Slide 1: 2012 Half Year Results
2012 Half Year Results Wednesday 16 May 2012 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 • Good first half of the year • Total revenue growth of 8.6%; organic growth of 5.0% • Underlying operating profit of £617m; up 8.8% • Interim dividend increased by 11% to 7.2 pence • £500m buyback on track to complete by the year end • Expectations for the full year remain posit
Slide 4: 2012 Half Year Results
2012 H Half lf Y Year R Results lt Dominic Blakemore 4
Slide 5: Revenue
Revenue Change Reported Constant Organic 2012 2011 Rates Currency Growth £ £m £ £m % % % North America 3,799 3,450 10.1% 9.6% 7.0% Europe & Japan 3,228 3,126 3.3% 3.5% (0.4)% Fast Growing & Emerging 1 523 1,523 1 297 1,297 17 4% 17.4% 19 5% 19.5% 12 4% 12.4% Revenue 8,550 7,873 8.6% 8.8% 5.0% Notes:
Slide 6: Operating Profit – Reported Currency
Operating Profit – Reported Currency Change Analysed By 2012 2011 Change Acquisition Currency Organic £m £m £m £m £m £m North America 313 281 32 Europe & Japan 214 214 - Fast Growing & Emerging 115 98 17 Unallocated overheads (30) (30) - Associates 5 4 1 Operating profit 617 567 50 19 - 31 Notes: 1.
Slide 7: Operating Profit and Margin – Constant Currency
Operating Profit and Margin – Constant Currency Margin 2012 2011 Change 2012 2011 £m £m £m % % North America 313 282 31 8.2% 8.1% Europe & Japan 214 213 1 6.6% 6.8% Fast Growing & Emerging 115 98 17 7.6% 7.6% Unallocated overheads (30) (30) - Associates 5 4 1 Operating profit 617 567 50 7.2% 7.2% No
Slide 8: Impact of Currency on Operating Profit
Impact of Currency on Operating Profit US $ Euro Average exchange rate for 2011 1.61 1.15 Estimated impact on 2011 operating profit +/- / £16m +/- / £8m off a 5 centt movementt Average exchange rate for 2012 HY 1.58 1.18 Spot exchange rate for 14 May 2012 1.61 1.25 8
Slide 9: Operating Profit Growth
estimates Operating Profit Growth Half Year £m (estimated) 2012 2011 2010 2009 2008 Net new business 15 20 18 14 15 Base estate 21 28 10 28 31 Above unit overheads (5) 2 12 6 4 Associates - - - 2 (1) Operating profit growth 31 50 40 50 49 Acquisitions/disposals q p 19 10 4 5 - Total operating profit
Slide 10: Income Statement
Income Statement 2012 2011 £m Reported Underlying Reported Underlying Revenue 8,550 8,550 7,873 7,873 Operating p gpprofit 604 617 559 567 Other gains 24 - - - Net finance costs (47) (45) (31) (36) Profit before tax 581 572 528 531 Tax (152) (146) (142) (143) Profit after tax 429 426 386 388 Non-con
Slide 11: Income Statement at Constant Currency: Proforma
Income Statement at Constant Currency : Proforma 2012 2011 £m Underlying Proforma Growth Revenue 8,550 7,860 Operating profit 617 567 +9% Net finance costs (45) (36) P fit before Profit b f tax t 572 531 Tax (146) (143) Profit after tax 426 388 Non-controlling interest (2) (2) Attributable profit 42
Slide 12: Free Cash Flow
Free Cash Flow £m 2012 2011 p gp Operating profit 617 567 Depreciation and amortisation 142 129 EBITDA 759 696 Net capital expenditure (178) (171) Trade working capital (including provisions) (50) (34) Post employment benefit obligations (28) (33) Net interest (46) (29) Net tax (123) (80) Net other
Slide 13: Free Cash Flow Progression
Free Cash Flow Progression £800m £693m £670m £593m £600m £520m H1 £400m £357m £368 £368m £212 £212m £200m £0m 2006 2007 2008 2009 2010 2011 2012 Notes: 1. 2. Based on continuing operations. 2010 reported free cash flow was £744m. The £670m represents the underlying free cash flow, after adjusting fo
Slide 14: Net Debt
Net Debt £m Opening net debt at 1 October 2011 761 Free cash flow from continuing operations (337) Free cash flow from discontinued operations 43 Acquisitions 188 Disposals (58) Equity dividends 243 Purchase of own shares, shares net of proceeds from issues 85 Impact of foreign exchange rates (17) O
Slide 15: Financial Summary
Financial Summary • Overall good financial performance • Encouraging organic revenue growth 5.0% • Further underlying EPS growth 9.8% • C ti Continued d strong t underlying d l i ffree cash h fl flow £368 £368m • Interim dividend of 7 7.2p 2p + 11% 15
Slide 16: Business Review, Strategy & Outlook
Business Review, Strategy & Outlook Richard Cousins 16
Slide 17: Agenda
Agenda 1. Business performance and MAP 2. Regional reviews 3. Strategy 4. Summary and outlook 17
Slide 18: Organic Revenue Growth
Organic Revenue Growth 2010 2011 2012 % H1 H2 H1 H2 H1 New Business 9.0 10.0 9.0 8.5 8.5 Lost Business (7.0) (6.5) (6.0) (5.5) (5.5) Net New Business 2.0 3.5 3.0 3.0 3.0 LFL Revenue (1.6) 2.0 2.7 2.0 2.0 Organic Growth 0.4 5.5 5.7 5.0 5.0 18
Slide 19: New Business & Retention
New Business & Retention • Delivering quality new business • Good wins across all sectors • Consistently high retention rate 8.2% 8.1% 7.9% 7.6% 7.0% • Exciting pipeline 19
Slide 20: Like for Like Revenue
Like for Like Revenue 2010 2011 2012 Like for Like Revenue H1 H2 H1 H2 H1 Price 1.5 1.5 1.7 2.0 2.0 Volume (3.1) 0.5 1.0 0.0 0.0 Region Trend North America Positive TOTAL (1.6) 2.0 2.7 2.0 2.0 Europe & Japan Small negative FG&E Good growth 20
Slide 21: Driving Consumer Participation & Spend
Driving Consumer Participation & Spend Customer & Business Knowledge Measuring Enterprise Success MAP 2 p Concepts Marketing Excellence Growing Sl & Sales S i Service Building Excellence Loyalty 21
Slide 22: Review of North America
Review of North America Revenue (£bn) & Organic Growth (%) • Positive trading momentum 7.0% 7.8% • Strong organic growth across all sectors 4.4% 2.8% 7.0% Operating Profit (£m) & Margin (%) • Underlying margin improvement 8.2% 8.1% • Start-up St t off Ascension A i Health H lth contract t t 7.9% 7.6
Slide 23: Review of Europe & Japan
Review of Europe & Japan Revenue (£bn) & Organic Growth (%) • Mixed performance across Europe (0.4)% 3.0% (0.7)% (0.4)% (2 8)% (2.8)% • Good new business wins in some countries • Difficult economic conditions, negative like for like Operating Profit (£m) & Margin (%) revenue 6.8% 6.6% 7 0% 7.0% 6.5%
Slide 24: Review of Fast Growing & Emerging
Review of Fast Growing & Emerging Revenue (£bn) & Organic Growth (%) • Strong organic revenue growth 12.4% 15.7% • Good levels of new business & like for like 3.5% 10.4% 10.0% revenue Operating Profit (£m) & Margin (%) • Particularly strong growth in Energy & Extraction 7.6% 7 6% 7.6% 7.3% 5.9% • Co
Slide 25: Strategy
Strategy STRATEGY Food Support services Geographic mix Emerging markets • Strong cash flow & balance sheet OWTH • Earnings growth Organic: structural growth GRO Infill M&A • Dividends Cost efficiencies net of reinvestment • Shareholder returns ARGIN Leveraging scale Flexible cost base MA Steady expa
Slide 26: Food: Structural Market Growth Opportunity
Food: Structural Market Growth Opportunity STRATEGY • Significant £200bn* market opportunity Structural Growth Opportunity by Sector • Healthcare & Education underpenetrated • Ranked 1 or 2 in all of our key markets • Compelling proposition * Source: Compass Group PLC estimates / market definitions
Slide 27: Support and Multi-services: Incremental Approach
Support and Multi-services: Incremental Approach STRATEGY Revenue Split: H1 2012 • Incrementally building capability 22% 7% 15% • Responding to different trends in different regions Support S pport services 78% Food included • Significant cross selling opportunities in multi-services Food only • Org
Slide 28: Geographic Priorities
Geographic Priorities STRATEGY H1 2012 Revenue: £8.6bn The future? Fast Growing & Fast Emerging Growing & 18% North America Emerging g g North 44% America Europe & Japan 38% Europe & Japan Region 2012 H1 organic Revenue opportunity Margin opportunity growth rate 38% North America 7.0% Ongoing; core
Slide 29: North America: Positive Momentum
North America: Positive Momentum GROWTH Historic Revenue Growth ($bn) • Significant size of existing business Avg. organic revenue growth: 5-7% • Healthy outsourcing culture • Significant market opportunity Estimated NA Addressable Food Market: £46bn • Excellent management team Self-operated: 41% Sm
Slide 30: North America: Strong Client Base
North America: Strong Client Base GROWTH 30
Slide 31: US Healthcare: Ascension Health
US Healthcare: Ascension Health GROWTH US Healthcare • Estimated market of over £10bn; 40% • 3rd largest healthcare system in the US outsourced • Compass will serve 90 locations across • Compass C US H Healthcare lth revenue the country £1.5bn; consistent growth • Increasing opportunity for large, f
Slide 32: Europe & Japan: Driving Greater Efficiency
Europe & Japan: Driving Greater Efficiency GROWTH • Mixed performance by country H1 2012 Margin by Region • Challenging economic conditions • Some g good g growth opportunities pp • Greater focus on efficiencies 32
Slide 33: Double Digit Revenue Growth Across FG&E
Double Digit Revenue Growth Across FG&E GROWTH South Africa Brazil UAE Chile Turkey Mexico Russia Africa & Argentina Middle East £0.6m Colombia Latin America £1.1bn Pacific & South / Fast Growing & Emerging Revenue (£bn) East Asia £1 1bn £1.1bn 15 1.5 13% CAGR Australia New Zealand China £2 8bn £2.8
Slide 34: Latin America
Latin America GROWTH Brazil • £800m revenue; 35,000 employees • Underlying margin doubled • Exciting growth in all sectors • Significant opportunity in Healthcare & Education Chile, Mexico, Colombia, Argentina • £400m revenue across 4 countries • Mood changing with improved governance, control & man
Slide 35: Pacific & South / East Asia
Pacific & South / East Asia GROWTH Pacific • Australia, Compass 4th largest business and growing strongly • Continued growth opportunities in the DOR sector • Food and support services Asia • India growing strongly and approaching break even • China / Hong Kong developing well • Exciting E iti oppor
Slide 36: Africa & Middle East
Africa & Middle East GROWTH South Africa • Improving p g business,, supported pp by y Supercare p acquisition UAE • Steady performance; strong DOR business Russia • Small but very good growth Turkey • Over O £200m £200 revenue; 16 16,000 000 employees l • Well balanced & fast growing 36
Slide 37: M&A
M&A GROWTH • Pleased with recent p progress g &g good returns • H1 spend of £188m • Infill acquisitions remain core part of strategy • Interesting pipeline over longer term 37
Slide 38: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet • Excellent cash flow g generation Uses of Cash (£m) • Uses of cash – Dividend growth – Infill M&A – Ongoing share buyback • Commitment to efficient balance Note: final dividend is paid out of H1 free cash flow sheet h t 38
Slide 39: Summary
Summary • Good first half performance • Reinvestment in the business & returns to shareholders • Management structure bringing increased focus • Significant opportunities for further growth • Continued progress on efficiencies 39
Slide 40: Outlook
Outlook “Compass has had a good first half of the year and our expectations for the full year remain positive and unchanged. Organic growth has been driven by good rates of new business wins, levels of retention remain high and infill acquisitions are making a meaningful contribution. We are continu
Slide 41: 2012 Half Year Results
2012 Half Year Results Wednesday 16 May 2012 41
Slide 42: Contents
Contents Revenue 43 Group Revenue by Geography Balance Sheet 52 Overview 53 Capital Expenditure % of Revenue Revenue by Sector 44 Group 45 North America Financing 54 Components of Net Debt 46 Europe & Japan 55 Principal Borrowings 47 Fast Growing & Emerging 56 Maturity Profile of Principal Borrowing
Slide 43: Revenue – Group Revenue by Geography
Revenue – Group Revenue by Geography 2012 North 2011 Fast Growing g& America Fast Growing g& North Emerging 18% Other FGE 6% 44% Emerging 16% America Turkey 2% 44% Turkey 1% Other FGE 6% Brazil 4% Brazil 4% Australia 6% Australia 5% USA 40% Other CE 6% Other CE 7% USA 39% Norway 2% Norway 1% Netherl
Slide 44: Revenue by Sector - Group
Revenue by Sector - Group 2012 2011 Sports & Sports & Leisure Leisure 10% 10% Healthcare Healthcare 18% Business Business & 18% I d t Industry & Industry 42% 42% Education 18% Def ence, Education Of f shore, 18% Remote Defence, 12% Offshore, Remote 12% Notes: 1. Based on continuing operations. 44
Slide 45: Revenue by Sector – North America
Revenue by Sector – North America 2012 2011 Sports & Leisure Sports & 12% Leisure 13% Business Business & Industry & Industry 30% 31% Healthcare 24% Healthcare 25% Def ence, Of f shore, R Remote t Defence, 6% Offshore, Education 27% Remote Education 5% 27% Notes: 1. Based on continuing operations. 4
Slide 46: Revenue by Sector – Europe & Japan
Revenue by Sector – Europe & Japan 2012 Sports & 2011 Leisure 10% Sports & Leisure 9% Healthcare Healthcare 15% 15% Business & Business & Industry Industry Education 57% 56% 13% Education 13% Defence, Defence Offshore, Defence, Remote Offshore, 6% Remote 6% Notes: 1. Based on continuing operations.
Slide 47: Revenue by Sector – Fast Growing & Emerging
Revenue by Sector – Fast Growing & Emerging 2012 2011 Sports & Leisure Sports & 4% Leisure, Healthcare Healthcare 4% 8% 9% Education Education, 5% Business 5% Business & Industry, & Industry 39% 40% Defence, Def ence, Off h Offshore, Of f shore, h Remote Remote, 43% 43% Notes: 1. Based on continuing
Slide 48: Sector Financials - Group
Sector Financials - Group North Europe & Fast Growing 2 America Japan & Emerging Other Total £m £m £m £m £m 2012 Revenue 3,799 3,228 1,523 8,550 Organic growth 7.0% (0.4)% 12.4% 5.0% Operating profit 313 214 115 (25) 617 3 Margin 8.2% 6.6% 7.6% 7.2% Cash flow 273 162 94 (192) 337 Cash flow conversio
Slide 49: Finance Cost – Net Finance Cost
Finance Cost – Net Finance Cost 2012 2011 £m £m Bank loans and overdrafts 4 4 Other loans 35 26 Finance lease interest 1 1 40 31 Bank interest income (4) (4) 36 27 Amount charged to pension scheme liabilities net of expected return on scheme assets 8 8 Unwinding of discount on provisions and put opt
Slide 50: EPS / Dividends – Earnings & Dividends Per Share
EPS / Dividends – Earnings & Dividends Per Share 2012 2011 Earnings per share Continuing and discontinued operations 22 5p 22.5p 20 3p 20.3p Discontinued operations - - Continuing operations 22.5p 20.3p Other adjustments 1 (0.1)p 0.1p Underlying earnings per share 22.4p 20.4p Dividends per share Int
Slide 51: EPS / Dividends – Dividend Cover
EPS / Dividends – Dividend Cover 2011 2010 2009 2008 Per share (pence) Dividend (interim plus final) 19 3p 19.3p 17 5p 17.5p 13 2p 13.2p 12 0p 12.0p Underlying earnings 1 39.0p 35.7p 30.0p 22.0p Dividend earnings cover 2.0x 2.0x 2.3x 1.8x Cash (£ C (£m)) Cash cost of dividend (in the year) 360 258 2
Slide 52: Balance Sheet - Overview
Balance Sheet - Overview 2012 HY 2011 HY 2011 FY £ £m £ £m £ £m Non-current assets 1,592 1,328 1,494 Working capital (427) (446) (495) Provisions (427) (440) (439) Interest payable (67) (69) (67) Post employment benefit obligations (319) (199) (292) Current tax payable (197) (287) (202) Deferred tax
Slide 53: Balance Sheet – Capital Expenditure % of Revenue
Balance Sheet – Capital Expenditure % of Revenue % of Revenue 5.0% 4.5% 3 9% 3.9% 4.0% 3.6% 3.3% 2.9% 3.0% 2.5% 2.3% 2.3% 2.2% 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 HY Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005, total Group is sh
Slide 54: Financing – Components of Net Debt
Financing – Components of Net Debt £m Bonds 1,084 Private placements 837 Bank loans 50 1,971 Finance leases 32 Other loans 28 Derivatives and Fair value accounting adjustments (32) Gross debt 1,999 Cash net of overdrafts (1,092) Closing net debt at 31 March 2012 907 Notes: 1. Based on nominal value
Slide 55: Financing – Principal Borrowings
Financing – Principal Borrowings Maturing in Coupon Calendar Year £m Bonds £250m 4 7.00% 2014 259 £325m 6.38% 2012 325 €600m 3.13% 2019 500 Total 1,084 US private placements $15m (2003 Notes) 5.67% 2013 9 $267m (2008 Notes) 6.45% - 6.72% 2013 - 2015 167 £35m (2008 Notes) 7.55% 2016 35 $1000m (2011 N
Slide 56: Financing – Maturity Profile of Principal Borrowings
Financing – Maturity Profile of Principal Borrowings £m 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 £ Bonds € Bonds US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 31 March 2012, maturing in the
Slide 57: Financing – Sources of Committed Borrowings
Financing – Sources of Committed Borrowings Bank Loans 3% Private Placements 42% Bonds 55% Notes: 1. Based on borrowings as at 31 March 2012. 57
Slide 58: Financing – Effective Currency of Net Borrowings
Financing – Effective Currency of Net Borrowings C$ Other A$ 4% 2% 5% Yen 6% £ 6% US $ 59% € 18% Notes: 1. Based on net borrowings as at 31 March 2012. 2. In line with the Group’s treasury policy, the Group hedges its economic exposure to its non-sterling cash flows by matching the currencies of its
Slide 59: Financing – Debt Ratios and Credit Ratings
Financing – Debt Ratios and Credit Ratings Ratings Outlook Confirmed Standard & Poors A- Positive 06-Mar-12 Moodys Baa1 Stable 24-Nov-11 Fitch (unsolicited) BBB+ Stable 29 Jul 11 29-Jul-11 Ratios 2012 2011 Net debt 1 / EBITDA 2 0.8x 0.6x EBITDA 2 / net interest 3 17 2x 17.2x 17 6x 17.6x Net debt 1 /
Slide 60: Exchange Rates – Rates Used in Consolidation
Exchange Rates – Rates Used in Consolidation 2 3 Income Statement Balance Sheet 2012 2011 2012 2011 per £ per £ per £ per £ Australian Dollar 1 53 1.53 1 59 1.59 1 54 1.54 1 55 1.55 Brazilian Real 2.83 2.66 2.91 2.61 Canadian Dollar 1.59 1.59 1.60 1.56 Euro 1.18 1.16 1.20 1.13 Japanese Yen 124.10 13
Slide 61: Exchange Rates – Effect on 2011 Revenue & Profit
Exchange Rates – Effect on 2011 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 62: Taxation – Statutory Tax Rates
Taxation – Statutory Tax Rates Key statutory tax rates within the Group 1 2012 UK 25% 3 USA (blended average of federal and state taxes) 40% a ce France 36% Germany 30% 4 Netherlands 25% It l Italy 28% Nordic 27% Brazil 34% Canada 27% Japan 41% Spain 30% Australia 30% Blended statutory tax rate 2 33
Slide 63: 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 64: . GROVE
. GROVE e ch ¢ COMPASS GRO U P