Compass Group PLC · LSE:CPG
Compass — H1 2019 Earnings Presentation
60 slides from Compass's earnings presentation, May 15, 2019
Slide 1: Half Year Results, 15 May 2019
Void 26 1 Bt Year Results 15 May 2019 ° co” ae
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 3
Slide 4: Today's agenda
Today’s agenda 1. Dominic Blakemore Welcome & highlights 2. Palmer Brown Half year results 3. Dominic Blakemore Regional review & group strategy 4. Q&A 4
Slide 5: Highlights
Highlights +6.6% +5.8% 7.5% ORGANIC REVENUE GROWTH OPERATING PROFIT GROWTH OPERATING MARGIN (CONSTANT CURRENCY) +14% +6.5% +6.5% FREE CASH FLOW GROWTH EPS GROWTH INTERIM DIVIDEND GROWTH (CONSTANT CURRENCY) Notes: Based on underlying performance at reported exchange rates unless indicated otherwise,
Slide 6: Palmer Brown, Interim Group Finance Director
Palmer Brown Interim Group Finance Director 6
Slide 7: Revenue
Revenue £m Organic Revenue Growth +7.9% +5.5% +3.2% +6.6% 634 79 49 240 12,468 11,466 11,706 H1 2018 Currency H1 2018 at 2019 North Europe Rest of World H1 2019 Revenue* FX rates America Revenue Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definit
Slide 8: Operating profit
Operating profit £m Constant currency operating profit growth +5.8% 57 5 23 (5) (5) 899 951 876 Margin 7.5% H1 2018 Currency H1 2018 North Europe Rest of World Other H1 2019 Operating profit* at 2019 FX America Operating profit rates Notes: Based on underlying performance at reported exchange rates
Slide 9: Income statement
Income statement £m HY 2018 HY 2019 restated* Operating profit 951 876 • FY 2019 net finance cost expected to be £120m Net finance costs (55) (55) Profit before tax 896 821 Tax (210) (195) • FY 2019 expected tax rate c.23.5% Profit after tax 686 626 Non-controlling interest (5) (6) Attributable prof
Slide 10: Operating cash flow
Operating cash flow £m HY 2018 HY 2019 restated* Operating profit 951 876 Depreciation and amortisation 289 261 • HY 2019 capex 3.3% of revenues Net capital expenditure (395) (369) • FY 2019 capex expected to be up to 3.5% of revenues Net cash flow 845 768 Net cash flow conversion 89% 88% Trade work
Slide 11: Free cash flow
Free cash flow £m HY 2018 HY 2019 restated* Operating cash flow 746 692 • FY 2019 expected to be c.£20m Post-employment benefits (9) (5) Net interest (53) (47) • HY 2019 cash tax c.17% Net tax (155) (152) • FY 2019 expected to be 20 - 22% Net other items 1 (24) Free cash flow 530 465 • FY 2019 free
Slide 12: Net debt
Net debt £m Reinvestment in Returns to the business shareholders 302 395 (2) 403 (925) 3,383 3,556 Oct 2018 opening FCF Net capex Net acquisitions/ Dividends FX/ other H1 2019 closing net debt pre-capex Disposals net debt Notes: Based on underlying performance at reported exchange rates unless indic
Slide 13: Disposal programme update
Disposal programme update SALES AND EXITS TOTAL PORTFOLIO COMPLETED TO DATE UNDER REVIEW Annual revenue c.£500m c.£1.2bn Operating margin c.3% c.7% Proceeds c.£100m For organic growth modelling purposes • Total disposals to be removed from FY 2018: Revenues £480m, operating profit £14m • Total dispo
Slide 14: Capital allocation
Capital allocation CAPEX M&A Appropriate investment: Efficient Required returns > cost of capital Up to 3.5% of sales by the end of year 2 balance sheet Strong investment grade credit rating Target net debt/ RETURNS TO DIVIDEND Growing in line with EBITDA 1.5x SHAREHOLDERS constant currency EPS Shar
Slide 15: Financial summary
Financial summary Organic revenue growth +6.6% Operating profit growth* +5.8% Operating profit margin 7.5% Free cash flow £530m EPS* 42.9p +6.5% Interim dividend 13.1p +6.5% Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions page 59 and 60.
Slide 16: Dominic Blakemore, Chief Executive
Dominic Blakemore Chief Executive 16
Slide 17: H1 2019 organic revenue growth
H1 2019 organic revenue growth 8.6% 3.2% 6.6% (5.2)% New business Lost business LFL Organic growth 17
Slide 18: North America
North America 01 Organic sector growth 25% HY 2019 20% Organic revenue up 7.9% • Continued strong growth across all sectors 15% • Retention rate high at 97% 10% 7.9% Profit growth of 9.4%* 5% • Successfully offsetting labour cost inflation 0% • Focus on productivity and pricing Total North America •
Slide 19: Europe
Europe 01 Organic growth by country and UK sector** HY 2019 40% Organic revenue up 5.5% 30% • Very good growth in the UK Defence sector • Improved performance in Continental Europe 20% Profit down by 2.5%* 10% 5.5% • High mobilisation costs from new business 0% • Some LFL volume weakness Total Europ
Slide 20: Rest of World
Organic growth Rest of World 01 2016 - HY 2019 5.0% 2.9% 3.2% 0.0% Organic revenue up 3.2%, up 5.0% ex O&R -0.6% -1.2% • Strong growth in developing markets and Spanish -5.0% speaking LATAM • Diminishing drag from Offshore & Remote -10.0% Profit growth of 4.3% • Continuing to drive efficiencies arou
Slide 21: Strategy
Strategy 21
Slide 22: Global market leader…
Global market leader… Global food services market c.£200bn* Leveraging our competitive advantages Large players • Food focused • Decentralised / flexible structure Compass • Sectorisation and sub-sectorisation approach • Unique scale in purchasing and overheads • Performance based culture • Attracti
Slide 23: …in an evolving food service market
…in an evolving food service market Food trends Changing consumer dynamics Seeking Individual Small and local Clean eating expression experience Simple food Health & Meat free diets Wellness Convenience 23
Slide 24: Staying ahead of market dynamics
Staying ahead of market dynamics 24
Slide 25: People Performance Purpose
PEOPLE PERFORMANCE PURPOSE DELIVERING BETTER QUALITY, MORE SUSTAINABLE LONG TERM GROWTH 25
Slide 26: Performance
PERFORMANCE 01 Sharing best practice BLUEPRINT 1 Codifying the approach and processes PRICING EXPERIENCE PLAYBOOK 2 Providing tools and templates PURCHASING to support delivery 3 MATURITY MATRIX Defining ‘must have’ foundations PRODUCTIVITY KPIs 4 Core metrics to track and UNDERPINNED BY DIGITAL & T
Slide 27: Cashierless checkout
EXPERIENCE 01 Cashierless checkout • Increased speed of service • Prices complex meal combinations • Camera based technology • Database of 1 million food images • Bespoke to individual client Starter Dessert • Potential to increase sales Drink Main course 27
Slide 28: Unattended markets
EXPERIENCE 01 Unattended markets 28
Slide 29: We have an app for that
EXPERIENCE 01 We have an app for that North America: Thrive, Boost Nourish Europe: FOODI Rest of World: FoodBook • 200 sites • 100 restaurants • 75k consumers • 120k users • Roll out in 350+ sites • 90k daily transactions 29
Slide 30: Workforce management and recruitment
PRODUCTIVITY 01 Workforce management and recruitment Workforce management Recruitment 30
Slide 31: Employee engagement
PRODUCTIVITY 01 Employee engagement Engagement Education Collaboration Recognition 31
Slide 32: People
PEOPLE 01 Highly engaged Exceptional Best unit Diversity and colleagues leadership management inclusion Employee 2 out of 3 leadership New global Improving female commitments roles filled internally development representation in programme senior leadership Development Succession planning opportuniti
Slide 33: Unit Manager training
PEOPLE 01 Unit Manager training • New global training programme Best unit management • Immersive and interactive 2-day workshop New global • Delivered by internal facilitators development programme • Practical tools for Unit Managers Remove unnecessary processes 33
Slide 34: Purpose
PURPOSE 01 Health and wellbeing Environmental game changers Better for the world Better nutrition choices Food waste Sourcing responsibly Mental health Single-use plastics Enriching local communities Healthy lifestyle Plant-forward meals Collaborating for big change Safety culture 34
Slide 35: Purpose: Stop food waste
2 a compass PURPOSE STOP FOOD WASTE CITIES ARE TAKING ACTION! Al — EE 59) BE A FOOD WASTE WARRIOR JOIN US AND HELP FIGHT FOOD WASTE! 36
Slide 36: People Performance Purpose
PEOPLE PERFORMANCE PURPOSE DELIVERING BETTER QUALITY, MORE SUSTAINABLE LONG TERM GROWTH 36
Slide 37: Summary and outlook
Summary and outlook • Excellent H1 2019 - very strong growth & consistent margin • Continued focus on implementing 3Ps strategy FY 2019 Outlook: • Similar to 2018 • Organic revenue growth above middle of our 4-6% range • Modest margin improvement 37
Slide 38: Supplementary information
Supplementary information 38
Slide 39: 2019 guidance for modelling purposes
2019 guidance for modelling purposes Interest charge c.£120m P&L tax rate c.23.5% Cash tax rate 20-22% Gross capex Up to 3.5% of revenues Working capital Small outflow Post-employment cash contribution c.£20m Foreign exchange impact on 2018 EBIT (at current spot rates) £25m Notes: Based on underlyin
Slide 40: Revenue
Revenue RoW 14% North America Support services 62% Support 14% Sports & Other RoW services Leisure Brazil Japan DOR Support Business & 2% 6% services Healthcare 12% Australia 12% Industry 3% DOR Food & Seniors 3% 2% Other service 5% Europe 9% 38% Germany 2% 23% Geography Service Line Sector 4% Franc
Slide 41: Geographic revenue by sector
Geographic revenue by sector 9% 8% 15% 31% 15% 15% 42% North America Europe Rest of World 53% 7% 28% 1% 15% 25% 8% 28% Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote Notes: Based on underlying performance, definitions page 59 and 60. 41
Slide 42: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total 2019 Revenue 7,691 2,976 1,801 12,468 Organic growth 7.9% 5.5% 3.2% 6.6% Operating profit 664 192 121 (26) 951 Margin 8.6% 6.5% 6.7% 7.5% Cash flow 502 171 119 (262) 530 Cash flow conversion 76% 89% 98% 56% 2018 restated* Reven
Slide 43: Dividend cover
Dividend cover 2018 restated* 2017 2016 2015 2014 Per share (pence) Dividend (interim plus final) 37.7p 33.5p 31.7p 29.4p 26.5p Underlying earnings 77.9p 72.3p 61.1p 53.7p 48.7p Dividend earnings cover 2.1x 2.2x 1.9x 1.8x 1.8x Cash (£m) Cash cost of ordinary dividend (in the year) 548 531 496 457 44
Slide 44: Balance sheet
Balance sheet Overview (£m) 2019 HY 2018 HY restated* 2018 FY restated* Goodwill 4,420 4,137 4,270 Other non-current assets 3,520 3,048 3,285 Working capital (1,171) (880) (1,227) Net Assets held for sale 160 0 164 Provisions (378) (378) (394) Post employment benefit obligations 52 116 122 Current t
Slide 45: Financing
Financing Components of net debt £m Bonds 2,308 Private placements 1,266 Bank loans 558 4,132 Finance leases 5 Other loans and fair value accounting adjustments 68 Derivatives (92) Gross debt 4,113 Cash net of overdrafts (557) Closing net debt at 31 March 2019 3,556 Notes: Based on nominal value of
Slide 46: Financing
Financing Maturing in Drawn Principal borrowings Coupon Financial Year £m Bonds €500m 1.875% 2023 431 €750m 0.625% 2024 646 £250m 2.000% 2025 250 £250m 3.850% 2026 250 €500m 1.500% 2028 431 £300m 2.000% 2029 300 Total 2,308 US private placements $1,000m (2011 Notes) 3.98% - 4.12% 2022 - 2024 576 $50
Slide 47: Financing
Financing £m 1000 900 800 700 600 500 400 300 200 100 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 £ bond € bond US$ private placement Bank Notes: Based on borrowings and facilities in place as at 31 March 2019, maturing in the financial year ending 30 September. The average life of the
Slide 48: Financing
Financing Debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 11 Mar 19 Moody’s A3 Stable 26 Mar 19 Fitch (unsolicited) A- Stable 28 Feb 19 Ratios 2019 HY 2018 HY Net debt1 / EBITDA2 1.5x 1.7x EBITDA2 / net interest3 20.4x 18.5x Notes: 1. Net debt is adjusted where nec
Slide 49: Currency impact on operating profit
Currency impact on operating profit £m HY 2018 FY 2018 USD 30 40 EUR - (3) CAD - - AUD (1) (2) BRL (1) (3) JPY 1 2 Other (7) (9) Total currency impact 23 25 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions page 59 and 60. Impact on FY 2018
Slide 50: Exchange rates
Exchange rates Rates used in consolidation Income Statement1 Balance Sheet2 2019 per £ 2018 per £ 2019 per £ 2018 per £ Australian Dollar 1.81 1.76 1.83 1.83 Brazilian Real 4.96 4.45 5.07 4.66 Canadian Dollar 1.72 1.74 1.74 1.81 Chilean Peso 872.76 847.36 886.69 846.68 Euro 1.14 1.14 1.16 1.14 Japan
Slide 51: Exchange rates
Exchange rates Effect on 2018 revenue and profit US DOLLAR CANADIAN 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 Exch
Slide 52: Exchange rates
Exchange rates Effect on 2018 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 53: HY 2018 income statement restated for IFRS15
HY 2018 income statement restated for IFRS15 £m HY 2018 IFRS15 HY 2018 reported adjustment restated Revenue 11,510 (44) 11,466 Operating profit 875 1 876 Net finance costs (55) - (55) Profit before tax 820 1 821 Tax (197) 2 (195) Profit after tax 623 3 626 Non-controlling interest (6) - (6) Attribut
Slide 54: HY 2018 operating cash flow restated for IFRS15
HY 2018 operating cash flow restated for IFRS15 £m HY 2018 IFRS15 HY 2018 reported adjustment restated Operating profit 875 1 876 Depreciation and amortisation 244 17 261 Net capital expenditure (369) - (369) Net cash flow 750 18 768 Net cash flow conversion 86% 88% Trade working capital (27) (11) (
Slide 55: HY 2018 free cash flow restated for IFRS15
HY 2018 free cash flow restated for IFRS15 £m HY 2018 IFRS15 HY 2018 reported adjustment restated Operating cash flow 692 - 692 Post-employment benefits (5) - (5) Net interest (47) - (47) Net tax (152) - (152) Net other items (23) - (23) Free cash flow 465 - 465 Free cash flow conversion 53% 53% Not
Slide 56: FY 2018 income statement restated for IFRS15
FY 2018 income statement restated for IFRS15 £m FY 2018 IFRS15 FY 2018 reported adjustment restated Revenue 23,239 (92) 23,147 Operating profit 1,741 3 1,744 Net finance costs (114) - (114) Profit before tax 1,627 3 1,630 Tax (390) 2 (388) Profit after tax 1,237 5 1,242 Non-controlling interest (8)
Slide 57: FY 2018 operating cash flow restated for IFRS15
FY 2018 operating cash flow restated for IFRS15 £m FY 2018 IFRS15 FY 2018 reported adjustment restated Operating profit 1,741 3 1,744 Depreciation and amortisation 500 34 534 Net capital expenditure (757) - (757) Net cash flow 1,484 37 1,521 Net cash flow conversion 85% 87% Trade working capital 147
Slide 58: FY 2018 free cash flow restated for IFRS15
FY 2018 free cash flow restated for IFRS15 £m FY 2018 IFRS15 FY 2018 reported adjustment restated Operating cash flow 1,580 - 1,580 Post-employment benefits (8) - (8) Net interest (95) - (95) Net tax (323) - (323) Net other items (13) - (13) Free cash flow 1,141 - 1,141 Free cash flow conversion 66%
Slide 59: Definitions
Definitions Total equity shareholders' funds adjusted for net debt, post employment benefit obligations net of associated deferred tax, amortised intangibles arising on acquisition, impaired Capital employed goodwill and excluding the Group's non-controlling partners' share of net assets and net ass
Slide 60: Definitions
Definitions ROCE Return on capital employed (ROCE) divides NOPAT by the 12 month average capital employed. • amortisation of intangibles arising on acquisition; • acquisition transaction costs; • adjustment to contingent consideration on acquisition; • one-off pension charge; Specific adjusting item