Agenda. Initial Facilities Team & Business UK Facilities Management Market & Trends Strategy Financial Performance & Transformation.

Transcription

1 Investor Session

2 Agenda Initial Facilities Team & Business UK Facilities Management Market & Trends Strategy Financial Performance & Transformation Innovation & LEAN Sector Focus Mike Brown Mike Brown Guy Smith Raj Krishnamurthy Jamie Reynolds Show Cases: Health Sector Transport Sector Technical Services Charlotte Marshall Graham Thwaites Chris Kenneally Summary & Q&A Mike Brown

3 The New Team Mike Brown, MD 2 years Serco, BOC Guy Smith, FD 1.5 years Unilever, Coca Cola Martin Kersey, HR Director 1.3 years Burger King Raj Krishnamurthy, Innovations Director 1.5 years BOC, Applied Materials Mark Szczesnowicz, MD Professional 2 years Knightsbridge Security Chris Kenneally, MD Technical Services 1.5 years Faceo, GS Hall Charlotte Marshall, MD Healthcare 1 year Sodexo Paul Daly, MD Commercial 3 years Sodexo Graham Thwaites, MD Transport 24 years Rentokil Initial Jamie Reynolds, Sales Director 0.5 years GS Hall

4 The New Team Mike Brown Managing Director Sectors Health Charlotte Marshall Professional Services Mark Sczesnowicz Transport Graham Thwaites Local Government Chris Kenneally Business Development Jamie Reynolds Finance Guy Smith Service lines Catering Paul Daly Security Mark Sczesnowicz Cleaning Graham Thwaites Technical Chris Kenneally HR Martin Kersey Core Sectors and Service Lines Innovations Raj Krishnamurthy

5 Initial Facilities fast facts 600m revenue, profit 30m 30,000 employees Services include: Cleaning Catering Security Technical Building Maintenance Total Facilities Management 3,000 customer sites Largest contract 50m pa London Underground

6 Key take aways for today FM market Large market Good growth potential Lower margin but high returns on capital Market moving to Multi-Service/TFM Initial Facilities Business transforming Building capability to capture Multi-Service/TFM Growth through sector focus Innovation key to success

7 The outsourcing market Business Processes (BPO) Outsourcing Market Facilities Management (FM)

8 What is Facilities Management? Cleaning Security Catering Technical TFM Office Industrial Waste Manned guarding CCTV Incident management Reception Restaurants Hospitals Hospitality Schools Building maintenance Fire protection Water treatment Energy management Cleaning Security Catering Technical Other - Grounds - Pest control Site based Route based

9 This image cannot currently be displayed. Structure of market Short term contracts Long term contracts Property Procurement Workplace Solutions Shared Services Complexity & Value Catering Security Cleaning TFM TFM Technical Services Catering Security Cleaning TFM Technical Waste Services Support Catering Services Security Cleaning Support Services Technical Catering Security Cleaning Single Service Multi-Service/ Bundled TFM/ Integrated Outsourced Services Partner

10 UK FM market 70bn Market UK Services Market 25.1% In-house Services 18.8% TFM Multi-Services Single Services 13.9% 42.1% Significant first time outsource opportunity Source: Frost & Sullivan

11 Growth Drivers Broadening Services Move to Multi- Service/TFM First Time Outsourcing Economic Drivers

12 Growth Rates TFM represents a strong growth market 6 UK Outsourced FM Market Service Growth Rates % Single Growth Rate Multi-Service Growth Rate TFM Growth Rate Source : Frost & Sullivan

13 Economic Benefits For First Time Outsource 20% customer savings opportunity Best practice efficiency, service levels Scale procurement, IT systems Specialist know how Specification Professionalise in-house service

14 Move to Multiservice/TFM. Customer Savings Potential 20% Lean Processes / De-skilling Technology Platforms Energy & Sustainability Services Reduce Client-side Multi Skilling & integration Management and Service Level Optimisation Average percentage of savings = 20%

15 Competitor offering and scale Scale Single Service Multi-Service TFM No single competitor has more than 5% share

16 Market Consolidating Mowlem MacAlpine EAGA Dalkia (UK) Utilyx Knightsbridge Guarding MSS Santia Water Santia Fire Phoenix Fire Reliance Chubb VSG (Security) ICM (Cleaning)

17 Initial Facilities Strategy Focus on Multi-Service/TFM One Initial Upgrade team Build capability Acquisition Technical Services Technology Platforms Operational efficiency Restructure Investment Invest in Innovation LEAN Service Line/Technology Innovation Growth through Sector Focus Health Transport Professional Services Local Government

18 Initial Facilities offering and scale Scale Single Service Multi-Service TFM

20 Initial Facilities Transformation & Financial Performance Guy Smith

21 Agenda Business transformation Acquisitions to add service capability Financial performance, cost saving & margin improvement Evolution of the business by service & sector Summary

22 Initial Facilities has already undergone a dramatic transformation stand-alone businesses Cleaning & catering Separate management teams Different finance systems 41 properties

23 Initial Facilities has already undergone a dramatic transformation stand-alone businesses Cleaning & catering Separate management teams Different finance systems 41 properties 2012 One business Cleaning, catering, security & technical Upgraded IF management team One finance system 10 properties. 5 more to close Saving 5m pa Acquisitions added services Shared service centre Business partnering

24 The next phase of the transformation agenda has already started stand-alone businesses Cleaning & catering Separate management teams Different finance systems 41 properties 2012 One business Cleaning, catering, security & technical Upgraded IF management team One finance system 10 properties. 5 more to close Saving 5m pa 2014 Investment in Systems: time & attendance, procurement, contract management Investment in Innovation Saving 5-6m pa

25 Bolt-on acquisitions have added specific service-line capabilities IF now positioned to be able to provide full TFM contracts Security - Knightsbridge Guarding June 2010 Technical - Santia Fire Feb 2011 FM - Santia Water Feb MSS Building Services Dec Phoenix Fire Jun 2012 Added 72m * revenue through 17m investment All acquisitions successfully integrated * Full year/ 12 month revenue

26 Business transformation is driving improved financial performance Revenue m YoY +2.3% YoY +5.4% CAGR 3.9% APBITA m YoY+21.6% YoY +13.1% CAGR 17.3% APBITA margin % CROCCE IF % Strong overall revenue growth with P&L leverage being constantly delivered Low capital investment business yields strong returns on investment Note- all revenue: external revenue, excluding intercompany

27 with further improvements in 1H Revenue m CAGR +2.2% CAGR +5.3% 20 APBITA m % 3.9% 4.3% 4.5% CAGR +19.8% CAGR +14.2% Transformation continues to improve profitability Seasonality accounts for 1H vs. FY differences

28 However, improvements could have been even better without two headwinds to manage Retail & SME Cleaning Economic environment Mitigation Re-orientation to higher value multi service contracts Cost reduction to manage more efficiently Spain Mitigation Proactively de-risking Spanish business Withdrawal from lower margin & slow paying contracts Focus on higher margin contracts with improved payment terms m Revenue Bridge Acquisitions* (44) Organic growth CAGR +3.9% 2009 Actual 2011 Actual Retail & SME cleaning (7) Spain 565 * Part year only for MSS acquisition

29 We are transforming our business to target multi-service growth opportunities 2009: By service 2012: By service Cleaning 65% 26% Cleaning Technical & Catering Multi-Service 17% 18% 32% 42% Technical, Catering & Security Multi-Service Acquisitions have added security service & strengthened ability to deliver full range of technical services Business focus now higher-value multi-service contracts Cleaning represents smaller proportion of the business

30 with a focus on higher-growth preferred sectors 2009: By sector 2012: By sector Professional Services Transport Healthcare 15% 9% 11% 11% 25% 15% 14% Professional Services Transport Healthcare Local Government Other 54% 31% 15% Local Government Other Business now oriented to preferred sectors: Professional Services, Transport, Healthcare, Local Government Multi-service offer within each sector Improved sector-specific capability specialism

31 17.3% profit CAGR from organic growth, acquisitions & cost reduction Organic growth has been supplemented by bolt-on acquisitions & cost-savings Acquisitions added service-line capability, positioning IF for delivering stronger organic growth through multi-service FM contracts Cost-savings delivered through business transformation, restructuring, process improvement Investment predominantly in sales capability to support multiservice FM growth m Acquisitions APBITA Bridge Organic growth Infrastructure/ Overhead Savings 2.7 Service delivery savings/ margin improvement (1.0) 2009 Actual 2011 Actual Note: retail/ SME cleaning & Spain netted vs. organic growth Investment in capability CAGR 17.3% 29.3

32 Transformation is creating the platform for improved value creation 2009 Actual 2011 Actual Cost Element % Rev Cost Element % Rev Revenue 100 Revenue 100 Materials (13.7) Materials (13.3) Revenue: Growth through TFM focus, sector specialism, cross selling Procurement: pooling, improved control Direct Labour (74.1) Sales & Account Mgt (2.0) Admin & OHs (6.1) APBITA 4.1 Direct Labour (73.7) Sales & Account Mgt (1.9) Admin & OHs (5.9) APBITA 5.2 People: Savings through Lean, Time & Attendance, management de-layering Admin & OH: Savings enabled by replacement of operations systems & property reductions

33 Business transformation summary Key elements in place to deliver growth Business re-organised to provide full-service TFM Solid presence in all FM services enable TFM delivery Strong sector-focus With increasingly efficient business infrastructure Currently on one finance platform with operations systems improvements to follow Plans to further reduce costs To underpin improved financial performance Delivered solid revenue and profit growth Low capital investment business with high returns on capital

34 Initial Facilities Strategy: Focus on Multi-Service/TFM One Initial Upgrade team Build capability Acquisition Technical Services Technology Platforms Operational efficiency Restructure Investment Invest in Innovation LEAN Service Line/Technology Innovation Growth through Sector Focus Health Transport Professional Services Local Government

35 LEAN and Innovation Raj Krishnamurthy

36 LEAN and Innovation Innovation Retention New services New business LEAN Efficiency Cost saving Retention 36

37 What is LEAN? Identifying and eliminating inefficiencies What inefficiencies are seen across the business? Simple Sector examples Vehicle Idling Looking for a wheelchair Repeat data entry Complex Sector examples Not optimised cleaning workflow Portering efficiency management True cost of vegetation control LEAN Processes Tools 5S, Rapid Events, Pareto Infrastructure 120 LEAN champions, Sector specialists Governance

38 LEAN Removing inefficiency Example Bed Turnaround in NHS Wards 38 Over delivery - Beyond specification - Job creep Inefficiency in execution - Wrong storage location - Too much waiting - Unavailability of kit Minutes Per Bed Cannot influence - Patient related - Nature of ward Inefficiency in design - Incorrect equipment - Wrong rota - Incorrect methods Prescott Avening Oakley Birth Montpellier Hospital Wards

39 How does LEAN Initial work? LEAN Champions LEAN Academy Rapid Improvement Events As Is Process Mapping Embedding New Process/Systems Identification of Inefficiencies Redesign Process Onsite with Staff Workflow Mapping LEAN Equipment Technology Challenge the Process not the People!

40 LEAN Achievements 10% returned on 2m NHS contract Over 4m saved on London Underground contract 8 12% savings on multi-storey offices Hard savings to customer operations

41 LEAN Achievements Simplified processes Improved end customer experience Lowered operating costs Increased client satisfaction from shared savings Increased contract profitability Supported London Living Wage Improved employee engagement Retention of People and Contract Investment in People Savings to Contract Investment in LEAN Savings to Customers Increased ability to retain customers and employees

42 What drives innovation? Innovation wins new business, improves retention Lower Cost to Serve Win New Business Innovation Increase Uptake/ Adoption Protect Asset Value Enhance User Experience and drives margin improvement

43 How do we innovate? Develop Customer Insight New Technology Further Research Customer Behaviour Engineer Creative Solutions Support change management Customer feedback mechanisms Retain Satisfied Customers Satisfy Unique Customer Needs

44 The Impact of Innovation The Quality Auditor The audit process Quality check process done by supervisors Detailed checks on performance and perception The innovation Paper Audits ipad Audit Benefits Instant response to issues Traceability and proof Lower costs to resolution Enhance User Experience Lower Cost to Serve

45 The Impact of Innovation Condition Monitor Live monitoring of Critical Assets: Eg: HVAC in Data Rooms/Trading Floors Constantly monitor for vibration, temperature, noise etc Engineer alerted to off-normal situation Benefits Intervene before asset is affected Reduce scheduled maintenance costs Reduce lifetime cost of asset Protect Assets Win New Business Lower Cost to Serve

46 Innovation and LEAN summary LEAN Removes inefficiencies Improves contract margin Retains customers and employees Innovation Differentiates Initial from competition Drives margin improvement Enables new services creation

48 Initial Facilities Strategy: Focus on Multi-Service/TFM One Initial Upgrade team Build capability Acquisition Technical Services Technology Platforms Operational efficiency Restructure Technology/LEAN Invest in Innovation LEAN Service Line/Technology Innovation Growth through Sector Focus Health Transport Professional Services Local Government

49 Growth through Sector Focus Jamie Reynolds

50 Sector attractiveness Sector Addressable Market Size Market Growth Move to TFM Value through Innovation Referenceability Healthcare Local Government Professional Services Transport Retail SME - Most attractive

51 Creating value in sectors FM Spends % Savings Ops

52 Transport sector A vibrant service market in railways Passenger numbers are rising Move to Multi-Service/TFM cleaning, vegetation, security and asset maintenance Services to: Fleet, stations, depots, trackside, passengers Increasing focus on passenger experience Enhanced passenger experience safety, punctuality and availability Train turnaround and graffiti management impacts performance outcomes Total Rail Market 1200m Outsourced Rail Market 1000m 7% 8% IF Share

53 Health sector Cost savings in NHS driving a growth market Strengthening market for first time outsourced services Cost reduction requirements driving increase in scope of outsourced services Opportunity to drive LEAN and waste reduction Patient experience, recovery and readmission driving improvements Ability to directly impact readmission rates through infection control and hygiene Ability to impact recovery through innovative catering solutions Total Market 3780m Outsourced Market 1050m 2% 7% IF Share 72% Market Penetration Outsourced In-house 28%

54 Professional Services* sector Sector confidence in multi-service offering driving TFM outsourcing Realisation of improved service through TFM Some segments under rising cost pressure Appetite for bringing innovation into the workplace to drive cost and productivity Strong reference-ability driving growth opportunities Strong customer base across service lines Integrated London-centric organisation Workplace and Sustainability strategy driving new service offering Supporting international customers through leveraging RI infrastructure Total Market 2500m Outsourced Market 2000m 5% 7% IF Share * Banking, Insurance, Legal, Accounting

55 Local Government Evolving outsourcing Severe reduction in government funding stimulating new models of partnership and delivery Fragmented market but trend towards multi-service contract packages Number of contracts significantly up in 2011 and many first time outsourcers Outlook Focus on premises efficiency and workplace transformation Significant opportunities to drive cost savings through LEAN methodologies Strong TFM reference-ability through portfolio of Local Government Properties Total Market 4010m Outsourced Market 1798m 2% 4% IF Share

56 Transformed Sales Function Before Scatter gun bidding Silo thinking Isolated bid production Inconsistent quality Poor governance After Strategically focused targets Sales team co-locate Consistent and excellence proposition Sharing knowledge/expertise Excellent governance Sales production Support function

57 Focused Sales Process salesforce.com stages F E D C B A Miller Heiman sales process UNIVERSE ABOVE THE FUNNEL IN THE FUNNEL BEST FEW Contract Awarded Investment in strategic selling process

58 Sector summary Growth through Sector Focus We are creating customer value through Service Innovation, LEAN and Technology Transformed Sales Function Strategy, Process, People

59 Agenda Initial Facilities Team & Business UK Facilities Management Market & Trends Strategy Financial Performance & Transformation Innovation & LEAN Sector Focus Mike Brown Mike Brown Guy Smith Raj Krishnamurthy Jamie Reynolds Show Cases: Health Sector Transport Sector Technical Services Charlotte Marshall Graham Thwaites Chris Kenneally Summary & Q&A Mike Brown

60 Investor Session Questions

61 Key take aways for today FM market Large market Good growth potential Lower margin but high returns on capital Market moving to Multi-Service/TFM Initial Facilities Business transforming Building capability to capture Multi-Service/TFM Growth through sector focus Innovation key to success

62 Investor Session