Compass Group PLC · LSE:CPG
Compass — H1 2009 Earnings Presentation
69 slides from Compass's earnings presentation, May 13, 2009
Slide 1: Forward looking statements
This presentation contains certain forward looking statements as defined under US legislation (section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934). By their nature, such statements involve uncertainty; as a consequence, actual results and developments ma
Slide 2: 2009 Half Year Results
2009 Half Year Results 13th May 2009 2
Slide 3: Presentation Structure
Presentation Structure 1. Sir Roy Gardner Welcome & Highlights 2. Andrew Martin Half Year Results 3. Richard Cousins Business Review, Strategy Summary & Outlook 4. Q&A 3
Slide 4: Business Highlights
Business Highlights • Another half year of very good progress across the business • Underlying EPS up by 43%, at a constant currency 15% • Free cash flow up by 33% • Interim dividend increased by 10% to 4.4 pence • Continuing momentum behind efficiency gains • Exciting future growth opportunities 4
Slide 5: Andrew Martin
Andrew Martin 2009 Half Year Results 5
Slide 6: Revenue
Revenue Change 3 Reported Constant 2 Organic 2009 2008 Rates Currency Growth £m £m % % % North America 3,082 2,267 36.0% 4.7% 4.4% Continental Europe 1,769 1,488 18.9% 1.9% 1.2% UK & Ireland 939 965 (2.7)% (3.6)% (3.6)% Rest of the World 1,137 869 30.8% 10.2% 5.4% Total revenue 6,927 5,589 23.9% 3.6
Slide 7: Operating Profit and Margin – Reported
Operating Profit and Margin – Reported Margin 2 2009 2008 Change 2009 2008 £m £m £m % % 3 North America 234 153 81 7.5% 6.7% Continental Europe 131 106 25 7.4% 7.1% UK & Ireland 54 52 2 5.8% 5.4% Rest of the World 60 38 22 5.3% 4.4% Unallocated overheads (28) (29) 1 Associates 4 2 2 Operating profit
Slide 8: Operating Profit and Margin – Constant Currency
Operating Profit and Margin – Constant Currency Margin 3 2009 2008 2 Change 2009 2008 £m £m £m % % 4 North America 234 205 29 7.5% 7.0% Continental Europe 131 124 7 7.4% 7.1% UK & Ireland 54 53 1 5.8% 5.4% Rest of the World 60 46 14 5.3% 4.5% Unallocated overheads (28) (31) 3 Associates 4 3 1 Operat
Slide 9: Operating Profit Growth
Operating Profit Growth £m (estimated) 2009 2008 2007 Historic Net new business 14 15 15 25 Base estate 28 31 20 (8) - price and volume - cost inflation - efficiencies Above unit overheads 8 3 18 (5) - inflation - efficiencies Acquisitions/disposals 5 - - - Total operating profit growth 55 49 53 12
Slide 10: Income Statement
Income Statement 2009 2008 £m Reported Underlying 3 Reported Underlying 3 Revenue 6,927 6,927 5,589 5,589 Operating profit 2 453 455 322 322 Net finance costs (66) (50) (41) (33) Profit before tax 387 405 281 289 Tax (112) (117) (81) (83) Profit after tax 275 288 200 206 Minority interest (3) (3) (3
Slide 11: Pro-forma Income Statement at Constant Currency
Pro-forma Income Statement at Constant Currency 2009 2008 £m Underlying Proforma 3 Growth Revenue 6,927 6,685 Operating profit 2 455 400 +14% Net finance costs (50) (40) Profit before tax 405 360 Tax (117) (103) Profit after tax 288 257 Minority interest (3) (4) Attributable profit 285 253 Average n
Slide 12: Free Cash Flow
Free Cash Flow £m 2009 2008 Operating profit 2 455 322 Depreciation and amortisation 106 84 EBITDA 561 406 Net capital expenditure 3 (125) (67) Working capital (including provisions) (65) (61) Net interest (44) (32) Net tax (87) (70) Dividends to minorities (1) (3) Net other non cash items 1 7 Free
Slide 13: Free Cash Flow – 3 Year Progression
Free Cash Flow – 3 Year Progression £600m £520m Total H2 £450m H1 £357m £340m £300m £212m £221m £150m £174m £240m £180m £136m £0m £38m 2006 2007 2008 2009 Notes: 1. Based on continuing operations, with 2006 restated to exclude Selecta. 13
Slide 14: Net Debt
Net Debt £m Opening net debt at 1 October 2008 1,005 Free cash flow from continuing operations (240) Free cash flow from discontinued operations 2 Acquisitions 1 94 Disposals 33 Purchase of own shares 11 Equity dividends 148 Impact of foreign exchange rates 195 Other 10 Closing net debt at 31 March
Slide 15: Recap on Financial Strength
Recap on Financial Strength • May 2009 Eurobond and US Private Placement repayments – £380m (at current exchange rates) – Repayable using surplus cash • Undrawn bank facility of circa £800m (at current exchange rates) – Available to May 2012 • Minimal further debt repayments before May 2012 – 2010 :
Slide 16: Financial Summary
Financial Summary • Operating margin growth (constant currency) + 60 basis points • Operating profit growth (constant currency) + 14% • Pro-forma EPS growth (constant currency) + 15% • Free cash flow + 33% • Interim dividend + 10% 16
Slide 17: Richard Cousins
Richard Cousins Business Review, Strategy Summary & Outlook 17
Slide 18: Agenda
Agenda • Business Performance and MAP • Regional Reviews • Strategy • Summary and Outlook 18
Slide 19: Operating Profit Growth
Operating Profit Growth £m (estimated) 2009 2008 2007 Historic Net new business 14 15 15 25 Base estate 28 31 20 (8) - price and volume - cost inflation - efficiencies Above unit overheads 8 3 18 (5) - inflation - efficiencies Acquisitions/disposals 5 - - - Total operating profit growth 55 49 53 12
Slide 20: New Business and Retention
New Business and Retention • Good new business wins across all sectors and geographies • Increased new business from support services • International clients, partner of choice • Core retention stable • Encouraging pipeline 20
Slide 21: Base Estate – Components of Growth
Base Estate – Components of Growth B&I / Sports & Leisure Healthcare / Education / DOR LFL price increases covering cost LFL price increases covering cost inflation inflation LFL volume decreases, but impact LFL volume increases converting to on profit contained profit growth Significant efficiency
Slide 22: Base Estate – Driving Incremental Efficiencies
Base Estate – Driving Incremental Efficiencies • Cost of Food – • Efficient supply chain and logistics • Menu planning and waste reduction • In Unit Costs – • Labour productivity and scheduling • In unit overhead reductions • Above Unit Overheads – • Gradual reduction • Redeployment to support growt
Slide 23: North America
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Slide 24: North America – Progress and Results
North America – Progress and Results Revenue & Organic Growth H1 £3.08bn £2.94bn 4.4% • Strong new business across £2.74bn 7% all sectors £2.57bn 7% 13% • High retention levels 2006 2007 2008 2009 Operating Profit & Margin H1 £234m • Margin growth £205m 7.5% £173m 7.0% £148m 6.3% 5.8% 2006 2007 2008
Slide 25: North America
North America • B&I Excellent new business wins, tight cost control • Healthcare Strong new business in food and support services • Education Increased participation in board plans driving LFL • Sports & Leisure Excellent cost management, strong pipeline 25
Slide 26: Major Contract Wins/Renewals
Major Contract Wins/Renewals • American Express • ESPN Zone – Los Angeles • World Bank • US Senate • Diakon Lutheran Social Ministries • Shands at the University of Florida • Eastern Connecticut State University • Indian Prairie School District in Illinois • Queens University of Charlotte • Universi
Slide 27: Continental Europe
Continental Europe 27
Slide 28: Continental Europe – Progress and Results
Continental Europe – Progress and Results Revenue & Organic Growth H1 £1.77bn £1.74bn 1.2% • Good performance against £1.67bn 4% challenging economic backdrop £1.62bn 3% 3% 2006 2007 2008 2009 • Continued momentum in new Operating Profit & Margin H1 business and retention £131m £124m 7.4% £112m 7.1%
Slide 29: Continental Europe
Continental Europe • France Solid performance • Italy Turnaround plan on track • Germany Excellent efficiency gains – LFL difficult • Spain Healthcare and Education growing well • Nordic On-going growth in the Offshore business 29
Slide 30: Major Contract Wins/Renewals
Major Contract Wins/Renewals • AstraZeneca AB • ArcelorMittal Ostrava • Bosch Hildesheim • DENSO • Electrolux • Essent • French Foreign Office • Google Switzerland GmbH • Oyak Renault Otomobil Fabrikaları A.Ş • Pfizer GmbH • Shell • StatoilHydro • Centro Hospitalar do Barlavento Algarvio • Centro Ho
Slide 31: UK & Ireland
UK & Ireland 31
Slide 32: UK & Ireland – Progress and Results
UK & Ireland – Progress and Results Revenue & Organic Growth H1 £974m £959m 1% £955m 3% • Challenging economic conditions (1)% £939m (3.6)% 2006 2007 2008 2009 • Healthcare and Education performing well Operating Profit & Margin H1 £54m £53m 5.8% 5.4% • Margin progressing £51m £50m 5.3% 5.2% 2006 20
Slide 33: Major Contract Wins/Renewals
Major Contract Wins/Renewals • Merrill Lynch • National Grid • Welsh Assembly • Kent County Council • Liverpool Community College • Royal Hampshire Hospital • Royal Victoria Infirmary • Southampton University Hospitals NHS Trust • Aviva Stadium (formerly Lansdowne Road) • Jockey Club Racecourses • R
Slide 34: Rest of the World
Rest of the World 34
Slide 35: Rest of the World – Progress and Results
Rest of the World – Progress and Results £1.14bn Revenue & Organic Growth H1 £1.03bn 5.4% £984m 9% 10% • Good growth in all regions £908m 19% 2006 2007 2008 2009 • Ongoing strength in energy and extraction Operating Profit & Margin H1 £60m £46m 5.3% £33m • Excellent cost leverage 4.5% £22m 3.4% 2.4%
Slide 36: Rest of the World
Rest of the World • Australia Strong revenue growth and improved operational efficiency • Japan Further progress on efficiency and improving margin • Brazil Focus on business development and growth • Middle East Strong growth driven by new business wins 36
Slide 37: Major Contract Wins/Renewals
Major Contract Wins/Renewals • American Express • B2W • Cablevision • Mazda • Unilever • Wal-Mart • Gosford Hospital • UADE University • ADMA-OPCO (Das Island and Offshore) • Anglo American Group (Usina) • Australian Defence Department • BHP Billiton - Port Haven 37
Slide 38: November 2008 – can we deliver in a more challenging environment?
November 2008 – can we deliver in a more challenging environment? 1 Is our strategy still valid? Yes 2 Can we continue to grow the business? Yes 3 Can we drive performance? Yes 4 Are our finances sufficiently robust? Yes 5 How will we deliver our objectives? MAP 38
Slide 39: Q1. Is our strategy still valid?
Q1. Is our strategy still valid? • Food is our core • Develop support services Our strategy • Scale in countries is delivering • Geographic spread • Sector diversity 39
Slide 40: Q2. Can we continue to grow our business?
Q2. Can we continue to grow our business? Net New Business Many new outsourcing opportunities LFL Revenue Challenges and opportunities Infill Acquisitions Exciting infill acquisition opportunities We continue to deliver growth 40
Slide 41: Growing the Business
Growing the Business Organic Revenue Growth Infill Acquisitions • Continued growth in food – North America – Ongoing outsourcing opportunity – B&I support services – Germany • New growth in support – B&I and Healthcare services support services – Capability across all major countries – UK – Compass
Slide 42: Q3. Can we drive performance? – Costs
Q3. Can we drive performance? – Costs FY 2008 Action Food £3.8bn Fully Variable Labour £4.6bn Mainly Variable In unit overheads £1.6bn Semi Variable Above unit overheads £0.8bn Semi Variable Margin increased by 60 bps 42
Slide 43: Q4. Are our finances sufficiently robust?
Q4. Are our finances sufficiently robust? • Excellent free cash flow – up 33% • Strong balance sheet Our finances remain robust • Significant headroom for refinancing • Flexibility to reward shareholders and invest in the business 43
Slide 44: Q5. How will we deliver our objectives?
Q5. How will we deliver our objectives? 44
Slide 45: Summary
Summary • Very good performance in the first half • Continued strong new business and retention • Effective management of variable cost base • Significant efficiency gains delivered • Robust free cash flow and strong balance sheet 45
Slide 46: Outlook for the Full Year
Outlook for the Full Year • Revenue trends continue into the second half • Strong pipeline of new business • Ongoing capability to flex the cost base • Accelerating efficiency gains Continued progress in the second half 46
Slide 47: Supplementary Information
Compass Group PLC 2009 Half Year Results 13th May 2009 Supplementary Information 47
Slide 48: Contents
Contents Revenue 349 Group Revenue by Geography Balance Sheet 13 59 Overview 14 60 Capital Expenditure % of Revenue Revenue by Sector 450 Group 551 North America Financing 15 61 Components of Net Debt 652 Continental Europe 16 62 Principal Borrowings 753 UK & Ireland 17 63 Maturity Profile of Princi
Slide 49: Revenue – Group Revenue by Geography
Revenue – Group Revenue by Geography 2009 Rest of the North World 16% Other ROW 5% America 2008 Brazil 3% 44% Rest of the World 15% Other ROW 5% North Japan 4% Brazil 2% America Japan 4% 41% Australia 4% Australia 4% Other CE 7% USA 40% Other CE 7% USA 36% Norway 2% Norway 2% Netherlands 2% Netherla
Slide 50: Revenue by Sector - Group
Revenue by Sector - Group 2009 Sports & 2008 Leisure 9% Sports & Leisure 9% Healthcare Healthcare 19% Business 17% Business & Industry & Industry 45% 47% Education 17% Defence, Education Offshore, 18% Defence, Remote Offshore, 10% Remote 9% Notes: 1. Based on continuing operations. 50
Slide 51: Revenue by Sector – North America
Revenue by Sector – North America 2009 2008 Sports & Leisure 10% Sports & Leisure Business 11% & Industry Business & Industry 36% Healthcare Healthcare 37% 26% 24% Defence, Education Offshore, Defence, 25% Remote Offshore, 3% Education Remote 25% 3% Notes: 1. Based on continuing operations. 51
Slide 52: Revenue by Sector – Continental Europe
Revenue by Sector – Continental Europe 2009 2008 Sports & Leisure Healthcare 4% Sports & 16% Leisure Healthcare 4% 17% Education Education Business 14% 14% Business & Industry Defence, 62% & Industry Offshore, Defence, 62% Remote Offshore, 3% Remote 4% Notes: 1. Based on continuing operations. 52
Slide 53: Revenue by Sector – UK & Ireland
Revenue by Sector – UK & Ireland 2009 2008 Sports & Leisure 11% Sports & Leisure Healthcare 11% 10% Healthcare 9% Education Business Business Education 13% & Industry & Industry 13% 57% 55% Defence, Offshore, Remote Defence, 10% Offshore, Remote 11% Notes: 1. Based on continuing operations. 53
Slide 54: Revenue by Sector – Rest of the World
Revenue by Sector – Rest of the World 2009 2008 Sports & Leisure Sports & 13% Leisure Business Healthcare 9% Healthcare & Industry 10% Business 11% & Industry 38% Education 38% 5% Education 4% Defence, Offshore, Remote Defence, 38% Offshore, Remote 34% Notes: 1. Based on continuing operations. 54
Slide 55: Sector Financials - Group
Sector Financials - Group North Continental UK & Rest of 2 America Europe Ireland the World Other Total £m £m £m £m £m £m 2009 Revenue 3,082 1,769 939 1,137 6,927 Organic growth 4.4% 1.2% (3.6)% 5.4% 2.6% Operating profit 234 131 54 60 (24) 455 3 Margin 7.6% 7.4% 5.8% 5.3% 6.5% Cash flow 215 105 40
Slide 56: Finance Cost – Net Finance Cost
Finance Cost – Net Finance Cost 2009 2008 £m £m Bank loans and overdrafts 8 7 Other loans 49 41 Finance lease interest 1 1 58 49 Bank interest income (11) (15) Other interest income (4) - 43 34 Amount charged to pension scheme liabilities net of expected return on scheme assets 6 (1) Unwinding of di
Slide 57: EPS / Dividends – Earnings & Dividends Per Share
EPS / Dividends – Earnings & Dividends Per Share 2009 2008 £m £m Earnings per share Continuing and discontinued operations 15.4p 11.3p Discontinued operations (0.7)p (0.9)p Continuing operations 14.7p 10.4p Other adjustments 1 0.7p 0.4p Underlying earnings per share 15.4p 10.8p Dividends per share I
Slide 58: EPS / Dividends – Dividend Cover
EPS / Dividends – Dividend Cover 2008 2007 2006 Per share (pence) Dividend declared (interim plus final) 12.0p 10.8p 10.1p Underlying earnings 22.0p 15.2p 9.4p Dividend earnings cover 1.8x 1.4x 0.9x Cash (£m) Cash cost of dividend (in the year) 209 208 213 Free cash flow 520 357 212 Dividend cash co
Slide 59: Balance Sheet - Overview
Balance Sheet - Overview 2009 2008 £m £m Non-current assets 1,113 863 Working capital (341) (176) Provisions (468) (464) Interest payable (72) (53) Post employment benefit obligations (257) (177) Current tax payable (248) (155) Deferred tax 312 221 Net assets before goodwill 39 59 Goodwill 3,645 3,1
Slide 60: 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% 1.9% 1.9% 1.9% 2.0% 1.7% 1.0% 2001 2002 2003 2004 2005 2005 2006 2007 2008 2009 H1 Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005, total Group is shown on a UK GAAP basis. 60 2. For 2
Slide 61: Financing – Components of Net Debt
Financing – Components of Net Debt £m Bonds 1,074 Private placements 758 Bank loans 17 1,849 Finance leases 63 Other loans 12 Swap monetisation and IFRS adjustments for derivatives 8 Gross debt 1,932 Cash net of overdrafts (674) Closing net debt at 31 March 2009 1,258 Notes: 1. Based on nominal valu
Slide 62: Financing – Principal Borrowings
Financing – Principal Borrowings Maturing in Coupon Calendar Year £m Bonds £250m 4 7.00% 2014 270 £325m 6.38% 2012 325 £200m 7.13% 2010 200 €300m 6.00% 2009 279 Total 1,074 US private placements $719m (2002 notes) 6.39% - 7.96% 2009 - 2012 502 $50m (2003 notes) 5.11% - 5.67% 2010 - 2013 35 $267m (20
Slide 63: Financing – Maturity Profile of Principal Borrowings
Financing – Maturity Profile of Principal Borrowings £m 700 600 500 400 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 £ Bonds € Bonds US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 31 March 2009, maturing in the financial year
Slide 64: Financing – Sources of Committed Borrowings
Financing – Sources of Committed Borrowings Bank Loans 1% Private Placements 41% Bonds 58% Notes: 1. Based on borrowings as at 31 March 2009. 64
Slide 65: Financing – Effective Currency of Net Borrowings
Financing – Effective Currency of Net Borrowings Other 1% £ 23% Yen US $ 9% 59% € 8% Notes: 1. Based on net borrowings as at 31 March 2009. 2. In line with the Group’s treasury policy, the Group hedges its economic exposure to its non-sterling cash flows by matching the currencies of its centrally h
Slide 66: Financing – Debt Ratings and Ratios
Financing – Debt Ratings and Ratios Ratings Outlook Confirmed Standard & Poors BBB+ Stable 25-Jan-08 Moodys Baa2 Stable 30-Nov-07 Fitch (unsolicited) BBB+ Stable 01-Feb-08 Ratios 2009 2008 Net debt 1 / EBITDA 2 1.4x 1.6x EBITDA 2 / net interest 3 11.4x 11.4x Net debt 1 / adjusted total capitalisatio
Slide 67: Exchange Rates – Rates Used in Consolidation
Exchange Rates – Rates Used in Consolidation Income Statement 2 Balance Sheet 3 2009 2008 2009 2008 per £ per £ per £ per £ Australian Dollar 2.24 2.24 2.06 2.17 Brazilian Real 3.39 3.56 3.26 3.46 Canadian Dollar 1.84 2.00 1.78 2.03 Euro 1.16 1.36 1.08 1.26 Japanese Yen 147.71 220.10 140.41 198.35 N
Slide 68: Exchange Rates – Effect on 2008 Revenue & Profit
Exchange Rates – Effect on 2008 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 69: Taxation – Statutory Tax Rates
Taxation – Statutory Tax Rates Key statutory tax rates within the Group 1 2009 UK 28% USA (blended average of federal and state taxes) 40% France 34% Germany 30% 3 Netherlands 26% Italy 28% Nordic 27% Brazil 34% Canada 31% Japan 41% Spain 30% Australia 30% 2 Blended statutory tax rate 33% Notes: 1.