Compass Group Plc · LSE:CPG
Compass — FY2005 Earnings Presentation
60 slides from Compass's earnings presentation, 2005
Slide 1: Compass Group PLC 2005 Preliminary Results
Compass Group PLC 2005 Preliminary Results 1
Slide 2: Introduction
Introduction • Financial Results • Management Changes • United Nations • Disposal of Travel Concessions business 2
Slide 3: Andrew Martin, Group Finance Director
Compass Group PLC 2005 Preliminary Results Andrew Martin Group Finance Director 3
Slide 4: Turnover
Turnover Increase Reported Constant Like for 2005 2004 Rates Currency 1 Like 2 £m £m % % % North America 3,937 3,531 11% 15% 12% UK 2,812 2,626 7% 7% 6% Continental Europe 3,555 3,402 4% 3% 2% Rest of the World 1,888 1,717 10% 10% 8% Excluding Fuel 12,192 11,276 8% 9% 7% 3 Fuel 512 496 Total Turnove
Slide 5: Operating Profit and Margin
Operating Profit and Margin Margin 2005 2004 Change 2005 2004 £m £m £m % % North America 207 190 17 5.3% 5.4% UK 197 286 (89) 7.0% 10.9% Continental Europe 190 178 12 5.3% 5.2% Rest of the World 107 109 (2) 5.7% 6.3% 1 Excluding Fuel 701 763 (62) 5.7% 6.8% 2 Fuel 8 8 Of which: 1 Operating Profit fro
Slide 6: Profit and Loss - Overview
Profit and Loss - Overview 2005 2004 £m £m Turnover 12,704 11,772 - Subsidiaries 709 771 2 - Associates 2 4 Total Operating Profit1 711 775 Interest (130) (130) Profit before Tax1 581 645 Tax (134) (152) Minority Interest (36) (38) Attributable Profit1 411 455 Average Number of Shares (millions) 2,1
Slide 7: Profit and Loss – Goodwill and Exceptional Items
Profit and Loss – Goodwill and Exceptional Items 2005 2004 £m £m Goodwill Amortisation (269) (275) Goodwill Impairment - Italy (95) - Goodwill (364) (275) Exceptional Loss - Middle East Military Business (45) - Loss on Disposal of Businesses (1) - Goodwill and Exceptional Items (410) (275) 7
Slide 8: Earnings and Dividends per Share
Earnings and Dividends per Share 2005 2004 Basic Earnings per Share Reported EPS - 8.3p Goodwill Amortisation and Exceptional Items 19.1p 12.7p Before Goodwill Amortisation and Exceptional Items 19.1p 21.1p Currency Translation Adjustment1 - -0.2p Underlying EPS 19.1p 20.9p Dividends Final Dividend
Slide 9: Free Cash Flow
Free Cash Flow £m 293 (53) 1000 (9) (159) 800 (108) 711 (291) 600 (29) 400 (7) 348 246 200 0 Total Operating Depreciation Working Capital Provisions Net Interest Tax Net Capital Dividends to Other Free Cash Flow 2004 Profit Expenditure Minority Partners Notes: 1. Working capital includes £31m of exp
Slide 10: Net Debt
Net Debt £m Opening Net Debt at 1 October 2004 2,373 Impact on Net Debt of: Free Cash Flow (348) 1 Acquisitions 124 2 Disposals (75) Equity Dividends 205 Impact of Foreign Exchange Rates 26 Other 11 Closing Net Debt at 30 September 2005 2,316 Notes: 1. Acquisitions include £16m re. the acquisition o
Slide 11: Disposal of Concessions Business
Disposal of Concessions Business • Travel Related Concessions Business – 2005 EBITDA of £160 million – 2005 EBIT of £115m – SSP Information Memorandum distributed – Process underway • Post disposal – Net capex towards 2.5% of sales – Operating Cash Flow conversion unchanged – ROCE ↑ 30 basis points
Slide 12: IFRS – Profit and Loss
IFRS – Profit and Loss Estimated Impact in 2005 Charge for Share Based Payments - circa £45m Move to Proportional Consolidation - Turnover È £300m No EPS of certain Joint Ventures - PBIT È £30m Impact - Minority Interest (and Tax) È £30m Move to FRS17 / IAS19 Pensions Accounting - PBIT Ç £15m No EPS
Slide 13: Relationships with Clients and Suppliers in the UK
Relationships with Clients and Suppliers in the UK • Clients – Our focus: Long term relationships, delivering value for money – 95% retention, high client satisfaction levels – Circa 10% new business per annum – Average client relationship of 9 years – Competitive marketplace • Suppliers – Our focus
Slide 14: Outlook
Outlook • UK • Continental Europe • Rest of the World • North America 14
Slide 15: Michael Bailey, CEO
Compass Group PLC 2005 Preliminary Results Michael Bailey CEO 15
Slide 16: Introduction
Introduction • Group • North America • UK • Continental Europe • Rest of the World 16
Slide 17: Business Review – Group
Business Review – Group • New business driving like for like turnover growth • Client retention remains high at 95% • North America driving throughput Components of like for like growth Source of like for like growth Travel Concessions 12.0% 11% (5)% 11% Vending 5% Business & 10.0% Industry 32% 8.0%
Slide 18: Business Review – North America
Business Review – North America • Strong growth driven by new business, throughput and high retention • Return on Capital Employed 7.5%, up 30 basis points • All the major sectors performing well Like for like turnover growth by sector Reported turnover by sector Travel 30% Concessions Vending 4% 13
Slide 19: Business Review – UK
Business Review – UK • Focus on improving performance of contract base and driving better returns from new capital invested • 97% operating cash flow conversion • B&I and Defence, Offshore & Remote Site driving growth in the Contract business Like for like turnover growth by sector Reported turnover
Slide 20: Business Review – Continental Europe
Business Review – Continental Europe • Return on Capital Employed 7.0%, up 40 basis points • Contract business remains challenging in parts of Europe • Strong turnaround in Travel Concessions Like for like turnover growth by sector Reported turnover by sector 10% Travel Concessions 18% 8% 6% Busines
Slide 21: Business Review – Rest of the World
Business Review – Rest of the World • LFL turnover & profit growth 14% and 22% respectively (ex ME military business) • Return on Capital Employed, ex ME military, up c.100 basis points • Strong performance in Australasia (16% LFL turnover growth) and emerging markets Like for like turnover growth b
Slide 22: Summary
Summary • Disposal of SSP and focus on Contract Catering & Support Services • Streamlined management structure • £50m cost savings • UK turnaround underway • Improved financial discipline across the Group • Financial objectives unchanged. Post SSP disposal: – 100bp ROCE progression (06-08) – £800m t
Slide 23: Supplementary Information Pack
Compass Group PLC 2005 Preliminary Results Supplementary Information Pack 23
Slide 24: Contents
Contents Profit and Loss 25 Overview Balance Sheet 43 Overview and ROCE 26 Goodwill and Exceptional Items Cash Flow 44 Free Cash Flow Turnover 27 Change in Presentation 45 Working Capital 28 2005 Like for Like Growth by Sector 46 Provisions for Liabilities and Charges 29 Group Turnover by Geography
Slide 25: Profit and Loss - Overview
Profit and Loss - Overview 2005 2004 Before Before Goodwill Goodwill Goodwill Goodwill Amortisation & Amortisation & Amortisation & Amortisation & Exceptional Exceptional Exceptional Exceptional Items Items Total Items Items Total £m £m £m £m £m £m Turnover 12,704 - 12,704 11,772 - 11,772 - Subsidia
Slide 26: Profit and Loss – Goodwill and Exceptional Items
Profit and Loss – Goodwill and Exceptional Items 2005 2004 £m £m Goodwill Amortisation (269) (275) Goodwill Impairment - Italy (95) - Goodwill (364) (275) Exceptional Loss - Middle East Military Business (45) - Loss on Disposal of Businesses (1) - Goodwill and Exceptional Items (410) (275) 26
Slide 27: Turnover – Change in Presentation
Turnover – Change in Presentation Reported Constant Currency1 Like for Like2 Increase Reported Constant Like for 2005 2004 2005 2004 2005 2004 Rates Currency1 Like2 £m £m £m £m £m £m % % % North America Reported 3,937 3,517 Add Gulf of Mexico4 14 Restated 3,937 3,531 3,937 3,434 3,795 3,375 11% 15%
Slide 28: Turnover – 2005 Like For Like Growth by Sector
Turnover – 2005 Like For Like Growth by Sector Contract Defence, Business & Offshore & Sports & Total Travel Industry Remote Education Healthcare Leisure Contract Vending Concessions Total % % % % % % % % % North America 11% 28% 12% 15% 17% 13% 4% 20% 12% UK 9% 13% -1% 5% 3% 6% 19% 4% 6% Continental
Slide 29: Turnover – Group Turnover by Geography
Turnover – Group Turnover by Geography 2005 Latin America 2% Asia Pacific 2% Australia 2% 2004 Japan 4% ESS 5% Latin America North America 32% 2% Asia Pacific 2% Australia 2% Rest of Europe 8% Japan 4% ESS 5% North America 31% Netherlands 2% Rest of Europe 8% Switzerland 2% Netherlands 2% Italy 3% S
Slide 30: Turnover – Group Turnover by Sector
Turnover – Group Turnover by Sector 2005 Travel Concessions 14% 2004 Business & Travel Concessions Industry 36% 14% Business & Industry Vending 8% 36% Vending 9% Sports & Leisure 10% Sports & Leisure 10% Defence, Defence, Offshore Healthcare 12% & Remote 8% Healthcare 13% Offshore & Remote 8% Educat
Slide 31: Turnover – 2005 Geographical Turnover by Sector
Turnover – 2005 Geographical Turnover by Sector North UK America Travel Concessions 4% Travel Vending 13% Business & Industry Concessions 28% 29% Business & Industry 38% Sports & Leisure 13% Defence, Offshore & Vending 2% Remote 2% Sports & Leisure Defence, 11% Offshore & Education 19% Healthcare 6%
Slide 32: 2005 Sector Financials – Group
2005 Sector Financials – Group 2005 North Continental Rest of America UK Europe the World Other Total £m £m £m £m £m £m Turnover 3,937 2,812 3,555 1,888 512 12,704 LFL Growth 12% 6% 2% 8% - 7% Reported PBIT 207 197 190 107 10 711 Central Overheads 13 9 24 6 (52) - Underlying PBIT2 220 206 214 113 (4
Slide 33: 2005 Sector Financials – North America
2005 Sector Financials – North America 2005 2004 Travel Contract Vending Concessions Total 1 Total 1 £m £m £m £m £m Turnover 3,262 515 160 3,937 3,531 LFL Growth 13% 4% 20% 12% 7% Reported PBIT 173 27 7 207 190 Central Overheads 11 2 - 13 17 Underlying PBIT2 184 29 7 220 207 Margin 5.6% 5.6% 4.4% 5.
Slide 34: 2005 Sector Financials – UK
2005 Sector Financials – UK 2005 2004 Travel Contract Vending Concessions Total 1 Total1 £m £m £m £m £m Turnover 1,930 68 814 2,812 2,626 LFL Growth 6% 19% 4% 6% 5% Reported PBIT 118 (1) 80 197 286 Central Overheads 6 - 3 9 10 Underlying PBIT2 124 (1) 83 206 296 Margin 6.4% - 10.2% 7.3% 11.3% Cash F
Slide 35: 2005 Sector Financials – Continental Europe
2005 Sector Financials – Continental Europe 2005 2004 Travel Contract Vending Concessions Total 1 Total 1 £m £m £m £m £m Turnover 2,499 410 646 3,555 3,402 LFL Growth 0% 2% 6% 2% 1% Reported PBIT 109 41 40 190 178 Central Overheads 17 3 4 24 25 Underlying PBIT2 126 44 44 214 203 Margin 5.0% 10.7% 6.
Slide 36: 2005 Sector Financials – Rest of the World
2005 Sector Financials – Rest of the World 2005 2004 Travel Contract ESS Concessions Total 1 Total 1 £m £m £m £m £m Turnover 1,263 557 68 1,888 1,717 LFL Growth 9% 0% -12% 8% 18% Reported PBIT 49 56 2 107 109 Central Overheads 4 2 - 6 7 Underlying PBIT2 53 58 2 113 116 Margin 4.2% 10.4% 2.9% 6.0% 6.
Slide 37: 2004 Sector Financials – Group
2004 Sector Financials – Group 2004 North Continental Rest of America UK Europe the World Other Total £m £m £m £m £m £m Turnover 3,531 2,626 3,402 1,717 496 11,772 LFL Growth 7% 5% 1% 18% - 7% Reported PBIT 190 286 178 109 12 775 Central Overheads 17 10 25 7 (59) - Underlying PBIT2 207 296 203 116 (
Slide 38: 2004 Sector Financials – North America
2004 Sector Financials – North America 2004 Travel Contract Vending Concessions Total 1 £m £m £m £m Turnover 2,900 499 132 3,531 LFL Growth 8% 3% 8% 7% Reported PBIT 156 29 5 190 Central Overheads 15 2 - 17 Underlying PBIT2 171 31 5 207 Margin 5.9% 6.2% 3.8% 5.9% Cash Flow2 132 27 2 161 Cash Flow Co
Slide 39: 2004 Sector Financials – UK
2004 Sector Financials – UK 2004 Travel Contract Vending Concessions Total 1 £m £m £m £m Turnover 1,794 57 775 2,626 LFL Growth 5% 0% 6% 5% Reported PBIT 154 6 126 286 Central Overheads 6 - 4 10 Underlying PBIT2 160 6 130 296 Margin 8.9% 10.5% 16.8% 11.3% Cash Flow2 140 2 128 270 Cash Flow Conversio
Slide 40: 2004 Sector Financials – Continental Europe
2004 Sector Financials – Continental Europe 2004 Travel Contract Vending Concessions Total 1 £m £m £m £m Turnover 2,436 392 574 3,402 LFL Growth 2% 2% 1% 1% Reported PBIT 118 44 16 178 Central Overheads 18 3 4 25 Underlying PBIT2 136 47 20 203 Margin 5.6% 12.0% 3.5% 6.0% Cash Flow2 130 40 27 197 Cas
Slide 41: 2004 Sector Financials – Rest of the World
2004 Sector Financials – Rest of the World 2004 Travel Contract ESS Concessions Total 1 £m £m £m £m Turnover 1,071 567 79 1,717 LFL Growth 18% 0% 1% 18% Reported PBIT 39 65 5 109 Central Overheads 5 2 - 7 Underlying PBIT2 44 67 5 116 Margin 4.1% 11.8% 6.3% 6.8% Cash Flow2 36 37 6 79 Cash Flow Conver
Slide 42: Dividends - Dividend Progression
Dividends - Dividend Progression Dividend per share 2001 2002 2003 2004 2005 Interim 1.9p 2.1p 2.7p 3.1p 3.3p Final 3.8p 5.0p 5.7p 6.2p 6.5p TOTAL 5.7p 7.1p 8.4p 9.3p 9.8p Cash Payments 2004 2005 2006 £m £m £m Interim 2003 60 Final 2004 134 Final 2005 140 Final 2003 123 Interim 2005 71 Interim 2006
Slide 43: Balance Sheet – Overview and ROCE
Balance Sheet – Overview and ROCE 2005 2004 £m £m Tangible Assets 1,777 1,805 Investments 51 30 Working Capital (726) (764) Provisions (398) (385) Equity Minority Interests (73) (54) Total Before Goodwill 631 632 Gross Goodwill per Balance Sheet 5,351 5,244 Amounts Previously Written-off to Reserves
Slide 44: Cash Flow - Free Cash Flow
Cash Flow - Free Cash Flow 2005 2004 £m £m Total Operating Profit 711 775 Depreciation 293 258 EBITDA 1,004 1,033 Working Capital (22) (203) Pensions, OPEBS and Insurance Provisions1 (31) (35) 2 Other Provisions (9) (38) Net Interest (159) (131) Tax (108) (107) 3 Net Capital Expenditure (291) (329)
Slide 45: Cash Flow - Working Capital
Cash Flow - Working Capital Approximate Inflow / (Outflow) Per £100m Growth in Turnover £m "Normal" Working Capital Requirment Associated with Growth in each Business Area Business and Industry c. (3) - (5) Defence, Offshore and Remote c. (10) - (15) Education c. (4) - (7) Healthcare c. (4) - (7) Sp
Slide 46: Cash Flow - Provisions for Liabilities and Charges
Cash Flow - Provisions for Liabilities and Charges Legal & Pensions Onerous Other Environ Deferred & OPEBS1 Insurance Contracts Claims -mental Tax Total £m £m £m £m £m £m £m At 1 October 2004 253 38 31 52 11 - 385 Arising from Acquisitions 2 - - 1 - - 3 Expenditure in the Period (26) (5) (6) (3) - -
Slide 47: Cash Flow - Net Capital Expenditure Trend
Cash Flow - Net Capital Expenditure Trend % of Turnover1 5 4.2% 4 3.4% 3.0% 3.0% 3 2.5% Group3 2.8% 2 2.4% Continuing Business4 1 0 2001 2002 2003 2004 2005 2005 Continuing £m 2001 2002 2003 2004 2005 Business Gross2 375 398 387 374 351 282 Net 2 345 344 323 338 303 252 Notes: 1. Turnover excludes f
Slide 48: Cash Flow - Net Capital Expenditure Vs Depreciation
Cash Flow - Net Capital Expenditure Vs Depreciation £m 400 Net Capital 350 Expenditure1 300 250 £175m £20m 200 Depreciation 150 100 50 0 2001 2002 2003 2004 2005 2005 Continuing Business 2005 Continuing £m 2001 2002 2003 2004 2005 Business Net Capital Expenditure1 345 344 323 338 303 252 Depreciatio
Slide 49: Financing - Net Debt
Financing - Net Debt £m Opening Net Debt at 1 October 2004 2,373 Impact on Net Debt of: Free Cash Flow (348) Acquisitions1 124 Disposals2 (75) Equity Dividends 205 Impact of Foreign Exchange Rates 26 Other 11 Closing Net Debt at 30 September 2005 2,316 Notes: 1. Acquisitions include £16m re. the acq
Slide 50: Financing - Components of Net Debt
Financing - Components of Net Debt £m Bonds 1,319 Private Placements 560 Bank Loans 630 2,509 Finance Leases 51 Other Loan Notes 9 Other Bank Loans 32 Gross Debt 2,601 Cash Net of Overdrafts (285) Closing Net Debt at 30 September 2005 2,316 50
Slide 51: Financing - Principal Borrowings
Financing - Principal Borrowings Maturing in Bonds Calendar Year £m £250m 7.00% 2014 283 4 £325m 6.38% 2012 325 £200m 7.13% 2010 200 €750m 6.00% 2009 511 1319 Maturing in Bonds Calendar Year £m $750m 2002 Notes 2007-2012 424 $110m 2002 Notes 2006-2011 62 $56m 2003 Notes 2010-2013 32 $13m 2003 Notes
Slide 52: Financing - Maturity Profile of Principal Borrowings
Financing - Maturity Profile of Principal Borrowings £m 900 800 700 600 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Facilties maturing in financial years ending 30 September £ Bonds € Bonds US $ Private Placement Bank Notes: 52 1. Based on borrowings and facilities in pla
Slide 53: Financing - Sources of Committed Borrowings
Financing - Sources of Committed Borrowings Bank Loans 25% Bonds 53% Private Placements 22% 53 Notes: 1. Based on borrowings as at 30 September 2005.
Slide 54: Financing - Effective Currency of Borrowings
Financing - Effective Currency of Borrowings Other 8% Swiss Francs 6% £ Sterling Yen 30% 4% € 17% US $ 35% Notes: 1. Based on borrowings as at 30 September 2005. 2. The Group hedges its economic exposure to its non-sterling cash flows by matching the currencies of its centrally held debt to the curr
Slide 55: Financing - Debt Ratings and Ratios
Financing - Debt Ratings and Ratios Ratings Standard & Poors BBB+ Stable Moodys Baa2 Negative Outlook Fitch (Unsolicited) BBB+ Stable Ratios1 2005 2004 Net Debt / EBITDA 2.3 2.3 EBITDA / Net Interest 7.7 7.9 Interest Cover 5.5 6.0 55 Notes: 1. Before goodwill amortisation and exceptional items.
Slide 56: Exchange Rates - Rates used in Consolidation
Exchange Rates - Rates used in Consolidation Profit and Loss Account Balance Sheet 2005 2004 2005 2004 per £ per £ per £ per £ Australian Dollar 2.42 2.47 2.32 2.50 Canadian Dollar 2.26 2.37 2.05 2.29 Danish Krone 10.83 10.94 10.95 10.84 Euro 1.46 1.47 1.47 1.46 Japanese Yen 198.34 194.98 200.51 199
Slide 57: Exchange Rates - Effect of Change in Rates on Turnover and Operating Profit
Exchange Rates - Effect of Change in Rates on Turnover and Operating Profit Turnover Operating Profit2 Approximate Impact Approximate Impact of 5 cent change of 5 cent change £m £m US Dollar Average 2005 rate of $1.85 +/- 5 Cents Impact on North America +/- 100 +/- 6 Impact on Rest of the World +/-
Slide 58: Taxation - Statutory Tax Rates
Taxation - Statutory Tax Rates 2005 1 Key Statutory Tax Rates within the Group: % UK 30% USA (Federal 35%/State 5%) 40% France 34% Germany 38% Netherlands 32% Italy 33% Scandinavia 28% Japan 41% Switzerland 21% Cyprus 15% U.A.E. 0% Blended Statutory Tax Rate2 33% Notes: 1. Before recognising the ben
Slide 59: IFRS – Profit & Loss
IFRS – Profit & Loss Estimated Impact in 2005 Charge for Share Based Payments - circa £45m Move to Proportional Consolidation - Turnover È £300m No EPS of certain Joint Ventures - PBIT È £30m Impact - Minority Interest (and Tax) È £30m Move to FRS17 / IAS19 Pensions Accounting - PBIT Ç £15m No EPS I
Slide 60: IFRS – Balance Sheet
IFRS – Balance Sheet Estimated Impact on Net Assets as at 30 September 2005 Goodwill 'Frozen' at UK GAAP Balance on 30 September 2004 Annual Impairment Testing FRS17 / IAS19 Pension Deficit on to Balance Sheet - circa (£240m) Acquiree 'Put' Option Liabilities on to Balance Sheet - circa (£160m) Fina