Slide 1: 2019 Full Year Results
2019 Full Year Results 26 November 2019 0
Slide 2: 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 all matters
Slide 3: Today's agenda
Today’s agenda 1. Dominic Blakemore Highlights & regional performance 2. Karen Witts Full year results 3. Dominic Blakemore Strategy & outlook 4. Q&A 2
Slide 4: Dominic Blakemore
Dominic Blakemore Chief Executive 3
Slide 5: Highlights
Highlights +6.4% +4.7% 7.4% ORGANIC REVENUE GROWTH OPERATING PROFIT GROWTH OPERATING MARGIN (CONSTANT CURRENCY) £1.2bn +6.0% +6.1% FREE CASH FLOW EPS GROWTH DIVIDEND GROWTH (CONSTANT CURRENCY) Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitio
Slide 6: FY 2019 organic revenue growth
FY 2019 organic revenue growth 7.9% (5.2)% 3.7% 6.4% New business Lost business LFL Organic growth 5
Slide 7: North America
North America 01 Organic sector growth 20% FY 2019 15% Organic revenue up 7.7% • Good growth across all sectors 10% • 40% of new wins from first time outsourcing 7.7% • Continued high retention rate of 96.4% 5% Profit growth of 9.0%* 0% • Maintained strong margin Total North America • Continuing to
Slide 8: North America: remains a large growth market
North America: remains a large growth market • Significant structural opportunity North America Food Service market • Market size c.£65bn 30 • c.70% self operated / regional players • High growth in mature B&I sector 20 66% 75% 70% • Increasing size of our addressable market 10 47% • Vending 0 • New
Slide 9: Europe
Europe 01 Organic growth by country and UK sector** 25% 20% Organic revenue up 4.1% • UK Defence contracts and strong S&L 15% • New management team in Continental Europe 10% 5% 4.1% Profit decline of 6.6%* 0% • Margin down 60bps -5% Total Europe • Declining B&I volumes & mobilisation costs -10% Cont
Slide 10: Europe: a significant market opportunity
Europe: a significant market opportunity • Regional clusters to improve efficiency • Exited non-core businesses • Targeted acquisitions to enhance our food EUROPE c.£75bn services proposition • Increase sub-sectorisation • Relatively low market penetration rates Structural growth opportunity Compass
Slide 11: Europe: positioning for the future
Europe: positioning for the future • Deteriorating macro environment • Prompt action to adjust Europe cost base, extended to certain Rest of World markets • c.£300m charge, c.£160m cash • c.£90m annualised benefit from FY21 onwards • Offset short-term margin pressure and better capitalise on future
Slide 12: Rest of World
Rest of World 01 Organic growth 4.3% Organic revenue up 4.3% 2.9% • Strong performances in Turkey, India and Spanish speaking LATAM • Offshore & Remote drag reducing Profit growth of 5.9%* -0.6% -1.2% • Margin up 40bps • Investment in pricing, purchasing and 2016 2017 2018 2019 productivity initiati
Slide 13: FY 2019 Summary
FY 2019 Summary • Strong year with organic growth of 6.4% • Excellent progress in North America • Good growth in Europe despite B&I weakness • Prompt action to mitigate volume pressures on margin • Rest of World improving 12
Slide 14: Karen Witts
Karen Witts Group Chief Financial Officer 13
Slide 15: Revenue
Revenue £m Organic revenue growth +7.7% +4.1% +4.3% +6.4% 1,233 95 29 648 25,152 23,795 23,147 FY 2018 Currency FY 2018 at 2019 North Europe Rest of World FY 2019 Revenue* FX rates America Revenue Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see defin
Slide 16: Operating profit
Operating profit £m Constant currency operating profit growth +4.7% 106 16 54 (26) (12) 1,798 1,882 1,744 FY 2018 Currency FY 2018 at North Europe Rest of World Other FY 2019 Operating 2019 FX rates America Operating profit* profit Notes: Based on underlying performance at reported exchange rates un
Slide 17: Operating profit margin
Operating profit margin 2019 2018 North America 8.2% 8.2% Europe 6.3% 6.9% Rest of World 7.9% 7.5% Group 7.4% 7.4% Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 59 and 60. 16
Slide 18: Cost actions
Cost actions £m FY19 FY20 Total MAP4 & MAP5 & other 70 c.110 c.180 • Cash payback c.2 years Onerous contracts 120 0 120 • Onerous contracts mainly in Europe B&I Total charge 190 c.110 c.300 • c.£90m annualised benefit from FY21 onwards Cash 29 c.130 c.160 • Underpins our stable margin guidance Illus
Slide 19: Income statement
Income statement £m 2019 2018* • 2020 net finance cost expected to be Operating profit 1,882 1,744 around £110m Net finance costs (110) (114) Profit before tax 1,772 1,630 • FY19 tax rate 23.3% • 2020 tax rate expected to be around Tax (413) (388) 24% Profit after tax 1,359 1,242 Non-controlling int
Slide 20: Operating cash flow
Operating cash flow £m 2019 2018* Operating profit 1,882 1,744 • D&A up slightly due to our Depreciation and amortisation 577 521 investments in capex Net capital expenditure (806) (757) Net cash flow 1,653 1,508 • FY19 Gross capex 3.4% • FY20 Gross capex up to 3.5% Net cash flow conversion 88% 86%
Slide 21: Free cash flow
Free cash flow £m 2019 2018* Operating cash flow 1,693 1,580 Post-employment benefits (15) (8) • FY20 expected to be £20m Net interest (107) (95) Net tax (328) (323) Other 4 (13) • FY19 cash tax 19% Free cash flow 1,247 1,141 • FY20 expected to be c.28% due to change to UK tax payment terms Free cas
Slide 22: Net debt
Net debt £m Reinvestment in Returns to the business shareholders 148 611 377 806 3,383 3,272 (2,053) 2018 Opening FCF Net capex Acquisitions/ Dividends FX/other 2019 Closing net net debt pre-capex Disposals debt Notes: Based on underlying performance at reported exchange rates unless indicated other
Slide 23: Portfolio
Portfolio SALES AND EXITS TOTAL PORTFOLIO COMPLETED UNDER REVIEW Annual revenue c.£670m c.£1.2bn Operating margin c.4% c.7% Proceeds c.£130m For organic growth modelling purposes • Total disposals to be removed from FY 2019: Revenues £240m, operating profit £13m • Total acquisitions to be added to F
Slide 24: Capital allocation model remains unchanged
Capital allocation model remains unchanged CAPEX M&A Appropriate investment: Efficient Required returns > cost of capital Up to 3.5% of sales by the end of year 2 balance sheet Strong investment grade credit rating Target net debt/ RETURNS TO DIVIDEND Growing in line with EBITDA 1.5x* SHAREHOLDERS c
Slide 25: Dominic Blakemore
Dominic Blakemore Chief Executive 24
Slide 26: People Performance Purpose
PEOPLE PERFORMANCE PURPOSE DELIVERING BETTER QUALITY, MORE SUSTAINABLE LONG TERM GROWTH 25
Slide 27: Global market leader
Global market leader Global food services market c. £200bn* Leveraging our competitive advantages Large players • Food focused Compass • Decentralised / flexible structure • Sectorisation and sub-sectorisation approach Self operated • Unique scale in purchasing and overheads Regional • Performance b
Slide 28: An even more focused business
PORTFOLIO 01 An even more focused business Disposals Growth opportunities South Africa Japan S&L Fazer Food Services Egypt UK security 27
Slide 29: Proposed acquisition of Fazer Food Services
Proposed acquisition of PORTFOLIO Fazer Food Services 01 • Leading contract catering business in the Nordics • Clear focus on food • B&I, Education, Healthcare and Defence Sweden • Excellent strategic fit with Compass Finland • Large addressable market opportunity Norway Helsinki Bergen Oslo • Subje
Slide 30: Building our portfolio in Europe
PORTFOLIO 01 Building our portfolio in Europe • Sectorisation and sub-sectorisation key to North American success • 26 strong brands across 5 sectors • Investing to broaden our core European offering • High-quality & innovative brands • Enables further sub-sectorisation • Builds scale and in-house e
Slide 31: Performance: Sharing Best Practice
PERFORMANCE 01 Sharing Best Practice BLUEPRINT 1 Codifying the approach and PRICING EXPERIENCE processes PLAYBOOK 2 Providing tools and templates PURCHASING to support delivery 3 MATURITY MATRIX Defining ‘must have’ foundations PRODUCTIVITY KPIs 4 Core metrics to track and UNDERPINNED BY DIGITAL & T
Slide 32: Growth acceleration
MAP 1 & MAP 2 01 Growth acceleration • Creates a virtuous circle of growth • Builds on existing best practices • Drive like for like sales • Increase retention • Blueprints, tools and training to support our businesses 31
Slide 33: Responding to changing consumer dynamics
EXPERIENCE 01 Responding to changing consumer dynamics • Increasing demand for variety / convenience Pop ups • Investing in new concepts Aggregator • Building on our scale and market presence Compass • Relevant for certain market segments owned delivery • c.$250m revenue and profitable Pilot partner
Slide 34: FOODWORKS
EXPERIENCE 01 FOODWORKS • Aggregator for popular local restaurants • Pop ups in client sites: • Additional variety • Supplement existing offer • Serve clients without kitchens • 21 cities, 7 sub-sectors • Earn commission based on sales • Strict qualifying criteria, health and food safety audits 33
Slide 35: Procurement best practice
MAP 3 01 Procurement best practice • Blueprint based on best-in-class purchasing • Focused on category management • Closer alignment between purchasing and operations • Supporting countries with right expertise • UK common ordering platform - Foodbuy Online • FY19: 136m items ordered worth £800m 34
Slide 36: Progressing our People agenda
PEOPLE 01 Progressing our People agenda Highly engaged Exceptional Best unit Diversity and colleagues Leadership management inclusion Stronger evaluation Improved gender Compass Commitments and onboarding balance at all leadership levels 70% of our vacancies Global Engagement filled internally Train
Slide 37: Purpose
PURPOSE 01 Health and wellbeing Environmental game changers Better for the world Better nutrition choices Food waste Sourcing responsibly Mental Health Single-use plastics Enriching local communities Healthy lifestyle Plant-forward meals Collaborating for big change Safety culture (caring for our pe
Slide 38: Health & Wellbeing
PURPOSE 01 Health & Wellbeing Nutrition choices / plant-based Mental health • Reducing sugar, fat and salt • Raising awareness and training • Healthy eating programmes • Mental wellness ambassadors • Nourished Life recipes • Piloting biometric mental health • Teaching kitchens monitoring programme 3
Slide 39: Outlook
Outlook • Continued disciplined strategic focus on our 3Ps • Significant structural growth opportunities globally FY20 • Positive expectations, although cautious on Europe • North America pipeline is strong • Rest of World improving • Mitigating B&I volume pressures • Organic growth around the middl
Slide 40: Supplementary information
Supplementary information 39
Slide 41: 2020 guidance for modelling purposes
2020 guidance for modelling purposes Interest charge c.£110m P&L tax rate c.24% Cash tax rate c.28% Gross capex Up to 3.5% of revenues Post-employment cash contribution c.£20m Foreign exchange impact on 2019 EBIT (at current spot rates) £(26)m Notes: Guidance based on a pre IFRS16 basis. Based on un
Slide 42: Revenue
Revenue RoW 15% North America Food service 62% Support 86% Sports & Other RoW services Leisure Brazil Japan DOR Support Business & services Healthcare 13% Australia 2% 7% 12% Industry 3% DOR Food & Seniors 3% 2% Other service 5% Europe 9% 39% Germany 23% 2% Geography Service Line Sector France 4% 58
Slide 43: Geographic revenue by sector
Geographic revenue by sector 10% 8% 16% 32% 14% 16% 42% North America Europe 7% Rest of World 53% 28% 2% 13% 22% 8% 29% Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote Notes: Based on underlying performance, definitions on page 59 and 60. 42
Slide 44: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total 2019 Revenue 15,694 5,854 3,604 25,152 Organic growth 7.7% 4.1% 4.3% 6.4% Operating profit 1,290 368 285 (61) 1,882 Margin 8.2% 6.3% 7.9% 7.4% Cash flow 1,136 377 272 (538) 1,247 Cash flow conversion 88% 102% 95% 66% ROCE 26.6%
Slide 45: Dividend cover
Dividend cover 2019 2018 2017 2016 2015 Per share (pence) Dividend (interim plus final) 40.0p 37.7p 33.5p 31.7p 29.4p Underlying earnings 85.2p 77.9p 72.3p 61.1p 53.7p Dividend earnings cover 2.1x 2.1x 2.2x 1.9x 1.8x Cash (£m) Cash cost of ordinary dividend (in the year) 611 548 531 496 457 Underlyi
Slide 46: Balance sheet
Balance sheet Overview (£m) 2019 2018* Goodwill 4,576 4,270 Other non-current assets 3,776 3,285 Working capital (1,381) (1,227) Net Assets held for sale 160 164 Provisions (489) (394) Post employment benefit obligations 189 122 Current tax payable (159) (158) Deferred tax (38) (12) Net debt (3,272)
Slide 47: Financing
Financing Components of net debt £m Bonds 2,348 Private placements 1,338 Bank loans 5 3,691 Finance leases 3 Other loans and fair value accounting adjustments 154 Derivatives (195) Gross debt 3,653 Cash net of overdrafts (381) Closing net debt at 30 September 2019 3,272 Notes: Based on nominal value
Slide 48: Financing
Financing Maturing in Drawn Principal borrowings Coupon Financial Year £m Bonds €500m 1.875% 2023 442 €750m 0.625% 2024 664 £250m 2.000% 2025 250 £250m 3.850% 2026 250 €500m 1.500% 2028 442 £300m 2.000% 2029 300 Total 2,348 US private placements $750m (2011 Notes) 3.98% - 4.12% 2022 - 2024 609 $500m
Slide 49: Financing
Financing £m 1000 900 800 700 600 500 400 300 200 100 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 £ bond € bond US$ private placement Bank Notes: Based on borrowings and facilities in place as at 30 September 2019, maturing in the financial year ending 30 September. The average life of the G
Slide 50: Financing
Financing Debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 11 Mar 19 Moody’s A3 Stable 26 Mar 19 Fitch (unsolicited) A- Stable 28 Feb 19 Ratios 2019 2018 Net debt1 / EBITDA2 1.3x 1.5x EBITDA2 / net interest3 22.5x 19.6x Notes: 1. EBITDA includes share of profit of a
Slide 51: Currency impact on operating profit
Currency impact on operating profit £m FY 2019 FY 2018 USD (13) 61 EUR (6) - CAD (1) 1 AUD (3) (2) BRL (3) (2) JPY - 3 TRY (1) (3) Other - (4) Total currency impact (26) 54 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 59 and 60
Slide 52: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2019 per £ 2018 per £ 2019 per £ 2018 per £ Australian Dollar 1.81 1.77 1.83 1.80 Brazilian Real 4.96 4.73 5.13 5.21 Canadian Dollar 1.69 1.73 1.63 1.69 Chilean Peso 875.59 850.39 897.37 860.15 Euro 1.13 1.13 1.13 1.12 Jap
Slide 53: Exchange rates
Exchange rates Effect on 2019 revenue and profit US DOLLAR CANADIAN DOLLAR EURO £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 Revenue Profit Exch
Slide 54: Exchange rates
Exchange rates Effect on 2019 revenue and profit AUSTRALIAN DOLLAR BRAZILIAN REAL JAPANESE YEN £m cumulative change for an £m cumulative change for an £m cumulative change for an incremental 5 cent movement incremental 20 centavo movement incremental 10 yen movement Exchange Revenue Profit Exchange
Slide 55: FY 2018 income statement restated for IFRS15
FY 2018 income statement restated for IFRS15 £m FY 2018 IFRS15 FY 2018 reported adjustment restated Revenue 23,239 (92) 23,147 Operating profit 1,741 3 1,744 Net finance costs (114) - (114) Profit before tax 1,627 3 1,630 Tax (390) 2 (388) Profit after tax 1,237 5 1,242 Non-controlling interest (8)
Slide 56: FY 2018 operating cash flow restated for IFRS15
FY 2018 operating cash flow restated for IFRS15 £m FY 2018 IFRS15 FY 2018 reported adjustment restated Operating profit 1,741 3 1,744 Depreciation and amortisation 500 21 521 Net capital expenditure (757) - (757) Net cash flow 1,484 24 1,508 Net cash flow conversion 85% 86% Trade working capital 147
Slide 57: HY 2019 operating cash flow restated for IFRS15
HY 2019 operating cash flow restated for IFRS15 £m HY 2019 IFRS15 HY 2019 reported adjustment restated Operating profit 951 951 Depreciation and amortisation 289 (6) 283 Net capital expenditure (395) (395) Net cash flow 845 (6) 839 Net cash flow conversion 89% 89% Trade working capital (83) (83) Pro
Slide 58: Turkey Restatement
Turkey Restatement FY EUROPE FY ROW £m 2019 2018 2017 2019 2018 2017 Old 5,854 5,762 5,598 3,604 3,667 3,932 Revenue Net restatement 306 288 313 (306) (288) (313) New 6,160 6,050 5.911 3,298 3,379 3,619 Old 4.1% 2.1% 0.9% 4.3% 2.9% -1.2% Organic revenue growth New 5.1% 3.0% 1.6% 2.4% 1.4% -2.5% Old
Slide 59: Turkey Restatement
Turkey Restatement HY EUROPE HY ROW £m 2019 2018 2017 2019 2018 2017 Old 2,976 2,905 2,860 1,801 1,855 1,965 Revenue Net restatement 154 167 163 (154) (167) (163) New 3,130 3,072 3,023 1,647 1,688 1,802 Old 5.5% 0.5% 1.0% 3.2% 3.4% -3.8% Organic revenue growth New 6.4% 1.5% 1.6% 1.4% 1.7% -5.1% Old
Slide 60: Definitions
Definitions Total equity shareholders' funds adjusted for net debt, post employment benefit obligations net of associated deferred tax, amortised intangibles arising on acquisition, impaired Capital employed goodwill and excluding the Group's non-controlling partners' share of net assets and net ass
Slide 61: Definitions
Definitions ROCE Return on capital employed (ROCE) divides NOPAT by the 12 month average capital employed. • acquisition related costs; • one-off pension charge; • cost action programme charge: Specific adjusting items • tax on share of profit of joint ventures; • gain/(loss) on sale and closure of