Bunzl Plc · LSE:BNZL
Bunzl — FY2019 Earnings Presentation
52 slides from Bunzl's earnings presentation, February 2020
Slide 1: 2019 Full Year Results
2019 FULL YEAR RESULTS FEBRUARY 2020
Slide 2: Introduction
INTRODUCTION FRANK VAN ZANTEN CEO 2
Slide 3: Highlights – Resilient Performance
HIGHLIGHTS – RESILIENT PERFORMANCE MIXED MACROECONOMIC AND RESILIENT PERFORMANCE MARKET CONDITIONS OPERATING MARGIN* UP FROM ORGANIC REVENUE 6.7% TO 6.8%◊ BROADLY STABLE CONTINUED STRONG 4 ACQUISITIONS IN RECENT MONTHS CASH CONVERSION* 101% (ANNUALISED REVENUE c.£300m) FREE CASHFLOW UP 10% PROMISING
Slide 4: Financial Results: Richard Howes CFO
FINANCIAL RESULTS: RICHARD HOWES CFO 4
Slide 5: Revenue Growth
REVENUE GROWTH Revenue growth * 1.0% 1.0% £m 10,000 1.4% Organic revenue 9,000 growth* of 0.3% 8,000 (0.2)% (0.2)% excluding price 7,000 changes at largest 6,000 grocery customer 9,234 9,212 9,327 5,000 4,000 3,000 2,000 Revenue 2018* Disposals Rebased 2018 Organic revenue Acquisitions Revenue 2019
Slide 6: Lease Accounting (IFRS 16)
LEASE ACCOUNTING (IFRS 16) No change in INCOME STATEMENT BALANCE SHEET approach to lease or buy decision ADJUSTED RIGHT-OF-USE No impact on OPERATING ASSETS cash flow PROFIT* £22.4m £432.9m NET FINANCE LEASE LIABILITIES No impact on existing EXPENSE debt covenants £23.3m £480.0m No impact on ADJUSTE
Slide 7: Income Statement
INCOME STATEMENT IAS 17 GROWTH◊ 2019 2019 2018 CONSTANT £m IFRS 16 IAS 17◊ IAS 17 REPORTED EXCHANGE Revenue 9,326.7 9,326.7 9,079.4 2.7% 1.0% Adjusted operating profit* 653.3 630.9 614.0 2.8% 1.5% Operating margin*∆ 7.0% 6.8% 6.8% Adjusting items** (124.9) (124.9) (147.8) Operating profit 528.4 506.
Slide 8: Income Statement (Continued)
INCOME STATEMENT (CONTINUED) IAS 17 GROWTH◊ 2019 2019 2018 CONSTANT £m IFRS 16 IAS 17◊ IAS 17 REPORTED EXCHANGE Effective tax rate* 23.8% 23.8% 23.1% Adjusted profit for the year* 440.6 441.3 429.9 2.7% 1.5% Weighted average number of shares (m) 333.3 333.3 331.7 Adjusted earnings per share* 132.2p
Slide 9: Dividend per Share
DIVIDEND PER SHARE (p) 27 years 51.3 of consecutive dividend increases CAGR 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 18 19 2019 FULL YEAR RESULTS FEBRUARY 2020 9
Slide 10: Balance Sheet
BALANCE SHEET DEC 2019 DEC 2018 £m IFRS 16 IAS 17 Intangibles 2,290.9 2,382.5 Net debt : EBITDA** Right-of-use assets 432.9 - 1.9x Tangibles 118.3 122.4 Working capital 943.4 948.3 Other net liabilities (278.2) (333.7) Substantial capacity 3,507.3 3,119.5 for self-funded Net pension deficit (36.0) (
Slide 11: Cash Flow
CASH FLOW Cash conversion* 2019 2018 £m IFRS 16 IAS 17 101% Operating cash flow*∆ 633.7 578.5 Net interest excluding interest on lease liabilities (51.2) (49.1) Tax (125.6) (113.2) Free cash flow up Free cash flow 456.9 416.2 Dividends (167.3) (152.2) 10% Acquisitions◊ Disposal of businesses (162.8)
Slide 12: Cash Conversion
CASH CONVERSION 110% Average cash 103% 102% 102% 101% conversion* 95% 97% 99% 97% 94% 93% 95% 92% 92% 93% 93% 97% TARGET 90% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 * Alternative performance measure – see Appendix 2 2019 FULL YEAR RESULTS FEBRUARY 2020 12
Slide 13: Capital Allocation
CAPITAL ALLOCATION SINCE 2004 Consistently strong free cash flow supports self-funded ACQUISITIONS ◊ 6%◊ † 163 ACQUISITIONS long term growth and £3.4bn SELF-FUNDED dividends 14%† DIVIDENDS STRONG LONG TERM GROWTH IN DIVIDENDS £1.5bn STABLE DIVIDEND COVER c. 2.5x* ◊ Including 3 acquisitions completed
Slide 14: Financial Summary
FINANCIAL SUMMARY REVENUE ADJUSTED OPERATING OPERATING MARGIN* PROFIT* 1.0%◊ 1.5%◊ 6.8%◊ CASH FREE CASH FLOW NET DEBT : CONVERSION* EBITDA* 101% 10% 1.9X ADJUSTED DIVIDEND ROACE * EPS* PER SHARE 1.0%◊ 2.2% 48.4% ◊ ◊ At constant exchange rates * Alternative performance measure and, where applicable,
Slide 15: Business Review: Frank van Zanten CEO
BUSINESS REVIEW: FRANK VAN ZANTEN CEO • Operations review • Prospects • Strategy 15
Slide 16: Business Area Analysis
BUSINESS AREA ANALYSIS Well diversified across: 31 NORTH AMERICA 59% Revenue CONTINENTAL EUROPE 20% Revenue countries 51% Operating profit* 27% Operating profit* 6 UK & IRELAND REST OF WORLD sectors 13% Revenue 8% Revenue 13% Operating profit* 9% Operating profit* * Adjusted operating profit (altern
Slide 17: North America
NORTH AMERICA IAS 17 GROWTH 2019 2019 2018 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 5,473.2 5,473.2 5,277.8 3.7% (0.1%) Adjusted operating profit* 343.6 331.0 317.1 4.4% 0.6% Operating margin* 6.3% 6.0% 6.0% Return on operating capital* 36.1% 45.5% 48.4% • Organic revenue marginal
Slide 18: Continental Europe
CONTINENTAL EUROPE IAS 17 GROWTH 2019 2019 2018 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 1,829.8 1,829.8 1,797.5 1.8% 3.0% Adjusted operating profit* 182.1 178.8 176.8 1.1% 2.6% Operating margin* 10.0% 9.8% 9.8% Return on operating capital* 45.0% 60.1% 60.4% • Good organic revenue
Slide 19: UK & Ireland
UK & IRELAND IAS 17 GROWTH 2019 2019 2018 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 1,242.1 1,242.1 1,263.6 (1.7)% (1.7)% Adjusted operating profit* 87.1 83.3 86.8 (4.0)% (4.1)% Operating margin* 7.0% 6.7% 6.9% Return on operating capital* 45.3% 84.4% 87.8% • Organic revenue broadl
Slide 20: Rest of the World
REST OF THE WORLD IAS 17 GROWTH 2019 2019 2018 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 781.6 781.6 740.5 5.6% 8.8% Adjusted operating profit* 61.6 59.0 56.4 4.6% 8.3% Operating margin* 7.9% 7.5% 7.6% Return on operating capital* 26.8% 31.0% 31.9% • Good organic revenue growth dri
Slide 21: Prospects
PROSPECTS • Group – at constant exchange rates, improved growth principally from recent acquisition activity • North America – good revenue growth due to recent acquisition. Continued revenue impact from largest grocery customer and weakness in the grocery and retail sectors. Ongoing focus on operat
Slide 22: 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 14.6%* more efficient Use strong ACQUISITION ba
Slide 23: Revenue by Customer Markets
REVENUE BY CUSTOMER MARKETS 74% resilient Other Foodservice Healthcare Grocery 7% 2% Foodservice Cleaning & hygiene 29% 11% Retail Healthcare 12% 13% 26% Cleaning & hygiene Grocery Safety 2019 FULL YEAR RESULTS FEBRUARY 2020 23
Slide 24: Organic Growth
ORGANIC GROWTH Organic revenue VOLUME PRICE MIX growth supported by: SELL MORE TO EXISTING INFLATION / DEFLATION OWN BRANDS / IMPORTS CUSTOMERS 3,200 EXPAND PRODUCT RANGE expert sales MARKET DYNAMICS MANUFACTURER BRANDS people WIN NEW CUSTOMERS FX IMPACT GEOGRAPHIES AND SECTORS 2,600 MARKET LEADING
Slide 25: Winning New Customers
WINNING NEW CUSTOMERS: WHAT OUR CUSTOMER ASKED FOR Experts in Best Able to deliver A strong team purchasing commercial the highest levels who offer options and consumables and value of service implement change packaging Support and Proactive and Manage customer A trusted supplier align on CSR innova
Slide 26: Sustainability
SUSTAINABILITY Increased level EXPERT ADVICE Provide of investment in AND INSIGHT customers with trusted practical sustainability advice and enhances our analysis competitive advantage UNIQUE Raw material POSITION IN agnostic as a SUPPLY CHAIN non-manufacturer SUSTAINABLE Bring more PRODUCT sustaina
Slide 27: Operating Model Improvements
OPERATING MODEL IMPROVEMENTS RESTRUCTURING AND COST BUSINESS/WAREHOUSE Improvements WAREHOUSING INITIATIVES CONSOLIDATIONS every day everywhere lead North America: Netherlands: to significant • Implemented a more focused and • Consolidation of three businesses in streamlined organisation structure t
Slide 28: Acquisition Growth
ACQUISITION GROWTH 163 acquisitions 16 17 18 20 04 05 06 07 08 09 10 11 12 13 14 15 19 YTD c.£300m Number of 7 7 9 8 7 2 9 10 13 11 17 22 14 15 6 3 3 acquisitions average spend in Committed last 5 years acquisition 302 129 162 197 123 6 126 185 277 295 211 327 184 616 183 124 77 spend (£m) Annualise
Slide 29: Recent Acquisitions
RECENT ACQUISITIONS JOSHEN • Completed in early January 2020 • Based in Cleveland, USA with annual revenue of £225m • Operating in 11 states, it supplies a wide range of packaging and goods not for resale into the North American grocery, foodservice and cleaning & hygiene sectors • Complements exist
Slide 30: Recent Acquisitions
RECENT ACQUISITIONS ICM • Expected to complete end of March 2020 • Based in Odense, Denmark with annual revenue of £48m • A leading distributor of personal protection equipment to end users and redistributors • Strengthens presence in Danish safety segment MEDCORP • Completed end of January 2020 • B
Slide 31: Financial Track Record 2004 - 2019
FINANCIAL TRACK RECORD 2004 - 2019 Proven long term REVENUE (£bn) ADJUSTED OPERATING PROFIT* (£m) 9.3 631 compounding growth strategy 2.4 169 CAGR c. 9 - 10% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 ADJUSTED EPS* (p) DIVIDEND PER SHARE (p) 132.4
Slide 32: Appendices
APPENDICES 32
Slide 33: Exchange Rates
APPENDIX 1 EXCHANGE RATES 2019 2018 Average rate US$ 1.28 1.33 Euro 1.14 1.13 Canadian$ 1.69 1.73 Brazilian real 5.04 4.87 Australian$ 1.84 1.79 Closing rate US$ 1.32 1.27 Euro 1.18 1.11 Canadian$ 1.72 1.74 Brazilian real 5.33 4.94 Australian$ 1.88 1.81 2019 FULL YEAR RESULTS FEBRUARY 2020 33
Slide 34: Alternative Performance Measures
APPENDIX 2 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 are
Slide 35: Adjusted Operating Profit
APPENDIX 3 ADJUSTED OPERATING PROFIT ALTERNATIVE PERFORMANCE MEASURES 2019 2019 2018 £m IFRS 16 IAS 17 IAS 17 Operating profit 528.4 506.0 466.2 Adjusted for: Customer relationships amortisation 107.3 107.3 111.1 Acquisition related items 17.6 17.6 33.4 GMP equalisation charge - - 3.3 Total adjustin
Slide 36: Adjusted Profit Before Income Tax
APPENDIX 4 ADJUSTED PROFIT BEFORE INCOME TAX ALTERNATIVE PERFORMANCE MEASURES 2019 2019 2018 £m IFRS 16 IAS 17 IAS 17 Profit before income tax 453.3 454.2 424.8 Adjusted for: Customer relationships amortisation 107.3 107.3 111.1 Acquisition related items 17.6 17.6 33.4 GMP equalisation charge - - 3.
Slide 37: Adjusted Profit for the Year
APPENDIX 5 ADJUSTED PROFIT FOR THE YEAR ALTERNATIVE PERFORMANCE MEASURES 2019 2019 2018 £m IFRS 16 IAS 17 IAS 17 Profit for the year 349.2 349.9 326.5 Adjusted for: Customer relationships amortisation 107.3 107.3 111.1 Acquisition related items 17.6 17.6 33.4 GMP equalization charge - - 3.3 Profit o
Slide 38: Net Debt
APPENDIX 6 NET DEBT 2019 2018 £m IFRS 16 IAS 17 Opening net debt (1,386.5) (1,523.6) Net cash inflow 99.1 184.9 Exchange 40.4 (47.8) Closing net debt excluding lease liabilities (1,247.0) (1,386.5) Lease liabilities (480.0) - Closing net debt including lease liabilities (1,727.0) (1,386.5) 2019 FULL
Slide 39: Cash Flow and Cash Conversion
APPENDIX 7 CASH FLOW AND CASH CONVERSION 2019 2018 £m IFRS 16 IAS 17 Adjusted operating profit * 653.3 614.0 Adjusted for: Non-cash items** 156.5 31.8 Working capital movement 4.3 (38.7) Cash flow from operations◊ 814.1 607.1 Net capital expenditure (28.8) (28.6) Payment of lease liabilities (151.6)
Slide 40: Annualised Acquisition Revenue
APPENDIX 8 ANNUALISED ACQUISITION REVENUE £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 North America 115 198 103 15 - - 35 7 410 89 84 153 38 283 72 74 Continental 301 61 7 100 52 - 115 96 23 5 46 98 87 219 34 3 Europe UK & Ireland - 2 267 110 39 27 - 39 16 32 4
Slide 41: Acquisition Growth 2019
APPENDIX 9 ACQUISITION GROWTH 2019 £124m BUSINESS Liberty Glove & Safety ACQUIRED February COUNTRY USA SECTOR Safety REVENUE* £74m committed spend Coolpack April Netherlands Foodservice £3m FRSA November Australia Safety £20m * Annualised and translated at December 2019 average exchange rates 2019 F
Slide 42: Historical Data
APPENDIX 10 HISTORICAL DATA £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 9,079 9,327 Adjusted operating 169 203 226 243 281 296 307 336 352 414 430 455 525 589 614 631 pr
Slide 43: Business Model
APPENDIX 11 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 Re
Slide 44: Value Proposition
APPENDIX 12 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 45: Market Leading Specialist Distributor
APPENDIX 13 MARKET LEADING SPECIALIST DISTRIBUTOR SPECIALIST COMPETITORS IN OUR FIELD OTHER COMPETITORS • FOOD DISTRIBUTORS SPECIALISTS • OFFICE SUPPLIES IN OTHER DISTRIBUTORS NATIONAL CATEGORIES • INDUSTRIAL DISTRIBUTORS DISTRIBUTORS REGIONAL DISTRIBUTORS GROCERY • GROCERY CUSTOMERS’ CUSTOMERS OWN
Slide 46: Competitive Positioning
APPENDIX 14 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 47: Bunzl Unique Service Offering
APPENDIX 15 BUNZL UNIQUE SERVICE OFFERING DESIGN / BESPOKE / INSTALLATION FULL RANGE MINIMISE PRINTED PRODUCT CUSTOMERS’ CUSTOMISED SERVICES STOCKED DELIVERY SLOTS MANAGEMENT WORKING CAPITAL PRODUCT BULKY LOW INNOVATIO ESSENTIAL PRODUCT TRAINING VALUE N CENTRES ITEMS AVAILABILITY PRODUCTS CONTRACT M
Slide 48: Sustainable Product Solutions
APPENDIX 16 SUSTAINABLE PRODUCT SOLUTIONS Proactively SINGLE USE PLASTICS working with customers, • Essential food and beverage suppliers and packaging for practical, safe and hygienic transit other stakeholders to • Actively promoting sustainable promote and alternatives support a sustainable • Uni
Slide 49: Significant Opportunities to Grow in Existing Countries
APPENDIX 17 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 ● ● ● ● Germ
Slide 50: Acquisition Parameters
APPENDIX 18 ACQUISITION PARAMETERS B2B GOODS-NOT CONSOLIDATED Disciplined -FOR-RESALE PRODUCT OFFERING (‘ONE- approach to STOP-SHOP’) acquisitions RESILIENT FRAGMENTED FURTHER MARKET AND GROWING CUSTOMER CONSOLIDATION MARKETS BASE AND SYNERGIES SMALL % OF TOTAL OPPORTUNITY ATTRACTIVE CUSTOMER SPEND
Slide 51: Acquisition Discipline
APPENDIX 19 ACQUISITION DISCIPLINE Successful track record of acquisition SAY “NO” MANY TIMES VERY SELECTIVE ABOUT growth through MORE THAN “YES” COUNTRIES AND SECTORS disciplined approach RETENTION OF REVIEW PERFORMANCE THOROUGH DUE MANAGEMENT AND VS INVESTMENT CASE DILIGENCE CUSTOMERS IS KEY WITH
Slide 52: 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 year ended 31 December 2019. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the s