Bunzl Plc · LSE:BNZL
Bunzl — H1 2017 Earnings Presentation
44 slides from Bunzl's earnings presentation, August 2017
Slide 1: 2017 Half Year Results
2017 HALF YEAR RESULTS AUGUST 2017
Slide 2: Introduction: Frank van Zanten, Chief Executive
INTRODUCTION: FRANK VAN ZANTEN CHIEF EXECUTIVE 2017 HALF YEAR RESULTS AUGUST 2017
Slide 3: Highlights
HIGHLIGHTS STRONG PICK UP IN ORGANIC RECORD COMMITTED GROWTH TO 3.7% ACQUISITION SPEND OF £546m ADJUSTED EARNINGS PER SHARE* DIVIDEND PER SHARE UP 8% UP 7%◊ * Before adjusting items (customer relationships amortisation and acquisition related items) and associated taxation - see Appendix 2 and Appen
Slide 4: Financial Results: Brian May, Finance Director
FINANCIAL RESULTS: BRIAN MAY FINANCE DIRECTOR 2017 HALF YEAR RESULTS AUGUST 2017 4
Slide 5: Revenue Growth
REVENUE GROWTH Organic growth 3.7% £m 5,000 3.6% 7.3% 3.7% 4,000 3,000 4,119 3,840 2,000 1,000 Revenue HY16* Organic growth Acquisitions Revenue HY17 * At constant exchange rates 2017 HALF YEAR RESULTS AUGUST 2017 5
Slide 6: Income Statement
INCOME STATEMENT GROWTH CONSTANT £m JUNE 17 JUNE 16 REPORTED EXCHANGE Revenue 4,119.2 3,446.8 20% 7% Adjusted operating profit* 272.6 235.1 16% 4% Operating margin* 6.6% 6.8% Adjusting items◊ (66.4) (55.0) Operating profit 206.2 180.1 Net finance expense (24.3) (24.5) Adjusted profit before income t
Slide 7: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT H1 2017 translation US$ : £ impact 1.6 +c. 12% 1.5 2015: 1.53 1.4 2016: 1.36 HY17: 1.26 1.3 1.2 1.1 Transaction impact Dec-14 Jan-15 Jun-15 Dec-15 Jan-16 Jun-16 Dec-16 Jan-17 Jun-17 largely offset Daily rate Average €:£ 1.5 1.4 2015: 1.38 1.3 HY17: 1.16 1.2 2016: 1.22 1.1 1.0
Slide 8: Income Statement (Continued)
INCOME STATEMENT (CONTINUED) GROWTH CONSTANT £m JUNE 17 JUNE 16 REPORTED EXCHANGE Effective tax rate 26.9% 27.7% Adjusted profit for the period* 181.5 152.3 19% 7% Adjusted earnings per share* 55.1p 46.2p 19% 7% Dividend per share 14.0p 13.0p 8% Reported tax rate 27.6% 28.4% Profit for the period 13
Slide 9: Dividend Per Share: 24 years of consecutive increases
DIVIDEND PER SHARE (p) 42.0 24 years 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 2017 HALF YEAR RESULTS AUGUST 2017 9
Slide 10: Balance Sheet
BALANCE SHEET Return on average INTANGIBLES £m JUNE 17 DEC 16 Increase from acquisitions of operating capital Intangibles 2,140.6 1,947.6 £258m partly offset by 54.3% Tangibles Working capital 122.6 888.7 123.3 819.0 exchange and amortisation WORKING CAPITAL Increase primarily from Other liabilities
Slide 11: Cash Flow
CASH FLOW Free cash flow £m JUNE 17 JUNE 16 23% Operating cash flow* Net interest 262.2 (21.7) 226.9 (20.8) Tax (53.1) (53.2) Free cash flow 187.4 152.9 Dividends (42.8) (38.6) Acquisitions (312.0) (98.3) Employee share schemes (30.2) 8.6 Net cash flow (197.6) 24.6 Cash conversion◊ % 96% 97% * Bef
Slide 12: Cash Conversion
CASH CONVERSION 110% 103% Average cash 102% 102% 97% 99% 95% 95% 96% conversion* 93% 92% 92% 93% 93% 97% TARGET 90% 04 05 06 07 08 09 10 11 12 13 14 15 16 HY17 * Operating cash flow before acquisition related items to adjusted operating profit – see Appendix 2 and Appendix 5 04 – 05 continuing opera
Slide 13: Uses of Free Cash Flow 2004 – HY17
USES OF FREE CASH FLOW 2004 – HY17 Consistently strong free cash flow supports long term DIVIDENDS 6%† CAGR >10% DIVIDEND PER SHARE growth £1.0bn STABLE DIVIDEND COVER c. 2.5x◊ 14%† ACQUISITIONS 147* ACQUISITIONS SINCE 2004 £2.7bn SELF-FUNDED * Includes the acquisition of HSESF in August 2017 and th
Slide 14: Financial Summary
FINANCIAL SUMMARY REVENUE ORGANIC ADJUSTED REVENUE OPERATING GROWTH PROFIT* 7%◊ 3.7% Highest in 5 years 4%◊ FREE CASH CASH ROACE FLOW CONVERSION** 23% 96% 54.3% ADJUSTED DIVIDEND EPS* PER SHARE 7%◊ 8% 24 years of growth ◊ At constant exchange rates * Before adjusting items (customer relationships am
Slide 15: Business Review: Frank van Zanten, Chief Executive
BUSINESS REVIEW: FRANK VAN ZANTEN CHIEF EXECUTIVE • Operations review • Prospects • Strategy 2017 HALF YEAR RESULTS AUGUST 2017
Slide 16: Revenue by Customer Markets
REVENUE BY CUSTOMER MARKETS 76% resilient Other Healthcare Foodservice 3% Grocery 8% Foodservice 29% Cleaning & hygiene Retail 8% Healthcare 12% 13% 27% Cleaning & hygiene Grocery Safety 2017 HALF YEAR RESULTS AUGUST 2017 16
Slide 17: Business Area Analysis
BUSINESS AREA ANALYSIS Well diversified by geography and sector NORTH AMERICA CONTINENTAL EUROPE 59% Revenue 19% Revenue 52% Operating profit* 26% Operating profit* UK & IRELAND REST OF WORLD 14% Revenue 8% Revenue 13% Operating profit* 9% Operating profit* * Adjusted operating profit - before adjus
Slide 18: North America
NORTH AMERICA GROWTH CONSTANT £m JUNE 17 JUNE 16 REPORTED EXCHANGE Revenue 2,432.6 1,997.8 22% 7% Adjusted operating profit* 148.0 128.1 16% 2% Operating margin* 6.1% 6.4% Return on operating capital 55.5% 57.5% • Revenue increase driven by strong improvement in organic growth • Growth in grocery fr
Slide 19: Continental Europe
CONTINENTAL EUROPE GROWTH CONSTANT £m JUNE 17 JUNE 16 REPORTED EXCHANGE Revenue 769.0 638.6 20% 9% Adjusted operating profit* 73.1 60.5 21% 10% Operating margin* 9.5% 9.5% Return on operating capital 59.1% 57.8% • Strong increases in revenue and profit with stable operating margin (+10bp at constant
Slide 20: UK & Ireland
UK & IRELAND GROWTH CONSTANT £m JUNE 17 JUNE 16 REPORTED EXCHANGE Revenue 566.1 523.4 8% 7% Adjusted operating profit* 37.9 36.0 5% 4% Operating margin* 6.7% 6.9% Return on operating capital 94.7% 100.4% • Trading in safety affected by subdued marketplace • Revenue and profit increase in cleaning &
Slide 21: Rest of the World
REST OF THE WORLD GROWTH CONSTANT £m JUNE 17 JUNE 16 REPORTED EXCHANGE Revenue 351.5 287.0 22% 2% Adjusted operating profit* 25.1 21.0 20% (1)% Operating margin* 7.1% 7.3% Return on operating capital 30.9% 29.1% • Latin America − Some recovery in Brazil with mixed performance elsewhere • Australasia
Slide 22: Prospects
PROSPECTS Group – further growth from strong market position, improved levels of organic growth and ongoing benefit from acquisitions North America – combination of recent acquisitions and improved organic growth should result in a good performance for the year Continental Europe – strong performanc
Slide 23: 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 16.4% more efficient ACQUISITION Use strong bal
Slide 24: Acquisition Growth
ACQUISITION GROWTH Record level of 2017 committed 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ytd* acquisition spend Number of 7 7 9 8 7 2 9 10 13 11 17 22 14 11 £546m acquisitions Committed acquisition 302 129 162 197 123 6 126 185 277 295 211 327 184 546 spend (£m) Annualised
Slide 25: Acquisition Growth 2017 YTD
ACQUISITION GROWTH 2017 YTD £543m EXISTING MARKETS Business Country Sector Revenue Acquired Packaging Film Sales USA Foodservice £5m January revenue acquired Kishigo USA Safety £26m March DDS USA Retail £248m May AMFAS Canada Safety £6m May Western Safety Canada Safety £4m May Tecnopacking Spain Foo
Slide 26: Acquisition Snapshot
ACQUISITION SNAPSHOT Two larger DDS acquisitions in • Completed in May 2017 existing markets • Based in Minneapolis, USA with revenue of £248m with synergies • Supplies a wide range of packaging, consumables and operating store supplies to the retail sector, primarily in North America • Complements
Slide 27: 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 28: Financial Track Record 2004-2016
FINANCIAL TRACK RECORD 2004-2016 Proven compounding REVENUE (£bn) ADJUSTED OPERATING PROFIT* (£m) 7.4 growth strategy 525 CAGR 10%-11% 2.4 169 04 05 06 07 08 09 10 11 12 13 14 15 16 04 05 06 07 08 09 10 11 12 13 14 15 16 ADJUSTED EPS* (p) DIVIDEND PER SHARE (p) 04-12 restated on adoption 42.0 of IAS
Slide 29: Appendices
APPENDICES 2017 HALF YEAR RESULTS AUGUST 2017
Slide 30: Exchange Rates
APPENDIX 1 EXCHANGE RATES JUNE 17 JUNE 16 Average rate US$ 1.26 1.43 Euro 1.16 1.28 Canadian$ 1.68 1.91 Brazilian real 4.00 5.30 Australian$ 1.67 1.95 Closing rate US$ 1.30 1.34 Euro 1.14 1.20 Canadian$ 1.69 1.74 Brazilian real 4.30 4.28 Australian$ 1.69 1.80 2017 HALF YEAR RESULTS AUGUST 2017 30
Slide 31: Income Statement Alternative Performance Measures
APPENDIX 2 INCOME STATEMENT ALTERNATIVE PERFORMANCE MEASURES £m JUNE 17 JUNE 16 Operating profit 206.2 180.1 Adjusting items* 66.4 55.0 Adjusted operating profit 272.6 235.1 Operating margin 6.6% 6.8% Net finance cost (24.3) (24.5) Adjusted profit before income tax 248.3 210.6 Tax on adjusted profit
Slide 32: Adjusting Items
APPENDIX 3 ADJUSTING ITEMS £m JUNE 17 JUNE 16 Customer relationships amortisation (47.4) (38.2) Deferred consideration payments (13.8) (14.1) Transaction costs and expenses (8.1) (2.9) Earn-out adjustments 2.9 0.2 Total adjusting items (66.4) (55.0) 2017 HALF YEAR RESULTS AUGUST 2017 32
Slide 33: Net Debt
APPENDIX 4 NET DEBT SIX MONTHS TO YEAR TO SIX MONTHS TO £m JUNE 17 DEC 16 JUNE 16 Opening net debt (1,228.6) (1,107.2) (1,107.2) Net cash (outflow) / inflow (197.6) 16.0 24.6 Exchange 23.7 (137.4) (86.2) Closing net debt (1,402.5) (1,228.6) (1,168.8) 2017 HALF YEAR RESULTS AUGUST 2017 33
Slide 34: Cash Flow and Cash Conversion
APPENDIX 5 CASH FLOW AND CASH CONVERSION £m JUNE 17 JUNE 16 Operating profit 206.2 180.1 Adjusting items 66.4 55.0 Adjusted operating profit* 272.6 235.1 Adjusted for: Non-cash items 19.6 16.5 Working capital movement (16.1) (14.0) Cash flow from operations◊ 276.1 237.6 Net capital expenditure (13.9
Slide 35: Annualised Acquisition Revenue
APPENDIX 6 ANNUALISED ACQUISITION REVENUE 2017 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ytd* North America 115 198 103 15 - - 35 7 410 89 84 153 38 289 Continental Europe 301 61 7 100 52 - 115 96 23 5 46 98 87 216 UK & Ireland - 2 267 110 39 27 - 39 16 32 40 - 76 7 Rest of
Slide 36: Historical Data
APPENDIX 7 HISTORICAL DATA £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 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 Adjusted operating 169 203 226 243 281 296 307 336 352 414 430 455 525 profit* Operating margin* 6.9 7.0 6.8 6.8 6.7 6.
Slide 37: What Makes Bunzl Different and Unique?
APPENDIX 8 WHAT MAKES BUNZL DIFFERENT AND UNIQUE? ABILITY TO INVEST IN ERP / DIGITAL AND Global market INFRASTRUCTURE leadership DECENTRALISED GLOBAL position MANAGEMENT SOURCING MODEL Competitive NATIONAL AND INTERNATIONAL advantage EX-OWNERS STAY WITH BUNZL FOOTPRINT EXPERTISE IN BEST PRACTICE MAK
Slide 38: Business Model
APPENDIX 9 BUSINESS MODEL One-stop-shop • Global suppliers for non-food • Low cost sources • Commodities consumables SOURCE • Own brands INDIVIDUAL RANGES CONSOLDATE a CONSOLIDATED OFFER DELIVER Foodservice Grocery Cleaning & hygiene Safety Retail Healthcare 2017 HALF YEAR RESULTS AUGUST 2017 38
Slide 39: 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 40: Service Offering
APPENDIX 11 SERVICE OFFERING ONE-STOP-SHOP ON-TIME IN-FULL DELIVERY DEDICATED FIELD ONE ORDER SALES FORCE ONE DELIVERY ONE INVOICE RANGE OF Service CUSTOMISED offering DELIVERY DIGITAL OPTIONS SOLUTIONS INCLUDING OWN FLEET CUSTOMISED OWN BRAND AND MANAGEMENT LOCAL AND EXPERT MANUFACTURER INFORMATION
Slide 41: Acquisition Parameters
APPENDIX 12 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 42: Acquisition Discipline
APPENDIX 13 ACQUISITION DISCIPLINE 147* acquisitions SAY “NO” MANY TIMES VERY SELECTIVE ABOUT 2004 – YTD 2017 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
Slide 43: Alternative Performance Measures
APPENDIX 14 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 (known as non-GAAP measures). The principal alternative performance measures
Slide 44: 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 six months ended 30 June 2017. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the