Compass Group Plc · LSE:CPG
Compass — H1 2013 Earnings Presentation
65 slides from Compass's earnings presentation, May 15, 2013
Slide 1: 2013 Half Year Results
2013 Half Year Results Wednesday 15 May 2013 1
Slide 2: Presentation Structure
Presentation Structure 1. Sir Roy Gardner Welcome & Highlights 2. Dominic Blakemore Half Year Results 3. Richard Cousins Business Review, Strategy & Outlook 4. Q&A 2
Slide 3: Business Highlights
Business Highlights • Organic revenue growth of 4.1% • Underlying operating profit of £650m • Underlying operating profit margin up 15 bps to 7.3% • EPS and interim dividend increased by 11% • £400m buyback on track to complete by the year end Delivering value to shareholders 3
Slide 4: 2013 Half Year Results
2013 Half Year Results Dominic Blakemore 4
Slide 5: Revenue
Revenue Change Adjusted 4 2 3 Reported Constant Organic Organic 2013 2012 Rates Currency Growth Growth £m £m % % % % North America 4,059 3,799 6.8% 6.8% 8.2% 8.7% Europe & Japan 3,080 3,228 (4.6)% (2.4)% (3.6)% (2.6)% Fast Growing & Emerging 1,665 1,523 9.3% 13.0% 10.5% 11.0% Revenue 8,804 8,550 3.0
Slide 6: Operating Profit – Reported Currency
Operating Profit – Reported Currency Change Analysed By Acquisition 2013 2012 Change Currency / Disposal Organic £m £m £m % £m £m £m North America 338 313 25 8.0% - (6) 31 Europe & Japan 212 214 (2) (0.9)% (4) 3 (1) Fast Growing & Emerging 126 115 11 9.6% (3) 3 11 Unallocated central overheads (32)
Slide 7: Impact of Currency on Operating Profit
Impact of Currency on Operating Profit US $ Euro Yen Other Total Impact on 2012 HY operating - £(2)m £(2)m £(3)m £(7)m 1 profit of 2013 HY average exchange rates Estimated average exchange 1.56 1.20 146 - - rate for 2013 FY 2 Estimated impact on 2012 FY £9m £3m £(8)m £(3)m £1m operating profit of es
Slide 8: Operating Profit and Margin – Constant Currency
Operating Profit and Margin – Constant Currency Margin 3 2013 2012 2 Change 2013 2012 £m £m £m % % % North America 338 313 25 8.0% 8.3% 8.2% Europe & Japan 212 210 2 1.0% 6.9% 6.6% Fast Growing & Emerging 126 112 14 12.5% 7.6% 7.6% Unallocated central overheads (32) (30) (2) Associates 6 5 1 Operati
Slide 9: Operating Profit Growth – Constant Currency
Operating Profit Growth – Constant Currency £m (estimated) 2013 2012 Net new business 18 15 Base estate 29 21 Above unit overheads (8) (5) Associates 1 - Operating profit growth 40 31 Acquisitions/disposals - 19 Total operating profit growth 40 50 Notes: 1. Based on continuing operations, excluding
Slide 10: European Exceptional
European Exceptional Announced in September 2012 Delivered in H1 2013 • Material (3%) like for like volume • Like for like volume decline as declines expected expected (2.5%) - Potential FY profit impact of £60m - H1 profit impact of c.£25million • Immediate & intense labour cost • Labour action pla
Slide 11: Income Statement
Income Statement 2013 2012 £m Reported Underlying 3 Reported Underlying 3 Revenue 8,804 8,804 8,550 8,550 Operating profit 2 615 650 604 617 Other gains (1) - 24 - Net finance costs (39) (39) (47) (45) Profit before tax 575 611 581 572 Tax (148) (158) (152) (146) Profit after tax 427 453 429 426 Non
Slide 12: Underlying Income Statement at Constant Currency
Underlying Income Statement at Constant Currency £m 2013 2012 3 Growth Revenue 8,804 8,430 Operating profit 2 650 610 +6.6% Net finance costs (39) (45) Profit before tax 611 565 Tax (158) (144) Profit after tax 453 421 Non-controlling interest (3) (2) Attributable profit 450 419 +7.4% Average number
Slide 13: Underlying Free Cash Flow
Underlying Free Cash Flow £m 2013 2012 Operating profit 2 650 617 Depreciation and amortisation 145 142 EBITDA 795 759 Net capital expenditure 3 (217) (178) Trade working capital (12) (44) Provisions (10) 6 Post employment benefits (26) (28) Net interest (33) (37) Net tax (120) (113) Net other items
Slide 14: Underlying Free Cash Flow Progression
Underlying Free Cash Flow Progression £800m £730m £693m £670m £593m £600m £520m H1 £386m £400m £357m £212m £200m £0m 2006 2007 2008 2009 2010 2011 2012 2013 H1 H2 Notes: 1. Based on continuing operations. 2. 2010 reported free cash flow was £744m. The £670m represents the free cash flow, after adjus
Slide 15: Net Debt
Net Debt £m Opening net debt at 1 October 2012 973 Underlying free cash flow from continuing operations (386) European exceptional cash flow 1 43 Exceptional pension payment 72 Acquisitions 2 63 Equity dividends 259 Purchase of own shares, net of proceeds from issues 231 Impact of foreign exchange r
Slide 16: Financial Summary
Financial Summary • Overall good financial performance • Organic revenue growth 4.1% • Margin progression 15bps • Underlying free cash flow generation £386m • Constant currency EPS growth 10.9% • Increase in interim dividend to 8.0 pence per share 11.1% 16
Slide 17: Business Review, Strategy & Outlook
Business Review, Strategy & Outlook Richard Cousins 17
Slide 18: Agenda
Agenda 1. Business performance and MAP 2. Regional reviews 3. Strategy 4. Summary and outlook 18
Slide 19: Organic Revenue Growth
Organic Revenue Growth 2011 2012 2013 % H1 H2 H1 H2 H1 New business 9.0 8.5 8.5 9.5 8.8 Lost business (6.0) (5.5) (5.5) (5.9) (6.0) Net new business 3.0 3.0 3.0 3.6 2.8 LFL revenue 2.7 2.0 2.0 2.1 1.3 Organic growth 5.7 5.0 5.0 5.7 4.1 19
Slide 20: New Business & Retention
New Business & Retention • Good rates of new business • Growth across all sectors • Ongoing roll out of Strategic Alliance Group • Exciting pipeline 20
Slide 21: Margin Progression in H1 2013
Margin Progression in H1 2013 7.2% +15 bps 7.3% H1 2012 Cost Volume Reinvestment Efficiencies Overhead Modest H1 2013 inflation impact leverage price increases 21
Slide 22: Increased Focus on Efficiencies
Increased Focus on Efficiencies • Recipe standardisation • Logistics • Management and scheduling • Operational excellence • Ongoing focus on MAP 5 22
Slide 23: Review of North America
Review of North America Revenue (£bn) & Organic Growth (%) 4.1 • Good organic revenue growth across all sectors 3.8 3.5 • High level of new business wins 3.1 3.0 2.9 7.0% 4.4% 2.8% 7.8% 7.0% 8.2% • Ascension contract expanded 2008 2009 2010 2011 2012 2013 Operating Profit (£m) & Margin (%) 338 • Tex
Slide 24: Review of Europe & Japan
Review of Europe & Japan Revenue (£bn) & Organic Growth (%) 3.2 • Difficult economic conditions 3.0 3.0 3.1 3.1 2.9 • Continuing negative like for like volume 3.0% (0.7)% (2.8)% (0.4)% (0.4)% (3.6)% • Solid progress on new business 2008 2009 2010 2011 2012 2013 Operating Profit (£m) & Margin (%) • C
Slide 25: Review of Fast Growing & Emerging
Review of Fast Growing & Emerging Revenue (£bn) & Organic Growth (%) 1.7 • Double digit organic revenue growth 1.5 1.2 1.0 1.0 • Particularly strong growth in oil & gas 0.9 10.0% 10.4% 3.5% 15.7% 12.4% 10.5% • Further efficiencies generated 2008 2009 2010 2011 2012 2013 Operating Profit (£m) & Margi
Slide 26: Strategy
Strategy Food and support services Organic top line growth Geographic spread & emerging markets Infill M&A Efficiencies • Food (MAP 3) Continued margin progression • Labour (MAP 4) • Above unit (MAP 5) Capex Progressive dividend Strong cash flow Infill M&A Shareholder value Returns to shareholders 2
Slide 27: Food: Structural Market Growth Opportunity
Food: Structural Market Growth Opportunity Outsourcing rates by region • £200bn market opportunity • Underpenetrated sectors Outsourcing rates by sector • Ranked 1 or 2 in most key markets • Compelling proposition Source: Compass Group PLC estimates / market definitions 27
Slide 28: Support and Multi Services: Incremental Approach
Support and Multi Services: Incremental Approach H1 2013 Multi & Support Services • Now a significant part of the Group Revenue: £2.2 billion 9% Food service • Incrementally building capacity Support & multi service 75% • Organic and inorganic growth H1 2013 Revenue By Sector 910 616 584 • Predomina
Slide 29: Support and Multi Services: Market Trends
Support and Multi Services: Market Trends Sector Market Trend Business & Industry • Bundling most pronounced in Northern Europe • Predominantly multi-nationals Healthcare/Education • Some early signs of bundling in the US: typically large hospitals and Higher Education • Established trend in UK Heal
Slide 30: Geographic Priorities
Geographic Priorities 2002 2012 The Future? Region H1 2013 organic Revenue opportunity Margin opportunity growth rate North America 8.2% Ongoing Steady expansion Europe & Japan (3.6)% Modest Further efficiencies Fast Growing & 10.5% High growth rates Balance with investment Emerging 30
Slide 31: North America: Positive Outlook
North America: Positive Outlook Revenue Margin • Market leadership in food • Ongoing opportunities - Increased efficiency in food purchasing • Healthy outsourcing culture - Flexible labour market • ‘Greenfield’ sites being established - Overhead leverage • £46 billion market opportunity: 70% self- •
Slide 32: North America: Success of Sectorised Approach
North America: Success of Sectorised Approach Sector Compass brands Example contracts Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote 32
Slide 33: Europe & Japan: Varied Picture
Europe & Japan: Varied Picture Northern and Eastern Europe Good new business wins Mixed LFL volume Western Europe & Japan Good new business in some countries Pressure on LFL volume incl. France Southern Europe Strong new business in Spain Strongly negative LFL volume 33
Slide 34: Europe & Japan: Strategy
Europe & Japan: Strategy Ongoing execution of action plans Sharpened focus on top line • Reduce fixed labour costs • Already performing well in parts • Increase flexibility • Investment in sales teams & training • Simplify processes • Retention best practices being rolled out • Drive ‘lean’ practice
Slide 35: Fast Growing & Emerging: Sub Regions
Fast Growing & Emerging: Sub Regions H1 2013 Revenue By Sub-Region Central Asia, Middle East & Africa, £0.4bn Latin America, £0.6bn Pacific & South/ East Asia, £0.7bn 35
Slide 36: FG&E: Investment in Organic Growth
FG&E: Investment in Organic Growth Approach Investment Developed / scaled - E.g. Australia / Brazil Established presence; Opportunistic investment selective quality growth in new business Mid-sized - E.g. Turkey Continue to build scale; Sales teams & ongoing target underpenetrated infrastructure exp
Slide 37: Fast Growing & Emerging: Growth in India
Fast Growing & Emerging: Growth in India Two years ago Now Employees 1,200 9,900 Clients 35 180 Sites 36 270 Meals per day 4,000 100,000 Offices 4 cities 9 cities 37
Slide 38: Fast Growing & Emerging: Progression in Mexico
Fast Growing & Emerging: Progression in Mexico Past to present Future opportunities • Loss maker • Enlarged sales team • Management strengthened • Exciting sales pipeline • Discipline improved • Investment in management school • Cost base reduced • Opportunity to leverage overhead • Now good margins
Slide 39: Summary and Outlook
Summary and Outlook • Good performance on growth and margin in the first half • First half trends expected to continue for the rest of the year: - Healthy pipeline in North America and Fast Growing & Emerging - LFL volume pressure in Europe & Japan likely to continue • Overall expectations for the y
Slide 40: Supplementary Information
Supplementary Information 40
Slide 41: Contents
Contents Revenue 42 Group Revenue by Geography Free Cash Flow 52 Reconciliation of Reported to Underlying Revenue by Sector 43 Group Balance Sheet 53 Overview 44 North America 54 Capital Expenditure % of Revenue 45 Europe & Japan 46 Fast Growing & Emerging Financing 55 Components of Net Debt 56 Prin
Slide 42: Revenue – Group Revenue by Geography
Revenue – Group Revenue by Geography 2013 North 2012 America Fast Growing & North 46% Emerging 18% America Fast Growing & Fast Growing Emerging 19% & Turkey 2% Other FGE 6% 44% Emerging 19% Other FGE, 7% Turkey, 2% Brazil 4% Brazil, 4% Australia 6% Australia, 6% Other CE 6% USA 40% USA, 41% Norway 1
Slide 43: Revenue by Sector - Group
Revenue by Sector - Group 2013 2012 Sports Sports && Sports & Leisure Leisure Leisure 10% 10% 10% Business & Industry Healthcare 40% 18% Business & Healthcare Business Healthcare Industry 20% & Industry 20% 42% 40% Education 18% Def ence, Of f shore, Education Education Remote 18% 12% 18% Defence, D
Slide 44: Revenue by Sector – North America
Revenue by Sector – North America 2013 2012 Sports & Leisure Sports & 13% Leisure 12% Business Business & & Industry Industry 29% 31% Healthcare 25% Defence, Healthcare Offsh ore, Def ence, 28% Remote Of f shore, 3% Remote Education 5% 27% Education 27% Notes: 1. Based on continuing operations. 44
Slide 45: Revenue by Sector – Europe & Japan
Revenue by Sector – Europe & Japan 2013 Sports & 2012 Leisure 9% Sports & Leisure 10% Healthcare 15% Healthcare 15% Business & Business & Industry Industry 56% Education Education 56% 13% 13% Defence, Defence, Offshore, Remote Offsh ore, 6% Remote 7% Notes: 1. Based on continuing operations. 45
Slide 46: Revenue by Sector – Fast Growing & Emerging
Revenue by Sector – Fast Growing & Emerging 2013 2012 Sports & Healthcare Leisure Sports & 3% Leisure, 7% Healthcare 4% Education 8% Education, 5% 5% Business Business & Industry, & Industry 40% 39% Defence, Def ence, Offsh ore, Of f shore, Remote, Remote 43% 46% Notes: 1. Based on continuing operat
Slide 47: Sector Financials - Group
Sector Financials - Group North Europe & Fast Growing 2 America Japan & Emerging Other Total £m £m £m £m £m 2013 Revenue 4,059 3,080 1,665 8,804 Organic growth 8.2% (3.6)% 10.5% 4.1% Operating profit 338 212 126 (26) 650 3 Margin 8.3% 6.9% 7.6% 7.3% Cash flow 4 339 174 62 (189) 386 Cash flow convers
Slide 48: Sector Financials – European Exceptional
Sector Financials – European Exceptional 2012 2013 2014 £m FY HY FY FY Like for like volume (2.0)% (2.5)% (3.0)% Profit drop through (at 35%) (40) (25) (60) Income statement savings: Accelerated cost efficiencies - 18 50 75 Other charges - 12 20 20 Total savings - 30 70 95 Income statement charge: A
Slide 49: Finance Cost – Net Finance Cost
Finance Cost – Net Finance Cost 2013 2012 £m £m Bank loans and overdrafts 4 4 Other loans 29 35 Finance lease interest 1 1 34 40 Bank interest income (4) (4) 30 36 Amount charged to pension scheme liabilities net of expected return on scheme assets 7 8 Unwinding of discount on provisions and put opt
Slide 50: EPS / Dividends – Earnings & Dividends Per Share
EPS / Dividends – Earnings & Dividends Per Share 2013 2012 Earnings per share Continuing and discontinued operations 23.1p 22.5p Other adjustments 1 1.4p (0.1)p Underlying earnings per share 24.5p 22.4p Dividends per share Interim dividend 8.0p 7.2p Final dividend 14.1p Total dividend 21.3p Notes: 1
Slide 51: EPS / Dividends – Dividend Cover
EPS / Dividends – Dividend Cover 2012 2011 2010 2009 Per share (pence) Dividend (interim plus final) 21.3p 19.3p 17.5p 13.2p Underlying earnings 1 42.6p 39.0p 35.7p 30.0p Dividend earnings cover 2.0x 2.0x 2.0x 2.3x Cash (£m) Cash cost of dividend (in the year) 378 360 258 229 Underlying free cash fl
Slide 52: Free Cash Flow – Reconciliation of Reported to Underlying
Free Cash Flow – Reconciliation of Reported to Underlying £m 2013 2012 Reported Adjs 4 Other 5 Underlying 4 Reported Adjs 4 Other 5 Underlying 4 Operating profit 2 615 (20) (15) 650 604 - (13) 617 Depreciation and amortisation 159 - 14 145 151 - 9 142 EBITDA 774 (20) (1) 795 755 - (4) 759 Net capita
Slide 53: Balance Sheet - Overview
Balance Sheet - Overview 2013 HY 2012 HY 2012 FY £m £m £m Non-current assets 1,764 1,592 1,584 Working capital (552) (427) (520) Provisions (579) (427) (603) Interest payable (50) (67) (63) Post employment benefit obligations (309) (319) (361) Current tax payable (146) (197) (116) Deferred tax 264 2
Slide 54: 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% 2.5% 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 HY Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005, total Group
Slide 55: Financing – Components of Net Debt
Financing – Components of Net Debt £m Bonds 763 Private placements 879 Bank loans 300 1,942 Finance leases 27 Other loans 65 Derivatives and Fair value accounting adjustments (82) Gross debt 1,952 Cash net of overdrafts (642) Closing net debt at 31 March 2013 1,310 Notes: 1. Based on nominal value o
Slide 56: Financing – Principal Borrowings
Financing – Principal Borrowings Maturing in Coupon Calendar Year £m Bonds £250m 4 7.00% 2014 256 €600m 3.125% 2019 507 Total 763 US private placements $15m (2003 Notes) 5.67% 2013 10 $267m (2008 Notes) 6.45% - 6.72% 2013 - 2015 176 £35m (2008 Notes) 7.55% 2016 35 $1000m (2011 Notes) 3.31% - 4.12% 2
Slide 57: Financing – Maturity Profile of Principal Borrowings
Financing – Maturity Profile of Principal Borrowings £m 700 600 500 400 300 200 100 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 £ Bonds € Bonds US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 31 March 2013, maturing in the
Slide 58: Financing – Sources of Committed Borrowings
Financing – Sources of Committed Borrowings Bank Loans 15% Bonds 39% Private Placements 46% Notes: 1. Based on borrowings as at 31 March 2013. 58
Slide 59: Financing – Effective Currency of Net Borrowings
Financing – Effective Currency of Net Borrowings Other Yen C$ 8% 2% 5% £ Sterling 5% A$ 4% US $ € 62% 14% Notes: 1. Based on net borrowings as at 31 March 2013 2. In line with the Group’s treasury policy, the Group hedges its economic exposure to its non-sterling cash flows by matching the currencie
Slide 60: Financing – Debt Ratios and Credit Ratings
Financing – Debt Ratios and Credit Ratings Ratings Outlook Confirmed Standard & Poors A Stable 18-Feb-13 Moodys Baa1 Stable 09-Oct-12 Fitch (unsolicited) A- Stable 26-Jul-12 Ratios 2013 2012 Net debt 1 / EBITDA 2 0.9x 0.8x EBITDA 2 / net interest 3 19.1x 17.2x Net debt 1 / adjusted total capitalisat
Slide 61: Exchange Rates – Rates Used in Consolidation
Exchange Rates – Rates Used in Consolidation Income Statement 2 Balance Sheet 3 2013 2012 2013 2012 per £ per £ per £ per £ Australian Dollar 1.52 1.53 1.46 1.54 Brazilian Real 3.21 2.83 3.06 2.91 Canadian Dollar 1.59 1.59 1.54 1.60 Euro 1.21 1.18 1.18 1.20 Japanese Yen 136.37 124.10 142.77 131.49 N
Slide 62: Exchange Rates – Effect on 2012 Revenue & Profit
Exchange Rates – Effect on 2012 Revenue & Profit US Dollar Euro Japanese Yen £m incremental change for an £m incremental change for an £m incremental change for an incremental 5 cent movement incremental 5 cent movement incremental 10 yen movement Exchange Revenue Profit Exchange Revenue Profit Exch
Slide 63: Exchange Rates – Effect of Current Rates on 2012 Profit
Exchange Rates – Effect of Current Rates on 2012 Profit US $ Euro Yen Other Total Average exchange rate for 2013 H1 1.58 1.21 136 Impact on 2012 HY operating profit - £(2)m £(2)m £(3)m £(7)m Spot exchange rate for 13 May 2013 1.54 1.18 156 Estimated average exchange rate for 2013 FY 1.56 1.18 146 Es
Slide 64: Disclaimer
Disclaimer Certain information included in the following presentations 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 65: Compass Group
, COMPASS GROUP