Slide 1: Half Year Results 2016
4 PE, - 2016: “HALF VE
Slide 2: 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 all matters
Slide 3: Today's agenda
Today’s agenda 1. Richard Cousins Welcome & highlights 2. Johnny Thomson Half year results 3. Richard Cousins Growth strategy & outlook 4. Q&A 3
Slide 4: Highlights
Highlights Organic revenue 5.8% Operating profit pre restructuring 6.4% Operating profit margin pre restructuring 7.5% EPS 30.8p 8.1% Half year dividend 10.6p 8.2% 4 Notes Based on underlying results at constant currency, with operating profit and margin before restructuring costs.
Slide 5: Johnny Thomson, Group Finance Director
, Johnny Thomson Group Finance Director
Slide 6: Revenue
Revenue Organic Revenue Growth +8.3% +3.7% +1.7% +5.8% £m 22 95 9,666 505 18 9,062 9,044 H1 2015 Currency H1 2015 North America Europe Rest of World H1 2016 Reported revenue at 2016 fx rates Reported revenue 6 Notes Based on underlying performance at reported exchange rates unless indicated otherwis
Slide 7: Operating profit
Operating profit Organic operating profit growth of 5.8% £m 6 6 44 11 724 3 688 691 H1 2015 Currency H1 2015 North America Europe Rest of World Restructuring H1 2016 Operating profit at 2016 fx rates Operating profit 7 Notes Based on underlying performance at reported exchange rates unless indicated
Slide 8: Operating profit margin
Operating profit margin H1 2016 H1 2015 North America 8.5% 8.5% Europe 7.4% 7.4% Rest of World 6.4% 6.8% Group before restructuring 7.5% 7.5% Group after restructuring 7.4% 7.5% 8 Notes Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 59.
Slide 9: Currency impact on operating profit
Currency impact on operating profit Impact on Impact on £m 2015 HY Profit 2015 FY Profit USD 22 45 EUR (2) 6 AUD (3) (1) BRL (5) (5) YEN 1 5 Other (10) (11) Total currency impact 3 39 9 Notes FY assumes current spot rates for the next 5 months.
Slide 10: Income statement
Income statement £m H1 2016 H1 2015 • FY 2016 expected to be around £100m Operating profit after restructuring 724 688 • FY 2016 effective interest expected to be Net finance costs (47) (51) around 3.5% Profit before tax 677 637 Tax (166) (159) • Tax rate 24.5% in line with FY 2015 Profit after tax
Slide 11: Operating cash flow
Operating cash flow £m H1 2016 H1 2015 Operating profit 724 688 • Gross capex at 2.7% of revenues Depreciation and 189 171 • FY expected to be c3.0% amortisation Net capital expenditure (250) (219) Net cash flow 663 640 • Working capital outflow in line with Net cash flow conversion 92% 93% historic
Slide 12: Free cash flow
Free cash flow £m H1 2016 H1 2015 Operating cash flow 575 530 • FY expected to be around £50m in line with previous years Post employment benefits (21) (23) Net interest (39) (45) • Cash tax rate 17% due to phasing Net tax (112) (127) • FY expected around 20% Net other items (7) (12) Free cash flow
Slide 13: Ongoing priorities for uses of cash
Ongoing priorities for uses of cash Capex M&A Appropriate investment: Required returns > cost of capital by the 2.5%-3.0% of sales end of year 2 Efficient balance sheet Strong investment grade credit rating Target net debt/ EBITDA 1.5x Dividend Shareholder returns Growing in line with EPS 13
Slide 14: Net debt
Net debt £m Returns to shareholders 172 2,917 72 Reinvestment in 322 2,603 646 the business 144 250 Oct 2015 FCF Capex Acquisitions Dividends Share FX/ Other H1 2016 Opening net pre-capex buyback Closing net debt debt 14
Slide 15: FY2016 guidance for modelling purposes
FY2016 guidance for modelling purposes Interest charge c£100m P&L tax rate c24.5% Cash tax rate around 20% Gross capex c3.0% of revenue Working capital small outflow + c£70m payroll related outflow Post employment cash contribution c£50m Net debt/ EBITDA target 1.5x Foreign exchange impact on EBIT a
Slide 16: Financial summary
Financial summary Organic revenue growth 5.8% Operating margin 7.4% Constant currency EPS growth 8% Free cash flow generation £396m Ongoing share buyback £72m Increase in dividend to 10.6 pence per share 8% 16 Notes Based on underlying performance at reported exchange rates unless indicated otherwis
Slide 17: Richard Cousins, Chief Executive Officer
Richard Cousins F Chief Executive Officer
Slide 18: H1 2016 overview
H1 2016 overview Revenue by Region Strong top line growth Excellent performance in North America Rest of World Growth in Europe continues Rest of World restructuring on track North Europe America 18
Slide 19: H1 2016 organic revenue growth
H1 2016 organic revenue growth 9.0% 5.5% 2.3% 5.8% New business Lost business Like for like Organic revenue growth 19
Slide 20: H1 2016 margin progression
H1 2016 margin progression 7.5% 7.5% 7.4% H1 2015 Cost Reinvestment/ Cost Overhead & Price 2016 margin Restructuring H1 2016 inflation mobilisation reduction & operating increases pre - costs efficiencies leverage restructuring 20
Slide 21: North America: core growth engine
North America: core growth engine Organic revenue up 8.3% Food service market (c $72bn)* Strong growth across all sectors 80 Excellent retention 96.5% 60 Like for like volumes up around 1% 65% 40 Margins up slightly 20 High mobilisation costs given fast growth Weakness in oil & gas related
Slide 22: North America: sub-sectorisation driving growth
North America: sub-sectorisation driving growth 40% North America Organic Revenue Growth H1 2016 30% 20% 10% 0% Total North America -10% -20% -30% 22
Slide 23: Rest of World: a mixed picture
Rest of World: a mixed picture Organic revenue up 1.7% Rest of World Revenue by Sector Excluding commodity related business revenue up 5% Education Weakness driven by Offshore & Remote Sports & Leisure Australia challenging as expected Offshore & Healthcare Remote & Seniors Margins down 40bps
Slide 24: Rest of World: weakness driven by commodities
Rest of World: weakness driven by commodities Rest of World Organic Revenue Growth 20% 15% Rest of World (total) 10% 5% 0% -5% 2012 2013 2014 2015 H1 2016 24
Slide 25: Rest of World: weakness driven by commodities
Rest of World: weakness driven by commodities Rest of World Organic Revenue Growth 20% RoW (B&I, Healthcare, etc) 15% Rest of World (total) 10% 5% 0% -5% 2012 2013 2014 2015 H1 2016 25
Slide 26: Rest of World: weakness driven by commodities
Rest of World: weakness driven by commodities Rest of World Organic Revenue Growth 20% Offshore & Remote RoW (B&I, Healthcare, etc) 15% Rest of World (total) 10% 5% 0% -5% 2012 2013 2014 2015 H1 2016 The restructuring programme is on track 26
Slide 27: Europe: accelerating growth
Europe: accelerating growth Organic revenue up 3.7% Food service market (c £100bn)* Strong new business wins 100 Improving trends in UK/ Spain/ Germany 80 Challenging in North Sea and France 60 88% Margins flat 40 Higher mobilisation costs as a result of 20 accelerating revenue growth Weak
Slide 28: European performance improving
European performance improving Good • UK and Iberia are in good shape On track • Recovery in the rest of Europe Challenging progressing well • Norway/ France are still tough • Creating clusters to leverage scale and share best practice 28
Slide 29: Europe: UK recovery
Europe: UK recovery UK & Ireland Organic revenue growth 8% 6% 4% 2% 0% -2% -4% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 29
Slide 30: Clear strategy
Clear strategy Focus on food - our core competence Food service market (c £200bn)* Incremental approach to support services 200 Prioritise organic growth 150 Bolt on M&A 100 Best in class • Operational execution 50 • Quality and service • Innovation 0 Self operated Outsourced Small regiona
Slide 31: Innovation
Innovation Compass’ operations Consumer needs Improve quality Food variety: new, different, ethnic etc. Lower food and Digital labour costs Clients Health & wellness Increase productivity and efficiency Speed & ease of ordering and delivery Ways to build and New, better/ different leverage scale exp
Slide 32: Business model
Business model GROWTH Organic MARGIN Operating efficiency Opex INVESTMENT Capex Bolt-on M&A EPS growth RETURNS TO Progressive dividend SHAREHOLDERS Capital returns A proven and sustainable model 32
Slide 33: Summary and outlook
Summary and outlook Continued strength in North America Restructuring in Rest of World on track Good growth in Europe Ongoing returns to shareholders Focused on strong growth with discipline Expectations for 2016 are positive and unchanged Remain positive about the structural growth op
Slide 34: Half Year 2016 Supplementary Information
~ 2016 HALF Y * Supplementary Information yr us ‘ ms 4 ¢ i “ At -
Slide 35: Group revenue
Group revenue By geography, sector & service line Rest of World 16% ROW 6% Food service Sports & Leisure 12% Brazil 3% 84% Business & North America Industry 37% Japan 3% 56% Australia 4% Other CE 5% Food service Healthcare Norway 1% 78% & Seniors Turkey 1% 22% Neth 1% Italy 1% USA 52% Spain 1% DOR f
Slide 36: Revenue by sector
Revenue by sector By geography North America Europe Rest of World Sports & Leisure 8% Sports & Leisure 8% Sports & Leisure 15% Business & Industry 29% Healthcare & Healthcare & Seniors 14% Seniors 13% Business & Industry 35% Education 5% Healthcare Education Defence, & Seniors 15% Offshore & 28% Rem
Slide 37: Geographic financials
Geographic financials North America Europe Rest of World Other1,2 Total £m £m £m £m £m 2016 Revenue 5,418 2,722 1,526 9,666 Organic growth 8.3% 3.7% 1.7% 5.8% Operating profit 461 201 97 (35) 724 Margin 8.5% 7.4% 6.4% 7.4% Cash flow 408 138 57 (207) 396 Cash flow conversion 89% 69% 59% 55% 2015 Reve
Slide 38: Geographic financials
Geographic financials Group Revenue (£bn) & Organic Growth (%) Group Operating Profit (£m) & Margin (%) 9.7 724 9.0 691 8.6 649 8.2 613 7.9 578 532 7.3 5.7 5.0 4.1 4.2 5.7 5.8 7.2 7.2 7.3 7.4 7.5 7.4 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 NA Revenue (£bn) & Organic Growth (%) NA
Slide 39: Geographic financials
Geographic financials Europe Revenue (£bn) & Organic Growth (%) Europe Operating Profit (£m) & Margin (%) 2.7 2.7 2.6 2.6 2.6 2.6 201 195 185 185 188 180 0.4 (0.2) (2.9) (1.0) 1.3 3.7 7.1 6.9 7.2 7.3 7.4 7.4 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 ROW Revenue (£bn) & Organic Grow
Slide 40: Income statement
Income statement Revenue Change Reported Constant Organic 2016 2015 Rates Currency Growth £m £m % % % North America 5,418 4,693 15.4% 10.3% 8.3% Europe 2,722 2,689 1.2% 3.6% 3.7% Rest of World 1,526 1,680 (9.2)% 1.5% 1.7% Revenue 9,666 9,062 6.7% 6.9% 5.8% 40 Notes Based on underlying performance, d
Slide 41: Income statement
Income statement Operating profit Change Analysed By Acquisition Change Organic 2016 2015 Currency / Disposal £m £m £m £m £m £m % North America 461 398 63 19 4 40 9.6% Europe 201 199 2 (4) - 6 3.1% Rest of World 97 115 (18) (12) - (6) (5.8)% Unallocated central overheads (32) (32) - - - - Associates
Slide 42: Income statement
Income statement Reconciliation of reported to underlying 2016 2015 £m Reported Non-underlying Underlying Underlying Revenue 9,536 (130) 9,666 9,062 Operating profit before restructuring 715 (20) 735 688 Restructuring (11) - (11) - Operating profit after restructuring 704 (20) 724 688 Net finance co
Slide 43: Income statement
Income statement Underlying at constant currency £m 2016 2015 Growth Revenue 9,666 9,044 Operating profit before restructuring 735 691 +6.4% Restructuring (11) - Operating profit after restructuring 724 691 Net finance costs (47) (51) Profit before tax 677 640 Tax (166) (160) Tax rate 24.5% 25.0% Pr
Slide 44: Earnings and dividends per share
Earnings and dividends per share 2016 2015 Earnings per share Continuing operations 30.4p 27.7p Other Adjustments 0.4p 0.7p Underlying earnings per share 30.8p 28.4p Dividends per share Interim dividend 10.6p 9.8p Final dividend 19.6p Total dividend 29.4p 44 Notes Underlying definitions on page 59.
Slide 45: EPS/dividends
EPS/dividends Dividend cover 2015 2014 2013 2012 2011 Per share (pence) Dividend (interim plus final) 29.4p 26.5p 24.0p 21.3p 19.3p Underlying earnings 53.7p 48.7p 47.7p 42.6p 39.0p Dividend earnings cover 1.8x 1.8x 2.0x 2.0x 2.0x Cash (£m) Cash cost of dividend (in the year) 457 444 404 378 360 Und
Slide 46: Free cash flow
Free cash flow Reconciliation of reported to underlying £m 2016 2015 Reported Adjs1 Other2 Underlying Reported Adjs1 Other2 Underlying Operating profit 704 - (20) 724 674 - (14) 688 Depreciation and 203 - 14 189 184 - 13 171 amortisation EBITDA 907 - (6) 913 858 - (1) 859 Net capital expenditure (25
Slide 47: Operating cash flow history
Operating cash flow history £m 2015 2014 2013 2012 2011 Operating profit 1,296 1,245 1,265 1,178 1,091 Depreciation and amortisation 340 317 299 282 254 Net capital expenditure (476) (445) (434) (366) (340) Net cash flow 1,160 1,117 1,130 1,094 1,005 Net cash flow conversion 90% 90% 89% 93% 92% Trad
Slide 48: Free cash flow history
Free cash flow history £m 2015 2014 2013 2012 2011 Operating cash flow 1,123 1,114 1,197 1,108 992 Post employment benefits (59) (46) (54) (54) (42) Net interest (93) (71) (65) (73) (55) Net tax (242) (259) (256) (225) (209) Net other items (7) (1) 12 4 7 Free cash flow 722 737 834 760 693 Cash conv
Slide 49: Balance sheet
Balance sheet ROCE £m 2015 2014 2013 2012 2011 2010 NOPAT 973 926 930 867 790 728 Average capital employed 5,093 4,799 4,878 4,774 4,307 3,999 ROCE 19.1% 19.3% 19.1% 18.2% 18.3% 18.2% 49 Notes Based on underlying performance, definitions on page 59.
Slide 50: Balance sheet
Balance sheet Overview 2016 HY 2015 HY 2015 FY £m £m £m Goodwill 3,768 3,600 3,538 Other non-current assets 2,392 2,111 2,135 Working capital (711) (656) (773) Provisions (398) (427) (387) Post employment benefit obligations 8 (141) (9) Current tax payable (130) (133) (105) Deferred tax 125 208 154
Slide 51: Balance sheet
Balance sheet Capital expenditure % of revenue 2.7% 2.7% 2.8% 2.7% 2.5% 2.3% 2.3% 2.3% 2.1% 1.9% 1.9% 1.7% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 HY 2016 Notes 51 1. Based on underlying performance, definitions on page 59. 2. Gross capital expenditure includes tangible and intangible
Slide 52: Financing
Financing Components of net debt £m Bonds 1,122 Private placements 1,357 Bank loans 699 3,178 Finance leases 13 Other loans and fair value accounting adjustments 135 Derivatives (109) Gross debt 3,217 Cash net of overdrafts (300) Closing net debt at 31 March 2016 2,917 52 Notes Based on nominal valu
Slide 53: Financing
Financing Principal borrowings Maturing in Coupon Financial Year £m Bonds €600m 3.125% 2019 476 €500m 1.875% 2023 396 £250m 3.850% 2026 250 Total 1,122 US private placements £35m (2008 Notes) 7.55% 2017 35 $1,000m (2011 Notes) 3.31% - 4.12% 2019 – 2024 696 $500m (2013 Notes) 3.09% - 3.81% 2020 – 202
Slide 54: Financing
Financing Maturity profile of principal borrowings £m 700 600 500 400 300 200 100 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 £ bond € bond US$ private placement £ private placement bank Notes 54 1. Based on borrowings and facilities in place as at 31 March 2016, maturing in the fi
Slide 55: Financing
Financing Debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 25 Feb 16 Moody’s Baa1 Positive 18 Jun 15 Fitch (unsolicited) A- Stable 2 Jun 15 Ratios 2016 2015 Covenant - Net debt1 / EBITDA2 1.8x 1.7x Compass - Net debt / EBITDA 1.7x 1.6x Covenant - EBITDA2 / net inter
Slide 56: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2016 per £ 2015 per £ 2016 per £ 2015 per £ Australian Dollar 2.04 1.89 1.87 1.94 Brazilian Real 5.73 4.18 5.09 4.74 Canadian Dollar 1.98 1.85 1.86 1.88 Euro 1.34 1.31 1.26 1.38 Japanese Yen 174.46 181.31 161.55 178.03 Nor
Slide 57: Exchange rates
Exchange rates Effect on 2015 revenue and profit US Dollar Canada Dollar Euro £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 5 cent movement incremental 5 cent movement Exchange Revenue Profit Exchange Revenue Profit Exchan
Slide 58: Exchange rates
Exchange rates Effect on 2015 revenue and profit Australian Dollar Brazilian Real Turkish Lira £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 20 centavo movement incremental 20 kurus movement Exchange Revenue Profit Exchang
Slide 59: Definitions
Definitions 1. Constant currency basis restates the prior period results to 2016’s 7. Underlying basic earnings per share excludes specific adjusting items and the tax attributable average exchange rates. to those items. 2. Underlying revenue represents the combined sales of Group and share 8. Under