Slide 1: 2016 Full Year Results
ne 16,FULL YBAR RESULTS tt Ae i oe ——r—~——““EEUC ss Se . — ee oe Soe ee — 20 Tuesday 22 November 2016 oe ee a ee
Slide 2: Richard Cousins, Chief Executive
Slide 3: 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 4: Today's agenda
Today’s agenda 1. Richard Cousins Welcome & highlights 2. Johnny Thomson Full year results 3. Richard Cousins Growth strategy & outlook 4. Q&A 4
Slide 5: Highlights
Highlights Organic revenue 5.0% Operating profit (constant currency) 5.6% Operating profit margin 7.2% Free cash flow 25.8% EPS (constant currency) 61.1p 7.8% Full year dividend 31.7p 7.8% Notes 5 Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions
Slide 6: Johnny Thomson, Group Finance Director
Slide 7: Revenue
Revenue £m Organic Revenue Growth +8.1% +2.8% -1.2% +5.0% +3.6% -10% 74 146 135 1,061 19,871 882 18,725 17,843 2015 Currency 2015 at 2016 North Europe Rest of World Rest of World 2016 Revenue FX rates America excl. Offshore & Offshore & Revenue Remote Remote Notes 7 Based on underlying performance a
Slide 8: Phasing
Phasing Organic Revenue Growth 7% 6% 5% 4% 3% 2% 1% 0% 2012 2013 2014 2015 2016 H1 H2 8
Slide 9: Operating profit
Operating profit £m Constant currency operating profit growth of 5.6% 5 10 26 85 3 1,445 72 1,368 1,296 2015 Currency 2015 at 2016 North Europe Rest of World Australia Other 2016 Operating profit FX rates America (excl. Australia) Operating profit Notes 9 Based on underlying performance at reported
Slide 10: Operating profit margin
Operating profit margin 2016 2015 North America 8.1% 8.1% Europe 7.2% 7.2% Rest of World 6.8% 7.3% Group 7.2% 7.2% Notes 10 Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 57/58.
Slide 11: Currency impact on operating profit
Currency impact on operating profit £m Impact on 2015 Profit Impact on 2016 Profit USD 64 124 EUR 9 21 CAD 1 7 AUD 2 12 BRL (4) 8 YEN 6 8 Other (6) 14 Total currency impact 72 194 Notes 11 FY 16 profit impact assumes current spot rates for the full year.
Slide 12: Income statement
Income statement £m 2016 2015 Operating profit after restructuring 1,445 1,296 • 2016 effective interest of 3% • 2017 net finance costs expected to be Net finance costs (101) (104) around £110m Profit before tax 1,344 1,192 Tax (330) (292) • Tax rate 24.5% in line with FY 2015 Profit after tax 1,014
Slide 13: Operating cash flow
Operating cash flow £m 2016 2015 Operating profit 1,445 1,296 • 2016 gross capex 2.9% of revenues Depreciation and amortisation 395 340 • 2017 capex expected to be similar to this year Net capital expenditure (549) (476) Net cash flow 1,291 1,160 Net cash flow conversion 89% 90% • Working capital be
Slide 14: Free cash flow
Free cash flow £m 2016 2015 Operating cash flow 1,293 1,123 • 2016 lower because 2015 included a £15m one-off payment in the US Post-employment benefits (39) (59) • The triannual valuation in the UK is complete and the plan is in surplus Net interest (94) (93) • 2017 expected to be around £20m Net t
Slide 15: Ongoing priorities for uses of cash
Ongoing priorities for uses of cash Capex M&A Appropriate investment: Required returns > cost of capital by 2.5-3.0% of sales the end of year 2 Efficient balance sheet Strong investment grade credit rating Target net debt/ EBITDA 1.5x Dividend Shareholder returns Growing in line with constant curren
Slide 16: Net debt
Net debt £m Returns to shareholders 403 2,874 100 Reinvestment in 496 2,603 1,457 the business 180 549 Oct 2015 FCF Capex Acquisitions Dividends Share FX/ other 2016 Opening net pre-capex buyback Closing net debt debt 16
Slide 17: 2017 guidance for modelling purposes
2017 guidance for modelling purposes Interest charge c. £110m P&L tax rate c. 25.5% Cash tax rate 20-23% Gross capex c. 3% of revenue Working capital small outflow Post employment cash contribution c. £20m Net debt/EBITDA target 1.5x Foreign exchange impact on 2016 EBIT (at current spot rates) £194m
Slide 18: Financial summary
Financial summary Organic revenue +5.0% Operating profit margin 7.2% EPS (constant currency) 61.1p +7.8% Free cash flow £908m Ongoing share buyback £100m Full year dividend 31.7p +7.8% Notes 18 Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on
Slide 19: Richard Cousins, Chief Executive
Slide 20: 2016 organic revenue growth
2016 organic revenue growth 8.8% 5.9% 2.1% 5.0% New business Lost business Like for like Organic revenue growth Notes 20 Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 57/58.
Slide 21: 2016 margin progression
2016 margin progression 7.2% 7.2% Volume Cost reduction & Price 2015 margin 2016 margin declines efficiencies increases Cost Reinvestment/ Overhead inflation mobilisation costs leverage Notes 21 Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on
Slide 22: North America: core growth engine
North America: core growth engine Organic revenue up 8.1% Food service market c. $84bn Strong growth across all sectors Excellent retention 96.3% Like for like volumes up around 1% Regional Compass players Structural Growth Self Margins flat Large Opportunity operated players High mobilisation costs
Slide 23: North America: sub-sectorisation driving growth
North America: sub-sectorisation driving growth North America Organic Revenue Growth 2016 40% 30% 20% 10% 0% Total North America -10% -20% Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote -30% 23
Slide 24: Rest of World: a mixed picture
Rest of World: a mixed picture Rest of World Revenue by Sector Organic revenue down 1.2% Revenue up 3.6%, excluding Offshore & Education Remote Sports & Leisure Weakness in commodity related business Offshore & Healthcare Remote & Seniors Margins down 50bps Restructuring programme complete and offse
Slide 25: Rest of World: commodities increasingly weak
Rest of World: commodities increasingly weak Rest of World Offshore & Remote 20% 15% 10% 5% 0% -5% -10% Offshore & Remote -15% -20% 2012 2013 2014 2015 H1 2016 H2 2016 25
Slide 26: Europe: another good year
Europe: another good year Organic revenue up 2.8% Food service market c. £75bn Strong new business wins Challenging in North Sea and France Ongoing turnaround and year end run rate Regional players Compass Margins flat Structural Growth Large Opportunity Self Efficiencies more than offset mobilisati
Slide 27: Europe now managed as 9 Business Units
Europe now managed as 9 Business Units Sales by Business Units Italy Iberia Turkey CEE UK & Ireland Nordics Benelux DACH (Germany, Austria and Switzerland) France 27
Slide 28: Our strategy is clear
Our strategy is clear Focus on food – our core competence Food service market c. £200bn Incremental approach to support services Regional Prioritise organic growth Compass players Structural Growth Bolt-on M&A Large Opportunity Self players operated Best-in-class execution: cost advantage of scale,
Slide 29: Improving the consumer's experience
Improving the consumer’s experience Health & sustainability Evolving the “unattended market” “Express” Point of Sale Digital Hospitality platform 29
Slide 30: Business model
Business model Growth Organic Margin Operating efficiency Opex Investment Capex Bolt-on M&A EPS growth Returns to Progressive dividend Shareholders Capital returns A proven and sustainable model 30
Slide 31: Summary and outlook
Summary and outlook Continued strength in North America Restructuring in Rest of World complete Good strategic progress in Europe Ongoing returns to shareholders Focused on strong growth with discipline Positive expectations for 2017 Remain positive about the structural growth opportunities 31
Slide 32: 2016 Full Year Results Appendix
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Slide 33: Group revenue
Group revenue By geography, sector & service line Rest of World 16% Other ROW 6% North America Sports & Brazil 3% 56% Leisure 12% Japan 3% Business & Australia 4% Food service 84% Industry 38% Other Europe Food service 78% Norway5%1% Norway 1% 1% Turkey Turkey 1% Healthcare & Netherlands Netherlands
Slide 34: Geographic revenue
Geographic revenue By sector North America Rest of World Sports & Sports & Leisure 9% Leisure 15% Business & Industry Healthcare & 30% Seniors 14% Business & Industry 36% Europe Sports & Leisure 8% Education 5% Healthcare & Seniors 29% Defence, Offshore & Healthcare & Remote 2% Seniors 14% Defence,
Slide 35: Geographic financials
Geographic financials North America Europe Rest of World Other1 Total £m £m £m £m £m 2016 Revenue 11,198 5,458 3,215 19,871 Organic growth 8.1% 2.8% (1.2)% 5.0% Operating profit 908 394 218 (75) 1,445 Margin 8.1% 7.2% 6.8% 7.2% Cash flow 814 303 217 (426) 908 Cash flow conversion 90% 77% 100% 63% RO
Slide 36: Geographic financials
Geographic financials Group Revenue (£bn) & Organic Growth (%) Group Operating Profit (£m) & Margin (%) 19.9 18.7 17.0 17.7 16.3 1,445 1,307 1,368 1,144 1,233 5.4 4.3 4.1 5.8 5.0 6.9 7.1 7.2 7.2 7.2 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 NA Revenue (£bn) & Organic Growth (%) NA Operating
Slide 37: Geographic financials
Geographic financials Europe Revenue (£bn) & Organic Growth (%) Europe Operating Profit (£m) & Margin (%) 394 5.4 5.3 5.5 384 5.3 5.2 371 364 344 -0.7 -2.4 -0.9 2.2 2.8 6.5 6.9 7.1 7.2 7.2 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 ROW Revenue (£bn) & Organic Growth (%) ROW Operating Profit (
Slide 38: Income statement: revenue
Income statement Revenue Change Reported Constant Organic 2016 2015 Rates Currency Growth £m £m % % % North America 11,198 9,361 19.6% 10.5% 8.1% Europe 5,458 5,192 5.1% 2.7% 2.8% Rest of World 3,215 3,290 (2.3)% (1.9)% (1.2)% Revenue 19,871 17,843 11.4% 6.1% 5.0% Notes 38 Based on underlying perfor
Slide 39: Income statement: operating profit
Income statement Operating profit Change Analysed By Acquisition 2016 2015 Change Currency / Disposal Organic £m £m £m £m £m £m % North America 908 760 148 63 10 75 9.1% Europe 394 374 20 10 - 10 2.6% Rest of World 218 241 (23) (2) (2) (19) (7.9)% Unallocated central overheads (65) (66) 1 - - 1 Asso
Slide 40: Income statement: reported to underlying
Income statement Reconciliation of reported to underlying 2016 2015 £m Reported Non-underlying Underlying Underlying Revenue 19,605 (266) 19,871 17,843 Operating profit 1,409 (36) 1,445 1,296 (101) Net finance costs (89) 12 (104) Other gains 1 1 - - Profit before tax 1,321 (23) 1,344 1,192 Tax (319)
Slide 41: Income statement: underlying at constant currency
Income statement Underlying at constant currency £m 2016 2015 Growth Revenue 19,871 18,725 Operating profit 1,445 1,368 +5.6% Net finance costs (101) (108) Profit before tax 1,344 1,260 Tax (330) (309) Tax rate 24.5% 24.5% Profit after tax 1,014 951 Non-controlling interest (10) (8) Attributable pro
Slide 42: Earnings and dividends per share
Earnings and dividends per share 2016 2015 Earnings per share Continuing operations 60.4p 52.3p Adjustments 0.7p 1.4p Underlying earnings per share 61.1p 53.7p Dividends per share Interim dividend 10.6p 9.8p Final dividend 21.1p 19.6p Total dividend 31.7p 29.4p Notes 42 Underlying definitions on pag
Slide 43: EPS/dividends
EPS/dividends Dividend cover 2016 2015 2014 2013 2012 Per share (pence) Dividend (interim plus final) 31.7p 29.4p 26.5p 24.0p 21.3p Underlying earnings 61.1p 53.7p 48.7p 47.7p 42.6p Dividend earnings cover 1.9x 1.8x 1.8x 2.0x 2.0x Cash (£m) Cash cost of dividend (in the year) 496 457 444 404 378 Und
Slide 44: Free cash flow
Free cash flow Reconciliation of reported to underlying £m 2016 2015 Reported Adjs1 Other2 Underlying Reported Adjs1 Other2 Underlying Operating profit 1,409 - (36) 1,445 1,261 - (35) 1,296 Depreciation and amortisation 426 - 31 395 366 - 26 340 EBITDA 1,835 - (5) 1,840 1,627 - (9) 1,636 Net capital
Slide 45: Operating cash flow history
Operating cash flow history £m 2016 2015 2014 2013 2012 Operating profit 1,445 1,296 1,245 1,265 1,178 Depreciation and amortisation 395 340 317 299 282 Net capital expenditure (549) (476) (445) (434) (366) Net cash flow 1,291 1,160 1,117 1,130 1,094 Net cash flow conversion 89% 90% 90% 89% 93% Trad
Slide 46: Free cash flow history
Free cash flow history £m 2016 2015 2014 2013 2012 Operating cash flow 1,293 1,123 1,114 1,197 1,108 Post employment benefits (39) (59) (46) (54) (54) Net interest (94) (93) (71) (65) (73) Net tax (246) (242) (259) (256) (225) Net other items (6) (7) (1) 12 4 Free cash flow 908 722 737 834 760 Cash
Slide 47: Balance sheet: ROCE
Balance sheet ROCE 2016 2015 2014 2013 2012 £m £m £m £m £m NOPAT 1,081 973 926 930 867 Average capital employed 5,565 5,093 4,799 4,878 4,774 ROCE 19.4% 19.1% 19.3% 19.1% 18.2% Notes 47 Based on underlying performance, definitions on page 57/58.
Slide 48: Balance sheet overview
Balance sheet Overview 2016 2015 £m £m Goodwill 4,050 3,538 Other non-current assets 2,694 2,135 Working capital (897) (773) Provisions (423) (387) Post employment benefit obligations (21) (9) Current tax payable (118) (105) Deferred tax 109 154 Net debt (2,874) (2,603) Net assets 2,520 1,950 Shareh
Slide 49: Capital expenditure (% of revenue)
Balance sheet Capital expenditure (% of revenue) 2.8% 2.9% 2.7% 2.7% 2.3% 2.3% 2.3% 2.1% 1.9% 1.9% 1.7% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Notes 49 Based on underlying performance, definitions on page 57/58. Gross capital expenditure includes tangible and intangible assets, inclu
Slide 50: Financing: components of net debt
Financing Components of net debt £m Bonds 1,202 Private placements 1,497 Bank loans 531 3,230 Finance leases 14 Other loans and fair value accounting adjustments 126 Derivatives (177) Gross debt 3,193 Cash net of overdrafts (319) Closing net debt at 30 September 2016 2,874 Notes 50 Based on nominal
Slide 51: Financing: principal borrowings
Financing Principal borrowings Maturing in Coupon Financial Year Drawn £m Bonds €600m 3.125% 2019 519 €500m 1.875% 2023 433 £250m 3.850% 2026 250 Total 1,202 US private placements £35m (2008 Notes) 7.55% 2017 35 $1,000m (2011 Notes) 3.31% - 4.12% 2019 – 2024 769 $500m (2013 Notes) 3.09% - 3.81% 2020
Slide 52: Financing: maturity profile of drawn debt
Financing Maturity profile of drawn debt £m 800 700 600 500 400 300 200 100 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 £ bond € bond US$ private placement £ private placement bank Notes Based on borrowings and facilities in place as at 30 September 2016, maturing in the financial years
Slide 53: Financing: debt ratios and credit ratings
Financing Debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 25 Feb 16 Moody’s Baa1 Positive 15 Jun 16 Fitch (unsolicited) A- Stable 16 May 16 Ratios 2016 2015 Net debt1 / EBITDA2 1.6x 1.6x EBITDA2 / net interest3 17.8x 15.9x Notes 1.Net debt is adjusted where necessa
Slide 54: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2016 per £ 2015 per £ 2016 per £ 2015 per £ Australian Dollar 1.94 1.98 1.70 2.16 Brazilian Real 5.19 4.66 4.22 6.03 Canadian Dollar 1.88 1.90 1.71 2.03 Euro 1.28 1.35 1.16 1.36 Japanese Yen 159.94 184.31 131.54 181.42 Nor
Slide 55: Exchange rates: effect on revenue and profit
Exchange rates Effect on 2016 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 56: Exchange rates: effect on revenue and profit
Exchange rates Effect on 2016 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 57: Definitions
Definitions 1. Constant currency basis restates the prior year results to the current year's 8. Underlying profit before tax excludes specific adjusting items. average exchange rates. 2. Underlying revenue represents the combined sales of Group and share of 9. Underlying basic earnings per share exc
Slide 58: Definitions
Definitions 16. Underlying free cash flow is adjusted for cash restructuring costs in the 21. Specific adjusting items: year relating to the 2012 and 2013 European exceptional programme. • Amortisation of intangibles arising on acquisition; • Acquisition transaction costs; • Adjustments to contingen