Compass Group Plc · LSE:CPG
Compass — FY2012 Earnings Presentation
69 slides from Compass's earnings presentation, Nov 21, 2012
Slide 1: 2012 Full Year Results
2012 Full Year Results Wednesday 21 November 2012 1
Slide 2: Presentation Structure
Presentation Structure 1. Sir Roy Gardner Welcome & Highlights 2. Dominic Blakemore Full Year Results 3. Richard Cousins Business Review, Strategy & Outlook 4. Q&A 2
Slide 3: Business Highlights
Business Highlights • Good full year performance • Strong growth in revenue and operating profit • European action plans – laying foundations for improved performance • Full year dividend increased by 10% to 21.3 pence • Share buyback programme extended by £400m in 2013 Good performance – delivering
Slide 4: 2012 Full Year Results
2012 Full Year Results Dominic Blakemore 4
Slide 5: Revenue
Revenue Change Reported Constant 2 Organic 3 2012 2011 Rates Currency Growth £m £m % % % North America 7,517 6,849 9.8% 8.3% 8.3% Europe & Japan 6,243 6,217 0.4% 2.9% (0.7)% Fast Growing & Emerging 3,145 2,767 13.7% 18.1% 11.8% Revenue 16,905 15,833 6.8% 7.9% 5.4% Notes: 1. 2. Based on continuing op
Slide 6: Operating Profit – Reported Currency
Operating Profit – Reported Currency Change Analysed By Acquisition 2012 2011 Change / Disposal Currency Organic £m £m £m % £m £m £m North America 598 538 60 11.2% 4 7 49 Europe & Japan 397 400 (3) (0.7)% 12 (11) (4) Fast Growing & Emerging 235 207 28 13.5% 13 (4) 19 Unallocated overheads (60) (60)
Slide 7: Impact of Currency on Operating Profit
Impact of Currency on Operating Profit US $ Euro All Currencies Average exchange rate for 2011 1.61 1.15 Average exchange rate for 2012 1.58 1.21 Impact on 2011 operating profit £7m £(10)m £(8)m Estimated impact on 2012 operating profit +/- £18m +/- £8m of a 5 cent movement Spot exchange rate for 20
Slide 8: Operating Profit and Margin – Constant Currency
Operating Profit and Margin – Constant Currency Margin 3 2012 2011 2 Change 2012 2011 £m £m £m % % % North America 598 545 53 9.7% 8.0% 7.9% Europe & Japan 397 389 8 2.1% 6.4% 6.4% Fast Growing & Emerging 235 203 32 15.8% 7.5% 7.5% Unallocated overheads (60) (60) - Associates 8 6 2 Operating profit
Slide 9: Operating Profit Growth – Constant Currency
Operating Profit Growth – Constant Currency £m (estimated) 2012 2011 2010 2009 2008 Net new business 35 40 38 27 28 Base estate 35 23 24 30 57 Above unit overheads (6) 4 20 31 6 Associates - - (1) 3 - Operating profit growth 64 67 81 91 91 Acquisitions/disposals 31 19 11 9 13 Total operating profit
Slide 10: Income Statement
Income Statement 2012 2011 £m Reported Exceptional Non-Underlying Underlying 3 Underlying 3 Revenue 16,905 - - 16,905 15,833 Operating profit 2 856 (295) (27) 1,178 1,091 Other gains 23 - 23 - - Net finance costs (90) - (5) (85) (71) Profit before tax 789 (295) (9) 1,093 1,020 Tax (178) 72 34 (284)
Slide 11: European Exceptional
European Exceptional Income Statement Charge (£m) 2012 2013 Accelerated cost efficiencies 100 50 Other charges 195 - Total charge 295 50 Income Statement Savings (£m) 2013 2014 Accelerated cost efficiencies 50 75 Other savings 20 20 Total savings 70 95 • Cash payback of 2 years 11
Slide 12: Income Statement at Constant Currency: Proforma
Income Statement at Constant Currency : Proforma 2012 2011 £m Underlying Proforma 3 Growth Revenue 16,905 15,668 Operating profit 2 1,178 1,083 +8.8% Net finance costs (85) (71) Profit before tax 1,093 1,012 Tax (284) (274) Profit after tax 809 738 Non-controlling interest (6) (6) Attributable profi
Slide 13: Free Cash Flow
Free Cash Flow 2012 2011 £m Underlying 4 Reported Operating profit 2 1,178 1,091 Depreciation and amortisation 282 254 EBITDA 1,460 1,345 Net capital expenditure 3 (366) (340) Trade working capital 31 (21) Provisions (17) 8 Post employment benefit obligations (54) (42) Net interest (73) (55) Net tax
Slide 14: Free Cash Flow Progression
Free Cash Flow Progression £800m £730m £693m £670m £593m £600m £520m £400m £357m £212m £200m £0m 2006 2007 2008 2009 2010 2011 2012 Free cash flow Advanced payment Notes: 1. Based on continuing operations. 2. 2010 reported free cash flow was £744m. The £670m represents the free cash flow, after adju
Slide 15: Net Debt
Net Debt £m Opening net debt at 1 October 2011 761 Underlying free cash flow from continuing operations (760) Settlement of non-recurring tax issues 31 European exceptional cash flow 20 Free cash flow from discontinued operations 43 Acquisitions 1 221 Disposals 2 (34) Equity dividends 378 Purchase o
Slide 16: Ongoing Priorities for Use of Capital
Ongoing Priorities for Use of Capital • Capital expenditure Appropriate investment – around 2.3% revenue • Progressive dividends Growth in line with constant currency earnings Maintaining cash cover around 2x • Disciplined infill M&A Required returns > cost of capital by end of year 2 • Surplus capi
Slide 17: M&A Strategy
M&A Strategy M&A criteria Post tax returns on M&A – 2008 to 2010 deals (£550m spend) • Strategic fit 12% 11% 10% 10% 8% • Scale and capability 8% 6% 4% • Quality business, strong management 2% 0% Year 1 Year 2 Year 3 • Required returns in excess of cost of capital by end of year 2 17
Slide 18: Balance Sheet Efficiency
Balance Sheet Efficiency • Target to maintain strong investment grade credit ratings – Moody’s Baa1 – S&P A- • Adjusted gross debt / EBITDA in the range of 2.2x to 2.3x – Provides the business with the flexibility it requires – Maintains strong investment grade credit ratings • Equivalent to medium
Slide 19: Financial Summary
Financial Summary • Overall good financial performance • Good organic revenue growth 5.4% • Excellent underlying EPS growth 10.1% • Continued strong underlying free cash flow £760m • Full year dividend of 21.3p 10.4% • Further share buy back of £400m 19
Slide 20: Business Review, Strategy & Outlook
Business Review, Strategy & Outlook Richard Cousins 20
Slide 21: Agenda
Agenda 1. Business performance and MAP 2. Regional reviews 3. Strategy 4. Summary and outlook 21
Slide 22: Organic Revenue Growth
Organic Revenue Growth % 2010 2011 2012 New Business 9.5 8.8 9.0 Lost Business (6.8) (5.8) (5.7) Net New Business 2.7 3.0 3.3 LFL Revenue 0.5 2.4 2.1 Organic Growth 3.2 5.4 5.4 22
Slide 23: New Business & Retention
New Business & Retention • Good rates of new business • Growth across all sectors • Maintained high retention rate • Exciting pipeline 23
Slide 24: Like for Like Revenue
Like for Like Revenue % 2011 2012 H1 H2 H1 H2 Price 1.7 2.0 2.0 2.0 Volume 1.0 0.0 0.0 0.1 Total 2.7 2.0 2.0 2.1 Region Volume (%) North America 0.0 Europe ex. Japan (2.5) FG&E 4.0 24
Slide 25: Margin Progression in 2012
Margin Progression in 2012 6.9% 6.9% 2011 Cost Volume Reinvestment Efficiencies Overhead Modest 2012 inflation impact leverage price increases 25
Slide 26: Review of North America
Review of North America Revenue (£bn) & Organic Growth (%) • Good organic revenue growth across all sectors 8.3% • High level of new business wins 7.4% 5.8% 7.1% 1.6% • Positive outsourcing trends Operating Profit (£m) & Margin (%) • Ascension Healthcare & Texas A&M mobilised • Steady margin progres
Slide 27: Review of Europe & Japan
Review of Europe & Japan Revenue (£bn) & Organic Growth (%) • Difficult economic conditions (0.7)% • Increasingly negative like for like volume 3.0% (0.4)% (3.1)% (1.6)% • Focus on cost efficiencies Operating Profit (£m) & Margin (%) • Japan recovery • Medium term opportunities 6.8% 6.4% 6.4% 6.4% 5
Slide 28: Review of Fast Growing & Emerging
Review of Fast Growing & Emerging Revenue (£bn) & Organic Growth (%) • Double digit organic revenue growth 11.8% • Strong new business and like for like revenue 14.5% 9.6% 5.3% 13.7% • Investment in management teams and process Operating Profit (£m) & Margin (%) • Margin held at 7.5% • Excellent top
Slide 29: Strategy
Strategy STRATEGY Food Support services Geographic mix Emerging markets • Earnings growth GROWTH • Strong cash flow & balance sheet Organic growth Infill M&A • Dividends Cost efficiencies net of reinvestment • Shareholder returns MARGIN Leveraging scale Flexible cost base Steady expansion Further sh
Slide 30: Food: Structural Market Growth Opportunity
Food: Structural Market Growth Opportunity • £200bn market opportunity • Ranked 1 or 2 in most key markets Estimated Addressable Food Market: £200bn* • Compelling proposition Self-operated: 56% Market • Underpenetrated sectors opportunity Small regional players: 28% Large players: 10% Compass: 6% *
Slide 31: Support and Multi Services: 2012 Revenue
Support and Multi Services: 2012 Revenue Revenue Split: FY 2012 • Support and multi services now a significant 9% part of the Group 24% • Incrementally building capacity 15% 76% • Organic and inorganic growth • A significant opportunity Support & Multi services Sector Split (£4.1bn) Support & Multi
Slide 32: Support and Multi Services: Sector Approach
Support and Multi Services: Sector Approach Sector Size Market trend Strategy DOR £1.7bn • Predominantly multi service • Market leading position • Excellent opportunities in • Continue organic growth Remote with some capital investment B&I £1.2bn • Some bundling by multi- • Continue to build capabil
Slide 33: Changing Geographic Profile
Changing Geographic Profile 2002 2012 The Future? A truly global business 33
Slide 34: North America: Positive Momentum
North America: Positive Momentum • Market leadership in food • Support services an increasing part of the mix • Healthy outsourcing culture Estimated NA Addressable Food Market: £46bn Self-operated: 42% • Significant market opportunity Small regional players: 27% Large players: 18% • Strong pipeline
Slide 35: US Capability to Deliver Large Multi service Contracts
US Capability to Deliver Large Multi service Contracts • 3rd largest healthcare system in the US • 6th largest educational institution in US • Compass serves 90 locations across the • 10 year contract country • Significant revenue potential from food & • Services include food, cleaning & some suppor
Slide 36: Europe & Japan: Driving Efficiencies
Europe & Japan: Driving Efficiencies • Actions to manage negative like for like volume • Increasing flexibility • Initiatives to improve productivity Improved operational efficiency and greater competitiveness 36
Slide 37: Fast Growing & Emerging
Fast Growing & Emerging Fast Growing & Emerging revenue by sub-region Central Asia, Middle East & Africa, £0.7m Latin America, £1.1bn Pacific & South/ East Asia, £1.3bn 37
Slide 38: Latin America
Latin America • GDP growth expected to be over 4% in 2013 Brazil • Scale and strong footprint, particularly in B&I • Significant opportunity in Healthcare and Education Chile, Mexico, Colombia & Argentina • Excellent growth potential • Emerging opportunities in Healthcare and Education • Acquisition
Slide 39: Central Asia, Middle East & Africa
Central Asia, Middle East & Africa Russia • Small but very good growth Turkey • Over £250m revenue; 16,000 employees • Well balanced & fast growing UAE • Steady performance; strong DOR business South Africa • Improving business, supported by Supercare acquisition 39
Slide 40: Opportunities in Pacific & South/East Asia
Opportunities in Pacific & South/East Asia Australia India, China/HK & South East Asia • Group’s 3rd largest business, 5% of • Vast and rapidly growing economies Group revenue • CAGR of 11% over last 4 years • India: over 20% revenue growth • DOR key driver • China/HK: performing well; strong presen
Slide 41: Summary and Outlook
Summary and Outlook • Good performance over the year Organic Top Line Growth • Ongoing commitment to an efficient balance sheet Continued Margin • 10% dividend increase and further £400m buyback Potential • Confident in delivering against 2013 market expectations Strong Cash Flow & Shareholder Value
Slide 42: Supplementary Information
Supplementary Information 42
Slide 43: Contents
Contents Revenue 44 Group Revenue by Geography Balance Sheet 54 Overview 55 Return on Capital Employed 56 Capital Expenditure % of Revenue Revenue by Sector 45 Group 46 North America 47 Europe & Japan Financing 57 Components of Net Debt 48 Fast Growing & Emerging 58 Principal Borrowings 59 Maturity
Slide 44: Revenue – Group Revenue by Geography
Revenue – Group Revenue by Geography 2012 North 2011 Fast Growing & America Fast Growing & North Emerging 19% Other FGE, 7% 44% Emerging 18% America Turkey, 2% Turkey 1% Other FGE 7% 43% Brazil, 4% Brazil 5% Australia, 6% Australia 5% USA, 40% USA 38% Other CE, 6% Other CE 6% Norway 2% Norway, 1% Ne
Slide 45: Revenue by Sector - Group
Revenue by Sector - Group 2012 2011 Sports & Sports & Leisure Leisure 11% 10% Healthcare 18% Business & Healthcare Business Industry 19% & Industry 42% 42% Education 16% Def ence, Education Of f shore, Remote 16% 13% Defence, Offshore, Remote 13% Notes: 1. Based on continuing operations. 45
Slide 46: Revenue by Sector – North America
Revenue by Sector – North America 2012 2011 Sports & Leisure Sports & 13% Leisure 14% Business Business & & Industry Industry 31% 31% Healthcare 25% Healthcare 27% Def ence, Of f shore, Defence, Remote Offshore, Education 6% 24% Remote Education 5% 24% Notes: 1. Based on continuing operations. 46
Slide 47: Revenue by Sector – Europe & Japan
Revenue by Sector – Europe & Japan 2012 Sports & 2011 Leisure 11% Sports & Leisure 10% Healthcare Healthcare 15% 15% Business & Business & Industry Industry Education 57% 56% 11% Education 12% Defence, Offshore, Defence, Remote Offshore, 7% Remote 6% Notes: 1. Based on continuing operations. 47
Slide 48: Revenue by Sector – Fast Growing & Emerging
Revenue by Sector – Fast Growing & Emerging 2012 2011 Sports & Leisure Sports & Leisure, Healthcare 3% Healthcare 4% 8% 9% Education Education, 5% 5% Business Business & Industry, & Industry 39% 40% Defence, Def ence, Offshore, Of f shore, Remote Remote, 44% 43% Notes: 1. Based on continuing operati
Slide 49: Sector Financials - Group
Sector Financials - Group North Europe & Fast Growing 2 America Japan & Emerging Other Total £m £m £m £m £m 2012 Revenue 7,517 6,243 3,145 16,905 Organic growth 8.3% (0.7)% 11.8% 5.4% Operating profit 598 397 235 (52) 1,178 3 Margin 8.0% 6.4% 7.5% 6.9% 4 Cash flow 532 376 207 (355) 760 Cash flow con
Slide 50: Finance Cost – Net Finance Cost
Finance Cost – Net Finance Cost 2012 2011 £m £m Bank loans and overdrafts 6 7 Other loans 69 51 Finance lease interest 2 2 77 60 Bank interest income (9) (4) 68 56 Amount charged to pension scheme liabilities net of expected return on scheme assets 15 14 Unwinding of discount on provisions and put o
Slide 51: EPS / Dividends – Earnings & Dividends Per Share
EPS / Dividends – Earnings & Dividends Per Share 2012 2011 Earnings per share Continuing and discontinued operations 32.1p 38.5p Discontinued operations - (2.1)p Continuing operations 32.1p 36.4p Other adjustments 1 10.5p 2.6p Underlying earnings per share 42.6p 39.0p Dividends per share Interim div
Slide 52: EPS / Dividends – Dividend Cover
EPS / Dividends – Dividend Cover 2012 2011 2010 2009 2008 Per share (pence) Dividend (interim plus final) 21.3p 19.3p 17.5p 13.2p 12.0p Underlying earnings 1 42.6p 39.0p 35.7p 30.0p 22.0p Dividend earnings cover 2.0x 2.0x 2.0x 2.3x 1.8x Cash (£m) Cash cost of dividend (in the year) 378 360 258 229 2
Slide 53: Free Cash Flow – Reconciliation of Reported to Underlying
Free Cash Flow – Reconciliation of Reported to Underlying 2012 2011 £m Reported Adjustments 4 Other 5 Underlying Underlying Operating profit 2 856 (295) (27) 1,178 1,091 Depreciation and amortisation 337 37 18 282 254 EBITDA 1,193 (258) (9) 1,460 1,345 Net capital expenditure 3 (366) - - (366) (340)
Slide 54: Balance Sheet - Overview
Balance Sheet - Overview 2012 2011 £m £m Non-current assets 1,584 1,494 Working capital (520) (495) Provisions (603) (439) Interest payable (63) (67) Post employment benefit obligations (361) (292) Current tax payable (116) (202) Deferred tax 256 205 Net assets before goodwill 177 204 Goodwill 4,037
Slide 55: Balance Sheet – Return on Capital Employed
Balance Sheet – Return on Capital Employed 2012 2011 £m £m NOPAT 1 867 790 Average capital employed 2 4,774 4,307 ROCE 18.2% 18.3% Notes: 1. Based on underlying operating profit, net of tax at the underlying rate of tax of the year, less operating profit of non-controlling interests. 55 2. Average c
Slide 56: Balance Sheet – Capital Expenditure % of Revenue
Balance Sheet – Capital Expenditure % of Revenue % of Revenue 5.0% 4.5% 3.9% 4.0% 3.6% 3.3% 2.9% 3.0% 2.5% 2.3% 2.3% 2.3% 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 Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005, total Group is shown on a
Slide 57: Financing – Components of Net Debt
Financing – Components of Net Debt £m Bonds 735 Private placements 829 Bank loans 50 1,614 Finance leases 28 Other loans 15 Derivatives and Fair value accounting adjustments (14) Gross debt 1,643 Cash net of overdrafts (670) Closing net debt at 30 September 2012 973 Notes: 1. Based on nominal value
Slide 58: Financing – Principal Borrowings
Financing – Principal Borrowings Maturing in Coupon Calendar Year £m Bonds £250m 4 7.00% 2014 257 €600m 3.13% 2019 478 Total 735 US private placements $15m (2003 Notes) 5.67% 2013 9 $267m (2008 Notes) 6.45% - 6.72% 2013 - 2015 166 £35m (2008 Notes) 7.55% 2016 35 $1000m (2011 Notes) 3.31% - 4.12% 201
Slide 59: Financing – Maturity Profile of Principal Borrowings
Financing – Maturity Profile of Principal Borrowings £m 700 600 500 400 300 200 100 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 £ Bonds € Bonds US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 30 September 2012, maturing in
Slide 60: Financing – Sources of Committed Borrowings
Financing – Sources of Committed Borrowings Bank Loans 3% Bonds 46% Private Placements 51% Notes: 1. Based on borrowings as at 30 September 2012. 60
Slide 61: Financing – Effective Currency of Net Borrowings
Financing – Effective Currency of Net Borrowings C$ A$ Yen 3% 3% 4% Other 6% £ Sterling 6% € US $ 15% 63% Notes: 1. Based on net borrowings as at 30 September 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 curr
Slide 62: 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 23-Mar-12 Fitch (unsolicited) A- Stable 26-Jul-12 Ratios 2012 2011 Net debt 1 / EBITDA 2 0.7x 0.6x EBITDA 2 / net interest 3 17.5x 19.2x Net debt 1 / adjusted total capitali
Slide 63: Financing – Proforma Moody’s Credit Ratio (1)
Financing – Proforma Moody’s Credit Ratio (1) “.. CFO less dividends to Adjusted Net Debt greater than 25% ..“ £m 2012 2011 Reported free cash flow 709 693 Net capex 420 339 Pension adjustment 52 42 Operating lease adjustment 169 158 Dividends paid (378) (360) Discontinued cash flow 95 3 CFO less di
Slide 64: Financing – Proforma Moody’s Credit Ratio (2)
Financing - Proforma Moody’s Credit Ratio (2) “.. Adjusted Gross Debt to Adjusted EBITDA less than 2.5x ..“ £m 2012 2011 Adjusted net debt 2,871 2,515 2 584 510 Cash Adjusted gross debt 3,455 3,025 Reported EBIT pre associates 1,170 1,085 Depreciation 282 254 Operating lease adjustment 253 237 Non-u
Slide 65: Exchange Rates – Rates Used in Consolidation
Exchange Rates – Rates Used in Consolidation Income Statement 2 Balance Sheet 3 2012 2011 2012 2011 per £ per £ per £ per £ Australian Dollar 1.53 1.57 1.55 1.60 Brazilian Real 2.99 2.65 3.28 2.89 Canadian Dollar 1.59 1.59 1.59 1.62 Euro 1.21 1.15 1.26 1.16 Japanese Yen 124.35 129.63 125.63 120.08 N
Slide 66: Exchange Rates – Effect on 2012 Revenue & Profit
Exchange Rates – Effect on 2012 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 67: 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% France 36% Germany 30% 4 Netherlands 25% Italy 28% Nordic 27% Brazil 34% Canada 27% Japan 41% Spain 30% Australia 30% Blended statutory tax rate 2 33% Notes: 1
Slide 68: 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 69: 2012 Full Year Results
2012 Full Year Results Wednesday 21 November 2012 69