31st Mar 2005 07:01
Compass Group PLC31 March 2005 Compass Group PLC Trading Update 31 March 2005 Compass Group PLC will issue its interim results for the six months ended 31March 2005 on 18 May 2005. Prior to its close period, the Company today issuesthe following scheduled trading update. TRADING GroupIn the first six months of 2005 and for the full year 2005, like-for-liketurnover growth for the Group is expected to be at least 6%, with continuingstrong performance in North America. Turnover growth has been driven by newbusiness wins and a continued high level of contract retention. UKIn the first six months and for the full year 2005, like-for-like turnover inthe UK is expected to be in line with our expectations, with solid growth inboth the Contract and Concession businesses. We have recently commenced a programme of rationalising some of our back officefunctions and have taken the decision to invest additional resource into ouroperational and front line management teams. Both of these initiatives areintended to underpin future profitable growth. Accordingly, there will be anadditional cost of approximately £5 million in the first six months andapproximately £9 million in the full year 2005. Continental Europe & Rest of WorldAs reported in our AGM statement, the picture in Continental Europe & Rest ofWorld Division remains mixed. Asia, Australasia, Latin America and Spaincontinue to perform well, while Northern Europe and in particular France,Germany and the Netherlands remain very challenging. Over the last few weeks, we have seen a shift in the volume and mix of ourMiddle East business as some of our military contracts have been replaced bypeacekeeping activity, which is at a lower margin. Our current expectation isthat profit in the first six months will be approximately £4 million lower thananticipated and approximately £15 million lower in the full year 2005. Theevolving nature of this part of the business makes it slightly more difficult toforecast definitively. North AmericaNorth America continues to perform well. In the full year 2005, profit isexpected to be in line with our previous expectations, but slightly weightedtowards the first six months of the year, reflecting the flow-through effect ofsignificant purchasing benefits that were realised in the second half of 2004. Cash FlowAn increased emphasis on the management of cash within the business means thatour guidance for the full year 2005 remains unchanged at £350 million to £370million on a constant currency basis (included in Appendix 2 is a list of thekey profit and loss translation rates for the year ending 30 September 2004).The Group's business profile is such that cash flows are seasonal and free cashflow will be weighted towards the second half, as in previous years. Michael J. Bailey, Chief Executive, said: "I see 2005 as an important year for the business. Our focus is firmly onputting the necessary actions in place to deliver strong free cash flowgeneration and improving return on capital employed over the medium term. Sincethe start of the financial year we have undertaken a number of initiatives toaccelerate the delivery of this, including a recently commenced review of ouroperational and cost structure." NOTES A number of adjustments and reclassifications were made to full year 2004numbers that will have an impact on the comparison of the six months ended 31March 2005 with the six months ended 31 March 2004. Appendix 1 provides anoutline of the relevant pro-forma adjustments. Today, the Group is announcing a number of important contract wins, the detailsof which can be found in Appendix 3. Compass Group PLC is the world's leading foodservice company providing food,vending and related services to clients and customers in the workplace, atschool and colleges, hospitals, on the move, at leisure and in defence, offshoreand remote locations. Compass Group has annual revenues of £12 billion andemploys 400,000 people in over 90 countries. Teleconference:A teleconference for investors and analysts will start at 8.00am (BST) onThursday, 31 March 2005. To participate in the teleconference call dial: +44 (0)20 7784 1004, password "Compass Group". A replay of the call will be available for seven days by dialling +44 (0) 207784 1024 or +1 718 354 1112. The passcode for both replay numbers is 4700112#. Enquiries:Compass Group PLCSarah EllisDirector of Corporate Strategy and Investor Relations +44 (0)1932 573 000 BrunswickSimon Sporborg +44 (0)20 7404 5959 Appendix 1 Outline of pro-forma adjustments for the six months ended 31 March 2004 Turnover (£m) UK CE&ROW NA Fuel Group2004 reported 1,292 2,549 1,772 231 5,844Currency (1) - (32) (19) - (51)Defence transfer (2) (48) 48 - - -2004 acquisitions (3) 15 54 28 - 972004 Pro-forma 1,259 2,619 1,781 231 5,890 Notes:(1) Retranslation of 2004 reported numbers from 2004 half year average rates to 2004 full year average rates.(2) Transfer of defence business, previously managed from the UK, and now managed locally.(3) Adjustment to include a full six month estimate in respect of acquisitions made in 2004. Operating Profit (£m) UK CE&ROW NA Associates Group2004 reported (1) 133 128 84 1 346Currency (2) - (2) (1) - (3)Defence transfer (3) (11) 11 - - -Trading update (4) (5) - - - (5)Pensions charge (5) (8) - - - (8)Purchasing & cost allocation (6) (9) 6 3 - -Accounting items (7) (6) (1) (3) - (10)2004 Pro-forma 94 142 83 1 320 Notes: (1) Based on continuing activities, including fuel and before goodwill amortisation.(2) Retranslation of 2004 reported numbers from 2004 half year average rates to 2004 full year average rates.(3) Transfer of defence business, previously managed from the UK, and now managed locally.(4) Estimated effect that the issues highlighted on 9th September 2004 had on H1 2004.(5) H1 2005 impact of additional pension costs in the UK, as highlighted on 30th September 2004.(6) Reallocation between segments of purchasing income and central costs highlighted on 30th November 2004.(7) H1 2005 impact of the accounting items, as highlighted on 30th November 2004. Appendix 2 Key profit and loss translation rates for the year ending 30 September 2004 1 pound sterling - US $1.791 pound sterling - Euro €1.47 Approximate translation rate effect of a movement in these key exchange ratesFor every 5-cent movement in the US$ (from the 2004 profit and loss exchangerate of $1.79), the approximate translation effect on North America 2004turnover and operating profit1 would be £89 million and £6 million respectively.The approximate translation effect on Continental Europe & Rest of World 2004turnover and operating profit1 would be £8 million and £2 million respectively. For every 5-cent movement in the Euro (from the 2004 profit and loss exchangerate of €1.47), the approximate translation effect on Continental Europe & Restof World 2004 turnover and operating profit1 would be £93 million and £5 millionrespectively. Note: 1. Before goodwill amortisation. Appendix 3 New contract gains and renewals announced today and previously released in thefinancial year 2004/2005. Please note that contract gains/renewals announcedtoday are indicated with an '*'. Business & Industry • * Sweden - Saab AB Linkoping awarded Eurest a new three-year contract with annual turnover of £1.3 million.• France - Bouygues Arc de Seine awarded Eurest a new three-year contract with annual turnover of £1.7 million. Healthcare • * Norway - Ulleval Patient Hospital awarded Medirest a new three-year contract with annual turnover of £2.1 million.• * USA - Rest Haven Christian Services (IL) awarded Morrison Management Specialists a new five-year contract with annual turnover of £4.1 million.• UK - West Hertfordshire Hospitals NHS Trust renewed its contract with Medirest for a further five years with annual turnover of £8.6 million.• UK - Homerton University Hospital NHS Foundation Trust awarded Medirest a new five-year contract with annual turnover of £4.0 million. Education •* UK - Durham County Council renewed its contract with Scolarest for a further two years with annual turnover of £8.6 million.• * UK - Millfield School (Somerset) renewed its contract with Scolarest for a further three years with annual turnover of £2.5 million.• * USA - Olivet College (MI) awarded Chartwell's Higher Education a new ten-year contract with annual turnover of £0.8 million.• USA - Norfolk State University (VA) awarded Thompson Hospitality a new five-year contract with annual turnover of £3.0 million. Defence, Offshore & Remote Site • * UK - Armada project (MoD PFI) awarded ESS Support Services Worldwide a new five-year contract with annual turnover of £4.0 million. • Norway - Statoil renewed its contract with ESS Offshore for a further five years with annual turnover of £11.6 million, covering Statfjord A, B and C platforms. Sports & Leisure• * Germany - SAP Arena (Mannheim) awarded Eurest Sports & Food a new two-year contract with annual turnover of £2.7 million.• * Japan - Fukuoka Mutual Aid Association awarded Seiyo Food Systems a new five-year contract with annual turnover of £2.3 million.• * Spain - AVE-Renfe renewed its contract with Railgourmet for a further four years with annual turnover of £24.1 million.• * UK - Hatfield House awarded Leith's a new ten-year contract with annual turnover of £1.0 million.• Japan - Japan Post awarded Seiyo Food Systems a new three-year contract with annual turnover of £18.3 million.• USA - University Place at Indiana University-Purdue University Indianapolis (IN) awarded Flik Conference Center Management a new ten-year contract with annual turnover of £8.5 million. Vending • * USA - Cardone Industries, Inc. awarded Vendlink a new one-year contract with annual turnover of £0.5 million. 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