Compass Group Plc · LSE:CPG
Compass — HY 2022 Earnings Presentation
46 slides from Compass's earnings presentation, May 11, 2022
Slide 1: 2022 Half Year Results
2022 Half Year Results 11 May 2022 1
Slide 2: Disclaimer
Disclaimer Certain information included in this presentation is forward looking and involves risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied by forward looking statements. Forward looking statements cover all matters which are
Slide 3: Dominic Blakemore, Group Chief Executive
Dominic Blakemore Group Chief Executive 3
Slide 4: Our clear focus on growth is delivering results
Our clear focus on growth is delivering results Revenue run rate above Another record of new wins Broad based growth 2019 level and client retention across all regions Inflation: medium-term Stepping up shareholder Proven resiliency and pressure but returns with a share balanced sector footprint lon
Slide 5: Palmer Brown, Group Chief Financial Officer
Palmer Brown Group Chief Financial Officer 5
Slide 6: Positive momentum continued into HY 2022
Positive momentum continued into HY 2022 98% 5.8% £2.5bn of 2019 REVENUE1 OPERATING MARGIN RECORD NEW WINS2 95.8% 9.4p £500m CLIENT RETENTION INTERIM DIVIDEND PER SHARE SHARE BUYBACK Notes: 1 HY 2022 revenue on a constant currency basis. 2 £2.5bn is the annual revenue of new business wins for the la
Slide 7: Continued strong net new growth, pricing and…
Continued strong net new growth, pricing and… +27% +6%1 +5% 38% organic 0.4 11.6 0.5 2.3 (0.1) 8.5 8.4 HY 2021 revenue Curre ncy HY 2021 at 2022 FX LFL volume Net new Pricing HY 2022 revenue (£bn) rates (£bn) Notes: On a constant currency basis. 1 Net new rebased to 2019 revenues is 4.4%. Based on u
Slide 8: …volume recovery, particularly in B&I and Education
…volume recovery, particularly in B&I and Education Revenue as % 2019 Q2 2022 vs. Q4 20211 Further base recovery 115 116 109 111 c.15 107 99 94 94 89 88 83 68 Business & Industry Sports & Leisure Education DOR Healthcare & Senior Group Living Q4 2021 Q2 2022 Notes: 1 On a constant currency basis. Ba
Slide 9: Strong revenue recovery across the regions
Strong revenue recovery across the regions Organic revenue % of 2019 revenues Net new Operating margin North America 47.9% 103% 8.2% 7.0% Europe 28.3% 90% 3.7% 4.5% Rest of World 9.6% 90% 1.2% 4.7% Notes: 1 HY 2022 revenue on a constant currency basis. Based on underlying performance at reported exc
Slide 10: Challenging inflationary environment
Challenging inflationary environment Procurement efficiencies Operational mitigation Contract structures • Benefits of scale supported by • Menu and inventory planning Dynamic pricing in ~ 70% of contracts: further growth • Food waste reduction • Cost-plus – pass through • Consolidate SKUs • Consume
Slide 11: Good underlying operating cash flow conversion
Good underlying operating cash flow conversion £m HY 2022 HY 2021 Operating profit 673 290 • OCF conversion 83% Depreciation and amortisation 366 380 EBITDA 1,039 670 • Working capital swing due to: Net capital expenditure (306) (272) • HY 2021 tax deferral benefit Trade working capital (142) 119 Le
Slide 12: Clear capital allocation priorities
Clear capital allocation priorities Invest in business M&A Capex Resilient Required returns > cost of capital by c.3.5% of revenue the end of year two balance sheet Strong investment grade credit rating Ordinary dividends Target net debt/ Shareholder returns EBITDA 1-1.5x c.50% of underlying earning
Slide 13: We are stepping up shareholder returns
We are stepping up shareholder returns Shareholder returns HY 2022 announcement • Interim dividend 9.4p Ordinary dividend • c. 50% of underlying FY earnings Additional shareholder • Share buyback programme with remuneration up to £500m capital return Strong balance sheet with leverage down to 1.3x1
Slide 14: FY 2022 guidance
FY 2022 guidance Increasing organic revenue growth and maintaining margin Full year organic Full year underlying Exit rate underlying revenue growth operating margin operating margin around 30% over 6% around 7% 14
Slide 15: Dominic Blakemore: Strategy
Dominic Blakemore Strategy 15
Slide 16: A clear strategy to capture the growth opportunity
A clear strategy to capture the growth opportunity • Significant runway for growth • Stronger, more resilient business • Scale, focus and expertise • Relevant offer: Digital and sustainability • Balanced portfolio limiting risk • Disciplined capital allocation 16
Slide 17: Within the context of a large addressable market
Within the context of a large addressable market Addressable global food services market at least £220bn • Best placed to capitalise on changed market Large conditions and unlock core opportunity: players ~10% • ~75% self-op or regional players Compass Self operated c. 50% • >60% self-op in Healthca
Slide 18: The list of reasons to outsource is growing
The list of reasons to outsource is growing Ø Talent attraction and retention Ø Health & Safety Ø Invest to improve offer Ø Business continuity Ø Entice employees back to work Ø Climate change/Net Zero Ø Improve productivity and morale Ø Increase in regulations Ø Manage supply chain Ø Support local
Slide 19: We have the most relevant offer and focused team
We have the most relevant offer and focused team • People and culture are key to continued success • Tailored solutions through sectorisation 5 Sectors, • Local leaders closest to the client and consumer 30+ sub-sectors • Agile and nimble response to market needs • Leveraging economies of scale • Su
Slide 20: Underpinned by an expanding digital capability
Underpinned by an expanding digital capability Bespoke food offer through sectors and sub-sectors Benefits MAP 1 Alignment with client expectation In-house capability tailors digital offer MAP 2 Stronger consumer participation MAP 3 Reduced waste and food costs A range of flexible digital channels t
Slide 21: Our ESG focus is a competitive advantage
Our ESG focus is a competitive advantage Planète Chef : Compass Culinary School Helping our client reduce CO2 and costs • All candidates come from socially • Crothall’s engineering team helped a Healthcare disadvantaged backgrounds client increase energy efficiency • No CV recruitment process • Oper
Slide 22: Case study: From traditional to digital food offer
Case study: From traditional to digital food offer More sustainable digital food model at Brunel University • In-house and high street brands Benefits include • Order by app or at digital kiosk ü Higher average transaction value • Open all day ü Reduced food waste by 33% • Pick up or delivery (on /
Slide 23: Record new business wins in all regions…
Record new business wins in all regions… New business wins (£bn)1 Last 12 months North America Europe & ROW Group +15% +30% +20% 2.5 2.1 1.6 1.4 0.9 0.7 2021 LTM Strong focus leading to broad based new business wins Notes: 1ARO value is the annual revenue of new business wins. 23
Slide 24: …record retention and an increase in net new growth
…record retention and an increase in net new growth Client retention (%) Net new (%) 4.4% 95.8% 94.8% 2.7% 2019 HY 2022 2019 HY 2022 Notes: HY 2022 net new is rebased to 2019. 24
Slide 25: Our portfolio is more balanced and lower risk
Our portfolio is more balanced and lower risk Revenues by sector In the last 10 years, we focused our portfolio Sports & Leisure • Focused on sectors and countries with 13% growth potential Business & Industry 10% 31% • Exited 7 countries and other non-core businesses 19% 42% Healthcare HY HY • Limi
Slide 26: Well positioned to accelerate growth
Well positioned to accelerate growth • Continued record new business wins and retention • Resilient business model with a balanced portfolio • Operational tools to help mitigate inflation PEOPLE & • Increasing organic revenue growth guidance for FY22 PURPOSE • Maintaining margin guidance for FY22 •
Slide 27: Supplementary Information
Supplementary Information 27
Slide 28: FY 2022 further guidance for modelling purposes
FY 2022 further guidance for modelling purposes • Capex c.3.5% of revenue • Interest charge c.£100m • Effective tax rate c.24% • Cash outflows: • c.£115m resizing charges • c.£110m due to payroll timings, reverses in FY24 28
Slide 29: Revenue
Revenue ROW 10% North America Other 66% Support services Sports & Japan RoW Leisure Australia Business & 2% 13% Industry Other 3% 5% 16% Europe 31% 12% France 4% Service Sector Geography 27% 8% 63% UK 8% 3% USA Healthcare & Senior DOR Canada 84% Living 21% Education Food service Europe 24% Notes: Ba
Slide 30: Geographic revenue by sector
Geographic revenue by sector North America Europe Rest of World 10% 3% 15% 16% 26% 34% 17% 44% 6% 1% 33% 17% 25% 12% 41% Business & Industry Defence, Offshore & Remote Education Healthcare & Senior Living Sports & Leisure Notes: Based on underlying performance at reported exchange rates unless indic
Slide 31: Organic growth split
Organic growth split Net new 6.1% 31.8% 37.9% 10.3% (4.2)% New business Lost business LFL Organic change Notes: Mobilised new business. Based on underlying performance at reported exchange rates unless indicated otherwise, see the definitions. 31
Slide 32: Underlying revenue as % of 2019
Underlying revenue as % of 20191 Q1 Q2 HY 2022 Business & Industry 76.6% 82.9% 80.4% Education 101.2% 107.3% 103.9% Healthcare & Senior Living 114.6% 116.3% 115.0% Sports & Leisure 107.3% 93.8% 99.4% Defence, Offshore & Remote 116.6% 115.3% 116.1% Group 96.9% 99.2% 98.0% North America 101.8% 103.7%
Slide 33: Income statement
Income statement £m HY 2022 HY 2021 Revenue 11,625 8,551 Operating profit 673 290 Operating profit margin 5.8% 3.4% Net finance costs (37) (56) Profit before tax 636 234 Tax expense (153) (63) Profit after tax 483 171 Non-controlling interests (3) - Attributable profit 480 171 Average number of shar
Slide 34: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total HY 2022 Revenue 7,657 2,766 1,202 11,625 Organic growth 47.9% 28.3% 9.6% 37.9% Operating profit 535 125 56 (43) 673 Margin 7.0% 4.5% 4.7% 5.8% Cash flow 487 92 39 (258) 360 Cash flow conversion 91% 74% 70% 53% HY 2021 Revenue 5
Slide 35: Balance sheet
Balance sheet Overview (£m) HY 2022 HY 2021 FY 2021 Goodwill 4,620 4,487 4,550 Other non-current assets 4,665 4,494 4,556 Working capital (1,105) (1,293) (1,255) Net assets held for sale 26 21 17 Provisions (601) (573) (581) Net post employment benefit assets 360 119 129 Current tax payable (120) (9
Slide 36: Reduction in net debt and leverage
Reduction in net debt and leverage £m Leverage Net capex Leverage 1.6x 2.6% of ratio now (3.0x at revenue 1.3x HY 2021) 109 33 250 (40) (666) 306 2,538 2,530 Oct 2021 opening FCF (pre capex) Net capex Acquisitions and Resizing Dividends Othe r HY 2022 closing net debt disposals net debt Notes: Based
Slide 37: Components of net debt
Components of net debt £m Bonds 2,277 Private placements 799 Financing 3,076 Overdrafts 163 Other loans and fair value accounting adjustments (36) Borrowing as per balance sheet 3,203 Leases 827 Derivatives (20) Gross debt 4,010 Cash (1,480) Closing net debt at 31 March 2022 2,530 Notes: Based on no
Slide 38: Financing
Financing Maturing in Drawn Principal borrowings Coupon Financial Year £m Bonds €500m 1.875% 2023 422 €750m 0.625% 2024 633 €500m 1.500% 2028 422 £250m 2.000% 2025 250 £250m 3.850% 2026 250 £300m 2.000% 2029 300 Total 2,277 US private placements $352m (2011 Notes) 4.12% 2024 267 $300m (2014 Notes) 3
Slide 39: Maturity profile
Maturity profile £m 1,000 900 800 700 600 500 400 300 200 100 0 2022 2023 2024 2025 2026 2027 2028 2029 £ Bond € Bond US $ Private Placement Notes: Based on borrowings and facilities in place as at 31 March 2022, maturing in the financial year ending 30 September. The average life of the Group's pri
Slide 40: Financing
Financing Debt ratios and credit ratings Ratings Short term Long term Outlook Latest Update Standard & Poor’s A-1 A Negative 16 Dec 21 Moody’s P-2 A3 Stable 01 Feb 22 Ratios for USPP covenant purposes HY 2022 FY 2021 Net debt1 / EBITDA2 1.0x 1.5x EBITDA2 / net interest3 27.0x 14.7x Reported ratios4
Slide 41: Currency impact on operating profit and revenue
Currency impact on operating profit and revenue £m IMPACT ON FY 2021 IMPACT ON HY 2021 USD 34 1 CAD 2 - AUD 1 (1) BRL 1 - TRY (5) (2) EUR (2) (1) JPY (1) - Other 3 - Total currency impact on profit 33 (3) Total currency impact on revenue 535 (109) Notes: Based on underlying performance at reported e
Slide 42: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2022 per £ 2021 per £ 2022 per £ 2021 per £ Australian Dollar 1.85 1.81 1.75 1.81 Brazilian Real 7.20 7.44 6.26 7.79 Canadian Dollar 1.70 1.74 1.64 1.73 Chilean Peso 1091.06 1,003.19 1,036.11 991.17 Euro 1.18 1.13 1.18 1.1
Slide 43: Exchange rates
Exchange rates Effect on 2021 revenue and profit US DOLLAR CANADIAN DOLLAR AUSTRALIAN DOLLAR £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 5 cent movement incremental 5 cent movement Exchange Revenue Profit Exchange Revenu
Slide 44: Exchange rates
Exchange rates Effect on 2021 revenue and profit EURO TURKISH LIRA BRAZILIAN REAL £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 20 kurus movement incremental 20 centavo movement Exchange Revenue Profit Exchange Revenue Pro
Slide 45: Definitions
Definitions INCOME STATEMENT Underlying revenue Revenue plus share of revenue of joint ventures. Underlying operating profit Operating profit excluding specific adjusting items*. Underlying operating margin Underlying operating profit divided by underlying revenue. Current year: Underlying revenue e
Slide 46: Definitions
Definitions BALANCE SHEET Net debt Bank overdrafts, bank and other borrowings, lease liabilities and derivative financial instruments, less cash and cash equivalents. Net debt to EBITDA Net debt divided by underlying EBITDA. CASH FLOW Purchase of intangible assets, purchase of contract fulfilment as