Compass Group Plc · LSE:CPG
Compass — Investor Day (June 2016)
168 slides from Compass's investor day presentation, Jun 30, 2016
Slide 1: Investor Seminar 2016
Slide 2: Strategy
Strategy Richard Cousins Chief Executive Officer
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: Objectives of the afternoon
Objectives of the afternoon Give a greater insight into the Group Highlight the growth opportunities we see Meet some of our senior management
Slide 5: Agenda
Agenda 2:00 Strategy Richard Cousins North America Gary Green / Adrian Meredith North America Healthcare and Sports & Leisure Bobby Kutteh / Andy Lansing 3:20 BREAK Latin America Alfredo Ruiz-Plaza Asia Pacific Mark van Dyck Europe & UK Dominic Blakemore / Dennis Hogan 4:40 BREAK Financial performan
Slide 6: Compass’ evolution
Compass’ evolution The last 10 years Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 2006–2008 2008–2010 2010–2012 2012–2014 2015 & beyond • Fix the basics • Recession & • Good • Balance sheet • Focus on food recovery operational tightened • Rapid EPS • Strong growth progress growth • Organic • Innovation •
Slide 7: Regional profile
Regional profile Group revenue £17.8bn £10.8bn £1.5bn 1996 2006 2016 North America Europe Rest of World
Slide 8: The basics have not changed
The basics have not changed Revenue by contract type • We need to offer “value for money” in terms of cost, quality & innovation P&L Cost + (mostly in (predominantly North America, • Operating on client premises presents in North America) some in Europe) continued opportunities to drive efficiencies
Slide 9: Organic revenue growth & margins
Organic revenue growth & margins 8% 7% 6% 5% 5% CAGR 4% 3% 2% 1% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Operating Margin 4.4%* 5.1% 5.8% 6.5% 6.9% 6.9% 6.9% 7.1% 7.2% 7.2% * Excluding disposed businesses (SSP & Selecta)
Slide 10: Our strategy is clear
Our strategy is clear Food service market c. £200bn • Focus on food – our core competence 200 • Incremental approach to support services 150 • Prioritise organic growth 100 50 • Bolt-on M&A 0 • Best-in-class execution: quality & innovation Self operated Small players Outsourced Large players Compass
Slide 11: Our competitive advantages
Our competitive advantages • Decentralised approach • Sectorisation & sub-sectorisation PEOPLE • Scale • People & culture
Slide 12: Innovation & sharing of best practice
Innovation & sharing of best practice A more focused approach Bring more excitement to our clients & consumers Improve our operations
Slide 13: Summary
Summary • Strong track record of execution • Clear strategy focused on food • Large market & growth opportunity • Strong competitive advantages • Accelerating innovation & sharing of best practice • Strong & experienced management team Continued focus on creating shareholder value
Slide 14: Slide 14
Slide 15: North America
North America Gary Green Chief Operating Officer
Slide 16: Overview
Overview 1 Compass North America today Gary Green 2 Growth story – building the growth culture Gary Green 3 Sustaining the growth model Adrian Meredith 4 Healthcare Bobby Kutteh 5 Sports & Leisure Andy Lansing
Slide 17: North America today
North America today Market leader in a growing market Great sector balance $14.5 billion business (2015) 8.5 million+ meals served a day Serve 96 of the Fortune 100 240K+ employees – Top 10 private sector employer in the US Note: Compass management estimates
Slide 18: Great client partners
° Great client partners compass 4 ¢ { 4 SONY. ma . sal Walmart >\< GUGGENHEIM 2. a Ge) pe fu woo ZF *]* Pen | Sim cuss $258 ‘in| BE Microsoft ED Ox bal Cz) MERCK Lowe's GRAMMY AWARDS yi 1 gag? nara MEET ASCENSION amazoncom Raytheon f PeG SAP A & ; = Prudential ate Bank of Americ: = ed — a. NBCUniver
Slide 19: Performance culture
Performance culture Financial results Revenue Operating profit $bn $m 16 1,200 14 CAGR 14% CAGR 19% 1,000 12 10 800 8 600 6 400 4 200 2 0 0 1994 2000 2005 2010 2015 1994 2000 2005 2010 2015 Margin 3.2% 5.7% 6.1% 7.7% 8.1%
Slide 20: Great sector balance
Great sector balance Revenue 1994 Revenue 2015 $1bn $14.5bn Sports & Leisure Defence, Offshore & Business & Remote Healthcare Industry & Seniors Business & Education Industry Healthcare & Seniors Education
Slide 21: Great market opportunity
Great market opportunity Revenue 2015 Food service market $14.5bn c. $84bn Sports & Leisure Business & Sports & Leisure Defence, Industry Defence, Offshore & Offshore & Remote Remote Business & Industry Healthcare Healthcare & Seniors & Seniors Education Education Note: Compass management estimates
Slide 22: Food service market by sector
Food service market by sector Market size $bn 30 20 66% 75% 70% 10 47% 0 Business & Industry Healthcare & Seniors Education Sports & Leisure Large players Small regional players Self operated Note: Compass management estimates
Slide 23: Growth strategy
Growth strategy How did we get here? 1 Growth focus – quality acquisitions → organic growth 2 Sectorisation – owner mentality, strong cultures 3 Quality of offer & innovation 4 Scale, operating leverage, efficiencies, MAP discipline 5 Experienced management, stability, strong operators
Slide 24: Compass North America
Compass North America Key acquisitions / milestones Service America 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SHRM (Canada)
Slide 25: Acquisition approach
Acquisition approach Have a Buy Reason Quality Focus on the People, Do your Recognise Homework the Culture
Slide 26: Acquisitions…growth mindset & growth cultures
Acquisitions…growth mindset & growth cultures Revenue ($m) Year acquired 2015 CAGR Flik 1995 56 676 13% Restaurant Associates 1998 160 659 9% Levy 2000 199 1,369 14% Morrison 2001 568 2,519 11% Crothall 2001 265 1,211 11% Bon Appetit 2002 256 1,002 11% A common passion around client and people reten
Slide 27: Sales & retention culture
Sales & retention culture • Sales force – Annual new Retention Sales resource Win (Generalists to from business ($m) rate Specialists) ratio generalists to 228 1,091 97% specialists; professionally trained 50% • Step change 88% in retention 32 13% 70 1994 2015
Slide 28: Sectorisation: client facing brands
Sectorisation: client facing brands Business & Industry • Great brands with unique cultures & Healthcare & Seniors heritage • Entrepreneurial spirit Education • Specialisation Sports & • Customer oriented Leisure • Growth mindset Vending & Refreshment Services Defence Offshore & Remote Central procu
Slide 29: How did we get here?
How did we get here? Why have we been successful? 1 Growth Focus – quality acquisitions → organic growth We hate losing business & take it personally Sector CEO who establishes client relationship in 2 Sectorisation – owner mentality, strong cultures the sales process will be around to operate the b
Slide 30: North America
North America Adrian Meredith Chief Financial Officer
Slide 31: How do we sustain the success?
How do we sustain the success? 1 Organic growth focus Sustain sales & retention culture 2 Sectorisation – owner mentality, strong cultures Maintain commitment to sectorisation & sub-sector development 3 Quality of offer & innovation Maintain focus on quality & increase focus on innovation in every a
Slide 32: North America (2011–2015)
North America (2011–2015) 5 year average revenue growth Revenue ($bn) & Operating profit ($m) & 7.8% Organic growth (%) Organic growth (%) Sector: 14.5 1,177 Healthcare & Seniors 9% 13.6 8% 1,104 8% 12.8 7% 1,028 8% Business & Industry 7% 11.9 8% 946 9% 11.0 8% Education 7% 9% 864 7% Sports & Leisur
Slide 33: Great sector balance & diversified client base
Great sector balance & diversified client base Top 10 clients Revenue 2015 By sector 2000 2015 1 B&I Healthcare Healthcare Business & 2 B&I Education & Seniors Industry 3 B&I Healthcare 4 B&I B&I 5 Education B&I Defence, 6 B&I Healthcare Offshore & 7 B&I Healthcare Remote 8 B&I Sports & Leisure Educ
Slide 34: Our growth model
° Our growth model <coupass
Slide 35: Our growth model & key themes
Our growth model & key themes Sustain growth MAP 1 MAP 2 (MAP 1 client sales & marketing) Retention focus 96.8% (2011–2015) • 5 year average source of new business: – 72% First time outsourcing / Small players – 28% Large players • Core & premium sector offers • Exploit exciting market opportunities
Slide 36: North America: Sub-sectorisation driving growth
North America: Sub-sectorisation driving growth Organic revenue growth Key themes of sub-sectorisation 35% • Client & consumer focused 25% • Specialist sales & operations • Significant growth potential 15% • Talented sub-sector leaders 8.3% 5% Total -5% North America H1 2016 -15% -25%
Slide 37: Our growth model & key themes
Our growth model & key themes Sustain growth MAP 1 (MAP 2 consumer sales & marketing) MAP 2 • Pricing • Targeted investments to drive LFL revenues • Driving innovation – Digital Hospitality – Data analytics – Micromarkets / small store formats – Health & wellness front and centre – Innovation partne
Slide 38: Innovation
Innovation Increasing client & consumer demand We have some of the most innovative clients on the planet Culture of Business Strategic innovation Excellence Partners with ideas from (HQ in Silicon best practice bring new the business, Valley) an sharing & speed ideas, ambitious rarely the innovation
Slide 39: Innovation
Innovation Priorities Making it easy for our clients & Keeping it simple so that our Protect client & consumers … tailored solutions unit managers can focus on consumer data clients & consumers Supporting Growth Driving Efficiencies • Food & culinary • Self service solutions innovation • Supply chai
Slide 40: Our growth model & key themes
Our growth model & key themes Driving efficiencies MAP 1 MAP 2 MAP 3 MAP 4 (MAP 3, 4, 5) MAP 5 • scale/systems = $6bn Compass $14bn 3rd party • Labour productivity / job design • Driving innovation in MAP 3 Webtrition, MAP 4 MySTAFF, MAP 5 process innovation • Obsession with simplifying processes
Slide 41: Overheads
Overheads: 5 Above Unit as % of revenue MAP 3 MAP 4 5% MAP 5 4.7% 4.5% 4.3% 4% 4.2% 4.1% 3% 2011 2012 2013 2014 2015 Efficiencies back of house = margin contribution & reinvestment
Slide 42: Our growth model
Our growth model People • Amazing can-do PEOPLE • Innovation to help cope with growth e.g. on-line recruiting – This year we will hire 85K employees • Succession planning – continue to attract, retain, develop next generation of owners No Complacency!
Slide 43: Slide 43
Slide 44: Healthcare in North America
Healthcare in North America Bobby Kutteh CEO, Healthcare – US
Slide 45: Healthcare in North America
Healthcare in North America Revenue $4.2bn 1 billion meals served annually 1.1 billion ft2 cleaned & maintained per day 98.3% average client retention rate
Slide 46: Evolution of healthcare sector in North America
Evolution of healthcare sector in North America Revenue $bn 5 +11% CAGR $4.2bn 4 3 2 $990m 1 0 2001 2003 2005 2007 2009 2011 2013 2015
Slide 47: North America healthcare market opportunity
North America healthcare market opportunity Market size 30 $bn Compass market position: #1 in food service 25 #1 in support services 20 24% of outsourced market 15 10 Compass Healthcare has 5 significant long term growth potential from first time 0 Food service Support service outsourcing Self opera
Slide 48: Support services
Support services • Excellent support services business in healthcare in North America • Complex business with barriers to entry – not a commodity • Cross-selling opportunity is significant!
Slide 49: Why do hospitals outsource?
Why do hospitals outsource? Core competency Cost savings Improved patient experience Industry best practices Shift operational risk
Slide 50: Compass differentiators
Compass differentiators Operational specialisation / sub-sectorisation focus Management stability Breadth of services Patient experience investment Analytics / technology focus
Slide 51: Drivers for future growth
Drivers for future growth Strong portfolio of clients for cross-selling Retail innovation Affordable Care Act Aging population Consumerism
Slide 52: Consumerism
Consumerism • Patients have choices • Access to information • Patients more savvy • ‘Cradle-to-Grave’ – lifetime of loyalty
Slide 53: Continued focus on cost
Continued focus on cost 3 4 5 Cost of Sales Unit Costs Above Unit Leverage scale Benchmarking Further leverage scale (Foodbuy) analytics & overhead for (internal & industry) system opportunities
Slide 54: Summary
Summary The future is bright Under- penetrated Great market people & leading retention Strong momentum
Slide 55: Slide 55
Slide 56: Sports & Leisure North America
Sports & Leisure North America Andy Lansing CEO Levy Restaurants
Slide 57: Our business
Our business Primarily Sports Headquartered & Leisure in Chicago company today Began as a 200 locations restaurant 110 cities company in 1978 30,000 team members
Slide 58: Our soul
Our soul Passionate Innovation sets restaurateurs us apart Scope of Our people are business the best people
Slide 59: The Compass / Levy story
The Compass / Levy story Sectorisation Foodbuy Back office support Restaurateur mentality E15 advanced analytics People / training best practices
Slide 60: Historic revenue growth
Historic revenue growth $bn 1.4 1.2 +14% CAGR 1.0 0.8 0.6 Compass 0.4 acquisition $199m 0.2 0.0 1989 1994 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 61: Market
Market Sports & Leisure market c. $6bn Levy had 99% retention in Self FY 2015 operated Levy / Compass Potential for growth from: • Large national accounts • Greenfield facilities • Small players Large Small • Self operated players players Note: Large players include Aramark, Delaware North & Centerp
Slide 62: Sub-sectorisation
Sub-sectorisation Select Partners Professional sports Indoor concerts / events Outdoor concerts / events Convention centers High street Minor leagues College athletics Retail merchandise
Slide 63: From anecdotal to empirical
From anecdotal to empirical Then Now
Slide 64: 2015 smart pricing for Major League Baseball
2015 smart pricing for Major League Baseball Game Attendance Per cap Consumption length Double digit LFL revenue growth
Slide 65: Design thinking agency
Design thinking agency ‘Right Brain’ End-to-end Range of Innovations Collaborative Tremendous agency to design work – lab model interest from complement thinking glamourous clients & our E15 ‘Left approach to less non-clients Brain’ & experts glamourous together with but high operators & impact part
Slide 66: Chicago’s plate
Chicago’s plate 20 Fans arriving earlier Redistribution of traffic flow 250m local food & media beverage impressions partners
Slide 67: Well placed for continued success
Well placed for continued success Culture of passion for restaurant quality Diverse portfolio in a dynamic industry Expansion through sub-sectorisation Balance of data-driven solutions & experience innovation The best people in the industry
Slide 68: Slide 68
Slide 69: Latin America
Latin America Alfredo Ruiz-Plaza Regional Managing Director
Slide 70: Compass Latin America
Compass Latin America Revenue by country £1.1bn Colombia Mexico • Market leader in the region Argentina Brazil • Present in 5 countries Chile Revenue by sector £1.1bn • 2.5 million meals a day Defence, Offshore & Remote • 60,000 employees Education Business & Healthcare Industry & Seniors Sports & N
Slide 71: Great global & local client partners
Great global & local client partners
Slide 72: Priorities
Priorities 1. Cost actions: • Offset negative volumes • Make business more efficient PEOPLE 2. Drive strong new business wins 3. Strengthen sales, retention & procurement capabilities
Slide 73: Market
Market Food service market c. £11bn • Compass – The #1 player in the region – The market leader in Brazil & Argentina • Highly fragmented market Compass Large players Small players Self operated Note: Compass management estimates for Latin America (Brazil, Chile, Mexico, Argentina & Colombia). Exclu
Slide 74: Growth opportunities in all sectors
Growth opportunities in all sectors Food service market by sector 4 £bn 3 2 1 0 Business & Industry Healthcare & Seniors Education Defence, Offshore & Remote Compass Other players Self operated Note: Compass management estimates for Latin America (Brazil, Chile, Mexico, Argentina & Colombia). Exclud
Slide 75: Brazil
Brazil Market Revenue • Food service market: £5 billion* £660m Defence, • Highly fragmented market Offshore & • Compass is #1 player with 12% share Remote Education Compass Healthcare • Taking decisive action on costs to offset & Seniors impact of negative LFL volumes • Maintaining strong pricing di
Slide 76: Spanish speaking markets
Spanish speaking markets Revenue Market £400m • Food service market: £6 billion* Argentina Mexico • Highly fragmented • Compass market share: 7.5% Colombia • Population: 230 million Chile Compass Revenue by sector • Growth in Business & Industry a priority • Taking out costs to offset weakness in De
Slide 77: Decisive action on costs
Decisive action on costs 3 4 5 • Significant reduction in • Changing contract • Adapted to scale, closed number of products and structure to enable regional offices SKUs greater flexibility • Standardised back office • Reinforced the quality of • Downsized in line with LFL processes our buyers movem
Slide 78: Actions to drive the top line
Actions to drive the top line • Reviewed existing portfolio of contracts – Fixed / exited poor performing contracts – Focus on continuous pricing • Strengthened sales force – Moved from generalists to sector specialists • Invested in retention – Strategic Alliance Group processes in all 5 countries
Slide 79: Case study: New business win
Case study: New business win Argentina British Hospital Annual revenues: £3 million Our game plan: • 2 years to build the relationship • Health & Safety best practices in Healthcare • Investment to improve infrastructure & production processes
Slide 80: Case study: New business win
Case study: New business win Brazil O Boticario Annual revenues: £1.8 million Our game plan: • New & dynamic offer – more variety & healthier choice • Strong reputation in the Business & Industry market • Health, Safety and Governance standards Curitiba Plant
Slide 81: Case study: Improving retention
Case study: Improving retention Brazil Porto Seguro High School Annual revenues: £2.1 million Our game plan: • New offer – food court & brand refresh • Innovation – “Frutaria do Patio” healthy & delicious products for children • Chartwells: Eat, Learn, Live programme “Frutaria do Patio”
Slide 82: Summary
Summary • Taking the necessary actions to manage a challenging environment • Restructured cost base will give us a PEOPLE competitive edge • Strong & disciplined new business wins We are addressing the short term challenges & are well placed for the future
Slide 83: Slide 83
Slide 84: Asia Pacific
Asia Pacific Mark van Dyck Regional Managing Director
Slide 85: Compass Asia Pacific
Compass Asia Pacific: Two sub-regions China & Japan Hong Kong 9 countries India Thailand Malaysia Singapore 3.1 billion people Indonesia Australia New Zealand Compass APAC sales £1.8 billion • Developed 90% of revenues Developed • Emerging Asia 10% of revenues Emerging Asia
Slide 86: Adapting our strategy accordingly
Adapting our strategy accordingly Characteristics Growth priorities Developed • Leading market positions • Sales & retention excellence • Well-developed processes • Strategic expansion of services & Japan • Stable regulatory & tax environment contract extension • Strong & capable management • Optima
Slide 87: Compass Asia Pacific financial highlights
Compass Asia Pacific financial highlights Revenue Developed markets Revenue Emerging Asia £bn £bn 1.8 0.3 1.6 1.4 1.2 0.2 1.0 0.8 0.6 0.1 0.4 0.2 0.0 0.0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 New Zealand Australia Japan Malaysia Thailand Singapore Indonesia India China
Slide 88: Significant outsourcing opportunities
Significant outsourcing opportunities Food service market Food service market Developed markets Emerging Asia c. £40bn c. £9bn Self operated Compass Self Compass operated Other players Other players Key outsourcing drivers: • Government & business’s quest for productivity Benchmark % outsourced • Gr
Slide 89: Increasing sector penetration
Increasing sector penetration Revenue heat map evolution across Asia Pacific 2011 2012 2013 2014 2015 Australia New Zealand Japan China Hong Kong India Indonesia None Below £25m Singapore £25m–50m Thailand £51m–75m Malaysia £76m–100m Offshore Defence Business Education Seniors Health- Sports & Above
Slide 90: Increasing sector penetration
Increasing sector penetration Revenue heat map evolution across Asia Pacific 2011 2012 2013 2014 2015 Australia New Zealand Japan China Hong Kong India Indonesia None Below £25m Singapore £25m–50m Thailand £51m–75m Malaysia £76m–100m Offshore Defence Business Education Seniors Health- Sports & Above
Slide 91: Increasing sector penetration
Increasing sector penetration Revenue heat map evolution across Asia Pacific 2011 2012 2013 2014 2015 Australia New Zealand Japan China Hong Kong India Indonesia None Below £25m Singapore £25m–50m Thailand £51m–75m Malaysia £76m–100m Offshore Defence Business Education Seniors Health- Sports & Above
Slide 92: Focus on driving the top line in MAP 1
Focus on driving the top line in MAP 1 Key Account geographic expansion 1 Retention with Strategic Alliance Group Extension of services e.g. guest services
Slide 93: … and in MAP 2
… and in MAP 2 Retail expansion 2 Innovation Refresh
Slide 94: ‘Refresh’ before & after
‘Refresh’ before & after compass
Slide 95: And we continue to drive efficiencies
And we continue to drive efficiencies • Significant supplier rationalisation opportunities 3 • Improved logistics / use of hubs • In unit labour control & rationalisation 4 • Lean processes • Leveraging overhead structure 5 • Systems & processes
Slide 96: Compass Australia
Compass Australia Facts & figures Revenue 2015 Key clients business portfolios 2 (Offshore & Remote, Urban) 7 business sectors 9 operating brands 40+ years operating in Australia 658 operating sites Offshore & Remote Defence Business & Industry Education 9,000 employees Healthcare & Seniors Sports &
Slide 97: Australia
Australia Food service market Food service market by sector c. £7bn 3.5 £bn 3.0 2.5 Self operated Compass 2.0 1.5 1.0 0.5 Other players 0.0 B&I Education Healthcare Sports & Defence, & Seniors LeisureOffshore & Remote Self operated Other players Compass Note: Compass management estimates
Slide 98: Australia: Great execution during the resources boom
Australia: Great execution during the resources boom... Revenue £bn 1.0 0.8 0.6 0.4 0.2 0.0 2011 2012 2013 2014 2015 Offshore & Remote Sports & Leisure Healthcare & Seniors Education Business & Industry Defence
Slide 99: ... and now taking decisive action to reset the business
... and now taking decisive action to reset the business Actions taken Timeline • Realignment of cost base through Agility 2014: Rapid Programme headcount & cost • Innovation of Offshore & Remote service offering reduction through ESS 2.0 & Village Life 2015: Lean operations & food control Progress
Slide 100: New Zealand: Exciting growth in a mature market
New Zealand: Exciting growth in a mature market Revenue Food service market £m c. £600m 80 70 Self 60 operated 50 40 Compass 30 20 10 - 2011 2012 2013 2014 2015 Other players Sports & Leisure Healthcare & Seniors Education Business & Industry Defence Offshore & Remote • Compass is the market leader
Slide 101: Japan: Strong position in an attractive market
Japan: Strong position in an attractive market Revenue Food service market by sector £m £bn 600 12 500 10 400 8 300 6 200 4 100 2 - 0 2011 2012 2013 2014 2015 Business & Health- Seniors Education Highway, Industry care Sports & Sports & Leisure Healthcare & Seniors Education Business & Industry Self
Slide 102: China: Significant market opportunity
China: Significant market opportunity Revenue Food service market £m c. £5bn 70 60 Compass 50 Other players 40 30 20 10 Self - operated 2011 2012 2013 2014 2015 Healthcare & Seniors Education Business & Industry Note: Compass management estimates
Slide 103: India: A transforming market
India: A transforming market Revenue Food service market £m c. £2.4bn 50 Self 45 operated 40 35 Compass 30 25 20 15 10 5 - Other players 2011 2012 2013 2014 2015 Support services Healthcare & Seniors Education Business & Industry Offshore & Remote Note: Compass management estimates
Slide 104: Asia Pacific: Strong growth potential
Asia Pacific: Strong growth potential Developed markets Emerging Asia • Strong & scalable positions • Building strong foundations • Taking necessary actions to for future growth ensure continued future growth • Carefully picking our sector plays Well positioned for the future
Slide 105: Slide 105
Slide 106: Europe
Europe Dominic Blakemore Chief Operating Officer
Slide 107: Agenda
Agenda Overview Strategy Summary & closing UK overview
Slide 108: Market opportunity
Market opportunity Food service market c. £75bn Self operated Compass Other players Note: Compass management estimates
Slide 109: Performance
Performance 6% 8% 7.1% 7.2% 6.9% 3.7% 4% 7% 6.5% 2.2% 2% 6% 0% 5% -0.7% -0.9% -2% 4% -2.4% -4% 3% 2012 2013 2014 2015 HY 2016 Organic revenue growth Margin
Slide 110: Margins have improved
Margins have improved Operating margin by country 12% 10% 8% 7.2% 6% 4% 2% 0% Europe FY 2015
Slide 111: But sales growth is not yet consistent
But sales growth is not yet consistent Sales growth by country 16% 12% 8% 4% 3.7% 0% Europe HY 2016 -4% -8% -12%
Slide 112: Priorities
Priorities Business Units to gain scale 1 • Drive organic revenue growth • Lower costs PEOPLE 2 Targeted IT investment and M&A 3 Build the right team UNDERPINNED BY BUSINESS UNITS
Slide 113: Moving to Business Units
Moving to Business Units Sales by country Sales by Business Units Italy Hungary UK Iberia Romania Russia Turkey Finland Italy Portugal CEE Spain UK & Ireland Turkey Slovakia Ireland Nordics Poland Czech Republic Denmark Benelux Sweden Luxemburg France Norway DACH Netherlands (Germany, Belgium Switze
Slide 114: UK a well sectorised business
UK a well sectorised business Revenue by sector Defence, Offshore & Remote Sports & Leisure Business & Industry Healthcare & Seniors Education
Slide 115: Continental Europe anchored in B&I
Continental Europe anchored in B&I Revenue by sector Defence, Offshore & Remote Sports & Leisure Healthcare & Seniors Business & Industry Education
Slide 116: Great market opportunity in key sectors
Great market opportunity … in 3 key sectors Food service market 30 £bn 25 20 15 10 5 0 Business & Industry Healthcare & Seniors Education Self operated Other players Compass Note: Compass management estimates
Slide 117: Organic revenue growth
Organic revenue growth New business wins Sales resources Capex as % of sales 10% 360 3% 350 340 2% 5% 330 320 1% 310 0% 300 0% 2012 2015 2012 2015 2012 2015 Invested in sellers & training Use of capex to increase retention Improved quality & variety of offer
Slide 118: A dynamic offer
A dynamic offer Sub- sectorisation Tailored to where client needs appropriate Use of partnerships
Slide 119: Sectors & sub-sectors
Sectors & sub-sectors Defence, Healthcare Business & Sports & Education Offshore & & Seniors Industry Leisure Remote
Slide 120: Staying relevant to the consumer
Staying relevant to the consumer High Street Partners Chef Partners RA Suppliers RA Concepts Underpinned by a universal estate of brands & partners
Slide 121: Innovation: Envision 2020
Innovation: Envision 2020 oe ES F of CANCER BEVERAGE] a ce Dementia are Friends nniiiiecs Univer i : oe mee Wes Ownership re-fresh) myfitnesspal X_ ’ 2 7 COMPASS 2, Storytelling
Slide 122: Beverage strategy
Beverage strategy Meal activation Outlet activation Incidence rate doubled 8% +100% 16% Control incidence incidence +8.6% +15% 60,000 40,000 +132% Test 20,000 +41.6% 0 2015 2016 Meals Drinks = 0.5L PET Equipment placement Entry packs Impulse coolers Incidence growth +50% Food 1st Drink 2nd 3,000 +40
Slide 123: Beverage strategy
° Beverage strategy Foourass ae th Se oe alec . ote iT ms te |e E = I cI peers eee
Slide 124: Server to Seller
° Serverto Seller compass e Unit Sales Tracker a — a — fe ee
Slide 125: Refresh
Refresh Before After
Slide 126: MAP 3 & 4 efficiencies in food costs: Scale
Scale MAP& 3 efficiencies in food costs TODAY Logistic contracts negotiated by 20+ major food logistic country with average volumes providers less than 30,000 tonnes BUSINESS UNIT STRATEGY 2016–2018 <5 logistic providers 840,000 tonnes of Europe volume with scale negotiated with scale providers capa
Slide 127: Efficiencies in labour costs
Efficiencies in labour costs Labour as % of sales 42% 41% 40% 39% 38% 37% 36% 35% 2012 2013 2014 2015 Note: For food service business only
Slide 128: Labour challenges & opportunities
Labour challenges & opportunities Challenges Opportunities OpEx & efficiency Labour flexibility Workplace programmes Aging Low workforce labour turnover Flexible union labour Sensible pricing agreements Targeted absence Fixed headcount National management reductions Financial minimum Increasing wage
Slide 129: Systems implementation integral to success
Systems implementation integral to success 2016 2017 2018 2019 2020 Business Unit 1 Business Unit 2 Business Unit 3 & 4 Business Unit 5, 6 & 7 Business Unit 8 & 9
Slide 130: Targeted M&A
Targeted M&A Increase scale A way to acquire Must be in certain sector expertise disciplined geographies
Slide 131: The right team to deliver
The right team to deliver UK & Eire France Turkey Italy Dennis Hogan Gaétan De L’Hermite Nihat Kartal Fabio Spaccasassi 22 years 12 years 24 years 4 years Benelux & DACH Nordics Iberia CEE Jürgen Thamm Ian Sarson Fernando Pascual Jan Jacob van Donselaar 17 years 11 years 4 years 4 years
Slide 132: Summary
Summary Business Units to gain scale 1 • Organic revenue growth • Lower costs PEOPLE 2 Targeted IT investment and M&A 3 The right team UNDERPINNED BY BUSINESS UNITS
Slide 133: Slide 133
Slide 134: UK & Ireland
UK & Ireland Dennis Hogan Managing Director
Slide 135: Agenda
Agenda UK overview Opportunities & challenges Summary
Slide 136: Compass UK
Compass UK Revenue £2bn Sector brands Business & Business & Industry Industry Healthcare & Seniors Education Offshore & Education Remote Defence Sports & Sports & Leisure Leisure Healthcare & Seniors Defence Offshore & Remote
Slide 137: A large market opportunity
A large market opportunity Food service market Food service market by sector c. £16bn £bn 6 5 Self operated 4 Compass 3 2 Large players 1 0 Small players Business & Healthcare Education Sports & Defence, Industry & Seniors Leisure Offshore & Remote Self operated Other players Compass Note: Compass m
Slide 138: Initial observations / actions
Initial observations / actions • Strong team, but lacking confidence • Increased intensity around retention • Heavier investment in sales & sales support • Sales growth culture: – Alignment of sales, operations & finance • Celebrating success
Slide 139: Financial performance
Financial performance Organic revenue growth 8% 6% 4% 2% 0% -2% -4% H1 2014 H2 2014 H1 2015 H2 2015 H1 2016
Slide 140: Financial performance
Financial performance Organic revenue growth 15% H1 2016 10% 5% 0% -5% -10% Business & Industry Education Healthcare & Seniors Sports & Leisure Defence, Offshore & Remote
Slide 141: Virtuous circle of growth
Virtuous circle of growth PEOPLE
Slide 142: New business
New business 1 Growth culture Sales resource Opportunities pursued Productivity (New wins / sales resource) 100 100% 4 80 80% 3 60 60% 2 40 40% 1 20 20% 0 0% 0 2012 2015 2012 2015 2012 2015
Slide 143: Retention
Retention 1 Retention Contracts up for renewal 40% at the start of the year 95% 93% 30% 91% 20% 89% 10% 87% 85% 0% 2013 2014 2015 2016 H1 2012 2015
Slide 144: Like for like
Like for like 2 Bring the high street in-house Innovative digital solutions
Slide 145: Food costs
Food costs 3 • Replicate US Foodbuy model • Procurement solutions – E-commerce, spend analysis & responsible sourcing dashboards • £300 million managed procurement spend added to £600 million Compass spend • Leverage UK&I purchasing power • Standardising offer
Slide 146: Labour costs
Labour costs 4/5 Headwinds Actions Pricing supported by contractual protection The National Apprenticeship Labour scheduling / time & attendance Living Wage Levy Investment in sales, procurement, marketing funded by back office efficiencies
Slide 147: Summary
Summary • Significant momentum from ongoing investment in sales & retention • Enhance procurement through Foodbuy PEOPLE • Labour efficiencies against economic headwinds • Confident in achieving sustainable growth
Slide 148: Slide 148
Slide 149: Financial Overview
Financial Overview Johnny Thomson Group Finance Director
Slide 150: Highlights from the last 10 years
Highlights from the last 10 years Organic revenue growth 5% CAGR Operating profit growth 10% CAGR Operating profit margin +280bps EPS 20% CAGR Free cash flow generation (pre-capex) £9.5bn Total returns to shareholders £7bn Note: Based on underlying results at constant currency
Slide 151: Organic revenue growth
Organic revenue growth 7% 6% 5% 5% CAGR 4% 3% 2% 1% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Organic revenue growth in the range of 4–6%
Slide 152: Operating profit
Operating profit Operating profit margin 4.4%* 5.1% 5.8% 6.5% 6.9% 6.9% 6.9% 7.1% 7.2% 7.2% £m 1,500 1,200 10% CAGR 900 600 300 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 *Excluding disposed businesses (SSP & Selecta) Underlying figures
Slide 153: Operating margins
Operating margins • Food & labour inflation • Overhead leverage • Restructuring • Labour productivity • Investment in revenue growth • Food procurement • Mobilisation costs Accretive •• LFL volume increases • Retention costs • Price increases Opportunities remain to modestly improve margins
Slide 154: Free cash flow
Free cash flow Conversion £bn 46%* 67% 78% 67% 74% 64% 65% 66% 59% 56% 1.0 0.5 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 We expect free cash conversion to be around 55–60% * Excluding disposed businesses (SSP & Selecta) Underlying figures
Slide 155: Priorities for uses of cash
Priorities for uses of cash Capex M&A Appropriate investment: Required returns > cost of 2.5–3.0% of sales capital by 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 EPS
Slide 156: Group capex
Group capex % of revenues Capex allocation 4.5 2015 3.9 3.6 3.3 2.9 2.8 2.7 2.7 2.5 2.3 2.3 2.3 2.1 1.9 1.9 1.7 New business Retention LFL growth IT and other 2001 2002 2003 2004 2005 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Group UK GAAP Continuing IFRS Appropriate investment at 2.5–3
Slide 157: Capex by region
Capex by region % of regional revenues 4 3 2 1 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 North America Capex includes tangible and intangible assets and assets acquired under finance leases Underlying figures
Slide 158: Capex by region
Capex by region % of regional revenues 4 3 2 1 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 North America Rest of World Capex includes tangible and intangible assets and assets acquired under finance leases Underlying figures
Slide 159: Capex by region
Capex by region % of regional revenues 4 3 2 1 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 North America Rest of World Europe Capex includes tangible and intangible assets and assets acquired under finance leases Underlying figures
Slide 160: M&A
M&A Required returns > country adjusted WACC by the end of Year 2 £m 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 2016 M&A will vary as we identify attractive opportunities
Slide 161: ROCE
ROCE 20% 15% 10% 5% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Underlying figures
Slide 162: Net debt
Net debt £m £7bn returned to shareholders 203 1,000 2,917 2,418 1,095 £5bn reinvested 3,269 in the business 9,562 1,694 3,206 2007 FCF pre- Capex M&A Dividends Share Capital Disposals / H1 2016 opening net capex buyback returns other closing net debt debt
Slide 163: Business model
Business model A proven & sustainable model Growth Organic 1/2 Margin Operating efficiency 3/4/5 Opex Investment Capex Infill M&A Returns to Progressive dividend shareholders Capital returns
Slide 164: Slide 164
Slide 165: Closing Remarks
Closing Remarks Richard Cousins Chief Executive Officer
Slide 166: Summary of the day
Summary of the day Good growth Strong competitive Best team to prospects advantages deliver
Slide 167: Q&A
Q&A
Slide 168: Slide 168