Compass Group Plc · LSE:CPG
Compass — FY2024 Earnings Presentation
48 slides from Compass's earnings presentation, Nov 26, 2024
Slide 1: 2024 Full Year Results
2024 Full Year Results 26 November 2024 1
Slide 2: Disclaimer
Disclaimer Certain information included in this presentation is of operations and financial conditions and the Company’s information known to the Company on the date of this forward looking and involves risks, assumptions and plans and objectives for future operations, including, presentation. Accor
Slide 3: Dominic Blakemore, Group Chief Executive Officer
Dominic Blakemore Group Chief Executive Officer 3
Slide 4: Another year of strong progress
Another year of strong progress… Organic Operating Operating revenue margin profit growth growth 16.4% 1 +30bps to 10.6% 7.1% Notes: Based on underlying performance at reported exchange rates unless otherwise indicated. See definitions in the supplementary slides. 1 On a constant currency basis 4
Slide 5: Driving consistent and compounding growth
Driving consistent and compounding growth… Investing to unlock Significant structural Even more focused Proven competitive further growth runway for growth on the core advantages opportunities Mid to high single digit organic revenue growth 5
Slide 6: By focusing on the core and investing for growth
…by focusing on the core and investing for growth Disposals further Investing Capex supports Strategic acquisitions improving the quality for sustainable client wins unlock future growth of our portfolio profitable growth & retention Notes: Based on underlying performance at reported exchange rates
Slide 7: Petros Parras, Group Chief Financial Officer
Petros Parras Group Chief Financial Officer 7
Slide 8: Strong financial performance
Strong financial performance Organic revenue Operating profit Earnings per share Free cash flow +11% +16% +15% +16% 4.2% net new 7.1% operating Increased 85% conversion business growth margin to 119.5c rate Notes: Growth measures on a constant currency basis. Other measures based on underlying perfo
Slide 9: Net new business growth accelerated in H2 2024
Net new business growth accelerated in H2 2024 $bn Organic 10.6% c.2% c.4% 4.2% 42.2 38.2 FY 2023 revenue Net new Pricing Volume FY 2024 revenue Notes: On a constant currency basis. Based on underlying performance at reported exchange rates unless otherwise indicated. See definitions in the suppleme
Slide 10: Sustaining higher revenue and profit growth across all regions
Sustaining higher revenue and profit growth across all regions Organic Operating Year on year Operating profit revenue growth margin margin change growth 1 North America 10.5% 8.2% +40bps 15.7% Europe 11.9% 5.9% +30bps 22.0% Rest of World 8.5% 6.0% +40bps 10.3% Group 10.6% 7.1% +30bps 16.4% Notes: B
Slide 11: Operating profit up 16% to $3bn
Operating profit up 16% to $3bn… $m FY 2024 FY 2023 Revenue 42,176 38,216 Operating profit 2,998 2,592 Operating profit margin 7.1% 6.8% Net finance costs (249) (166) Interest charge FY24: increase due to higher interest rates & debt Profit before tax 2,749 2,426 FY25: expected to be c.$300m Tax exp
Slide 12: Continued strong cash generation providing flexibility
…with continued strong cash generation providing flexibility $m FY 2024 FY 2023 Operating profit 2,998 2,592 Capex as % revenue Depreciation and amortisation 1,147 1,028 FY24: 3.7% due to catch-up from prior year EBITDA 4,145 3,620 FY25: expected to be c.3.5% Net capital expenditure (1,541) (1,098)
Slide 13: Investing in growth and rebuilding margin
Investing in growth and rebuilding margin… Ongoing margin progress ● Investment in growth ● New business & mobilisation costs 7.1% ● Increased scale 6.8% ● Overhead leverage 6.2% ● Productivity ● Digital benefits FY22 FY23 FY24 …with further progress to come Notes: Based on underlying performance at
Slide 14: Further improving the quality of our portfolio
Further improving the quality of our portfolio… PORTFOLIO RESHAPING STRATEGIC ACQUISITIONS ● Exited five countries in FY24: ● UK: CH&CO ● Argentina, Angola, Brazil, Mainland China ● Germany: HOFMANNs and the UAE ● US: Canteen vending businesses ● Agreed to exit Chile, Colombia, Mexico and ● France:
Slide 15: Investing in growth whilst rewarding shareholders
Investing in growth whilst rewarding shareholders $bn 0.1 Leverage 1.3x Shareholder returns $1.5bn Leverage 1.2x 0.5 Investment $2.6bn 1.0 1.0 (3.3) 5.4 4.5 1.6 FY23 closing net FCF (pre capex) Net capex Acquisitions and Dividends Share buybacks Other FY24 closing net debt disposals debt Notes: Base
Slide 16: Our capital allocation model remains unchanged
Our capital allocation model remains unchanged Invest in business M&A Capex Required returns > cost of capital c.3.5% of revenue by the end of year two Strong balance sheet Investment grade credit rating Target net debt/ Ordinary dividends EBITDA 1-1.5x c.50% of underlying earnings Surplus capital p
Slide 17: FY25 guidance: profit growth ahead of revenue growth
FY25 guidance: profit growth ahead of revenue growth Operating profit growth 1 High-single digit % Organic Ongoing revenue growth margin above 7.5% improvement Notes: Based on underlying performance at reported exchange rates unless otherwise indicated. See definitions in the supplementary slides. 1
Slide 18: Dominic Blakemore, Group Chief Executive Officer
Dominic Blakemore Group Chief Executive Officer Internal
Slide 19: Market trends & our competitive advantages will sustain growth
Market trends & our competitive advantages will sustain growth Food more valued Operational complexity Macro challenges ● Health & wellbeing ● Allergens & dietary requirements ● Inflation pressure: food & labour ● Talent attraction & retention ● ESG ● Supply chain factors Unique competitive advantag
Slide 20: Confident in sustaining higher revenue and profit growth
We’re confident in sustaining higher revenue and profit growth Pre COVID (2015-19) Outlook Ahead of revenue MSD to growth HSD ORG c.5% c.5% CAGR CAGR 'Net positive’ Volume (LFL) c.0% ‘Dependent on Volume (LFL) inflation’ Pricing c.2% Pricing 4-5% Net new business c.3% (FTO % in 40s) Net new business
Slide 21: We've improved the quality of our country portfolio
We’ve improved the quality of our country portfolio… DISPOSED NON-CORE MARKETS MORE RESILIENT FOCUS ON OPPORTUNITIES ● Disposal programme complete ● Reduced operational ● Greater consistency ● Exited further nine countries complexities and volatility in operations of earnings ● More predictable perf
Slide 22: Significant market opportunity
Significant market opportunity... Global addressable food services market Huge runway for growth ● Small market share Large players ● c.75% either self-operated or regional players Self Compass 15% < ● c.90% of our opportunity is in North America and next top ten markets operated c.$320bn Market sha
Slide 23: North America: dynamic market ripe with opportunities
North America: dynamic market ripe with opportunities Favourable market dynamics Sustained growth ● Strong net new business growth ● B&I fastest growing sector Large players Self operated c. 20% ● Growth through further sub-sectorisation Market share ● Market leader in vending c.$135bn Compass ● Inn
Slide 24: B&I: strongest growth in our most mature sector
B&I: strongest growth in our most mature sector North America B&I organic sub-sector growth ● Higher than average net new B&I c.15% ● Driven by first time outsourcing ● Strong LFL pricing & volume ● Evolving model with changing trends ● Excellent pipeline B&I sub-sectors 24
Slide 25: Sustained higher net new business growth in Europe
Sustained higher net new business growth in Europe… Growth mindset Significant market opportunity ● Growth playbook: sales & retention processes ● Market mapping to prioritise growth Large players ● CRM tools upgraded & embedded ● In country approach Compass c. 7% Market share Self operated c.$135bn
Slide 26: Self-help driving higher retention
…with self-help driving higher retention Europe Retention c.95.5% LEVERS TO IMPROVE RETENTION c.92.5% ● Systematic pre-emption process ● Improved client feedback (NPS) ● Enhanced culinary / brand offer ● Improved salesforce training ● Capex investment 2015-2019 2022-2024 26
Slide 27: Unlocking further growth through acquisitions
Unlocking further growth through acquisitions… ATTRIBUTES WE SEEK STRATEGIC FINANCIAL IN TARGETS BENEFIT RETURN Unique characteristics Enhances our offer Driving performance ● High quality brands Sectorisation & sub-sectorisation Multi-year strong growth ● Capability and reach Building our brand por
Slide 28: Expanding our brand portfolio through sub-sectorisation
…expanding our brand portfolio through sub-sectorisation NORDICS 2019 2022 2022 2022 2022 2023 2023 2024 2024 2024 2024 Food service Specialise in S&L Events business Luxury event Foodbuy Concept & Education Cook to freeze Food service Food service Food service & operations in in Ireland in S&L cate
Slide 29: To enhance our capability, offer and reach
…to enhance our capability, offer and reach PLATFORM ASSETS SUB-SECTORISATION INFILL Flexible operating model Enhances our client offer Strategic opportunities Vending GPO scale 29
Slide 30: Continuing to invest in capability and resources
Continuing to invest in capability and resources CAPABILITY & TALENT RESOURCES, SYSTEMS & PROCESSES Sales & retention excellence CRM tools Forums & best practice sharing Unit performance insight To support further growth Thought leadership: client & consumer insight Consumer promotions / loyalty Tra
Slide 31: Summary: increased confidence in our growth algorithm
Summary: increased confidence in our growth algorithm... Returns Organic revenue Profit growth Net new business growth growth Long-term attractive Mid to high Ahead of revenue 4 – 5% compounding single digit growth shareholder returns …as we continue delivering long-term compounding shareholder retu
Slide 32: FY25 guidance summary
FY25 guidance summary Underlying operating profit: High single-digit growth %1 - organic revenue growth above 7.5% - ongoing margin progression Capex: c.3.5% of revenue Interest charge: c.$300m Effective tax rate: c.25.5% 2 Net M&A impact in FY25 : $(30)m operating profit, c.(100)bps operating profi
Slide 33: Supplementary Information
Supplementary Information 33
Slide 34: Revenue
Revenue RoW 9% North America 68% Other Sports & RoW Support services Leisure Australia Business & Industry 3% 6% 14% 14% Other Europe Healthcare 12% & Senior Living 38% France 3% GEOGRAPHY SERVICE 23% SECTOR 8% UK 65% 3% USA Canada 7% 86% 18% DOR Food service Education Europe 23% Notes: Based on und
Slide 35: Geographic revenue by sector
Geographic revenue by sector 13% 4% 15% 14% 35% 35% 15% 7% 48% NORTH AMERICA EUROPE REST OF WORLD 28% 1% 14% 21% 10% 40% Business & Industry Defence, Offshore & Remote Education Healthcare & Senior Living Sports & Leisure Notes: Based on underlying performance at reported exchange rates unless indic
Slide 36: Geographic financials
Geographic financials $m North America Europe Rest of World Other1 Total FY 2024 Revenue 28,581 9,887 3,708 42,176 Organic growth 10.5% 11.9% 8.5% 10.6% Operating profit 2,335 583 224 (144) 2,998 Margin 8.2% 5.9% 6.0% 7.1% Cash flow 1,915 625 229 (1,029) 1,740 Cash flow conversion 82% 107% 102% 85%
Slide 37: Balance sheet
Balance sheet $m FY 2024 FY 2023 Goodwill 6,899 6,105 Other non-current assets 8,757 7,301 Working capital (1,805) (1,514) Net assets held for sale 94 5 Provisions (714) (633) Net post-employment benefit obligations (732) (458) Current tax payable (94) (152) Net deferred tax asset (108) 105 Net debt
Slide 38: Components of net debt
Components of net debt $m Bonds 3,918 Private placements 700 Commercial Paper 25 Financing1 4,643 Other loans and fair value accounting adjustments (117) Borrowings 4,526 Leases 1,315 Derivatives 103 Gross debt 5,944 Cash net of overdrafts (553) Closing net debt at 30 September 2024 5,391 Notes: 1 B
Slide 39: Financing
Financing Principal borrowings Coupon Maturing in Financial Year Drawn $m Bonds £250m 2.000% 2025 335 £250m 3.850% 2026 335 €500m 1.500% 2028 558 £300m 2.000% 2029 402 €500m 3.000% 2030 558 €750m 3.250% 2031 837 £250m 4.375% 2032 335 €500m 3.250% 2033 558 Total 3,918 US private placements $300m (201
Slide 40: Maturity profile
Maturity profile $m 1,000 800 600 400 200 0 2025 2026 2027 2028 2029 2030 2031 2032 2033 US $ Commercial Paper £ Bond £ Sustainable Bond € Bond € Sustainable Bond US $ Private Placement Notes: Based on borrowings and facilities in place as at 30 September 2024, maturing in the financial year ending
Slide 41: Financing
Financing Debt ratios and credit ratings Ratings Short term Long term Outlook Latest Update Standard & Poor’s A-1 A Stable 1 Aug 24 Moody’s P-1 A2 Stable 9 Aug 24 Ratios for USPP covenant purposes FY 2024 FY 2023 Net debt1 / EBITDA1 1.1x 1.0x EBITDA1 / net interest1 19.6x 27.6x Reported ratios FY 20
Slide 42: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 FY 2024 per $ FY 2023 per $ FY 2024 per $ FY 2023 per $ Australian Dollar 1.51 1.51 1.44 1.55 Brazilian Real 5.20 5.09 5.45 5.00 Canadian Dollar 1.36 1.35 1.35 1.35 Euro 0.92 0.94 0.90 0.94 Japanese Yen 150.03 140.07 143.0
Slide 43: Currency impact on operating profit and revenue
Currency impact on operating profit and revenue $m IMPACT ON HY 2024 IMPACT ON FY 2024 AUD 0 (1) BRL (3) (3) CAD (1) (2) EUR (2) (7) GBP 0 0 JPY 0 (1) TRY (3) (4) Other (4) (7) Total currency impact on profit (13) (25) Total currency impact on revenue (161) (359) Notes: Based on underlying performan
Slide 44: Exchange rates
Exchange rates Effect on 2024 revenue and profit POUND STERLING CANADIAN DOLLAR EURO $m cumulative change for an $m cumulative change for an $m cumulative change for an incremental 5 pence movement incremental 5 cent movement incremental 5 cent movement Exchange Rate Revenue Change Profit Change Exc
Slide 45: Exchange rates
Exchange rates Effect on 2024 revenue and profit AUSTRALIAN DOLLAR TURKISH LIRA JAPANESE YEN $m cumulative change for an $m cumulative change for an $m cumulative change for an incremental 5 cent movement incremental 2 lira movement incremental 5 Yen movement Exchange Rate Revenue Change Profit Chan
Slide 46: Definitions
Definitions INCOME STATEMENT Underlying revenue Revenue plus share of revenue of joint ventures. Underlying operating profit Operating profit excluding specific adjusting items2. Underlying operating margin1 Underlying operating profit divided by underlying revenue. Current year: Underlying revenue
Slide 47: Definitions
Definitions BALANCE SHEET Net debt Bank overdrafts, bank and other borrowings, lease liabilities and derivative financial instruments, less cash and cash equivalents. Net debt to EBITDA Net debt divided by underlying EBITDA. Capital employed Total equity shareholders’ funds, excluding: net debt; pos
Slide 48: Definitions
Definitions BUSINESS GROWTH New business Current year underlying revenue for the period in which no revenue had been recognised in the prior year. Lost business Prior year underlying revenue for the period in which no revenue has been recognised in the current year. Net new business New business min