				25		28
Dividends paid to minority interests				(4)		(3)
Free cash flow from continuing operations				520		357

Notes to the consolidated financial statements
for the year ended 30 September 2008
1 Segmental reporting
			Geographical segments
			North	Continental	United		Rest of	Intra-
			America	Europe	Kingdom		the World	Group		Total
	Revenues		£m	£m	£m		£m	£m		£m
	Year ended 30 September 2008
	Total revenue		4,553	3,021	1,926		1,947	-		11,447
	Less: Inter-segment revenue (2)		-	-	-		-	-		-
	External revenue		4,553	3,021	1,926		1,947	-		11,447
	Less: Discontinued operations		-	-	-		(7)	-		(7)
	External revenue - continuing		4,553	3,021	1,926		1,940	-		11,440
	Year ended 30 September 2007
	Total revenue		4,162	2,842	1,986		1,654	(18)		10,626
	Less: Inter-segment revenue (2)		-	(7)	(7)		(4)	18		-
	External revenue		4,162	2,835	1,979		1,650	-		10,626
	Transfers (1)		44	-	-		(44)	-		-
	Less: Discontinued operations		-	(282)	(48)		(28)	-		(358)
	External revenue - continuing		4,206	2,553	1,931		1,578	-		10,268
	(1) Mexico was transferred from the Rest of the World to the North America segment during the current reporting period to reflect a similar change in the management reporting structure. The 2007
	segmental results have been restated on a consistent basis.
	(2) In the prior year inter-segment revenue largely arose as the result of trading between Selecta and other discontinued companies and the rest of the Group. There was no inter-segmental trading in
	the current year.
							Business segments
							Contracts	Vending		Total
	Revenues						£m	£m		£m
	Year ended 30 September 2008
	External revenue						10,999	448		11,447
	Less: Discontinued operations						(7)	-		(7)
	External revenue - continuing						10,992	448		11,440
	Year ended 30 September 2007
	External revenue						9,843	783		10,626
	Less: Discontinued operations						(33)	(325)		(358)
	External revenue - continuing						9,810	458		10,268

			Geographical segments
			North	Continental	United		Rest of	Central
			America	Europe	Kingdom		the World	activities		Total
	Result		£m	£m	£m		£m	£m		£m
	Year ended 30 September 2008
	Total operating profit before associates  and amortisation of intangibles arising on acquisition		311	197	108		103	(62)		657
	Less: Discontinued operations		-	-	-		1	-		1
	Operating profit before associates and amortisation  of intangibles arising on acquisition - continuing		311	197	108		104	(62)		658
	Less: Amortisation of intangibles arising on acquisition		-	-	-		(3)	-		(3)
	Operating profit before associates - continuing		311	197	108		101	(62)		655
	Add: Share of profit of associates		2	-	2		-	-		4
	Operating profit - continuing		313	197	110		101	(62)		659
	Finance income									27
	Finance costs									(100)
	Hedge accounting ineffectiveness									(4)
	Change in fair value of minority interest put options									(16)
	Profit before tax									566
	Income tax expense									(169)
	Profit for the year from continuing operations									397
	Year ended 30 September 2007
	Total operating profit before associates  and amortisation of intangibles arising on acquisition		261	181	107		57	(58)		548
	Transfers (1)		3	-	-		(3)	-		-
	Less: Discontinued operations		-	(30)	-		7	-		(23)
	Operating profit before associates and amortisation  of intangibles arising on acquisition - continuing		264	151	107		61	(58)		525
	Less: Amortisation of intangibles arising on acquisition		-	-	-		-	-		-
	Operating profit before associates - continuing		264	151	107		61	(58)		525
	Add: Share of profit of associates		1	-	3		-	-		4
	Operating profit - continuing		265	151	110		61	(58)		529
	Finance income									28
	Finance costs									(115)
	Hedge accounting ineffectiveness									(6)
	Change in fair value of minority interest put options									-
	Profit before tax									436
	Income tax expense									(124)
	Profit for the year from continuing operations									312
	(1) Mexico was transferred from the Rest of the World to the North America segment during the current reporting period to reflect a similar change in the management reporting structure. The 2007
	segmental results have been restated on a consistent basis.

2 Operating costs
		2008		2007
Operating costs		£m		£m
Cost of food and materials:
Cost of inventories consumed		3,776		3,426
Labour costs:
Employee remuneration (note 3)		5,083		4,518
Overheads:
Depreciation - owned property, plant and equipment (1)		115		103
Depreciation - leased property, plant and equipment		10		11
Amortisation - owned intangible assets (1)		81		60
Property lease rentals		50		52
Other occupancy rentals - minimum guaranteed rent		39		38
Other occupancy rentals - rent in excess of minimum guaranteed rent		10		4
Other asset rentals		58		55
Audit and non-audit services		5		5
Other expenses (1)		1,555		1,471
Operating costs before amortisation of intangibles arising on acquisition		10,782		9,743
Amortisation - intangible assets arising on acquisition		3		-
Total continuing operations		10,785		9,743
(1) Certain contract-related assets previously included in property, plant and equipment and other receivables have been reclassified as intangible assets. The associated depreciation, amortisation and
other expenses reported in 2007 have been restated accordingly. There is no impact on the income statement.
(2) Impairment of goodwill and inventories and net foreign exchange gains/losses recorded in income statement £nil (2007: £nil).

3 Employees
		2008		2007
Average number of employees, including directors and part-time employees		Number		Number
North America		136,853		126,691
Continental Europe		78,570		66,990
United Kingdom		64,146		66,105
Rest of the World		108,591		101,541
Total continuing operations		388,160		361,327
Discontinued operations		21		4,303
Total continuing and discontinued		388,181		365,630
		2008		2007
Aggregate remuneration of all employees including directors		£m		£m
Wages and salaries		4,297		3,804
Social security costs		723		638
Share-based payments		14		24
Pension costs - defined contribution plans		28		34
Pension costs - defined benefit plans		21		18
Total continuing operations		5,083		4,518
Discontinued operations		1		102
Total continuing and discontinued		5,084		4,620
In addition to the pension cost shown in operating costs above, there is a pensions-related net credit to finance income of £2 million (2007: charge of £2 million).

4 Financing and other gains/losses
Finance income and costs are recognised in the income statement in the period in which they are earned or incurred.
		2008		2007
Finance income and costs		£m		£m
Finance income
Bank interest		25		28
Expected return on pension scheme assets net of amount charged to scheme liabilities (note 23)		2		-
Total finance income		27		28
Finance costs
Bank loans and overdrafts		14		5
Other loans		84		104
Finance lease interest		2		3
Interest on bank loans, overdrafts, other loans and finance leases		100		112
Unwinding of discount on put options held by minority shareholders		-		1
Amount charged to pension scheme liabilities net of expected return on scheme assets (note 23)		-		2
Total finance costs		100		115
Finance costs by defined IAS 39(1) category
Fair value through profit or loss (unhedged derivatives)		4		(5)
Derivatives in a fair value hedge relationship		7		4
Derivatives in a net investment hedge relationship		(10)		(5)
Other financial liabilities		99		118
Interest on bank loans, overdrafts, other loans and finance leases		100		112
Fair value through profit or loss (put options held by minority interests)		-		1
Outside of the scope of IAS 39 (pension scheme charge)		-		2
Total finance costs		100		115
(1) IAS 39 'Financial Instruments: Recognition and Measurement'.
The Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge the risks associated with changes in foreign exchange rates and interest rates. As explained in section Q of the Group's accounting policies, which are set out in the Annual Report, such derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. For derivative financial instruments that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement in the period. The Group has a small number of outstanding put options which enable minority shareholders to require the Group to purchase the minority interest shareholding at an agreed multiple of earnings. These options are treated as derivatives over equity instruments and are recorded in the balance sheet at fair value which is re-evaluated at each period end. Fair value is based on the present value of expected cash outflows. The movement in fair value is recognised as income or expense within the income statement.
		2008		2007
Other (gains)/losses		£m		£m
Hedge accounting ineffectiveness
Unrealised net (gains)/losses on unhedged derivative financial instruments (1)		4		3
Unrealised net (gains)/losses on derivative financial instruments in a designated fair value hedge (2)		(11)		13
Unrealised net (gains)/losses on the hedged item in a designated fair value hedge		11		(13)
Unhedged translation losses on foreign currency borrowings		-		3
Total hedge accounting ineffectiveness (gains)/losses		4		6
Minority interest put options
Change in fair value of minority interest put options (credit)/charge		16		-
(1) Categorised as 'fair value through profit or loss' (IAS 39).
(2) Categorised as derivatives that are designated and effective as hedging instruments carried at fair value (IAS 39).

5 Tax
Recognised in the income statement:										2008		2007
Income tax expense on continuing operations										£m		£m
Current tax
Current year										176		149
Adjustment in respect of prior years										(3)		(27)
Current tax expense/(credit)										173		122
Deferred tax
Current year										(8)		2
Impact of changes in statutory tax rates										(1)		6
Adjustment in respect of prior years										5		(6)
Deferred tax expense/(credit)										(4)		2
Total income tax
Income tax expense/(credit) on continuing operations										169		124
The income tax expense for the year is based on the effective United Kingdom statutory rate of corporation tax for the period of 29% (2007: 30%). This effective rate results from the reduction in the UK corporation tax rate from 30% to 28% with effect from 1 April 2008. The impact of changes in statutory tax rates in the year ended 30 September 2007 relate principally to this reduction in the UK corporation tax rate, as a deferred tax charge arose from the reduction in the balance sheet carrying value of deferred tax assets to reflect the anticipated rate of tax at which those assets were expected to reverse. Overseas tax is calculated at the rates prevailing in the respective jurisdictions.
										2008		2007
Reconciliation of the income tax expense on continuing operations										£m		£m
Profit before tax from continuing operations before exceptional items										566		436
Notional income tax expense at the UK statutory rate of 29% (2007: 30%) on profit before tax										164		131
Effect of different tax rates of subsidiaries operating in other jurisdictions										22		19
Impact of changes in statutory tax rates										(1)		6
Permanent differences										3		3
Impact of share-based payments										(5)		-
Tax on profit of associates										(1)		(1)
Losses and other temporary differences not previously recognised										(25)		(10)
Unrelieved current year tax losses										11		9
Prior year items										2		(33)
Other										(1)		-
Income tax expense on continuing operations										169		124

										2008		2007
Tax credited/(charged) to equity										£m		£m
Deferred tax credit/(charge) on actuarial gains/losses on post-employment benefits										(5)		(6)
Other current and deferred tax credits										2		1
Total tax credit/(charge) on actuarial gains/losses and other items recognised in equity										(3)		(5)
Current tax credit on foreign exchange movements recognised in equity										8		13
Tax credit/(charge) on items recognised in equity										5		8
Recognition of deferred tax asset relating to currency translation differences in prior years										-		37
Tax credit/(charge) to equity										5		45
					Pensions			Self-		Net
					and post-			funded		short-term
		Tax			employment			insurance		temporary
Movement in net deferred tax		depreciation		Intangibles	benefits	Tax losses		provisions		differences		Total
asset/(liability)		£m		£m	£m	£m		£m		£m		£m
At 1 October 2006		(21)		(2)	154	10		23		55		219
Credit/(charge) to income		36		(12)	(45)	1		9		6		(5)
Credit/(charge) to equity		-		(7)	(8)	-		-		36		21
Transfer from/(to) current tax		(11)		-	-	-		-		-		(11)
Business acquisitions		-		-	-	-		-		-		-
Business disposals		11		-	(2)	-		-		-		9
Other movements		-		(1)	1	(2)		-		5		3
Exchange adjustment		2		-	(4)	-		(2)		3		(1)
At 30 September 2007		17		(22)	96	9		30		105		235
At 1 October 2007		17		(22)	96	9		30		105		235
Credit/(charge) to income		28		(19)	(25)	(4)		7		13		-
Credit/(charge) to equity		-		(7)	(5)	-		-		1		(11)
Transfer from/(to) current tax		-		-	-	-		-		-		-
Business acquisitions		-		(17)	-	-		-		5		(12)
Business disposals		-		9	-	-		-		-		9
Other movements		-		(1)	1	-		-		(2)		(2)
Exchange adjustment		(2)		(7)	7	2		5		8		13
At 30 September 2008		43		(64)	74	7		42		130		232
Net short-term temporary differences relate principally to provisions and other liabilities of overseas subsidiaries.

After netting off balances within countries, the following are the deferred tax assets and liabilities recognised in the consolidated balance sheet:
										2008		2007
Net deferred tax balance										£m		£m
Deferred tax assets										256		240
Deferred tax liabilities										(24)		(5)
Net deferred tax asset/(liability)										232		235
Unrecognised deferred tax assets in respect of tax losses and other temporary differences amount to £56 million (2007: £43 million). Of the total, tax losses of £7 million will expire at various dates between 2009 and 2017. These deferred tax assets have not been recognised as the timing of recovery is uncertain. No deferred tax liability is recognised on temporary differences of £2,616 million (2007: £2,726 million) relating to the unremitted earnings of overseas operations as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future.

6 Discontinued operations
Year ended 30 September 2008 The profit for the year from discontinued operations of £53 million is comprised of the profit arising on the sale of two properties formerly occupied by Selecta, the European vending business, which was disposed of in July 2007 of £nil; an adjustment to deferred tax liabilities forming part of the net assets of businesses disposed of in prior years of £9 million; the release of surplus provisions of £38 million and accruals relating to prior year disposals of £11 million; and a loss after tax from trading activities of £1 million.
Year ended 30 September 2007 The Group disposed of its European vending business, Selecta, on 2 July 2007 for a net profit after tax of £129 million. The Group also completed the sale and closure of a number of other small businesses as part of the exit from other discontinued operations, and established additional provisions totalling £45 million in respect of prior year disposals in these areas, resulting in a net loss after tax of £11 million before the release of net tax provisions of £79 million. These provisions were released following the settlement of a number of long-standing issues connected with prior year discontinued activities. The total net profit after tax arising on the disposal of these operations was £68 million. Overall an exceptional net credit of £197 million was recognised in the period. The disposal process was complete by the end of the year and no assets or liabilities were classified as being held for sale as at 30 September 2007.
							2007
			2008				Selecta		Other (1)		Total
Net assets disposed and disposal proceeds			£m				£m		£m		£m
Goodwill			-				411		2		413
Other intangible assets			-				-		-		-
Property, plant and equipment			2				144		2		146
Investments			-				-		-		-
Inventories			-				37		-		37
Trade and other receivables			-				58		3		61
Cash and cash equivalents			-				53		1		54
Gross assets disposed of			2				703		8		711
Trade and other payables			-				(100)		-		(100)
Post-employment benefit obligations			-				-		(3)		(3)
Tax			(9)				(15)		-		(15)
Minority interest			-				-		-		-
Other liabilities			-				(3)		(2)		(5)
Gross liabilities disposed of			(9)				(118)		(5)		(123)
Net assets/(liabilities) disposed of			(7)				585		3		588
Increase/(decrease) in retained liabilities (2) (3)			(68)				63		45		108
Cumulative exchange translation loss recycled on disposals (4)			-				-		-		-
Profit/(loss) on disposal before tax			58				130		(27)		103
Consideration, net of costs			(17)				778		21		799
Consideration deferred to future periods			-				-		-		-
Cash disposed of			-				(53)		(1)		(54)
Cash inflow/(outflow) from current year disposals			(17)				725		20		745
Deferred consideration and other payments relating to previous disposals			-				-		37		37
Cash inflow/(outflow) from disposals			(17)				725		57		782
(1) Comprises travel concessions and various other non-core businesses and adjustments to prior year disposals.
(2) Additional provisions were established in respect of the prior year disposal of the travel concessions catering businesses and in respect of the Middle East military catering operations discontinued in
the prior year in the year ended 30 September 2007. Total £45 million.
(3) Including the release of surplus provisions of £38 million; the release of surplus accruals of £11 million; the utilisation of provisions in respect of purchase price adjustments; warranty claims and other
indemnities of £25 million and the collection of other amounts totalling £6 million in the year ended 30 September 2008.
(4) The Group manages foreign currency exposures in accordance with the policies set-out in note 20, matching its principal projected cash flows by currency to actual or effective borrowings in the same
currency. As a result the cumulative exchange translation loss recycled on disposals is £nil (2007: £nil).
						2007
		2008 (1)				Selecta		Other (2)		Total
Financial performance of discontinued operations		£m				£m		£m		£m
Trading activities of discontinued operations
External revenue		7				325		33		358
Inter-segment revenues		-				14		1		15
Total revenue		7				339		34		373
Operating costs		(8)				(307)		(43)		(350)
Trading activities of discontinued operations before exceptional costs		(1)				32		(9)		23
Exceptional operating costs (note 7)		-				-		-		-
Profit before tax		(1)				32		(9)		23
Income tax (expense)/credit (see below)		-				(8)		-		(8)
Profit after tax		(1)				24		(9)		15
Exceptional items: Disposal of net assets and  other adjustments relating to discontinued operations
Profit on disposal of net assets of discontinued operations		9				130		18		148
Increase in provisions related to discontinued operations (3)		-				-		(45)		(45)
Release of surplus provisions and accruals related to discontinued operations  (4)		49				-		-		-
Cumulative translation exchange loss recycled on disposals (5)		-				-		-		-
Profit on disposal before tax		58				130		(27)		103
Income tax (expense)/credit		(4)				(1)		95		94
Total profit after tax		54				129		68		197
Profit for the year from discontinued operations
Profit/(loss) for the year from discontinued operations		53				153		59		212
						2007
		2008 (1)				Selecta		Other (2)		Total
Income tax from discontinued operations		£m				£m		£m		£m
Income tax on trading activities of discontinued operations
Current tax		-				(7)		-		(7)
Deferred tax		-				(1)		-		(1)
Income tax (expense)/credit on discontinued operations		-				(8)		-		(8)
Exceptional items: Income tax on disposal of net assets and other adjustments relating to discontinued operations
Current tax		-				(1)		18		17
Deferred tax		(4)				-		(2)		(2)
Exceptional tax credit (note 7)		-				-		79		79
Income tax (expense)/credit on disposal of net assets of discontinued operations		(4)				(1)		95		94
Total tax income from discontinued operations
Total income tax (expense)/credit from discontinued operations		(4)				(9)		95		86
(1) The trading activity in the year ended 30 September 2008 relates to the final run-off of activity in businesses earmarked for closure.
(2) Comprises travel concessions and various other non-core businesses and adjustments to prior year disposals.
(3) Additional provisions were established in respect of the prior year disposal of the travel concessions catering businesses and in respect of the Middle East military catering operations discontinued in
the prior year in the year ended 30 September 2007. Total £45 million.
(4) Including the release of surplus provisions of £38 million and the release of surplus accruals of £11 million.
(5) The Group manages foreign currency exposures in accordance with the policies set-out in note 20, matching its principal projected cash flows by currency to actual or effective borrowings in the same
currency. As a result the cumulative exchange translation loss recycled on disposals is £nil (2007: £nil).

7 Exceptional items
Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to clearly explain the financial performance of the Group. Items reported as exceptional are material items of income or expense that have been shown separately due to the significance of their nature or amount.
All of the exceptional items occurring in both the current and the prior year relate to discontinued operations and are described in more detail in note 6.
		2008		2007
Exceptional items		£m		£m
Continuing operations
Continuing operations		-		-
Discontinued operations
Profit on disposal of net assets and other adjustments relating to discontinued operations net of tax (note 6)		54		197
Discontinued operations		54		197
Continuing and discontinued operations
Total		54		197

8 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 year. The adjusted earnings per share figures have been calculated based on earnings excluding the effect of discontinued operations, the amortisation of intangible assets arising on acquisition, hedge accounting ineffectiveness, and the change in the fair value of minority interest put options and the tax attributable to these amounts. These items are excluded in order to show the underlying trading performance of the Group.
			2008					2007
			Attributable					Attributable
			profit					profit
Attributable profit			£m					£m
Profit for the year attributable to equity shareholders of the Company			443					515
Less: Profit for the year from discontinued operations			(53)					(212)
Attributable profit for the year from continuing operations			390					303
Add back: Amortisation of intangible assets arising on acquisition (net of tax)			2					-
Add back: Loss/(profit) from hedge accounting ineffectiveness (net of tax)			3					4
Add back: Change in fair value of minority interest put options (net of tax)			16					-
Underlying attributable profit for the year from continuing operations			411					307
			2008					2007
			Ordinary shares					Ordinary shares
			of 10p each					of 10p each
Average number of shares (millions of ordinary shares of 10p each)			millions					millions
Average number of shares for basic earnings per share			1,868					2,015
Dilutive share options			13					11
Average number of shares for diluted earnings per share			1,881					2,026
			2008					2007
			Earnings					Earnings
			per share					per share
			pence					pence
Basic earnings per share (pence)
From continuing and discontinued operations			23.7					25.6
From discontinued operations			(2.8)					(10.6)
From continuing operations			20.9					15.0
Amortisation of intangible assets arising on acquisition (net of tax)			0.1					-
Hedge accounting ineffectiveness (net of tax)			0.2					0.2
Change in fair value of minority interest put options (net of tax)			0.8					-
From underlying continuing operations			22.0					15.2
Diluted earnings per share (pence)
From continuing and discontinued operations			23.6					25.4
From discontinued operations			(2.8)					(10.4)
From continuing operations			20.8					15.0
Amortisation of intangible assets arising on acquisition (net of tax)			0.1					-
Hedge accounting ineffectiveness (net of tax)			0.2					0.2
Change in fair value of minority interest put options (net of tax)			0.8					-
From underlying continuing operations			21.9					15.2

9 Dividends
A final dividend in respect of 2008 of 8.0 pence per share, £147 million in aggregate(1), has been proposed giving a total dividend in respect of 2008 of 12.0 pence per share (2007: 10.8 pence per share). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 5 February 2009 and has not been included as a liability in these financial statements.
		2008			2007
		Dividends			Dividends
		per share			per share
Dividends on ordinary shares of 10p each		pence	£m		pence	£m
Amounts recognised as distributions to equity shareholders during the year:
Final dividend for the prior year		7.2p	135		6.7p	136
Interim dividend for the current year		4.0p	74		3.6p	72
Total dividends		11.2p	209		10.3p	208

(1) Based on the number of shares in issue at 30 September 2008.

10 Goodwill
During the year the Group acquired the remaining 50% interest in GR SA, its 50% owned Brazilian joint venture; Propoco Inc ('Professional services') a leading regional provider of facilities management services to the US healthcare market; and Medi-Dyn Inc, a US based healthcare company. It also made seven other small infill acquisitions in various countries around the world and bought out minority interests in Japan and Italy (see note 27). This is reflected in the £155 million addition to goodwill shown below.
Goodwill												£m
Cost
At 1 October 2006												3,558
Additions												12
Reclassified												-
Business disposals - discontinued activities												(413)
Business disposals - other activities												-
Currency adjustment												(65)
At 30 September 2007												3,092
At 1 October 2007												3,092
Additions (1)												155
Reclassified												(2)
Business disposals - discontinued activities												-
Business disposals - other activities												(2)
Currency adjustment												154
At 30 September 2008												3,397
Impairment
At 1 October 2006												107
Impairment charge recognised in the year												-
At 30 September 2007												107
At 1 October 2007												107
Impairment charge recognised in the year												-
At 30 September 2008												107
Net book value
At 30 September 2007												2,985
At 30 September 2008												3,290
(1) Comprised of £22 million of existing goodwill recognised on the acquisition of remaining 50% interest in GR SA and £133 million of additional goodwill arising on the acquisition of GR SA and various other businesses (note 27).

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units ('CGUs') that are expected to benefit from that business combination. A summary of goodwill allocation by business segment is shown below.
										2008		2007
Goodwill by business segment										£m		£m
USA										939		757
Rest of North America										93		87
Total North America										1,032		844
Continental Europe										170		161
United Kingdom										1,734		1,733
Rest of the World										354		247
Total										3,290		2,985
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of a CGU has been determined from value in use calculations. The key assumptions for these calculations are long-term growth rates and pre-tax discount rates and use cash flow forecasts derived from the most recent financial budgets and forecasts approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates based on local expected economic conditions and do not exceed the long-term average growth rate for that country. The pre-tax discount rates are based on the Group's weighted average cost of capital adjusted for specific risks relating to the country in which the CGU operates.
						2008				2007
						Residual		Pre-tax		Residual		Pre-tax
Growth and discount rates						growth rates		discount rates		growth rates		discount rates
USA						4.6%		11.8%		2.8%		12.2%
Rest of North America						2.4%		9.6%		2.2%		10.4%
Continental Europe						2.4 - 4.5%		8.5 - 12.6%		0.6 - 2.7%		7.0 - 10.7%
United Kingdom						3.8%		10.3%		2.5%		9.8%
Rest of the World						1.7 - 11.5%		9.4 - 20.6%		(0.3) - 9.0%		6.5 - 17.6%

11 Other intangible assets
						Contract and other intangibles
		Computer			Arising on
		software				acquisition	Other			Total
Other intangible assets		£m				£m	£m			£m
Cost
At 1 October 2006		167				-	327			494
Additions		6				-	68			74
Disposals		(22)				-	(26)			(48)
Business acquisitions		-				-	1			1
Business disposals - discontinued activities		(1)				-	(3)			(4)
Business disposals - other activities		-				-	-			-
Reclassified		2				-	20			22
Currency adjustment		(2)				-	(24)			(26)
At 30 September 2007		150				-	363			513
At 1 October 2007		150				-	363			513
Additions		15				-	59			74
Disposals		(25)				-	(45)			(70)
Business acquisitions (3)		3				65	-			68
Business disposals - discontinued activities		-				-	-			-
Business disposals - other activities		-				-	-			-
Reclassified		3				-	3			6
Currency adjustment		14				-	48			62
At 30 September 2008		160				65	428			653
Amortisation
At 1 October 2006		75				-	112			187
Charge for the year		18				-	42			60
Disposals		(21)				-	(18)			(39)
Business acquisitions		-				-	-			-
Business disposals - discontinued activities		(1)				-	(3)			(4)
Business disposals - other activities		-				-	-			-
Reclassified		-				-	16			16
Currency adjustment		-				-	(8)			(8)
At 30 September 2007		71				-	141			212
At 1 October 2007		71				-	141			212
Charge for the year		24				3	57			84
Disposals		(25)				-	(41)			(66)
Business acquisitions (3)		1				-	-			1
Business disposals - discontinued activities		-				-	-			-
Business disposals - other activities		-				-	-			-
Reclassified		2				-	-			2
Currency adjustment		7				-	20			27
At 30 September 2008		80				3	177			260
Net book value
At 30 September 2007		79				-	222			301
At 30 September 2008		80				62	251			393
(1) Certain contract-related assets previously included in property, plant and equipment, and other receivables have been reclassified as intangible assets. The 2007 balance sheet has been restated
accordingly. There is no impact on the income statement.
(2) Contract-related intangible assets result from payments made by the Group in respect of client contracts and generally arise where it is economically more efficient for a client to purchase assets used in
the performance of the contract and the Group fund these purchases.
(3) The acquisition of additional shares in a proportionately consolidated entity results in a corresponding adjustment to both cost and accumulated amortisation.

 

12 Property, plant and equipment
		Land and	Plant and	Fixtures and
		buildings	machinery	fittings		Total
Property, plant and equipment		£m	£m	£m		£m
Cost
At 1 October 2006		293	829	497		1,619
Additions		18	94	43		155
Disposals		(46)	(105)	(63)		(214)
Business acquisitions		-	-	-		-
Business disposals - discontinued activities		(16)	(318)	(58)		(392)
Business disposals - other activities		-	-	-		-
Reclassified		(32)	41	(20)		(11)
Currency adjustment		(7)	(10)	1		(16)
At 30 September 2007		210	531	400		1,141
At 1 October 2007		210	531	400		1,141
Additions (3)		17	69	40		126
Disposals		(19)	(57)	(47)		(123)
Business acquisitions (2)		-	9	8		17
Business disposals - discontinued activities		(2)	-	-		(2)
Business disposals - other activities		-	(1)	(2)		(3)
Reclassified		2	(1)	-		1
Currency adjustment		27	64	34		125
At 30 September 2008		235	614	433		1,282
Depreciation
At 1 October 2006		112	603	285		1,000
Charge for the year		14	82	46		142
Disposals		(27)	(97)	(52)		(176)
Business acquisitions		-	-	-		-
Business disposals - discontinued activities		(7)	(197)	(42)		(246)
Business disposals - other activities		-	-	-		-
Reclassified		4	(13)	3		(6)
Currency adjustment		1	(12)	2		(9)
At 30 September 2007		97	366	242		705
At 1 October 2007		97	366	242		705
Charge for the year		17	66	42		125
Disposals		(10)	(47)	(42)		(99)
Business acquisitions (2)		-	3	3		6
Business disposals - discontinued activities		-	-	-		-
Business disposals - other activities		-	(1)	(1)		(2)
Reclassified		13	(28)	18		3
Currency adjustment		13	46	22		81
At 30 September 2008		130	405	284		819
Net book value
At 30 September 2007		113	165	158		436
At 30 September 2008		105	209	149		463

The net book amount of the Group's property, plant and equipment includes assets held under finance leases as follows:
		Land and	Plant and	Fixtures and
		buildings	machinery	fittings		Total
Property, plant and equipment held under finance leases		£m	£m	£m		£m
At 30 September 2007		2	41	2		45
At 30 September 2008		2	32	5		39
(1) Certain contract-related assets previously included in plant and machinery and fixtures and fittings have been reclassified as intangible assets. The 2007 balance sheet has been restated accordingly.
There is no impact on the income statement.
(2) The acquisition of additional shares in a proportionately consolidated entity results in a corresponding adjustment to both cost and accumulated depreciation.
(3) Includes leased assets of £8 million (2007: £15 million).

13 Interests in associates
During the year the Group increased its investment in Twickenham Experience Ltd by £4 million as the result of a rights issue.  In 2007 the Group sold half of its 25% interest in its former associate Au Bon Pain leaving it with a 12.5% shareholding at the end of 2007. Since the end of 2007, this shareholding has been accounted for as an investment (note 14).
						2008		2007
Principal associates		Country of incorporation				% ownership		% ownership
Twickenham Experience Ltd		England & Wales				40%		40%
Oval Events Limited		England & Wales				25%		25%
Thompson Hospitality Services LLC		USA				49%		49%
						2008		2007
Interests in associates						£m		£m
Net book value
At 1 October						25		39
Additions						4		-
Business disposals - discontinued activities						-		-
Business disposals - other activities						-		(7)
Share of profits less losses (net of tax)						4		4
Dividends received						(5)		(6)
Reclassified to investments (note 14)						(1)		(6)
Currency and other adjustments						1		1
At 30 September						28		25
The Group's share of revenues and profits (including those from Au Bon Pain up to the date the Group reduced its shareholding to 12.5% in 2007) is included below:
						2008		2007
Associates						£m		£m
Share of revenue and profits
Revenue						25		37
Expenses / taxation (1)						(21)		(33)
Profit after tax for the year						4		4
Share of net assets
Goodwill						26		19
Other						2		6
Net assets						28		25
Share of contingent liabilities
Contingent liabilities						-		-
(1) Expenses include the relevant portion of income tax recorded by associates.

14 Other investments
During the year, the Group redeemed a number of debentures and other holdings in sports and leisure venues and reduced its investment in Au Bon Pain by a further 1.48%, leaving it with a 11.02% shareholding at the end of 2008. There were no other material changes save for the appreciation of the Sterling value of investments held by overseas subsidiaries as a result of the weakening of Sterling.
		2008		2007
Other investments		£m		£m
Net book value
At 1 October		12		9
Additions		-		2
Disposals		(1)		-
Business acquisitions		1		-
Business disposals - other activities		-		(4)
Reclassified from interests in associates (note 13)		1		6
Currency and other adjustments		4		(1)
At 30 September		17		12
Comprised of
Debenture and other holdings in sports and leisure venues (1)		-		1
Investment in Au Bon Pain (2) (3)		7		6
Other investments (2)		10		5
Total		17		12
(1) Categorised as 'held to maturity' financial assets (IAS 39).
(2) Categorised as 'available for sale' financial assets (IAS 39).
(3) The reduction in the Group's US Dollar investment in Au Bon Pain was more than offset by currency translation gains.

15 Joint ventures
During the year the Group acquired the remaining 50% interest in GR SA, its 50% owned Brazilian joint venture. It also sold its share of Radhakrishna Hospitality Services Private Ltd and SHRM Food and Allied Services Private Ltd, its Indian joint ventures, to a company controlled by the joint venture partner. The sale of the Indian business has not been accounted for as a discontinued operation in accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' as it does not meet the criteria for classification as a discontinued operation.
Principal joint ventures					2008		2007
			Country of incorporation		% ownership		% ownership
GR SA (1)			Brazil		100%		50%
Quadrant Catering Ltd			England & Wales		49%		49%
Radhakrishna Hospitality Services Private Ltd /  SHRM Food and Allied Services Private Ltd (2)			India		-		50%
Sofra Yemek Üretim Ve Hizmet AS			Turkey		50%		50%
ADNH-Compass Middle East LLC			United Arab Emirates		50%		50%
(1) Now 100% owned and accounted for as a subsidiary (see note 37).
(2) Sold during the year.
None of these investments is held directly by the ultimate parent company. All joint ventures provide foodservice and/or support services in their respective countries of incorporation and make their accounts up to 30 September.

The share of the revenue, profits, assets and liabilities of the joint ventures (including the revenues and profits of the Brazilian and Indian joint ventures up to the point the Group purchased the remaining shareholding or disposed of its share) included in the consolidated financial statements are as follows:

Joint ventures					2008		2007
					£m		£m
Share of revenue and profits
Revenue					301		318
Expenses					(288)		(291)
Profit after tax for the year					13		27
Share of net assets
Non-current assets					13		34
Current assets					81		66
Non-current liabilities					(13)		(6)
Current liabilities					(62)		(56)
Net assets					19		38
Share of contingent liabilities
Contingent liabilities					12		10

16 Trade and other receivables
			2008					2007
			Current	Non-current		Total		Current		Non-current		Total
Trade and other receivables			£m	£m		£m		£m		£m		£m
Net book value
At 1 October			1,343	47		1,390		1,424		99		1,523
Net movement			88	12		100		(74)		(46)		(120)
Currency adjustment			146	7		153		(7)		(6)		(13)
At 30 September			1,577	66		1,643		1,343		47		1,390
Comprised of
Trade receivables			1,418	4		1,422		1,196		4		1,200
Less: Provision for impairment of trade receivables			(54)	-		(54)		(47)		-		(47)
Net trade receivables (1)			1,364	4		1,368		1,149		4		1,153
Other receivables			57	49		106		68		35		103
Less: Provision for impairment of other receivables			(5)	-		(5)		(5)		-		(5)
Net other receivables (2)			52	49		101		63		35		98
Accrued income			75	-		75		65		-		65
Prepayments			79	12		91		61		7		68
Amounts owed by associates (1)			7	1		8		5		1		6
Trade and other receivables			1,577	66		1,643		1,343		47		1,390
(1) Categorised as 'loans and receivables' financial assets (IAS 39).
(2) Certain contract-related assets previously included within other receivables have been reclassified as intangible assets. The 2007 balance sheet has been restated accordingly. There is no impact  on the income statement.

Trade receivables
The book value of trade and other receivables approximates to their fair value due to the short-term nature of the majority of the receivables.
Credit sales are only made after credit approval procedures have been satisfactorily completed. The policy for making provisions for bad and doubtful debts varies from country to country as different countries and markets have different payment practices, but various factors are considered including how overdue the debt is, the type of debtor and its past history, and current market and trading conditions. Full provision is made for debts that are not considered to be recoverable.
There is limited concentration of credit risk with respect to trade receivables due to the diverse and unrelated nature of the Group's client base. Accordingly the directors believe that there is no further credit provision required in excess of the provision for the impairment of receivables. The book value of trade and other receivables represents the Group's maximum exposure to credit risk.
Trade receivable days for the continuing business at 30 September 2008 were 50 days (2007: 50 days on a comparable basis).
The ageing of gross trade receivables and of the provision for impairment is as follows:
			2008
			Not	0-3		3-6		6-12		Over 12
			yet	months		months		months		months
Trade receivables			due	overdue		overdue		overdue		overdue		Total
			£m	£m		£m		£m		£m		£m
Gross trade receivables			1,102	253		34		16		17		1,422
Less: Provision for impairment of trade receivables			(4)	(8)		(17)		(8)		(17)		(54)
Net trade receivables			1,098	245		17		8		-		1,368
			2007
			Not	0-3		3-6		6-12		Over 12
			yet	months		months		months		months		Total
			due	overdue		overdue		overdue		overdue
Trade receivables			£m	£m		£m		£m		£m		£m
Gross trade receivables			932	200		30		8		30		1,200
Less: Provision for impairment of trade receivables			-	(8)		(15)		(4)		(20)		(47)
Net trade receivables			932	192		15		4		10		1,153
Movements in the provision for impairment of trade and other receivables are as follows:
			2008					2007
			Trade	Other		Total		Trade		Other		Total
Provision for impairment of trade and other receivables			£m	£m		£m		£m		£m		£m
At 1 October			47	5		52		41		6		47
Charged to income statement			19	-		19		6		1		7
Credited to income statement			(6)	-		(6)		-		-		-
Utilised			(9)	-		(9)		-		(2)		(2)
Currency adjustment			3	-		3		-		-		-
At 30 September			54	5		59		47		5		52
At 30 September 2008, trade receivables of £270 million (2007: £221 million) were past due but not impaired. The Group has made a provision based on a number of factors, including past history of the debtor, and all unprovided for amounts are considered to be recoverable.

17 Inventories
		2008		2007
Inventories		£m		£m
Net book value
At 1 October		179		212
Net movement		12		(28)
Currency adjustment		22		(5)
At 30 September		213		179
Comprised of
Food and beverage inventories		164		135
Other inventories		49		44
Total		213		179

18 Cash and cash equivalents
		2008		2007
Cash and cash equivalents		£m		£m
Cash at bank and in hand		111		140
Short-term bank deposits		468		699
Cash and cash equivalents (1)		579		839
(1) Categorised as 'loans and receivables' financial assets (IAS 39).
		2008		2007
Cash and cash equivalents by currency		£m		£m
Sterling		464		685
US Dollar		5		45
Euro		19		35
Japanese Yen		1		5
Other		90		69
Cash and cash equivalents		579		839
The Group's policy to manage the credit risk associated with cash and cash equivalents is set out in note 20. The book value of cash and cash equivalents represents the maximum credit exposure.

19 Short-term and long-term borrowings
		2008					2007
Short-term and long-term borrowings		Current	Non-current		Total		Current		Non-current			Total
		£m	£m		£m		£m		£m			£m
Bank overdrafts		29	-		29		118		-			118
Bank loans		18	17		35		19		17			36
Loan notes		84	354		438		-		380			380
Bonds		237	802		1,039		-		1,019			1,019
Borrowings (excluding finance leases)		368	1,173		1,541		137		1,416			1,553
Finance leases		14	39		53		14		36			50
Borrowings (including finance leases) (1)		382	1,212		1,594		151		1,452			1,603
(1) Categorised as 'other financial liabilities' (IAS 39).
Bank overdrafts principally arise as a result of uncleared transactions. Interest on bank overdrafts is at the relevant money market rates.
All amounts due under bonds, loan notes and bank facilities are shown net of unamortised issue costs.
The Group has fixed term, fixed interest private placements totalling US$769 million (£431 million) at interest rates between 5.11% and 7.955%. The carrying value of these loan notes is £438 million.
Loan notes
							Nominal value			Redeemable		Interest
US$ private placement							$147m		May 2009			6.39%
US$ private placement							$36m		May 2010			6.53%
US$ private placement							$35m		Nov 2010			5.11%
US$ private placement							$62m		May 2011			6.67%
US$ private placement							$24m		Sep 2011			7.955%
US$ private placement							$450m		May 2012			6.81%
US$ private placement							$15m		Nov 2013			5.67%
The Group also has Euro denominated Eurobonds of €300 million (£236 million) and Sterling denominated Eurobonds totalling £775 million at interest rates of between 6.0% and 7.125%. The carrying value of these bonds is £1,039 million. The bond redeemable in December 2014 is recorded at its fair value to the Group on acquisition.
Bonds
							Nominal value			Redeemable		Interest
Euro Eurobond							€300m		May 2009			6.0%
Sterling Eurobond							£200m		Jan 2010			7.125%
Sterling Eurobond							£325m		May 2012			6.375%
Sterling Eurobond							£250m		Dec 2014			7.0%
The maturity profile of borrowings (excluding finance leases) is as follows:
Maturity profile of borrowings (excluding finance leases)									2008			2007
									£m			£m
Within 1 year, or on demand									368			137
Between 1 and 2 years									226			292
Between 2 and 3 years									73			224
Between 3 and 4 years									588			63
Between 4 and 5 years									2			550
In more than 5 years									284			287
Borrowings (excluding finance leases)									1,541			1,553

The fair value of the Group's borrowings is calculated by discounting future cash flows to net present values at current market rates for similar financial instruments. The table below shows the fair value of borrowings excluding accrued interest:
					2008				2007
					Carrying		Fair		Carrying		Fair
Carrying value/fair value of borrowings (excluding finance leases)					value		value		value		value
					£m		£m		£m		£m
Bank overdrafts					29		29		118		118
Bank loans					35		35		36		37
Loan notes					438		438		380		392
€300m Eurobond May 2009					237		236		212		214
£200m Eurobond Jan 2010					199		200		201		204
£325m Eurobond May 2012					330		318		328		324
£250m Eurobond Dec 2014					273		251		278		258
Bonds					1,039		1,005		1,019		1,000
Borrowings (excluding finance leases)					1,541		1,507		1,553		1,547
					2008				2007
							Present				Present
Gross/present value of finance lease liabilities					Gross		value		Gross		value
					£m		£m		£m		£m
Finance lease payments falling due:
Within 1 year					16		14		16		14
In 2 to 5 years					33		30		32		28
In more than 5 years					11		9		9		8
					60		53		57		50
Less: future finance charges					(7)		-		(7)		-
Present value of finance lease liabilities					53		53		50		50
		2008					2007
			Finance						Finance
		Borrowings	leases		Total		Borrowings		leases		Total
Borrowings by currency		£m	£m		£m		£m		£m		£m
Sterling		812	-		812		831		1		832
US Dollar		454	24		478		452		24		476
Euro		242	21		263		237		21		258
Japanese Yen		15	-		15		16		-		16
Other		18	8		26		17		4		21
Total		1,541	53		1,594		1,553		50		1,603
The Group had the following undrawn committed facilities available at 30 September, in respect of which all conditions precedent had then been met:
									2008		2007
Undrawn committed facilities									£m		£m
Expiring between 2 and 5 years									689		630

20 Derivative financial instruments

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern with an optimal balance of debt and equity. The capital structure of the Group consists of cash and cash equivalents as disclosed in note 18; debt, which includes the borrowings disclosed in note 19; and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in note 25.

Financial management

The Group continues to manage its interest rate and foreign currency exposure in accordance with the policies set out in the Company's Annual Report. The Group's financial instruments comprise of cash, borrowings, receivables and payables that are used to finance the Group's operations. The Group also uses derivatives, principally interest rate swaps and forward currency contracts, to manage interest rate and currency risks arising from the Group's operations. The Group does not trade in financial instruments. The Group's treasury policies are designed to mitigate the impact of fluctuations in interest rates and exchange rates and to manage the Group's financial risks. The Board approves any changes to the policies.

Credit risk

The Group's policy is to minimise its exposure to credit risk from the failure of any single financial counterparty by spreading its risk across a portfolio of financial counterparties and managing the aggregate exposure to each against certain pre-agreed limits. Exposure to counterparty credit risk arising from deposits, derivative and forward foreign currency contracts is concentrated at the Group centre where possible. Financial counterparty limits are derived from the long and short term credit ratings, and the balance sheet strength of the financial counter-party . All financial counterparties are required to have a minimum short term credit rating from Moodys of P-1 or equivalent from another recognised agency. The Group's policy to manage the credit risk associated with trade and other receivables is set out in note 16.

		2008								2007
		Current		Non-current		Current		Non-current		Current		Non-current		Current		Non-current
Derivative financial		assets		assets		liabilities		liabilities		assets		assets		liabilities		liabilities
instruments		£m		£m		£m		£m		£m		£m		£m		£m
Interest rate swaps
Fair value hedges (1)		1		19		(1)		(6)		-		13		-		(15)
Not in a hedging relationship (2)		-		-		(3)		-		2		-		-		-
Total		1		19		(4)		(6)		2		13		-		(15)
(1) Derivatives that are designated and effective as hedging instruments carried at fair value (IAS 39).
(2) Derivatives carried at 'fair value through profit or loss' (IAS 39).
										2008				2007
										Fair value		Cash flow		Fair value		Cash flow
Notional amount of derivative financial										swaps		swaps		swaps		swaps
instruments by currency										£m		£m		£m		£m
Sterling										1,025		-		775		30
US Dollar										197		174		173		245
Euro										99		103		52		35
Japanese Yen										20		79		16		77
Other										-		123		-		128
Total										1,341		479		1,016		515
						2008						2007
										Effective						Effective
						Gross		Forward		currency of		Gross		Forward		currency of
Effective currency denomination of borrowings						borrowings		contracts		borrowings		borrowings		contracts		borrowings
after the effect of derivatives						£m		£m		£m		£m		£m		£m
Sterling						806		(245)		561		837		(318)		519
US Dollar						478		222		700		476		247		723
Euro						263		(142)		121		258		(98)		160
Japanese Yen						15		77		92		16		59		75
Other						26		94		120		21		105		126
Total						1,588		6		1,594		1,608		(5)		1,603

21 Trade and other payables
		2008				2007
		Current	Non-current	Total		Current	Non-current	Total
Trade and other payables		£m	£m	£m		£m	£m	£m
Net book value
At 1 October		1,833	36	1,869		1,990	46	2,036
Net movement		216	(8)	208		(146)	(10)	(156)
Currency adjustment		186	5	191		(11)	-	(11)
At 30 September		2,235	33	2,268		1,833	36	1,869
Comprised of
Trade payables (1)		856	4	860		660	4	664
Amounts owed to associates (1) (2)		2	-	2		3	-	3
Social security and other taxes		218	-	218		190	-	190
Other payables		161	15	176		166	18	184
Deferred consideration on acquisitions (1)		10	4	14		3	3	6
Liability on put options held by minority equity partners (3)		18	10	28		-	8	8
Accruals (4)		805	-	805		671	3	674
Deferred income		165	-	165		140	-	140
Trade and other payables		2,235	33	2,268		1,833	36	1,869
(1) Categorised as 'other financial liabilities' (IAS 39).
(2) Amounts owed to associates were included in other payables in 2007.
(3) Categorised as 'fair value through profit or loss' (IAS 39).
(4) Of this balance £300 million (2007: £291 million) is categorised as 'other financial liabilities' (IAS 39).
The directors consider that the carrying amount of trade and other payables approximates to their fair value. The current trade and other payables are payable on demand. Trade payable days for the continuing business at 30 September 2008 were 53 days (2007: 49 days on a comparable basis).

22 Provisions
			Provisions in
			respect of
			discontinued
			and disposed	Onerous	Legal and
Provisions		Insurance	businesses	contracts	other claims	Environmental			Total
		£m	£m	£m	£m		£m		£m
At 1 October 2006		107	108	44	38		10		307
Reclassified (1)		-	-	3	4		(4)		3
Expenditure in the year		(7)	(14)	(6)	-		(1)		(28)
Charged to income statement		19	108	5	30		3		165
Credited to income statement		-	(2)	-	-		-		(2)
Fair value adjustments arising on acquisitions (note 27)		-	-	-	-		-		-
Business disposals - other activities		-	-	-	-		-		-
Currency adjustment		(7)	-	-	(1)		-		(8)
At 30 September 2007		112	200	46	71		8		437
At 1 October 2007		112	200	46	71		8		437
Reclassified (1)		-	4	1	9		6		20
Expenditure in the year		(6)	(25)	(9)	(5)		(6)		(51)
Charged to income statement		22	-	12	20		5		59
Credited to income statement		-	(38)	(8)	(6)		(3)		(55)
Fair value adjustments arising on acquisitions (note 27)		-	-	7	19		-		26
Business disposals - other activities		-	-	-	(2)		-		(2)
Currency adjustment		15	1	1	2		1		20
At 30 September 2008		143	142	50	108		11		454
							2008		2007
Provisions							£m		£m
Current							113		86
Non-current							341		351
Total provisions							454		437
(1) Including items reclassified from accrued liabilities and other balance sheet captions.
The provision for insurance relates to the costs of self-funded insurance schemes and is essentially long-term in nature.  Provisions in respect of discontinued and disposed businesses relate to estimated amounts payable in connection with onerous contracts and claims arising from disposals. The final amount payable remains uncertain as, at the date of approval of these financial statements, there remains a further period during which claims may be received. The timing of any settlement will depend upon the nature and extent of claims received. Surplus provisions of £38 million (2007: £nil) were credited to the discontinued operations section of the income statement in the year. Provisions for onerous contracts represent the liabilities in respect of short-term and long-term leases on unoccupied properties and other contracts lasting under five years.  Provisions for legal and other claims relate principally to provisions for the estimated cost of litigation and sundry other claims. The timing of the settlement of these claims is uncertain. Environmental provisions are in respect of potential liabilities relating to the Group's responsibility for maintaining its operating sites in accordance with statutory requirements and the Group's aim to have a low impact on the environment. These provisions are expected to be utilised as operating sites are disposed of or as environmental matters are resolved.

23 Post-employment benefit obligations
Pension schemes operated
The Group operates a number of pension arrangements throughout the world which have been developed in accordance with statutory requirements and local customs and practices. The majority of schemes are self-administered and the schemes' assets are held independently of the Group's finances. Pension costs are assessed in accordance with the advice of independent, professionally qualified actuaries. The Group makes employer contributions to the various schemes in existence within the range of 6% - 35% of pensionable salaries. The contributions payable for defined contribution schemes of £28 million (2007: £36 million) have been fully expensed against profits in the current year.
						2008																						2007
						UK						USA						Other					Total					UK						USA						Other						Total
Fair value of plan assets						£m						£m						£m					£m					£m						£m						£m						£m
At 1 October						1,290						69						83					1,442					1,174						68						166						1,408
Currency adjustment						-						16						8					24					-						(6)						1						(5)
Expected return on plan assets						79						10						5					94					67						5						6						78
Actuarial gain/(loss)						(153)						(32)						(4)					(189)					14						5						3						22
Employee contributions						3						8						3					14					4						-						4						8
Employer contributions						25						14						17					56					68						17						25						110
Benefits paid						(40)						(15)						(18)					(73)					(47)						(20)						(13)						(80)
Merger of Vendepac Scheme  into the UK Scheme						-						-						-					-					10						-						(10)						-
Other balance sheet transfers						-						57						(2)					55					-						-						-						-
Disposals and plan settlements						-						-						(4)					(4)					-						-						(99)						(99)
At 30 September						1,204						127						88					1,419					1,290						69						83						1,442
						2008																						2007
Present value of defined						UK						USA						Other					Total					UK						USA						Other						Total
benefit obligations							£m						£m						£m					£m						£m					£m						£m							£m
At 1 October						1,228						129						155					1,512					1,269						155						266						1,690
Currency adjustment						-						25						17					42					-						(11)						2						(9)
Current service cost						9						5						9					23					12						3						12						27
Past service cost						-						-						(2)					(2)					-						(1)						-						(1)
Curtailment credit						-						-						-					-					-						-						(6)						(6)
Amount charged to plan liabilities						71						12						9					92					64						8						8						80
Actuarial (gain)/loss						(84)						(25)						(3)					(112)					(84)						(5)						(19)						(108)
Employee contributions						3						8						3					14					4						-						4						8
Benefits paid						(40)						(15)						(18)					(73)					(47)						(20)						(13)						(80)
Merger of Vendepac Scheme  into the UK Scheme						-						-						-					-					10						-						(10)						-
Plan amendment						-						-						1					1					-						-						-						-
Disposals and plan settlements						-						-						(4)					(4)					-						-						(103)						(103)
Other balance sheet transfers						-						57						-					57					-						-						14						14
Acquisitions						-						-						2					2					-						-						-						-
At 30 September						1,187						196						169					1,552					1,228						129						155						1,512

								2008																2007
Present value of defined								UK				USA				Other			Total					UK						USA				Other				Total
benefit obligations								£m				£m				£m			£m					£m						£m				£m				£m
Funded obligations								1,158				143				112			1,413					1,199						81				98				1,378
Unfunded obligations								29				53				57			139					29						48				57				134
Total obligations								1,187				196				169			1,552					1,228						129				155				1,512
																										2008					2007			2006			2005
Post-employment benefit obligations recognised in the balance sheet																										£m					£m			£m			£m
Present value of defined benefit obligations																										1,552					1,512			1,690			1,595
Fair value of plan assets																										(1,419)					(1,442)			(1,408)			(1,040)
Total deficit of defined benefit pension plans per above																										133					70			282			555
Surplus not recognised																										-					92			-			-
Past service cost not recognised (1)																										(2)					-			-			-
Post-employment benefit obligations per the balance sheet																										131					162			282			555
(1) To be recognised over the remaining service life in accordance with IAS 19.
Total pension costs/(credits) recognised in the income statement								2008																			2007
								UK					USA				Other				Total					UK					USA			Other			Total
								£m					£m				£m				£m					£m					£m			£m			£m
Current service cost								9					5				9				23					12					3			12			27
Past service credit								-					-				(2)				(2)					-					(1)			-			(1)
Curtailment credit								-					-				-				-					-					-			(6)			(6)
Charged/(credited) to operating expenses								9					5				7				21					12					2			6			20
Amount charged to pension liability								71					12				9				92					64					8			8			80
Expected return on plan assets								(79)					(10)				(5)				(94)					(67)					(5)			(6)			(78)
(Credited)/charged  to finance costs								(8)					2				4				(2)					(3)					3			2			2
Total pension costs/(credits)								1					7				11				19					9					5			8			22
(1) The total pension costs/(credits) shown above relate to both continuing and discontinued operations.
The history of experience adjustments is as follows. In accordance with the transitional provisions for the amendments to IAS 19 issued on 16 December 2004, the disclosures below are determined prospectively from the 2005 reporting period.

												2008		2007		2006		2005
Experience adjustments												£m		£m		£m		£m
Experience adjustments on plan liabilities - gain/(loss)												5		(15)		(14)		(8)
Experience adjustments on plan assets - (loss)/gain												(189)		22		39		75

The actuarial gain/loss reported in the statement of recognised income and expense can be reconciled as follows:
																2008		2007
Actuarial adjustments																£m		£m
Actuarial (gains)/losses on fair value of plan assets																189		(22)
Actuarial (gains)/losses on defined benefit obligations																(112)		(108)
Actuarial (gains)/losses																77		(130)
Increase/(decrease) in surplus not recognised																(92)		92
Actuarial (gains)/losses per the statement of recognised income and expense																(15)		(38)
The Group made total contributions of £56 million in the year (2007: £110 million) including special contributions of disposal proceeds to pension plans of £nil (2007: £45 million) and expects to make regular ongoing contributions of £42 million in 2009. The expected return on plan assets is based on market expectations at the beginning of the period. The actual return on assets was a loss of £95 million (2007: gain £100 million). The cumulative actuarial loss recognised in the statement of recognised income and expense was £141 million (2007: £156 million). An actuarial gain of £15 million (2007: £38 million) was recognised during the year. Net post-employment benefit obligations of £131 million shown above include a surplus of £54 million on the UK Scheme which has been recognised in the year on the basis that the Company is now satisfied that it will be able to benefit from this surplus in the future.

 

24 Called up share capital
During the year 4,878,299 options were granted under the Compass Group Management Share Option Plan. All options were granted over the Company's ordinary shares and the grant price was equivalent to the market value of the Company's shares at the date of grant. No options were granted under any of the Company's other share option plans.
The Company commenced an on market share buy-back programme following the disposal of Select Service Partner in June 2006. This programme was extended following the disposal of Selecta in July 2007. A third phase of the programme commenced on 1 July 2008. During the year, a total of 107,014,468 ordinary shares of 10 pence each were repurchased for consideration of £348 million and cancelled.
					2008					2007
Authorised and allotted share capital					Number of shares			£m		Number of shares			£m
Authorised:
Ordinary shares of 10p each					3,000,010,000			300		3,000,010,000			300
Allotted and fully paid:
Ordinary shares of 10p each					1,841,932,734			184		1,926,996,323			193
							2008				2007
Allotted share capital							Number of shares				Number of shares
Ordinary shares of 10p each allotted as at 1 October							1,926,996,323				2,098,723,901
Ordinary shares allotted during the year on exercise of share options							21,950,879				9,679,856
Repurchase of ordinary share capital							(107,014,468)				(181,407,434)
Ordinary shares of 10p each allotted as at 30 September							1,841,932,734				1,926,996,323

25 Reconciliation of movements in equity
		Attributable to equity shareholders of the Company
			Share		Capital
		Share	premium		redemption	Own	Other		Retained			Minority
		capital	account		reserve	shares	reserves		earnings			interests				Total
Reconciliation of movements in equity		£m	£m		£m	£m	£m		£m			£m				£m
At 1 October 2006		210	96		15	-	4,288		(2,303)			6				2,312
Total recognised income and expense		-	-		-	-	1		575			19				595
Issue of shares		1	26		-	-	-		-			-				27
Fair value of share-based payments		-	-		-	-	25		-			-				25
Settled in cash or existing shares (purchased in market)		-	-		-	-	(11)		-			-				(11)
Share buy back		(18)	-		18	-	-		(575)			-				(575)
Transfer on exercise of put options		-	-		-	-	9		-			-				9
Buy-out of minority interests		-	-		-	-	-		-			-				-
Fair value adjustments arising on acquisition		-	-		-	-	-		-			-				-
Other changes		-	-		-	-	-		-			-				-
		193	122		33	-	4,312		(2,303)			25				2,382
Dividends paid to Compass shareholders (note 9)		-	-		-	-	-		(208)			-				(208)
Dividends paid to minority interest		-	-		-	-	-		-			(3)				(3)
Increase in own shares held for staff compensation scheme (1)		-	-		-	(1)	-		-			-				(1)
At 30 September 2007		193	122		33	(1)	4,312		(2,511)			22				2,170
At 1 October 2007		193	122		33	(1)	4,312		(2,511)			22				2,170
Total recognised income and expense		-	-		-	-	71		455			10				536
Issue of shares		2	56		-	-	-		-			-				58
Fair value of share-based payments		-	-		-	-	14		-			-				14
Settled in cash or existing shares (purchased in market)		-	-		-	-	(5)		-			-				(5)
Share buy back		(11)	-		11	-	-		(348)			-				(348)
Transfer on exercise of put options		-	-		-	-	-		-			-				-
Buy-out of minority interests		-	-		-	-	-		-			(6)				(6)
Fair value adjustments arising on acquisition		-	-		-	-	9		-			-				9
Other changes		-	-		-	-	-		(3)			(3)				(6)
		184	178		44	(1)	4,401		(2,407)			23				2,422
Dividends paid to Compass shareholders (note 9)		-	-		-	-	-		(209)			-				(209)
Dividends paid to minority interest		-	-		-	-	-		-			(4)				(4)
Increase in own shares held for staff compensation scheme (1)		-	-		-	(3)	-		-			-				(3)
At 30 September 2008		184	178		44	(4)	4,401		(2,616)			19				2,206
(1) These shares are held in trust and are used to satisfy some of the Group's liabilities to employees for share options, share bonus and long-term incentive plans.

Own shares held by the Group represent 1,276,271 shares in Compass Group PLC (2007: 271,960 shares). 1,259,062 shares are held by the Compass Group Employee Share Trust ('ESOP') and 17,209 shares by the Compass Group Employee Trust Number 2 ('CGET2'). These shares are listed on a recognised stock exchange and their market value at 30 September 2008 was £4.4 million (2007: £0.8 million). The nominal value held at 30 September 2008 was £127,627 (2007: £27,196). ESOP and CGET2 are discretionary trusts for the benefit of employees and the shares held are used to satisfy some of the Group's liabilities to employees for share options, share bonus and long-term incentive plans. All of the shares held by the ESOP and CGET2 are required to be made available in this way. The analysis of other reserves is shown below:
										Equity
					Share-based					adjustment
					payment	Merger	Revaluation	Translation		for put		Total other
					reserve	reserve	reserve	reserve		options		reserves
Other reserves					£m	£m	£m	£m		£m		£m
At 1 October 2006					130	4,170	-	5		(17)		4,288
Total recognised income and expense					-	-	-	1		-		1
Fair value of share-based payments					25	-	-	-		-		25
Settled in cash or existing shares (purchased in market)					(11)	-	-	-		-		(11)
Transfer on exercise of put options					-	-	-	-		9		9
Fair value adjustments arising on acquisition					-	-	-	-		-		-
At 30 September 2007					144	4,170	-	6		(8)		4,312
At 1 October 2007					144	4,170	-	6		(8)		4,312
Total recognised income and expense					-	-	(1)	72		-		71
Fair value of share-based payments					14	-	-	-		-		14
Settled in cash or existing shares (purchased in market)					(5)	-	-	-		-		(5)
Transfer on exercise of put options					-	-	-	-		-		-
Fair value adjustments arising on acquisition					-	-	9	-		-		9
At 30 September 2008					153	4,170	8	78		(8)		4,401
The merger reserve arose in 2000 following the demerger from Granada Compass plc. The equity adjustment for put options arose in 2005 on the accounting for the options held by the Group's minority partners requiring the Group to purchase those minority interests.

26 Share-based payments

Full details of the Compass Group Share Option Plan ('Option Plan'), the Management Share Option Plan ('Management Plan') and the Savings-Related Share Option Scheme can be found in the Company's Annual Report.

27 Business combinations
The Group acquired the remaining 50% interest in GR SA, its 50% owned Brazilian joint venture, for cash consideration of £91 million on 6 March 2008. Propoco Inc ('Professional Services'), a leading regional provider of facilities management services to the US healthcare market, was acquired on 1 October 2007 for a total consideration of £38 million. £36 million was paid at closing, with the remaining £2 million being deferred for 12 months. Medi-Dyn Inc, a US based healthcare company was acquired on 10 July 2008 for a total consideration of £26 million of which £23 million was paid at closing with the remaining £3 million being deferred for twelve months. Seven other small infill acquisitions were made during the year for a total consideration of £21 million, £5 million of which was deferred. On 29 November 2007 the Group bought out the remaining 10% minority interest in Palmar S.p.A, its Italian subsidiary which provides support services, and on 25 March 2008 it acquired a further 9% of the shares of Seiyo Food - Compass Group Inc, its Japanese subsidiary, taking the Group's shareholding from 86% to 95%. The combined consideration for the two transactions was £15 million.
													Buy-out of
		Acquisition of 50% interest in GR SA						Other acquisitions					minority interests				Total
		Book			Fair			Book		Fair			Fair				Fair
		value	(1)		value		(2)	value		value			value				value
		£m			£m			£m		£m			£m				£m
Net assets acquired
Goodwill		22			22			-		-			-				22
Other intangible assets:
- Computer software		2			2			-		-			-				2
- Contract-related and other intangibles arising on acquisition		-			52			-		13			-				65
Property, plant and equipment		10			10			1		1			-				11
Deferred tax asset		-			11			-		-			-				11
Inventories		3			3			1		1			-				4
Trade and other receivables		20			20			5		5			-				25
Cash and cash equivalents		4			4			1		1			-				5
Other assets		1			2			1		2			-				4
Trade and other payables		(30)			(30)			(6)		(6)			-				(36)
Provisions (note 22)		-			(26)			-		-			-				(26)
Post-employment benefit obligations (note 23)		(2)			(2)			-		-			-				(2)
Deferred tax liabilities		(1)			(22)			-		(1)			-				(23)
Other liabilities		(1)			(1)			-		-			-				(1)
Minority interest (note 25)		-			-			-		-			6				6
		28			45			3		16			6				67
Portion of fair value adjustment credited to revaluation reserve (note 25) (2)					(9)					-			-				(9)
Fair value of net assets acquired					36					16			6				58
Goodwill arising on acquisition					55					69			9				133
Total consideration					91					85			15				191
Satisfied by
Cash consideration and costs					91					75			15				181
Deferred consideration					-					10			-				10
					91					85			15				191
Cash flow
Cash consideration					91					75			15				181
Cash acquired					(4)					(1)			-				(5)
Net cash outflow arising on acquisition					87					74			15				176
Deferred consideration and other payments relating to previous acquisitions																	5
Total cash outflow arising from the purchase of subsidiary companies and investments in associated undertakings																	181
(1) Final agreed amounts.
(2) The fair value adjustments arising on the acquisition of the remaining 50% interest in GR SA relate to 100% of the shareholding. The portion of the fair value adjustment pertaining to the Group's
existing 50% shareholding in GR SA was credited to the revaluation reserve in accordance with IFRS 3.
Adjustments made to the fair value of assets acquired include the value of intangible assets, provisions and other adjustments recognised on acquisition in accordance with IFRS 3 'Business Combinations'. The adjustments made in respect of the acquisitions in the twelve months to 30 September 2008 are provisional and will be finalised within 12 months of the acquisition date.
The goodwill arising on the acquisition of the remaining 50% interest in GR SA represents the premium the Group paid to gain full operational and strategic control of the company. This will allow the business to be fully integrated into the Group. The initial goodwill arising on the acquisition of the other businesses represents the premium the Group paid to acquire seven small companies which complement the existing business and create significant opportunities for cross selling and other synergies.
In the period from acquisition to 30 September 2008 the acquisitions contributed revenue of £187 million and operating profit of £11 million to the Group's results. If the acquisitions had occurred on 1 October 2007, Group revenue for the year would have been £11,527 million and total Group operating profit (including associates) would have been £664 million.

28 Reconciliation of operating profit to cash generated by operations
		2008		2007
Reconciliation of operating profit to cash generated by continuing operations		£m		£m
Operating profit from continuing operations		655		525
Adjustments for:
Amortisation of intangible fixed assets (2)		81		60
Amortisation of intangible assets arising on acquisition		3		-
Depreciation of property, plant and equipment (2)		125		114
(Gain)/loss on disposal of property, plant and equipment / intangible assets		2		5
(Gain)/loss on business disposals - other activities		(6)		-
Increase/(decrease) in provisions		21		43
Decrease in post-employment benefit obligations		(33)		(42)
Share-based payments - charged to profits		14		23
Share-based payments - settled in cash or existing shares (1)		(5)		(11)
Operating cash flows before movement in working capital		857		717
(Increase)/decrease in inventories		(13)		(7)
(Increase)/decrease in receivables (2)		(108)		10
Increase/(decrease) in payables		179		36
Cash generated by continuing operations (2)		915		756
(1) It was originally anticipated these payments would be satisfied by the issue of new shares.
(2) Certain contract-related assets previously included with property, plant and equipment and other receivables have been reclassified as intangible assets. The 2007 cashflow has been restated  accordingly. There is no impact on the income statement.

 

29 Cash flow from discontinued operations
		2008		2007
Cash flow from discontinued operations		£m		£m
Net cash from/(used in) operating activities of discontinued operations
Cash generated from discontinued operations		2		(11)
Tax paid		-		(7)
Net cash from/(used in) operating activities of discontinued operations		2		(18)
Net cash from/(used in) investing activities by discontinued operations
Purchase of property, plant and equipment		-		(34)
Proceeds from sale of property, plant and equipment		-		4
Net cash from/(used in) investing activities by discontinued operations		-		(30)
Net cash from/(used in) financing activities by discontinued operations
Dividends paid to minority interests		-		-
Net cash from/(used in) financing activities by discontinued operations		-		-

 

30 Analysis of net debt
This table is presented as additional information to show movement in net debt, defined as overdrafts, bank and other borrowings, finance leases and derivative financial instruments, net of cash and cash equivalents.
						Gross debt
										Total								Derivative
		Cash and cash				Bank		Bank and other		overdrafts and				Finance				financial								Net
		equivalents				overdrafts		borrowings		borrowings				leases				instruments				Total				debt
Net debt		£m				£m		£m		£m				£m				£m				£m				£m
At 1 October 2006		848				(56)		(1,841)		(1,897)				(57)				11				(1,943)				(1,095)
Cash flow		(11)				(66)		305		239				-				-				239				228
Cash flow from repayment of obligations under finance leases		-				-		-		-				15				-				15				15
(Increase)/decrease in net debt as a result of new finance leases taken out		-				-		-		-				(15)				-				(15)				(15)
Currency translation gains/(losses)		2				3		68		71				1				-				72				74
Acquisitions and disposals  (excluding cash and overdrafts)		-				1		-		1				6				-				7				7
Other non-cash movements		-				-		33		33				-				(11)				22				22
At 30 September 2007		839				(118)		(1,435)		(1,553)				(50)				-				(1,603)				(764)
At 1 October 2007		839				(118)		(1,435)		(1,553)				(50)				-				(1,603)				(764)
Cash flow		(276)				95		46		141				-				-				141				(135)
Cash flow from repayment of obligations under finance leases		-				-		-		-				11				-				11				11
(Increase)/decrease in net debt as a result of new finance leases taken out		-				-		-		-				(8)				-				(8)				(8)
Currency translation gains/(losses)		16				(6)		(125)		(131)				(6)				-				(137)				(121)
Acquisitions and disposals  (excluding cash and overdrafts)		-				-		-		-				-				-				-				-
Other non-cash movements		-				-		2		2				-				10				12				12
At 30 September 2008		579				(29)		(1,512)		(1,541)				(53)				10				(1,584)				(1,005)

 

Other non-cash movements are comprised as follows:
												2008		2007
Other non-cash movements in net debt												£m		£m
Amortisation of the fair value adjustment in respect of the £250 million Sterling Eurobond  redeemable in December 2014												4		4
Fair value debt adjustment												(11)		4
Swap monetisation credit												9		25
Changes in the value of derivative financial instruments												10		(11)
Other non-cash movements												12		22

 

31 Contingent liabilities
		2008		2007
Contingent liabilities		£m		£m
Performance bonds and guarantees and indemnities (including those of associated undertakings)		301		227
On 21 October 2005, the Company announced that it had instructed Freshfields Bruckhaus Deringer to conduct an investigation into the relationships between Eurest Support Services ('ESS') (a member of the Group), IHC Services Inc. ('IHC') and the United Nations. Ernst & Young assisted Freshfields Bruckhaus Deringer in this investigation. On 1 February 2006, it was announced that the investigation had concluded. The investigation established serious irregularities in connection with contracts awarded to ESS by the UN. The work undertaken by Freshfields Bruckhaus Deringer and Ernst & Young gave no reason to believe that these issues extended beyond a few individuals within ESS to other parts of ESS or the wider Compass Group of companies. The Group settled all outstanding civil litigation against it, in relation to this matter, in October 2006 but litigation continues between competitors of ESS, IHC and other parties involved in UN procurement.
IHC's relationship with the UN and ESS was part of a wider investigation into UN procurement activity being conducted by the United States Attorney's Office for the Southern District of New York, and with which the Group co-operated fully. The current status of that investigation is uncertain and a matter for the US authorities. Those investigators could have had access to sources unavailable to the Group, Freshfields Bruckhaus Deringer or Ernst & Young, and further information may yet emerge which is inconsistent with, or additional to, the findings of the Freshfields Bruckhaus Deringer investigation, which could have an adverse impact on the Group. The Group has however not been contacted by, or received further requests for information from, the United States Attorney's Office for the Southern District of New York in connection with these matters since January 2006. The Group has cooperated fully with the UN throughout.
In February 2007, the Group's Portuguese business, Eurest (Portugal) Sociedade Europeia Restaurantes LDA, was visited by the Portuguese Competition Authority (PCA) as part of an investigation into possible past breaches of competition law by the Group and other caterers in the sector. The PCA investigation relates to a part of the Portuguese catering business which services mainly public sector contracts. The Group is cooperating fully with the PCA. The investigation has been ongoing for some while and it is likely that it will take several more months to complete. The outcome cannot be predicted at this point. Revenues of the Portuguese business for the year ended 30 September 2008 were £110 million (€145 million).  It is not currently possible to quantify any potential liability which may arise in respect of these matters. The directors currently have no reason to believe that any potential liability that may arise would be material to the financial position of the Group. The Group, through a number of its subsidiary undertakings, is, from time to time, party to various other legal proceedings or claims arising from its normal business. Provisions are made as appropriate. None of these proceedings is regarded as material litigation.
The Group has provided a guarantee to one of its joint venture partners over the level of profits which will accrue to them in future periods. The maximum amount payable under this guarantee is £35 million, which would be payable in respect of the period from 1 July 2007 to 31 December 2010. Based on the latest management projections, no overall liability is expected to arise in relation to this guarantee. No provision has been recorded at 30 September 2008 (2007: £nil).

 

32 Capital commitments
		2008		2007
Capital commitments		£m		£m
Contracted for but not provided for		28		23

 

33 Operating lease and concessions commitments
The Group leases offices and other premises under non-cancellable operating leases. The leases have varying terms, purchase options, escalation clauses and renewal rights. The Group has some leases that include revenue-related rental payments that are contingent on future levels of revenue.  Future minimum rentals payable under non-cancellable operating leases and concessions agreements are as follows:
		2008					2007
		Operating leases					Operating leases
		Land and	Other	Other Occupancy			Land and	Other	Other Occupancy
		buildings	assets	rentals			buildings	assets	rentals
Operating lease and concessions commitments		£m	£m	£m			£m	£m	£m
Falling due within 1 year		48	48	31			40	41	26
Falling due between 2 and 5 years		120	62	83			111	54	61
Falling due in more than 5 years		72	9	52			71	5	33
Total		240	119	166			222	100	120

 

34 Related party transactions

The following transactions were carried out with related parties of Compass Group PLC:

Subsidiaries

Transactions between the ultimate parent company and its subsidiaries, and between subsidiaries, have been eliminated on consolidation.

Joint ventures

There were no significant transactions between joint ventures or joint venture partners and the rest of the Group during the year except for the acquisition of the remaining 50% interest in GR SA, the Group's 50% owned Brazilian joint venture (see note 27) and the sale of the Group's share in Radhakrishnan Hospitality Services Private Ltd and SHRM Food and Allied Services Private Ltd, the Group's 50% owned Indian joint ventures (see note 15).

Associates

The balances with associated undertakings are shown in notes 16 and 21. There were no significant transactions with associated undertakings during the year.

Key management personnel

The remuneration of directors and key management personnel is set out in the Annual Report. During the year there were no other material transactions or balances between the Group and its key management personnel or members of their close family.

35 Post balance sheet events

On 30 October 2008, the Group raised and received a total of £185 million in the US private placement market through the issue of five, seven and eight year loan notes.

Loan notes

Nominal value

Redeemable

Interest

US$ private placement

$105m

Oct 2013

6.45%

US$ private placement

$162m

Oct 2015

6.72%

Sterling private placement

£35m

Oct 2016

7.55%

This has further strengthened the Group's balance sheet and extended the maturity profile of the Group's borrowings.
									30 Oct 2008		30 Sep 2008
Maturity profile of borrowings (excluding finance leases)									£m		£m
Within 1 year, or on demand									368		368
Between 1 and 2 years									226		226
Between 2 and 3 years									73		73
Between 3 and 4 years									588		588
Between 4 and 5 years									61		2
In more than 5 years									410		284
Borrowings (excluding finance leases)									1,726		1,541
The average maturity profile of the Group's borrowings is now 3.4 years (3.1 years as at 30 September 2008).

 

36 Exchange rates
Exchange rates			2008		2007
Average exchange rate for year
Australian Dollar			2.19		2.44
Brazilian Real			3.40		4.02
Canadian Dollar			1.99		2.19
Euro			1.32		1.48
Japanese Yen			212.97		234.05
Norwegian Krone			10.53		11.98
South African Rand			14.66		14.18
Swedish Krona			12.40		13.63
Swiss Franc			2.14		2.40
US Dollar			1.97		1.97
Closing exchange rate as at 30 September
Australian Dollar			2.26		2.30
Brazilian Real			3.44		3.75
Canadian Dollar			1.90		2.02
Euro			1.27		1.43
Japanese Yen			189.23		234.33
Norwegian Krone			10.54		11.05
South African Rand			14.76		14.05
Swedish Krona			12.43		13.18
Swiss Franc			2.00		2.38
US Dollar			1.78		2.04
(1) Average rates are used to translate the income statement and cash flow. Closing rates are used to translate the balance sheet. Only the most significant currencies are shown.

37 Details of principal subsidiary companies
All companies listed below are wholly owned by the Group, except where otherwise indicated. All interests are in the ordinary share capital. All companies operate principally in their country of incorporation, except for Compass International Purchasing Ltd which operates throughout the world. A full list of the Group's operating subsidiary undertakings will be annexed to the next annual return.
		Country of
Company		incorporation		Principal activities
North America
Compass Group Canada Ltd		Canada		Foodservice and support services
Bon Appétit Management Co		USA		Foodservice
Compass Group USA Investments, Inc		USA		Holding company
Compass Group USA, Inc		USA		Foodservice and support services
Crothall Services Group		USA		Support services to the healthcare market
Flik International Corp		USA		Fine dining facilities
Foodbuy LLC (64%)		USA		Purchasing services in North America
Levy Restaurants LP		USA		Fine dining and foodservice at sports and entertainment facilities
Morrison Management Specialists, Inc		USA		Foodservice to the healthcare and senior living market
Restaurant Associates Corp		USA		Fine dining facilities
Wolfgang Puck Catering & Events, LLC (49%) (1)		USA		Fine dining facilities
Continental Europe
Compass Group France Holdings SAS		France		Holding company
Compass Group France		France		Foodservice and support services
Compass Group Deutschland GmbH		Germany		Holding company
Medirest GmbH & Co OHG (2)		Germany		Foodservice to the healthcare and senior living market
Eurest Deutschland GmbH		Germany		Foodservice to business and industry
Eurest Services GmbH		Germany		Support services to business and industry
Eurest Sports & Food GmbH		Germany		Foodservice to the sports and leisure market
Onama S.p.A. (3)		Italy		Foodservice and prepaid meal vouchers
Palmar S.p.A. (4)		Italy		Support services
Lunchtime S.p.A.		Italy		Prepaid meal vouchers
Compass Group International BV		Netherlands		Holding company
Compass Group Nederland BV		Netherlands		Foodservice and support services
Compass Group Nederland Holding BV		Netherlands		Holding company
Eurest Services BV		Netherlands		Foodservice and support services
Compass Group Holdings Spain, S.L.		Spain		Holding company
Eurest Colectividades S.L.		Spain		Foodservice and support services
Compass Group (Schweiz) AG		Switzerland		Foodservice and support services
Restorama AG		Switzerland		Foodservice
United Kingdom
Compass Contract Services (UK) Ltd		England & Wales		Foodservice and support services
Compass Group Holdings PLC		England & Wales		Holding company and corporate activities
Compass Group, UK & Ireland Ltd		England & Wales		Holding company
Compass International Purchasing Ltd		England & Wales		Purchasing services throughout the world
Compass Purchasing Ltd		England & Wales		Purchasing services in the UK and Ireland
Compass Services UK Ltd		England & Wales		Foodservice and support services
Hospitality Holdings Ltd (5)		England & Wales		Intermediate holding company
Letherby & Christopher Ltd		England & Wales		Foodservice for the UK sports and events business
Scolarest Ltd		England & Wales		Foodservice for the UK education market
Rest of the World
Compass Group (Australia) Pty Ltd		Australia		Foodservice and support services
GR SA (6)		Brazil		Foodservice and support services
Seiyo Food - Compass Group, Inc (95%) (7)		Japan		Foodservice and support services
Compass Group Southern Africa (Pty) Ltd (70%)		South Africa		Foodservice and support services
(1) The Group exercises control of this entity and accounts for it as a subsidiary.
(2) Formerly known as Clinic Catering Service GmbH & Co OHG.
(3) Ristomat S.p.A. was merged into Onama S.p.A. during the year and on 14 November 2008 the company was renamed Compass Group Italia S.p.A.
(4) The Group acquired the remaining 10% shareholding in Palmar S.p.A during the year (2007: 90%).
(5) Held directly by the parent company.
(6) The Group acquired the remaining 50% interest in GR SA during the year. This company was previously accounted for as a joint venture (see note 15).
(7) The Group acquired a further 9% in Seiyo Food - Compass Group, Inc during the year (2007: 86%).

ENDFR BABMTMMATTMP

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Compass Group