Compass Group Plc · LSE:CPG
Compass — H1 2014 Earnings Presentation
64 slides from Compass's earnings presentation, May 14, 2014
Slide 1: 2014 Half Year Results
2014 Half Year Results Wednesday 14 May 2014
Slide 2: Disclaimer
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 a
Slide 3: Welcome & highlights
Welcome & highlights Richard Cousins Group Chief Executive
Slide 4: Presentation structure
Presentation structure 1. Richard Cousins Welcome & highlights 2. Dominic Blakemore Half year results 3. Richard Cousins Growth strategy & outlook 4. Q&A 4
Slide 5: Business highlights
Business highlights Organic revenue growth 4.2% Operating profit £647m, 6% Operating profit margin 7.4%, 10bps EPS 25.3 pence, 10% Strong cash flow £345m Notes: 5 1. All numbers are underlying, at constant currency
Slide 6: Uses of cash
Uses of cash Interim dividend 8.8 pence, 10% £76m spend on infill acquisitions £500m buyback programme ongoing, to be completed in 2015 Special dividend, £1 billion Investment...balance sheet efficiency...significant cash returns 6
Slide 7: 2014 Half Year Results
2014 Half Year Results Dominic Blakemore Group Finance Director
Slide 8: Revenue
Revenue Change Adjusted 4 Reported Constant 2 Organic 3 Organic 2014 2013 Rates Currency Growth Growth £m £m % % % % North America 4,151 4,059 2.3% 7.0% 6.6% 6.3% Europe & Japan 2,951 3,080 (4.2)% (1.8)% (1.6)% (2.1)% Fast Growing & Emerging 1,557 1,665 (6.5)% 9.3% 9.7% 9.4% Revenue 8,659 8,804 (1.6
Slide 9: Operating profit at reported currency
Operating profit at reported currency Change Analysed By Acquisition 2014 2013 Change Currency / Disposal Organic £m £m £m £m £m £m North America 350 338 12 (15) 2 25 Europe & Japan 213 212 1 (4) - 5 Fast Growing & Emerging 110 126 (16) (18) - 2 Unallocated central overheads (32) (32) - - - - Associ
Slide 10: Impact of currency on operating profit
Impact of currency on operating profit 2013 HY 2014 HY Impact on 09-May Impact on Average Rate Average Rate 2013 HY Profit Spot Rate 2013 FY Profit USD 1.58 1.64 £(12)m 1.68 £(36)m CAD 1.59 1.77 £(3)m 1.84 £(7)m EUR 1.21 1.20 £1m 1.22 £(3)m YEN 136.37 166.95 £(4)m 171.28 £(7)m AUD 1.52 1.80 £(9)m 1.
Slide 11: Operating profit and margin at constant currency
Operating profit and margin at constant currency Margin 3 2014 2013 2 Change 2014 2013 £m £m £m % % % North America 350 323 27 8.4% 8.4% 8.3% Europe & Japan 213 208 5 2.4% 7.2% 6.9% Fast Growing & Emerging 110 108 2 1.9% 7.1% 7.6% Unallocated central overheads (32) (32) - Associates 6 6 - Operating
Slide 12: Income statement
Income statement 2014 2013 £m Reported Non-Underlying Underlying 3 Underlying 3 Revenue 8,659 - 8,659 8,804 Operating profit 2 634 (13) 647 650 Net finance costs (39) - (39) (39) Profit before tax 595 (13) 608 611 Tax (148) 4 (152) (158) Tax rate 25% 26% Profit after tax 447 (9) 456 453 Non-controll
Slide 13: Underlying income statement at constant currency
Underlying income statement at constant currency £m 2014 2013 3 Growth Revenue 8,659 8,309 Operating profit 2 647 613 +5.5% Net finance costs (39) (38) Profit before tax 608 575 Tax (152) (149) Tax rate 25% 26% Profit after tax 456 426 Non-controlling interest (2) (3) Attributable profit 454 423 +7.
Slide 14: Free cash flow
Free cash flow £m 2014 2013 Operating profit 2 647 650 Depreciation and amortisation 155 145 EBITDA 802 795 Net capital expenditure 3 (203) (217) Trade working capital (59) (12) Provisions (4) (10) Post employment benefits (22) (26) Net interest (35) (33) Net tax (138) (120) Net other items 4 9 Free
Slide 15: Net debt
Net debt £m Opening net debt at 1 October 2013 1,193 Underlying free cash flow from continuing operations (345) European exceptional cash flow 1 21 Acquisitions 2 76 Equity dividends 287 Purchase of own shares 200 Impact of foreign exchange rates (37) Other 10 Closing net debt at 31 March 2014 1,405
Slide 16: Ongoing priorities for use of cash
Ongoing priorities for use of cash 1Capital 3 Appropriate investment – Disciplined Required returns > cost expenditure around 2.5% of revenue of capital by end of year 2 infill M&A 2 4 Progressive Growth in line with Returns to To maintain balance dividend constant currency shareholders shee
Slide 17: Balance sheet efficiency
Balance sheet efficiency Appropriate Capital Financial To make the right credit Strong investment grade expenditure flexibility investment choices ratings Sensible £1 billion Target net debt : EBITDA gearing 1.5x special dividend announced today 17
Slide 18: Proposed special dividend
Proposed special dividend £1 billion special dividend, 56 pence per share Receive as income or capital Share consolidation EPS enhancing Payment date 29 July 2014 Notes: 18 1. Subject to shareholder approval
Slide 19: Financial summary
Financial summary Organic revenue growth 4.2% Margin progression 10bps Constant currency EPS growth 10% Underlying free cash flow generation £345m Increase in interim dividend to 8.8 pence per share 10% Existing share buyback, to be completed in 2015 £500m Special dividend £1bn Strong
Slide 20: Growth strategy & outlook
Growth strategy & outlook Richard Cousins Group Chief Executive
Slide 21: Agenda
Agenda 1. Performance review 2. Group strategy 3. Growth opportunities 4. Summary & outlook 21
Slide 22: Performance review: H1 organic revenue growth
Performance review H1 organic revenue growth 8.5% 6.5% 2.2% 4.2% New Business Lost Business Like for Like Organic Revenue Growth Consistent organic growth trends 22
Slide 23: Performance review: Regional trends
Performance review Regional trends 10bps North America High levels of new business and excellent retention 8.4% 6.3% Ongoing margin improvement Organic Revenue Margin 30bps Europe & Japan 7.2% MAP 1 progress, signs of LFL improvement (2.1)% Efficiencies driving further margin progress Organi
Slide 24: Strategy
Strategy Growth Organic Margin Operating efficiency Investment Opex, capex, infill M&A Returns to Shareholders EPS growth, efficient balance sheet A proven and sustainable model 24
Slide 25: Focus on food
Focus on food Food Service Market (c.£200bn) 250 Core competence; clear focus 200 - Self Operated 150 Outsourced 83% Small Regional 100 Significant, £200bn opportunity Large Players 50 Compass 0 >80% self-operated/small players Food Service Market - by Sector 80 Ranked 1 or 2 in most key mar
Slide 26: Incremental approach to support and multi services
Incremental approach to support and multi services 2013 Split of revenue Multi services, a core proposition in DOR DOR food 7% DOR multi 6% services Elsewhere, divergent trends 11% Support services Incrementally building capability and partnerships Focus on soft support services Food: 83% Su
Slide 27: Geographic priorities: Emerging Markets increasing share
Geographic priorities Emerging Markets increasing share 2003 2013 +10 years? FGE FGE FGE NA NA NA E&J E&J E&J Region Approach North America Core growth engine Europe & Japan Return to growth Fast Growing & Emerging High growth balanced with investment 27
Slide 28: Driving organic growth: MAP 1 & 2
Driving organic growth MAP 1 & 2 New business and retention Participation and spend Service excellence, intelligent Investment in sales and training marketing International clients Retail skills training 28
Slide 29: North America: Core growth engine
North America Core growth engine NA Split of revenue Revenue H1 2014 - £4.2bn Market leadership in food, across all sectors DOR 3% Vibrant outsourcing culture Sports & $72bn market, 65% in house and small players Leisure 14% B&I 29% Excellent sales and retention processes Education Margin 26
Slide 30: Silicon Valley & Bay Area Tech Business
Silicon Valley & Bay Area Tech Business Revenue - $m 250 200 150 Twitter 100 50 0 2003 2014 Employees Oracle 3000 2500 2000 SAP 1500 1000 Linked In 500 Google Yahoo 0 Ebay 2003 2014 22 accounts across Silicon Valley Compass clients: Adobe, Altera, BD Bioscience, Brocade, Ebay, Electronic Arts, Filem
Slide 31: North America Healthcare & Seniors
North America Healthcare & Seniors Healthcare & Seniors: $16bn market First time outsourcing (Houston Medical Center) Consolidation of systems and facilities Food and support services Significant new wins in H1 2014 Double digit new business in H1 31
Slide 32: North America Higher Education
North America Higher Education Education, $23bn market Large institutions still self operated Continued trend to outsourcing Food and support services Significant new wins in H1 2014 Strong momentum, significant opportunity 32
Slide 33: Europe & Japan: Recovery
Europe & Japan Recovery Cost reduction Top line growth Lower fixed labour costs Economy starting to improve Greater flexibility and productivity Investing in sales Simplified processes Better retention processes Overhead control Competitive offer Efficiency ... investment ... return
Slide 34: Europe & Japan: Driving new business
Europe & Japan Driving new business UK Denmark Important new contract with Royal Navy Global wind energy company Government consolidation programme First time outsourcing 12 sites, 15,000 population Large, long term contract, 17 locations Germany France 34
Slide 35: Fast Growing & Emerging: Sub regions
Fast Growing & Emerging Sub regions FY 13 £3.4bn (19% Group) LATAM CAMEAT APAC £1.1bn £0.8bn £1.5bn Angola Azerbaijan Egypt Australia China & Hong Kong Argentina Brazil Chile Gabon Kazakhstan Russia India Indonesia Colombia Mexico Saudi Arabia South Africa Turkey New Zealand PNG Qatar UAE Singapore
Slide 36: Asia Pacific: Australia
Asia Pacific Australia Important part of the Group Australia DOR Revenue Aluminia Zinc 1% Copper 2% c.80% DOR, well diversified Defence Coal 2% 9% Gold 8% 6% Oil & Gas Slowing, but large established business Nickel 13% 1% LNG 20% Iron Ore Growing Healthcare and Education sectors 38% 36
Slide 37: Asia Pacific: India and China
Asia Pacific India and China India China 1.2bn population 1.3bn population We serve c.100,000 meals a day We serve c.120,000 meals a day Key sectors - B&I & private HSE controls and governance Healthcare Key sectors - B&I & private Education Investing for growth High growth - domes
Slide 38: Asia Pacific: B&I in China
Asia Pacific B&I in China World’s 3rd largest internet company Roche HQ in China 12,000 meals a day in 5 cities 2,500 meals a day, tripled since start Significant growth potential Significant growth potential Health, safety and governance driving demand 38
Slide 39: CAMEAT
CAMEAT Market leading position in Energy H1 2014 revenue: £0.4bn & Extraction Middle East - strong businesses South Africa across the region 20% Turkey 38% Strong B&I businesses in Turkey Energy and Extraction and South Africa 23% Growing Healthcare and Education Middle East 19% 39
Slide 40: LATAM
LATAM Brazil H1 2014 revenue: £0.5bn Mexico Argentina 6% Colombia Chile 7% 12% Colombia Mexico Brazil 9% 66% Chile Argentina Accelerating growth, huge opportunities, balanced investment 40
Slide 41: Brazil
Brazil B&I: 69% Healthcare: 10% Competitive offer, lower costs Increased professionalism and investment Regional expansion Underpenetrated sector DOR: 11% Education: 3% Significant opportunities Acceleration in outsourcing Vale contract: 10m+ meals, 25 sites Significant opportunity 2
Slide 42: Commitment to shareholder value
Commitment to shareholder value Consistent top line growth and margin progression, strong cash flows Appropriate investment, opex and capex to support growth Progressive dividend policy Infill M&A opportunities Refined balance sheet efficiency, new £1bn return and ongoing buyback A proven
Slide 43: Rewarding shareholders
Rewarding shareholders Committed shareholder returns 2006 to date Ordinary Share Dividends Buybacks £2.7bn £2.5bn Special Dividends £1bn Over £6 billion returned to shareholders 43
Slide 44: Summary and outlook
Summary and outlook A good first half with solid organic growth and margin progression Ongoing strength in North America and Fast Growing & Emerging Improving outlook in Europe & Japan £1bn special dividend, 10% increase in interim dividend, buyback ongoing Strong pipeline and significant
Slide 45: Supplementary Information
Supplementary Information 2014 Half Year Results
Slide 46: Contents
Contents Group revenue 47 By geography & sector Free cash flow 54 Reconciliation of reported to underlying Group revenue 47 By geography & sector Free cash flow 54 Reconciliation of reported to underlying Revenue by sector 48 Revenue by sector External 48 geographies External geographies Balance Bal
Slide 47: Group revenue – by geography & sector
Group revenue – by geography & sector Fast Growing & Emerging 18% Sports & Other FGE, 6% Leisure North America 48% 10% Turkey, 2% Brazil, 4% Australia, 6% Healthcare Business & Other CE, 7% USA, 43% 20% Industry 40% Norway, 1% Netherlands, 1% Italy, 1% Spain, 2% Germany, 3% Japan, 3% Education Franc
Slide 48: Revenue by sector – external geographies
Revenue by sector – external geographies North America Fast Growing & Emerging Sports & Sports & Leisure Leisure Healthcare 14% 3% 7% Business & Industry Education 29% 5% Business & Industry 39% Europe & Japan Defence, Healthcare Offshore, 28% Remote 3% Sports & Defence, Leisure Offshore, 9% Remote
Slide 49: Geographic financials - Group
Geographic financials - Group North Europe & Fast Growing 2 America Japan & Emerging Other Total £m £m £m £m £m 2014 Revenue 4,151 2,951 1,557 8,659 Organic growth 6.6% (1.6)% 9.7% 4.2% Operating profit 1 350 213 110 (26) 647 3 Margin 8.4% 7.2% 7.1% 7.4% Cash flow 4 323 162 68 (208) 345 Cash flow co
Slide 50: Geographic financials – Group and NA trends
Geographic financials – Group and NA trends Group Revenue (£bn) & Organic Growth (%) Group Operating Profit (£m) & Margin (%) 8.7 647 8.3 613 8.0 577 532 7.4 475 435 6.7 6.7 383 6.4 6.1 325 5.0% 5.0% 2.6% 0.4% 5.7% 5.0% 4.1% 4.2% 5.1% 5.7% 6.5% 7.0% 7.2% 7.2% 7.3% 7.4% 2007 2008 2009 2010 2011 2012
Slide 51: Geographic financials – E&J and FG&E trends
Geographic financials – E&J and FG&E trends E&J Revenue (£bn) & Organic Growth (%) E&J Operating Profit (£m) & Margin (%) 3.1 213 3.0 3.0 205 205 208 2.9 2.9 3.0 199 2.9 2.9 190 183 167 1.0% 3.0% (0.7% (2.8)% (0.4% (0.4)% (3.6)% (1.6)% 5.7% 6.2% 6.5% 7.0% 6.6% 6.9% 7.2% 6.8% 2007 2008 2009 2010 2011
Slide 52: EPS/dividends – earnings & dividends per share
EPS/dividends – earnings & dividends per share 2014 2013 Earnings per share Continuing and discontinued operations 24.8p 23.1p Other adjustments 1 0.5p 1.4p Underlying earnings per share 25.3p 24.5p Dividends per share Interim dividend 8.8p 8.0p Final dividend 16.0p Total dividend 24.0p Notes: 1. Ot
Slide 53: EPS/dividends – dividend cover
EPS/dividends – dividend cover 2013 2012 2011 2010 2009 Per share (pence) Dividend (interim plus final) 24.0p 21.3p 19.3p 17.5p 13.2p Underlying earnings 1 47.7p 42.6p 39.0p 35.7p 30.0p Dividend earnings cover 2.0x 2.0x 2.0x 2.0x 2.3x Cash (£m) Cash cost of dividend (in the year) 404 378 360 258 229
Slide 54: Free cash flow – reconciliation of reported to underlying
Free cash flow – reconciliation of reported to underlying £m 2014 2013 Reported Adjs 4 Other 5 Underlying Reported Adjs 4 Other 5 Underlying Operating profit 2 634 - (13) 647 615 (20) (15) 650 Depreciation and amortisation 166 - 11 155 159 - 14 145 EBITDA 800 - (2) 802 774 (20) (1) 795 Net capital e
Slide 55: Balance sheet - overview
Balance sheet - overview 2014 HY 2013 HY 2013 FY £m £m £m Goodwill 3,551 4,169 3,620 Other non-current assets 1,775 1,764 1,725 Working capital (673) (602) (719) Provisions (471) (579) (531) Post employment benefit obligations (158) (310) (209) Current tax payable (130) (146) (130) Deferred tax 211
Slide 56: Balance sheet – capital expenditure % of revenue
Balance sheet – capital expenditure % of revenue % of Revenue 5.0% 4.5% 3.9% 4.0% 3.6% 3.3% 2.9% 3.0% 2.7% 2.5% 2.5% 2.3% 2.3% 2.3% 2.1% 1.9% 1.9% 2.0% 1.7% 1.0% 2001 2002 2003 2004 2005 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 HY Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005 tot
Slide 57: Financing – components of net debt
Financing – components of net debt £m Bonds 748 Private placements 1,032 Bank loans 300 2,080 Finance leases 19 Other loans and fair value accounting adjustments 32 Derivatives (51) Gross debt 2,080 Cash net of overdrafts (675) Closing net debt at 31 March 2014 (1,405) Notes: 1. Based on nominal val
Slide 58: Financing – principal borrowings
Financing – principal borrowings Maturing in Coupon Financial Year £m Bonds £250m 4 7.00% 2014 252 €600m 3.125% 2019 496 Total 748 US private placements $162m (2008 Notes) 6.72% 2015 97 £35m (2008 Notes) 7.55% 2016 35 $1000m (2011 Notes) 3.31% - 4.12% 2018 - 2023 600 $500m (2013 Notes) 3.09% - 3.81%
Slide 59: Financing – maturity profile of principal borrowings
Financing – maturity profile of principal borrowings £m 700 600 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 £ Bond € Bond US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 31 March 2014, maturing in the f
Slide 60: Financing – debt ratios and credit ratings
Financing – debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 18-Feb-13 Moodys Baa1 Positive 04-Jul-13 Fitch (unsolicited) A- Stable 24-Feb-14 Ratios 2014 2013 Net debt 1 / EBITDA 2 1.0x 0.9x EBITDA 2 / net interest 3 20.4x 19.3x Net debt 1 / adjusted total capitalis
Slide 61: Exchange rates – rates used in consolidation
Exchange rates – rates used in consolidation Income Statement 2 Balance Sheet 3 2014 2013 2014 2013 per £ per £ per £ per £ Australian Dollar 1.80 1.52 1.80 1.46 Brazilian Real 3.79 3.21 3.76 3.06 Canadian Dollar 1.77 1.59 1.84 1.54 Euro 1.20 1.21 1.21 1.18 Japanese Yen 166.95 136.37 171.69 142.77 N
Slide 62: Exchange rates – effect on 2013 revenue & profit
Exchange rates – effect on 2013 revenue & profit US Dollar Canadian Dollar Euro £m incremental change for an £m incremental change for an £m incremental change for an incremental 5 cent movement incremental 5 cent movement incremental 5 cent movement Exchange Revenue Profit Exchange Revenue Profit E
Slide 63: Exchange rates – effect on 2013 revenue & profit
Exchange rates – effect on 2013 revenue & profit Australian Dollar Brazilian Real Japanese Yen £m incremental change for an £m incremental change for an £m incremental change for an incremental 5 cent movement incremental 10 centavo movement incremental 10 yen movement Exchange Revenue Profit Exchan
Slide 64: Compass Group
ad * COMPASS GROUP * COMPASS