16 <strong>Compass</strong> <strong>Group</strong> PLC Annual Report 2007Business reviewcontinuedFinancial instrumentsThe <strong>Group</strong> continues to manage its interestrate and foreign currency exposure inaccordance with the policies set out below.The <strong>Group</strong>’s financial instruments comprisecash, borrowings, receivables and payables thatare used to finance the <strong>Group</strong>’s operations.The <strong>Group</strong> also uses derivatives, principallyinterest rate and cross currency swaps andforward currency contracts, to manage interestrate and currency risks arising from the<strong>Group</strong>’s operations. The <strong>Group</strong> does not tradein financial instruments. The <strong>Group</strong>’s treasurypolicies are designed to mitigate the impact offluctuations in interest rates and exchange ratesand to manage the <strong>Group</strong>’s financial risks. TheBoard approves any changes to the policies.Principal risks and uncertaintiesThe Board has a proactive approach to riskmanagement with the aim of protecting itsemployees and customers and safeguardingthe interests of the Company and itsshareholders.<strong>Compass</strong> <strong>Group</strong> has specific policies in placeto ensure that risks are properly evaluatedand managed at the appropriate level withinthe business. A risk assessment exercise iscarried out across the <strong>Group</strong> each year and theoutcome is reviewed by the Board bi-annually.Outlined below is a summary of what theBoard considers to be the key risks anduncertainties to successful delivery of itscorporate objectives and the activities the<strong>Group</strong> undertakes to mitigate against thesekey risks and uncertainties:DescriptionFood safetyClient retentionPeople retentionand motivationHealth, safetyand environmentPurchasingLitigationReputationMitigating activitiesThe <strong>Group</strong> has in place policies,processes and training proceduresto ensure compliance with its legalobligations in relation to food hygieneand safety.Our business model is structured so thatwe are not reliant on one particularsector, geography or client.Training and development programmes,succession planning and performancemanagement are designed to alignrewards with our corporate objectivesand to retain and motivate ourbest people.Our Health, Safety and EnvironmentForum promotes policy, sets standardsand monitors best practice and reportsto the Corporate Social ResponsibilityCommittee.To reduce risk we are focusing ontraceability, clear specification of ourrequirements to nominated suppliersand the improvement of purchasingcompliance by Unit Managers.Though we do not operate in a litigiousindustry we have in place policies andprocesses in our major countries tomitigate against third-party litigation.The <strong>Group</strong>’s zero tolerance basedCode of Ethics governs all aspects ofour relationship with our stakeholders.The Corporate Social ResponsibilityCommittee investigates any allegedbreaches.Liquidity riskThe <strong>Group</strong> finances its borrowings from anumber of sources including banks, thepublic markets and the US private placementmarkets.The maturity profile of the <strong>Group</strong>’s principalborrowings at 30 September 2007 shows theaverage period to maturity is 4.1 years. The<strong>Group</strong>’s undrawn committed bank facilitiesat 30 September 2007 were £630 million.Maturity profile of principal borrowings£m60050040030020010002008£ Bonds2009201020112012201320142015€ Bonds US$ Private Placement BankForeign currency riskThe <strong>Group</strong>’s policy is to match as far aspossible its principal projected cash flows bycurrency to actual or effective borrowings inthe same currency. As currency earnings aregenerated, they are used to service and repaydebt in the same currency. To implement thispolicy, forward currency contracts or crosscurrency swaps are taken out which, whenapplied to the actual currency liabilities,convert these to the required currency. Areconciliation of the 30 September 2007 actualcurrency liabilities to the effective currencyborrowed is set out below.Forwardsand cross EffectiveGross currency currency ofborrowings swaps borrowingsCurrency £m £m £mSterling 837 (318) 519US Dollar 476 247 723Euro 258 (98) 160Japanese Yen 16 59 75Other currencies 21 105 126Total 1,608 (5) 1,603Analysed as:Non-Current currentliabilities liabilities TotalLiability £m £m £mFinance leases 14 36 50Bank overdrafts 118 – 118Bank loans 19 17 36Loan notes – 380 380Bonds – 1,019 1,019Total 151 1,452 1,603The borrowings in each currency give rise toforeign exchange differences on translationinto Sterling. Where the borrowings are eitherless than, or equate to, the net investment inoverseas operations, these exchange ratemovements are treated as movements onreserves and recorded in the statement ofrecognised income and expense rather thanin the income statement.Non-Sterling earnings streams are translatedat the average rate of exchange for the year.This results in differences in the Sterlingvalue of currency earnings from year to year.The table below sets out the exchange ratesused for major currencies for translating the2007 and 2006 income statements andbalance sheets.Average rate Closing rateCurrency 2007 2006 2007 2006Australian Dollar 2.44 2.41 2.30 2.53Brazilian Real 4.02 3.97 3.75 4.22Canadian Dollar 2.19 2.06 2.02 2.13Euro 1.48 1.46 1.43 1.48Japanese Yen 234.05 209.07 234.33 220.54Norwegian Krone 11.98 11.66 11.05 12.47South African Rand 14.18 11.95 14.05 14.52Swedish Krona 13.63 13.67 13.18 13.80Swiss Franc 2.40 2.29 2.38 2.34US Dollar 1.97 1.80 2.04 1.87Interest rate riskAs detailed above, the <strong>Group</strong> has effectiveborrowings in a number of currencies andits policy is to ensure that, in the short-term,it is not materially exposed to fluctuationsin interest rates in its principal currencies.The <strong>Group</strong> implements this policy eitherby borrowing fixed rate debt or by usinginterest rate swaps so that at least 80% ofits projected net debt is fixed for one year,reducing to 60% fixed for the second yearand 40% fixed for the third year.Shareholder returnThe market price of the <strong>Group</strong>’s ordinaryshares at the close of the financial year was302 pence per share (2006: 268 pence).Going concernAfter making enquiries, the directors have areasonable expectation that the <strong>Group</strong> hasadequate resources to continue in operationalexistence for the foreseeable future. For thisreason, they continue to adopt the goingconcern basis in preparing the financialstatements.ConclusionThe successful disposal of the Europeanvending business, Selecta, and the exit fromother remaining non-core assets has resultedin a focused <strong>Group</strong> with a strong financialposition. In the coming year the focus willcontinue to be on embedding MAP deeperinto the organisation and on improvingbusiness performance.Andrew Martin<strong>Group</strong> Finance Director28 November 2007
17 <strong>Compass</strong> <strong>Group</strong> PLC Annual Report 2007Board of directors01 Sir Roy Gardner 1Chairman Age 62Appointed Chairman in July 2006 having beenappointed to the Board as senior independent nonexecutivedirector in October 2005. He is a senioradvisor to Credit Suisse, a non-executive directorof Willis <strong>Group</strong> Holdings Limited, President of theEnergy Institute, Chairman of the Advisory Board ofthe Energy Futures Lab of Imperial College London,a member of the International Advisory Board of theIESE Business School at the University of Navarra,President of Carers UK, Chairman of the BritishOlympics Appeal Committee for the Beijing Gamesand Chairman of the Apprenticeship AmbassadorsNetwork. He is a former Chief Executive of Centricaplc, Chairman of Manchester United plc, FinanceDirector of British Gas plc, Managing Director ofGEC-Marconi Ltd and a Director of GEC plc anda former non-executive director of Laporte plc.Sir Roy received his Knighthood in 2002 for servicesto the gas and electricity industries.02 Richard Cousins 2, 8<strong>Group</strong> Chief Executive Age 48Appointed to the Board in May 2006 and appointed<strong>Group</strong> Chief Executive in June 2006. He is anon-executive director of HBOS plc. Richard wasuntil December 2005 Chief Executive Officer ofBPB plc, having held a number of positions withthat company since joining it in1990 and is a formernon-executive director of P&O. His earlier careerwas with Cadbury Schweppes plc and BTR plc.03 Andrew Martin 2, 8<strong>Group</strong> Finance Director Age 47Appointed to the Board in March 2004. He waspreviously a partner with Arthur Andersen andheld senior financial positions with Forte Plc andGranada <strong>Group</strong> PLC. Following the disposal ofthe Hotels Division in 2001, Andrew joined FirstChoice Holidays PLC as Finance Director. He is anAssociate of the Institute of Chartered Accountantsin England and Wales and an Associate of theChartered Institute of Taxation.04 Gary Green 8<strong>Group</strong> Managing Director – USA,Canada and Mexico Age 50Appointed to the Board in January 2007. Joinedthe <strong>Group</strong> in 1986 in a senior finance role in theUK and became a UK director in 1992. Garyrelocated to the USA in 1994 as Chief FinanceOfficer of the <strong>Group</strong>’s North American business andin 1999 became Chief Executive Officer. He is achartered accountant and in 2001 received anhonorary doctorate from Johnson & WalesUniversity in the USA.05 Sir James Crosby 3, 5Senior independent non-executivedirector Age 51Appointed to the Board in February 2007. He isa non-executive director of ITV plc and is DeputyChairman of the Financial Services Authority andis a former Chief Executive of HBOS plc. He is aFellow of the Faculty of Actuaries.06 Sven Kado 4, 6Non-executive director Age 63Appointed to the Board in April 2002. He isChairman of Marsh & McLennan Holdings GmbHand was previously Chief Financial Officer of NixdorfComputer AG, Chief Financial Officer of DyckerhoffAG and senior advisor of Principal Finance<strong>Group</strong>/Nomura International.2, 6, 707 Steve LucasNon-executive director Age 53Appointed to the Board in July 2004. He is FinanceDirector of National Grid plc having been previouslyExecutive Director, Finance of Lattice <strong>Group</strong> plc.He is a chartered accountant and has held a numberof senior finance positions with Shell InternationalPetroleum Company and British Gas. More recentlyhe was Treasurer at BG <strong>Group</strong>.08 Susan MurrayNon-executive director Age 50Appointed to the Board in October 2007. She isnon-executive Chairman of Farrow & Ball and anon-executive director of Enterprise Inns Plc, SSLInternational PLC, Wm Morrison SupermarketsPLC and Imperial Tobacco PLC. She is a formernon-executive director of Aberdeen AssetManagement PLC, a former Chief Executive ofLittlewoods Stores Limited and former WorldwidePresident and Chief Executive of The Pierre SmirnoffCompany, part of Diageo plc. Susan is a Fellow ofthe Royal Society of Arts and a council member ofthe Advertising Standards Authority.09 Tim Parker 4, 6Non-executive director Age 52Appointed to the Board in February 2007. He isa former Chief Executive of the AA and a formernon-executive director of Alliance Boots Plc.10 Sir Ian Robinson 3, 4Non-executive director Age 65Appointed to the Board in December 2006.He is Chairman of Ladbrokes plc (formerly Hilton<strong>Group</strong> plc), a non-executive director of Scottish &Newcastle plc and Siemens Holdings plc. He is aformer Chairman of Amey plc, Chief Executive ofScottish Power plc and non-executive director ofASDA plc and RMC plc. He is a Fellow of the RoyalAcademy of Engineers, a Fellow of the Institution ofChemical Engineers and a member of the TakeoverPanel. Sir Ian received his Knighthood in 2000 forservices to the electricity industry.2, 8, 911 Mark WhiteGeneral Counsel and Company SecretaryAge 47A solicitor who joined <strong>Compass</strong> <strong>Group</strong> on 1June 2007.He is secretary to the Audit, Disclosure, GeneralBusiness, Nomination and RemunerationCommittees. Mark was previously <strong>Group</strong> CompanySecretary and Counsel of Wolseley plc and CompanySecretary of Enterprise Oil plc and Rotork plc.1. Chairman of the Nomination and CorporateResponsibility Committees2. Member of the Corporate Responsibility Committee3. Member of the Nomination Committee4. Member of the Audit Committee5. Chairman of the Remuneration Committee6. Member of the Remuneration Committee7. Chairman of the Audit Committee8. Member of the Executive Committee9. Trustee of the <strong>Compass</strong> Pension Scheme0102030405060708091011