Corporate Financial Management of Compass Group Plc - Essay Example

?Compass Group Plc Outline i. Background ii. Message from the management iii. Services iv. Brands v. Financials vi. Compass Group’s 5-Year gearing Graph vii. Analysis of driving strategies to achieve corporate objectives viii. Conclusion ix. Bibliography Background Compass Group plc has its headquarters in the Compass House in Chertsey, United Kingdom. It is a British multinational company offering food and other support services. It has businesses in over fifty countries operating under various brands making it the world’s largest contract company offering food services. The company uses its five hundred and eight thousand employees to serve more than four billion meals every year in the fifty thousand locations around the world. Some of the brands include All Leisure Hospitality, Canteen Vending, DeltaFM, Best Vendors Management, and Morrison Management Specialists among others. Compass Group aspires to provide excellent contract food and support services that include cleaning desks, running office and reception services, and other company routine maintenance services in its vision (Cardinal Environment ltd, 200, p. 13). The management and employees of Compass group is passionate about serving foods with great quality. Service centres include factories, universities, colleges, schools, people in offices, hospitals, sports and cultural venues, offshore platforms, and homes for senior community people. The company offers services with high quality as such; it is the leading provider of meals to university students in Australia. The company invented the steamplicity a system of steam cooking in hospitals. Message from the management Richard Cousins, The chief Executive Officer, Compass Group PLC delivered a compelling speech during the last company annual general meeting that included the tabling of the financial report. In his speech, Cousins explained that the company’s performance in a challenging environment was excellent. Over that period of trade, Compass established consistent high levels of new business that saw it make positive change in operational efficiency that generated one hundred and sixty-one million pounds in terms of savings. According to him, the prevailing short-term economic conditions will continue to affect the company’s unprocessed revenue growth. The chair, Sir Roy Gardner, reiterated that the group’s overall core strategy remains unchanged as it remains centred on foodservice and support service business with a very high rate of growth rate. Services Compass Group serves the needs of people by offering high quality, well balanced, and nutritious food. This refreshes peoples’ tired minds, reenergises peoples’ productivity, enhances the concentration of students at school, and offers the right diet for invalids and convalescents in hospitals. The company focuses on consumers by being constantly innovative in providing food services and brands to retain its customer base while at the same time venturing into new markets. Compass Group’s service structure allows it to serve clients in any format and location irrespective of the geographical location and size (Schiller, 1998, p. 29). This includes formal dining, twenty-four hour service, self-service, vending, and free-flow restaurants. Despite the large customer base, that averages four billion customers every year, the company makes sure that it meets individual customer tastes. Companies that focus on running their operations and choose to use Compass group in undertaking food and support services benefit in many ways. Benefits include reducing costs of maintenance and food. They also improve the quality of providing the same services because Compass group is professional in service provision. Due to its professionalism, Compass guarantees the highest health, environmental, and safety standards (Schweikart, 1990, p. 43). The companies will also take advantage of innovativeness by employees of Compass group to enjoy newest services and best practices around the world. Customers from as far as Asia will benefit from technology invented in the United States because the company spreads any new invention across its branches. The other benefit is enjoying services from the best and latest brands in the world irrespective of the origin. Compass group also offers a range of support services that include cleaning, project management, and maintenance of building operations, outdoor, security, business, and office services, logistics, and transport (Monks Partnership, 2000, p. 31). The company runs these activities using their standardised processes that give priority to collaborating. The standardised activities blend first-class hospitality and industrial efficiency to give the best value to customers. The company enjoys market dominance because it is consistent in its business while serving customers in single sites, groups, and national or at multinational levels. These activities make Compass group the leading caterer in the world. Brands The company understands that every business environment has its unique characteristics and requirements therefore build the brands using experts to meet the difference. Among the company’s major brands includes Eurest. Through this brand, Compass Group creates and provides contemporary food solutions. The company offers these in tearooms and boardrooms. Most companies employ the services of Eurest because they need high quality services at a low cost offered in the most efficient way. Eurest assures its clients of very safe food services. The brand operates in financial institutions, technology companies, and media. Eurest is Compass’ brand that has the greatest capacity, scope, depth, and scope to meet demands by large national, multinational, and international clients. The brand offers large clients the appropriate economies of outsourcing from a single client variety of services including running office operations and providing food services. Restaurant Associates is another brand of Compass Group and is responsible for gastronomic flair, hospitality, creativity, and style (Munn and Garcia, 1983, p. 63). Compass group also has Bon Appetit Management as its brand. This brand is clear indication of how Compass group is flexible because it is an onsite food service provider. The brand operates in the United States serving corporations, schools, universities, and, colleges. The company has specially designated sites in institutions where customers receive these services. Through the brand, Compass sources for the most affordable food in the United States and provides them to customers considering market segmentation. The ideology led to Compass group becoming the pioneer in applying sound environmental policies. The last of the company’s major brands is the FLIK International. Some of its services include offering dining services. This is another brand running its activities in the United States. The brand serves clients in executive suites and corporate settings. Services are unique in the sense that it only serves upscale and authentic clients setting the brand apart within the food service industry. Its services are prestigious and among the recipients are flamboyant legal and financial institutions. Financials Compass group plc serves billions of people around the world on daily basis. The company believes and enhances innovativeness to develop new ways to deliver its services. The company looks for supplies with the highest quality to offer services with the best value. The company also offers the best support services. Through this, the company received revenue totalling to sixteen billion, nine hundred and five thousand pounds in the trading period that ended in December two thousand and twelve (Verdier, 2002, p. 17). Over the same period, the company enjoyed an operating margin of six point nine percent. In two thousand and eleven financial years, Compass group received fifteen billion, eight hundred and thirty three thousand pounds in terms of revenue. The operating margin remained at six point nine percent. The trading period that ended in December two thousand and ten, the company received fourteen billion, four hundred and sixty eight thousand pounds with the operating margin remaining the same. The transactions have an underlying profit of one billion one hundred and seventy eight thousand pounds, one billion and ninety one thousand pounds, and one billion and three thousand respectively over the three financial periods. Following the business operations, the company earned a profit of seven hundred and eighty nine million pounds in two thousand and twelve resulting forty-two point six earnings per share. A profit of nine hundred and fifty eight million in two thousand and eleven led to thirty-nine earnings per share while in two thousand and ten a profit of nine hundred and thirteen million pounds gave rise to thirty-five point seven earnings per share. During the three-year trading period, shareholders received dividends of twenty-one point three pence, nineteen point three pence, and seventeen point five pence per ordinary share respectively. Furthermore, the underlying cash flow was seven hundred and sixty million, six hundred and ninety three million, and seven hundred and forty four million respectively over the three years of business trading. Compass Group financial results for the last 5 years Values in British pound Income Statement: 30/09/2012 30/09/2011 30/09/2010 30/09/2009 30/09/2008   (Millions) (Millions) (Millions) (Millions) (Millions) Revenue: 16,905.00 15,833.00 14,468.00 13,444.00 11,440.00 Operating Profit / (Loss): 848.00 1,010.00 983.00 870.00 655.00 Net Interest: (85.00) (71.00) (81.00) (100.00) (73.00) Profit Before Tax: 789.00 958.00 913.00 773.00 566.00 Profit after tax from continuing operations: 611.00 694.00 667.00 552.00 397.00 Discontinued Operations: Profit after tax from- discontinuing operations: n/a 40.00 13.00 40.00 53.00 Profit for the period: 611.00 734.00 680.00 592.00 450.00 Attributable to: Equity holders of parent company: 605.00 728.00 675.00 586.00 443.00 Minority Interests / Other Equity: 6.00 6.00 5.00 6.00 7.00 Total Dividend Paid: n/a n/a n/a n/a n/a Retained Profit / (Loss) for the Financial Year: n/a n/a n/a n/a n/a Earnings per Share: Basic: 32.10p 36.40p 35.30p 29.50p 20.90p Diluted: 31.90p 36.10p 35.10p 29.40p 20.80p Adjusted: 42.60p 39.00p 35.70p 30.00p 22.00p Dividend per Share: 21.30p 19.30p 17.50p 13.20p 12.00p Balance Sheet: 30/09/2012 30/09/2011 30/09/2010 30/09/2009 30/09/2008   (Millions) (Millions) (Millions) (Millions) (Millions) Assets: Non-Current Assets: Property, Plant & Equipment: 652.00 655.00 581.00 530.00 463.00 Intangible Assets: 4,841.00 4,779.00 4,403.00 4,073.00 3,683.00 Investment Properties: n/a n/a n/a n/a n/a Investments: 128.00 120.00 69.00 64.00 45.00 Other Financial Assets: 87.00 64.00 81.00 60.00 19.00 Other Non-Current Assets: 386.00 317.00 368.00 364.00 322.00 6,094.00 5,935.00 5,502.00 5,091.00 4,532.00 Current Assets: Inventories: 261.00 270.00 238.00 230.00 213.00 Trade and Other Receivables: 2,114.00 2,030.00 1,830.00 1,680.00 1,577.00 Cash at Bank & In Hand: 728.00 1,110.00 643.00 588.00 579.00 Current Asset Investments: n/a n/a n/a n/a n/a Other Current Assets: 33.00 65.00 41.00 52.00 20.00 3,136.00 3,475.00 2,752.00 2,550.00 2,389.00 Other Assets: n/a n/a n/a n/a n/a Total Assets: 9,230.00 9,410.00 8,254.00 7,641.00 6,921.00 Liabilities: Current Liabilities: Borrowings: 77.00 711.00 148.00 323.00 382.00 Other Current Liabilities: 3,406.00 3,279.00 3,091.00 2,776.00 2,586.00 3,483.00 3,990.00 3,239.00 3,099.00 2,968.00 Net Current Assets: n/a n/a n/a n/a n/a Non-Current Liabilities: Borrowings: 1,708.00 1,247.00 1,200.00 1,277.00 1,212.00 Provisions: 397.00 336.00 317.00 353.00 365.00 Other Non-Current Liabilities: 401.00 334.00 425.00 367.00 170.00 2,506.00 1,917.00 1,942.00 1,997.00 1,747.00 Other Liabilities: n/a n/a n/a n/a n/a Total Liabilities: 5,989.00 5,907.00 5,181.00 5,096.00 4,715.00 Net Assets: 3,241.00 3,503.00 3,073.00 2,545.00 2,206.00 Capital & reserves: Share Capital: 186.00 190.00 189.00 185.00 184.00 Share Premium Account: 386.00 353.00 317.00 215.00 178.00 Other Reserves: 4,493.00 4,572.00 4,564.00 4,531.00 4,441.00 Retained Earnings: (1,834.00) (1,620.00) (2,002.00) (2,395.00) (2,616.00) Shareholders’ Funds: 3,231.00 3,495.00 3,068.00 2,536.00 2,187.00 Minority Interests / Other Equity: 10.00 8.00 5.00 9.00 19.00 Total Equity: 3,241.00 3,503.00 3,073.00 2,545.00 2,206.00 (Verdier, 2002, p. 06) Compass Group’s 5-Year gearing Graph Finance Leverage (Verdier, 2002, p. 13) Analysis of driving strategies to achieve corporate objectives Compass group desires to deliver constantly superior and excellent contract food and support services. The company uses various strategies to achieve its mission and follow the vision. Every member of Compass group is committed to delivering the superior services in the most efficient manner. This results in shared benefits for customers, employees, and shareholders. The management has principles that guide decision-making. The company believes in independence. Employees maintain independence from third parties because they are consultants. This gives them leverage creating greater latitudes that create value for themselves and the company (Mase, 2002, p. 77). Compass group runs its activities objectively. The company gives advice based on opportunities and expertise. The company has competent employees who deliver these services with utmost trust. The management of the company believes that the best way to handle customers is maintaining the highest level of confidentiality. The staffs treat information received during consultation cautiously to avoid compromising confidentiality. Compass has culture that makes sure that all the employees including those on attachment, internship, and contract are familiar with the modes of operations within the company. The objectives set the company apart within the food service industry. Through this, the company cuts its niche in the market as the dominant force. Employees comprehend company desires, what the company holds as important, and the reputation that the brands give the company. The principles guide employee actions, decisions, and behaviours and in the process strive to achieve the company’s financial and strategic objectives. Compass group’s success strategies centres on various areas. The company strives to develop its current expertise and strengths in areas of operations. This includes businesses in contract food and a chain support services. The efforts focus in markets that have growth potential. In addition, the markets offer huge capacity that the company needs to expand its global customer base. The company strives to provide services while combining quality performance, low cost, and the most efficient channels. To achieve these, the company enhances consistency in the process of providing the services. Since the company’s activities are international, Compass group spreads the strong performance culture it implements across all the branches. The company has five drivers key to its Management and Performance (MAP) framework. The company centres on Customer sales and marketing dimensions Cost of food and support services Consumer sales and marketing Above unit costs Unit costs (HSBC Securities, 1998, p. 117) The client sales and marketing grows the company’s existing markets while enhancing relationships between the company and existing clients. Compass group earns consumer loyalty through consumer sales and marketing which grows its volume and increases customer participation. The cost of food drives the company towards sourcing for cheap quality supplies that enables the company to provide quality foods that customers can afford. The company has efficient production mechanisms, which further cut costs. In concentrating on unit costs, the company delivers the appropriate services in the most cost effective and efficient way. Finally, the company creates the easiest organizational structure that allows shareholders, employees, the management, supplies, and clients to pass information in the easiest and effective way. The structure does not have complex layers and that eliminates bureaucracy. Compass group outlines the highest degree for corporate governance and business practices that lead to accountability and responsible behaviour among employees. The standards cover business ethics, conduct, safety, health, and environmental practices. The human resource department undertakes a training program that continues to develop employees to become the best in the food and service industry. The training schedule also makes sure that the employees have a strong link with the overall company strategic goals. The program motivates the employees because it offers them a series of courses to choose. Conclusion The Compass group is world’s largest caterer serving millions of people everyday across the globe. The company keeps expanding and recording profits as per the books of accounts over the last five financial years. The company offers various contact food and support services to its clients. The company’s strategic ideologies clearly segment the market to enable it survive in the global market within the food service industry. The company brands remain the favourite among customers across the world and this makes the company the most popular. The training program outlined by the human resource department makes sure that the company produces employees who fully understand the company. The program enables employees to align their goals to the overall company objectives and this enhances their commitment to the company. The training system is responsible for employees putting the company at the top of the priority list above their personal needs. The management and performance (MAP) strategy that the company follows will see the company remain a market leader for quite some time while making sustainable profits. Bibliography Cardinal Environment ltd, 2001, Environmental management in FTSE 100 companies, London, Gee Pub. HSBC Securities, 1998, FTSE 100 TRAINS: a security tracking the FTSE 100 Index, London, HSBC Securities. Mase, B, 2002, The impact of changes in the FTSE 100 Index, Uxbridge (GB), Brunel University. Munn, G., & Garcia, L, 1983, Encyclopaedia of banking and finance, Boston, Bankers Pub. Monks Partnership, 2000, FTSE 100 companies’ board pay & incentive practice, Saffron Walden, Monks Partnership. Schweikart, L., 1990, Banking and finance, 1913-1989, New York, Facts on File. Schiller, J., 1998, The 100% return options trading strategy, New York, Windsor Books. Verdier, D, 2002, Moving money banking and finance in the industrialized world, Cambridge, Cambridge University Press. Retrieved from: http://site.ebrary.com/id/10064302. Read More