Chairman’s statement

Our priority is to manage your business with the creation of shareholder value firmly at the top of the agenda.

I was delighted to take over as Chairman of Compass in July. This is a good business. We have a significant presence in the countries and sectors in which we want to trade. Our people are passionate about what they do and are proud to work for us. We also continue to achieve excellent levels of contract retention demonstrating that we have a satisfied client base.

These are solid foundations on which to build. Our priority now is to create value for shareholders.

During the year we took the actions necessary to improve our future performance. We have streamlined and reshaped the management team to better reflect the needs of the business. We have improved financial discipline and governance right across the Group, giving the Board much better visibility as to the performance of the business.

In June we sold our travel concessions business, Select Service Partner (‘SSP’), for £1.8 billion. This disposal will enable us to focus on our contract catering operations and exploit the significant growth opportunities in support services.

In November we announced our plan to sell our European vending business, Selecta. As the business derives only 9% of its revenue from our contract foodservice clients, it is not a core part of our operations.

These actions provide the basis for improving returns to shareholders.

Strategy

The creation of shareholder value is our priority. Contract foodservice offers attractive and sustainable growth potential which, allied to support services, represents our core activities. The business model is sound and our focus now is on better executing our strategy to deliver sustainable growth and profits. We will do this by growing our business in a more disciplined way, continuing to give our customers superior levels of service whilst being focused on driving cost efficiencies for the shared benefit of our customers, shareholders and employees.

Returns to shareholders

The Board is proposing a final dividend of 6.7 pence per share for payment in March 2007, bringing our full year dividend to 10.1 pence, a year-on-year increase of 3%. Whilst we remain committed to growing the dividend in real terms, our objective over the medium term is to move the dividend cover more towards the two times level.

In June 2006 on completion of the sale of our travel concessions business, SSP, we commenced a £500 million on the market share buy-back programme. As of 30 September 2006 we had purchased shares for cancellation to the value of £149 million.

Once the planned sale of Selecta is completed, our aim will be to achieve a balanced use of the net proceeds and this will include an extension of the current share buy-back programme.

Management

Since becoming Chairman I have looked at the management skills needed to meet the future needs of the business. I have begun a process of re-invigorating the Board.

During the year Sir Francis Mackay, Chairman, and Michael Bailey, Chief Executive, left the Company. On behalf of the Board I would like to acknowledge their role in establishing Compass Group as the global leader in contract foodservice.

In June we appointed Richard Cousins, previously Chief Executive of BPB plc, as our new Group Chief Executive. Richard’s track record in operational management, business transformation and the creation of shareholder value has already been invaluable in mapping out the Group’s future strategy.

In December Val Gooding will step down from the Board after seven years. On behalf of the directors I would like to thank Val for the enormous dedication and commitment she has shown to the Group.

Peter Cawdron, who has been a member of the Board since 1993 and is currently Deputy Chairman and Senior Independent Director, will retire from the Board at the Annual General Meeting in February. I would like to thank Peter on behalf of the Board for his outstanding contribution to the Group and on a personal note for the support he has given me since taking over as Chairman.

I am delighted to welcome two new additions to the Board. Sir Ian Robinson, formerly Chief Executive of Scottish Power and currently Chairman of Ladbrokes plc (formerly Hilton Group plc) and a Director of Siemens Holdings plc will join the Board as a non-executive director on 1 December. His experience of developing international businesses will be enormously valuable to us.

Gary Green will join the Board as an executive director on 1 January 2007. He has been at Compass for over 20 years and has successfully led the development of our business in North America since 1999.

Corporate governance

The way the Group is managed has been a matter of concern for shareholders. During the year I have taken a number of decisive steps to improve corporate governance. We have put in place more robust centralised controls to ensure effective decision making. I have also established a sub-committee of the Board to focus on corporate responsibility. Its terms of reference include looking at all aspects of business conduct, safety, health and environmental management, and responsible business practice.

United Nations

This has been an unfortunate episode in the Group’s history. The Board has instituted a number of changes to control procedures as a result of the lessons we have learned. In March 2006 two competing food companies brought US lawsuits totalling some £600 million against ESS, Compass and various ESS staff. Though these claims would have been resolutely defended we decided that it was in the best interests of the on-going business and shareholders to settle these claims without prolonged litigation. In October, with no admission of legal liability, we reached final settlement of all claims for less than £40 million. We continue to cooperate fully with the relevant UN and US authorities in their on-going investigations.

Our people

This has been another tough year for our people. They have supported one another as we have taken the actions necessary to improve our performance and restore our reputation. They have also acted professionally to produce the highest level of customer service. On behalf of the Board I want to record our appreciation of their continued dedication and commitment.

Outlook

The results we have reported for 2006 are a benchmark from which to measure our future performance. Fundamental changes have been made during the year, including new leadership, a comprehensive review of the business, and establishing clear strategic priorities for the future. We have improved financial discipline and governance across the Group and we are now well placed to leverage the significant opportunities our global platform gives us. These actions will, in the years ahead, improve our performance and deliver value for shareholders.

Sir Roy Gardner
Chairman
29 November 2006