Compass Group PLC · LSE:CPG
Compass — Investor Day (July 2008)
79 slides from Compass's investor day presentation, Jul 22, 2008
Slide 1: Investor and Analyst Seminar
Investor and Analyst Seminar 22nd July 2008
Slide 2: Contents
Contents 1. Introduction Richard Cousins 2. North America and MAP 1 Gary Green 3. France & Asia Pacific and MAP 2 Didier Coutte 4. UK & Ireland and MAP 3 Ian El-Mokadem 5. Continental Europe and MAP 4 Miguel Ramis 6. Latin America, Africa & Middle East Andy Furlong 7. MAP 5 Andy Martin 8. Summary Ri
Slide 3: Introduction: Today is About
Richard Cousins Introduction Today is About • Repeating our core strategic principles • Exploring MAP • Explaining our key regional businesses • Meeting the five Group MD’s • Giving you two excellent case studies • Showing you our new Innovation Centre
Slide 4: But it is Not About / Key People
But it is Not About • Current trading • Detailed financial analysis Key People • Group MD’s and FD North America – Gary Green France & Asia Pacific – Didier Coutte UK & Ireland – Ian El-Mokadem Continental Europe – Miguel Ramis Latin America, Africa & Middle East – Andy Furlong Group Finance Directo
Slide 5: Focus Over the Last 2 Years
Focus Over the Last 2 Years… Strategically Operationally Respected core strengths Increased discipline in growth Tightened focus on Foodservice Focus on loss-making / poor- and Support Services performing contracts Reduced risk; country exits and Developed and implemented disposal programme ‘MAP’ Dr
Slide 6: MAP: Growing the Top Line
MAP 1 Client Sales and Marketing 2 Consumer Sales and Marketing 3 Cost of Food 4 Unit Costs 5 Above Unit Overheads Growing the Top Line Organic growth New business Retention LFL price LFL volume In-fill acquisitions TOTAL GROWTH Priority is organic growth with selective in-fill acquisitions, where a
Slide 7: Foodservice market opportunity
Foodservice market opportunity £150bn £150bn 160 South America 11 140 • Exciting growth opportunities Asia Pacific 120 35 Self Operated 84 • £150bn market 100 Billions of pounds North America, 56% 80 • Less than 45% outsourced 51 60 • 4-5% annual growth 40 Outsourced Europe 67 • Compass 7% share of
Slide 8: Margin Improvement Driving Cashflow
Margin Improvement Menu planning Labour scheduling Organisational structure: group, country, sector, unit Purchasing Training Support, governance and Distribution Process benchmarking control Wastage and portion Absenteeism Shared services control In-unit overheads Overheads reduction Driving Cashfl
Slide 9: Performance, Investment and Return
Performance, Investment and Return Improved margin Disciplined control Strong top-line (and profit) of capex and growth performance working capital Drives free cashflow …which enables… Reinvestment in Rewards to the business …and… shareholders How will we deliver our performance? • Plans • Reporting
Slide 10: Summary and Agenda for the Day
Summary • Good progress…further improvement to come • Deliver significant future growth – Priority is organic growth – Selective in-fill acquisitions • Drive further margin improvement – LFL, food, labour, overheads • Strong capex and working capital management Agenda for the Day • Gary Green – Nort
Slide 11: Agenda for the Day
Agenda for the Day • Ian El-Mokadem – UK & Ireland and MAP 3 • Miguel Ramis – Continental Europe and MAP 4 • Andy Furlong – Latin America, Africa & Middle East • Andy Martin – MAP 5 Investor and Analyst Seminar
Slide 12: Gary Green: North America and MAP
Gary Green North America and MAP 1 My agenda 1. Business Overview & Financial History 2. How we developed the business 3. North America today 4. MAP in the business 5. Summary
Slide 13: Business Overview – Current Shape and Sector Revenue
1. Business Overview – Current Shape North America £4.2bn (FY 2007) 40% of Group Revenue US 36% Canada 4% Business Overview – Sector Revenue 1995 2007 Sports & Healthcare Leisure 23% 13% 11% DOR 48% B&I 3% 30% 41% Education 20% Vending 11%
Slide 14: Financial History – North America
Financial History – North America Reported Revenue (£bn) 5.0 14% Organic – 8% 4.5 200% growth £4.2bn 12% 4.0 in revenue 10% 3.5 3.0 8% 2.5 6% 2.0 1.5 £1.4bn 4% 1.0 2% 0.5 - 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 UK GAAP IFRS Financial History – North America Operating Profit (£m) 300 £
Slide 15: Margin Progression and Capex as % of Revenue
Financial Results – Margin Progression 7.0% 6.3% 6.0% 5.0% 4.4% MAP Introduced 4.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 (Note: excludes discontinued operations) Financial Results – Capex as a % of Revenue 5.0% MAP Introduced 4.0% 3.0% 2.0% 1.0% 95 97 99 01 03 05 07 19 19 19 20 20 20 20
Slide 16: How we developed the business
2. How we developed the business • Strategic Acquisitions • Sectorisation • Net Growth Culture • Great People Acquisition Philosophy • Have a reason • Buy quality • Do your homework • Focus on the people, recognise the culture • Communicate, Communicate, Communicate
Slide 17: Strategic Acquisitions
Strategic Acquisitions Beaver Foods Service HDS America 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2004 2005 2006 2007 Professional Services Best Vendors How we developed the business • Strategic Acquisitions • Sectorisation • Net Growth Culture • Great People
Slide 18: Sectorisation
Sectorisation How we developed the business • Strategic Acquisitions • Sectorisation • Net Growth Culture • Great People
Slide 19: Why growth is important / Net Growth Culture
Why growth is important Organic Growth Competitive Purchasing/ Operating Advantage Economies Margin Advantage Net Growth Culture • Sectorise the salesforce • Prioritise the opportunities • Identify the decision criteria • Gain internal consensus (operations/sales/finance) • Deliver on expectations •
Slide 20: Great People
How we developed the business • Strategic Acquisitions • Sectorisation • Net Growth Culture • Great People Great People • Attract – Investment in Resource Network – Johnson & Wales University partnership • Retain – Career development – ‘High touch’ style – Stable, experienced, performance-oriented t
Slide 21: North America today: Business & Industry
3. North America today £4.2bn - Revenue 150,000 - Employees 7,500 - Units 12 - Operating sectors Business & Industry • 85% outsourced • Retail focussed • Opportunity to add on services • Capitalise on “green” issues via Bon Appetit • Strong operational teams • Sub-sector split
Slide 22: Hearst Corporation
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Slide 23: Healthcare
Yahoo Healthcare • 35% outsourced • Economy may encourage outsourcing • Patients, staff and visitors (retail) • Great opportunity in senior living • Strong support services capability – cross selling
Slide 24: Education
Education • 44% outsourced • Continued increase in enrollment • Trend to outsource • Development of sustainable and environmentally-friendly offer State Universities Independent schools Private Universities K-12 Louisiana State University
Slide 25: Sports & Leisure
Ohio Wesleyan Sports & Leisure • Management strength • International credibility • Proof sources / restaurant quality • Add-on services
Slide 26: Sports & Leisure
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Slide 27: MAP in the Business
4. MAP in the Business • THE GLUE • Intensity of Performance • Different emphasis by sector • MAP Plans and Reporting MAP 2 : Consumer Sales & Marketing Initiatives being developed and implemented to enhance our consumer proposition and drive LFL sales growth include: • Pricing • Outtakes • Profiles
Slide 28: MAP: Cost of Food and Unit Costs
MAP 3 : Cost of Food In order to offset increasing food cost inflation, a number of initiatives are being developed and implemented: • Model market • Wastage control • E-procurement • Distribution rationalisation • Portion control/menu engineering MAP 4 : Unit Costs Labour cost challenge is being me
Slide 29: Above Unit Overheads and Summary
MAP 5 : Above Unit Overheads • Focus, Focus, Focus • Flat whilst growing • Consolidation / leverage 5. Summary Lots of opportunities No complacency
Slide 30: Client Sales & Marketing
Client Sales & Marketing MAP 1 focuses on Market Development New Clients Existing Clients LFL growth Client Sales & Marketing
Slide 31: Progress and Priorities: Market Development
Progress and Priorities Market Development • Market penetration/development plans • Innovation and best practice • Building support services • International clients Client Sales & Marketing Our Marketplace £150 billion global market in foodservice Under-penetrated Source: technomics, GIRA, Restauran
Slide 32: Progress and Priorities: New Clients
Progress and Priorities New Clients • Better quality new business • Contract standards/approvals • CAPEX and WC Client Sales & Marketing Major Client Wins / Retains Client Sales & Marketing
Slide 33: Progress and Priorities: Existing Clients
Progress and Priorities Existing Clients • Loss-making contracts • Retention • Pricing and indices • Add-on sales Client Sales & Marketing Client Sales & Marketing
Slide 34: Didier Coutte: France and Asia Pacific and MAP 2
Investor and Analyst Seminar Didier Coutte France and Asia Pacific and MAP 2
Slide 35: Business Footprint – France & Rest of the World
Business Footprint – France & Rest of the World Compass businesses 2008 Current shape Rest of the World £1.6bn (FY2007) Continental Europe £2.6bn (FY2007) 16% of Group Revenue 25% of Group Revenue
Slide 36: France and Australia
France Key Facts • Recent focus - Business development and retention 15,846 Employees - Succession planning 2,397 Units - Margin improvement 753,000 Meals/day Revenue by sector • Market opportunities/current trends - Significant market, <40% penetrated - Outsourcing of government linked foodservice
Slide 37: Japan and Asia (excluding Japan)
Japan Key Facts • Re-focussed the business 14,320 Employees - Divestments 1,606 Units - Organisation restructure 585,000 Meals /day - Margin improvement Revenue by sector Sports & Leisure 29% • Market opportunities/current trends - 2nd largest market in the world - We are No.3 with 3% market share H
Slide 38: MAP in the business
MAP in the business • Turnaround process (Australia – France – Japan) : a 3 step process over 3 to 4 years: - Step 1 : MAP 5 (Restructure, reduce overheads, strengthen management Ö more dynamic organisation) - Step 2 : MAP 3 & 4 (Operational effectiveness, better cost management, improved service de
Slide 39: Summary
Summary • France : Further growth and ongoing efficiencies • Japan : Significant market opportunities, continued focus on efficiencies • Australia : Attractive market conditions underpinning growth and new market opportunities • India and China : Building platforms for growth • SEA : Continue to dev
Slide 40: MAP 2 focuses on consumer
MAP 2 focuses on Consumer Right consumer offers Proposition Consumer Right pricing strategy Pricing Consumer More people, more often, spending more Volumes Consumer Sales & Marketing Why it is important – changing market Evolving market • P&L “retail” contracts in B&I • Declining client subsidies an
Slide 41: Why it is important – financially; Progress and Priorities
Why it is important – financially • Consumer spend almost 50% of Group revenues • Important driver of organic growth • All like for like, with high drop through to margin Consumer Sales & Marketing Progress and Priorities Progress Priorities • Retail approach Consumer • New offers Proposition • Cons
Slide 42: What does success look like?
What does success look like? Market leading consumer offers, competitively priced, driving increased consumer participation and spend Consumer Sales & Marketing Consumer Sales & Marketing
Slide 43: Ian El-Mokadem: UK and Ireland & MAP 3
Investor and Analyst Seminar Ian El-Mokadem UK and Ireland & MAP 3
Slide 44: Business Footprint – UK & Ireland
Business Footprint – UK & Ireland Compass businesses 2008 Current Shape UK & I Revenue - £1.9 bn (FY 2007) Revenue by Sector (FY 2007) 19% of Group Revenue
Slide 45: Historical issues in the UK; Executive Team
Historical issues in the UK • Business focus • Complexity • Loss-making contracts • Evolving marketplace • Performance and operating framework • Reputation UK and Ireland Executive Team Graham Sims Ian Sarson Matthew Thompson Jason Leek, MD Neil Smith MD Eurest MD HED&G MD S L& H Restaurant Associat
Slide 46: Current position; Eurest (B&I)
Current position • Reorganisation complete • Client and consumer offer addressed (product/branding) • Good progress on loss-making contracts • Tighter contract standards and sales process • Purchasing overhauled • One Compass change programme Eurest (B&I) Key Facts • Catering, retail and support ser
Slide 47: Restaurant Associates and Medirest
Restaurant Associates (Fine Dining) Key Facts • Fine dining and related soft services for 4,000 Employees corporate clients including hotels 230 Sites • Formed from merger of three businesses 450 Units in 2007 We operate two, one Michelin Star restaurants Market leader in hotel outsourcing • Recentl
Slide 48: Scolarest and Chartwells; Sports, Leisure & Hospitality
Scolarest and Chartwells (Education) Key Facts • Catering and retail services for state & 11,000 Employees independent schools, colleges & universities 1,700 Sites 1,950 Units • UK market leader Around 1 in 10 meals served in educational establishments in England are served by Compass • Offers have
Slide 49: MAP in the business
MAP in the business • MAP implemented across the COMPASS GROUP UK & IRELAND EXECUTIVE COMMITTEE on Thursday, 8th May, 2008 to be held in The Innovation Centre, Chertsey business and underpinning new Commencing at 9.00am Agenda initiatives 1. Health and Safety (a) Regular Report 2. Minutes from Previ
Slide 50: Summary: MAP priorities
Summary • MAP priorities: – MAP 1: Sustainable new business and improved retention – MAP 2: Development of consumer led offers – MAP 3: Continued focus on purchasing compliance – MAP 4: Improving in-unit efficiency – MAP 5: Continued focus on efficiency and improved unit support • Turnaround challen
Slide 51: Cost of Food: why it is important
Why it is important – cost Spend £3.5bn On Average 34% of revenue Cost of Food Why it is important – managing food cost inflation • Global increase in demand with insufficient capacity • Food price inflation in many geographies, in most food lines • Cost impact for Compass - £3.5bn spend on food, 1/
Slide 52: Cost of food: Progress and Priorities
Progress and Priorities Progress Priorities • Menu planning Commercial • Sustainable sourcing • Supplier & product rationalisation Supply Chain/ • Spot/seasonal buying/promotions Continued focus and Purchasing transferring best practice • De-coupling food cost and logistics across the business • Sup
Slide 53: Food Price Inflation – The Conclusion
Food Price Inflation – The Conclusion • Food price inflation is well understood and is being acted upon • MAP is in place and doing its job • We are on top of this issue Cost of Food MAP 3 Initiatives 85:10:5 ‘Trim Trax’ Cost of Food
Slide 54: What does success look like?
What does success look like? The optimal range and quality of food, responsibly sourced, purchased and prepared at the lowest cost Cost of Food Cost of Food
Slide 55: Miguel Ramis: Continental Europe and MAP 4
Investor and Analyst Seminar Miguel Ramis Continental Europe and MAP 4
Slide 56: Business Footprint – Europe; Overview
Business Footprint – Europe Compass businesses 2008 Continental Europe – Overview • Strategy re-focussed – Non core businesses disposed: – SSP – Selecta – Rail Gourmet – Inflight Catering – Non core countries exited: – 7 country exits – now 22 countries
Slide 57: Current Shape; Market Opportunities
Current Shape Continental Europe - £2.6 bn (FY2007) Revenue by Sector ( FY2007) 25% of Group Revenue Market Opportunities • Significant market place – across all sectors • Low outsource penetration - Healthcare and Education < 30% • Emerging support services opportunity • Different sector profile /
Slide 58: How we manage the business; Germany
How we manage the business • Simplified structure – No divisional structure – Country “clusters” where appropriate • Strengthened the leadership • MAP – a common agenda – Country MAP plans – Reporting/benchmarking – Country Business Reviews • Best practice sharing Germany • Market leader Key Facts 1
Slide 59: Spain and Italy
Spain • Market Leader, well balanced portfolio Key Facts 10,000 Employees • Well established business – strong management team 2,000 Units 270,000 Meals/day • Excellent track record of growth – revenue and margin • Ongoing focus on pricing; menu planning; purchasing and supply chain • Excellent oppo
Slide 60: Central and Eastern Europe; MAP in the business
Central and Eastern Europe (CEE) • ‘Cluster’ comprising Czech Republic, Key Facts Poland, Romania, Slovakia and Russia 6,500 Employees 550 Units • Czech Republic – strong market 240,000 Meals/day position; platform to support emerging markets • Focus on improving efficiency; purchasing and supply ch
Slide 61: Summary
Summary • Use of MAP to continue to drive performance improvements • Improved top-line growth through: – Foodservice and support services – LFL focus • Continue margin improvement • Maximise the growth opportunities in every country Unit Costs
Slide 62: Unit Costs: MAP focuses on labour
MAP 4 focuses on Labour Productivity Right people, right place, right time Wage & Ancillary Labour Costs Controlling the cost of providing labour Unit Overheads Controlling the cost of in- in-unit overheads Unit costs Size of the opportunity Labour In-unit overheads £4.0bn of spend £1.5bn of spend 3
Slide 63: In-Unit Overheads – the opportunity
In-Unit Overheads – the opportunity Occupancy and Utilities IT and Equipment Analyse Maintenance Laundry and cleaning Uniforms £1.5bn Consumables e.g. serviettes Other In-unit Benchmark Waste disposal Overheads Insurance Banking Depreciation/Amortisation Reduce Costs Unit costs Progress and Prioriti
Slide 64: MAP Initiatives: What does success look like?
MAP 4 Initiatives Business Efficiency Programme ‘MAD MAX’ Unit costs What does success look like? Delivering the right quality of services whilst being the lowest cost, most efficient operator Unit costs
Slide 65: Investor and Analyst Seminar
Unit costs Investor and Analyst Seminar
Slide 66: Andy Furlong: Central Asia, Middle East, Africa & Latin America
Andy Furlong Central Asia, Middle East, Africa & Latin America Business Footprint – S. America, Africa & M. East Compass businesses 2008
Slide 67: Current shape; How We Manage These Businesses
Current shape Rest of World £1.6bn (FY2007) 16% of Group Revenue UAE, South Africa & Remote Sites 17% How We Manage These Businesses • Locally empowered MDs • High transparency • Cultural sensitivity • Strong risk management processes • Controls and governance • Ethical recruitment
Slide 68: Health and Safety, MAP; UAE & Qatar
How We Manage These Businesses • Health and Safety – Huge priority – A true” USP” • MAP – Common language and framework – “Joined Up” company at every level UAE & Qatar Key Facts • JV with local company 17,000 Employees 350 Units • Focussed operations High growth rates Clients both respectable local
Slide 69: Brazil and Remote Sites
Brazil Key Facts • Now 100% ownership 25,000 Employees 1,500 Units • Foodservice market leader Over 1m meals served per day • Established B&I operations Operate in 350 cities • Multi service evolving • Building a presence in Education and Healthcare • Significant future growth potential - New sector
Slide 70: South Africa; MAP in the business
South Africa • Market leader in foodservice Key Facts 6,200 Employees • Multi-sector presence 500 Units Serve 55,000 meals per day • Significant restructuring to reduce fixed overheads • New management team • Well respected in-country BEE JV partner • Future opportunities – Multi services – Educatio
Slide 71: Using MAP in the business; Summary
Using MAP in the business Menu Planning Office Consolidation • Standard Menus and Ingredients • Operational Support moved into units • Centralised Procurement • Eliminated Individual Offices • Controlled Volumes • Hot-Desks, and Common File Storage • 10% Reduction in Meal Costs • Consolidated 6 Corp
Slide 72: Investor and Analyst Seminar
Investor and Analyst Seminar
Slide 73: Andy Martin: MAP Above Unit Overheads
Andy Martin MAP 5 Above Unit Overheads
Slide 74: MAP 5 focuses on Above Unit Overheads
MAP 5 focuses on Above Unit Right management structure supported Overheads by the most efficient overhead Above Unit Overheads Progress and Priorities Progress Priorities • Simplified structures • Simplifying processes Above Unit • Reduced management layers • Reducing bureaucracy Overheads • Consoli
Slide 75: MAP 5 Initiatives
MAP 5 Initiatives Restructuring Back office efficiencies Above Unit Overheads Why it is important 2/3 People 1/3 Non-people 8% of revenue 60% of unit profit Above Unit Overheads
Slide 76: MAP Progress: What does success look like?
MAP 5 Progress • 2005/06 and 2006/07 – £100m reduction in overheads • 2007/08 (H1) – leveraging remaining overhead base; £11m of further reduction Above Unit Overheads What does success look like? A simple, effective organisational model, with the appropriate level of overhead to support the growth
Slide 77: Richard Cousins: Summary
Investor and Analyst Seminar Richard Cousins Summary
Slide 78: Today is About; What you have heard
Today is About • Repeating our core strategic principles • Exploring MAP • Explaining our key regional businesses • Meeting the five Group MD’s • Giving you two excellent case studies • Showing you our new Innovation Centre What you have heard Gary Green • High performing business, significant futur
Slide 79: What you have heard: Exciting future opportunities
What you have heard • Significantly improved performance in all countries Miguel Ramis and good growth opportunities Continental Europe • Low penetration rates • MAP 4 – managing labour and in-unit costs Andy Furlong • Much more focus Latin America, • Strengthened governance and controls Africa & Mi