Slide 1: 2018 Half Year Results
2018 Half Year Results 9 May 2018
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: Dominic Blakemore, Chief Executive
Dominic Blakemore Chief Executive
Slide 4: Today's agenda
Today’s agenda 1. Dominic Blakemore Welcome & highlights 2. Johnny Thomson Half year results 3. Dominic Blakemore Half year review & strategy 4. Q&A 4
Slide 5: Highlights
Highlights 4.8% 7.5% £465m ORGANIC REVENUE GROWTH OPERATING MARGIN FREE CASH FLOW 10% 10% EPS (CONSTANT CURRENCY) INTERIM DIVIDEND 5 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 65 and 66.
Slide 6: Johnny Thomson, Group Finance Director
Johnny Thomson Group Finance Director 6
Slide 7: Revenue
Revenue £m Organic Revenue Growth +7.3% +0.5% +3.4% +4.8% (Ex Easter and weather +5.3%) 27 58 508 11,617 (700) 11,510 10,917 H1 2017 Currency H1 2017 at 2018 North Europe Rest of World H1 2018 Revenue FX rates America Revenue 7 Notes: Based on underlying performance at reported exchange rates unless
Slide 8: Operating profit
Operating profit £m Constant currency operating profit growth of 4.5% 44 10 5 894 875 (21) (57) 837 H1 2017 Currency H1 2017 North Europe Rest of World Other H1 2018 Operating profit at 2018 FX rates America Operating profit 8 Notes: Based on underlying performance at reported exchange rates unless
Slide 9: Operating profit margin
Operating profit margin HY 2018 HY 2017 North America 8.5% 8.5% Europe 6.7% 7.5% Rest of World 6.7% 6.3% Group 7.5% 7.6% 9 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 65 and 66.
Slide 10: Currency impact on operating profit
Currency impact on operating profit £m IMPACT ON HY 2017 PROFIT IMPACT ON FY 2017 PROFIT USD (49) (68) EUR 3 2 CAD (1) (2) AUD (2) (5) BRL (2) (5) JPY (2) (3) Other (4) (9) Total currency impact (57) (90) 10 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise
Slide 11: Income statement
Income statement £m HY 2018 HY 2017 Operating profit 875 894 FY 2018 net finance cost expected to be Net finance costs (55) (52) £120m Profit before tax 820 842 Tax (197) (213) FY 2018 expected tax rate c.24% Profit after tax 623 629 Non-controlling interest (6) (6) Attributable profit 617 623 Aver
Slide 12: Operating cash flow
Operating cash flow £m HY 2018 HY 2017 Operating profit 875 894 Depreciation and amortisation up due to Depreciation and amortisation 244 239 capex investments Net capital expenditure (369) (325) HY 2018 gross capex 3.5% of revenues Net cash flow 750 808 FY 2018 capex expected to be between Net cash
Slide 13: Free cash flow
Free cash flow £m HY 2018 HY 2017 Operating cash flow 692 711 Post-employment benefits (5) (5) FY 2018 expected to be c.£15m Net interest (47) (38) Net tax (152) (159) HY 2018 net tax 18.5% FY 2018 expected to be 19 - 22% Net other items (23) (7) Free cash flow 465 502 Free cash flow reduced due t
Slide 14: Net debt
Net debt £m Reinvestment in Returns to the business shareholders 318 3,446 369 (87) 3,565 353 (834) Oct 2017 Opening FCF Net capex Acquisitions/ Dividends FX/ other H1 2018 Closing net debt pre-capex Disposals net debt 14 Notes: Based on underlying performance at reported exchange rates unless indi
Slide 15: 2018 guidance for modelling purposes
2018 guidance for modelling purposes Interest charge c. £120m P&L tax rate c. 24.0% Cash tax rate 19-22% Gross capex 3-3.5% of revenues Working capital c.£40m inflow Post-employment cash contribution c.£15m Foreign exchange impact on 2017 EBIT (at current spot rates) £(90)m 15 Notes: Based on und
Slide 16: Financial summary
Financial summary Organic revenue growth +4.8% Operating profit margin 7.5% Free cash flow £465m EPS (constant currency) 39.0p +10% Interim dividend 12.3p +10% 16 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 65 and 66.
Slide 17: Dominic Blakemore, Chief Executive
Dominic Blakemore Chief Executive
Slide 18: H1 2018 organic revenue growth
H1 2018 organic revenue growth 8.4% 1.6% 4.8% (5.2)% New business Lost business LFL Organic growth 18 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 65 and 66.
Slide 19: North America: excellent progress
North America: excellent progress Organic revenue up 7.3% Sports & Leisure 14% • Broad based sector growth Business & Industry • Retention rate remains at c.97% 30% • Completed acquisition of Unidine Sector revenue Defence, Margin strong at 8.5% Offshore & Remote • Successfully offsetting labour cos
Slide 20: North America: broad-based growth across sectors
North America: broad-based growth across sectors Organic growth H1 2018 20% 10% 0% Total North America -10% Business & Industry Healthcare & Seniors ` Education Sports & Leisure Defence, Offshore & Remote 20 Notes: Based on underlying performance at reported exchange rates unless indicated otherwi
Slide 21: North America: Higher Education – a differentiated offer
North America: Higher Education – a differentiated offer • Combined account with Northwestern University including the Kellogg Business School • Five sub-sectors working together • Provide catering to students and sports teams • Will use the latest vending technology 21
Slide 22: North America: varied sources of growth
North America: varied sources of growth New business wins by source 100% 75% 50% 25% 0% 2013 2014 2015 2016 2017 HY 2018 Large players Regional players First time outsourcing 22 Notes: Based on management’s estimates.
Slide 23: North America: recipe for success
North America: recipe for success • Sectorisation & sub-sectorisation • Scale in food • Overhead leverage • Culture & people 23
Slide 24: Europe: a mixed picture
Europe: a mixed picture Organic revenue up 0.5% • Good growth in the UK driven by new business wins • Continental Europe continues to be subdued Margin down as expected to 6.7% • Cost pressures in the UK • Actions taken in H1 to offset cost pressures • Benefits to come in the second half 24 Notes: B
Slide 25: Strengthening our capabilities on the Continent
Strengthening our capabilities on the Continent Sub-sectorising larger markets • France: launching a new premium B&I brand • Germany: acquisition of Kanne Café, Leonardi and Royal Business Leveraging regional and sub-regional scale • Business unit structure in place • Increased savings from Contin
Slide 26: Rest of World: improving performance
Rest of World: improving performance Organic revenue up 3.4%, up 5.2% ex O&R • Strong performances in Turkey and Spanish speaking LATAM • Offshore & Remote down 1.7% Margin increased by 40bps to 6.7% • Continued benefits from restructuring 26 Notes: Based on underlying performance at reported exchan
Slide 27: Trading summary and outlook
Trading summary and outlook Trading summary • Excellent performance in North America • UK driving growth in Europe • Rest of World improving FY 2018 outlook • Continued strong organic growth • Modest margin improvement 27
Slide 28: Strategy
Strategy 28
Slide 29: The current strategy has delivered excellent performance
The current strategy has delivered excellent performance INCREMENTAL BEST IN CLASS PRIORITISE FOCUS ON APPROACH TO BOLT-ON EXECUTION, ORGANIC FOOD SUPPORT M&A QUALITY & GROWTH SERVICES INNOVATION
Slide 30: Organic revenue growth of 4-6%...
Organic revenue growth of 4-6%... 4.9% CAGR 5.9% 5.8% 5.4% 5.4% 5.0% 5.0% 4.3% 4.1% 4.0% 3.2% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 30 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 65 and 66.
Slide 31: ...with modest margin improvement, high ROCE...
…with modest margin improvement, high ROCE… Operating margin ROCE 20.3% 19.1% 19.3% 19.1% 19.4% 18.2% 18.3% 18.2% 16.7% 14.9% 7.4 12.5% 7.1 7.2 7.2 7.2 6.9 6.9 6.9 6.5 5.8 5.1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 31 Notes: Based on underlying performance at reported exchange rates
Slide 32: ... and significant returns to shareholders
… and significant returns to shareholders Returns to shareholders (£bn) 2 1.5 £8.4bn returned to shareholders since 2007 1 0.5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ordinary dividend £3.9bn Share buyback £2.5bn Return of Cash/ Special Dividend £2.0bn 32
Slide 33: The market opportunity in food services is huge
The market opportunity in food services is huge Food services market Compass is the global leader c. £200bn* • c.10% market share Stuctural Growth Opportunity Food services market size c.£200bn Regional players • Significant structural growth opportunity • c.75% regional players or in-house provide
Slide 34: We have developed significant competitive advantages
We have developed significant competitive advantages • Strong organic growth • Decentralised/ flexible structure • Sectorisation & sub-sectorisation approach PEOPLE AND • Unique scale in purchasing and CULTURE overheads • Best people and a performance based culture 34
Slide 35: The environment continues to change
The environment continues to change RAPIDLY INCREASED INCREASING FOCUS ON COST EVOLVING COMPETITION SOCIAL AND INFLATION CONSUMER FOR LABOUR ENVIRONMENTAL TRENDS IMPACT 35
Slide 36: Increasing our intensity
Increasing our intensity PERFORMANCE PEOPLE PURPOSE
Slide 37: Sharpen our operational focus
Performance Sharpen our operational focus People Purpose • Develop and share best practices in a more disciplined way • Save cost of funding of similar initiatives within the Group • Increase commitment and accountability from markets • Ensure consistency and speed of execution 37
Slide 38: Executing MAP with more intensity
Performance Executing MAP with more intensity People Purpose CLIENT SALES CONSUMER SALES ABOVE UNIT AND MARKETING AND MARKETING COST OF FOOD IN UNIT COSTS OVERHEADS REVENUE DRIVERS Sectorisation/ Purchasing Productivity Functional COST DRIVERS Pricing subsectorisation Framework Framework Leadership
Slide 39: Labour productivity (MAP 4 & 5)
Performance Labour productivity (MAP 4 & 5) People Purpose WORKFORCE SIMPLIFICATION PROCESS/ AND WORK TECHNOLOGY BACK OFFICE/ MANAGEMENT DESIGN OVERHEADS 3 9
Slide 40: Portfolio: strengthen and simplify
Performance Portfolio: strengthen and simplify People Purpose Acquisitions • Strengthen capability / offer • Organic growth potential • Management Disposals • Simplify portfolio
Slide 41: People
Performance People People Purpose • Improve gender diversity Total workforce: 45% • Attract & welcome talent from all Leadership team: 70% generations • Retain & engage our employees Total workforce: 55% • Train & develop to offer long term career Leadership team: 30% (2017 = 28%) paths • Strengthen
Slide 42: Purpose
Performance Purpose People Purpose OUR PEOPLE RESPONSIBLE HEALTH & ENVIRONMENT SOURCING WELLBEING Global lost time incident Global food safety Number of sites offering Greenhouse gas frequency rate down 26% incident rate down 14% healthy eating intensity ratio 6.0, down since 2014 since 2014 program
Slide 43: The Compass model is unchanged
The Compass model is unchanged Organic revenue growth 4 – 6% Operating margin Modest margin improvement Dividend Growth in line with constant currency EPS Capex Up to 3.5% of revenues Surplus cash used for M&A or returned to Net Debt / EBITDA 1.5x shareholders via buy-backs or special dividends 43
Slide 44: Summary
Summary • Continuity of strategy: focus on food • Increased intensity around MAP and sharing of best practices Creating sustainable long • Review portfolio: simplify and strengthen our capability term shareholder • Attract and retain talent value • Integrate CSR into the Group’s strategy and operati
Slide 45: Supplementary information
Supplementary information 45
Slide 46: Revenue
Revenue ROW 16% North America Support services 59% 15% Other Row Support Services Sports & Leisure Brazil Business & Japan DOR Support Healthcare 7% Services & Seniors 11% Industry Australia 3% 13% 3% 3% 2% Other DOR Food 5% Europe 8% 39% 23% 3% Geography Service Line Sector Germany 55% 5% France 9%
Slide 47: Geographic revenue by sector
Geographic revenue by sector 7% 8% 14% 30% 15% 14% 42% North America Europe 7% Rest of World 29% 15% 57% 2% 6% 25% 29% Business & Industry Defence, Offshore & Remote Education Healthcare & Seniors Sports & Leisure 47 Notes: Based on underlying revenues, definitions on page 65 and 66.
Slide 48: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total 2018 Revenue 6,736 2,917 1,857 11,510 Organic growth 7.3% 0.5% 3.4% 4.8% Operating profit 575 197 124 (21) 875 Margin 8.5% 6.7% 6.7% 7.5% Cash flow 468 186 82 (271) 465 Cash flow conversion 81% 94% 66% 53% 2017 Revenue 6,792 2,
Slide 49: Geographic financials
Geographic financials Group Revenue (£bn) & Organic Growth (%) Group Operating Profit (£m) & Margin (%) 2014 9.4 4.2% 2014 717 7.4% 2015 9.9 5.7% 2015 763 7.5% 2016 10.6 5.8% 2016 795 7.4% 2017 10.9 3.6% 2017 837 7.6% 2018 11.5 4.8% 2018 875 7.5% NA Revenue (£bn) & Organic Growth (%) NA Operating Pr
Slide 50: Geographic financials
Geographic financials Europe Revenue (£bn) & Organic Growth (%) Europe Operating Profit (£m) & Margin (%) 2014 205 7.4% 2014 2.8 (1.8)% 2015 210 7.5% 2015 2.8 0.7% 2016 214 7.4% 2016 2.9 3.2% 2017 218 7.5% 2017 2.9 1.0% 2018 197 6.7% 2018 2.9 0.5% ROW Revenue (£bn) & Organic Growth (%) ROW Operating
Slide 51: Dividend cover
Dividend cover 2017 2016 2015 2014 2013 Per share (pence) Dividend (interim plus final) 33.5p 31.7p 29.4p 26.5p 24.0p Underlying earnings 72.3p 61.1p 53.7p 48.7p 47.7p Dividend earnings cover 2.2x 1.9x 1.8x 1.8x 2.0x Cash (£m) Cash cost of dividend (in the year) 531 496 457 444 404 Underlying free c
Slide 52: Operating cash flow
Operating cash flow £m 2017 2016 2015 2014 2013 Operating profit 1,705 1,445 1,296 1,245 1,265 Depreciation and amortisation 483 395 340 317 299 Net capital expenditure (683) (549) (476) (445) (434) Net cash flow 1,505 1,291 1,160 1,117 1,130 Net cash flow conversion 88% 89% 90% 90% 89% Trade workin
Slide 53: Free cash flow
Free cash flow £m 2017 2016 2015 2014 2013 Operating cash flow 1,419 1,293 1,123 1,114 1,197 Post-employment benefits (14) (39) (59) (46) (54) Net interest (97) (94) (93) (71) (65) Net tax (332) (246) (242) (259) (256) Net other items (2) (6) (7) (1) 12 Free cash flow 974 908 722 737 834 Cash conve
Slide 54: ROCE
ROCE £m 2017 2016 2015 2014 2013 NOPAT 1,264 1,081 973 926 930 Average capital employed 6,218 5,565 5,093 4,799 4,878 ROCE 20.3% 19.4% 19.1% 19.3% 19.1% 54 Notes: Full year information based on underlying performance, definitions on page 65 and 66.
Slide 55: Balance sheet
Balance sheet Overview (£m) 2018 HY 2017 HY 2017 FY Goodwill 4,137 4,126 3,994 Other non-current assets 3,012 2,840 2,820 Working capital (877) (837) (821) Provisions (378) (415) (398) Post-employment benefit asset 116 17 28 Current tax payable (162) (152) (141) Deferred tax 21 94 84 Net debt (3,5
Slide 56: Capital expenditure
Capital expenditure Capital expenditure (% of revenue) 3.5% 3.1% 2.9% 2.8% 2.7% 2.7% 2.3% 2.3% 2.3% 2.1% 1.9% 1.7% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 HY 56 Notes: Based on underlying performance, definitions on page 65 and 66. Gross capital expenditure includes tangible and
Slide 57: Capital allocation framework
Capital allocation framework CAPEX M&A Appropriate investment: Efficient Required returns > cost of 3.0%-3.5% of sales balance sheet capital by the end of year 2 Strong investment grade credit rating DIVIDEND Target net debt/ RETURNS TO SHAREHOLDERS Growing in line with EBITDA 1.5x Share buybacks o
Slide 58: Financing
Financing Components of net debt £m Bonds 2,172 Private placements 1,354 Bank loans 478 4,004 Finance leases 8 Other loans and fair value accounting adjustments 22 Derivatives (93) Gross debt 3,941 Cash net of overdrafts (376) Closing net debt at 31 March 2018 3,565 58 Notes: Based on nominal value
Slide 59: Financing
Financing Maturing in Drawn Principal borrowings Coupon Financial Year £m Bonds €600m 3.125% 2019 526 €500m 1.875% 2023 438 €750m 0.625% 2024 658 £250m 3.850% 2026 250 £300m 2.000% 2029 300 Total 2,172 US private placements $1,000m (2011 Notes) 3.31% – 4.12% 2019 – 2024 714 $500m (2013 Notes) 3.09%
Slide 60: Financing
Financing £m 1000 900 800 700 600 500 400 300 200 100 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 £ bond € bond US$ private placement Bank bilaterals 60 Notes: Based on borrowings and facilities in place as at 31 March 2018, maturing in the financial year ending 30 September. The averag
Slide 61: Financing
Financing Debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 15 Mar 18 Moody’s A3 Stable 07 Mar 18 Fitch (unsolicited) A- Stable 24 Oct 17 Ratios 2018 HY 2017 HY Net debt1 / EBITDA2 1.7x 1.4x EBITDA2 / net interest3 18.5x 19.6x 61 Notes: 1. Net debt is adjusted where
Slide 62: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2018 per £ 2017 per £ 2018 per £ 2017 per £ Australian Dollar 1.76 1.66 1.83 1.64 Brazilian Real 4.45 4.02 4.66 3.97 Canadian Dollar 1.74 1.66 1.81 1.67 Chilean Peso 847.36 824.47 846.68 827.93 Euro 1.14 1.16 1.14 1.17 Jap
Slide 63: Exchange rates
Exchange rates Effect on 2017 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 64: Exchange rates
Exchange rates Effect on 2017 revenue and profit Australian Dollar Brazilian Real Japanese Yen £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 20 centavo movement incremental 10 yen movement Exchange Revenue Profit Exchange
Slide 65: Definitions
Definitions Total equity shareholders' funds adjusted for net debt, post employment benefit obligations net of associated deferred tax, amortised intangibles arising on acquisition, Capital employed impaired goodwill and excluding the Group's non-controlling partners' share of net assets and net as
Slide 66: Definitions
Definitions ROCE Return on capital employed (ROCE) divides NOPAT by the 12 month average capital employed. acquisition transaction costs;; adjustment to contingent consideration on acquisition;; amortisation of intangibles arising on acquisition;; change in the fair value of investments;; Specific a