Full year results announcement

About this update from Compass Group Plc

[{"type":"text","content":"\n \n \n \n \n \n   \n \n \n \n Legal Entity Identifier (LEI) No. 2138008M6MH9OZ6U2T68 \n \n \n \n Full year results announcement for the year ended 30 September 2022 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying 1 results \n \n \n \n \n Statutory results \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n \n Change \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n \n Change \n \n \n \n \n \n \n Revenue \n \n \n \n \n £25.8bn \n \n \n \n \n £18.7bn 2 \n \n \n \n \n  37.5% 3 \n \n \n \n \n £25.5bn \n \n \n \n \n £17.9bn \n \n \n \n \n  42.5% \n \n \n \n \n \n \n Operating profit \n \n \n \n \n £1,590m \n \n \n \n \n £848m 2 \n \n \n \n \n 87.5% 2 \n \n \n \n \n £1,500m \n \n \n \n \n £545m \n \n \n \n \n 175.2% \n \n \n \n \n \n \n Operating margin \n \n \n \n \n 6.2% \n \n \n \n \n 4.5% \n \n \n \n \n 170bps \n \n \n \n \n 5.9% \n \n \n \n \n 3.0% \n \n \n \n \n 290bps \n \n \n \n \n \n \n Earnings per share \n \n \n \n \n 63.0p \n \n \n \n \n 30.9p 2 \n \n \n \n \n 103.9% 2 \n \n \n \n \n 62.6p \n \n \n \n \n 20.0p \n \n \n \n \n 213.0% \n \n \n \n \n \n \n Operating cash flow \n \n \n \n \n £1,351m \n \n \n \n \n £1,004m \n \n \n \n \n 34.6% \n \n \n \n \n £1,596m \n \n \n \n \n £1,171m \n \n \n \n \n 36.3% \n \n \n \n \n \n \n Free cash flow \n \n \n \n \n £890m \n \n \n \n \n £660m \n \n \n \n \n 34.8% \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Annual dividend per share \n \n \n \n \n 31.5p \n \n \n \n \n 14.0p \n \n \n \n \n 125.0% \n \n \n \n \n 31.5p \n \n \n \n \n 14.0p \n \n \n \n \n 125.0% \n \n \n \n \n \n \n \n   \n \n \n \n \n Record net new business which accelerated through the year \n \n \n \n \n Further £250m share buyback in H1 2023, taking total programme to £750m \n \n \n \n \n \n   \n \n \n \n \n Performance highlights \n \n \n • \n Strong organic revenue growth of 37.5%. In Q4 2022, Group was at 116% of 2019 revenues with Business & Industry at 106% \n \n \n • \n Underlying operating margin improved by 170bps year on year to 6.2%, with H2 2022 at 6.5% \n \n \n • \n Excellent net new business of 7.5% (5.7% rebased to 2019, above historical rate of 3%) \n \n \n • \n Client retention rate up by 100bps year on year to a new record of 96.4% \n \n \n • \n New business wins increased to £2.5bn 4 , with strong contributions from North America and Europe \n \n \n • \n First-time outsourcing market remains buoyant, accounting for c.45% of new business wins \n \n \n • \n Investing in the business: Capex 2.7% of underlying revenue and net M&A expenditure of £268m \n \n \n • \n Leverage of 1.3x net debt/EBITDA, within our target range of 1x-1.5x \n \n \n Strategy \n \n \n • \n Continuing to capitalise on the significant structural growth opportunities and the acceleration of outsourcing \n \n \n • \n Ongoing investment in our market-leading digital and ESG capabilities \n \n \n • \n Successfully issued first sustainable bonds to help deliver climate net zero by 2050 \n \n \n Shareholder returns \n \n \n • \n Annual dividend per share increased to 31.5p \n \n \n • \n Completed initial £500m share buyback, further £250m announced today to be completed in H1 2023 \n \n \n 2023 o \n utlook \n \n \n • \n Constant-currency underlying operating profit growth expected to be above 20%, delivered through: \n \n \n -  \n Organic revenue growth of around 15%, weighted towards H1 2023 \n \n \n -  \n Underlying operating margin above 6.5% \n \n \n Statutory results \n \n \n • \n Statutory revenue increased by 42.5% \n \n \n • \n Statutory operating profit up by 175.2%. The prior year included £157m of COVID-19 resizing costs \n \n \n   \n \n \n 1.  \n Reconciliation of statutory to underlying results can be found in notes 2 (segmental analysis) and 13 (non-GAAP measures) to the consolidated financial statements. \n \n \n 2.  \n Measured on a constant-currency basis. \n \n \n 3.  \n Organic revenue change. \n \n \n 4.  \n Annual revenue of new business wins in the last 12 months. \n \n \n \n Business review \n \n \n \n Dominic Blakemore, Group Chief Executive, said: \n \n \n \"The Group's performance surpassed our expectations both in terms of net new business growth and base volume recovery, with Business & Industry now operating above its pre-pandemic revenues. The strong growth trends seen in the first half have continued, with net new business accelerating through the year in all our regions. Our clients are continuing to face operational complexities and inflationary pressures, which are driving increased outsourcing, and we are successfully capitalising on the resulting growth opportunities. \n \n \n North America continues to perform strongly, and we are particularly pleased with our progress in Europe, which is benefiting from an increased focus on growth and retention, supported by investments in our people, brands, and processes. \n \n \n Thanks to the hard work of our teams across the world, Compass has emerged from the pandemic as a stronger and more resilient business, reflecting our clear strategy and market-leading growth enablers. While the macroeconomic environment is uncertain, we are working in partnership with our clients to mitigate inflationary pressures and supporting our colleagues during this challenging period by offering financial support and other benefits. \n \n \n For 2023, we expect underlying \n operating profit growth to be above 20% on a constant-currency basis, to be delivered through \n organic revenue growth of around 15%, weighted towards the first half of the year \n , and underlying operating margin above 6.5%. Having completed the previously announced share buyback of £500m, we have announced a further share buyback of up to £250m, taking the total to £750m. \n \n \n Looking further ahead, we remain excited about the significant structural growth opportunities globally, leading to the potential for revenue and profit growth above historical rates, returning margin to pre-pandemic levels and rewarding shareholders with further returns.\" \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n Results presentation today \n \n \n A recording of the results presentation for investors and analysts will be available on the Company's website today, Monday 21 November 2022, at 7.00 a.m. There will be a live question and answer session at 9.00 a.m., accessible via the Company's website, www.compass-group.com , and you will be able to participate by dialing : \n \n   \n \n \n \n \n \n \n UK Toll Number: \n \n \n \n \n +44 (0) 33 0551 0200 \n \n \n \n \n \n \n UK Toll-Free Number: \n \n \n \n \n 0808 109 0700 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n US Toll Number: \n \n \n \n \n +1 212 999 6659 \n \n \n \n \n \n \n US Toll-Free Number: \n \n \n \n \n 1 866 966 5335 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Participant PIN Code: \n \n \n \n \n Compass \n \n \n \n \n \n \n Please connect to the call at least 10-15 minutes prior to the start time. \n \n \n Financial calendar \n \n \n \n \n \n \n Ex-dividend date for 2022 final dividend \n \n \n \n \n Thursday 19 January 2023 \n \n \n \n \n \n \n Record date for 2022 final dividend \n \n \n \n \n Friday 20 January 2023 \n \n \n \n \n \n \n Q1 Trading Update / Annual General Meeting \n \n \n \n \n Thursday 9 February 2023 \n \n \n \n \n \n \n Last day for DRIP elections \n \n \n \n \n Thursday 9 February 2023 \n \n \n \n \n \n \n 2022 final dividend date for payment \n \n \n \n \n Thursday 2 March 2023 \n \n \n \n \n \n \n Half-year results \n \n \n \n \n Wednesday 10 May 2023 \n \n \n \n \n \n \n Enquiries \n \n \n \n \n \n \n Investors \n \n \n \n \n Agatha Donnelly, Helen Javanshiri & Simon Bielecki \n \n \n \n \n +44 1932 573 000 \n \n \n \n \n \n \n Press \n \n \n \n \n Giles Robinson, Compass Group PLC \n \n \n \n \n +44 1932 963 486 \n \n \n \n \n \n \n \n \n \n \n \n \n \n Tim Danaher, Brunswick \n \n \n \n \n +44 207 404 5959 \n \n \n \n \n \n \n Website \n \n \n \n \n www.compass-group.com \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n Business review (continued) \n \n \n \n Basis of preparation \n \n \n Throughout this Annual Results Announcement, and consistent with prior years, underlying and other alternative performance measures are used to describe the Group's performance alongside statutory measures. \n \n \n The Executive Committee manages and assesses the performance of the Group using various underlying and other Alternative Performance Measures (APMs). These measures are not recognised under International Financial Reporting Standards (IFRS) or other generally accepted accounting principles (GAAP) and may not be directly comparable with APMs used by other companies. Underlying measures reflect ongoing trading and, therefore, facilitate meaningful year-on-year comparison. Management believes that the Group's underlying and alternative performance measures, together with the results prepared in accordance with IFRS, provide comprehensive analysis of the Group's results. Certain of these measures are financial Key Performance Indicators (KPIs) which measure progress against our strategy. \n \n \n The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n Group performance \n \n \n Organic growth was 37.5% 1 with underlying revenue, on a constant-currency basis, 105% of its 2019 level 2 . Underlying operating margin increased by 170bps to 6.2% 1 (2021: 4.5%) despite mobilisation costs associated with the higher new business growth and inflationary pressures. As a result, underlying operating profit increased to £1,590m 1 (2021: £811m). \n \n \n We are continuing to invest in exciting growth opportunities both through capital expenditure and M&A. Capital expenditure was 2.7% 1 of underlying revenue, lower than historic levels due to timing delays in some investments. Going forward, we continue to expect capital expenditure to be around 3.5% 1 of underlying revenue. \n \n \n Net M&A expenditure in the year was £268m, which was largely spent on a number of bolt-on acquisitions mainly in the US. Following the year end, in October 2022, the Group also divested of four Central and Eastern European businesses in Czech Republic, Hungary, Slovakia and Romania. \n \n \n The Group generated a strong underlying operating cash flow of £1,351m 1 (2021: £1,004m) which represented a conversion rate of 85% 1 , back in line with our typical pre-COVID level. Underlying free cash flow was £890m 1 (2021: £660m), with a conversion rate of 56% 1 . As a result of improving profit, leverage reduced to 1.3x 1 , well within our target range of 1x-1.5x. \n \n \n Revenue \n \n \n Organic growth of 37.5% 1 reflected the reopening of sectors, with like-for-like volume growth of approximately 24%, the strong impact of winning and retaining business, with net new business of 7.5%, and pricing benefits of approximately 6%. Client retention rates continued to improve to a record 96.4%, 100bps higher than 2021, with underlying revenue growth from new business wins at 11.1%. The post-pandemic recovery accelerated in the fourth quarter of the prior year, particularly in Sports & Leisure and Education and, consequently, the percentage growth in the fourth quarter of this year is lower. \n \n \n   \n \n \n \n \n \n \n \n Organic revenue growth \n \n \n 1 \n \n \n \n \n \n Q1 \n \n \n \n \n Q2 \n \n \n \n \n Q3 \n \n \n \n \n Q4 \n \n \n \n \n FY \n \n \n \n \n \n \n Business & Industry \n \n \n \n \n 26.9% \n \n \n \n \n 40.5% \n \n \n \n \n 59.9% \n \n \n \n \n 57.3% \n \n \n \n \n 47.4% \n \n \n \n \n \n \n Education \n \n \n \n \n 51.6% \n \n \n \n \n 47.9% \n \n \n \n \n 41.4% \n \n \n \n \n 26.6% \n \n \n \n \n 41.3% \n \n \n \n \n \n \n Healthcare & Senior Living \n \n \n \n \n 11.6% \n \n \n \n \n 10.3% \n \n \n \n \n 12.0% \n \n \n \n \n 11.4% \n \n \n \n \n 11.2% \n \n \n \n \n \n \n Sports & Leisure \n \n \n \n \n 343.8% \n \n \n \n \n 228.3% \n \n \n \n \n 142.7% \n \n \n \n \n 37.3% \n \n \n \n \n 126.5% \n \n \n \n \n \n \n Defence, Offshore & Remote \n \n \n \n \n 8.7% \n \n \n \n \n 6.8% \n \n \n \n \n 10.5% \n \n \n \n \n 11.3% \n \n \n \n \n 9.5% \n \n \n \n \n \n \n Group \n \n \n \n \n \n 38.6% \n \n \n \n \n \n \n 37.0% \n \n \n \n \n \n \n 43.4% \n \n \n \n \n \n \n 31.2% \n \n \n \n \n \n 37.5% \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n 1.  \n Alternative Performance Measure (APM). The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n 2.  \n Throughout this Report, underlying revenue as a percentage of 2019 is calculated on a constant-currency basis. \n \n \n \n \n \n \n \n Business review (continued) \n \n \n \n For the full year, underlying revenue increased to 105% of 2019 revenues, reaching 116% in the fourth quarter. All sectors and regions traded above pre-pandemic levels during the second half of 2022, with Business & Industry seeing a notable improvement as employees returned to work, exiting the year at 106% of its pre-pandemic level. Education and Sports & Leisure also performed particularly well, increasing to 117% and 125% of 2019 revenues, respectively, in the fourth quarter. \n \n \n   \n \n \n \n \n \n \n Underlying revenue 1 as % of 2019 2 \n \n \n \n \n Q1 \n \n \n \n \n Q2 \n \n \n \n \n Q3 \n \n \n \n \n Q4 \n \n \n \n \n FY \n \n \n \n \n \n \n Business & Industry \n \n \n \n \n 76.6% \n \n \n \n \n 82.9% \n \n \n \n \n 96.8% \n \n \n \n \n 106.1% \n \n \n \n \n 90.9% \n \n \n \n \n \n \n Education \n \n \n \n \n 101.2% \n \n \n \n \n 107.3% \n \n \n \n \n 110.3% \n \n \n \n \n 117.5% \n \n \n \n \n 108.1% \n \n \n \n \n \n \n Healthcare & Senior Living \n \n \n \n \n 114.6% \n \n \n \n \n 116.3% \n \n \n \n \n 120.4% \n \n \n \n \n 123.9% \n \n \n \n \n 118.8% \n \n \n \n \n \n \n Sports & Leisure \n \n \n \n \n 107.3% \n \n \n \n \n 93.8% \n \n \n \n \n 118.8% \n \n \n \n \n 125.0% \n \n \n \n \n 112.1% \n \n \n \n \n \n \n Defence, Offshore & Remote \n \n \n \n \n 116.6% \n \n \n \n \n 115.3% \n \n \n \n \n 121.5% \n \n \n \n \n 120.4% \n \n \n \n \n 118.6% \n \n \n \n \n \n \n Group \n \n \n \n \n \n 96.9% \n \n \n \n \n \n \n 99.2% \n \n \n \n \n \n \n 109.5% \n \n \n \n \n \n \n 115.9% \n \n \n \n \n \n 105.4% \n \n \n \n \n \n \n   \n \n \n 1.  \n Alternative Performance Measure (APM). The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n 2.  \n Throughout this Report, underlying revenue as a percentage of 2019 is calculated on a constant-currency basis. \n \n \n   \n \n \n On a statutory basis, revenue increased by 43% to £25,512m (2021: £17,908m). \n \n \n Operating profit \n \n \n Underlying operating profit increased by 88% on a constant-currency basis, to £1,590m 1 , and our underlying operating margin was 6.2% 1 \n (2021: 4.5%) \n . The margin improvement reflects the ongoing cost efficiency disciplines of the business and is despite the mobilisation costs and inflationary pressures. \n \n \n Statutory operating profit was £1,500m (2021: £545m), an increase of 175% reflecting the higher revenue and margin recovery. Statutory operating profit includes non-underlying item charges of £90m (2021: £266m), including acquisition-related costs of £92m (2021: £106m). Non-underlying items in the prior year also included COVID-19 resizing costs of £157m. A full list of non-underlying items is included in note 13 (non-GAAP measures). \n \n \n Capital allocation \n \n \n Our capital allocation framework is clear and unchanged. Our priority is to invest in the business to fund growth opportunities, target a strong investment-grade credit rating with a leverage target of around 1x-1.5x net debt to EBITDA and pay an ordinary dividend, with any surplus capital being returned to shareholders. \n \n \n Growth investment consists of: (i) capital expenditure to support organic growth in both new business wins and retention of existing contracts; and (ii) bolt-on M&A opportunities that strengthen our capabilities and broaden our exposure. We have a proven track record of strong returns from our investment strategy evidenced by our historical returns on capital employed. \n \n \n Shareholder returns \n \n \n Our dividend policy is to pay out around 50% of underlying earnings through an interim and final dividend. The Board has proposed a final dividend of 22.1p which, including the interim dividend of 9.4p, gives a total dividend for 2022 of 31.5p.  \n \n \n The £500m share buyback programme announced in May 2022 was completed in November 2022. We have announced a further share buyback of up to £250m, to take place during the first half of the 2023 financial year, taking the total buyback to £750m. \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n   \n \n \n Business review (continued) \n \n \n \n Regional performance \n \n \n \n North America - 66.5% of Group underlying revenue (2021: 61.6%) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying results 1 \n \n \n \n \n Change 1 \n \n \n \n \n Statutory results \n \n \n \n \n Change \n \n \n \n \n \n \n Regional financial summary \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n \n Reported rates \n \n \n \n \n Constant currency \n \n \n \n \n Organic \n \n \n \n \n \n 2022 \n \n \n \n \n \n 2021 \n \n \n \n \n Reported rates \n \n \n \n \n \n \n Revenue \n \n \n \n \n £17,139m \n \n \n \n \n £11,170m \n \n \n \n \n 53.4% \n \n \n \n \n 43.7% \n \n \n \n \n 44.1% \n \n \n \n \n \n £17,121m \n \n \n \n \n \n £11,149m \n \n \n \n \n 53.6% \n \n \n \n \n \n \n Operating profit 2 \n \n \n \n \n £1,236m \n \n \n \n \n £607m \n \n \n \n \n 103.6% \n \n \n \n \n 91.0% \n \n \n \n \n 92.1% \n \n \n \n \n \n £1,183m \n \n \n \n \n \n £560m \n \n \n \n \n 111.3% \n \n \n \n \n \n \n Operating margin \n \n \n \n \n 7.2% \n \n \n \n \n 5.4% \n \n \n \n \n 180bps \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 6.9% \n \n \n \n \n \n 5.0% \n \n \n \n \n 190bps \n \n \n \n \n \n \n   \n \n \n 1.  \n Reconciliation of statutory to underlying results can be found in note 2 (segmental analysis) and note 13 (non-GAAP measures) to the consolidated financial statements. \n \n \n 2.  \n 2021 re-presented to reflect the change in the definition of regional underlying operating profit to include the share of results of associates (£1m loss). \n \n \n Underlying \n \n \n Full-year organic revenue growth was 44%, with revenue at 109% of 2019 levels, and 119% in the fourth quarter. Net new business growth was 9.0% reflecting both strong new business wins and continued high retention at 97.1%. Growth was broad based across all sectors, with strong wins from first-time outsourcing. \n \n \n Our Business & Industry sector, along with Sports & Leisure, benefited from continued volume recovery throughout the year, reflecting the return to the office and live events, together with higher per capita spend. Both sectors delivered strong double-digit net new business growth. Our Education sector, despite lapping strong reopening numbers last year, continued to rebuild volumes during the year and the resilient Healthcare & Senior Living business continued to perform strongly. \n \n \n Volume growth, combined with our continued focus on efficiency and cost control, delivered margin progression throughout the year. Full-year margin increased by 180bps to 7.2%, with margin in the second half of the year improving by 40bps to 7.4%. Operating profit was £1,236m, which represents 91% growth on a constant-currency basis. \n \n \n Statutory \n \n \n Statutory revenue increased by 54% to £17,121m reflecting the continued recovery from the pandemic and favourable exchange translation. \n \n \n Statutory operating profit was £1,183m, a £623m increase, due to the stronger revenue, improved margin and favourable exchange translation. \n \n \n \n \n \n \n \n Business review (continued) \n \n \n \n \n Europe - 23.0% of Group underlying revenue (2021: 25.6%) \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying results 1 \n \n \n \n \n Change 1 \n \n \n \n \n Statutory results \n \n \n \n \n Change \n \n \n \n \n \n \n Regional financial summary \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n \n Reported rates \n \n \n \n \n Constant currency \n \n \n \n \n Organic \n \n \n \n \n \n 2022 \n \n \n \n \n \n 2021 \n \n \n \n \n Reported rates \n \n \n \n \n \n \n Revenue \n \n \n \n \n £5,935m \n \n \n \n \n £4,641m \n \n \n \n \n 27.9% \n \n \n \n \n 32.3% \n \n \n \n \n 31.8% \n \n \n \n \n \n £5,694m \n \n \n \n \n \n £4,434m \n \n \n \n \n 28.4% \n \n \n \n \n \n \n Operating profit/(loss) \n \n \n \n \n £299m \n \n \n \n \n £147m \n \n \n \n \n 103.4% \n \n \n \n \n 112.1% \n \n \n \n \n 112.1% \n \n \n \n \n \n £267m \n \n \n \n \n \n £(62)m \n \n \n \n \n 530.6% \n \n \n \n \n \n \n Operating margin \n \n \n \n \n 5.0% \n \n \n \n \n 3.2% \n \n \n \n \n 180bps \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 4.7% \n \n \n \n \n \n (1.4)% \n \n \n \n \n 610bps \n \n \n \n \n \n \n   \n \n \n 1.  \n Reconciliation of statutory to underlying results can be found in note 2 (segmental analysis) and note 13 (non-GAAP measures) to the consolidated financial statements. \n \n \n Underlying \n \n \n Organic revenue grew by 32%, with net new business growth of 5.6%, driven by double-digit new business and a 160bps improvement in retention to 95.3%. Encouragingly, net new business growth accelerated in the second half of 2022 driven by improving trends in the UK, France and Germany. Overall, revenue for the year was 98% of 2019 levels, and 109% in the fourth quarter, reflecting the recovery in Business & Industry and Sports & Leisure. \n \n \n With good volume recovery and higher growth, operating profit more than doubled to £299m, with margin increasing by 180bps to 5.0%. Despite the progressively challenging macroeconomic environment and increased new business mobilisation, margin increased by 100bps between the first and second half of the year to 5.5%. \n \n \n The region invested in several bolt-on acquisitions to enhance their offer, especially in the Sports & Leisure sector, and to drive procurement efficiencies. In March, the Group exited Russia and, following the year end, divested of four businesses in Central and Eastern Europe. \n \n \n Statutory \n \n \n Statutory revenue was £5,694m, with the difference from underlying revenue being the presentation of the share of results of our joint ventures operating in the Middle East. \n \n \n The statutory operating profit of £267m represents a £329m improvement on 2021 reflecting the improved trading performance and higher non-underlying charges in relation to acquisition and resizing activity in the prior year. \n \n \n \n \n \n \n \n Business review (continued) \n \n \n \n \n Rest of World -10.5% of Group underlying revenue (2021: 12.8%) \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying results 1 \n \n \n \n \n Change 1 \n \n \n \n \n Statutory results \n \n \n \n \n Change \n \n \n \n \n \n \n Regional financial summary \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n \n Reported rates \n \n \n \n \n Constant currency \n \n \n \n \n Organic \n \n \n \n \n \n 2022 \n \n \n \n \n \n 2021 \n \n \n \n \n Reported rates \n \n \n \n \n \n \n Revenue \n \n \n \n \n £2,697m \n \n \n \n \n £2,325m \n \n \n \n \n 16.0% \n \n \n \n \n 15.4% \n \n \n \n \n 14.8% \n \n \n \n \n \n £2,697m \n \n \n \n \n \n £2,325m \n \n \n \n \n 16.0% \n \n \n \n \n \n \n Operating profit \n \n \n \n \n £141m \n \n \n \n \n £130m \n \n \n \n \n 8.5% \n \n \n \n \n 6.0% \n \n \n \n \n 5.4% \n \n \n \n \n \n £137m \n \n \n \n \n \n £120m \n \n \n \n \n 14.2% \n \n \n \n \n \n \n Operating margin \n \n \n \n \n 5.2% \n \n \n \n \n 5.6% \n \n \n \n \n (40)bps \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 5.1% \n \n \n \n \n \n 5.2% \n \n \n \n \n (10)bps \n \n \n \n \n \n \n   \n \n \n 1.  \n Reconciliation of statutory to underlying results can be found in note 2 (segmental analysis) and note 13 (non-GAAP measures) to the consolidated financial statements. \n \n \n Underlying \n \n \n The 15% organic revenue increase in our Rest of World region reflects net new business growth of 3.6% and double-digit like-for-like volume growth, driven by good levels of pricing, especially in Latin America. Retention improved to 94.5% and revenues were 100% of 2019 levels, with the fourth quarter at 113%. With a higher exposure to the more defensive sectors of Healthcare and Defence, Offshore & Remote, the region had lower volume recovery as it was less impacted by the pandemic. \n \n \n During the year, several large markets continued with localised lockdowns and border closures which increased operational challenges and wage inflation. As a result, whilst operating profit was £141m, an increase of 6% on a constant-currency basis, operating margin declined by 40bps to 5.2% for the full year, reflecting these challenges. However, in the second half, margin was 5.6%, a 90bps improvement on the first half of the year. \n \n \n Statutory \n \n \n Statutory revenue increased by 16% to £2,697m. There is no difference between statutory and underlying revenue. \n \n \n Statutory operating profit was £137m, an increase of £17m reflecting the improved trading performance and £8m of COVID-19 resizing costs in the prior year. \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n Business review (continued) \n \n \n \n Strategy \n \n \n Our strategic focus is on food, with targeted support services.  The addressable food services market is estimated to be worth at least £220bn. There remains a significant structural growth opportunity from first-time outsourcing, as around half of the market is still self-operated. As the operating environment becomes increasingly challenging due to inflationary pressures, increased client demands and other additional complexities, we have a clear strategy to capture the resultant acceleration in first-time outsourcing based on our focus, scale and expertise.  \n \n \n Being the largest global player, our scale in procurement and focus on cost efficiencies give us competitive advantages that translate into greater value for clients and consumers. Our sectorised and sub-sectorised approach enables us to provide a tailored offer to meet changing client requirements. We are continuing to invest in our market-leading propositions in digital and ESG which are clear growth enablers in the food services market. \n \n \n Our strategic focus on People, Performance and Purpose continues to underpin all that we do in our ambition to deliver value to all our stakeholders. \n \n \n People \n \n \n Our people are essential to our strategy for growth: they are at the heart of how we win and why we win, and their health and safety are always our number one priority. We have continued to deliver our core development training programmes, Mapping for Value and Mapping for Action, to reinforce our use of the MAP framework within our leadership and operational teams, respectively. Around 4,000 employees have now completed Mapping for Value and more than 14,000 employees have participated in Mapping for Action. \n \n \n As part of our commitment to ensure inclusion for all, we endeavour to harness the talents of our diverse workforce across every level of the organisation. Work has continued at pace on developing, retaining and promoting our female talent. In the UK & Ireland, 58% of all promotions during the year were female with approximately 13% of the workforce promoted. 53% of promotions of salaried staff in the USA were female. This focus has supported the increase in female representation at Senior Leaders level to 37%. \n \n \n We prioritise the health and wellbeing of our people and are sensitive to the current economic environment that is putting significant pressure on colleagues' household budgets. In line with our values and within the parameters of our decentralised operating model, this support is delivered through tailored programmes in each of our markets, including communicating financial wellbeing guidance and extending our community food donation scheme to include hot meals. In North America, Compass provides flexibility through a digital HR tool and same day pay, which benefits 15,000 colleagues. Our UK&I business, which is already an accredited Real Living Wage provider, provides approximately 200,000 free meals for colleagues every week and access to a 'Helping Hands' fund to provide support with emergency or unexpected payments.   \n \n \n Purpose \n \n \n Our Planet Promise is Compass Group's global commitment to a sustainable future for all. It encompasses the Company's values as an ethical, sustainable and inclusive business, together with our ambition to positively impact the world. As well as being the right thing to do, this mission is also key to our growth aspirations. Sustainability is a critical issue for many of Compass' clients. \n \n \n We were the first in the industry to publish a worldwide commitment to reach climate net zero by 2050. In July 2022, the Group launched a Sustainable Financing Framework to issue sustainable debt. Sustainable financing aligns with the expectations of our clients and shareholders and supports our worldwide carbon reduction commitment and social mobility initiatives. Under this framework, in September 2022, we successfully issued two sustainable bonds, raising proceeds of €500m (£439m) and £250m, respectively, which will be used to progress the Group's sustainability initiatives and the delivery of its global climate net zero target. \n \n \n One of the most impactful ways to prevent climate change is to reduce food waste. To better understand and mitigate our businesses' food waste footprint, Compass is expanding the use of smart meter technology across our global operations while working in partnership with clients and suppliers to halve food waste by 2030. As well as working to incentivise our workforce to fight food waste, we highlight our progress through visible awareness-raising initiatives, such as Stop Food Waste Day in over 40 countries. \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n Business review (continued) \n \n \n \n Summary \n \n \n The Group performed strongly both in terms of revenue growth and margin improvement, with underlying operating profit nearly doubling to £1.6bn 1 . Revenue in all sectors and regions exceeded their pre-COVID levels in the second half, with Business & Industry recovering particularly well.  Organic revenue growth was strong as the Group benefited from good volume recovery and excellent levels of net new business. Underlying operating margin also grew strongly to 6.2% 1 despite mobilising high levels of new business. \n \n \n While there are global inflationary pressures and macroeconomic uncertainties, we have a resilient and flexible business model to help mitigate these challenges. This environment, alongside increasing operational complexities, is continuing to lead to an acceleration in first-time outsourcing as organisations seek cost savings and an improved food offer. We have a clear strategy to capture this growth opportunity based on our scale, expertise and sectorised market approach, which has resulted in new business wins of £2.5bn 2 and our highest ever client retention rate of 96.4%. \n \n \n Our disciplined capital allocation framework supports growth whilst ensuring a robust balance sheet, rewarding shareholders through dividends and additional shareholder returns. In 2022, we declared a total dividend of 31.5p per share and returned £500m to shareholders via a share buyback programme. \n \n \n Looking further ahead, we remain excited about the significant structural growth opportunities globally, leading to the potential for revenue and profit growth above historical rates, returning margin to pre-pandemic levels and rewarding shareholders with further returns. \n \n \n   \n \n \n \n \n \n   \n \n \n Dominic Blakemore \n \n \n Group Chief Executive Officer \n \n \n 21 November 2022 \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n   \n \n \n   \n \n \n 1.  \n Alternative Performance Measure (APM). The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n 2.  \n Annual revenue of new business wins in the last 12 months. \n \n \n   \n \n \n \n Financial results \n \n \n \n Group performance \n \n \n The Executive Committee manages and assesses the performance of the Group using various underlying and other Alternative Performance Measures (APMs). These measures are not recognised under International Financial Reporting Standards (IFRS) or other generally accepted accounting principles (GAAP) and may not be directly comparable with APMs used by other companies. Underlying measures reflect ongoing trading and, therefore, facilitate meaningful year-on-year comparison. Management believes that the Group's underlying and alternative performance measures, together with the results prepared in accordance with IFRS, provide comprehensive analysis of the Group's results. Certain of these measures are financial Key Performance Indicators (KPIs) which measure progress against our strategy. \n \n \n The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n Underlying results 1 \n \n \n · \n Underlying revenue at 105% of 2019 revenues on a constant-currency basis, with all regions and sectors operating above 2019 levels in the second half \n \n \n · \n Underlying operating margin of 6.2%, an increase of 170bps \n \n \n · \n Return on capital employed of 15.8%, up from 8.7% 2 in 2021 \n \n \n · \n Basic underlying earnings per share increased by 104% to 63.0p on a constant-currency basis \n \n \n · \n Underlying free cash flow of £890m, with cash conversion of 56% \n \n \n Statutory results \n \n \n · \n Revenue increased by 43% \n \n \n · \n Operating profit of £1,500m, an increase of 175% \n \n \n · \n Basic earnings per share of 62.6p, an increase of 213% \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n £m \n \n \n \n \n 2021 \n \n \n £m \n \n \n \n \n Change \n \n \n \n \n \n \n Revenue \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying - reported rates 1 \n \n \n \n \n 25,771 \n \n \n \n \n 18,136 \n \n \n \n \n 42.1% \n \n \n \n \n \n \n Underlying - constant currency 1 \n \n \n \n \n 25,771 \n \n \n \n \n 18,745 \n \n \n \n \n 37.5% \n \n \n \n \n \n \n Organic 1 \n \n \n \n \n 25,599 \n \n \n \n \n 18,617 \n \n \n \n \n 37.5% \n \n \n \n \n \n \n Statutory \n \n \n \n \n 25,512 \n \n \n \n \n 17,908 \n \n \n \n \n 42.5% \n \n \n \n \n \n \n Operating profit \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying - reported rates 1 \n \n \n \n \n 1,590 \n \n \n \n \n 811 \n \n \n \n \n 96.1% \n \n \n \n \n \n \n Underlying - constant currency 1 \n \n \n \n \n 1,590 \n \n \n \n \n 848 \n \n \n \n \n 87.5% \n \n \n \n \n \n \n Organic 1 \n \n \n \n \n 1,585 \n \n \n \n \n 841 \n \n \n \n \n 88.5% \n \n \n \n \n \n \n Statutory \n \n \n \n \n 1,500 \n \n \n \n \n 545 \n \n \n \n \n 175.2% \n \n \n \n \n \n \n Operating margin \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying - reported rates 1 \n \n \n \n \n 6.2% \n \n \n \n \n 4.5% \n \n \n \n \n 170bps \n \n \n \n \n \n \n Return on capital employed (ROCE) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying - reported rates 1 \n \n \n \n \n 15.8% \n \n \n \n \n 8.7% 2 \n \n \n \n \n 710bps \n \n \n \n \n \n \n Basic earnings per share \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying - reported rates 1 \n \n \n \n \n 63.0p \n \n \n \n \n 29.5p \n \n \n \n \n 113.6% \n \n \n \n \n \n \n Underlying - constant currency 1 \n \n \n \n \n 63.0p \n \n \n \n \n 30.9p \n \n \n \n \n 103.9% \n \n \n \n \n \n \n Statutory \n \n \n \n \n 62.6p \n \n \n \n \n 20.0p \n \n \n \n \n 213.0% \n \n \n \n \n \n \n Free cash flow \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying - reported rates 1 \n \n \n \n \n 890 \n \n \n \n \n 660 \n \n \n \n \n 34.8% \n \n \n \n \n \n \n Dividend \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Full-year dividend per ordinary share \n \n \n \n \n 31.5p \n \n \n \n \n 14.0p \n \n \n \n \n 125.0% \n \n \n \n \n \n \n 1.  \n The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n 2.  \n Re-presented to reflect a simplified definition of capital employed (see page 49). As defined in previous years, ROCE was 7.7% in 2021 on average capital employed of £7,931m. \n \n \n \n Financial results (continued) \n \n \n \n Segmental performance \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying revenue 1 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Change 1 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n \n \n \n 2021 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Reported \n \n \n \n \n Constant \n \n \n \n \n Organic \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n £m \n \n \n \n \n \n £m \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n rates \n \n \n \n \n currency \n \n \n \n \n \n \n North America \n \n \n \n \n 17,139 \n \n \n \n \n 11,170 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 53.4% \n \n \n \n \n 43.7% \n \n \n \n \n 44.1% \n \n \n \n \n \n \n Europe \n \n \n \n \n 5,935 \n \n \n \n \n 4,641 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 27.9% \n \n \n \n \n 32.3% \n \n \n \n \n 31.8% \n \n \n \n \n \n \n Rest of World \n \n \n \n \n 2,697 \n \n \n \n \n 2,325 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 16.0% \n \n \n \n \n 15.4% \n \n \n \n \n 14.8% \n \n \n \n \n \n \n Total \n \n \n \n \n 25,771 \n \n \n \n \n 18,136 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 42.1% \n \n \n \n \n 37.5% \n \n \n \n \n 37.5% \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying operating profit 1 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Underlying operating margin 1 \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n \n \n 2021 2 \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n \n \n 2021 \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n £m \n \n \n \n \n £m \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n £m \n \n \n \n \n £m \n \n \n \n   \n \n \n \n \n \n North America \n \n \n \n \n 1,236 \n \n \n \n \n 607 \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n 7.2% \n \n \n \n \n 5.4% \n \n \n \n   \n \n \n \n \n \n Europe \n \n \n \n \n 299 \n \n \n \n \n 147 \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n 5.0% \n \n \n \n \n 3.2% \n \n \n \n   \n \n \n \n \n \n Rest of World \n \n \n \n \n 141 \n \n \n \n \n 130 \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n 5.2% \n \n \n \n \n 5.6% \n \n \n \n   \n \n \n \n \n \n Unallocated overheads \n \n \n \n \n (86) \n \n \n \n \n (73) \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n Total \n \n \n \n \n 1,590 \n \n \n \n \n 811 \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n 6.2% \n \n \n \n \n 4.5% \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n 1.  The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n 2.  Re-presented to reflect the change in the definition of regional underlying operating profit to include the share of results of associates (North America: £1m loss). \n \n \n Income statement \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2021 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n Statutory £m \n \n \n \n \n Adjustments £m \n \n \n \n \n Underlying 1 £m \n \n \n \n \n \n \n \n \n \n \n \n Statutory £m \n \n \n \n \n Adjustments £m \n \n \n \n \n Underlying 1 £m \n \n \n \n \n \n \n Revenue \n \n \n \n \n 25,512 \n \n \n \n \n 259 \n \n \n \n \n 25,771 \n \n \n \n \n \n \n \n \n \n \n \n 17,908 \n \n \n \n \n 228 \n \n \n \n \n 18,136 \n \n \n \n \n \n \n Operating profit \n \n \n \n \n 1,500 \n \n \n \n \n 90 \n \n \n \n \n 1,590 \n \n \n \n \n \n \n \n \n \n \n \n 545 \n \n \n \n \n 266 \n \n \n \n \n 811 \n \n \n \n \n \n \n Net (loss)/gain on sale and closure of businesses \n \n \n \n \n (7) \n \n \n \n \n 7 \n \n \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n 10 \n \n \n \n \n (10) \n \n \n \n \n - \n \n \n \n \n \n \n Finance costs \n \n \n \n \n (24) \n \n \n \n \n (76) \n \n \n \n \n (100) \n \n \n \n \n \n \n \n \n \n \n \n (91) \n \n \n \n \n (22) \n \n \n \n \n (113) \n \n \n \n \n \n \n Profit before tax \n \n \n \n \n 1,469 \n \n \n \n \n 21 \n \n \n \n \n 1,490 \n \n \n \n \n \n \n \n \n \n \n \n 464 \n \n \n \n \n 234 \n \n \n \n \n 698 \n \n \n \n \n \n \n Tax expense \n \n \n \n \n (352) \n \n \n \n \n (13) \n \n \n \n \n (365) \n \n \n \n \n \n \n \n \n \n \n \n (107) \n \n \n \n \n (64) \n \n \n \n \n (171) \n \n \n \n \n \n \n Profit for the year \n \n \n \n \n 1,117 \n \n \n \n \n 8 \n \n \n \n \n 1,125 \n \n \n \n \n \n \n \n \n \n \n \n 357 \n \n \n \n \n 170 \n \n \n \n \n 527 \n \n \n \n \n \n \n Non-controlling interests \n \n \n \n \n (4) \n \n \n \n \n - \n \n \n \n \n (4) \n \n \n \n \n \n \n \n \n \n \n \n - \n \n \n \n \n - \n \n \n \n \n - \n \n \n \n \n \n \n Attributable profit \n \n \n \n \n 1,113 \n \n \n \n \n 8 \n \n \n \n \n 1,121 \n \n \n \n \n \n \n \n \n \n \n \n 357 \n \n \n \n \n 170 \n \n \n \n \n 527 \n \n \n \n \n \n \n Average number of shares \n \n \n \n \n 1,779m \n \n \n \n \n - \n \n \n \n \n 1,779m \n \n \n \n \n \n \n \n \n \n \n \n 1,784m \n \n \n \n \n - \n \n \n \n \n 1,784m \n \n \n \n \n \n \n Basic earnings per share \n \n \n \n \n 62.6p \n \n \n \n \n 0.4p \n \n \n \n \n 63.0p \n \n \n \n \n \n \n \n \n \n \n \n 20.0p \n \n \n \n \n 9.5p \n \n \n \n \n 29.5p \n \n \n \n \n \n \n EBITDA \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2,371 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 1,554 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n 1.  The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n \n \n \n \n   \n \n \n \n Financial results (continued) \n \n \n \n Statutory income statement \n \n \n Revenue \n \n \n On a statutory basis, revenue increased by 43% to £25,512m (2021: £17,908m). \n \n \n Operating profit \n \n \n Statutory operating profit was £1,500m (2021: £545m), an increase of 175%, reflecting the higher revenue and margin recovery. Statutory operating profit includes non-underlying item charges of £90m (2021: £266m), including acquisition-related costs of £92m (2021: £106m). Non-underlying items in the prior year also included COVID-19 resizing costs of £157m. A full list of non-underlying items is included in note 13 (non-GAAP measures). \n \n \n Net gain or loss on sale and closure of businesses \n \n \n The Group has recognised a net loss of £7m on the sale and closure of businesses (2021: net gain of £10m), including exit costs of £7m (2021: £nil). The net loss in the year includes the Group's exit from its operations in Russia in March. \n \n \n Finance costs \n \n \n Finance costs decreased to £24m (2021: £91m) mainly due to fair value gains on derivatives held to minimise volatility in short-term underlying finance costs, and the impact of the repayment of a tranche of US Private Placement (USPP) notes in October 2021 and termination of the covenant waivers, which were negotiated during the pandemic, in June 2021. \n \n \n T \n ax expense \n \n \n Profit before tax was £1,469m (2021: £464m) giving rise to an income tax expense of £352m (2021: £107m), equivalent to an effective tax rate of 24.0% (2021: 23.1%). The increase in rate primarily reflects the mix of profits by country being taxed at different rates. \n \n \n Earnings per share \n \n \n Basic earnings per share was 62.6p (2021: 20.0p), an increase of 213%, reflecting the higher profit for the year. \n \n \n Underlying income statement \n \n \n Revenue \n \n \n Organic growth was 37.5% with underlying revenue, on a constant-currency basis, 105% of its 2019 level. \n \n \n Organic growth of 37.5% reflected the reopening of sectors, with like-for-like volume growth of approximately 24%, the strong impact of winning and retaining business, with net new business of 7.5%, and pricing benefits of approximately 6%. Client retention rates continued to improve to a record 96.4%, 100bps higher than 2021, with underlying revenue growth from new business wins at 11.1%. \n \n \n Operating profit \n \n \n Underlying operating profit increased by 88% on a constant-currency basis, to £1,590m, and our underlying operating margin was 6.2% (2021: 4.5%), 84% of the 2019 margin. The margin improvement reflects the ongoing cost efficiency disciplines of the business and is despite the mobilisation costs and inflationary pressures. \n \n \n Finance costs \n \n \n Underlying finance costs decreased to £100m (2021: £113m) mainly due to the impact of the repayment of a tranche of USPP notes in October 2021 and termination of the covenant waivers in June 2021. \n \n \n Tax expense \n \n \n On an underlying basis, the tax charge was £365m (2021: £171m), equivalent to an effective tax rate of 24.5% (2021: 24.5%). The tax environment continues to be uncertain, with more challenging tax authority audits and enquiries globally. \n \n \n Earnings per share \n \n \n On a constant-currency basis, underlying basic earnings per share increased by 104% to 63.0p (2021: 30.9p) reflecting the higher profit for the year. \n \n \n \n \n \n \n   \n \n \n \n Financial results (continued) \n \n \n \n Balance sheet \n \n \n Liquidity \n \n \n The Group finances its operations through cash generated by the business and borrowings from a number of sources, including banking institutions, the public and the private placement markets. The Group has developed long-term relationships with a number of financial counterparties with the balance sheet strength and credit quality to provide credit facilities as required. \n \n \n A USPP note of $398m (£297m) was repaid on 1 October 2021. In September 2022, the Group issued fixed-rate sustainable bonds of €500m (£439m) and £250m maturing in 2030 and 2032, respectively. The new bonds effectively pre-finance debt maturities of €500m (£439m) in January 2023 and $352m (£315m) in October 2023. \n \n \n The Group seeks to avoid a concentration of debt maturities in any one period to spread its refinancing risk. The maturity profile of the Group's principal borrowings at 30 September 2022 shows that the average period to maturity is 3.9 years (2021: 3.7 years). \n \n \n The Group's USPP notes contain leverage and interest cover covenants which are tested semi-annually at 31 March and 30 September. The leverage covenant test stipulates that consolidated net debt must be less than or equal to 3.5 times consolidated EBITDA. The interest cover covenant test stipulates that consolidated EBITDA must be more than or equal to 3 times consolidated net finance costs. Consolidated EBITDA and net finance costs are based on the preceding 12 months. The leverage and interest cover ratios were 1.0 times and 33.4 times, respectively, at 30 September 2022. Net debt, consolidated EBITDA and net finance costs are subject to certain accounting adjustments for the purposes of the covenant tests. \n \n \n At 30 September 2022, the Group had access to £3,732m (2021: £3,656m) of liquidity, including £2,000m (2021: £2,000m) of undrawn committed bank facilities and £1,732m (2021: £1,656m) of cash, net of overdrafts. \n \n \n Our credit ratings remain strong investment grade - Standard & Poor's A/A-1 Long-term and Short-term (outlook Stable) and Moody's A3/P-2 Long-term and Short-term (outlook Stable). \n \n \n Net debt \n \n \n Net debt has increased by £452m to £2,990m (2021: £2,538m). The Group generated £823m of free cash flow, after investing £704m in capital expenditure, which was more than offset by a £258m outflow from the acquisition of subsidiaries, joint ventures and associates, net of disposal proceeds, returns to shareholders in dividends of £418m and the share buyback of £425m, and adverse exchange translation of £251m. \n \n \n The ratio of net debt to market capitalisation of £32,227m at 30 September 2022 was 9.3% (2021: 9.3%). At 30 September 2022, the ratio of net debt to underlying EBITDA was 1.3x (2021: 1.6x). Our leverage policy is to maintain strong investment-grade credit ratings and to target net debt to underlying EBITDA in the range of 1x-1.5x. \n \n \n Post-employment benefits \n \n \n The Group has continued to review and monitor its pension obligations throughout the year, working closely with the trustees and actuaries of all schemes across the Group to ensure appropriate assumptions are used and adequate provision and contributions are made. \n \n \n The triennial actuarial valuation of the Compass Group Pension Plan (UK Plan) took place as at 5 April 2022 and showed a surplus of £299m, which represents a funding level of 113% compared with 106% at 5 April 2019. The accounting surplus in the UK Plan increased to £581m at 30 September 2022 (2021: £353m) mainly reflecting an increase in the discount rate, net of inflation, used to measure the liabilities as corporate bond yields have increased, partly offset by a decrease in the market value of plan assets as gilt and corporate bond yields have increased. \n \n \n The deficit in the rest of the Group's defined benefit pension schemes has increased to £759m (2021: £224m) mainly reflecting the re-presentation of assets totalling £566m (2021: £546m) held in the US Rabbi Trust from post-employment benefit obligations to other investments. \n \n \n The total pensions operating charge for defined contribution schemes in the year was £175m (2021: £124m) and £24m (2021: £24m) for defined benefit schemes. \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n Financial results (continued) \n \n \n \n Return on capital employed \n \n \n Return on capital employed was 15.8% (2021: 8.7% 1 ) based on net underlying operating profit after tax at the underlying effective tax rate of 24.5% (2021: 24.5%). The increase mainly reflects the higher profit, partly offset by higher average capital employed. The average capital employed was £7,567m (2021: £7,005m 1 ). \n \n \n Cash flow \n \n \n Free cash flow \n \n \n Free cash flow totalled £823m (2021: £464m). During the year, we made cash payments of £57m (2021: £186m) in relation to programmes aimed at resizing the business. Adjusting for this, and acquisition transaction costs of £10m which are reported as part of operating cash flow, underlying free cash flow was £890m (2021: £660m), with underlying free cash flow conversion at 56% (2021: 81%). \n \n \n Capital expenditure of £704m (2021: £610m) is equivalent to 2.7% (2021: 3.4%) of underlying revenue. \n \n \n The working capital outflow was £159m (2021: £165m inflow), including an adverse impact of approximately £110m from the timing of the monthly payroll in a number of countries. \n \n \n The net interest outflow reduced to £86m (2021: £116m) consistent with the lower finance costs in the year. \n \n \n The net tax paid was £332m (2021: £200m), equivalent to an underlying cash tax rate of 22% (2021: 29%). \n \n \n Acquisition and disposal of businesses \n \n \n The total cash spent on business acquisitions during the year, net of cash acquired, was £303m (2021: £172m), including £221m of bolt-on acquisitions and interests in associates, £72m of contingent consideration and other payments relating to businesses acquired in previous years, and £10m of acquisition transaction costs included in net cash flow from operating activities. \n \n \n The Group received £35m (2021: paid £11m) in respect of disposal proceeds net of exit costs, which includes the sale of a further 17% shareholding in the Japanese Highways business classified as an asset held for sale at 30 September 2021 and receipts in respect of prior year business disposals. \n \n \n Dividends paid \n \n \n Dividends paid in 2022 of £418m represents the 2021 final dividend (£250m) and the 2022 interim dividend (£168m). \n \n \n Purchase of own shares \n \n \n There was a £425m cash outflow in respect of the share buyback. The balance of the £500m programme announced in May 2022 was completed in November. \n \n \n Foreign exchange translation \n \n \n The £251m loss (2021: £83m gain) on foreign exchange translation of net debt primarily arises in respect of the Group's US dollar-denominated USPP notes. \n \n \n Other non-cash movements \n \n \n Other non-cash movements primarily comprises fair value movements on derivative financial instruments used to manage the Group's interest rate exposure. \n \n \n Shareholder returns \n \n \n Our dividend policy is to pay out around 50% of underlying earnings through an interim and final dividend. \n \n \n In determining the level of dividend in any year, the Board considers a number of factors, which include but are not limited to: \n \n \n · \n the level of available distributable reserves in the parent company \n \n \n · \n   future cash commitments and investment requirements to sustain the long-term growth prospects of the business \n \n \n · \n potential strategic opportunities \n \n \n · \n   the level of dividend cover \n \n \n   \n \n \n 1.  Re-presented to reflect a simplified definition of capital employed (see page 49). As defined in previous years, ROCE was 7.7% in 2021 on average capital employed of £7,931m. \n \n \n \n Financial results (continued) \n \n \n \n Further surpluses, after considering the matters set out above, may be distributed to shareholders over time by way of special dividend payments, share repurchases or a combination of both. \n \n \n Compass Group PLC, the parent company of the Group, is a non-trading investment holding company which derives its distributable reserves from dividends paid by subsidiary companies. The level of distributable reserves in the parent company is reviewed annually and the Group aims to maintain distributable reserves that provide adequate cover for shareholder returns. The distributable reserves of the parent company include the distributable portion of retained earnings and the own shares reserve totalling £2,969m at 30 September 2022 (2021: £3,125m). \n \n \n An interim dividend of 9.4p per share (2021: nil), £168m in aggregate, was paid in July. It is proposed that a final dividend of 22.1p per share (2021: 14.0p per share), £389m in aggregate, be paid on 2 March 2023 to shareholders on the register on 20 January 2023. This will result in a total dividend for the year of 31.5p per share (2021: 14.0p per share), £557m in aggregate (2021: £250m). The dividend is covered 2.0 times on an underlying earnings basis. \n \n \n The final dividend of 22.1p will be paid gross and a Dividend Reinvestment Plan (DRIP) will be available. The last date for receipt of elections for the DRIP will be 9 February 2023. \n \n \n The Group is in a strong position to fund its dividend, which is well covered by cash generated by the business. Details of the Group's going concern assessment can be found on page 34. The ability of the Board to maintain its future dividend policy will be influenced by a number of the principal risks identified on pages 22 to 27 that could adversely impact the performance of the Group, although we believe we have the ability to mitigate those risks as outlined on pages 22 to 27. \n \n \n The £500m share buyback programme announced in May 2022 was completed in November 2022. We have announced a further share buyback of up to £ \n 250m \n , to take place during the first half of the 2023 financial year, taking the total buyback to £ \n 750 \n m. \n \n \n Treasury \n \n \n The Group manages its liquidity, foreign currency exposure and interest rate risk in accordance with the policies set out below. \n \n \n 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 swaps, forward currency contracts and cross currency swaps, 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. \n \n \n Foreign currency risk \n \n \n The Group's policy is to balance its principal projected cash flows by currency with 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. Where necessary, to implement this policy, forward currency contracts and cross currency swaps are taken out which, when applied to the actual currency borrowings, convert these to the required currency. \n \n \n The borrowings in each currency can give rise to foreign exchange differences on translation into sterling. Where the borrowings are either less than, or equal to, the net investment in overseas operations, these exchange rate movements are treated as movements on reserves and recorded in the consolidated statement of comprehensive income rather than in the consolidated income statement. \n \n \n Non-sterling earnings streams are translated at the average rate of exchange for the year. Fluctuations in exchange rates have given, and will continue to give, rise to translation differences. The Group is only partially protected against the impact of such differences through the matching of cash flows to currency borrowings. \n \n \n Interest rate risk \n \n \n As set out 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 the interest rates on at least 80% of the Group's projected debt are fixed for one year. For the second and third year, interest rates are fixed within ranges of 30% to 70% and 0% to 40% of projected debt, respectively. \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n Financial results (continued) \n \n \n \n Tax \n \n \n As a Group, we are committed to creating long-term shareholder value through the responsible, sustainable and efficient delivery of our key business objectives. This will enable us to grow the business and make significant investments in the Group and its operations. \n \n \n We adopt an approach to tax that supports this strategy and also balances the various interests of our stakeholders, including shareholders, governments, employees and the communities in which we operate. Our aim is to pursue a principled and sustainable tax strategy that has strong commercial merit and is aligned with our business strategy. We believe this will enhance shareholder value whilst protecting our reputation. \n \n \n In doing so, we act in compliance with the relevant local and international laws and disclosure requirements, and we conduct an open and transparent relationship with the relevant tax authorities that fully complies with the Group's Code of Business Conduct and Code of Ethics. \n \n \n After many years of operations, the Group has numerous legacy subsidiaries across the world. Whilst some of these entities are incorporated in low-tax territories, Compass does not seek to avoid tax through the use of tax havens. \n \n \n In an increasingly complex international corporate tax environment, a degree of tax risk and uncertainty is, however, inevitable. Tax risk can arise from differences in interpretation of regulations, but most significantly where governments apply diverging standards in assessing intra-group cross-border transactions. This is the situation for many multinational organisations. We manage and control these risks in a proactive manner and, in doing so, exercise our judgement and seek appropriate advice from relevant professional firms. Tax risks are assessed as part of the Group's formal governance process and are reviewed by the Board and the Audit Committee on a regular basis. \n \n \n Risks and uncertainties \n \n \n The Board takes a proactive approach to risk management aimed at protecting the Group's employees, clients and consumers and safeguarding the interests of the Group and its shareholders in a constantly changing environment. \n \n \n The principal risks and uncertainties facing the business and the activities the Group undertakes to mitigate these are set out on pages 22 to 27. \n \n \n Related party transactions \n \n \n Details of transactions with related parties are set out in note 11 to the consolidated financial statements. These transactions have not had, and are not expected to have, a material effect on the financial performance or position of the Group. \n \n \n Going concern \n \n \n The factors considered by the directors in assessing the ability of the Group to continue as a going concern are discussed on page 34. \n \n \n The Group has access to considerable financial resources, together with longer-term contracts with a number of clients and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Group is well-placed to manage its business risks successfully. \n \n \n Based on the assessment discussed on page 34, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least the period to 31 March 2024. For this reason, they continue to adopt the going concern basis in preparing the financial statements. \n \n \n \n \n \n \n \n Financial results (continued) \n \n \n \n Viability statement \n \n \n In accordance with provision 31 of the UK Corporate Governance Code 2018, the directors have assessed the Group's viability, considering its current trading performance, financial position, financing, strategic plan and principal risks. \n \n \n Business prospects \n \n \n The Board has considered the long-term prospects of the Group based on its business model, strategy and markets. Compass is a global leader in food services and the geographical and sector diversification of the Group's operations helps to minimise the risk of serious business interruption or catastrophic damage to its reputation. The Group's business model is structured so that it is not reliant on one group of clients or sector. The Group's largest client constitutes 2% of underlying revenue, with the top 10 clients accounting for 10%. \n \n \n Assessment \n \n \n The directors have determined that a three-year period to 30 September 2025 is an appropriate period over which to provide its viability statement on the basis that it is the period reviewed by the Board in its strategic planning process and is aligned to the typical length of the Group's contracts (three to five years). The directors believe that this presents the Board and readers of the Annual Report with a reasonable degree of confidence over this longer-term outlook. \n \n \n The Board's assessment of the Group's viability comprises the following business processes: \n \n \n · \n Risk management process \n \n \n The Group operates a formal risk management process under which the Group's principal risks are assessed and prioritised biannually. Risks and corresponding controls and mitigations are reviewed by country and regional leadership teams on an ongoing basis. The findings of the risk reviews, including the principal risks and any developing trends, are reported to the Board twice a year. In making its viability assessment, the Board carried out a robust evaluation of the principal risks facing the Group (see pages 22 to 27), including those that would threaten its business model, future performance, solvency or liquidity. \n \n \n · \n Strategic planning process \n \n \n The Board considers annually a three-year, bottom-up strategic plan and a more detailed budget which is prepared for the following year. Current-year business performance is reforecast during the year. The plan is reviewed and approved by the Board, with involvement throughout from the Group CEO, Group CFO and the Executive team. The Board's role is to consider the appropriateness of key assumptions, considering the external environment and business strategy. The most recent three-year plan was approved by the Board in November 2022. \n \n \n · \n Headroom and covenant analysis \n \n \n At 30 September 2022, the Group had £2.0bn of undrawn committed bank facilities, which mature in August 2024 (£140m) and August 2026 (£1,860m), and £1.7bn of cash net of overdrafts. Term debt maturities in the three-year period total £2.0bn, of which £0.7bn was pre-financed with bond issues in September 2022. Based on the forecast cash flows in the strategic plan, the remainder of the maturing debt is expected to be refinanced during the three-year period to 30 September 2025 to maintain the desired level of headroom. \n \n \n A reverse stress test has been undertaken to identify the circumstances that would cause the Group to breach the headroom against its committed facilities or the financial covenants on its USPP debt. The reverse stress test, which removes discretionary M&A expenditure and share buybacks as mitigating actions, shows that underlying EBITDA 1 would have to reduce by more than 60% of the strategic plan level throughout the three-year assessment period before the leverage covenant is reached. The refinancing requirement is not accelerated given the strong liquidity position of the Group. \n \n \n The principal risks that would have the most significant impact on the Group's business model, future performance, solvency or liquidity are further outbreaks of COVID-19 or another pandemic and associated containment measures, geopolitical tensions, economic conditions and food and labour cost inflation and these, together with the other principal risks identified on pages 22 to 27, have been considered as part of the viability assessment. Specific scenarios based on the principal risks have not been modelled on the basis that the level of headroom to absorb the occurrence of such risks is substantial and there is a range of other actions available that could be implemented to mitigate the potential impact. \n \n \n   \n \n \n 1.  \n Alternative Performance Measure (APM). The Group's APMs are defined in note 13 (non-GAAP measures) and reconciled to GAAP measures in notes 2 (segmental analysis) and 13 to the consolidated financial statements. \n \n \n \n Financial results (continued) \n \n \n \n Substantial mitigating actions were identified and implemented as part of the Group's COVID-19 pandemic response in 2020, including reducing capital expenditure, resizing the cost base, renegotiating client contracts, pausing M&A activity and shareholder returns, raising equity, negotiating covenant waivers and securing additional committed funding. \n \n \n In the event that the financial covenants were to come under pressure, mitigating actions include repaying the loan notes from available liquidity, or refinancing, in advance of their maturity or negotiating covenant waivers. The Group's long-term (A/A3) and short-term (A-1/P-2) credit ratings and well-established presence in the debt capital markets provide the directors with confidence that the Group could raise additional debt finance if required. \n \n \n Conclusion \n \n \n Based on the results of this analysis, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period to 30 September 2025. \n \n \n   \n \n \n \n \n \n Palmer Brown \n \n \n Group Chief Financial Officer \n \n \n 21 November 2022 \n \n \n \n Risk management \n \n \n \n The Board takes a proactive approach to risk management aimed at protecting the Group's employees, clients and consumers and safeguarding the interests of the Company and its shareholders in a constantly changing environment. \n \n \n Risk management is an essential element of business governance. The Group has risk management policies, processes and procedures in place to ensure that risks are properly identified, evaluated, and managed at the appropriate level. \n \n \n The identification of risks and opportunities, the development of action plans to manage those risks and maximise the opportunities, and the continual monitoring of progress against agreed key performance indicators (KPIs) are integral parts of the business process and core activities throughout the Group. \n \n \n In compliance with provision 28 of the UK Corporate Governance Code 2018 (the Code), the Board has conducted a robust assessment of the Company's emerging and principal risks. The following pages set out the Board's approach to assessing and mitigating risk, the principal risks of the Company and the procedures in place to identify emerging risks. \n \n \n Risk management framework \n \n \n The Board has overall responsibility for risk management. This includes the establishment of policies and procedures to manage risk, overseeing the internal control framework, reviewing the nature and extent of the principal risks, setting risk appetite and embedding a culture of risk management throughout the business. \n \n \n The Board has approved a risk management policy. The Group operates a formal risk management process in accordance with this policy, under which the Group's principal risks (set out on pages 22 to 27) are assessed and prioritised biannually. In accordance with the guidance set out in the FRC's Guidance on Risk Management, Internal Control and Related Financial Business Reporting 2014 and in the Code, this process has been in place for the financial year under review. These systems are designed to manage rather than eliminate the risk of failure to achieve the Group's strategic objectives, safeguard the Group's assets against material loss, fairly report the Group's performance and position, and ensure compliance with relevant legislation, regulation and best practice including that related to social, environmental and ethical matters. These systems provide reasonable, but not absolute, assurance against material misstatement or loss. \n \n \n The Board delegates aspects of risk management, with the Executive Committee responsible for the day-to-day management of significant risk, and the Audit Committee responsible for the oversight of Compass' risk management systems and internal financial controls. The Group Director of Risk and Internal Audit maintains the risk management framework including the risk policy. The Audit Committee annually reviews the effectiveness of the Group's approach to risk management and any changes to the risk policy and recommends the principal risks and uncertainties disclosures made in the Annual Report and Accounts to the Board for approval. \n \n \n Risks and the corresponding controls and mitigations are reviewed by country and regional leadership teams on an ongoing basis. Risk updates are integral to periodic management reviews and are regularly reviewed by the Regional Governance Committees and the Executive Committee. A critical component of the risk review process is the dynamic identification of emerging and developing risks at a country, regional and Group level. This bottom-up and top-down approach provides a comprehensive assessment of the key risks facing the Group. The findings of the risk reviews, including the principal risks and any developing trends, are reported to and considered by the Board twice a year. \n \n \n Risks are considered at gross and net levels. This allows the impact of the risk and likelihood of its occurrence both before and after controls and mitigations to be assessed. Risk management plans are developed for all significant risks. They include a clear description of the nature of the risk, quantification of the potential impact and likelihood of occurrence, the owners for each risk, and details of the controls and mitigations in place, proportionate to the risk, and in line with the Company's business. The identification and assessment of climate-related risks and opportunities are incorporated within the risk management process. All country operating units are mandated to consider climate-related risks and opportunities. These are assessed in terms of % profit before interest and tax (PBIT) impact in accordance with the criteria set out in the Board-approved risk management policy. All country and Group level risks are assigned risk owners and, together with the mitigations, are recorded in the central risk reporting system. \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n Risk management (continued) \n \n \n \n Group companies also submit biannual risk and internal control assurance letters to the Group CFO on internal control and risk management issues, with comments on the control environment within their operations. The Chair of the Audit Committee reports to the Board on any matters arising from the Committee's review of how the risk management and internal control processes have been applied. \n \n \n The Audit Committee keeps under review the adequacy and effectiveness of the Company's and Group's internal financial controls and risk management systems. \n \n \n Risk appetite \n \n \n The Board interprets risk appetite as the level of risk that the Company is willing to take to meet its strategic objectives. The Board's attitude to and appetite for risk are communicated to the Group's businesses through the strategy planning process and the internal risk governance and control frameworks. In determining its risk appetite, the Board recognises that a prudent and robust approach to risk mitigation must be carefully balanced with a degree of flexibility so that the entrepreneurial spirit that has greatly contributed to the Company's success is not inhibited. \n \n \n In assessing risk appetite, the Board reviews the three-year business plan and associated strategic risks. Risk appetite for specific financial risks such as funding and liquidity, credit, counterparty, foreign exchange and interest rate risk are set out in the Board approved treasury policies. Compliance with legal and regulatory requirements, such as those contained in the Companies Act, health and safety and other risk-specific legislation is mandatory. \n \n \n New and emerging risks \n \n \n The Board has established processes for identifying emerging risks, and horizon scanning for risks that may arise over the medium to long term. Emerging and potential changes to the Group's risk profile are identified through the Group's risk management framework and through direct feedback from management, including in regard to changing operating conditions, and market and consumer trends. \n \n \n As announced in Compass' half year results, geopolitical tension, in particular the conflict between Russia and Ukraine, has been recognised as a new principal risk due to the national security threat to countries, particularly in Europe and NATO, and the disruption to the global energy market which has contributed to the elevation of the existing cost inflation, economic and cyber security risks. The Board continues to monitor the situation carefully with the safety and security of colleagues front of mind. In March, Compass permanently exited the Russian market and moved away from all known Russian suppliers. Compass continues to manage inflation risks by sharing best practice across the Group to drive greater efficiencies through menu management, supplier rationalisation, labour scheduling and productivity through the increased use of technology. Cost indexation in our contracts also gives us the contractual right to review pricing with our clients. Compass is cognisant of changes in the macroeconomic environment such as pressure on food commodity prices, fuel and labour, and the inflationary impact these bring to the business. The macroeconomic environment is kept under evaluation through regular business reviews, which provide the agility to flex contracts and the operating model accordingly. \n \n \n \n \n \n \n   \n \n \n \n Risk management (continued) \n \n \n \n Our principal risks \n \n \n The principal risks and uncertainties facing the business at the date of this Report, and any changes to the status of these risks since last year, are set out on pages 22 to 27. These have been subject to robust assessment and review. \n \n \n They do not, however, comprise all the risks that the Group may face and are not listed in any order of priority. Additional risks and uncertainties not presently known to management, or which are considered to be remote or are deemed to be less material at the date of this Report, may also have an adverse effect on the Group. \n \n \n Pandemic COVID-19 \n \n \n The pandemic risk continues to represent a principal risk to the Group. Lessons have been learned from the business' response to COVID-19 and these have been incorporated into risk management processes and procedures to mitigate the impact of this risk as far as possible in the event of further outbreaks of COVID-19, or another pandemic. The Group will continue to monitor recurrences of COVID and retains the ability to adapt its service offering, apply relevant health and safety precautions and deploy resources as necessary. \n \n \n Other principal risks \n \n \n The Group faces a number of operational risks on an ongoing basis, such as litigation and financial risks, as well as some wider risks, for example, environmental and reputational. \n \n \n All risks disclosed in previous years can be found in the annual reports available on our website, www.compass-group.com. These risks remain important to the business and are kept under regular review. However, the disclosures on pages 22 to 27 focus on risks currently considered to be more significant to the Group. \n \n \n \n \n \n \n   \n \n \n \n Principal risks \n \n \n \n \n \n \n \n \n Key \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Link to \n \n \n \n \n \n \n \n \n \n \n \n People \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increased risk \n \n \n \n \n \n \n \n \n Client sales and marketing \n \n \n \n \n \n Performance \n \n \n \n \n Static risk \n \n \n   \n \n \n \n Consumer sales and marketing \n \n \n \n \n \n Purpose \n \n \n \n \n Decreasing risk \n \n \n   \n \n \n \n Cost of food \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n New risk \n \n \n \n In-unit costs \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n Above-unit overheads \n \n \n \n \n \n   \n \n \n \n \n \n \n \n RISK \n \n \n \n \n \n \n DESCRIPTION \n \n \n \n \n \n \n MITIGATION \n \n \n \n \n \n \n \n CLIMATE CHANGE AND SUSTAINABILITY \n \n \n \n \n \n \n Climate change \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n The impact of climate change on the environment may lead to issues around food sourcing and supply chain continuity in some of the Group's markets. Issues in these areas could affect the availability of some food products, and potentially may lead to food cost inflation. \n \n \n The Group continues to focus on evaluating its exposure to climate change and seeks to identify potential future issues early so that sourcing and operations can be adjusted, and menus adapted appropriately.  Work continues with clients and suppliers to propose, execute and measure solutions to support their efforts and those of Compass in reducing greenhouse gas emissions (GHG). Compass has targeted climate net zero GHG emissions by 2050 alongside validated science- based-targets to reduce emissions by 2030 (from a 2019 base year) in line with the 2015 Paris Agreement. Based on the scenario analysis carried out in relation to TCFD, we believe the risks do not have the potential to have a material impact on the Group.  \n \n \n \n \n \n Social and ethical \nstandards \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n Compass relies on its people to deliver great service to its clients and consumers and recognises that the welfare of employees is the foundation of its culture and business. Compass remains vigilant in upholding high standards of business ethics with regard to human rights and social equality. \n \n \n To enhance its ability to counter risks to its businesses and supply chains from modern slavery, Compass has focused on the areas where its human rights strategy can have the greatest impact. This has been done through the Human Rights Working Group, the engagement of external specialist advisers, the Group's Modern Slavery eLearning tools and ongoing work to strengthen and improve the Group's human rights due diligence through supplier evaluation and labour agency reviews. \n \n \n \n \n \n HEALTH AND SAFETY \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Health and safety \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n \n Compass feeds millions of consumers and Group companies employ hundreds of thousands of people around the world every day. For that reason, setting the highest standards for food hygiene and safety is paramount. \n \n Health and safety breaches could cause serious business interruption and could result in criminal and civil prosecution, increased costs and potential damage to the Company's reputation. \n \n \n Management meetings throughout the Group feature a health and safety update as one of their first substantive agenda items. \n Health and safety improvement KPIs are included in the annual bonus plans for each of the businesses' management teams. The Group has policies, procedures and standards in place to ensure compliance with legal obligations and industry standards. \n The safety and quality of the Group's global supply chain are assured through compliance with a robust set of standards which are regularly reviewed, audited and upgraded as necessary to improve supply chain visibility and product integrity. \n Further mitigations in place include Global Operational Safety Standards, Global Supply Chain Integrity Standards and a Global Allergen Management Plan. \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n Principal risks (continued) \n \n \n \n \n \n \n \n \n Key \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Link to \n \n \n \n \n \n \n \n \n \n \n \n People \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increased risk \n \n \n \n \n \n \n \n \n Client sales and marketing \n \n \n \n \n \n Performance \n \n \n \n \n Static risk \n \n \n   \n \n \n \n Consumer sales and marketing \n \n \n \n \n \n Purpose \n \n \n \n \n Decreasing risk \n \n \n   \n \n \n \n Cost of food \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n New risk \n \n \n \n In-unit costs \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n Above-unit overheads \n \n \n \n \n \n   \n \n \n \n \n \n \n \n RISK \n \n \n \n \n \n \n DESCRIPTION \n \n \n \n \n \n \n MITIGATION \n \n \n \n \n \n \n \n HEALTH AND SAFETY (CONTINUED) \n \n \n \n \n \n \n Pandemic COVID-19 \n \n \n \n \n Trend \n \n   2022   2021 \n \n \n The Group's operations were significantly disrupted due to the global COVID-19 pandemic and associated containment measures, but Compass has recovered well and learned from the pandemic. As a result, the risk has declined.  Further outbreaks of the virus, or another pandemic, could cause further business risk. \n \n \n Operations and working practices have been adjusted to retain the skills and experience of colleagues and provide flexibility in the event of a resumption of containment measures. \n To protect the Group's employees, clients and consumers, enhanced health and safety protocols and personal protective equipment requirements and guidelines, hygiene requirements and site layout solutions, developed in consultation with expert advisers and with our clients, have been adopted accordingly. \n Careful management of the Group's cost base and robust measures to protect the Group's liquidity position have ensured that we remain resilient and well placed to take advantage of appropriate opportunities as they arise. \n Robust incident management and business continuity plans are in place and are being monitored for effectiveness and regularly reviewed to reflect best practice. \n \n \n \n \n \n PEOPLE \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Recruitment \n \n \n \n \n Trend \n \n \n  2022  \n   2021 \n   \n \n \n \n Failure to attract and recruit people with the right skills at all levels could limit the success of the Group. \n \n The Group faces resourcing challenges in some of its businesses in some key positions due to labour shortages and a lack of industry experience amongst candidates, appropriately qualified people and the seasonal nature of some of Compass' businesses. \n \n \n The Group aims to mitigate this risk by efficient, time critical resource management, mobilisation of existing, experienced employees within the organisation, improved use of technology such as apps and social media, and targeted recruitment, training and development programmes. \n \n \n \n \n \n Retention and \nmotivation \n \n \n \n \n Trend \n \n \n   \n 2022 \n   \n \n \n \n   \n 2021 \n \n \n \n \n Retaining and motivating the best people with the right skills, at all levels of the organisation, is key to the long-term success of the Group. \n \n \n The current economic conditions may increase the risk of attrition at all levels of the organisation. \n \n Potential business closures resulting from further COVID-19 lock downs or other social distancing controls may significantly impact the Group's workforce in affected regions. \n \n \n The Group has established tools, training, development, performance management and reward programmes to help retain, develop, motivate and support its best people. \n The Group has a number of well-established initiatives, which help to monitor levels of engagement and to respond to the needs of employees. Specifically, Compass has increased its local focus and employee support on mental health awareness, stress management and resilience to better equip its people in times of uncertainty and change. \n To protect its workforce, Compass applies measures available to it to retain as many of its skilled workforce as possible, including redeployment. \n \n \n \n \n \n \n \n \n \n   \n \n \n \n Principal risks (continued) \n \n \n \n \n \n \n \n \n Key \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Link to \n \n \n \n \n \n \n \n \n \n \n \n People \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increased risk \n \n \n \n \n \n \n \n \n Client sales and marketing \n \n \n \n \n \n Performance \n \n \n \n \n Static risk \n \n \n   \n \n \n \n Consumer sales and marketing \n \n \n \n \n \n Purpose \n \n \n \n \n Decreasing risk \n \n \n   \n \n \n \n Cost of food \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n New risk \n \n \n \n In-unit costs \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n Above-unit overheads \n \n \n \n \n \n   \n \n \n \n \n \n \n \n RISK \n \n \n \n \n \n \n DESCRIPTION \n \n \n \n \n \n \n MITIGATION \n \n \n \n \n \n \n \n CLIENTS AND CONSUMERS \n \n \n \n \n \n \n Sales and retention \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n \n The Group's businesses rely on securing and retaining a diverse range of clients. \n \n \n The potential loss of material client contracts in an increasingly competitive market is a risk to Compass' businesses. \n \n Reduced office attendance, closure of client sites and fewer site visitors as a result of the ongoing impact of COVID-19 and related variants may impact revenues in affected sectors. \n \n \n Compass has strategies that strengthen its long-term relationships with its clients and consumers based on quality, value and innovation. \n The Group's business model is structured so that it is not reliant on one particular sector or group of clients. \n Technology is used to support the delivery of efficiencies and to contribute to growth through, for example, cashierless and cashless payment systems and the use of artificial intelligence. This is beneficial to clients and consumers and positively impacts retention and new business wins. \n Compass continues to focus on financial security and safety. In today's environment, these are key strengths for clients. \n Contracts may be renegotiated. There is continued focus on retention and new sales and the use of technology and innovative client solutions. \n \n \n \n \n \n Service delivery, contractual compliance and retention \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n The Group's operating companies contract with a large number of clients. Failure to comply with the terms of these contracts, including proper delivery of services, could lead to the loss of business and/or claims. \n \n \n Processes are in place to ensure that the services delivered to clients are of an appropriate standard and comply with the required contract terms and conditions. \n \n \n \n \n \n Competition and disruption \n \n \n \n \n Trend \n \n   2022     202 1 \n \n \n \n The Group operates in a highly competitive marketplace. The levels of concentration and outsource penetration vary by country and by sector. Some markets are relatively concentrated with two or three key players. Others are highly fragmented and offer significant opportunities for consolidation and penetration of the self-operated market. \n \n \n Ongoing structural changes in working and education environments may reduce the number of people in offices and educational establishments. \n \n The emergence of new industry participants and traditional competition using disruptive technology could adversely affect the Group's businesses. \n \n \n Compass aims to minimise this and to respond to new market and consumer food services trends by continuing to promote its differentiated propositions and by focusing on its strengths, such as flexibility in the cost base, quality, value of service and innovation. \n Harnessing knowledge and experience and continuing to invest in technology helps to counter any potential risk and to capitalise on the opportunities created. \n Compass continues to evolve its offer to increase participation rates and service sites of different sizes. \n The business is able to adapt to changes in the service provision environment and where possible take advantage of changes in the market. By leveraging its expertise and technology Compass is able to differentiate its food services offer. For example, investments in SmartQ, EAT Club and Feedr have given Compass platforms that allow it to pivot food operations according to changing client and consumer demands. \n \n \n \n \n \n \n \n \n \n   \n \n \n \n Principal risks (continued) \n \n \n \n \n \n \n \n \n Key \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Link to \n \n \n \n \n \n \n \n \n \n \n \n People \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increased risk \n \n \n \n \n \n \n \n \n Client sales and marketing \n \n \n \n \n \n Performance \n \n \n \n \n Static risk \n \n \n   \n \n \n \n Consumer sales and marketing \n \n \n \n \n \n Purpose \n \n \n \n \n Decreasing risk \n \n \n   \n \n \n \n Cost of food \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n New risk \n \n \n \n In-unit costs \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n Above-unit overheads \n \n \n \n \n \n   \n \n \n \n \n \n \n \n RISK \n \n \n \n \n \n \n DESCRIPTION \n \n \n \n \n \n \n MITIGATION \n \n \n \n \n \n \n \n ECONOMIC AND POLITICAL ENVIRONMENT \n \n \n \n \n \n \n Geopolitical \n \n \n \n \n Trend \n \n \n   \n 2022 \n \n \n \n At the half year, Compass recognised geopolitical tensions, including the conflict between Russia and Ukraine as a new principal risk. The conflict has heightened national security threats to countries, particularly in Europe and NATO and its disruption to the global energy market has contributed to the elevation of the existing cost inflation, economic and cyber security risks. \n \n \n As a Group, Compass is monitoring the situation closely with the safety and security of the Group's employees front of mind.  In March, Compass permanently exited the Russian market and moved away from all known Russian suppliers. The Group continues to manage inflation risks by sharing best practice across the Group to drive greater efficiencies through menu management, supplier rationalisation, labour scheduling, and productivity by the increased use of technology. Cost indexation in our contracts also gives Compass the contractual right to review pricing with clients. \n \n \n \n \n \n Economy \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n Sectors of Compass' business could be susceptible to adverse changes in economic conditions and employment levels. \n Continued worsening of economic conditions has increased the risk to the businesses in some jurisdictions. \n \n \n As part of Compass' strategy, the Group is focused on productivity and purchasing initiatives which help to manage the cost base. During adverse conditions, if necessary, actions can be taken to reduce labour costs and action plans have been implemented to protect profitability and liquidity. \n \n \n \n \n \n Cost inflation \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n \n At Compass, the objective is always to deliver the right level of service in the most efficient way. An increase in the cost of labour, for example, minimum wages in the US and UK, or the cost of food, could constitute a risk to our ability to do this. \n \n Increases in inflation continue to intensify cost pressures in some locations. \n \n \n As part of the MAP framework and by sharing best practice across the Group, Compass seeks to manage inflation by continuing to drive greater efficiencies through menu management, supplier rationalisation, labour scheduling and productivity, and by the increased use of technology. Cost indexation in our contracts also gives Compass the contractual right to review pricing with clients. \n It is anticipated that the cost action programmes and continued oversight of supply chain costs will assist in taking appropriate action to mitigate the risks in this area. \n \n \n \n \n \n Political instability \n \n \n \n \n Trend \n \n   2022    2021 \n \n \n Compass is a global business operating in countries and regions with diverse economic and political conditions. Operations and earnings may be adversely affected by political or economic instability. \n \n \n The Group remains alert to future changes presented by emerging markets or fledgling administrations and tries to anticipate and contribute to important changes in public policy. \n Where possible, Compass seeks to absorb price increases through operational efficiencies. Cost indexation in our contracts also gives Compass the contractual right to review pricing with clients. \n Recruitment and retention strategies are also in place to mitigate any impact on labour supply. \n Compass remains vigilant to changes in political stability in local jurisdictions and retains the flexibility to take appropriate mitigating action as necessary. \n \n \n \n \n \n \n \n \n \n   \n \n \n \n Principal risks (continued) \n \n \n \n \n \n \n \n \n Key \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Link to \n \n \n \n \n \n \n \n \n \n \n \n People \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increased risk \n \n \n \n \n \n \n \n \n Client sales and marketing \n \n \n \n \n \n Performance \n \n \n \n \n Static risk \n \n \n   \n \n \n \n Consumer sales and marketing \n \n \n \n \n \n Purpose \n \n \n \n \n Decreasing risk \n \n \n   \n \n \n \n Cost of food \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n New risk \n \n \n \n In-unit costs \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n \n \n   \n \n \n \n \n Above-unit overheads \n \n \n \n \n \n   \n \n \n \n \n \n \n \n RISK \n \n \n \n \n \n \n DESCRIPTION \n \n \n \n \n \n \n MITIGATION \n \n \n \n \n \n \n \n COMPLIANCE AND FRAUD \n \n \n \n \n \n \n Compliance and fraud \n \n \n \n \n Trend \n \n   2022     2021 \n \n \n \n Ineffective compliance management with increasingly complex laws and regulations, or evidence of fraud, bribery and corruption, anti-competitive behaviour or other serious misconduct, could have an adverse effect on the Group's reputation, its performance and/or a reduction in the Company's share price and/or a loss of business. It could also lead to criminal action, sanction or other litigation being brought against the Company, its directors or Executive management. \n \n Companies face increased risk of fraud, bribery and corruption, anti-competitive behaviour and other serious misconduct both internally and ext...

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