Compass Group PLC · LSE:CPG
Compass — FY2021 Earnings Presentation
56 slides from Compass's earnings presentation, Nov 23, 2021
Slide 1: 2021 Full Year Results
2021 Full Year Results 23 November 2021 1
Slide 2: Disclaimer
Disclaimer Certain information included in this Annual Report and Accounts 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 mat
Slide 3: Dominic Blakemore, Group Chief Executive
Dominic Blakemore Group Chief Executive 3
Slide 4: Today's agenda
Today’s agenda Dominic Blakemore: Overview Palmer Brown: Financials Dominic Blakemore: Strategy 4
Slide 5: 2021: A year of strong recovery
2021: A year of strong recovery Building a better Record new business wins Continued roll out of business and retention digital solutions More flexible Unique culture with Reinstated dividends operating model strong values reflecting confidence Compass is well positioned for continued revenue and ma
Slide 6: Focused on growth
Focused on growth MARKET OPPORTUNITIES CONTROL THE INVEST IN CONTROLLABLE GROWTH STRATEGIC ENABLERS 6
Slide 7: Palmer Brown, Group Chief Financial Officer
Palmer Brown Group Chief Financial Officer 7
Slide 8: FY21 financial highlights
FY21 financial highlights 88% 5.8% £2.1bn OF 2019 REVENUE IN Q41 OPERATING MARGIN IN Q4 RECORD NEW WINS2 (FY 2021: 77% of 2019) (FY 2021: 4.5% margin) (c.50% from first time outsourcing) 95.4% £1bn 14.0p STRONG RETENTION OPERATING CASH FLOW DIVIDEND REINSTATED (FY 2020: 95.1%) (124% cash conversion)
Slide 9: Progressive recovery in revenue and margin
Progressive recovery in revenue and margin 7.5% 7.0% 105% 5.9% 5.8% 104% 5.0% 5.0% 4.2% 95% 98% 88% 2.7% 3.0% 85% 0.6% 1.0% 76% 71% 72% 75% -1.0% 66% -4.8% 65% -3.0% -5.0% 56% 55% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Group operating margin % Revenue as % of 2019 1 Notes: 1
Slide 10: Revenue recovery throughout the year; strong exit in Q4
Revenue recovery throughout the year; strong exit in Q4 Revenues (% of 2019) Q1 vs. Q4 20211 111 109 105 107 100% 94 89 88 68 71 62 67 25 Business & Industry Education Healthcare & Senior Sports & Leisure Defence, Offshore and Group Living Remote Notes: 1 On a constant currency basis. Based on under
Slide 11: B&I: Adapting to changing working patterns
B&I: Adapting to changing working patterns • Delta variant delaying return to office • Sentiment is turning positive • Office populations rising slowly • Most unit populations c.50% • Food being used as an incentive now and • 40% of Restaurant Associate clients in post pandemic US & UK offer some fr
Slide 12: Opportunity for further recovery of the base business
Opportunity for further recovery of the base business For illustrative purposes: Group Q4 revenue analysis vs. Q4 20191 Excluding c.20% net new volume and gap pricing • Base business at c.80% of 100% 2019 level 88% c.80% • Significant potential for further growth as base recovers % of Q4 2019 Base b
Slide 13: Strong net new driving revenue growth in H2
Strong net new driving revenue growth in H2 Revenue (£m) Operating profit (£m) Net new £50m £450m £500m Margin 3.4% 5.4% 4.5% 12% growth 80% growth 18,136 811 9,585 521 8,551 290 H1 21 H2 21 FY 21 H1 21 H2 21 FY 21 Notes: Based on underlying performance at reported exchange rates unless indicated ot
Slide 14: North America: Exceptional new business wins
North America: Exceptional new business wins FY organic revenue down 6.7% FY 2021 • Q4 revenues at 90% of pre-COVID1 Net new 3.9% • Strong growth in Healthcare & Senior Living, good recovery in Education and Sports & Leisure (3.6%) • >50% of new business from first time outsourcing, 7.5% including 8
Slide 15: Europe: Growth improved in H2
Europe: Growth improved in H2 FY organic revenue down 9.6% FY 2021 • Q4 revenues at 84% of pre-COVID1 Net new (0.7%) • Positive FY organic growth in Turkey, Spain, and across Central Europe 5.6% (6.3%) • Education, Healthcare & Senior Living, and DOR traded in line with pre-COVID levels by Q4 • H2 n
Slide 16: Rest of World: Resilient performance
Rest of World: Resilient performance FY organic revenue growth of 3.0% FY 2021 • Double digit FY organic growth in LATAM, New Zealand, and DOR in Australia Net new 3.6% • Delayed recovery in B&I and Education • Q4 revenues at 90% of pre-COVID1 (5.7%) 9.3% FY operating margin 5.6% • Q4 margin of 7.3%
Slide 17: Reduction in net debt and leverage
Reduction in net debt and leverage £m Repaid £225m Gross capex Mainly Unidine Further £115m £83m FX & Leverage Leverage 2.1x of deferred 3.6% of earn-out cash costs £94m non cash ratio (3.0x at HY) taxes revenue payment expected in FY22 items now 1.6x 186 183 (1,270) (177) 610 3,006 2,538 FY21 openi
Slide 18: Capital allocation priorities
Capital allocation priorities Invest in the business M&A Capex for organic growth Resilient Required returns > cost of capital by c.3.5% revenue the end of year two balance sheet Strong investment grade credit rating Ordinary dividends Target net debt/ Returns to Shareholders EBITDA 1-1.5x c.50% of
Slide 19: Managing current pressures
Managing current pressures Near-term challenges Resilient & proven business model • Foodbuy Supply chain disruption • Flexing food and client offer • Career development Labour shortages • Promoting flexibility & efficiency • Operational efficiencies Inflation • Contract structures Mobilisation • Exp
Slide 20: Excited about our growth potential
Excited about our growth potential FY 2022 guidance: Opportunities going forward: • Organic revenue growth 20-25% • Base business recovery • Net new business mobilised in 2021 • Operating margin over 6%; exit rate of c.7% • Record new business wins yet to mobilise • Market and structural dynamics •
Slide 21: Dominic Blakemore: Strategy
Dominic Blakemore Strategy 21
Slide 22: Focused on growth
Focused on growth Market opportunities: • Significant structural opportunity • Operational complexity due to COVID • Inflation and other cost pressures CONTROL THE INVEST IN CONTROLLABLE GROWTH Strategic enablers: • Flexible operating model • Digital innovation • Capex and M&A • ESG 22
Slide 23: Significant food service market opportunities
Significant food service market opportunities… Global food services market Food services market Food services market c. £220bn by region by sector 80 70 70 Large players 60 60 50 50 Compass Self 40 40 operated 30 30 20 20 Regional players 10 10 0 0 North America Europe Rest of World B&I H&SL Ed S&L
Slide 24: ...and higher value support services
…and higher value support services • Differentiated proposition in Healthcare & Senior Living, DOR and Education • Requires dedicated management expertise • Double digit organic growth throughout the pandemic and margin accretive • Strong pipeline of new future business with cross selling opportunit
Slide 25: Operational complexity & inflation: a tailwind to outsourcing
Operational complexity & inflation: a tailwind to outsourcing Resilience Innovation Agility • Health & Safety protocols • Culinary expertise • Decentralised model enables • Ability to invest and co- • Digital capability quick decision making create • Hybrid solutions • Rapid deployment of • Scale in
Slide 26: Record new business wins and strong outsourcing trend
Record new business wins and strong outsourcing trend New business wins (ARO value) Sources of growth (%) 100 Large Large Large Large players players players players £2.1bn 80 Regional players Regional 60 FTO players +15% c.50% 40 Pre- COVID 20 Self- Self- operated operated 0 North America Europe Re
Slide 27: North America: 8 out of top 10 new wins from first time outsourcing
North America: 8 out of top 10 new wins from first time outsourcing New business wins (ARO) Total $300m Notes: ARO value is the annual revenue of new business wins. Grey is business won from a competitor. 27
Slide 28: Operational flexibility: Hybrid solutions to B&I clients
Operational flexibility: Hybrid solutions to B&I clients Copper Pan Kitchen (UK) Popote (France) • A scalable and flexible way to feed • Centrally produced gourmet dishes employees at work or at home delivered to your location • Virtual kitchen enabled by Feedr • Adapts to fluctuating volumes; small
Slide 29: Digital: Increased participation and improved efficiency
Digital: Increased participation and improved efficiency Case study: B&I client mobile offer Post-pandemic consumer preferences: • Fourfold acceleration of digital solutions Driving participation: • Increased comfort and willingness to use • Higher transaction value technology • 60% population but 9
Slide 30: M&A: Great growth enabler
M&A: Great growth enabler Case study: Unidine in Healthcare & Senior Living • Portfolio diversification • Acquired in 2017 • Margin doubled • Strengthen existing capability in sectors • Revenue CAGR 17% • ROCE>15% and or regions • Profit CAGR 34% continuing to increase • Retain and reward existing m
Slide 31: Our ESG focus is a competitive advantage
Our ESG focus is a competitive advantage Reaching Climate Net Zero Social mobility Global commitment, delivered through Compass Group Academy collaboration, innovation and investment • Commitment to social mobility • Carbon neutral: Scope 1 & 2 by 2030 • Flagship training and development hub • Net Z
Slide 32: The Compass model of value creation is robust
The Compass model of value creation is robust Organic revenue growth: accelerated first time outsourcing and continued share gains Value created through operations Return to industry leading margins Capex supporting new business wins and retention Value created through capital M&A to gain sector exp
Slide 33: Summary
Summary • A strong year of recovery • Record new business wins and retention • Exciting opportunity for future growth • Creating a better business for all stakeholders We expect revenue and profit growth above historical rates, returning margin to pre-pandemic levels 33
Slide 34: Supplementary Information
Supplementary Information 34
Slide 35: Revenue
Revenue ROW 13% North America Other 61% Support services Sports & Brazil RoW Leisure Japan Australia Healthcare & Business & 2% 5% Senior Living 8% 2% 19% Industry 4% Other 31% Europe 12% Geography Service 33% Sector Germany 2% 4% 58% France 8% USA 10% 3% UK 81% DOR 18% Canada Education Food service
Slide 36: Geographic revenue by sector
Geographic revenue by sector North America Europe Rest of World 10% 7% 2% 25% 17% 20% 32% 45% 6% 2% 41% 15% 22% 13% 43% Business & Industry Defence, Offshore & Remote Education Healthcare & Senior Living Sports & Leisure Notes: Based on underlying performance at reported exchange rates unless indica
Slide 37: FY21 Organic growth split
FY21 Organic growth split Net new 2.6% 7.2% (4.6%) (8.9%) (6.3)% New Business Lost Business LFL Organic Change Notes: Mobilised new business. Based on underlying performance at reported exchange rates unless indicated otherwise, see the definitions. 37
Slide 38: Underlying revenue as % of 2019
Underlying revenue as % of 20191 Q1 Q2 Q3 Q4 FY Business & Industry 61.5% 57.8% 60.8% 68.4% 62.1% Education 66.9% 72.0% 77.7% 93.6% 76.5% Healthcare & Senior Living 105.2% 105.2% 107.2% 111.3% 107.2% Sports & Leisure 24.7% 28.3% 48.8% 89.3% 49.1% Defence, Offshore & Remote 107.1% 108.6% 110.6% 108.8
Slide 39: Income statement
Income statement £m FY 2021 FY 2020 Operating profit 811 561 Net finance costs (113) (134) Profit before tax 698 427 Tax (171) (116) Profit after tax 527 311 Non-controlling interests - (2) Attributable profit 527 309 Average number of shares (millions) 1,784 1,658 Basic earnings per share (pence) 2
Slide 40: Underlying cash flow
Underlying cash flow £m FY 2021 FY 2020 Operating profit 811 561 Depreciation and amortisation 743 857 EBITDA 1,554 1,418 Net capital expenditure (610) (706) Trade working capital 165 (143) Lease payments of principal (153) (152) Other 48 103 Operating cash flow 1,004 520 Operating cash flow convers
Slide 41: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total FY 2021 Revenue 11,170 4,641 2,325 18,136 Organic growth (6.7)% (9.6)% 3.0% (6.3)% Operating profit 608 147 130 (74) 811 Margin 5.4% 3.2% 5.6% 4.5% Cash flow 764 170 124 (398) 660 Cash flow conversion 126% 116% 95% 81% ROCE 11.
Slide 42: Cost benefits from resizing
Cost benefits from resizing £m Costs of resizing Estimated annual benefits Above Above Above Above In unit unit FY 2020 In unit unit FY 2021 In unit unit FY 2020 In unit unit FY 2021 (MAP 4) (MAP 5) Total (MAP 4) (MAP 5) Total (MAP 4) (MAP 5) Total (MAP 4) (MAP 5) Total North 22 26 48 - - - 140 55 1
Slide 43: FY 2022: Further guidance for modelling purposes
FY 2022: Further guidance for modelling purposes • Interest charge c.£110m • Effective tax rate c.25% • Capex c.3.5% of revenue • Cash outflows: • c.£115m resizing charges • c.£110m due to payroll timings, reverses in FY24 43
Slide 44: Balance sheet
Balance sheet Overview (£m) FY 2021 FY 2020 Goodwill 4,550 4,669 Other non-current assets 4,556 4,900 Working capital (1,255) (1,128) Net Assets held for sale 17 6 Provisions (581) (637) Post employment benefit obligations 129 190 Current tax payable (87) (117) Deferred tax 128 26 Net debt (2,538) (
Slide 45: Components of net debt
Components of net debt £m Bonds 2,305 Private placements 1,075 3,380 Leases 845 Other loans and fair value accounting adjustments 71 Derivatives (102) Gross debt 4,194 Cash net of overdrafts (1,656) Closing net debt at 30 September 2021 2,538 Notes: Based on nominal value of borrowings as at 30 Sept
Slide 46: Financing
Financing Maturing in Drawn Principal borrowings Coupon Financial Year £m Bonds €500m 1.875% 2023 430 €750m 0.625% 2024 645 €500m 1.500% 2028 430 £250m 2.000% 2025 250 £250m 3.850% 2026 250 £300m 2.000% 2029 300 Total 2,305 US private placements $750m (2011 Notes) 3.98% - 4.12% 2022 - 2024 556 $300m
Slide 47: Maturity profile
Maturity profile £m 1,000 900 800 700 600 500 400 300 200 100 0 2022 2023 2024 2025 2026 2027 2028 2029 £ Bond € Bond US $ Private Placement Notes: Based on borrowings and facilities in place as at 30 September 2021, maturing in the financial year ending 30 September. 47 The average life of the Grou
Slide 48: Financing: Debt ratios and credit ratings
Financing Debt ratios and credit ratings Ratings Short term Long term Outlook Latest Update Standard & Poors A-1 A Negative 21 Dec 20 Moody’s P-2 A3 Stable 17 Dec 20 Ratios for USPP covenant purposes FY 2021 FY 2020 Net debt1 / EBITDA2 1.5x 2.3x EBITDA2 / net interest3 14.7x 9.6x Reported ratios* FY
Slide 49: Liquidity position
Liquidity position £m FY 2021 FY 2020 Revolving Credit Facility maturing 20261 2,000 2,000 Revolving Credit Facility maturing 20212 - 800 Total Committed Revolving Credit Facilities (RCF) 2,000 2,800 Bank of England COVID Corporate Finance Facility (CCFF)3 - 600 Total Unutilised Committed Credit Fac
Slide 50: Currency impact on revenue and operating profit
Currency impact on revenue and operating profit £m IMPACT ON FY 2021 IMPACT ON FY 2020 USD 7 (31) CAD 1 - AUD (1) 2 EUR (3) - TRY (3) (4) BRL - 1 JPY - (1) UAE - (2) Other (1) (4) Total currency impact on profit - (39) Total currency impact on revenue (30) (964) Notes: Based on underlying performanc
Slide 51: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2021 per £ 2020 per £ 2021 per £ 2020 per £ Australian Dollar 1.83 1.89 1.87 1.80 Brazilian Real 7.35 6.21 7.35 7.29 Canadian Dollar 1.73 1.72 1.71 1.73 Euro 1.15 1.14 1.16 1.10 Japanese Yen 147.07 137.83 150.44 136.43 Tur
Slide 52: Exchange rates
Exchange rates Effect on 2021 revenue and profit US DOLLAR CANADIAN DOLLAR AUSTRALIAN DOLLAR £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 Revenu
Slide 53: Exchange rates
Exchange rates Effect on 2021 revenue and profit EURO TURKISH LIRA BRAZILIAN REAL £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 20 kurus movement incremental 20 centavo movement Exchange Revenue Profit Exchange Revenue Pro
Slide 54: Change in Alternative Performance Measures
Change in Alternative Performance Measures FY 2021 FY 2021 Definition change under new reported for FY 2022 definition Impact Margin 4.5% To include associate income 4.5% - Capex as % of revenue 3.6% From gross to net capex 3.4% (20bps) Return on capital employed 7.7% Simplified capital employed1 8.
Slide 55: Definitions
Definitions INCOME STATEMENT Underlying revenue Revenue plus share of revenue of joint ventures. Current year: Underlying revenue excluding businesses acquired, sold and closed in the year. Prior year: Underlying revenue including a proforma 12 months in Organic revenue respect of businesses acquire
Slide 56: 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. Total equity shareholders' funds excluding net debt, post employment benefi