Compass Group PLC

Good morning and welcome to our 2024 half-year results. We've had a strong first half. Operating profit increased by 19%, driven by organic revenue growth of 11% and an operating margin of 7.1%. The strong trading performance, along with our positive outlook, gives us the confidence to raise guidance for underlying profit growth to towards 15%. We're delivering sustained, balanced growth and the business is in great shape. The global market opportunity is large, giving us a significant structural growth runway. We're relentlessly focusing on our core markets, where we're embedding proven processes and best practice. We've strong competitive advantages, including our brands and scale, which have taken years to build and are difficult to replicate. and we have scope to further unlock growth opportunities through investment, particularly in Europe. The ability to invest is crucial in our industry. CapEx, which is mostly client-related, supports new business wins, helps retain clients, improves the customer experience, and leads to longer contracts. Infill M&A further supports our strong brand portfolio and capabilities and is a great source of talent. We're continuing to refine our portfolio so we can increase our focus on core markets with better growth prospects, and we're investing more in core systems and processes. There's more detail on strategy in a moment, but with that, I'll now hand over to Petros.

Thank you, Dominic. Good morning, everyone. First, looking at the components of revenue growth. Pricing trended around 5%, similar to the current blended rate of inflation we're currently seeing. Net new, which can be lumpy, was 3.7% and slightly better than we forecasted at Q1. We expect this to accelerate in the second half and be in the range of 4-5% for the full year. Volume growth of around 2.5% was stronger than we expected and there are several factors which contributed to that. In B&I, the return to office continued to improve, particularly on Mondays. There were more events in both B&I and Sports in Leisure, some of which were seasonal and are unlikely to repeat, and were benefiting from our stronger value proposition compared to the high street. Looking forward to the second half, we expect volume growth to moderate as the comparatives get tougher and we return to a more normal growth profile. As a reminder, before the pandemic, our growth was mainly driven by net new and pricing, with relatively little from volumes. We are sustaining balanced growth across all our regions, with double-digit organic revenue growth and good margin progression. Every region delivered strong improvement in operating profit. Constant currency group operating profit increased by 19% to $1.5 billion. As expected, interest increased to $111 million. For the full year, we expect interest costs to be around $235 million, reflecting the acquisition of CH&Co. Our effective tax rate was 25.5% in line with our guidance. As a result, EPS was up by 16%, and in line with our policy, dividends grew by the same percentage. We're using our strong cash position to invest in growth. At 3.3% of revenue, CAPEX is normalizing to our pre-pandemic rate. As Dominic said, CAPEX supports new business growth and helps us retain clients as well as delivering excellent returns. For the full year, we continue to expect CAPEX to be around 3.5% of revenue as we mobilize more business in the second half. One of our strategic priorities is to go deeper in our larger and more developed markets, which offer better growth prospects. In line with this strategy, we've exited the further four non-core countries and have agreed to exit Brazil, which is subject to regulatory approval. We're also investing in our brand portfolio and flexible operating models. Net M&A expenditure was $373 million, mainly related to Hoffmann's in Germany. Note, this doesn't include CH&Co as it completed in April. The impact this year from acquisitions and disposals, including Brazil, is immaterial. For fiscal 2025, it is minus $200 million revenue at average margin, which is minus 50 basis points of operating profit growth. Our strong cash generation enables us to invest in our business. We take a very disciplined approach to capital deployment. Return on capital employed has recovered post-pandemic and, importantly, is now around double the group's WAC. M&A unlocks future sources of growth and generates excellent returns over time. Based on our strong trading performance and positive outlook, we have raised guidance for the full year. We now expect constant currency operating profit growth to be towards 15%, driven by organic revenue growth of towards 10%. Now, back to Dominic.

Thanks, Petros. We have three strategic priorities to sustain growth. First, we're focusing relentlessly on our core markets and sectors. Second, we continue to invest in infill M&A to unlock future sources of growth. And third, we're nurturing our talent and developing our future leaders. There are significant opportunities for organic growth in every region. We estimate our addressable market to be around $300 billion. And despite being the largest in the industry, our global market share is less than 15%, with Europe at only 7%. Self-operators account for just under half of the market, and regional players about a quarter. Combined, they represent about 75% of the addressable market. Experience has shown us that outsourcing starts in B&I. As clients and consumers become familiar with the benefits of outsourcing, it starts to permeate other sectors, such as healthcare and education. These sectors have the largest first-time outsourcing potential, with over 50% still self-operated. Even the most penetrated sector and most mature market, B&I in North America, has seen rapid growth from flexible operating models, such as unattended markets and vending. The vending market is very fragmented. In the US alone, it's estimated to be about $25 billion, and we have a 12% market share. so there's plenty of further growth potential. Compass has strong and proven competitive advantages, which have been built over the last 30 years. This includes the way we approach the market through sectorization and sub-sectorization. Our brand portfolio helps us to tailor the offer to individual client needs. It's unique to us and difficult to replicate organically, as many were originally acquired. Another advantage is the flexibility of our operating model, ranging from different food models to our digital and sustainability initiatives. Our thought leadership and solutions in these areas are often cited by clients as one of the reasons they choose to outsource the Compass. Foodbuy, our group procurement organisation, provides significant leverage when it comes to purchasing. Over the last 20 years, we've been growing our purchasing scale and investing in systems and data to give us the best cost advantage and compliance levels. Learning from our success in the US, we've been scaling our procurement blueprint in Canada, the UK and Australia. We'll be talking more about Foodbuy at our deep dive for investors and analysts in September. And finally, our sales and retention and MAP frameworks, which have been in place for decades. MAP gives us insight into the operations of individual units, sectors and countries and supports execution. These processes underpin our strong performance culture across what is a relatively decentralized business. Our competitive advantages are most developed in North America. M&A created the platform for growth with a portfolio of specialist, client-facing brands bought as infill acquisitions in the late 1990s and 2000s. They helped differentiate our offer across the market, enabling our sub-sectors to grow by 130% on average over the past 10 years. We can also use multiple brands at the same site, giving clients an even more tailored offer and leading to higher customer satisfaction rates. This helps us win new business and grow revenue with existing clients. Consistent execution and communication of best practice is particularly important given the nature of our decentralized business. Whether that's through productivity insights, pricing support, purchasing excellence, or sales processes and forums, our regions are now even more connected than ever. This is resulting in more balanced growth. During the 2010s, North America was the main driver of the group's performance, helped by investments in CapEx and M&A. As we invest and replicate Compass best practice elsewhere, we're now benefiting from sustained higher growth in all regions. M&A further helps us unlock growth and our approach is straightforward as we replicate our North America blueprint elsewhere. We like high quality businesses that have unique capabilities or reach with strong brands, strong management teams and a great culture. We retain what has made them special, and we drive benefit from procurement and back office synergies, as well as providing access to best practice to accelerate their growth. And we've had proven track record of success. In North America, we've grown revenue for eight of our largest brands from $3 billion when they were acquired to $18 billion today. That's an average CAGR of 11%. By using this successful blueprint elsewhere, we're adding further sector and sub-sector expertise and increasing flexibility in our operating model. Recent examples include CH&Co in the UK and Hoffmans in Germany. They're different businesses, but both are great examples of high-quality acquisitions. This is underpinned by the same financial discipline as we look for returns to exceed WAC by the end of the second year. CH&Co has a strong track record of performance, a highly regarded management team, an excellent brand portfolio that enhances our offering capability. It's a really exciting addition to Compass, deepening our expertise and giving us better access to different sub-sectors, particularly in B&I. Hoffmann's in Germany produces high-quality, cooked and instantly frozen meals, which are distributed by an established network. It gives us more flexibility in the way we serve customers in healthcare, education and B&I, and increases our reach to clients without on-site kitchens. Using Hoffmann's, we can also better cater for specialist diets and serve customers on shoulder days when there are lower volumes on site. Our final strategic priority is to recruit, develop and nurture talent across all levels of our organisation. It's a key priority for the team and a personal passion of mine. We've seen over time how the best talent is typically homegrown, so we're investing more in development programmes to cultivate our own talent for the future. It's a really exciting time for the business. We're further strengthening our competitive advantages, becoming an even more focused business and growing strongly. We've multiple levers to drive revenue and profits and are confident in sustaining mid to high single-digit organic revenue growth with ongoing margin progress, which will enable us to grow profit ahead of revenue. This is supported by a strong capital allocation model, which enables us to continue our track record of generating long-term, compounding shareholder returns. Now over to Q&A. The operator will share instructions on how to ask questions. Please remember that you must be connected by phone in order to ask a question. Operator, over to you.