Compass Group Plc · LSE:CPG
Compass — FY2014 Earnings Presentation
54 slides from Compass's earnings presentation, Nov 26, 2014
Slide 1: 2014 Full Year Results
2014 Full Year Results Wednesday 26 November 2014
Slide 2: Disclaimer
Disclaimer Disclaimer Certain information included in the following presentation is forward-looking and involves risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied by forward-looking statements. Forward-looking statements cover a
Slide 3: Presentation structure
Presentation structure 1. Richard Cousins Welcome & highlights 2. Dominic Blakemore Full year results 3. Richard Cousins Growth strategy & outlook 4. Q&A 3
Slide 4: Business highlights
Business highlights Organic revenue growth 4.1% Operating profit margin 7.2% 10bps EPS 48.7 pence 10.5% Full year dividend 26.5 pence 10.5% £1bn cash return; ongoing £500m share buyback Another strong full year performance 4 All numbers are underlying, at constant currency
Slide 5: 2014 Full Year Results
2014 Full Year Results Dominic Blakemore Group Finance Director
Slide 6: Revenue
Revenue Change 2 3 Reported Constant Organic 2014 2013 Rates Currency Growth £m £m % % % North America 8,199 8,150 0.6% 7.2% 6.8% Europe & Japan 5,716 6,039 (5.3)% (1.6)% (1.5)% Fast Growing & Emerging 3,143 3,368 (6.7)% 7.5% 8.1% Revenue 17,058 17,557 (2.8)% 4.1% 4.1% Notes: 1. Based on continuing
Slide 7: Operating profit at reported currency
Operating profit at reported currency Change Analysed By Acquisition 2014 2013 Change Currency / Disposal Organic £m £m £m £m £m £m North America 666 657 9 (40) 4 45 Europe & Japan 409 420 (11) (16) - 5 Fast Growing & Emerging 226 242 (16) (32) - 16 Unallocated central overheads (65) (64) (1) - - (1
Slide 8: Impact of currency on operating profit
Impact of currency on operating profit 2013 2014 Impact on 21-Nov Impact on Average Rate Average Rate 2013 Profit Spot Rate 2014 Profit USD 1.57 1.66 £(33)m 1.57 £36m CAD 1.59 1.79 £(7)m 1.76 £1m EUR 1.19 1.23 £(5)m 1.26 £(6)m YEN 143.83 169.92 £(7)m 184.32 £(3)m AUD 1.58 1.81 £(15)m 1.81 - BRL 3.30
Slide 9: Operating profit and margin at constant currency
Operating profit and margin at constant currency Margin 3 2014 2013 2 Change 2014 2013 £m £m £m % % % North America 666 617 49 7.9% 8.1% 8.1% Europe & Japan 409 404 5 1.2% 7.2% 7.0% Fast Growing & Emerging 226 210 16 7.6% 7.2% 7.2% Unallocated central overheads (65) (64) (1) Associates 9 9 - Operati
Slide 10: Income statement
Income statement 2014 2013 £m Reported Non-Underlying Underlying 3 Underlying 3 Revenue 17,058 - 17,058 17,557 2 Operating profit 1,217 (28) 1,245 1,265 Other gains 14 14 - - Net finance costs (84) 2 (86) (77) Profit before tax 1,147 (12) 1,159 1,188 Tax (279) 14 (293) (309) Tax rate 25% 26% Profit
Slide 11: Underlying income statement at constant currency
Underlying income statement at constant currency £m 2014 2013 3 Growth Revenue 17,058 16,380 Operating profit 2 1,245 1,176 +5.9% Net finance costs (86) (76) Profit before tax 1,159 1,100 Tax (293) (286) Tax rate 25% 26% Profit after tax 866 814 Non-controlling interest (6) (8) Attributable profit 8
Slide 12: Free cash flow
Free cash flow £m 2014 2013 Operating profit 2 1,245 1,265 Depreciation and amortisation 319 299 EBITDA 1,564 1,564 Net capital expenditure 3 (447) (434) Trade working capital (16) 102 Provisions 11 (35) Post employment benefits (45) (54) Net interest (71) (65) Net tax (261) (256) Net other items 6
Slide 13: Net debt
Net debt £m Opening net debt at 1 October 2013 1,193 Underlying free cash flow from continuing operations (741) 1 European exceptional cash flow 58 Acquisitions 2 128 Disposals (34) 3 Investment in associate 16 Equity dividends 444 Purchase of own shares net of proceeds from issues 275 Return of cas
Slide 14: Ongoing priorities for use of cash
Ongoing priorities for use of cash Capex M&A Appropriate investment: Required returns > cost of circa 2.5% of revenue capital by end of year 2 Efficient balance sheet Strong investment grade credit ratings Target net debt / EBITDA 1.5x Dividend Shareholder returns Growing in line with EPS £1 billion
Slide 15: Financial summary
Financial summary Organic revenue growth 4.1% Margin progression 10bps Constant currency EPS growth 10.5% Underlying free cash flow generation £741m Increase in dividend to 26.5 pence per share 10.5% Existing share buyback, to be completed in 2015 £500m Return of cash £1bn Strong finan
Slide 16: Growth strategy & outlook
Growth strategy & outlook Richard Cousins Group Chief Executive
Slide 17: Business model
Business model Growth Organic Margin Operating efficiency Investment Opex, capex, infill M&A • EPS growth Returns to • Progressive dividend Shareholders • Capital returns A proven and sustainable model 17
Slide 18: Clear strategy
Clear strategy Food Service Market (c.£200bn) Focused on food: 250 200 Self Operated • Core competence 150 Outsourced • Over 80% of revenues 83% Small Regional 100 • Ranked #1 or #2 in most key markets Large Players 50 Compass • Incremental approach to support services 0 • Significant £200bn oppor
Slide 19: Focusing on organic growth
Focusing on organic growth 2014 Going forward Proven strategy Increase the focus on growth Balance sheet Invest more resources optimised Relentless focus on efficiencies Strong growth with discipline 19
Slide 20: Performance review
Performance review 2014 organic revenue growth 8.5% 6.5% 2.1% 4.1% New Business Lost Business Like for Like Organic Revenue Growth Consistent organic growth trends 20
Slide 21: Margin progression
Margin Margin progression Progression in H1 2013 7.2% 10 bps 7.1% 2013 Cost inflation Reinvestment Cost reduction / Overhead Price 2014 efficiencies leverage increases 21
Slide 22: North America
North America Core growth engine Revenue up 6.8% Food Service Market (c.$72bn) Strong growth across all sectors 80 Q4 had especially high retention 70 Self Operated 60 Margin up 5bps 50 Outsourced 65% Reinvesting for growth 40 Small Regional Opportunities in purchasing and labour 30 Large Pl
Slide 23: "Refresh" Programme
North America Innovation “Refresh” Programme Before After 23
Slide 24: North America: Avenue C
North America Innovation Avenue C An unattended vending solution No labour micro market/convenience store 1100 units installed Opening 60 new units a month 24
Slide 25: North America: organic growth with existing clients
North America Organic growth with existing clients 2002 2013 2014 Annual revenue Annual Annual $70m revenue $4m revenue $30m Client growth, Support Food and support additional sites and services only, services, more an increased range one site sites of food and support services 25
Slide 26: Canada: gaining momentum
North America Canada: gaining momentum Revenue Food Service Market (c.$14bn) Historically focused on DOR 16 Leveraging best practice 14 Self Operated Increased focus on retention and 12 Outsourced innovation 10 81% Small Regional More balanced growth profile across 8 sectors 6 Large Players
Slide 27: Europe & Japan
Europe & Japan Restructuring complete, trend improving Revenue down 1.5% Food Service Market (c.£100bn) Exits complete, Q4 performance 120 encouraging 100 New business wins improving Self operated 80 Margin up 20 bps Outsourced 60 Small Regional Opportunities in purchasing and labour 88% Large
Slide 28: Europe & Japan: Focusing on growth
Europe & Japan Focusing on growth Changing our priorities Mixed economic backdrop Extra sales resources Focus on retention Leveraging best practice 28
Slide 29: Fast Growing & Emerging
Fast Growing & Emerging Strong growth in Emerging Markets Revenue up 8.1% Geographic split of revenue 2014 - £3.1bn Double digit growth in Emerging Markets Accelerating outsourcing trend Slowdown in Australia DOR CAMEAT Australia Margin flat c. 70% Emerging Markets Margins improved in H2 ASI
Slide 30: Fast Growing & Emerging: CAMEAT
Fast Growing & Emerging CAMEAT Turkey Good growth despite tough trading environment New business wins and like for like volume increases UAE Strong retention and growth with existing clients Exciting pipeline of new contracts: 2020 Expo in Dubai South Africa Growth in both food and support
Slide 31: Fast Growing & Emerging: AsiaPac
Fast Growing & Emerging AsiaPac Australia Soft H2 due to lower demand for commodities Decisive action to offset weakness in Australia Rest of the region Good revenue growth in the rest of the region Accelerating outsourcing trend Health, safety and governance driving demand Excellent gro
Slide 32: Fast Growing & Emerging: LATAM
Fast Growing & Emerging LATAM Brazil Good growth despite weakening economy Soft like for like volumes Gaining scale and improving our competitiveness Rest of LATAM Mexico and Colombia still work in progress Good new business and contractual inflation adjustments in Argentina Chile perfor
Slide 33: Summary and outlook
Summary and outlook A good year with solid organic growth and margin progression Ongoing strength in North America and Fast Growing & Emerging Improving outlook in Europe & Japan Balance sheet optimised: £1bn return of cash Continued returns to shareholders: dividend and ongoing buyback
Slide 34: Supplementary Information
2014 Full Year Results Supplementary Information
Slide 35: Contents
Contents Group revenue 36 By geography, sector & service Free cash flow 43 Reconciliation of reported to underlying Revenue by sector 37 External geographies Balance sheet 44 Overview 45 ROCE 46 Capital expenditure % of revenue Geographic financials 38 Group Financing 47 Components of net debt 39 Gr
Slide 36: Group revenue – by geography, sector & service
Group revenue – by geography, sector & service Fast Growing & Emerging 18% Other FGE, 5% Middle East, 1% North America 48% Sports & Leisure Turkey, 2% 11% Brazil, 4% Australia, 6% Other CE, 6% USA, 43% Business & Industry Healthcare 40% Norway, 1% 21% Netherlands, 1% Italy, 1% Spain, 2% DOR food Ger
Slide 37: Revenue by sector – external geographies
Revenue by sector – external geographies North America Fast Growing & Emerging Sports & Leisure Sports & Leisure 2% 15% Healthcare Business & 8% Industry Education 29% 5% Europe & Japan Business & Industry Sports & Leisure 40% 10% Healthcare Defence, 29% Offshore, Remote Healthcare Defence, 3% 16% O
Slide 38: Geographic financials – Group
Geographic financials – Group North Fast Growing & 2 America Europe & Japan Emerging Other Total £m £m £m £m £m 2014 Revenue 8,199 5,716 3,143 17,058 Organic growth 6.8% (1.5)% 8.1% 4.1% 1 Operating profit 666 409 226 (56) 1,245 Margin 3 8.1% 7.2% 7.2% 7.2% 4 Cash flow 628 360 163 (410) 741 Cash flo
Slide 39: Geographic financials – Group and NA trends
Geographic financials – Group and NA trends Group Revenue (£bn) & Organic Growth (%) Group Operating Profit (£m) & Margin (%) 17.1 1,245 16.4 1,176 15.7 1,091 14.6 1,010 926 13.4 845 12.7 12.8 749 12.0 639 5.0% 5.9% 0.0% 3.2% 5.4% 5.4% 4.3% 4.1% 5.8% 6.5% 6.9% 6.9% 6.9% 7.1% 7.2% 5.1% 2007 2008 2009
Slide 40: Geographic financials – E&J and FG&E trends
Geographic financials – E&J and FG&E trends E&J Revenue (£bn) & Organic Growth (%) E&J Operating Profit (£m) & Margin (%) 6.0 404 409 5.7 5.8 5.8 5.7 375 375 379 5.6 5.6 360 5.5 342 312 3.0% 3.0% (3.1)% (1.6)% (0.4)% (0.7)% (3.0)% (1.5)% 5.6% 6.0% 6.5% 6.8% 6.5% 6.4% 7.0% 7.2% 2007 2008 2009 2010 20
Slide 41: EPS/dividends – earnings and dividends per share
EPS/dividends – earnings and dividends per share 2014 2013 Earnings per share Continuing and discontinued operations 49.0p 23.5p Discontinued operations (0.2)p (0.2)p Continuing operations 48.8p 23.3p Other adjustments 1 (0.1)p 24.4p Underlying earnings per share 48.7p 47.7p Dividends per share Inte
Slide 42: EPS/dividends – dividend cover
EPS/dividends – dividend cover 2014 2013 2012 2011 2010 Per share (pence) Dividend (interim plus final) 26.5p 24.0p 21.3p 19.3p 17.5p Underlying earnings 1 48.7p 47.7p 42.6p 39.0p 35.7p Dividend earnings cover 1.8x 2.0x 2.0x 2.0x 2.0x Cash (£m) Cash cost of dividend (in the year) 444 404 378 360 258
Slide 43: Free cash flow – reconciliation of reported to underlying
Free cash flow – reconciliation of reported to underlying £m 2014 2013 4 5 4 5 Reported Adjs Other Underlying Reported Adjs Other Underlying Operating profit 2 1,217 - (28) 1,245 802 (436) (27) 1,265 Depreciation and amortisation 344 - . 25 319 701 377 25 299 EBITDA 1,561 - (3) 1,564 1,503 (59) (2)
Slide 44: Balance sheet - overview
Balance sheet - overview 2014 £m 2013 £m Goodwill 3,565 3,620 Other non-current assets 1,889 1,725 Working capital (752) (719) Provisions (438) (531) Post employment benefit obligations (176) (209) Current tax payable (116) (130) Deferred tax 207 227 Net debt (2,331) (1,193) Net assets 1,848 2,790 S
Slide 45: Balance sheet - ROCE
Balance sheet - ROCE 2014 2013 2012 2011 2010 2009 £m £m £m £m £m £m NOPAT 1 926 930 867 790 728 627 Average capital employed 2 4,799 4,878 4,774 4,307 3,999 3,752 ROCE 19.3% 19.1% 18.2% 18.3% 18.2% 16.7% Notes: 1. Based on underlying operating profit, net of tax at the underlying tax rate of the ye
Slide 46: Balance sheet – capital expenditure % of revenue
Balance sheet – capital expenditure % of revenue % of Revenue 5.0% 4.5% 3.9% 4.0% 3.6% 3.3% 2.9% 3.0% 2.7% 2.7% 2.5% 2.3% 2.3% 2.3% 2.1% 1.9% 1.9% 2.0% 1.7% 1.0% 2001 2002 2003 2004 2005 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005 total
Slide 47: Financing – components of net debt
Financing – components of net debt £m Bonds 1,358 Private placements 1,060 Bank loans 300 2,718 Finance leases 17 Other loans and fair value accounting adjustments 51 Derivatives (61) Gross debt 2,725 Cash net of overdrafts (394) Closing net debt at 30 September 2014 2,331 Notes: 1. Based on nominal
Slide 48: Financing – principal borrowings
Financing – principal borrowings Maturing in Coupon Financial Year £m Bonds £250m 7.000% 2015 250 £250m 3.850% 2026 250 €600m 3.125% 2019 468 €500m 1.875% 2023 390 Total 1,358 US private placements $162m (2008 Notes ) 6.720% 2016 100 £35m ( 2008 Notes ) 7.550% 2017 35 $1000m (2011 Notes) 3.31%-4.12%
Slide 49: Financing – maturity profile of principal borrowings
Financing – maturity profile of principal borrowings £m 700 600 500 400 300 200 100 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 £ Bond € Bond US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 30 September 2014, maturing in t
Slide 50: Financing – debt ratios and credit ratings
Financing – debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 14-May-14 Moodys Baa1 Positive 14-May-14 Fitch (unsolicited) A- Stable 24-Feb-14 Ratios 2014 2013 Net debt 1 / EBITDA 2 1.6x 0.8x EBITDA 2 / net interest 3 18.2x 20.3x Notes: 1. Net debt is adjusted where
Slide 51: Exchange rates – rates used in consolidation
Exchange rates – rates used in consolidation Income Statement 2 Balance Sheet 3 2014 per £ 2013 per £ 2014 per £ 2013 per £ Australian Dollar 1.81 1.58 1.85 1.73 Brazilian Real 3.80 3.30 3.97 3.60 Canadian Dollar 1.79 1.59 1.81 1.66 Euro 1.23 1.19 1.28 1.20 Japanese Yen 169.92 143.83 177.83 158.90 N
Slide 52: Exchange rates – effect on 2014 revenue & profit
Exchange rates – effect on 2014 revenue & profit US Dollar Canadian Dollar Euro £m incremental change for an £m incremental change for an £m incremental change for an incremental 5 cent movement incremental 5 cent movement incremental 5 cent movement Exchange Revenue Profit Exchange Revenue Profit E
Slide 53: Exchange rates – effect on 2014 revenue & profit
Exchange rates – effect on 2014 revenue & profit Australian Dollar Brazilian Real Japanese Yen £m incremental change for an £m incremental change for an £m incremental change for an incremental 5 cent movement incremental 10 centavo movement incremental 10 yen movement Exchange Revenue Profit Exchan
Slide 54: Compass Group
Za * COMPASS G RO U P