Bunzl Plc · LSE:BNZL
Bunzl — H1 2018 Earnings Presentation
48 slides from Bunzl's earnings presentation, August 2018
Slide 1: 2018 Half Year Results
2018 HALF YEAR RESULTS AUGUST 2018
Slide 2: Introduction: Frank van Zanten, Chief Executive
INTRODUCTION: FRANK VAN ZANTEN CHIEF EXECUTIVE 2018 HALF YEAR RESULTS AUGUST 2018
Slide 3: Highlights
HIGHLIGHTS ADJUSTED EARNINGS PER SHARE* DIVIDEND PER SHARE UP 9% UP 14%◊ FURTHER INCREASE IN ORGANIC ACQUISITION SPEND OF £132m GROWTH TO 5.2% * Before adjusting items (customer relationships amortisation and acquisition related items), disposal of businesses and associated tax - see Appendix 2 and
Slide 4: Financial Results: Brian May, Finance Director
FINANCIAL RESULTS: BRIAN MAY FINANCE DIRECTOR 2018 HALF YEAR RESULTS AUGUST 2018
Slide 5: Revenue Growth
REVENUE GROWTH Organic growth 11.6% 5.2% 5,000 4,500 7.1% (0.7)% Strong growth across 5.2% 4,000 all business areas 3,500 3,000 £m 2,500 3,893 4,344 2,000 1,500 1,000 Revenue HY17* Organic growth Acquisitions Disposals Revenue HY18 * At constant exchange rates 2018 HALF YEAR RESULTS AUGUST 2018 5
Slide 6: Income Statement
INCOME STATEMENT GROWTH CONSTANT £m JUNE 18 JUNE 17 REPORTED EXCHANGE Revenue 4,343.7 4,119.2 5% 12% Adjusted operating profit* 285.0 272.6 5% 10% Operating margin* 6.6% 6.6% Adjusting items◊ (74.2) (66.4) Operating profit 210.8 206.2 Net finance expense (27.1) (24.3) Disposal of businesses 13.6 - P
Slide 7: Income Statement (Continued)
INCOME STATEMENT (CONTINUED) GROWTH CONSTANT £m JUNE 18 JUNE 17 REPORTED EXCHANGE Effective tax rate 23.8% 26.9% Adjusted profit for the period* 196.4 181.5 8% 14% Adjusted earnings per share* 59.4p 55.1p 8% 14% Dividend per share 15.2p 14.0p 9% Reported tax rate 24.4% 27.6% Profit for the period 14
Slide 8: Dividend per Share
DIVIDEND PER SHARE (p) 25 years 46.0 of consecutive CAGR dividend increases > 10% 4.0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 2018 HALF YEAR RESULTS AUGUST 2018 8
Slide 9: Balance Sheet
BALANCE SHEET Return on average INTANGIBLES £m JUNE 18 DEC 17 Increase from acquisitions of operating capital Intangibles 2,365.5 2,351.7 £101m largely offset by 52.0% Tangibles Working capital 119.8 914.4 125.2 871.9 amortisation, disposals and exchange WORKING CAPITAL Other net liabilities (424.1)
Slide 10: Cash Flow
CASH FLOW Cash conversion◊ £m JUNE 18 JUNE 17 94% Operating cash flow* Net interest 267.0 (24.9) 262.2 (21.7) Tax (60.5) (53.1) Free cash flow 181.6 187.4 Dividends (46.2) (42.8) Acquisitions** (150.7) (312.0) Disposal of businesses 55.3 - Employee share schemes 20.0 (30.2) Net cash inflow / (outflo
Slide 11: Cash Conversion
CASH CONVERSION 110% Average cash 103% 102% 102% 99% 97% 97% 94% conversion* 93% 95% 92% 92% 93% 93% 95% 97% TARGET 90% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 HY18 * Operating cash flow before acquisition related items to adjusted operating profit – see Appendix 2 and Appendix 5 04 – 05 continuin
Slide 12: Uses of Free Cash Flow 2004 – HY18
USES OF FREE CASH FLOW 2004 – HY18 Consistently strong free cash flow supports self-funded DIVIDENDS 6%† CAGR >10% DIVIDEND PER SHARE long term growth £1.2bn STABLE DIVIDEND COVER c. 2.5x◊ 14%† ACQUISITIONS 155* ACQUISITIONS SINCE 2004 £3.2bn SELF-FUNDED ◊ Based on adjusted earnings per share * Incl
Slide 13: Financial Summary
FINANCIAL SUMMARY REVENUE ORGANIC ADJUSTED REVENUE OPERATING GROWTH PROFIT* 12%◊ 5.2% 10%◊ CASH YTD COMMITTED ROACE CONVERSION** ACQUISITION SPEND 94% £132m 52.0% ADJUSTED DIVIDEND EPS* PER SHARE 14% ◊ 9% 52.0% ◊ ◊ At constant exchange rates * Before adjusting items (customer relationships amortisat
Slide 14: Business Review: Frank van Zanten, Chief Executive
BUSINESS REVIEW: FRANK VAN ZANTEN CHIEF EXECUTIVE • Operations review • Strategy • Prospects 2018 HALF YEAR RESULTS AUGUST 2018
Slide 15: Revenue by Customer Markets
REVENUE BY CUSTOMER MARKETS 74% resilient Other Healthcare Foodservice Grocery 7% 3% Foodservice 29% Cleaning & hygiene Retail 10% Healthcare 12% 13% 26% Cleaning & hygiene Grocery Safety 2018 HALF YEAR RESULTS AUGUST 2018 15
Slide 16: Business Area Analysis
BUSINESS AREA ANALYSIS Well diversified by geography and sector NORTH AMERICA CONTINENTAL EUROPE 57% Revenue 21% Revenue 47% Operating profit* 30% Operating profit* UK & IRELAND REST OF WORLD 14% Revenue 8% Revenue 13% Operating profit* 10% Operating profit* * Adjusted operating profit - before adju
Slide 17: North America
NORTH AMERICA GROWTH CONSTANT £m JUNE 18 JUNE 17 REPORTED EXCHANGE Revenue 2,459.6 2,432.6 1% 10% Adjusted operating profit* 140.1 148.0 (5)% 3% Operating margin* 5.7% 6.1% Return on operating capital 50.2% 55.5% • Revenue growth driven by strong organic growth and impact of acquisitions • Reduction
Slide 18: Continental Europe
CONTINENTAL EUROPE GROWTH CONSTANT £m JUNE 18 JUNE 17 REPORTED EXCHANGE Revenue 890.2 769.0 16% 15% Adjusted operating profit* 88.6 73.1 21% 22% Operating margin* 10.0% 9.5% Return on operating capital 59.1% 59.1% • Substantial increases in revenue and profit with improved operating margin • Signifi
Slide 19: UK & Ireland
UK & IRELAND GROWTH CONSTANT £m JUNE 18 JUNE 17 REPORTED EXCHANGE Revenue 625.9 566.1 11% 11% Adjusted operating profit* 39.7 37.9 5% 5% Operating margin* 6.3% 6.7% Return on operating capital 91.1% 94.7% • Strong organic revenue growth with operating margin impacted by challenging market • Trading
Slide 20: Rest of the World
REST OF THE WORLD GROWTH CONSTANT £m JUNE 18 JUNE 17 REPORTED EXCHANGE Revenue 368.0 351.5 5% 14% Adjusted operating profit* 28.2 25.1 12% 23% Operating margin* 7.7% 7.1% Return on operating capital 33.5% 30.9% • Substantial improvement in operating margin • Overall strong results in Latin America •
Slide 21: Consistent and Proven Compounding Strategy
CONSISTENT AND PROVEN COMPOUNDING STRATEGY High ROIC PROFITABLE Use competitive despite ORGANIC advantage to significant GROWTH grow market share in a profitable way acquisition spend OPERATING MODEL ROIC Daily focus on making IMPROVEMENTS our business 15.4% more efficient ACQUISITION Use strong bal
Slide 22: Financial Track Record 2004-2017
FINANCIAL TRACK RECORD 2004-2017 Proven compounding REVENUE (£bn) ADJUSTED OPERATING PROFIT* (£m) growth strategy 8.6 589 CAGR c. 10% 2.4 169 04 05 06 07 08 09 10 11 12 13 14 15 16 17 04 05 06 07 08 09 10 11 12 13 14 15 16 17 ADJUSTED EPS* (p) DIVIDEND PER SHARE (p) 04-12 restated on adoption 46.0 o
Slide 23: Acquisition Growth
ACQUISITION GROWTH 155 acquisitions 2018 2004 – ytd 2018; 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ytd total spend of Number of 7 7 9 8 7 2 9 10 13 11 17 22 14 15 4 £3.3bn acquisitions Committed acquisition 302 129 162 197 123 6 126 185 277 295 211 327 184 616 132 spend
Slide 24: Significant Opportunities to Grow in Existing Countries
SIGNIFICANT OPPORTUNITIES TO GROW IN EXISTING COUNTRIES COUNTRY FOODSERVICE GROCERY C&H SAFETY RETAIL HEALTHCARE COUNTRY FOODSERVICE GROCERY C&H SAFETY RETAIL HEALTHCARE USA ● Hungary ● ● Canada ● Romania ● ● ● Mexico ● ● ● Slovakia ● ● ● ● UK Israel ● ● ● ● ● Ireland Turkey ● ● ● ● Germany ● ● Braz
Slide 25: Growth Opportunities – Example
GROWTH OPPORTUNITIES – EXAMPLE Significant scope UK & IRELAND CONTINENTAL EUROPE for future growth 2017: £1.2bn revenue £6bn potential* 2017: £1.6bn revenue *Potential revenue - UK & Ireland 2017 revenue as percentage of GDP scaled relative to GDP of the countries of Continental Europe in which Bunz
Slide 26: Bunzl Unique Service Offering
BUNZL UNIQUE SERVICE OFFERING BESPOKE / DESIGN / PRINTED PRODUCT INSTALLATION MINIMISE MANAGEMENT SERVICES FULL CUSTOMERS’ RANGE WORKING STOCKED CAPITAL PRODUCT CUSTOMISED TRAINING BULKY LOW DELIVERY SLOTS PRODUCT INNOVATION VALUE ESSENTIAL CENTRES AVAILABILITY PRODUCTS ITEMS CONTRACT DELIVERY MOBIL
Slide 27: Expert Knowledge and Advice
EXPERT KNOWLEDGE AND ADVICE Our industry leading salesforce Innovation case study 3,000 expert sales staff supported by 2,600 locally based customer service specialists supporting customers with: − product knowledge − range rationalisation 25% 20% premium premium − industry trends − health and safet
Slide 28: Customised Digital Solutions
CUSTOMISED DIGITAL SOLUTIONS • Enhancing customer intimacy and ease of order processing − personalised experience through customer specific web platforms and punch-out − data analytics – usage & compliance, contract mobilisations − budgetary controls / spending limits − multi-tier approval levels −
Slide 29: Value Added Services - Case Study
VALUE ADDED SERVICES - CASE STUDY • Design, supply, installation and maintenance of catering equipment • Asset tagging • Reactive repairs • Planned maintenance • Repair or replace analysis • Safety certificates • Cross-selling opportunities with UK hospitality business 2018 HALF YEAR RESULTS AUGUST
Slide 30: Prospects
PROSPECTS Group – prospects positive with continued growth from strong competitive position, diversified and resilient businesses and ability to consolidate fragmented markets further North America – good overall growth from the combination of organic revenue growth and impact of acquisitions Contin
Slide 31: Appendices
APPENDICES 2018 HALF YEAR RESULTS AUGUST 2018
Slide 32: Exchange Rates
APPENDIX 1 EXCHANGE RATES JUNE 18 JUNE 17 Average rate US$ 1.38 1.26 Euro 1.14 1.16 Canadian$ 1.76 1.68 Australian$ 1.78 1.67 Brazilian real 4.71 4.00 Closing rate US$ 1.32 1.30 Euro 1.13 1.14 Canadian$ 1.74 1.69 Australian$ 1.79 1.69 Brazilian real 5.08 4.30 2018 HALF YEAR RESULTS AUGUST 2018 32
Slide 33: Income Statement Alternative Performance Measures
APPENDIX 2 INCOME STATEMENT ALTERNATIVE PERFORMANCE MEASURES £m JUNE 2018 JUNE 2017 Operating profit 210.8 206.2 Adjusting items* 74.2 66.4 Adjusted operating profit◊ 285.0 272.6 Operating margin 6.6% 6.6% Net finance expense (27.1) (24.3) Adjusted profit before income tax◊ 257.9 248.3 Tax on adjust
Slide 34: Adjusting Items
APPENDIX 3 ADJUSTING ITEMS £m JUNE 2018 JUNE 2017 Customer relationships amortisation (55.6) (47.4) Deferred consideration payments (10.0) (13.8) Transaction costs and expenses (3.1) (8.1) Earn out adjustments (5.3) 2.9 Interest on acquisition related income tax (0.2) - Total adjusting items (74.2)
Slide 35: Net Debt
APPENDIX 4 NET DEBT SIX MONTHS TO YEAR TO SIX MONTHS TO £m JUNE 2018 DEC 17 JUNE 2017 Opening net debt (1,523.6) (1,228.6) (1,228.6) Net cash inflow / (outflow) 60.0 (334.0) (197.6) Exchange (14.1) 39.0 23.7 Closing net debt (1,477.7) (1,523.6) (1,402.5) 2018 HALF YEAR RESULTS AUGUST 2018 35
Slide 36: Cash Flow and Cash Conversion
APPENDIX 5 CASH FLOW AND CASH CONVERSION £m JUNE 2018 JUNE 2017 Operating profit 210.8 206.2 Adjusting items 74.2 66.4 Adjusted operating profit* 285.0 272.6 Adjusted for: Non-cash items 18.5 19.6 Working capital movement (23.8) (16.1) Cash flow from operations◊ 279.7 276.1 Net capital expenditure (
Slide 37: Annualised Acquisition Revenue
APPENDIX 6 ANNUALISED ACQUISITION REVENUE 2018 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ytd North America 115 198 103 15 - - 35 7 410 89 84 153 38 283 69 Continental 301 61 7 100 52 - 115 96 23 5 46 98 87 219 32 Europe UK & Ireland - 2 267 110 39 27 - 39 16 32 40 - 76
Slide 38: Acquisition Growth 2018 YTD
APPENDIX 7 ACQUISITION GROWTH 2018 YTD £101m BUSINESS Revco ACQUIRED January COUNTRY USA SECTOR Safety REVENUE* £27.5m revenue acquired QS March Netherlands Cleaning & hygiene £4.9m Monte Package March USA Foodservice £41.8m Company Enor July Norway Foodservice £27.0m * Annualised and converted at J
Slide 39: Historical Data
APPENDIX 8 HISTORICAL DATA £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue 2,439 2,924 3,333 3,582 4,177 4,649 4,830 5,109 5,359 6,098 6,157 6,490 7,429 8,581 Adjusted operating 169 203 226 243 281 296 307 336 352 414 430 455 525 589 profit* Operating margin* 6.9 7.0
Slide 40: Business Model
APPENDIX 9 BUSINESS MODEL One-stop-shop • Global suppliers for non-food • Low cost sources • Commodities consumables SOURCE • Own brands INDIVIDUAL RANGES • Direct to site • Cross dock CONSOLDATE a • Warehouse replenishment CONSOLIDATED OFFER DELIVER Foodservice Grocery Cleaning & hygiene Safety Ret
Slide 41: Value Proposition
APPENDIX 10 VALUE PROPOSITION Outsourcing COST TO ACQUIRE PRODUCT COST adds value for our customers COST TO PROCESS INVENTORY INVESTMENT CASH FLOW DIRECT LABOUR & OVERTIME INVENTORY FINANCE COST EXPEDITED ORDERS INBOUND FREIGHT PURCHASE ORDER ADMINISTRATION INVENTORY DAMAGE & SHRINKAGE ACCOUNTS PAYA
Slide 42: Market Leading Specialist Distributor
APPENDIX 11 MARKET LEADING SPECIALIST DISTRIBUTOR SPECIALIST COMPETITORS IN OUR FIELD OTHER COMPETITORS • FOOD DISTRIBUTORS SPECIALISTS IN • OFFICE SUPPLIES OTHER DISTRIBUTORS NATIONAL CATEGORIES • INDUSTRIAL DISTRIBUTORS DISTRIBUTORS REGIONAL DISTRIBUTORS GROCERY • GROCERY CUSTOMERS’ CUSTOMERS OWN
Slide 43: Competitive Positioning
APPENDIX 12 COMPETITIVE POSITIONING SPECIALIST IN OUR CATEGORIES Bunzl offers customised high service solutions SPECIALIST across focused DISTRIBUTORS market sectors ONE SIZE FITS ALL CUSTOMISED SOLUTIONS SPECIALIST GROCERY DISTRIBUTORS IN GENERALISTS CUSTOMERS’ OTHER CASH AND CARRY ONLINE SELLERS O
Slide 44: Bunzl Customers
APPENDIX 13 BUNZL CUSTOMERS 95% Typical customers • Larger, representing 95% of revenue of revenue generated • B2B by larger, service intensive customers • Often multi-site with average annual spend of Typical customer requirements £180,000 • Innovative, customised solutions • One-stop-shop: broad r
Slide 45: Acquisition Parameters
APPENDIX 14 ACQUISITION PARAMETERS Disciplined B2B GOODS CONSOLIDATED NOT FOR RESALE PRODUCT approach to OFFERING (ONE- acquisitions STOP-SHOP) RESILIENT FRAGMENTED FURTHER MARKET AND GROWING CUSTOMER CONSOLIDATION MARKETS BASE AND SYNERGIES SMALL % OF TOTAL OPPORTUNITY ATTRACTIVE CUSTOMER SPEND FOR
Slide 46: Acquisition Discipline
APPENDIX 15 ACQUISITION DISCIPLINE 155 acquisitions 2004 – ytd 2018 SAY “NO” MANY TIMES VERY SELECTIVE ABOUT MORE THAN “YES” COUNTRIES AND SECTORS RETENTION OF REVIEW PERFORMANCE THOROUGH DUE MANAGEMENT AND VS INVESTMENT CASE DILIGENCE CUSTOMERS IS KEY WITH BOARD TARGETS ARE IDENTIFIED BY BUSINESS A
Slide 47: Alternative Performance Measures
APPENDIX 16 ALTERNATIVE PERFORMANCE MEASURES This presentation includes various performance measures defined under International Financial Reporting Standards (‘IFRS’) as well as a number of alternative performance measures. The principal alternative performance measures used in this presentation ar
Slide 48: Disclaimer
DISCLAIMER This document has been prepared by Bunzl plc (the ‘Company’) solely for use at the presentation of the Company’s results announcement in respect of the period ended 30 June 2018. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the sli