Slide 1: 2017 Full Year Results
2017 Full Year Results Tuesday 21 November 2017
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: Richard Cousins, Chief Executive
Richard Cousins Chief Executive 3
Slide 4: Today's agenda
Today’s agenda 1. Richard Cousins Welcome & highlights 2. Johnny Thomson Full year results 3. Richard Cousins Growth strategy & outlook 4. Q&A 4
Slide 5: Highlights
Highlights ORGANIC REVENUE GROWTH OPERATING PROFIT MARGIN FREE CASH FLOW 4.0% 20bps 7.3% EPS (CONSTANT CURRENCY) FULL YEAR DIVIDEND RETURNS TO SHAREHOLDERS 72.3p 33.5p £1.6bn 5.7% 5.7% Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definit
Slide 6: Johnny Thomson, Group Finance Director
Johnny Thomson Group Finance Director 6
Slide 7: Revenue
Revenue £m Organic Revenue Growth +7.1% +1.6% -2.5% +4.0% +3% -14% 89 76 838 168 22,852 2,146 22,017 19,871 2016 Currency 2016 at 2017 North Europe Rest of World Rest of World 2017 FX rates America (excl. Offshore Offshore & Remote) & Remote Notes: Based on underlying performance at reported exchang
Slide 8: Operating profit
Operating profit £m Constant currency operating profit growth of 5.6% 5 7 21 70 (12) 1,705 169 1,614 1,445 2016 Currency 2016 North Europe Rest of World Australia Restructuring/ 2017 Operating at 2017 America (excl. Other Operating profit FX rates Australia) profit Notes: Based on underlying perform
Slide 9: Operating profit margin by region
Operating profit margin by region 2017 2016 North America 8.1% 8.1% Europe 7.2% 7.2% Rest of World 6.9% 6.8% Group 7.4% 7.2% Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 52-53. 9
Slide 10: Currency impact on operating profit
Currency impact on operating profit Impact on 2016 Profit Impact on 2017 Profit £m Actual FX Current Spot Rates USD 98 (36) EUR 24 5 CAD 7 - AUD 12 (3) BRL 9 (2) JPY 6 (3) Other 13 (2) Total currency impact 169 (41) Notes: Based on underlying performance at reported exchange rates unless indicated o
Slide 11: Income statement
Income statement £m 2017 2016 Operating profit 1,705 1,445 FY 2017 effective interest of 2.9% Net finance costs (114) (101) 2018 net finance cost expected to be around £120m Profit before tax 1,591 1,344 Tax (404) (330) FY 2017 tax rate 25.4% Profit after tax 1,187 1,014 FY 2018 expected to be 26.5%
Slide 12: Operating cash flow
Operating cash flow £m 2017 2016 Operating profit 1,705 1,445 Depreciation and amortisation up due to higher capex Depreciation and amortisation 483 395 and FX Net capital expenditure (683) (549) FY 2017 gross capex 3.1% of revenues Net cash flow 1,505 1,291 FY 2018 capex expected to be just over 3%
Slide 13: Free cash flow
Free cash flow £m 2017 2016 Operating cash flow 1,419 1,293 FY 2017 £14m as expected Post-employment benefits (14) (39) FY 2018 expected to be around £20m Net interest (97) (94) Net tax (332) (246) FY 2017 20.9% Net other items (2) (6) FY 2018 expected to be 20-23% Free cash flow 974 908 Free cash f
Slide 14: Net debt
Net debt £m Reinvestment in Returns to the business shareholders 19 1,003 84 3,446 2,874 1,657 77 531 683 Oct 2016 FCF Net capex Acquisitions/ Dividends Special Share FX/ other 2017 Opening net pre-capex Disposals Dividend buyback Closing net debt debt Notes: Based on underlying performance at repor
Slide 15: Ongoing priorities for uses of cash
Ongoing priorities for uses of cash CAPEX M&A Appropriate investment: Efficient Required returns > cost of 2.5-3% of sales balance sheet capital by the end of year 2 Strong investment grade credit rating Target net debt/ RETURNS TO DIVIDEND EBITDA 1.5x SHAREHOLDERS Growing in line with Share buyback
Slide 16: 2018 guidance for modelling purposes
2018 guidance for modelling purposes Interest charge c. £120m P&L tax rate c. 26.5% Cash tax rate 20%-23% Gross capex Just over 3% of revenue Working capital £40m inflow Post employment cash contribution c. £20m Foreign exchange impact on 2017 EBIT (at current spot rates) £(41)m Notes: Based on unde
Slide 17: 2018 phasing
2018 phasing • Positive outlook for the year • Growth & margins weighted to H2 • Capex weighted to H1 17
Slide 18: Financial summary
Financial summary Organic revenue growth +4.0% Operating profit margin +20bps EPS (constant currency) 72.3p +5.7% Free cash flow +7.3% Full year dividend 33.5p +5.7% Share buyback £19m Special dividend £1bn Notes: Based on underlying performance at reported exchange rates unless indicated otherwise,
Slide 19: Richard Cousins, Chief Executive
Richard Cousins Chief Executive 19
Slide 20: 2017 organic revenue growth
2017 organic revenue growth 8.7% 5.7% 1.0% 4.0% New business Lost business Like for like Organic revenue growth Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 52-53. 20
Slide 21: 2017 margin progression
2017 margin progression 7.4% 7.3% 7.2% 2016 Cost reduction Overhead Price Cost Reinvestment Volume 2017 margin End of 2017 & efficiencies leverage increases inflation declines Pre-restructuring restructuring Notes: Based on underlying performance at reported exchange rates unless indicated otherwise
Slide 22: North America: core growth engine
North America: core growth engine Organic revenue up 7.1% Food services market • Strong growth across all sectors c. $84bn Structural • Excellent retention of 96% Growth Opportunity • Sensible pricing Regional players Margins are strong at 8.1% • Good efficiencies and pricing Self operated • Labour
Slide 23: Sub-sectorisation continues to drive growth
Sub-sectorisation continues to drive growth Organic revenue growth FY 2017 20% 10% 0% Total North America -10% Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote Notes: Based on underlying performance at reported exchange rates unless indicated otherwise,
Slide 24: Exciting new contract wins
Exciting new contract wins North America Revenues Healthcare & Seniors Education 23% 29% 15% 2% Business & Industry 31% Sports & Leisure 24
Slide 25: Innovating in labour
Innovating in labour Freeing up unit manager time to focus on clients and consumers • Tool to source hourly associates in a more efficient way • Simplification project to reduce tasks at unit level 25
Slide 26: Europe: improving performance
Europe: improving performance Organic revenue up 1.6% Food services market • Growth accelerated in H2 c. £75bn Structural • Sensible pricing Growth Opportunity Regional Margins flat players • Efficiencies from the creation of business units • Labour cost pressures, especially Self in support service
Slide 27: Europe: regional overview
Europe: regional overview • Subdued trading in Continental Europe • Challenging environment in North Sea • Exciting growth in the UK • Strong growth in Turkey 27
Slide 28: Rest of World: turning positive
Rest of World: turning positive Organic revenue down 2.5% (up 1.6% in Q4) Rest of World Revenue • Revenue up 3.0%, excluding Offshore & Remote by sector • Continued weakness in commodity 5% 9% related business 33% 15% Margin up 10bps • Better than expected restructuring savings • Benefit from delay
Slide 29: Rest of World: improving revenue trend
Rest of World: improving revenue trend Offshore & Remote 15% 5% -5% -15% -25% 2012 2013 2014 2015 H1 2016 H2 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Notes: Based on underlying performance at reported exchange rates unless indicated otherwise, see definitions on page 52-53. 29
Slide 30: Compass Group going forward
Compass Group going forward • Large/ significant market opportunity Food services market c. £200bn • Consistent strategy: focused on food Structural Growth Opportunity • Growth Regional players • Scale • Operational performance Self operated • Management Compass Group Other large players Regional pl
Slide 31: Summary and outlook
Summary and outlook • Continued strength in North America • Europe performing as expected • Rest of World trends are encouraging • £1.6bn returned to shareholders • 2018 - Modest margin improvement - Strong organic revenue growth 31
Slide 32: 2017 Full Year Results
2017 Full Year Results Tuesday 21 November 2017
Slide 33: Supplementary information
Supplementary information
Slide 34: Revenue
Revenue ROW North Support 16% America services 58% 15% Other Row Support Services Sports & Leisure Brazil Japan DOR Support Healthcare Business & Australia 6% Services 13% & Seniors 12% 3% Industry 3% 4% DOR 2% Food Other Service 6% 39% Europe 11% 23% Geography Service Line Sector 2% 54% USA Germany
Slide 35: Geographic revenue by sector
Geographic revenue by sector 8% 9% 15% 31% 15% 15% 38% North America Europe Rest of World 5% 29% 57% 14% 2% 6% 23% 33% Business & Industry Healthcare & Seniors Education Sports & Leisure Defence, Offshore & Remote Notes: Based on underlying revenues, definitions on page 52-53. 35
Slide 36: Geographic financials
Geographic financials £m North America Europe Rest of World Other1 Total 2017 Revenue 13,322 5,911 3,619 22,852 Organic growth 7.1% 1.6% (2.5)% 4.0% Operating profit 1,082 428 248 (53) 1,705 Margin 8.1% 7.2% 6.9% 7.4% Cash flow 902 360 202 (490) 974 Cash flow conversion 83% 84% 81% 57% ROCE 29.5% 11
Slide 37: Geographic financials
Geographic financials Group Revenue (£bn) & Organic Growth (%) Group Operating Profit (£m) & Margin (%) 22.8 1,705 22.0 1,614 20.8 1,530 19.7 1,461 18.9 1,377 4.3% 4.1% 5.8% 5.0% 4.0% 7.3% 7.1% 7.4% 7.2% 7.2% 7.5% 7.4% 7.2% 7.6% 7.4% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 NA Revenue (£bn)
Slide 38: Geographic financials
Geographic financials Europe Revenue (£bn) & Organic Growth (%) Europe Operating Profit (£m) & Margin (%) 5.9 5.8 428 5.7 423 5.6 5.6 413 392 399 (2.4)% (0.9)% 2.2% 2.8% 1.6% 6.9% 7.1% 7.2% 7.2% 7.2% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 ROW Revenue (£bn) & Organic Growth (%) ROW Operati
Slide 39: Dividend cover
Dividend cover 2017 2016 2015 2014 2013 Per share (pence) Dividend (interim plus final) 33.5p 31.7p 29.4p 26.5p 24.0p Underlying earnings 72.3p 61.1p 53.7p 48.7p 47.7p Dividend earnings cover 2.2x 1.9x 1.8x 1.8x 2.0x Cash (£m) Cash cost of dividend (in the year) 531 496 457 444 404 Underlying free c
Slide 40: Operating cash flow
Operating cash flow £m 2017 2016 2015 2014 2013 Operating profit 1,705 1,445 1,296 1,245 1,265 Depreciation and amortisation 483 395 340 317 299 Net capital expenditure (683) (549) (476) (445) (434) Net cash flow 1,505 1,291 1,160 1,117 1,130 Net cash flow conversion 88% 89% 90% 90% 89% Trade workin
Slide 41: Free cash flow
Free cash flow £m 2017 2016 2015 2014 2013 Operating cash flow 1,419 1,293 1,123 1,114 1,197 Post employment benefits (14) (39) (59) (46) (54) Net interest (97) (94) (93) (71) (65) Net tax (332) (246) (242) (259) (256) Net other items (2) (6) (7) (1) 12 Free cash flow 974 908 722 737 834 Cash conver
Slide 42: ROCE
ROCE £m 2017 2016 2015 2014 2013 NOPAT 1,264 1,081 973 926 930 Average capital employed 6,218 5,565 5,093 4,799 4,878 ROCE 20.3% 19.4% 19.1% 19.3% 19.1% Notes: Based on underlying performance, definitions on page 52-53. 42
Slide 43: Balance sheet
Balance sheet Overview (£m) 2017 2016 Goodwill 3,994 4,050 Other non-current assets 2,820 2,694 Working capital (821) (897) Provisions (398) (423) Post employment benefit obligations 28 (21) Current tax payable (141) (118) Deferred tax 84 109 Net debt (3,446) (2,874) Net assets 2,120 2,520 Sharehold
Slide 44: Balance sheet: capital expenditure
Balance sheet Capital expenditure (% of revenue) 3.1% 2.8% 2.9% 2.7% 2.7% 2.3% 2.3% 2.3% 2.1% 1.9% 1.7% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Notes: Based on underlying performance, definitions on page 52-53. Gross capital expenditure includes tangible and intangible assets, includi
Slide 45: Financing
Financing Components of net debt £m Bonds 2,180 Private placements 1,416 Bank loans 303 3,899 Finance leases 10 Other loans and fair value accounting adjustments 42 Derivatives (126) Gross debt 3,825 Cash net of overdrafts (379) Closing net debt at 30 September 2017 3,446 Notes: Based on nominal val
Slide 46: Financing
Financing Maturing in Drawn Principal borrowings Coupon Financial Year £m Bonds €600m 3.125% 2019 529 €500m 1.875% 2023 440 €750m 0.625% 2024 661 £250m 3.850% 2026 250 £300m 2.000% 2029 300 Total 2,180 US private placements $1,000m (2011 Notes) 3.31% - 4.12% 2019 – 2024 745 $500m (2013 Notes) 3.09%
Slide 47: Financing
Financing £m 1000 900 800 700 600 500 400 300 200 100 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 £ bond € bond US$ private placement Bank bilaterals Notes: Based on borrowings and facilities in place as at 30 September 2017, maturing in the financial year ending 30 September. There are
Slide 48: Financing
Financing Debt ratios and credit ratings Ratings Outlook Confirmed Standard & Poors A Stable 24 Feb 17 Moody’s4 A3 Stable 02 Mar 17 Fitch (unsolicited) A- Stable 24 Oct 17 Ratios 2017 2016 Net debt1 / EBITDA2 1.6x 1.6x EBITDA2 / net interest3 18.8x 17.8x Notes: 1. Net debt is adjusted where necessar
Slide 49: Exchange rates
Exchange rates Rates used in consolidation Income Statement 1 Balance Sheet 2 2017 per £ 2016 per £ 2017 per £ 2016 per £ Australian Dollar 1.67 1.94 1.71 1.70 Brazilian Real 4.09 5.19 4.24 4.22 Canadian Dollar 1.68 1.88 1.68 1.71 Chilean Peso 837.69 972.94 857.49 855.93 Euro 1.15 1.28 1.13 1.16 Jap
Slide 50: Exchange rates
Exchange rates Effect on 2017 revenue and profit US Dollar Canada 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 Exchan
Slide 51: Exchange rates
Exchange rates Effect on 2017 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 52: Definitions
Definitions Capital employed Total equity shareholders' funds adjusted for net debt, post employment benefit obligations net of associated deferred tax, amortised intangibles arising on acquisition, impaired goodwill and excluding the Group's non-controlling partners' share of net assets and net ass
Slide 53: Definitions
Definitions ROCE Return on capital employed (ROCE) divides NOPAT by the 12 month average capital employed. Specific adjusting items acquisition transaction costs; adjustment to contingent consideration on acquisition; amortisation of intangibles arising on acquisition; change in the fair value of in