Compass Group Plc · LSE:CPG
Compass — FY2023 Earnings Presentation
55 slides from Compass's earnings presentation, Nov 20, 2023
Slide 1: 2023 Full Year Results
2023 Full Year Results 20 November 2023 1
Slide 2: Disclaimer
Disclaimer Certain information included in this presentation is of operations and financial conditions and the Company’s information known to the Company on the date of this forward looking and involves risks, assumptions and plans and objectives for future operations, including, presentation. Accor
Slide 3: Dominic Blakemore, Group Chief Executive Officer
Dominic Blakemore Group Chief Executive Officer
Slide 4: Another great year of strong financial results
We’ve had another great year of strong financial results… SHARE REVENUE OPERATING OPERATING BUYBACKS PROFIT CASH FLOW Excellent growth Completed c.£1bn. £2.1bn with £1.8bn with 86% Further buyback to over £31bn margin up 60bps conversion announced …supporting investment for future growth Notes: Base
Slide 5: Generating long term compounding shareholder returns
Generating long term compounding shareholder returns… VALUE CREATED THROUGH Profit growth VALUE CREATED THROUGH OPERATIONS (MAP) ahead of revenue CAPITAL ALLOCATION growth Higher revenue growth Capex to support organic growth Cost efficiencies Long term Bolt on M&A compounding shareholder Scale bene
Slide 6: Palmer Brown, Group Chief Financial Officer
Palmer Brown Group Chief Financial Officer
Slide 7: Continuing our track record of strong performance
Continuing our track record of strong performance Operating profit increased by 30% 1 ORGANIC OPERATING REVENUE GROWTH MARGIN 19% 6.8% Notes: Based on underlying performance at reported exchange rates unless otherwise indicated. See definitions in the supplementary slides. 1 On a constant currency b
Slide 8: Strong growth drives revenue to over £31bn
Strong growth drives revenue to over £31bn £bn c.5% c.7% c.7% Organic 19% 1.9 31.3 1.8 0.6 1.2 25.8 26.4 2022 revenue Currency 2022 at 2023 FX rates Net new Pricing Volume 2023 revenue Notes: On a constant currency basis. Based on underlying performance at reported exchange rates unless otherwise in
Slide 9: Growth continues to be broad based
Growth continues to be broad based… Organic Operating Year on year Operating profit revenue margin margin change growth 1 North America 17.4% 7.8% +60bps 28.0% Europe 21.6% 5.6% +60bps 31.5% Rest of World 21.8% 5.6% +40bps 30.6% Group 18.8% 6.8% +60bps 29.6% …with strong profit performance across al
Slide 10: Operating profit now over £2.1bn
Operating profit now over £2.1bn £m FY 2023 FY 2022 Revenue 31,281 25,771 Operating profit 2,122 1,590 Expected FY24 interest charge of c.$225m Operating profit margin 6.8% 6.2% Likely to increase as the business grows and we maintain Net finance costs (136) (100) leverage in range of 1-1.5x Profit
Slide 11: Strong operating and free cash flow conversion
Strong operating and free cash flow conversion £m FY 2023 FY 2022 Operating profit 2,122 1,590 Depreciation and amortisation 842 781 FY23 capex 2.9% of revenue EBITDA 2,964 2,371 FY24 capex expected to be around 3.5% of revenue Net capital expenditure (899) (704) Trade working capital (89) (159) FY2
Slide 12: Our flexible operating model gives us confidence
Our flexible operating model gives us confidence… FY23 POSITION LOOKING AHEAD INTO FY24 DESPITE HEADWINDS… WHILE PRESSURES ARE LIKELY TO CONTINUE… ● Inflation ● Current blended inflation c.7% ● Net new business drag ● Food inflation easing but wage inflation persistent …MARGIN INCREASED BY 60BPS …WE
Slide 13: We have a natural profit growth hedge
We have a natural profit growth hedge… FASTER GROWTH SLOWER GROWTH FASTER REVENUE GROWH STRONGER MARGIN PROGRESS ● Increased outsourcing ● Less mobilisation costs ● Higher inflation / pricing ● More mature contract mix ● Acquisitions ● Easier to mitigate inflation Profit growth exceeding revenue ONG
Slide 14: Our capital allocation model remains unchanged
Our capital allocation model remains unchanged Invest in business M&A Capex Required returns > cost of capital c.3.5% of revenue by the end of year two Resilient balance sheet Strong investment grade credit rating Target net debt/ Ordinary dividends EBITDA 1-1.5x c.50% of underlying earnings Surplus
Slide 15: We are continuing to tighten our portfolio
We are continuing to tighten our portfolio… DISPOSALS & EXITS ACQUISITIONS ● Nine tail countries including: ● Net M&A expenditure £304m in FY23 ● Central & Eastern Europe ● Vending & office coffee ● Argentina (October 2023) ● Foodbuy UK ● Now operate in c.35 countries ● HOFMANNs (November 2023) NET
Slide 16: Low leverage despite £1.2bn investment and £1.6bn returns
Low leverage despite £1.2bn investment and £1.6bn returns £bn £1.6bn 0.9 £1.2bn 0.7 3.7 3.0 2.1 0.3 Leverage Leverage 0.9 1.2x 1.3x FY23 opening net debt FCF (pre capex) Net capex Acquisitions and Dividends Share buybacks FY23 closing net debt disposals Notes: Based on underlying performance at repo
Slide 17: FY24 guidance: Profit growth above revenue growth
FY24 guidance: Profit growth above revenue growth Operating profit growth towards 13% 1 Organic revenue Operating margin High single Ongoing digit growth progression Notes: Based on underlying performance at reported exchange rates unless otherwise indicated. See definitions in the supplementary sli
Slide 18: Dominic Blakemore, Group Chief Executive Officer
Dominic Blakemore Group Chief Executive Officer
Slide 19: Step change in growth set to continue
Step change in growth set to continue… Attractive M&A Organic revenue growth: Ongoing year on year margin Mid to high single digit improvement Surplus cash returns to shareholders Compounding shareholder returns …as we create value through our operations 19
Slide 20: We have been investing in our people and processes
We have been investing in our people and processes… THEN: NORTH AMERICA NOW: ACCELERATED, BALANCED INVESTMENT PHASE DOMINATED GROWTH ● Organic growth and profit CAGR c.5% ● Evolving operating model ● Growth mindset and culture ● Lack of growth outside North America ● Formalised best practice sharing
Slide 21: Evidenced by sustained new business
…which is evidenced by sustained new business… ANNUAL REVENUES FROM NEW BUSINESS WINS STEP CHANGE IN NET NEW AND RETENTION £2.7bn 12.0% 96.8% 96.5% £2.5bn 96.4% 96.3% £2.1bn 10.0% £1.9bn 95.8% 95.4% 8.0% 95.3% 94.8% 6.0% 5.7% 94.8% 94.4% 4.6% 94.3% 4.0% 3.3% 2.7% 93.8% 2.1% 37% 49% 45% 47% 2.0% 93.3
Slide 22: We have clear priorities to capture the opportunity
We have clear priorities to capture the opportunity… 1 2 3 4 5 Significant opportunities Regional priorities to Maximising flexibility of Future sources of Nurturing talent in core markets enable higher our operating models growth through and developing and sectors growth and further disciplined M&A
Slide 23: Our addressable market is at least $300bn
Our addressable market is at least $300bn… 1 Compass: ● We are the global leader in food services <15% ● With less than 15% market share ● 50% of the market in the hands of self-operators ● The other 35% by large and small competitors Additional market opportunity in vending and targeted support ser
Slide 24: Our core markets have significant growth potential
Our core markets have significant growth potential… 1 “MORE IN THE CORE” Outsourcing maturity develops from B&I Business & ● Exited nine countries Industry ● Low outsourcing penetration in most sectors Healthcare & Senior Living 52% ● Maximising use of flexible operating models Education 55% ● Lever
Slide 25: North America: sustaining our track record of growth
North America: sustaining our track record of growth 2 WITH REVENUES c.30% HIGHER THAN 2019 …WITH PLENTY MORE OPPORTUNITIY …AND A CLEAR STRATEGY TO CAPTURE IT MAP 1: Significant FTO and market share gains Opportunity c. 80% ● Existing sectors and sub-sectors ● Scaling new concepts i.e. vending/deliv
Slide 26: Europe: growth momentum continues
Europe: growth momentum continues 2 …WITH STRONG NET NEW BUSINESS …SUPPORTED BY INVESTMENT IN A VERY ATTRACTIVE MARKET… GROWTH… FUNDAMENTAL PROCESSES 12.0% 97.0% Compass 7% MAP 1: GROWTH TRANSFORMATION Opportunity 96.0% PROGRAMME 10.0% 96.0% >90% Self- 95.3% ● Universe mapping with forecasted probab
Slide 27: The food services industry is increasingly complex
The food services industry is increasingly complex… 3 Inflation and Operational Client Consumer macro-economic complexity dynamics expectations pressures Evolving Driving outsourcing operating model …with heightened expectations 27
Slide 28: Investing in flexible operating models
We’ve been investing in flexible operating models… 3 Flexibility of offer Grab & Go, Digital Delivered in, Sustainability capability workforce initiatives planning Carbon Client apps, reduction, loyalty menus, food programmes waste & supplier initiatives People Dashboards development Diversity, & KP
Slide 29: Targeting attractive M&A opportunities
And targeting attractive M&A opportunities… 4 WE HAVE A STRONG M&A TRACK RECORD ACQUISITION OF HOFMANNs*, GERMANY ● North American portfolio of 20+ brands built mainly through ● High quality meals, cooked and frozen acquisitions ● New capability with scaled production ● New capability, specialisatio
Slide 30: Developing talent and leadership to support growth
Developing talent and leadership to support growth 5 Prioritise growth for our colleagues Opportunity for all ● Pipeline of talent for internal promotion Leadership and Career Development ● Succession planning ● Tailored individual development Executive leaders c.350 Rise Global Gender Programme Bui
Slide 31: Generating higher, long term compounding shareholder returns
Generating higher, long term compounding shareholder returns VALUE CREATED THROUGH Profit growth VALUE CREATED THROUGH OPERATIONS (MAP) ahead of revenue CAPITAL ALLOCATION growth Higher revenue growth Capex to support organic growth Cost efficiencies Long term Bolt on M&A compounding shareholder Sca
Slide 32: FY24 guidance summary
FY24 guidance summary Underlying operating profit: Growth towards 13%1 - high single digit organic revenue growth - ongoing margin progression Capex: c.3.5% of revenue Interest charge: c.$225m Effective tax rate: c.25.5% Working capital: Small outflow Net M&A impact : c.$(100)m revenues2 at average
Slide 33: Supplementary Information
Supplementary Information 33
Slide 34: Revenue
Revenue RoW 10% North America Support services 67% Other Sports & RoW Australia Leisure Business & Industry 3% 7% 15% 15% Other Healthcare Europe & Senior 12% Living 35% France 3% GEOGRAPHY SERVICE SECTOR 24% 8% UK 64% 3% USA 8% Canada 85% 18% DOR Education Europe 23% Food service Notes: Based on un
Slide 35: Geographic revenue by sector
Geographic revenue by sector 13% 4% 17% 14% 31% 35% 16% 7% 46% NORTH AMERICA EUROPE REST OF WORLD 29% 2% 14% 21% 11% 40% Business & Industry Defence, Offshore & Remote Education Healthcare & Senior Living Sports & Leisure Notes: Based on underlying performance at reported exchange rates unless indic
Slide 36: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total FY 2023 Revenue 21,092 7,038 3,151 31,281 Organic growth 17.4% 21.6% 21.8% 18.8% Operating profit 1,653 392 175 (98) 2,122 Margin 7.8% 5.6% 5.6% 6.8% Cash flow 1,477 277 176 (689) 1,241 Cash flow conversion 89% 71% 101% 58% ROC
Slide 37: Balance sheet
Balance sheet Overview (£m) FY 2023 FY 2022 Goodwill 5,002 5,119 Other non-current assets 5,982 5,895 Working capital (1,239) (1,319) Net assets held for sale 4 26 Provisions (519) (579) Net post-employment benefit obligations (376) (178) Current tax payable (125) (139) Net deferred tax asset 85 70
Slide 38: Components of net debt
Components of net debt £m Bonds 2,569 Private placements 862 Financing1 3,431 Other loans and fair value accounting adjustments (224) Borrowing 3,207 Leases 945 Derivatives 181 Gross debt 4,333 Cash net of overdrafts (680) Closing net debt at 30 September 2023 3,653 Notes: 1. Based on nominal value
Slide 39: Financing
Financing Principal borrowings Coupon Maturing in Financial Year Drawn £m Bonds €750m 0.625% 2024 651 £250m 2.000% 2025 250 £250m 3.850% 2026 250 €500m 1.500% 2028 434 £300m 2.000% 2029 300 €500m 3.000% 2030 434 £250m 4.375% 2032 250 Total 2,569 US private placements $352m (2011 Notes) 4.12% 2024 28
Slide 40: Maturity profile
Maturity profile £m 1,000 800 600 400 200 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 £ Bond £ Sustainable Bond € Bond € Sustainable Bond US $ Private Placement Notes: Based on borrowings and facilities in place as at 30 September 2023, maturing in the financial year ending 30 September. The aver
Slide 41: Financing
Financing Debt ratios and credit ratings Ratings Short term Long term Outlook Latest Update Standard & Poor’s A-1 A Stable 9 Aug 23 Moody’s P-1 A2 Stable 6 Oct 23 Ratios for USPP covenant purposes FY 2023 FY 2022 Net debt1 / EBITDA2 1.0x 1.0x EBITDA2 / net interest3 27.6x 33.4x Reported ratios4 FY 2
Slide 42: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2023 per £ 2022 per £ 2023 per £ 2022 per £ Australian Dollar 1.84 1.80 1.89 1.74 Brazilian Real 6.22 6.72 6.11 6.04 Canadian Dollar 1.65 1.64 1.65 1.53 Euro 1.15 1.18 1.15 1.14 Japanese Yen 171.13 158.27 182.14 161.58 Tur
Slide 43: Definitions
Definitions INCOME STATEMENT Underlying revenue Revenue plus share of revenue of joint ventures. Underlying operating profit Operating profit excluding specific adjusting items2. Underlying operating margin1 Underlying operating profit divided by underlying revenue. Current year: Underlying revenue
Slide 44: 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. Capital employed Total equity shareholders’ funds, excluding: net debt; pos
Slide 45: Definitions
Definitions BUSINESS GROWTH New business Current year underlying revenue for the period in which no revenue had been recognised in the prior year. Lost business Prior year underlying revenue for the period in which no revenue has been recognised in the current year. Net new business New business min
Slide 46: Re-presentation of Alternative Performance Measures in US dollars
Re-presentation of Alternative Performance Measures in US dollars Group to change its reported currency from sterling to US dollars from 1 October 2023 as previously announced These tables show the re-presentation of Alternative Performance Measures for each financial period from 2019 onwards Primar
Slide 47: Income statement
Income statement FULL YEAR HALF YEAR $m 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 Revenue 38,216 32,948 24,761 25,882 32,099 18,819 15,605 11,530 16,184 16,172 Organic revenue growth 18.8% 37.5% (6.3)% (18.8)% 6.4% 24.7% 37.9% (30.4)% 1.6% 6.6% Operating profit 2,592 2,033 1,107 719 2,402 1,
Slide 48: Underlying cash flow
Underlying cash flow FULL YEAR HALF YEAR $m 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 Operating profit 2,592 2,033 1,107 719 2,402 1,251 903 391 1,096 1,234 Depreciation and amortisation 1,028 1,000 1,014 1,098 736 500 491 512 479 367 EBITDA 3,620 3,033 2,121 1,817 3,138 1,751 1,394 903 1,57
Slide 49: Net debt
Net debt FULL YEAR HALF YEAR $m 2023 2022 2023 2022 Opening net debt 3,337 3,422 3,337 3,422 Free cashflow ex capex (2,614) (2,039) (1,137) (894) Net capital expenditure 1,098 900 434 411 M&A and disposals 371 343 256 146 Other Net Debt 323 (337) 224 (88) Dividends 796 539 462 335 Share buyback 1,14
Slide 50: Geographic financials
Geographic financials FULL YEAR HALF YEAR Group $m 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 Revenue 38,216 32,948 24,761 25,882 32,099 18,819 15,605 11,530 16,184 16,172 Organic Growth 18.8% 37.5% (6.3)% (18.8)% 6.4% 24.7% 37.9% (30.4)% 1.6% 6.6% Operating profit 2,592 2,033 1,107 719 2,402
Slide 51: Geographic financials
Geographic financials FULL YEAR HALF YEAR Europe $m 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 Revenue 8,598 7,588 6,337 6,469 8,156 4,228 3,713 3,047 4,086 4,208 Organic Growth 21.6% 31.8% (9.6)% (24.0)% 5.2% 28.2% 28.3% (32.8)% (3.9)% 6.4% Operating profit1 479 382 201 (37) 537 235 167 43 2
Slide 52: Currency impact on operating profit and revenue
Currency impact on operating profit and revenue $m IMPACT ON HY 2023 IMPACT ON FY 2023 AUD (1) (2) BRL 1 2 CAD (0) (1) EUR 4 4 GBP (1) 0 JPY (1) (2) TRY (6) (9) Other (4) (4) Total currency impact on profit (8) (12) Total currency impact on revenue (50) (92) Notes: Based on underlying performance at
Slide 53: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 FULL YEAR per $ per $ per $ per $ per $ per $ per $ per $ per $ per $ AUD Australian Dollar 1.51 1.41 1.34 1.47 1.42 1.55 1.56 1.38 1.40 1.48 BRL Brazilian Real 5.09 5.26 5
Slide 54: Exchange rates: effect on 2023 revenue and profit
Exchange rates Effect on 2023 revenue and profit POUND STERLING CANADIAN DOLLAR AUSTRALIAN DOLLAR $m cumulative change for an $m cumulative change for an $m cumulative change for an incremental 5 pence movement incremental 5 cent movement incremental 5 cent movement Exchange Rate Revenue Change Prof
Slide 55: Exchange rates: effect on 2023 revenue and profit
Exchange rates Effect on 2023 revenue and profit EURO TURKISH LIRA JAPANESE YEN $m cumulative change for an $m cumulative change for an $m cumulative change for an incremental 5 cent movement incremental 3 lira movement incremental 5 Yen movement Exchange Rate Revenue Change Profit Change Exchange R