Bunzl Plc · LSE:BNZL
Bunzl — H1 2016 Earnings Presentation
48 slides from Bunzl's earnings presentation, August 2016
Slide 1: 2016 Half Year Results
2016 Half Year Results August 2016
Slide 2: Agenda
Agenda 1 Philip Rogerson, Chairman: Introduction 2 Brian May, FD: Financial Results 3 Frank van Zanten, CEO: Business Review 4 Q&A 2016 Half Year Results 1
Slide 3: Introduction
Introduction Philip Rogerson Chairman 2016 Half Year Results 2
Slide 4: Financial results
Financial results Brian May Finance Director 2016 Half Year Results 3
Slide 5: Income statement
Growth Income Constant statement £m Jun 16 Jun 15 Reported Exchange Revenue 3,446.8 3,135.2 10% 6% Adjusted operating profit* 235.1 208.4 13% 9% Operating margin* 6.8% 6.6% Customer relationship amortisation and acquisition costs (55.0) (39.9) Operating profit 180.1 168.5 Net finance cost (24.5) (21
Slide 6: Foreign exchange impact
Foreign US$ : £ exchange 1.60 FY15: 1.53 1.55 impact 1.50 1.45 HY15: 1.52 1.40 HY16: 1.43 1.35 1.30 H1 2016 1.25 translation impact 1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 1-Jan-16 1-Apr-16 1-Jul-16 +4% Daily rate Average FY15 Average HY16 €:£ 1.50 FY15: 1.38 1.45 1.40 1.35 HY15: 1.37 1.30 1.25 HY16: 1.
Slide 7: Income statement (continued)
Growth Income Constant statement £m Jun 16 Jun 15 Reported Exchange (continued) Effective tax rate 27.7% 27.5% Adjusted profit for the period* 152.3 135.6 12% 9% Adjusted earnings per share* 46.2p 41.4p 12% 8% Dividend per share Dividend per share 13.0p 11.75p 11% 11% Reported tax rate 28.4% 28.6%
Slide 8: Dividend per share (p)
Dividend per share (p) 38.0 CAGR >10% 23 years of consecutive dividend increases 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 2016 Half Year Results 7
Slide 9: Balance sheet
Balance £m Jun 16 Dec 15 Intangibles Increase from exchange sheet Intangibles 1,861.4 1,647.8 impact of £181.8m and acquisitions of £67.1m, Tangibles 117.1 110.9 partially offset by amortisation Working capital 766.3 655.0 Working capital Increase primarily from Other liabilities (337.3) (250.2)
Slide 10: Cash flow
Cash flow £m Jun 16 Jun 15 Operating cash flow* 226.9 199.7 Interest (20.8) (20.0) Tax (53.2) (45.5) Free cash flow 152.9 134.2 Free cash flow Dividends (38.6) (36.0) 14% Acquisitions (98.3) (263.1) Employee share schemes 8.6 (45.0) Net cash flow 24.6 (209.9) Operating cash flow* to adjusted opera
Slide 11: Cash conversion
Cash 110% conversion 103% 102% 102% 93% 95% 95% 97% 97% 92% 92% 93% 93% 90% Average cash conversion* 97% 04 05 06 07 08 09 10 11 12 13 14 15 HY16 * Operating cash flow before acquisition related costs to adjusted operating profit – See Appendix 2 and 4 04 - 05 continuing operations only 2016 Half Ye
Slide 12: Uses of free cash since 2004
Uses of free cash since 2004 Dividends Dividend per share CAGR >10% (2004 – 2015) £917m Stable dividend cover – c.2.5x Acquisitions 130 acquisitions since 2004 Self-funded £2.4bn 2016 Half Year Results 11
Slide 13: Financial summary
Financial Revenue and Revenue Adjusted Operating summary Operating operating profit margin* profit profit* %† 6 %† 9 20bp † Cash flow and Free cash flow Cash ROACE Capital conversion** management 14% 97% 55.4% EPS and Adjusted Dividend Dividend EPS* per share %† 8 11% 12% at actual exc
Slide 14: Business review
Business review Frank van Zanten Chief Executive 2016 Half Year Results 13
Slide 15: Business review
Business review 1 Operations review 2 Prospects 3 Initial observations 4 Strategy 2016 Half Year Results 14
Slide 16: Revenue growth
Revenue growth £m 4,000 0.9% 0.1% 4.9% 5.9% 3,500 3,000 159 31 2 2,500 3,255 3,447 2,000 1,500 1,000 Revenue Trading day Underlying Acquisitions Revenue HY15 HY16 (FX adjusted) 2016 Half Year Results 15
Slide 17: Revenue by customer markets
Revenue by Healthcare Other customer markets 4% 7% c. 73% resilient 28% 10% Foodservice Retail Grocery Cleaning & hygiene Foodservice Healthcare 13% Safety 13% 25% Grocery Cleaning & hygiene 2016 HY Revenue 2016 Half Year Results 16
Slide 18: Business area analysis
Business area analysis NORTH AMERICA CONTINENTAL EUROPE Well diversified by 58% Revenue 19% Revenue geography and sector 52% Adjusted profit* operating 25% Adjusted profit* operating Over 85% of Group revenue and profit generated outside the UK UK & IRELAND REST OF WORLD 15% Revenue 8% Revenue 15% A
Slide 19: North America
North Growth Constant America £m June 16 June 15† Reported Exchange Revenue 1,997.8 1,807.5 11% 5% Adjusted operating profit* 128.1 111.3 15% 10% Operating margin* 6.4% 6.2% Return on operating capital 57.5% 58.3% Revenue increase from recent acquisitions and improved underlying growth with operat
Slide 20: Continental Europe
Continental Growth Europe £m June 16 June 15† Reported Constant Exchange Revenue 638.6 530.7 20% 13% Adjusted operating profit* 60.5 48.0 26% 18% Operating margin* 9.5% 9.0% Return on operating capital 57.8% 54.7% Significant revenue and profit growth, principally driven by acquisitions, with oper
Slide 21: UK & Ireland
UK & Ireland Growth Constant £m June 16 June 15 Reported Exchange Revenue 523.4 535.1 (2)% (3)% Adjusted operating profit* 36.0 37.3 (3)% (4)% Operating margin* 6.9% 7.0% Return on operating capital 100.4% 106.8% Weaker performance Improved profitability in safety Resilient performance from cl
Slide 22: Rest of the World
Rest of the Growth Constant World £m June 16 June 15 Reported Exchange Revenue 287.0 261.9 10% 15% Adjusted operating profit* 21.0 22.0 (5)% 5% Operating margin* 7.3% 8.4% Return on operating capital 29.1% 37.6% Margins remain under pressure due to macroeconomic conditions and currency weakness
Slide 23: Prospects
Prospects Group – continued growth due to strong competitive position and opportunities to consolidate markets further The recent weakening of sterling will have a significant positive effect on reported results at current exchange rates North America – good performance from recent acquisition
Slide 24: Initial observations as Chief Executive
Initial observations as Chief Executive Experienced Excellent management Proven strategy business model team Good potential to grow both organically and by acquisition Strong balance Continue to Collaboration and sheet and cash invest in IT and best practice flow digital 2016 Half Year Results 23
Slide 25: Consistent and proven compounding
Consistent and proven compounding Profitable organic Business Acquisition growth strategy growth improvement Use strong balance Use competitive Daily focus on making sheet and excellent cash advantage to grow our business better and flow to further market share in a more efficient consolidate our ma
Slide 26: What makes Bunzl different and unique?
What makes Bunzl different and National and international Decentralised management unique? footprint model Expertise Ability to invest in in making and Global market ERP / digital and integrating infrastructure leadership position acquisitions Competitive advantage Best practice Global sharing sourc
Slide 27: Organic growth
Organic Market growth drivers growth Exposed to growing sectors including: – Foodservice – away from home activity – Cleaning & hygiene – away from home activity – Healthcare – ageing population – Safety – increased regulation and compliance Trend to outsourcing (particularly grocery and retail)
Slide 28: Operating model efficiencies
Operating Consolidating warehouses model Close smaller & less efficient facilities efficiencies Continually evaluate & upgrade warehousing ERP implementations Warehouse management systems Vehicle routing systems Small CRM systems improvements Digital every day everywhere lead Investment
Slide 29: Acquisition parameters
Acquisition parameters Consolidated Goods not-for B2B product offering resale (‘one-stop-shop’) Further market Resilient and Fragmented consolidation and growing markets customer base Disciplined synergies approach to acquisitions Opportunity for Attractive Small % of total ‘own label’ financial ret
Slide 30: Acquisition growth
2016 Acquisition 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ytd growth Number of 7 7 9 8 7 2 9 10 13 11 17 22 8 acquisitions Committed acquisition 302 129 162 197 123 6 126 185 277 295 211 327 101 spend (£m) Since 2004 Annualised 130 acquisitions acquisition 430 270 386 225 151 27 1
Slide 31: Significant opportunities to grow in existing countries
Country Foodservice Grocery C&H Safety Retail Healthcare USA Significant Canada opportunities Mexico UK to grow in Ireland existing Germany France countries Italy Spain Netherlands Belgium Denmark Switzerland Austria Czech Republic Romania Hungary Slovakia Israel Turkey Brazil Chile Colombia Argenti
Slide 32: Geographic expansion
Geographic expansion 1997* 2003* 2005* 2012 2016 7 countries 12 countries 18 countries 27 countries 29 countries Significant scope for future geographic Some potential new country opportunities expansion China Sweden Singapore Finland Poland Norway * Continuing operations only 2016 Half Year Results
Slide 33: Acquisition growth 2016
Business Acquired Country Sector Revenue* Acquisition growth Earthwise Bag February USA Grocery £13m 2016 Bursa Pazari March Turkey Foodservice £32m Inkozell & Mo Ha Ge May Germany Healthcare £18m Classic Bag May UK Retail £8m Polaris Chemicals May Belgium Cleaning & hygiene £3m Plus II July Canada
Slide 34: Financial track record 2004-2015
Financial Revenue (£bn) Adjusted operating profit* (£m) track record 6.5 455 6.1 6.2 430 2004 - 2015 5.4 414 5.1 352 4.8 336 4.6 4.2 307 296 281 3.6 3.3 243 226 2.9 203 2.4 169 9%-10% 04 05 06 07 08 09 10 11 12 13 14 15 04 05 06 07 08 09 10 11 12 13 14 15 CAGR Adjusted eps* (p) Dividend per share (p
Slide 35: Appendices
Appendices 2016 Half Year Results 34
Slide 36: Appendix 1 Exchange rates
Appendix 1 June 16 June 15 Average rate Exchange US $ 1.43 1.52 rates Euro 1.28 1.37 Canadian $ 1.91 1.88 Brazilian real 5.30 4.52 Australian $ 1.95 1.95 Closing rate US $ 1.34 1.57 Euro 1.20 1.41 Canadian $ 1.74 1.96 Brazilian real 4.28 4.89 Australian $ 1.80 2.05 2016 Half Year Results 35
Slide 37: Appendix 2 Reconciliation between GAAP and alternative performance measures
Appendix 2 £m June 16 June 15 Operating profit 180.1 168.5 Reconciliation between GAAP Adjusted for: and alternative performance Customer relationship amortisation 38.2 32.7 measures Acquisition related costs 16.8 7.2 Adjusted operating profit 235.1 208.4 Operating margin 6.8% 6.6% Net finance cost
Slide 38: Appendix 3 Net debt
Appendix 3 £m Six months to June 16 Year to Dec 15 Six months to June 15 Opening net debt (1,107.2) (877.4) (877.4) Net debt Net cash inflow / (outflow) 24.6 (206.6) (209.9) Currency translation (86.2) (23.2) 20.0 Closing net debt (1,168.8) (1,107.2) (1,067.3) 2016 Half Year Results 37
Slide 39: Appendix 4 Cash flow
Appendix 4 £m June 16 June 15 Operating profit 180.1 168.5 Cash flow Customer relationship amortisation 38.2 32.7 Acquisition related costs 16.8 7.2 Adjusted operating profit* 235.1 208.4 Depreciation and software amortisation 12.9 12.2 Working capital movement (14.0) (11.3) Other 3.6 1.4 Cash flow
Slide 40: Appendix 5 Historical data
Appendix 5 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Historical 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 data Adjusted operating 169 203 226 243 281 296 307 336 352 414 430 455 profit* Operating 6.9 7.0 6.8 6.8 6.7 6.4 6.4 6.6 6.6 6.8 7.0 7
Slide 41: Appendix 6 Business model
Appendix 6 Global suppliers Low cost sources Business Source Commodities model Own brands Individual ranges to One-stop-shop for non-food consumables Consolidate Consolidated offer to Deliver Cleaning Foodservice Grocery Retail Safety Healthcare & hygiene 2016 Half Year Results 40
Slide 42: Appendix 7 Value proposition
Appendix 7 Cost to acquire Product cost Value proposition Inventory investment Cash flow Direct labour & overtime Outsourcing Inventory finance cost Cost to adds value for process Expedited orders our customers Inbound freight Purchase order administration Inventory damage & shrinkage Accounts payab
Slide 43: Appendix 8 Acquisition pipeline
Appendix 8 2015 External sources acquisition Bunzl Bunzl subsidiaries central pipeline team conversion Pool of opportunities 500+ c.40 Meaningful discussions c.35 Active engagement 2015 Completed 22 2016 Half Year Results 42
Slide 44: Appendix 9 Acquisition discipline
Appendix 9 Acquisition discipline Say “no” many Very selective more times than about countries “yes” and sectors 130 acquisitions since 2004 Review Retention of Thorough due performance vs management diligence investment case and customers with Board is key 2016 Half Year Results 43
Slide 45: Appendix 10 Annualised acquisition revenue
Appendix 10 2016 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ytd North Annualised America 115 198 103 15 - - 35 7 410 89 84 153 36 acquisition Continental 301 61 7 100 52 - 115 96 23 5 46 98 60 Europe revenue UK & - 2 267 110 39 27 - 39 16 32 40 - 8 Ireland Acquisitions Rest of th
Slide 46: Appendix 11 Continental Europe development
Appendix 11 Revenue 1,800 1,600 Continental 1,400 CAGR Europe 1,200 1,000 12% EURm development 800 600 400 200 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted operating profit 160 140 CAGR 120 15% 100 EURm 80 60 40 20 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20
Slide 47: Appendix 12 Alternative performance measures
This presentation includes various performance measures defined under International Financial Appendix 12 Reporting Standards (‘IFRS’) as well as a number of alternative performance measures. The principal alternative performance measures used in this presentation are: Alternative • • adjusted opera
Slide 48: Disclaimer
This document has been prepared by Bunzl plc (the ‘Company’) solely for use at the presentation of Disclaimer the Company’s results announcement in respect of the six months ended 30 June 2016. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the