Compass Group Plc · LSE:CPG
Compass — H1 2024 Earnings Presentation
53 slides from Compass's earnings presentation, May 15, 2024
Slide 1: 2024 Half Year Results
2024 Half Year Results 15 May 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 Internal
Slide 4: An excellent first half performance
An excellent first half performance… Operating profit growth 18.7%1 Organic revenue Operating growth margin 11.2% 7.1% …as we upgrade FY profit growth guidance to towards 15% Notes: Based on underlying performance at reported exchange rates unless otherwise indicated. See definitions in the suppleme
Slide 5: We are delivering sustainable growth
We are delivering sustainable growth… Significant structural Focus relentlessly Proven competitive Investing to unlock runway for growth on the core advantages further opportunities Mid to high single digit organic revenue growth 5
Slide 6: Supported by ongoing investment
…which is being supported by ongoing investment… Organic M&A CAPEX ACQUISITIONS DISPOSALS 3.3% revenue $373m net expenditure Further refining portfolio …delivering strong compounding returns to shareholders Notes: Based on underlying performance at reported exchange rates unless otherwise indicated.
Slide 7: Petros Parras, Group Chief Financial Officer
Petros Parras Group Chief Financial Officer Internal
Slide 8: We continue to benefit from strong revenue growth
We continue to benefit from strong revenue growth $bn c.5.0% 3.7% c.2.5% Organic 11.2% 0.5 0.7 20.9 0.9 18.8 HY23 at HY24 FX rates Pricing Net new Volume HY 2024 revenue Notes: On a constant currency basis. Based on underlying performance at reported exchange rates unless otherwise indicated. See de
Slide 9: Like for like volume growth exceeded our expectations
Like for like volume growth exceeded our expectations Additional events Better value proposition B&I return to office in B&I and S&L vs market H1 volume growth of c.2.5% expected to moderate in H2 9
Slide 10: We're sustaining balanced growth across all our regions
We’re sustaining balanced growth across all our regions Organic Operating Year on year Operating profit revenue growth margin margin change growth 1 North America 10.9% 8.2% +40bps 17.6% Europe 12.4% 5.8% +20bps 17.8% Rest of World 10.6% 5.3% +80bps 32.1% Group 11.2% 7.1% +50bps 18.7% Notes: Based o
Slide 11: Operating profit growth stronger than anticipated
Operating profit growth stronger than anticipated… $m HY 2024 HY 2023 Revenue 20,887 18,819 Operating profit 1,474 1,251 Operating profit margin 7.1% 6.6% FY24 interest charge expected to be c.$235m Net finance costs (111) (79) Profit before tax 1,363 1,172 Tax expense (348) (275) Effective tax rate
Slide 12: Capex is normalising as we invest in growth
…and capex is normalising as we invest in growth $m HY 2024 HY 2023 Operating profit 1,474 1,251 Depreciation and amortisation 556 500 HY24 capex 3.3% of revenue EBITDA 2,030 1,751 FY24 capex expected to be c.3.5% of revenue Net capital expenditure (693) (434) Trade working capital (158) (201) Lease
Slide 13: We're going deeper into our larger developed markets
We’re going deeper into our larger developed markets… NON-CORE DISPOSALS STRATEGIC ACQUISITIONS ● Exited four countries: ● HOFMANNs: more flexible operating model ● Argentina, Angola (announced at FY23 results) ● CH&CO: enhancing our sub-sectorisation ● Mainland China, the UAE ● US: further building
Slide 14: 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
Slide 15: Excellent returns from capex and M&A
…with excellent returns from capex and M&A Return on Capital Employed INVESTING FOR SUSTAINED GROWTH 19.3% ● Disciplined capital deployment 16.0% ● Strong post-pandemic recovery ● ROCE around double WACC 8.7% 4.7% 2020 2021 2022 2023 15
Slide 16: Increasing FY24 profit growth guidance
Increasing FY24 profit growth guidance Organic Operating revenue growth profit growth towards 10% towards 15%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 including announced
Slide 17: Dominic Blakemore, Group Chief Executive Officer
Dominic Blakemore Group Chief Executive Officer Internal
Slide 18: Our priorities are to capture and sustain growth
Our priorities are to capture and sustain growth… 1 2 3 Focus on core markets Invest in capex Nurture talent and and sectors & M&A to unlock develop leaders to future growth support growth 18
Slide 19: A huge opportunity for organic growth by region
There is a huge opportunity for organic growth by region… 1 Addressable food services market by region Global: c.$300bn North America: c.$100bn Europe & RoW: c.$200bn Opportunity Opportunity Opportunity c.85% c.80% >90% Compass Compass c.7% <15% Compass c.20% Self- Self- Self- operated operated oper
Slide 20: Opportunity by sector
…and by sector 1 Core countries addressable food services market by sector Outsourcing maturity develops from B&I Business & Rapid growth from flexible operating models (unattended Industry markets and walk out tech) Healthcare & Compelling multi-brand/service offer, 90% self-op in Senior Living Sen
Slide 21: We have proven competitive advantages
We have proven competitive advantages… 1 Sectorisation & Purchasing scale and Sales & Retention and MAP sub-sectorisation Flexible operating model compliance Frameworks Through our brand portfolio Bespoke client offer GPO operates in four core markets Driving performance …which help us win new busin
Slide 22: North America: M&A created the platform for growth
North America: M&A created the platform for growth 1 Service America Flexible operating models Emerging sub-sectors 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2011 2012 2016 2017 Since 2018 22
Slide 23: A strong brand portfolio
…resulting in a strong brand portfolio... 1 North America revenue by sub-sector Average growth of 130% over last 10 years …which is a significant competitive advantage 23
Slide 24: Our brands help us win and grow with existing clients
Our brands help us win and grow with existing clients… 1 A client in B&I A client in Healthcare A client in Education A client in S&L 200% increase in 4 years New win using multi-brand offer 30% growth in 5 years 300% increase in 18 years …by providing a more tailored offer 24
Slide 25: Consistent execution of best practice is key
Consistent execution of best practice is key… 1 Productivity Pricing Supporting growth Processes Procurement & forums …given the nature of our decentralised business 25
Slide 26: Unlocking further growth through improved collaboration
Unlocking further growth through improved collaboration 1 Attractive M&A MAP 1 MAP 2 MAP 3/4/5 opportunities New business and Price and volume Ongoing efficiencies to unlock future retention growth growth ● Sales excellence ● Data driven decisions ● Purchasing excellence ● Sectorisation ● Real time
Slide 27: Growth is now more balanced across our regions
Growth is now more balanced across our regions 1 Pre-COVID Post-COVID Now: North America drives growth Improvement in Europe and ROW Relentless focus on the core 2010-2019 growth HY22-HY24 growth equally balanced ● MAP 1 consistent delivery of Compass Best Practice ● MAP 2 leverage existing tech Nor
Slide 28: Our approach to M&A is straightforward
Our approach to M&A is straightforward… 2 High quality brands Retain unique culture and proposition Capability Accelerate growth or reach Compass scale and best practice Talent 28
Slide 29: A proven track record of success
…and we have a proven track record of success 2 Revenue $18bn $3bn On acquisition Now 29
Slide 30: We are using our M&A blueprint elsewhere
We are using our M&A blueprint elsewhere 2 Sectorisation & Flexible operating model Financial discipline sub-sectorisation Through our brand portfolio Bespoke client offer Driving performance ROCE >WACC by the end of year 2 30
Slide 31: CH&CO has a strong track record of performance
CH&CO has a strong track record of performance… 2 ● Annual revenues of c.$570m ● Highly regarded management team ● Strong brands, cultural and commercial fit ● Enhances our position in different B&I sub-sectors ● Exciting growth potential ● Synergies from procurement and back office ● Completed Apri
Slide 32: HOFMANNs provides a flexible operating model
HOFMANNs provides a flexible operating model… 2 ● Annual revenues of c.$200m ● High quality cooked meals instantly frozen ● Significant warehousing and distribution network ● Perfect for catering for specialist diets ● Suitable for low volume days and SMEs ● Helps penetrate Healthcare, Education and
Slide 33: Talent is central to our growth ambition
Talent is central to our growth ambition 3 Opportunities for everyone Executive leaders c.350 Rise Global Gender People Internal Programme development promotion Emerging leaders 30% Club c.1,600 Winning Operator Women Impact leadership Consumer-led Growth Europe Academy Supporting growth Multi-Unit
Slide 34: Multiple levers to drive revenue and profit growth
We have multiple levers to drive revenue and profit growth… Attractive M&A MAP 1 MAP 2 MAP 3/4/5 opportunities New business and Price and volume Ongoing efficiencies to unlock further retention growth growth Mid to high single digit revenue growth and ongoing margin progression Profit growth above r
Slide 35: Long-term compounding shareholder returns
…leading to long-term compounding shareholder returns VALUE CREATED THROUGH VALUE CREATED THROUGH Profit growth ahead OPERATIONS (MAP) CAPITAL ALLOCATION of revenue growth Higher revenue growth Capex to support organic growth Cost efficiencies Long term Strategic infill M&A compounding shareholder S
Slide 36: FY24 guidance summary
FY24 guidance summary Underlying operating profit: Growth towards 15%1 - organic revenue growth towards 10% - ongoing margin progression Capex: c.3.5% of revenue Interest charge: c.$235m Effective tax rate: c.25.5% Working capital: Small outflow Net M&A impact2: FY24: Immaterial FY25: $(200)m revenu
Slide 37: Supplementary Information
Supplementary Information 37
Slide 38: Revenue
Revenue RoW 9% North America 68% Other Sports & RoW Support services Leisure Australia Business & Industry 3% 6% 14% 13% Other Healthcare Europe & Senior 13% Living 37% France 3% GEOGRAPHY SERVICE 23% SECTOR 7% UK 64% 4% USA Canada 7% 86% 20% DOR Food service Education Europe 23% Notes: Based on und
Slide 39: Geographic revenue by sector
Geographic revenue by sector 11% 5% 14% 13% 34% 15% 36% 7% 48% NORTH AMERICA EUROPE REST OF WORLD 28% 1% 16% 23% 10% 39% Business & Industry Defence, Offshore & Remote Education Healthcare & Senior Living Sports & Leisure Notes: Based on underlying performance at reported exchange rates unless indic
Slide 40: Geographic financials
Geographic financials $m North America Europe Rest of World Other1 Total HY 2024 Revenue 14,127 4,801 1,959 20,887 Organic growth 10.9% 12.4% 10.6% 11.2% Operating profit 1,165 278 103 (72) 1,474 Margin 8.2% 5.8% 5.3% 7.1% HY 2023 Revenue 12,691 4,228 1,900 18,819 Organic growth 23.2% 28.2% 27.9% 24
Slide 41: Balance sheet
Balance sheet $m HY 2024 HY 2023 FY 2023 Goodwill 6,263 6,187 6,105 Other non-current assets 8,013 6,920 7,301 Working capital (1,097) (1,261) (1,514) Net assets held for sale 130 6 5 Provisions (646) (704) (633) Net post-employment benefit obligations (654) (396) (458) Current tax payable (211) (18
Slide 42: Components of net debt
Components of net debt $m Bonds 4,027 Private placements 700 Financing1 4,727 Other loans and fair value accounting adjustments (177) Borrowings 4,550 Leases 1,232 Derivatives 150 Gross debt 5,932 Cash net of overdrafts (637) Closing net debt at 31 March 2024 5,295 Notes: 1 Based on nominal value of
Slide 43: Movement in net debt and leverage
Movement in net debt and leverage $bn Shareholder returns $1.0bn 0.1 0.4 Investment $1.1bn 0.6 0.4 1.4 0.7 5.3 4.5 Leverage Leverage 1.4x 1.2x FY24 opening net FCF (pre capex) Net capex Acquisitions and Dividends Share buybacks Other HY24 closing net debt disposals debt Notes: Based on underlying pe
Slide 44: Financing
Financing Principal borrowings Coupon Maturing in Financial Year Drawn $m Bonds €750m 0.625% 2024 810 £250m 2.000% 2025 316 £250m 3.850% 2026 316 €500m 1.500% 2028 540 £300m 2.000% 2029 379 €500m 3.000% 2030 540 €750m 3.250% 2031 810 £250m 4.375% 2032 316 Total 4,027 US private placements $300m (201
Slide 45: Maturity profile
Maturity profile $m 1,000 800 600 400 200 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 £ Bond £ Sustainable Bond € Bond € Sustainable Bond US $ Private Placement Notes: Based on borrowings and facilities in place as at 31 March 2024, maturing in the financial year ending 30 September. 45 The avera
Slide 46: Financing: debt ratios and credit ratings
Financing Debt ratios and credit ratings Ratings Short term Long term Outlook Latest Update Standard & Poor’s A-1 A Stable 9 Aug 23 Moody’s P-1 A2 Stable 6 Oct 23 Ratios for USPP covenant purposes HY 2024 FY 2023 Net debt1 / EBITDA1 1.1x 1.0x EBITDA1 / net interest1 25.5x 27.6x Reported ratios2 HY 2
Slide 47: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 HY 2024 per $ HY 2023 per $ HY 2024 per $ HY 2023 per $ Australian Dollar 1.53 1.50 1.53 1.49 Brazilian Real 4.96 5.22 5.01 5.07 Canadian Dollar 1.35 1.36 1.35 1.35 Euro 0.93 0.96 0.93 0.92 Japanese Yen 148.06 137.55 151.3
Slide 48: Currency impact on operating profit and revenue
Currency impact on operating profit and revenue $m IMPACT ON FY 2023 IMPACT ON HY 2023 AUD (1) (1) BRL 0 1 CAD (1) 0 EUR 3 4 GBP 0 (1) JPY (2) (1) TRY (11) (7) Other (4) (4) Total currency impact on profit (16) (9) Total currency impact on revenue (122) (17) Notes: Based on underlying performance at
Slide 49: Exchange rates
Exchange rates Effect on 2023 revenue and profit POUND STERLING CANADIAN DOLLAR AUSTRALIAN DOLLAR $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 Prof
Slide 50: Exchange rates
Exchange rates Effect on 2023 revenue and profit EURO TURKISH LIRA JAPANESE YEN $m cumulative change for an $m cumulative change for an $m cumulative change for an incremental 5 cent movement incremental 3 lira movement incremental 5 Yen movement Exchange Rate Revenue Change Profit Change Exchange R
Slide 51: 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 52: 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 53: 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