Compass Group Plc · LSE:CPG
Compass — Investor Day (June 2013)
174 slides from Compass's investor day presentation, Jun 13, 2013
Slide 1: Shareholder Conference 13 June 2013
Shareholder Conference th 13 June 2013
Slide 2: Welcome and Group Strategy
Welcome and Group Strategy Richard Cousins Group Chief Executive
Slide 3: Disclaimer
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
Slide 4: Health & safety moment
Health & safety moment • Fire exits • Do not use the lifts • Evacuation Assembly point 4
Slide 5: Objectives of today
Objectives of today • Give a greater insight into the Group • Highlight the growth opportunities we see • Meet some of our senior management • It is not to give an update on current trading 5
Slide 6: Who you'll hear from
Who you’ll hear from Group Richard Cousins Group strategy Dominic Blakemore Financial strategy North America Gary Green North America strategy Amy Knepp Our sales & retention approach Steve Sweeney Growing in Higher Education Europe & Japan Andy Martin Europe & Japan strategy Break 6
Slide 7: Who you'll hear from (cont'd)
Who you’ll hear from (cont’d) Europe & Japan (cont’d) Alfredo Ruiz Plaza Spain: managing a crisis and growing Takeshi Kohjima Compass in Japan Fast Growing & Emerging Richard Cousins Overview of Fast Growing & Emerging Yasar Buyukcetin Opportunities in Turkey Johnny Thomson Focus on Brazil Q&A and c
Slide 8: Group strategy
um Group strategy bd Ce + COMPASS G U INA ATHHAH 8
Slide 9: Health & safety
Health & safety • Number one operational priority • Significant investment in controls and governance • Good progress to date • Food safety performance improved by >30% since 2008 • Lost Time Injury Rate improved by >25% since 2008 • Ongoing commitment to programmes to improve safety leadership and
Slide 10: The Compass story
The Compass story 1988: UK only 1995: growing globally 2006: 100 countries 2013: 50 countries Note: Illustrative only 10
Slide 11: Recent strategic evolution
Recent strategic evolution Phase 1 Phase 2 Phase 3 Phase 4 2006-2008 2008-2010 2010- 2012 2013 - Recession Incisive Fixing the Accelerate and regional basics growth recovery approach • Strategy: driven by geography and market • Performance: focus on revenue, margin and cash flow 11
Slide 12: Delivery through the MAP framework
Delivery through the MAP framework 1 Client Sales and Marketing 2 Consumer Sales and Marketing 3 Cost of Food 4 Unit Costs 5 Above Unit Overheads 12
Slide 13: Good progress on revenue and margin
Good progress on revenue and margin Group revenue (£bn) Group operating profit (£m) £1.2bn H1 2013 margin: 7.3% Avg. organic growth: 5% Margin improvement: +280 bps Note: Underlying profit 13
Slide 14: Strong free cash flow and returns
Strong free cash flow and returns Group free cash flow Total shareholder return (£m) 250 Growth: over 200% Compass increase: over 300% FTSE 100 increase: 36% 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 Compass FTSE 100 14
Slide 15: Clear and consistent strategy
Clear and consistent strategy Food and support services Organic top line growth Geographic spread & emerging markets Infill M&A Efficiencies • Food (MAP 3) Continued margin • Labour (MAP 4) progression • Above unit (MAP 5) Capex Progressive dividend Strong cash flow Infill M&A Shareholder value Retu
Slide 16: Evolving geographic profile
Evolving geographic profile 2002 2012 The Future? Fast Growing & Emerging 16
Slide 17: Different opportunities in each region
Different opportunities in each region Region H1 2013 organic Revenue opportunity Margin opportunity growth rate North America 8.2% Ongoing Steady expansion Europe & Japan (3.6)% Modest Further efficiencies Fast Growing & 10.5% High growth rates Balance with investment Emerging 17
Slide 18: Food: Significant structural growth opportunity
Food: Significant structural growth opportunity 56% 56% 83% 27% 44% 10% 7% • Food service market c.£200bn, 44% outsourced • Over 80% self operated or small regional players • Compass 7% of market; top 4 are 17% • Underpenetrated sectors Note: market data figures based on Compass Group management est
Slide 19: Food: Good opportunities across all sectors
Food: Good opportunities across all sectors • Well diversified across sectors 2012 Group revenue by sector • Good opportunity from ‘greenfield’ sites & increased outsourcing in B&I • Growing presence in Healthcare & Education • Significant opportunity 19
Slide 20: Support and multi services Group revenue split: FY 2012
Support and multi services Group revenue split: FY 2012 24% • Now a significant part of the Group • Incrementally building capacity • Organic and inorganic growth Support & multi services sector split (£4.1bn) • A significant opportunity; disciplined approach Support & Multi Service Revenue 2006: £1
Slide 21: Support and multi services: Sector approach
Support and multi services: Sector approach Sector 2012 revenue Market trend Strategy Defence, Offshore & £1.7bn • Predominantly multi service • Market leading position Remote • Excellent opportunities • Ongoing organic growth Business & Industry £1.2bn • Some bundling by multi nationals • Continue
Slide 22: How we drive organic growth
How we drive organic growth • Invest in sales teams, process • Service excellence & training • Innovation and training • Innovation and quality • Intelligent marketing • Continued focus on improving retention • Measure success • Exciting pipeline Focus on quality, sustainable organic growth 22
Slide 23: How we generate efficiencies
How we generate efficiencies • Menu management Food • Product & supplier rationalisation • Logistics and waste reduction • Labour productivity In-unit costs • Scheduling and planning • Better controls • Good progress to date; remains a focus Overheads • Simplify processes & reduce duplication • Oper
Slide 24: Infill M&A
Infill M&A M&A SPEND: 2008 – 2013 • Nearly £1.3bn spent on acquisitions since 2008 FOOD SERVICE MULTI SERVICE £677m £584m • Preference for small-mid size infill INCLUDING • Food and support services £328m IN FAST GROWING & EMERGING • Existing geographies TOTAL: £1.3bn • New capabilities and strong m
Slide 25: Management
Management • Some parts of Compass have and had excellent management teams • Others needed strengthening • Since 2006, of top 500 leadership team: • 1/3 new to Compass • 1/3 moved within • 1/3 unchanged • Investing in people for the future 25
Slide 26: Summary
Summary Organic Top Line • Significant progress over last 7 years Growth • BUT still great opportunities ahead • Delivery of consistent strategy Continued Margin Potential • Focus on top line growth and efficiencies • Clear geographic priorities Strong Cash Flow & Shareholder Value • Strong manageme
Slide 27: Financial Strategy
Financial Strategy Dominic Blakemore Finance Director
Slide 28: Key highlights from half year results
Key highlights from half year results • Overall good financial performance • Organic revenue growth +4.1% • Margin progression +15bps • Constant currency EPS growth +10.9% • Underlying free cash flow generation £386m • Interim dividend of 8.0 pence per share +11.1% 28
Slide 29: Historic financial performance
Historic financial performance Group revenue (£bn) EPS (pence) Avg. organic growth: 5% 2012 earnings 2x dividend Group operating profit (£m) Group free cash flow: (£m) Growth: over 200% Margin improvement to H1 2013: 280 bps Note: Underlying figures 29
Slide 30: Financial strategy
Financial strategy • Strong free cash flow Management of working capital • Capital expenditure Appropriate investment – around 2.3% revenue • Progressive dividends Growth in line with constant currency earnings Maintaining cover around 2x • Disciplined infill M&A Required returns > cost of capital b
Slide 31: Strong free cash flow – Management of working capital
Strong free cash flow – Management of working capital 70 +12 days Working capital 60 improvements -5 days £400m in total 50 40 30 -1 day 20 10 0 Debtors Days Creditor Days Inventory Days 2006 2012 31
Slide 32: Capital expenditure – What we spend
Capital expenditure – What we spend Gross Capex • 85% of capex on revenue generating activities Spend by Type • New business - a competitive advantage • Retention - to help retain the contract • Base estate - to drive participation & spend New Business Retention Base Estate Maintenance & IT 32
Slide 33: Capital expenditure – Evaluation & control of spend
Capital expenditure – Evaluation & control of spend • Disciplined process for capex approval Gross capex spend % of revenue 5% 4.5% 5% • Post investment appraisals 4% 3.9% 3.6% 4% 3.3% 3% 2.9% • Returns over 20%, post tax 3% 2.5% 2.1% 2.3% 2.3% 2.3% 2% 1.9% 1.9% 1.7% 2% • Average spend on capex c.2.
Slide 34: Capital expenditure – Case studies
Capital expenditure – Case studies Case Study 1: Retention Case Study 2: New business • Signed 10 year contract in 1999 • New 10 year contract in 2011 • Introduced capex to secure 20 year • Used capex as part of the bid: extension in 2009: • Investment in regional and national retail brands • Refurb
Slide 35: Progressive dividend policy
Progressive dividend policy • Growth in line with constant currency earnings, maintaining cover around 2x • Earnings and cash cover moved 25p 35% 30% from 1x to 2x since 2006 20p 25% 15p 20% • Rebased dividend in 2010 10p 15% 10% 5p 5% • Dividend doubled since 2006 - 0% 2006 2007 2008 2009 2010 2011
Slide 36: Disciplined infill M&A – Strategy
Disciplined infill M&A – Strategy Total spend since 2008: £1.3bn £677m M&A criteria £569m £584m £364m £328m • Strategic fit • Scale and capability NA E&J FG&E Food SuS Post tax returns • Quality business, strong management 2008 to 2010 deals (£550m spend) 12% 11% 10% 10% • Required returns in excess
Slide 37: Disciplined infill M&A – Case study
Disciplined infill M&A – Case study Clean Mall, Brazil • Acquired 2010 • Consistent with our M&A strategy • Support services specialist • Cross sell opportunity • Year 2 ROCE over 20% 37
Slide 38: Surplus capital efficiency – Returns to shareholders
Surplus capital efficiency – Returns to shareholders • Committed to an efficient balance sheet • Target to maintain strong investment grade credit ratings • Moody’s Baa1 • S&P A- • Adjusted gross debt / EBITDA of 2.2x to 2.3x (Net debt / EBITDA, 1.0x – 1.2x) • £900m of share buy backs during calenda
Slide 39: Conclusion
Conclusion Since 2006 we have delivered the following: • Average organic revenue growth 5% • Total margin progression 280bps • Underlying EPS growth > 400% • Free cash flow £3.8bn • Dividend growth > 100% • Capital returns £900m 39
Slide 40: North America Strategy
North America Strategy Gary Green CEO, North America
Slide 41: North America today
North America today • Market leader • $12 billion business • 6 million meals a day across 48 states • 11th largest private sector employer in the US • 190,000 employees • Winning portfolio of brands Note: Compass Group management estimates 41
Slide 42: Track record of performance 2002 - 2012
Track record of performance 2002 - 2012 Revenue ($bn) • Grown from $5bn to $12bn • > 6% annual organic revenue growth • Improved margin to 8% Operating profit ($m) • Great momentum 42
Slide 43: How have we delivered this?
How have we delivered this? 1. Geographic coverage and sector presence 2. Sales and retention culture 3. Quality of offer and innovation 4. Scale leverage and efficiencies 5. Experienced management & quality people 43
Slide 44: Acquisitions created the platform
Acquisitions created the platform Service America Professional Coffee Services Distributors 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (Lackm Medidyne 44
Slide 45: Well balanced & diversified business
Well balanced & diversified business • Wide geographic presence: 48 states, 10 provinces & 2 territories • Access to all market segments North American market Compass Group North America 2012 revenue Vending, Vending B&I 11% 18% 15% DOR, 5% B&I, 29% DOR 4% Sports & Leisure, 10% Sports & Healthcare L
Slide 46: Sectorised approach to the market
Sectorised approach to the market Sector Compass brands Example contracts Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote 46
Slide 47: Sales & retention culture
Sales & retention culture • Sales force - from generalists to specialists; professionally trained • Step change in retention Annual new business ($m) Retention rate Sales resource (generalists Productivity $m Win ratio to specialists) (new wins / sales person) 1994 2012 47
Slide 48: High quality offer & innovation
High quality offer & innovation • Quality offer at all market levels • Innovation • Excellence in marketing • Focus on participation and spend 48
Slide 49: Scale leverage and efficiencies – MAPs 3 & 4
Scale leverage and efficiencies – MAPs 3 & 4 • Reconfigured the purchasing model • People Share • Professional team of specialist buyers • E-procurement • STAFF (labour scheduling) • Sourcing • In-unit systems to reduce admin burden • Wholesalers to manufacturers • My Finance (p/l review) • Supplier
Slide 50: Scale leverage and efficiencies – MAP 5
Scale leverage and efficiencies – MAP 5 Reduced MAP 5 above unit overheads by >$200 million through: • Closing 27 field accounting centers • Integrating over 100 acquisitions • Replacing the legacy systems with SAP… • Whilst supporting $11 billion of new account openings and…. • Investing in the cre
Slide 51: Experienced management and quality people
Experienced management and quality people ATTRACT • Investment in Resource Network • Johnson & Wales partnership • Rewards/incentives RETAIN • ‘High touch’ style • Stable, performance-oriented team • Be-A-Star program DEVELOP • Visible communications • Training programs 51
Slide 52: The future
The future 1. Large and growing addressable market 2. Positive outsourcing trends 3. Market leading businesses, offers and brands 4. Ongoing efficiencies 5. A capable & motivated team 52
Slide 53: Large and Growing Addressable Market
Large and Growing Addressable Market • $72bn addressable food service market • 65% self operated / small, regional 42% 42% 65% players 23% 58% 21% 14% • Healthcare and Education <40% outsourced • Opportunities across ALL sectors Note: market data figures based on Compass Group management estimates 5
Slide 54: Positive outsourcing trends
Positive outsourcing trends • Healthy outsourcing culture • Rising costs / austerity driving new outsourcing interest • Big contract potential: Higher Education & Healthcare • Actively pursuing opportunities 54
Slide 55: Market leading businesses: Business & Industry
Market leading businesses: Business & Industry • Core engine of growth • All market levels – Bon Appetit / RA / Eurest • New greenfield sites and small regional players • New formats: small store, grab ‘n’ go 55
Slide 56: Healthcare & Seniors
Healthcare & Seniors • $16 billion market; 40% outsourced & accelerating • Compass $2bn; growing at 6-8% • Patient, staff & visitor feeding • Large contract potential and bundling • Exciting future opportunities Note: Compass Group management estimates 56
Slide 57: Sports & Leisure
Sports & Leisure • Convention facilities, concert and performance venues, racetracks, stadiums and arenas • Restaurant heritage; retail mindset • Good opportunities in sports and other sectors 57
Slide 58: Vending & office coffee service
Vending & office coffee service • Market leader with $1.2bn annual revenue • National coverage with nearly 100 branches, plus franchise network • Rapid growth in office coffee service • Good opportunities to grow with all sectors • Recent innovations - Cashless systems (Avenue C) - Healthy choices (
Slide 59: Support services
Support services NA 2012 revenue: $12bn • Acquired 2001, 20% CAGR, now $1.8bn 6% 21% 15% • Core Healthcare support services 79% • Extended into Education & B&I • Stand-alone or multi service offer • Disciplined expansion into new services A strong platform to grow 59
Slide 60: Some potential headwinds but further efficiencies
Some potential headwinds but further efficiencies • Further SKU rationalization • Leverage 3rd party volumes • Webtrition (menu engineering / recipe database) • “Other costs” (e.g. uniforms & apparel) • Emerging technology (i.e. scan & swipe checkout) • Labour management systems (i.e. biometrics) •
Slide 61: Summary
Summary • Leader in a growing market • Leading offers/brands/clients across the sectors • Vibrant outsourcing trend • Excellent sales and retention • Further opportunities to leverage scale • Experienced and motivated team • At all levels of the business An exciting future ahead Note: Compass Group
Slide 62: North America Sales & Retention
North America Sales & Retention Amy Knepp Executive VP Strategic Alliance Group
Slide 63: The science of selling Compass Group
The science of selling Compass Group • 150+ person, professionally-trained, experienced sales force • Sector-focused • Proposal Development Center • Extensive annual training & personal development • Compensation aligned to emphasize ROI and cash flow 63
Slide 64: The science of selling Compass Group
The science of selling Compass Group • Managing the Sales force • Territory management • Database management: right client, right time • Managing the Process • Research • WITY • Buyers Grid • Proposal development • ALWAYS involve operations and finance • Dream fulfillment: delivering the promise 64
Slide 65: Why is retention important?
Why is retention important? Retention of your business is critical to the overall health and is reflective of the overall health of our organization 65
Slide 66: Strategic Alliance Group (SAG)
Strategic Alliance Group (SAG) • Dedicated resource started in 1995 • Very selective hiring criteria • Team members have operational experience • Territory management • Use the Sales Funnel process • Pre-emptive & proactive 66
Slide 67: The process for clients and operators
The process for clients and operators • SAG White Paper discussions with operations • Value Improvement Process Interviews (VIPIs) • Strategic ‘gap analysis’ & action plan development • Proforma development • Proposal development • Presentation 67
Slide 68: Key success factors
Key success factors • Right people • Operational trust • Follow the Process • Belief in the virtuous circle 68
Slide 69: How will your clients answer?
How will your clients answer? • Have we solved the problem(s) we were hired to solve? • Have we proactively brought innovation? • Do we have the right relationships? • Do we have your loyalty? • Will you give an unqualified referral? If our contract was up today, would you renew? 69
Slide 70: It's a culture!
Strategic Alliance Group It’s a culture! 70
Slide 71: U.S. Higher Education
U.S. Higher Education Steve Sweeney CEO, Chartwells
Slide 72: Compass and the addressable U.S. education market
Compass and the addressable U.S. education market Compass North America 2012 revenue: $12 billion Addressable market ($23 billion) Healthcare & Seniors, 19% Education: 61% 26% of revenue ($2.8bn) B&I, 29% 39% Sports & Leisure, 10% Vending, 11% DOR, 5% • Significant business; strong position • Large
Slide 73: Compass' education business
Compass’ education business K-12 Higher Education • Large market; low outsourcing penetration • Large market; trend to outsourcing • Chartwells serves over 550 school districts • Serving 230 universities • Health & wellness: “Nutrition that tastes good” • Customized approach • Multi-year approach •
Slide 74: Focus on the higher education market
Focus on the higher education market • Huge potential market; over $4 billion self operated • >4,400 possible locations… • Representing 21 million students • Large campuses; student populations >20,000 • Clear trend to outsourcing 74
Slide 75: U.S. higher education: Top self-op campuses
U.S. higher education: Top self-op campuses ($1bn) CAMPUS REVENUE CAMPUS REVENUE Pennsylvania State University $106M Purdue University $46M Michigan State University 62 University of Illinois Urbana-Champaign 43 Rutgers University 60 Brigham Young University 42 University of Massachusetts Amherst 60
Slide 76: U.S. higher education market trends
U.S. higher education market trends DRIVING FORCES State directives Falling endowments Cuts in Better food, government service, funding facilities Capital investment for renovation Student Retention Allows clients to concentrate on their core business 76
Slide 77: Chartwells self-op conversions
Chartwells self-op conversions 77
Slide 78: Texas A&M University
Texas A&M University • Opened in 1876 • 6th largest public university with 50,000 students • 804 campus buildings covering 8 sq. miles • 42 dining concepts • 30,000 meals served per day • 1500 Compass employees on site • Range of support services 78
Slide 79: Texas A&M: The bid process - WITY
Texas A&M: The bid process - WITY • Learning the campus culture • On-campus interviews – the WITY process • Mapping the campus • Determining ‘best value’ proposition - Quality - Service - Price • Assemble management team – local and national • Ask – Listen – Deliver 79
Slide 80: Mobilisation and lessons learned
Mobilisation and lessons learned • Quick turn around • Mutual support – Chartwells & SSC • On boarding – It’s personal • Webtrition – STAFF – Foodbuy • Communication – Press conference • Our product – Our services 80
Slide 81: In conclusion
In conclusion • The outsourcing option is compelling • The pipeline is robust • Schools, Higher Education, support services • We have the resources – sales – operations • Ability to meet client requirements: food, support services or bundled • Reputation – references 81
Slide 82: Final Thoughts
Final Thoughts Gary Green CEO, North America
Slide 83: No complacency!
Final Thoughts ORGANIC REVENUE OPERATING GROWTH EFFICIENCIES PEOPLE COMPETITIVE ADVANTAGE NO COMPLACENCY! 83
Slide 84: Europe & Japan Strategy
Europe & Japan Strategy Andrew Martin Group COO, Europe & Japan
Slide 85: Introduction to Europe & Japan
Introduction to Europe & Japan Revenue 2012 North America £ 7,517m Europe & Japan £ 6,243m Fast Growing £ 3,145m 85
Slide 86: Overview of the Compass region
Overview of the Compass region • 35% of Group revenue, 23 countries • Economically/demographically more mature • Short term economic challenges • Good medium term opportunities 86
Slide 87: Well-diversified business geographically
We have a well-diversified business geographically... • 70% of revenue in E&J from top 5 countries: • UK • France • Japan • Germany • Spain • Exited 10 countries including: • Greece • Cyprus • Croatia 87
Slide 88: …and by sector
…and by sector Business & Healthcare Sports & Defence, Offshore Industry Education & Seniors Leisure & Remote 56% 12% 15% 11% 6% 88
Slide 89: We can deliver food and support services
We can deliver food and support services Food service, 85% Support services, 15% 89
Slide 90: Food is our core offer
Food is our core offer Sector Compass brands Example contracts Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote 90
Slide 91: Responding in support services
Responding in support services • Bundling in B&I – mainly northern Europe - multi nationals • Trend in UK Healthcare, elsewhere less obvious • Capability where needed through M&A / organic growth and / or partnerships Cleaning Landscaping Reception Security Light maintenance Laundry 91
Slide 92: Economic conditions - Material decline
Economic conditions - Material decline GDP growth for the Eurozone • Declining GDP & downward revisions to forecasts • OECD forecasts for 2013 -0.6% • Post 2008/9 short recovery Rate of unemployment for the Eurozone 12.1% • Unemployment still rising 7.6% • Outlook uncertain 92
Slide 93: Like for like volumes hit
Like for like volumes hit • Increasingly negative trends; 3 year Like for like volume declines (%) decline 5.5% • All sectors impacted • Decline 2013 c.3% • Mitigation - significant labour cost reduction 93
Slide 94: Varied picture across region
Varied picture across region Northern and Eastern Europe Good new business wins Mixed LFL volume Western Europe & Japan Good new business in some countries Pressure on LFL volume incl. France Southern Europe Strong new business in Spain Strongly negative LFL volume 94
Slide 95: Financial performance
Financial performance Revenue (£m) • Revenue affected by economic conditions • Operating margin up 150 bps Operating profit (£m) and margin (%) • Cash generation significantly improved 4.9% 6.4% • Still lots to go for! Free cash flow (£m) Note: 2006 financials are stated on a constant currency basis
Slide 96: Decisive action taken
Decisive action taken Restructure Southern Europe Increased cost efficiency • Exit poor performing contracts • Food cost reduced / quality traceability improved • Non-core businesses disposed • Labour costs – reduced headcount, • Debtors reviewed increased flexibility • Office space consolidated • C
Slide 97: Case study: Reducing duplication
Case study: Reducing duplication Product rationalisation – UK example • Blue cheese varieties 145 to 15 • Improved control / traceability • Economies of scale • Across entire UK product base: ARO benefit £20m Many opportunities in other countries 97
Slide 98: Cost of labour framework
Cost of labour framework Flexibility Work patterns : Day? Week? Month? Planning Controls “…deliver the How many hours? right service Who to pay? From whom? How many hours? quality at the Doing what? What cost? When? How? lowest net cost…” 98
Slide 99: Progress made
Progress made Announced September 2012 Delivered H1 2013 • (3)% LFL volume declines expected • (2.5)% LFL decline actual • Potential FY £60m profit impact • Actual H1 c.£25m profit impact • Immediate & intense labour • Action plans ahead of schedule cost reduction • £30m savings H1 • Significant sav
Slide 100: Looking forward
Looking forward Drive Cost Efficiency Top Line – Sharp Focus • Reduced fixed labour costs • Sales & training – ongoing investment • Greater labour flexibility • Retention best practices roll out • Simplified & lower cost processes • Food offer – continuous innovation • Lean organisational structure
Slide 101: Driving the top line
Driving the top line • Food service market c.£100bn, 47% outsourced 53% 53% • >80% self operated / small regional players 34% 47% 8% 5% • Fragmented ~ many regional operators 13% • Underpenetrated sectors, Healthcare & Education <35% outsourced • Opportunity to grow in ALL sectors Note: market data
Slide 102: Case studies: New business & retention
Case studies: New business & retention New • Better process business in • Expanded sales force across sectors France • Greater focus on quality 96% 93% 94% • Increased priority Retention • Implementation of ‘SAG’ process in Japan • Total commitment 102
Slide 103: Further efficiencies
Further efficiencies • Range of margins: 4% to 11% H1 2013 margin by country 12% • Further efficiencies in under 10% performing countries 8% Region: 6.9% 6% • Steady progress in others 4% 2% • MAP framework – ongoing intensity 0% Individual countries 103
Slide 104: Good medium term opportunities
Good medium term opportunities • Focus on quality / sustainable new business Revenue • Improve retention • When economy stabilises – flat LFL volumes? • Continue to drive efficiencies Margin • Lower and more flexible cost base Target: organic revenue growth & steady margin improvement 104
Slide 105: Compass Group Spain
Compass Group Spain Alfredo Ruiz Plaza Managing Director Iberia
Slide 106: Compass has a presence in key areas of Spain
Compass has a presence in key areas of Spain... BASQUE COUNTRY Region % revenue Bilbao Catalunya 30 Madrid 20 CATALUNYA Basque Country 10 Valencia 8 MADRID MALLORCA Canary Islands 5 Mallorca 5 VALENCIA Primary regions 78 Rest of Spain 22 CANARY ISLANDS 106
Slide 107: A balanced business across sectors
And a balanced business across sectors 2012 revenue: €338m Note: additional 1% of revenue generated from Sports & Leisure 107
Slide 108: We have a strong position in an attractive market
We have a strong position in an attractive market 6.0 Market Landscape (€5.6bn) 5.0 55% 55% Self operated • Food service market of c.€5.6bn 4.0 83% Small Regional 3.0 2.0 28% Large Players • >80% self operated / small regional players 45% 1.0 12% Compass 5% 0.0 • <50% outsourced • Opportunities to g
Slide 109: Good financial performance since 2006
Good financial performance since 2006 Revenue (€m) Avg. organic growth: 5% • Solid growth in new business and improving retention • ...but pressure on LFL for last 3 years • Significant margin improvement Operating Profit & Margin Improvement Margin improvement: +140bps • Focus across all areas of M
Slide 110: Economic backdrop
Economic backdrop Rate of GDP growth • Declining GDP since 2008; expected to continue through 2013 • Downgrades to economic forecasts Rate of unemployment Continuing • Large government deficit Economic Slowdown • Unemployment rate now 27% Source: Ministerio De Economia Y Hacienda & ANFAC 110
Slide 111: Impact of the economy on Compass
Impact of the economy on Compass Sector Issue Impact on Compass B&I • Headcount reductions • Smaller consumer population • Lower subsidies • Pressure on client & consumer • Reduced client & consumer budgets spend Education • Changing school hours • Lower demand for school • Lower levels of funding m
Slide 112: Like for like volume trends
Like for like volume trends • Increasingly negative trends; 3 year Like for like volume declines (%) decline of nearly 10% • Impact across all sectors Avg. -1.5% Avg. -2.5% • €25m impact on revenue since 2011 • Mitigated by significant reduction Avg. -5.0% in labour cost 112
Slide 113: Decisive action taken
Decisive action taken • 40% reduction in number • Reduced headcount • Downsized & relocated of products head office; closed • Changed contract regional offices • 70% of volume now structure to enable delivered through one greater flexibility • Standardised back office logistics partner processes 113
Slide 114: Actions also focused on driving the top line
Actions also focused on driving the top line • Increasingly selective on new business • Reviewed contract portfolio • Fixed / exited poor performing contracts • More selective of counterparties • Re-focused top line • Strengthened sales force • Invested in retention • Strengthened working capital co
Slide 115: Good quality, sustainable new business
As a result, we’ve delivered good quality, sustainable new business • Acceleration in trend to outsourcing • Refocused sales force, better training • More selective • Delivering gross new business of c.10% • Quality, sustainable contracts 115
Slide 116: Case study: New business win
Case study: New business win • 2012 new business: contract length 7 years • Annual revenue £520k • Our game plan: • Redefinition of the offer: variety in menus / new on-site manager / investment • Best practice on B&I 116
Slide 117: Case study: Improving underlying retention
Case study: Improving underlying retention • Client since 1981; extended in 2012 for another 10 years • Biggest B&I account in Spain with an expansion plan to double their Madrid Campus • Annual revenue £4.6m • Our game plan: • Proactive culinary solutions to handle new students’ diversity: 60% of M
Slide 118: Good growth opportunities
Good growth opportunities • Good market opportunity • B&I: consolidate position, adjust consumer offers • Healthcare: well positioned for new public / private contracts • Higher Education: strong platform to grow • When economy stabilises, strategy should deliver organic revenue growth and steady ma
Slide 119: We are well placed for the short & medium term
We are well placed for the short & medium term • Short term economic outlook difficult, but we’re taking action to manage it • Exciting market opportunities • Investing to drive top line • Further scope to drive efficiencies • Restructured cost base will give us a competitive edge Cautiously optimis
Slide 120: Compass Group Japan: Seiyo Food
Compass Group Japan: Seiyo Food Takeshi Kohjima Managing Director
Slide 121: Compass has a presence in all the major cities
Compass has a presence in all the major cities... Region % revenue Tokyo 46 Osaka: population 17.1m Osaka 8 Fukuoka 6 Nagoya 2 Fukuoka: population 5.1m Primary regions 62 Tokyo: population 35.7m Rest of Japan 38 • • • • Population of 128 million people 50% live in these 4 cities Nagoya: population 7
Slide 122: A balanced business across a range of sectors
And a balanced business across a range of sectors • Predominantly Business & Industry 2012 revenue: JPY 100bn Retail, 4% • Good exposure to growing Healthcare & Sports & Seniors market Leisure, 16% B&I, 40% Highways, • Some opportunities in Higher Education 14% Healthcare & • Solid businesses in Spo
Slide 123: We have a strong position in an attractive market
We have a strong position in an attractive market • Food service market of c.¥5tn, c.56% 44% 44% outsourced 43% 56% 2% • Fragmented industry ~ the 15 largest players 11% account for less than 20% of market 13% • Good growth opportunities – ALL sectors Note: market data figures based on Compass Group
Slide 124: Compass' development in Japan
Compass’ development in Japan • Exited high street restaurant business to focus on contract catering Retention rate (%) • Strategic acquisitions 96% • Chiyoda (B&I), Sun Food (B&I, Healthcare, Education), NKS (Healthcare) 93% • Significant increase in retention rate 2.8% 6.3% 2006 2012 • Margin more
Slide 125: Focus on top line best practice
Focus on top line best practice • Ongoing investment in the sales team • Implementation of US retention model • Increased focus on consumer proposition to drive spend 125
Slide 126: Case study: Retention & new business
Case study: Retention & new business • Started operating head office cafeteria in 2006 • Re-bid in January 2013, including innovative offers: • “My choice” (food offer by calories) • Café Liscio • Successfully retained and expanded the contract; increased revenue by over 30% • Currently operate 11 S
Slide 127: Ongoing drive for efficiencies across MAP
Ongoing drive for efficiencies across MAP • Focus on product rationalisation • External SKUs: 22,000 7,400 • Approved suppliers: reduced by 30% • Estimated saving: JPY 500m • Efficiency in labour and utilities costs • Focus on using flexibility already available • Reorganised business; continued red
Slide 128: Flat macro environment likely to continue
Looking forward, flat macro environment likely to continue GDP growth • Little / no GDP growth • Deflationary backdrop Continuing Economic Slowdown • New government committed to CPI growth revitalising economy • 2% inflation target Source: Cabinet Office & Ministry of Internal Affairs and Communicat
Slide 129: Good opportunities from demographic trends
But there are good opportunities from demographic trends Total population (millions) • Population declining • But increasing rate of retirement among ‘baby boomers’ • People aged over 65 will comprise more than 30% of the population by 2020 Distribution of population by age +70% • Highest life expec
Slide 130: Particularly in Healthcare & Seniors
Particularly in Healthcare & Seniors Healthcare & Seniors market Compass’ position • Estimated size: JPY 1.3 trillion • Top 6 player; strong growth • Approx. 50% currently self operated • Acquisition of NKS in 2012 to accelerate organic growth • Fragmented market • Based in Tokyo (doubled our presen
Slide 131: We will maintain our focus on driving the top line
We will maintain our focus on driving the top line • Ongoing growth in B&I • Healthcare & Seniors increasingly important • Ongoing investment in sales and retention • Market consolidation opportunities Bank of Metropolitan Police Japan Head headquarters Office 131
Slide 132: As we move into the next phase of efficiencies
As we move into the next phase of efficiencies • Significant supplier rationalisation opportunities • Improved logistics • Better deals with wholesalers • Forecasting labour requirements, by day, for the week ahead • Using existing flexibility in labour force 132
Slide 133: Good future opportunities
Good future opportunities • Strong market position, particularly in B&I and Healthcare • Great potential for organic growth • Opportunities for infill M&A • Continue to generate efficiencies, which can • Benefit the bottom line; and • Help us to grow 133
Slide 134: Fast Growing & Emerging Strategy
Fast Growing & Emerging Strategy Richard Cousins Group Chief Executive
Slide 135: Significance of fast growing & emerging economies
Significance of fast growing & emerging economies Over the coming decades, emerging Global GDP Growth economies will: • Contribute majority of global growth • See significant increases in working populations • Generate greater income per capita and discretionary spend Developed Markets Emerging Mark
Slide 136: What Does This Mean for Compass?
What Does This Mean for Compass? Huge opportunity but discipline needed
Slide 137: Growing significance to the Group
Growing significance to the Group 2002 2012 Revenue increased from £750m to £3.1bn 137
Slide 138: Streamlined focus within the region
Streamlined focus within the region Current countries Exited since 2003 Australia China Bahrain Oman Cameroon Venezuela Brazil Algeria East Timor Israel Turkey Indonesia Kuwait Zambia Malawi South Africa Angola Burundi Tanzania Eritrea Chile India Liberia Swaziland Botswana UAE Russia Cambodia Ghana
Slide 139: Strong financial performance
Strong financial performance Revenue (£bn) & Organic Growth (%) • Achieving scale in chosen markets • Investing in management and processes 16.0% 14.0% 13.7% 5.3% 9.6% 14.5% 11.8% • Focus on sustainable, disciplined growth Operating Profit (£m) & Margin (%) • Profit quadrupled; margin increased 390b
Slide 140: Significant structural growth opportunity
Significant structural growth opportunity 73% 73% 95% 22% 27% 2% 3% 5% • Food service market c.£58bn – Only c.27% outsourced • Underpenetrated sectors but developing • Building scale across region • Huge opportunity Note: market data figures based on Compass Group management estimates 140
Slide 141: How we manage the region
How we manage the region 2012 Revenue By Sub-Region Central CentralAsia, Asia, Middle Middle East&& East Africa, Africa,£0.4bn £0.7bn Latin America, Latin America, £1.1bn £0.6bn Pacific & South/ East Asia, Pacific £0.7bn& South / East Asia, £1.3bn 141
Slide 142: Overview of Australia & New Zealand
Overview of Australia & New Zealand COMPASS OFFICES REGIONAL OFFICES Australia 13,000 employees | 650+ locations New Zealand 3,000 employees | 330+ locations 142
Slide 143: Australia: Market leadership in Defence, Offshore & Remote
Australia: Market leadership in Defence, Offshore & Remote Australia revenue (AUD m) Avg. organic growth: 13% • Australia FY 2012 revenue £1bn; 6% of Group • Mainly DOR but excellent balance 2012 DOR revenue • Good profitability and strong management • Healthy pipeline but coming off peak of growth
Slide 144: DOR Case Study: Port Haven – Pilbara
DORCASE in Action STUDY: PORT HAVEN – PILBARA, WESTERN AUSTRALIA
Slide 145: Case Study of Curtis Island
Case Study of Curtis Island • Awaiting information from Australia – chased on 31 May CASE STUDY: CURTIS ISLAND, QUEENSLAND
Slide 146: Compass Group Turkey: Sofra Group
Compass Group Turkey: Sofra Group Yaşar Büyükçetin Managing Director
Slide 147: Turkey has a rapidly growing economy
Turkey has a rapidly growing economy • GDP of $800bn, up from $230bn in 2002 • Expected to be fastest growing OECD economy in 2011 - 2017 • Forecast to have 3rd highest growth rate globally by 2017, behind China & India • Over $100bn of foreign direct investment over last 9 years Source: OECD 147
Slide 148: And positive demographics
And positive demographics Forecast changes in population demographics (millions) • Population of 76 million • Estimated to grow to 100m by 2023 • Average age of 29 • Labour force: 28 million • Student population: 25 million 148
Slide 149: Compass is present across the country
Compass is present across the country • • HQ in Istanbul; 13 regional offices • 19,000 employees in 2,000 units; 8th largest employer in Turkey • Significant progress on HSE 149
Slide 150: Wide ranging client base
Wide ranging client base: Domestic & international clients 150
Slide 151: Strong revenue and margin growth
We have delivered strong revenue and margin growth • Revenue more than tripled Revenue (TL m) c. 700 • Average annual organic growth of c.15% • Some infill M&A c. 200 • Margin improved by over 300 basis points Note: above numbers on a pro forma basis, assuming 100% ownership of Sofra before 2011 151
Slide 152: Drivers of organic growth
Drivers of organic growth • Strong new business • Improving retention • Pricing reflects inflation • Positive like for like volume growth 152
Slide 153: Food service market opportunity
Looking forward - Food service market opportunity Private sector food market (c.TL 8bn) • Private sector food service market of c.TL 8bn • Currently 36% outsourced; growing rapidly • Compass has a market leading position Public sector food market (c.TL 30bn) • 90% of private sector market self opera
Slide 154: Opportunity in support services
Opportunity in support services Private sector support services market (c.TL 12bn) • Large support services market, 32% outsourced & growing • Now 19% of Compass Turkey revenue • Focus on cleaning and security Breakdown of 2012 revenue • Some demand from international companies for multi services •
Slide 155: For example, Philip Morris
For example, Philip Morris HQ & Camlica DC Gunesli DC Samsun DC Bursa DC Philsa Izmir DC Antalya DC Ankara DC Adana DC 155
Slide 156: Key facts
Key facts Overview Service Delivery • Multi services contract • From 26 service providers to 1, covering • 5 year contract and renewable • Food service • Annual turnover of €10m • Cleaning • 500 employees deployed • Business & office services • Light Maintenance • Outdoor services Benefits to the Cl
Slide 157: Opportunities to grow from a solid base in Business & Industry
There are opportunities to grow from a solid base in Business & Industry 2012 Revenue by Sector • Opportunities in multiple sectors and services • Large and fast growing country • Established presence in B&I; still significant opportunities • Education and Healthcare underpenetrated 157
Slide 158: Continue to drive revenue growth and efficiencies
We will continue to drive further revenue growth and efficiencies • Continuous focus on HSE and quality • Good performance to date but more to go • Positive economic backdrop • Outstanding opportunities for organic growth, supplemented by infill M&A • Potential for further efficiencies 158
Slide 159: Compass Group Brazil: GRSA
Compass Group Brazil: GRSA Johnny Thomson Managing Director
Slide 160: Brazil: Positive fundamentals
Brazil: Positive fundamentals • Very diversified economy • Good demographics • Improved public financial management • World Cup / Olympics • Significant economic growth 160
Slide 161: Brazil's economy has experienced significant growth
Brazil’s economy has experienced significant growth 2002 2012 Growth 2002-12 USA USA 1.5x Japan China 5.5x Germany Japan 1.5x UK Germany 1.7x France France 1.8x China Brazil US$ 2.3 trillion 4.5x Italy UK 1.5x Canada Italy 1.6x Mexico India 3.6x Spain Russia 5.9x Brazil US$ 0.5 trillion Canada 2.4x
Slide 162: Compass has scale in Brazil
Compass has scale in Brazil 36 years 22% R$ 2.2 bn Experience in Brazil. Market share Revenue (2011/2012) Market leader 2,000+ 36,000+ Operating Units Employees 1.5 million 45,000+ 10+ Tons of products Meals per day Support Services consumed per month Note: Compass Group management estimates 162
Slide 163: Our sector presence / opportunity
Our sector presence / opportunity SUPPORT BUSINESS & EDUCATION HEALTHCARE D.O.R SERVICES INDUSTRY REVENUE % OF TOTAL 2% 8% 8% 7% 69% LEVEL OF OUTSOURCING 7% 16% 74% 67% 82% 3 YR CAGR 36% 22% 25% 26% 12% Note: Compass Group management estimates 163
Slide 164: Our geographic presence / opportunity
Our geographic presence / opportunity North: North East: GDP : 5% GDP : 13% Revenue: 5% Revenue: 10% South East Midwest: (RJ/MG): GDP GDP: :9% 9% GDP: 21% Revenue: Revenue:5%5% Revenue: 21% South: São Paulo GDP: 34% GDP : 17% Revenue: 52% Revenue: 8% 164
Slide 165: Competitive landscape / opportunity
Competitive landscape / opportunity 2010 • Food service market of c.R$21bn • Outsourced food service market of c.R$11bn • Market leading position Market landscape (R$21bn) 2012 48% 72% 24% 16% 12% Note: Compass Group management estimates 165
Slide 166: Strong growth
Strong growth Revenue Operating Profit CAGR CAGR 12% 21% • Double digit revenue growth • Margin expansion of 160 basis points 166
Slide 167: Management approach
Management approach ACCELERATED SUSTAINABLE GROWTH MARGIN OPPORTUNITIES EXPANSION 167
Slide 168: Exciting structural growth opportunities
Exciting structural growth opportunities Healthcare / Education >15% Support Services >20% • Trend to outsourcing • Organic consolidation EDUCATION • Investment • Professionalising service process • Professionalized segment SUPPORT SERVICES • Cross-selling to foodservice clients management B&I > 10%
Slide 169: Sustainable efficiencies to drive growth
Sustainable efficiencies to drive growth • Logistics platform • Systems-driven labour productivity • Purchasing consolidation / maturity • Operational labour turnover • Menu management development • Leveraging overhead structure 169
Slide 170: Case study - Healthcare
Case study - Healthcare • Most respected hospital in Brazil • Our services: Patient room service + Commercial restaurant + Employee restaurant • Facts: 223 employees / R$12m revenues • Contract renewed to 2017 • Success Factors: • Consistent quality (98% satisfaction) • Innovation: Compass best prac
Slide 171: Case study - Support services
Case study - Support services • One of the largest Telecom operators in Brazil • 35 sites in São Paulo and Rio de Janeiro • Our services: Cleaning • Facts: 400 employees / R$17m revenues • Contract initiated in October 2012 • Success Factors • Centralized Recruitment / Integration model • Investment
Slide 172: Case study - Education
Case study - Education • Largest private school in Brazil (11,000 students) • Our services: 7 Restaurants + 15 Canteens + Lunch kits • Facts: 145 employees / R$14m revenues • Contract initiated in February 2013 • Success Factors: • Personalized attendance • Eat Learn Live concept • Senior management
Slide 173: Summary
Summary • Excellent growth to date • Continuing to professionalise management • Exciting structural growth opportunities remain 173
Slide 174: Compass Group
G RO U P GROUP