Compass Group Plc · LSE:CPG
Compass — H1 2011 Earnings Presentation
64 slides from Compass's earnings presentation, Oct 14, 2011
Slide 1: 2011 Half Year Results
hd z 2011 Half Year Results <= COMPASS GROUP
Slide 2: Presentation Structure
Presentation Structure 1. Sir Roy Gardner Welcome & Highlights 2. Andrew Martin Half Year Results 3. Richard Cousins Business Review, Strategy, Summary & Outlook 4. Q&A 2
Slide 3: Business Highlights
Business Highlights • A strong first half performance • Constant currency revenue + 9.9%, organic revenue + 5.7*% • Constant currency EPS +13%, free cash flow of £349m • Operating profit of £567m • Interim dividend increased by 30% to 6.5 pence Moving into the Growth Phase * Underlying growth rate e
Slide 4: Andrew Martin: 2011 Half Year Results
Andrew Martin 2011 Half Year Results 4
Slide 5: Revenue
Revenue Change Reported Constant 2 Organic 3 2011 2010 Rates Currency Growth £m £m % % % North America 3,450 3,059 12.8% 12.3% 7.8% Continental Europe 1,880 1,850 1.6% 4.5% 1.3% UK & Ireland 977 897 8.9% 9.2% (0.4)% Rest of the World 1,566 1,298 20.6% 12.3% 10.9% Total revenue 7,873 7,104 10.8% 9.9%
Slide 6: Operating Profit - Reported
Operating Profit - Reported Change Analysed By 2011 2010 Change Acquisition Currency Organic £m £m £m £m £m £m North America 281 242 39 Continental Europe 149 143 6 UK & Ireland 54 54 - Rest of the World 109 89 20 Unallocated overheads (30) (28) (2) Associates 4 4 - Operating profit 567 504 63 10 3
Slide 7: Operating Profit and Margin – Constant Currency
Operating Profit and Margin – Constant Currency Margin 3 2011 2010 2 Change 2011 2010 £m £m £m % % North America 281 243 38 8.1% 7.9% Continental Europe 149 139 10 7.9% 7.7% UK & Ireland 54 54 - 5.5% 6.0% Rest of the World 109 95 14 7.0% 6.8% Unallocated overheads (30) (28) (2) Associates 4 4 - Oper
Slide 8: Impact of Currency
Impact of Currency US $ Euro Average exchange rate for 2010 1.56 1.15 Estimated impact on 2010 operating profit +/- £15m +/- £9m of a 5 cent movement Average exchange rate for 2011 H1 1.59 1.16 8
Slide 9: Operating Profit Growth
Operating Profit Growth Half Year £m (estimated) 2011 2010 2009 2008 2007 Historic Net new business 20 18 14 15 15 25 Base estate 28 10 28 31 20 (8) Above unit overheads 2 12 6 4 17 (5) Associates - - 2 (1) 1 - Operating profit growth 50 40 50 49 53 12 Acquisitions/disposals 10 4 5 - - - Total opera
Slide 10: Income Statement
Income Statement 2011 2010 £m Reported Underlying 3 Reported Underlying 3 Revenue 7,873 7,873 7,104 7,104 Operating profit 2 559 567 500 504 Net finance costs (31) (36) (41) (42) Profit before tax Average short to 528 531 459 462 medium term tax Tax rate of 27% (142) (143) (125) (126) Profit after t
Slide 11: Income Statement at Constant Currency : Proforma
Income Statement at Constant Currency : Proforma 2011 2010 £m Underlying Proforma 3 Growth Revenue 7,873 7,162 Operating profit 2 567 507 +12% Net finance costs (36) (42) Profit before tax 531 465 Tax (143) (127) Profit after tax 388 338 Non-controlling interest (2) (1) Attributable profit 386 337 A
Slide 12: Free Cash Flow
Free Cash Flow £m 2011 2010 Operating profit 2 567 504 Depreciation and amortisation 129 112 EBITDA 696 616 Net capital expenditure 3 (171) (142) Working capital (including provisions) (67) (3) Net interest (29) (47) Net tax (80) (73) Dividends to minorities (2) (2) Net other items 2 2 Free cash flo
Slide 13: Free Cash Flow Progression
Free Cash Flow Progression £744m £800m One-off Underlying £670m H2 H1 £593m £600m £520m £400m £357m £349m £212m £200m £0m 2006 2007 2008 2009 2010 2011 Notes: 1. Based on continuing operations. 13
Slide 14: Net Debt
Net Debt £m Opening net debt at 1 October 2010 621 Free cash flow from continuing operations (349) Acquisitions 1 126 Equity dividends 236 Exceptional pension payment 50 Disposals 8 Net proceeds from issue of ordinary share capital 2 (12) Impact of foreign exchange rates (2) Other (7) Closing net de
Slide 15: Approach to Acquisitions
Approach to Acquisitions • Strategic fit • Operational improvement • Restructuring • Integration • Financial hurdles 15
Slide 16: Financial Summary
Financial Summary • Overall strong financial performance • Encouraging organic revenue trend + 5.7% • Operating margin growth + 20 basis points • Continued strong free cash flow £349m • EPS growth (constant currency) + 13% • Interim dividend + 30% 16
Slide 17: Richard Cousins: Business Review, Strategy, Summary & Outlook
Richard Cousins Business Review, Strategy, Summary & Outlook 17
Slide 18: Agenda
Agenda 1. Business Performance and MAP 2. Regional Reviews 3. Strategy 4. Summary and Outlook 18
Slide 19: Organic Revenue Growth
Organic Revenue Growth 2009 2010 2011 % H1 H2 H1 H2 H1 New Business 8.5 8.5 9.0 10.0 9.0 Lost Business (7.0) (7.0) (7.0) (6.5) (6.0) Net New Business 1.5 1.5 2.0 3.5 3.0 LFL Revenue 1.1 (4.1) (1.6) 2.0 2.7 Organic Growth 2.6 (2.6) 0.4 5.5* 5.7* Increased Net New Business, Stabilising LFL Revenue * U
Slide 20: Net New Business
Net New Business • Continued strong new business • Investment in sales resource and training • Improving retention rate • Best practice retention model roll out • Ongoing investment in retention teams Improving Retention Rates 20
Slide 21: Cost Efficiencies - Food
Cost Efficiencies - Food • Product / supplier rationalisation Total H1 Cost Base - £7.3bn • Professional purchasing £2.5bn • Supply chain efficiencies 34% • Menu planning • Waste reduction Food Labour In Unit Above Unit Further Progress Made … More To Do 21
Slide 22: Managing Food Inflation
Managing Food Inflation • Contract structure Contract Structure • Menu planning Costs Price • Professional purchasing Sovereignty Passed Through • Efficiencies Indexation Clauses • Proven track record Cost + Fixed Price P&L 22
Slide 23: Cost Efficiencies
Cost Efficiencies • MAP 4: some progress, significant opportunity Total H1 Cost Base - £7.3bn £1.2bn (16%) • Labour productivity and scheduling 15% £0.4bn (6%) • MAP 5: further reduction 40% • Ongoing cost containment £3.2bn (44%) Labour In Unit Above Unit Food Scope For Further Efficiency And Overh
Slide 24: North America – Progress and Results
North America – Progress and Results H1 Revenue (£bn) & Organic Growth (%) • Good growth in net new business 3.5 7.8% 3.1 • High retention rates across all sectors 3.0 2.8 2.8% 2.7 4.4% 7% • Consistent delivery in B&I 7% 2007 2008 2009 2010 2011 • Exciting opportunities in Healthcare & Education H1
Slide 25: Continental Europe – Progress and Results
Continental Europe – Progress and Results H1 Revenue (£bn) & Organic Growth (%) • Good levels of new business 1.9 1.8 1.8 1.8 1.7 • Good performances in Germany, Italy, Turkey 3% 4% 1.2% (0.8)% 1.3% • Spain and Portugal: challenging economies 2007 2008 2009 2010 2011 • Multi services providing a new
Slide 26: UK & Ireland – Progress and Results
UK & Ireland – Progress and Results H1 Revenue (£m) & Organic Growth (%) • Market conditions remain challenging 955 974 937 977 895 1% (3.6)% (5.7)% (0.4)% (1)% • Improvement in retention • Organic revenue stable 2007 2008 2009 2010 2011 • Consistent margin, acquisition restructuring cost H1 Operati
Slide 27: Rest of the World – Progress and Results
Rest of the World – Progress and Results H1 Revenue (£bn) & Organic Growth (%) 1.6 • Good levels of new business in most territories 1.4 1.4 1.2 1.2 9% 5.4% 1.4% 10.9% • Double digit organic growth in Brazil & Australia 10% • Excellent growth in Energy & Extraction 2007 2008 2009 2010 2011 businesse
Slide 28: Japan
Japan • Earthquake and tsunami struck 11 March 2011 • Limited structural damage to client sites • LFL reductions in B&I and particularly Sports & Leisure • Cost reduction plans in place • £5m profit impact in H1, ongoing impact expected in H2 of around £20m 28
Slide 29: Strategy
Strategy Focus on Food 2006-08 Fast Growing Support Services Turnaround Scale in Countries Geographic Spread 2009-10 Recession & Recovery Sectorisation PROVEN STRATEGY 2011→ Growth 29
Slide 30: Moving into the Growth Phase
Moving into the Growth Phase • Greater focus on organic growth, Organic Top sales and retention Line Growth • Ongoing cost efficiencies Continued Margin Improvements • Infill M&A becoming more significant • Re-investment to drive growth Significant Cash Flow & • Margin progression, strong cash flow
Slide 31: Foodservice: Core Focus
Foodservice: Core Focus Source of New Business • Ranked 1 to 3 in all of our largest markets First 20% Time Large Outsourcing Players • Significant £200bn* market opportunity 50% 30% Small Regional Players • Underpenetrated sectors Opportunity by Sector* • First time outsourcing & small regional 70
Slide 32: Fast growing support services
Fast growing support services Strategy Total Revenue: FY 2010 • Building capability in each market 20% • Organic growth PLUS infill M&A Multi Services 38% • Significant cross selling opportunity • Increasing importance to the Group Slow But Growing Trend To Multi-services 2010 Multi Service: £2.9bn
Slide 33: Support Services
Support Services Services Delivered Client Examples Cleaning Reception/Mailroom Security Light Maintenance Other 46% M&A Sectors DOR Healthcare B&I Education 33
Slide 34: Geographic Priorities & Strategy
Geographic Priorities & Strategy Australia – NZ South East Asia 17% China Fast Growing & Emerging 44% India North America UAE Japan Africa Japan Russia 39% Continental Turkey Europe Eastern Europe UK & Ireland Brazil Latin America Increased Focus On Fast Growing And Emerging Countries 34
Slide 35: India
India • Vast and rapidly growing economy LUDHIANA NEW DELHI • Compass India c.10,000 employees • Increasing geographic coverage KOLKATA • Food and support services MUMBAI PUNE Baramati HYDERABAD • Strong organic growth and exciting infill M&A BANGALORE CHENNAI 8 Regional Offices 44 Operating Cities
Slide 36: Turkey
Turkey • Acquisition of Sofra 50% JV • Turkeys leading food & ss organisation • Rapidly growing economy, strong future prospects • 2010 revenue £180m • 14,000 employees • Significant trend to outsourcing and multi-services • Market leading position in foodservice • Strong support services business R
Slide 37: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet Free Cash Flow £m • Significant cash flow delivered 320 +157% 270 220 • Strong balance sheet 17 0 12 0 H 1 2007 H 12 0 0 8 H 1 2009 H 1 2 0 10 H 1 2 0 11 p • Increasing M&A activity 7 Dividend 6 .5 6 5 .5 +80% 5 • Increased dividend 4 .5 4 3 .5 3 H 1 2007 H 12 0 0 8 H 1 2
Slide 38: M&A
M&A 2010/11 M&A Lifes a Party • Preference for small-mid size infill Chiyoda Foods Menke Menue CDC • Food and support services Elior Netherlands UHS Sofra * • Existing geographies Tampa Bay* Rei Limpa HLS • Developed & emerging markets VFM BGP Resurs* PPP IML Marquise*
Slide 39: Summary
Summary • Strong organic revenue performance Organic Top Line Growth • Ongoing efficiencies and margin progression Continued Margin • Strong cash flow and balance sheet Improvements • Exciting infill acquisitions Significant Cash Flow & • Dividend up 30% Balance Sheet Strength 39
Slide 40: Outlook
Outlook “Compass has had a good start to the year, delivering both strong organic revenue growth and a further improvement in the margin. As we look out to the second half, we are encouraged by the pipeline of new business and the ongoing opportunities we have to generate further efficiencies. After
Slide 41: Supplementary Information
Compass Group PLC 2011 Half Year Results Supplementary Information 41
Slide 42: Contents
Contents Revenue 43 Group Revenue by Geography Balance Sheet 53 Overview 54 Capital Expenditure % of Revenue Revenue by Sector 44 Group 45 North America Financing 55 Components of Net Debt 46 Continental Europe 56 Principal Borrowings 47 UK & Ireland 57 Maturity Profile of Principal Borrowings 48 Re
Slide 43: Revenue – Group Revenue by Geography
Revenue – Group Revenue by Geography 2011 Rest of the World 20% North Other ROW 6% America Rest of the 2010 World 18% Brazil 5% 44% Other ROW 5% North Brazil 4% America 43% Australia 5% Australia 4% Japan 4% Japan 5% USA 39% USA 39% Other CE 7% Other CE 7% Netherlands 1% Netherlands 2% Norway 2% Nor
Slide 44: Revenue by Sector - Group
Revenue by Sector - Group Sports & 2011 2010 Leisure 10% Sports & Healthcare Business Leisure 18% 10% & Industry Healthcare Business 42% & Industry 19% 41% Education 18% Defence, Offshore, Education Remote 18% Defence, 12% Offshore, Remote 12% Notes: 1. Based on continuing operations. 44
Slide 45: Revenue by Sector – North America
Revenue by Sector – North America 2011 Sports & 2010 Leisure 13% Business & Industry Sports & Leisure Business 30% 13% & Industry 28% Healthcare Healthcare 24% 25% Defence, Offshore, Defence, Remote Offshore, 6% Education Remote 28% 6% Education 27% Notes: 1. Based on continuing operations. 45
Slide 46: Revenue by Sector – Continental Europe
Revenue by Sector – Continental Europe 2011 Sports & 2010 Leisure Healthcare 3% 15% Sports & Leisure Healthcare 4% 16% Education 15% Education 14% Business Business & Industry & Industry 60% Defence, Defence, 62% Offshore, Offshore, Remote Remote 6% 5% Notes: 1. Based on continuing operations. 46
Slide 47: Revenue by Sector – UK & Ireland
Revenue by Sector – UK & Ireland 2011 Sports & 2010 Leisure 13% Sports & Leisure Healthcare 14% 12% Healthcare Business Business 13% & Industry & Industry 49% 53% Education Education 12% 13% Defence, Defence, Offshore, Remote Offshore, 11% Remote 10% Notes: 1. Based on continuing operations. 47
Slide 48: Revenue by Sector – Rest of the World
Revenue by Sector – Rest of the World 2011 Sports & 2010 Leisure 10% Sports & Healthcare Leisure 11% Business 12% & Industry Healthcare Business 11% & Industry Education 39% 38% 4% Education 4% Defence, Offshore, Defence, Remote Offshore, 35% Remote 36% Notes: 1. Based on continuing operations. 48
Slide 49: 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 2011 Revenue 3,450 1,880 977 1,566 7,873 Organic growth 7.8% 1.3% (0.4)% 10.9% 5.7% Operating profit 281 149 54 109 (26) 567 3 Margin 8.1% 7.9% 5.5% 7.0% 7.2% Cash flow 281 104 3
Slide 50: Finance Cost – Net Finance Cost
Finance Cost – Net Finance Cost 2011 2010 £m £m Bank loans and overdrafts 4 3 Other loans 26 32 Finance lease interest 1 1 31 36 Bank interest income (4) (3) 27 33 Amount charged to pension scheme liabilities net of expected return on scheme assets 8 7 Unwinding of discount on provisions and put opt
Slide 51: EPS / Dividends – Earnings & Dividends Per Share
EPS / Dividends – Earnings & Dividends Per Share 2011 2010 £m £m Earnings per share Continuing and discontinued operations 20.3p 17.9p Discontinued operations - - Continuing operations 20.3p 17.9p Other adjustments 1 0.1p 0.1p Underlying earnings per share 20.4p 18.0p Dividends per share Interim div
Slide 52: EPS / Dividends – Dividend Cover
EPS / Dividends – Dividend Cover 2010 2009 2008 2007 Per share (pence) Dividend (interim plus final) 17.5p 13.2p 12.0p 10.8p Underlying earnings 1 35.7p 30.0p 22.0p 15.2p Dividend earnings cover 2.0x 2.3x 1.8x 1.4x Cash (£m) Cash cost of dividend (in the year) 258 229 209 208 Free cash flow 744 593
Slide 53: Balance Sheet - Overview
Balance Sheet - Overview 2011 2010 £m £m Non-current assets 1,328 1,177 Working capital (446) (351) Provisions (440) (498) Interest payable (69) (60) Post employment benefit obligations (199) (336) Current tax payable (287) (270) Deferred tax 230 285 Net assets before goodwill 117 (53) Goodwill 3,86
Slide 54: 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% 2.3% 2.1% 1.9% 1.9% 2.0% 1.7% 1.0% 2001 2002 2003 2004 2005 2005 2006 2007 2008 2009 2010 2011 HY Group UK GAAP Continuing IFRS Notes: 1. For 2001 to 2005, total Group is shown on a UK GAA
Slide 55: Financing – Components of Net Debt
Financing – Components of Net Debt £m Bonds 588 Private placements 545 Bank loans 4 1,137 Finance leases 38 Other loans 22 Derivatives and Fair value accounting adjustments (22) Gross debt 1,175 Cash net of overdrafts (504) Closing net debt at 31 March 2011 671 Notes: 1. Based on nominal value of bo
Slide 56: Financing – Principal Borrowings
Financing – Principal Borrowings Maturing in Coupon Calendar Year £m Bonds £250m 4 7.00% 2014 263 £325m 6.38% 2012 325 Total 588 US private placements $536m (2002 notes) 6.67% - 7.96% 2011 - 2012 334 $50m (2003 notes) 5.67% 2011 - 2013 9 $267m (2008 notes) 6.45% - 6.72% 2013 - 2015 167 £35m (2008 no
Slide 57: 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 31 March 2011, maturing in the financial years ending 30 Septem
Slide 58: Financing – Sources of Committed Borrowings
Financing – Sources of Committed Borrowings Bank Loans 0% Private Placements Bonds 48% 52% Notes: 1. Based on borrowings as at 31 March 2011. 58
Slide 59: Financing – Effective Currency of Net Borrowings
Financing – Effective Currency of Net Borrowings Other Yen 7% 5% £ 12% US $ € 62% 14% Notes: 1. Based on net borrowings as at 31 March 2011. 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 centrally
Slide 60: Financing – Debt Ratios and Credit Ratings
Financing – Debt Ratios and Credit Ratings Ratings Outlook Confirmed Standard & Poors BBB+ Positive 28-May-10 Moodys Baa1 Stable 26-Nov-09 Fitch (unsolicited) BBB+ Stable 19-Jul-10 Ratios 2011 2010 Net debt 1 / EBITDA 2 0.6x 0.8x EBITDA 2 / net interest 3 17.6x 12.6x Net debt 1 / adjusted total capi
Slide 61: Exchange Rates – Rates Used in Consolidation
Exchange Rates – Rates Used in Consolidation Income Statement 2 Balance Sheet 3 2011 2010 2011 2010 per £ per £ per £ per £ Australian Dollar 1.59 1.77 1.55 1.64 Brazilian Real 2.66 2.84 2.61 2.71 Canadian Dollar 1.59 1.68 1.56 1.53 Euro 1.16 1.12 1.13 1.11 Japanese Yen 130.74 143.45 132.85 138.85 N
Slide 62: 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 63: Taxation – Statutory Tax Rates
Taxation – Statutory Tax Rates Key statutory tax rates within the Group 1 2011 UK 27% 3 USA (blended average of federal and state taxes) 40% France 34% Germany 30% 4 Netherlands 25% Italy 28% Nordic 27% Brazil 34% Canada 29% Japan 41% Spain 30% Australia 30% Blended statutory tax rate 2 33% Notes: 1
Slide 64: Forward looking statements
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