Compass Group Plc · LSE:CPG
Compass — FY2010 Earnings Presentation
69 slides from Compass's earnings presentation, 2010
Slide 1: 2010 Full Year Results
2010 Full Year Results 1
Slide 2: Presentation Structure
Presentation Structure 1. Sir Roy Gardner Welcome & Highlights 2. Andrew Martin Full Year Results 3. Richard Cousins Business Review, Strategy, Summary & Outlook 4. Q&A 2
Slide 3: Business Highlights
Business Highlights • Record operating profit of over £1bn • Constant currency EPS +15% • Strong free cash flow of £744m (+25%) • Return to organic revenue growth • Dividend rebased: Full year dividend increased by 33% to 17.5 pence Exciting Growth Opportunities 3
Slide 4: Andrew Martin
Andrew Martin 2010 Full Year Results 4
Slide 5: Revenue
Revenue Change 2 3 Reported Constant Organic 2010 2009 Rates Currency Growth £m £m % % % North America 6,369 5,806 9.7% 8.6% 5.8% Continental Europe 3,506 3,429 2.2% 1.0% 0.1% UK & Ireland 1,782 1,829 (2.6)% (2.6)% (3.3)% Rest of the World 2,811 2,380 18.1% 5.8% 6.1% Total revenue 14,468 13,444 7.6%
Slide 6: Operating Profit and Margin - Reported
Operating Profit and Margin - Reported Margin 2 2010 2009 Change 2010 2009 £m £m £m % % North America 491 438 53 7.7% 7.5% Continental Europe 248 232 16 7.1% 6.8% UK & Ireland 114 114 - 6.4% 6.2% Rest of the World 204 151 53 7.3% 6.3% Unallocated overheads (60) (58) (2) Associates 6 7 (1) Operating
Slide 7: Operating Profit and Margin – Constant Currency
Operating Profit and Margin – Constant Currency Margin 3 2010 2009 2 Change 2010 2009 £m £m £m % % North America 491 442 49 7.7% 7.5% Continental Europe 248 235 13 7.1% 6.8% UK & Ireland 114 114 - 6.4% 6.2% Rest of the World 204 171 33 7.3% 6.4% Unallocated overheads (60) (58) (2) Associates 6 7 (1)
Slide 8: Margin Progression by Quarter
Margin Progression by Quarter Basis Points Q1 Q2 Q3 Q4 FY Margin North America 30 20 20 20 20 7.7% Continental Europe 30 30 30 30 30 7.1% UK & Ireland 20 20 25 15 20 6.4% Rest of the World 170 130 50 20 90 7.3% Total Group 55 45 35 25 40 6.9% Notes: 1. Based on continuing operations, excluding amort
Slide 9: Impact of Currency
Impact of Currency US $ Euro Average exchange rate for 2009 1.56 1.15 Estimated impact on 2010 operating profit +/- £15m +/- £9m of a 5 cent movement Average exchange rate for 2010 1.56 1.15 9
Slide 10: Operating Profit Growth
Operating Profit Growth Full Year £m (estimated) 2010 2009 2008 2007 Historic Net new business 38 27 28 30 50 Base estate 24 30 57 35 (15) Above unit overheads 20 31 6 36 (10) Associates (1) 3 - - - Operating profit growth 81 91 91 101 25 Acquisitions/disposals 11 9 13 - - Total operating profit gro
Slide 11: Income Statement
Income Statement 2010 2009 £m Reported Underlying 3 Reported Underlying 3 Revenue 14,468 14,468 13,444 13,444 Operating profit 2 989 1,003 877 884 Net finance costs (76) (81) (104) (100) Profit before tax Average short to 913 922 773 784 medium term tax Tax rate of 27% (246) (248) (221) (224) Profit
Slide 12: Income Statement at Constant Currency : Pro-forma
Income Statement at Constant Currency : Pro-forma 2010 2009 £m Underlying Proforma 3 Growth Revenue 14,468 13,820 Operating profit 2 1,003 911 +10% Net finance costs (81) (101) Profit before tax 922 810 Tax (248) (231) Profit after tax 674 579 Minority interest (5) (6) Attributable profit 669 573 Av
Slide 13: EPS Progression
EPS Progression Reported Underlying EPS +15% Constant Currency Growth % 35p +15% +30% 25p 35.7p +77% 30.0p 15p 22.0p 15.2p 9.4p 5p 2006 2007 2008 2009 2010 Notes: 1. Underlying EPS excludes amortisation of intangibles arising on acquisitions £(7)m (2009: £(7)m), acquisition transaction costs £(5)m (
Slide 14: Free Cash Flow
Free Cash Flow £m 2010 2009 Operating profit 2 1,003 884 Depreciation and amortisation 238 225 EBITDA 1,241 1,109 Net capital expenditure 3 (310) (259) Working capital (including provisions) 84 8 Net interest (72) (100) Net tax (203) (166) Dividends to minorities (4) (3) Net other items 8 4 Free cas
Slide 15: Free Cash Flow Progression
Free Cash Flow Progression £744m £700m £74m £593m £520m £500m Underlying £357m £670m £300m £212m £100m 2006 2007 2008 2009 2010 Notes: 1. Based on continuing operations. 15
Slide 16: Net Debt
Net Debt £m Opening net debt at 1 October 2009 943 Free cash flow from continuing operations (744) Free cash flow from discontinued operations (3) Acquisitions 1 205 Disposals 9 Net proceeds from issue of ordinary share capital 2 (97) Equity dividends 258 Impact of foreign exchange rates 11 Other 39
Slide 17: Dividend Progression
Dividend Progression 20p Full Year Dividend Rebased +33% Growth % 15p +10% +11% +7% 17.5p +3% 10p 13.2p 12.0p 10.1p 10.8p 9.8p 5p 2005 2006 2007 2008 2009 2010 Cover 1.1x 0.9x 1.4x 1.8x 2.3x 2.0x (earnings) Notes: 1. 2005 based on published underlying EPS restated from UK GAAP to IFRS and to exclude
Slide 18: Financial Summary
Financial Summary • Overall strong financial performance • Encouraging organic revenue trend + 3.2% • Operating margin growth + 40 basis points • EPS growth (constant currency) + 15% • Free cash flow of £744m + 25% • Rebased full year dividend to 17.5p + 33% 18
Slide 19: Richard Cousins
Richard Cousins Business Review, Strategy, Summary & Outlook 19
Slide 20: Agenda
Agenda 1. Business Performance and MAP 2. Regional Reviews 3. Strategy 4. Summary and Outlook 20
Slide 21: Organic Revenue Growth Returning
Organic Revenue Growth Returning % 2007 2008 2009 2010 New Business 8.0 8.5 8.5 9.5 Lost Business (6.0) (6.0) (7.0) (6.8) Net New Business 2.0 2.5 1.5 2.7 LFL Revenue 3.0 3.4 (1.5) 0.5 Organic Growth 5.0 5.9 0.0 3.2 Increased Net New Business, Stabilising Like for Like Revenue Financial years ending
Slide 22: 2010 Organic Revenue Progression
2010 Organic Revenue Progression 2008 / 2009 2009 / 2010 % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 New Business 8.5 8.5 8.5 8.5 9.0 9.0 10.0 10.0 Lost Business (7.0) (7.0) (7.0) (7.0) (7.0) (7.0) (6.5) (6.5) Net New Business 1.5 1.5 1.5 1.5 2.0 2.0 3.5 3.5 LFL Revenue 2.5 (1.0) (3.5) (4.5) (3.7) 0.5 2.0 2.0 Organic
Slide 23: Net New Business
Net New Business Net New Business • Encouraging trend 3.5% • Improved sales and retention • Best practice sharing 2.0% 1.5% 1.5% • Investment in growth H109 H209 1H10 2H10 Exciting Pipeline of New Business 23
Slide 24: Margin Growth
Margin Growth Group Margin Development Regional Margins 2010 v 2009 7.7% 7.1% 6.4% 7.3% +20bp +90bp +30bp +250bp +20bp 6.9% 6.5% 5.8% 5.1% 4.4% 2006 2007 2008 2009 2010 NA CE UK&I ROW 2009 Margin 2010 Margin Growth on 2009 Financial years ending 30 September 2010 Margin 24
Slide 25: Cost Efficiencies
Cost Efficiencies • Product / supplier rationalisation • Supply chain efficiencies • Focused purchasing • Waste reduction • Menu planning Further Progress Made … More To Do 25
Slide 26: Cost Efficiencies
Cost Efficiencies Unit Overhead & Labour • Significant cost base • Further progress on in unit overhead £2.1bn • Labour productivity and scheduling £5.8bn • Agency labour In Unit Overheads Unit Labour 2010: £7.9bn Total Cost Some Progress but Further Scope to Improve 26
Slide 27: Cost Efficiencies
Cost Efficiencies • Further cost reduction achieved Above Unit Cost • Cost redeployed to operations 1000 >100m Savings In 5 Years and sales 980 960 940 920 • Flat structures 900 880 860 840 • Ongoing cost containment 820 2005 2006 2007 2008 2009 2010 Financial years ending 30 September Another Year
Slide 28: North America – Progress and Results
North America – Progress and Results Revenue (£bn) & Organic Growth (%) • Strong business development 6.4 5.8% 5.9 5.7 1.6% • High retention rates across all sectors 5.3 7.1% 5.0 6% 12% • Double digit growth in S&L and Education 2006 2007 2008 2009 2010 Operating Profit (£m) & Margin (%) • Encouragi
Slide 29: Continental Europe – Progress and Results
Continental Europe – Progress and Results Revenue (£bn) & Organic Growth (%) • France Integration of Caterine 3.5 3.5 3.5 3.3 3.2 0.1% • Germany Developing multi-services 4.0% 5.4% (1.1)% 2.0% • Italy Encouraging growth 2006 2007 2008 2009 2010 Operating Profit (£m) & Margin (%) • Spain Challenging
Slide 30: UK & Ireland – Progress and Results
UK & Ireland – Progress and Results Revenue (£bn) & Organic Growth (%) 1.9 1.9 1.9 1.8 1.8 • Market conditions remain challenging - 2.0% (0.3)% (5.4)% (3.3)% • Progressive improvement in organic revenue • Good growth in Healthcare 2006 2007 2008 2009 2010 Operating Profit (£m) & Margin (%) • New bus
Slide 31: Rest of the World – Progress and Results
Rest of the World – Progress and Results Revenue (£bn) & Organic Growth (%) 2.8 • Australia Strong new business wins 2.7 2.6 6.1% 2.3% 10.6% • Japan Continued margin progression 2.3 2.1 9.0% 13% • Brazil Double digit organic growth 2006 2007 2008 2009 2010 Operating Profit (£m) & Margin (%) 204 • UA
Slide 32: The Model
The Model Organic Operating Revenue Efficiencies Growth & Margin Growth Shareholder Value Infill Free Cash Acquisitions Flow 32
Slide 33: Strategy
Strategy Focus on foodservice Fast growing support services Scale in countries PROVEN STRATEGY Geographic spread Sectorisation 33
Slide 34: Strategic Evolution
Strategic Evolution 2006-2008 2009 - 2010 2011 → Recession Turnaround Growth & recovery Phase 1 Phase 2 Phase 3 Phase 3: Balancing Top Line & Margin 34
Slide 35: Geographic Priorities & Strategy
Geographic Priorities & Strategy 17% 44% Fast Growing & Emerging North America Japan Continental Europe UK & I 39% 50 Core Countries 35
Slide 36: Organic Revenue Growth: The Market Opportunity
Organic Revenue Growth: The Market Opportunity FOOD SUPPORT SERVICES* £200bn Overall Market Opportunity** £200bn Overall Market Opportunity** 200 150 100 50 46% 0 Increase Com pass Outsourced Self operated outsourcing Opportunity by Sector** 70 60 Further 38% 50 40 bundling of 30 20 services 10 0 Ou
Slide 37: Support Services: Strategy
Support Services: Strategy • Building on Compass’ core competences KEY SERVICES Cleaning • Establishing platform in all major countries Housekeeping Reception • Organic growth and M&A Security Mailroom • Predominantly soft services; self performed Light Maintenance Support Services Cross Selling Mul
Slide 38: Support Services: Where we are today
Support Services: Where we are today 2010 Revenues (£) 20% 2.9bn Food Multi-service 2006 Revenues (£) 12% 1. 4b n Mercedes-Benz South Africa (Pty) Ltd Food Multiservice *2010 Multi-service: £2.9bn (20%) of which support services: £2.1bn (14.5%) and 38 foodservice: £0.8bn (5.5%)
Slide 39: Balancing Top Line & Margin
Balancing Top Line & Margin REVENUE Part Redeployed to Drive Revenue Sales & Retention, Emerging Markets, Support Services COST EFFICIENCIES AND Drop Through to Margin MARGIN GROWTH Ongoing Steady Margin Growth 39
Slide 40: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Cash Generation (£m) £m • Significant cash flow delivered 1000 Residual Cash Flow Dividends 900 Acquisitions Capex 800 • Strong balance sheet 700 600 500 • Increasing M&A activity 400 300 200 • Increased dividend 100 0 2007 2008 2009 2010 Financial years ending 30 Septemb
Slide 41: M&A
M&A STRATEGY DEALS DONE Geographies Existing Food THS - India Caterine - France Food Healthcare IDA - Denmark Education Scale Support services Hurley Group - CA Clean Mall - Brazil Support services Build capability SSC - USA Cross selling VSG - UK IDA - Denmark 41
Slide 42: Summary
Summary • Organic revenue growth returning Organic Top Line Growth • Ongoing efficiencies and margin progression • Strong cash flow and balance sheet Continued Margin Improvements • Exciting infill acquisitions Significant Cash Flow & • Dividend rebased Balance Sheet Strength 42
Slide 43: Outlook
Outlook “Compass has delivered another year of strong performance, despite the continuing challenging economic conditions. The return to organic revenue growth is encouraging. Looking forward, Compass is well placed to exploit the significant structural growth opportunity in both food and support se
Slide 44: This presentation contains certain forward looking statements as defined under US legislation (section 27A
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 45: Supplementary Information
Compass Group PLC 2010 Full Year Results Supplementary Information 45
Slide 46: Contents
Contents Revenue 47 Group Revenue by Geography Balance Sheet 57 Overview 58 Return on Capital Employed 59 Capital Expenditure % of Revenue Revenue by Sector 48 Group 49 North America 50 Continental Europe Financing 60 Components of Net Debt 51 UK & Ireland 61 Principal Borrowings 52 Rest of the Worl
Slide 47: Revenue – Group Revenue by Geography
Revenue – Group Revenue by Geography 2010 Rest of the World 20% North Other ROW 6% America Rest of the 2009 World 18% Brazil 4% 44% Other ROW 6% North Brazil 3% America Australia 5% 43% Australia 4% Japan 5% Japan 5% USA 40% Other CE 6% USA 39% Other CE 7% Netherlands 2% Netherlands 1% Norway 2% Nor
Slide 48: Revenue by Sector - Group
Revenue by Sector - Group Sports & 2010 2009 Leisure 11% Sports & Leisure Business 11% Healthcare & Industry 19% 41% Healthcare Business 19% & Industry 43% Education 15% Defence, Education Offshore, 16% Defence, Remote 12% Offshore, Remote 13% Notes: 1. Based on continuing operations. 48
Slide 49: Revenue by Sector – North America
Revenue by Sector – North America 2010 Sports & 2009 Leisure 14% Business Sports & & Industry Leisure 29% 12% Business & Industry 33% Healthcare Healthcare 26% 26% Defence, Offshore, Defence, Remote Offshore, Education Remote 7% 22% 7% Education 24% Notes: 1. Based on continuing operations. 49
Slide 50: Revenue by Sector – Continental Europe
Revenue by Sector – Continental Europe 2010 Sports & 2009 Leisure Healthcare 4% Sports & 16% Leisure Healthcare 5% 16% Education Education 13% Business 12% Business & Industry & Industry Defence, 61% 61% Defence, Offshore, Offshore, Remote 6% Remote 6% Notes: 1. Based on continuing operations. 50
Slide 51: Revenue by Sector – UK & Ireland
Revenue by Sector – UK & Ireland 2010 2009 Sports & Leisure 15% Sports & Leisure 15% Healthcare Business Healthcare 13% 11% & Industry Business 48% & Industry 51% Education 12% Education Defence, 12% Offshore, Defence, Remote Offshore, 11% Remote 12% Notes: 1. Based on continuing operations. 51
Slide 52: Revenue by Sector – Rest of the World
Revenue by Sector – Rest of the World 2010 Sports & 2009 Leisure 12% Sports & Leisure 13% Healthcare Business 10% & Industry Business Healthcare & Industry 38% 11% 38% Education Education 5% 5% Defence, Offshore, Defence, Remote Offshore, 33% Remote 35% Notes: 1. Based on continuing operations. 52
Slide 53: 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 2010 Revenue 6,369 3,506 1,782 2,811 14,468 Organic growth 5.8% 0.1% (3.3)% 6.1% 3.2% Operating profit 491 248 114 204 (54) 1,003 3 Margin 7.7% 7.1% 6.4% 7.3% 6.9% Cash flow 535
Slide 54: Finance Cost – Net Finance Cost
Finance Cost – Net Finance Cost 2010 2009 £m £m Bank loans and overdrafts 4 8 Other loans 64 90 Finance lease interest 2 3 70 101 Bank interest income (5) (14) 65 87 Amount charged to pension scheme liabilities net of expected return on scheme assets 15 11 Unwinding of discount on provisions and put
Slide 55: EPS / Dividends – Earnings & Dividends Per Share
EPS / Dividends – Earnings & Dividends Per Share 2010 2009 £m £m Earnings per share Continuing and discontinued operations 36.0p 31.7p Discontinued operations (0.7)p (2.2)p Continuing operations 35.3p 29.5p Other adjustments 1 0.4p 0.5p Underlying earnings per share 35.7p 30.0p Dividends per share I
Slide 56: EPS / Dividends – Dividend Cover
EPS / Dividends – Dividend Cover 2010 2009 2008 2007 2006 Per share (pence) Dividend (interim plus final) 17.5p 13.2p 12.0p 10.8p 10.1p Underlying earnings 1 35.7p 30.0p 22.0p 15.2p 9.4p Dividend earnings cover 2.0x 2.3x 1.8x 1.4x 0.9x Cash (£m) Cash cost of dividend (in the year) 258 229 209 208 21
Slide 57: Balance Sheet - Overview
Balance Sheet - Overview 2010 2009 £m £m Non-current assets 1,220 1,087 Working capital (511) (363) Provisions (432) (465) Interest payable (66) (70) Post employment benefit obligations (389) (335) Current tax payable (242) (235) Deferred tax 281 289 Net assets before goodwill (139) (92) Goodwill 3,
Slide 58: Balance Sheet – Return on Capital Employed
Balance Sheet – Return on Capital Employed 2010 2009 £m £m NOPAT 1 728 640 Capital employed 3,694 3,488 Average capital employed 3,591 3,350 ROCE 20.3% 19.1% Notes: 1. Based on continuing operations, excluding the impact of amortisation of intangibles arising on acquisition £(7)m (2009: £(7)m), acqu
Slide 59: 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% 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 Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005, total Group is shown on a UK GAAP basis. 2. F
Slide 60: Financing – Components of Net Debt
Financing – Components of Net Debt £m Bonds 590 Private placements 576 Bank loans 7 1,173 Finance leases 42 Other loans 25 Swap monetisation and IFRS adjustments for derivatives (15) Gross debt 1,225 Cash net of overdrafts (604) Closing net debt at 30 September 2010 621 Notes: 1. Based on nominal va
Slide 61: Financing – Principal Borrowings
Financing – Principal Borrowings Maturing in Coupon Calendar Year £m Bonds £250m 4 7.00% 2014 265 £325m 6.38% 2012 325 Total 590 US private placements $536m (2002 notes) 6.67% - 7.96% 2011 - 2012 340 $50m (2003 notes) 5.11% - 5.67% 2010 - 2013 32 $267m (2008 notes) 6.45% - 6.72% 2013 - 2015 169 £35m
Slide 62: Financing – Maturity Profile of Principal Borrowings
Financing – Maturity Profile of Principal Borrowings £m 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 2017 £ Bonds US $ Private Placement £ Private Placement Bank Notes: 1. Based on borrowings and facilities in place as at 30 September 2010, maturing in the financial years ending 30 Se
Slide 63: Financing – Sources of Committed Borrowings
Financing – Sources of Committed Borrowings Bank Loans 1% Private Bonds Placements 50% 49% Notes: 1. Based on borrowings as at 30 September 2010. 63
Slide 64: Financing – Effective Currency of Net Borrowings
Financing – Effective Currency of Net Borrowings Other Yen 9% 7% £ 10% US $ 59% € 15% Notes: 1. Based on net borrowings as at 30 September 2010. 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 centra
Slide 65: Financing – Debt Ratings and Ratios
Financing – Debt Ratings and Ratios Ratings Outlook Confirmed Standard & Poors BBB+ Positive 28-May-10 Moodys Baa1 Stable 26-Nov-09 Fitch (unsolicited) BBB+ Stable 19-Jul-10 Ratios 2010 2009 Net debt 1 / EBITDA 2 0.6x 1.0x EBITDA 2 / net interest 3 15.2x 11.1x Net debt 1 / adjusted total capitalisat
Slide 66: Exchange Rates – Rates Used in Consolidation
Exchange Rates – Rates Used in Consolidation Income Statement 2 Balance Sheet 3 2010 2009 2010 2009 per £ per £ per £ per £ Australian Dollar 1.74 2.12 1.63 1.83 Brazilian Real 2.77 3.26 2.67 2.85 Canadian Dollar 1.64 1.82 1.62 1.73 Euro 1.15 1.15 1.15 1.10 Japanese Yen 139.19 149.65 131.64 143.86 N
Slide 67: Exchange Rates – Effect on 2010 Revenue & Profit
Exchange Rates – Effect on 2010 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 68: Taxation – Statutory Tax Rates
Taxation – Statutory Tax Rates Key statutory tax rates within the Group 1 2010 UK 28% 3 USA (blended average of federal and state taxes) 40% France 34% Germany 30% 4 Netherlands 26% Italy 28% Nordic 27% Brazil 34% Canada 31% Japan 41% Spain 30% Australia 30% Blended statutory tax rate 2 34% Notes: 1
Slide 69: This presentation contains certain forward looking statements as defined under US legislation (section 27A
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