Bunzl Plc · LSE:BNZL
Bunzl — H1 2019 Earnings Presentation
50 slides from Bunzl's earnings presentation, August 2019
Slide 1: 2019 Half Year Results
2019 HALF YEAR RESULTS AUGUST 2019
Slide 2: Introduction: Frank van Zanten, Chief Executive
INTRODUCTION: FRANK VAN ZANTEN CHIEF EXECUTIVE 2019 HALF YEAR RESULTS AUGUST 2019 2
Slide 3: Highlights
HIGHLIGHTS SLOWING MACROECONOMIC RESILIENT PERFORMANCE AND MARKET CONDITIONS OPERATING MARGIN* UNDERLYING REVENUE DOWN 6 BASIS POINTS◊ GROWTH 0.8% CONTINUED STRONG ACQUISITION SPEND OF £98m CASH CONVERSION* 96% WITH ACTIVE PIPELINE * Alternative performance measure – see Appendix 2 ◊ At constant exc
Slide 4: Financial Results: Brian May, Finance Director
FINANCIAL RESULTS: BRIAN MAY FINANCE DIRECTOR 2019 HALF YEAR RESULTS AUGUST 2019
Slide 5: Revenue Growth
REVENUE GROWTH Revenue growth * 1.2% 1.2% Underlying organic growth 0.8% 1.5% 0.8% (0.5)% (0.6)% * At constant exchange rates 2019 HALF YEAR RESULTS AUGUST 2019 5
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* £10.9m £456.9m NET FINANCE LEASE LIABILITIES No impact on existing EXPENSE debt covenants £11.6m £504.4m No impact on ADJUSTE
Slide 7: Income Statement
INCOME STATEMENT IAS 17 GROWTH◊ JUNE 19 JUNE 19 JUNE 18 CONSTANT £m IFRS 16 IAS 17◊ IAS 17 REPORTED EXCHANGE Revenue 4,528.4 4,528.4 4,343.7 4.3% 1.2% Adjusted operating profit* 302.7 291.8 285.0 2.4% 0.3% Operating margin* 6.7% 6.4% 6.6% Adjusting items** (63.7) (63.7) (74.2) Operating profit 239.0
Slide 8: Income Statement (continued)
INCOME STATEMENT (CONTINUED) IAS 17 GROWTH◊ JUNE 19 JUNE 19 JUNE 18 CONSTANT £m IFRS 16 IAS 17◊ IAS 17 REPORTED EXCHANGE Effective tax rate* 23.8% 23.8% 23.8% Adjusted profit for the period* 201.3 201.9 196.4 2.8% 0.8% Weighted average number of shares (m) 333.3 333.3 330.5 Adjusted earnings per sha
Slide 9: Dividend per Share
DIVIDEND PER SHARE (p) 26 years 50.2 of consecutive dividend increases 4.0 2019 HALF YEAR RESULTS AUGUST 2019 9
Slide 10: Balance Sheet
BALANCE SHEET JUNE 19 DEC 18 INTANGIBLES £m IFRS 16 IAS 17 Increase from acquisitions, partly offset by amortisation Net debt : EBITDA at Intangibles 2,427.2 2,382.5 low end of target Right-of-use assets 456.9 - WORKING CAPITAL range provides Tangibles 122.5 122.4 Increase from acquisitions, the imp
Slide 11: Cash Flow
CASH FLOW JUNE 19 JUNE 18 Cash conversion* £m IFRS 16 IAS 17 96% Operating cash flow* 278.4 267.0 Net interest excluding interest on lease liabilities (30.8) (24.9) Tax (60.8) (60.5) Free cash flow 186.8 181.6 Dividends (50.7) (46.2) Acquisitions◊ (144.8) (150.7) Disposal of businesses - 55.3 Employ
Slide 12: Cash Conversion
CASH CONVERSION Average cash conversion* 97% TARGET 90% * Alternative performance measure – see Appendix 2 2019 HALF YEAR RESULTS AUGUST 2019 12
Slide 13: Uses of Free Cash Flow 2004 – 2019 HY
USES OF FREE CASH FLOW 2004 – 2019 HY Consistently strong free cash flow supports long term DIVIDENDS 6%† GROWTH IN STRONG LONG TERM growth DIVIDENDS £1.3bn STABLE DIVIDEND COVER c. 2.5x* 14%† ACQUISITIONS 159 ACQUISITIONS SINCE 2004 £3.3bn SELF-FUNDED * Based on adjusted earnings per share 2019 HAL
Slide 14: Financial Summary
FINANCIAL SUMMARY • Resilient performance despite lower than ADJUSTED PROFIT normal underlying organic revenue growth and BEFORE INCOME TAX* the impact of disposals made in 2018 £265m £265m 1% 1%◊◊ • Continued strong cash conversion in line with CASH CONVERSION* historical average 96% 96% • Acquisit
Slide 15: Business Review: Frank van Zanten, Chief Executive
BUSINESS REVIEW: FRANK VAN ZANTEN CHIEF EXECUTIVE • Operations review • Prospects • Strategy 2019 HALF YEAR RESULTS AUGUST 2019
Slide 16: 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 2019 HALF YEAR RESULTS AUGUST 2019 16
Slide 17: Business Area Analysis
BUSINESS AREA ANALYSIS Well diversified across: 31 Countries NORTH AMERICA CONTINENTAL EUROPE 58% Revenue 20% Revenue 6 Sectors 50% Operating profit* 29% Operating profit* UK & IRELAND REST OF WORLD 87% of 13% Revenue 12% Operating profit* 9% Revenue 9% Operating profit* revenue generated outside UK
Slide 18: North America
NORTH AMERICA IAS 17 GROWTH JUNE 19 JUNE 19 JUNE 18 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 2,634.5 2,634.5 2,459.6 7.1% 0.7% Adjusted operating profit* 157.1 151.1 140.1 7.9% 1.4% Operating margin* 6.0% 5.7% 5.7% Return on operating capital* 46.8% 50.2% • Slowing underlying orga
Slide 19: Continental Europe
CONTINENTAL EUROPE IAS 17 GROWTH JUNE 19 JUNE 19 JUNE 18 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 906.4 906.4 890.2 1.8% 3.7% Adjusted operating profit* 91.1 89.4 88.6 0.9% 3.2% Operating margin* 10.1% 9.9% 10.0% Return on operating capital* 59.6% 59.1% • Good underlying organic r
Slide 20: UK & Ireland
UK & IRELAND IAS 17 GROWTH JUNE 19 JUNE 19 JUNE 18 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 602.5 602.5 625.9 (3.7)% (3.7)% Adjusted operating profit* 37.4 35.6 39.7 (10.3)% (10.3)% Operating margin* 6.2% 5.9% 6.3% Return on operating capital* 84.6% 91.1% • Significant impact of d
Slide 21: Rest of the World
REST OF THE WORLD IAS 17 GROWTH JUNE 19 JUNE 19 JUNE 18 CONSTANT £m IFRS 16 IAS 17 IAS 17 REPORTED EXCHANGE Revenue 385.0 385.0 368.0 4.6% 8.2% Adjusted operating profit* 28.7 27.4 28.2 (2.8)% 0.7% Operating margin* 7.5% 7.1% 7.7% Return on operating capital* 29.7% 33.5% • Good underlying organic re
Slide 22: Prospects
PROSPECTS Overall – expectations for 2019 remain unchanged North America – expect underlying revenue to reduce slightly; benefit from improved sourcing and ongoing cost savings Continental Europe – combination of organic growth and acquisitions expected to lead to overall growth UK & Ireland – perfo
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 14.7%* more efficient ACQUISITION Use strong ba
Slide 24: Organic Growth
ORGANIC GROWTH Organic revenue VOLUME PRICE MIX growth typically real GDP+ (11 of SELL MORE TO EXISTING OWN BRAND AND last 15 years) CUSTOMERS INFLATION / DEFLATION IMPORTS EXPAND PRODUCT RANGE MARKET DYNAMICS MANUFACTURER BRANDS WIN NEW CUSTOMERS FX IMPACT GEOGRAPHIES AND SECTORS MARKET LEADING CUS
Slide 25: Acquisition Growth
ACQUISITION GROWTH 159 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 HY 19 acquisitions Number of 2004 – 2019 HY acquisitions 7 7 9 8 7 2 9 10 13 11 17 22 14 15 6 2 Committed 98 £300m+ acquisition 302 129 162 197 123 6 126 185 277 295 211 327 184 616 183 spend (£m) per annum Annualised acquisition av
Slide 26: Growth Opportunities – Example
GROWTH OPPORTUNITIES – EXAMPLE Significant scope UK & IRELAND CONTINENTAL EUROPE for future growth 2018: £1.3bn revenue £6bn potential revenue* 2018: £1.8bn revenue *Potential revenue - UK & Ireland 2018 revenue as percentage of GDP scaled relative to GDP of the countries of Continental Europe in wh
Slide 27: Acquisition Discipline
ACQUISITION DISCIPLINE Successful track record of SAY “NO” MANY TIMES VERY SELECTIVE ABOUT acquisition MORE THAN “YES” COUNTRIES AND SECTORS growth through disciplined approach RETENTION OF REVIEW PERFORMANCE THOROUGH DUE MANAGEMENT AND VS INVESTMENT CASE DILIGENCE CUSTOMERS IS KEY WITH BOARD TARGET
Slide 28: Sustainability
SUSTAINABILITY Unique position SUSTAINABLE Bring more to lead the PRODUCT sustainable alternatives to industry towards SOLUTIONS market a sustainable approach to single-use EXPERT ADVICE Provide customers with plastics AND INSIGHT trusted practical advice and analysis PARTNERSHIPS TO Helping to CLOS
Slide 29: Material Footprint Tool
MATERIAL FOOTPRINT TOOL £0 £10,000 £20,000 £30,000 £40,000 £50,000 £60,000 HEAVYWEIGHT PLASTIC CUTLERY PLANT BASED BIO-PLASTIC CUTLERY LIGHTWEIGHT PLASTIC CUTLERY EPS/ FOAM CUPS & LIDS PLASTIC STRAWS CUP LIDS LIDDING FILM PP NON VEND CUPS AND LIDS DISPOSABLE PLASTIC GLASSWARE PLASTIC BAGS CARDBOARD
Slide 30: Financial Track Record 2004 - 2018
FINANCIAL TRACK RECORD 2004 - 2018 Proven long term REVENUE (£bn) ADJUSTED OPERATING PROFIT* (£m) 9.1 compounding growth 614 strategy 2.4 169 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 ADJUSTED EPS* (p) DIVIDEND PER SHARE (p) 04-12 restated on adoption
Slide 31: Appendices
APPENDICES 2019 HALF YEAR RESULTS AUGUST 2019
Slide 32: Exchange Rates
APPENDIX 1 EXCHANGE RATES JUNE 19 JUNE 18 Average rate US$ 1.29 1.38 Euro 1.15 1.14 Canadian$ 1.73 1.76 Brazilian real 4.97 4.71 Australian$ 1.83 1.78 Closing rate US$ 1.27 1.32 Euro 1.12 1.13 Canadian$ 1.66 1.74 Brazilian real 4.87 5.08 Australian$ 1.81 1.79 2019 HALF YEAR RESULTS AUGUST 2019 32
Slide 33: 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 34: Adjusted Operating Profit
APPENDIX 3 ADJUSTED OPERATING PROFIT ALTERNATIVE PERFORMANCE MEASURES JUNE 19 JUNE 19 JUNE 18 £m IFRS 16 IAS 17 IAS 17 Operating profit 239.0 228.1 210.8 Adjusted for: Customer relationships amortisation 54.4 54.4 55.6 Acquisition related items 9.3 9.3 18.6 Total adjusting items 63.7 63.7 74.2 Adjus
Slide 35: Adjusted Profit Before Income Tax
APPENDIX 4 ADJUSTED PROFIT BEFORE INCOME TAX ALTERNATIVE PERFORMANCE MEASURES JUNE 19 JUNE 19 JUNE 18 £m IFRS 16 IAS 17 IAS 17 Profit before income tax 200.5 201.2 197.3 Adjusted for: Customer relationships amortisation 54.4 54.4 55.6 Acquisition related items 9.3 9.3 18.6 Profit on disposal of busi
Slide 36: Adjusted Profit for the Period
APPENDIX 5 ADJUSTED PROFIT FOR THE PERIOD ALTERNATIVE PERFORMANCE MEASURES JUNE 19 JUNE 19 JUNE 18 £m IFRS 16 IAS 17 IAS 17 Profit for the period 155.1 155.7 149.2 Adjusted for: Customer relationships amortisation 54.4 54.4 55.6 Acquisition related items 9.3 9.3 18.6 Profit on disposal of businesses
Slide 37: Net Debt
APPENDIX 6 NET DEBT SIX MONTHS TO YEAR TO SIX MONTHS TO £m JUNE 19 DEC 18 JUNE 18 Opening net debt (1,386.5) (1,523.6) (1,523.6) Net cash (outflow)/inflow (38.0) 184.9 60.0 Exchange 1.7 (47.8) (14.1) Closing net debt excluding lease liabilities (1,422.8) (1,386.5) (1,477.7) Lease liabilities (504.4)
Slide 38: Cash Flow and Cash Conversion
APPENDIX 7 CASH FLOW AND CASH CONVERSION £m JUNE 19 JUNE 18 Adjusted operating profit * 302.7 285.0 Adjusted for: Non-cash items** 80.6 18.5 Working capital movement (15.4) (23.8) Cash flow from operations◊ 367.9 279.7 Net capital expenditure (14.4) (12.7) Payment of lease liabilities (75.1) - Opera
Slide 39: Annualised Acquisition Revenue
APPENDIX 8 ANNUALISED ACQUISITION REVENUE 2019 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 HY North America 115 198 103 15 - - 35 7 410 89 84 153 38 283 72 73 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 3
Slide 40: Acquisition Growth 2019 YTD
APPENDIX 9 ACQUISITION GROWTH 2019 YTD £98m BUSINESS Liberty Glove & Safety February ACQUIRED COUNTRY USA SECTOR Safety REVENUE* £73m YTD committed Coolpack April Netherlands Foodservice £3m spend * Annualised and translated at June 2019 average exchange rates 2019 HALF YEAR RESULTS AUGUST 2019 40
Slide 41: Historical Data
APPENDIX 10 HISTORICAL DATA £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 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 Adjusted 169 203 226 243 281 296 307 336 352 414 430 455 525 589 614 operating profit* Operating
Slide 42: 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 43: 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 44: Market Leading Specialist Distributor
APPENDIX 13 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 45: 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 46: Bunzl Customers
APPENDIX 15 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
Slide 47: Bunzl Unique Service Offering
APPENDIX 16 BUNZL UNIQUE SERVICE OFFERING DESIGN / BESPOKE / INSTALLATION FULL RANGE MINIMISE PRINTED PRODUCT CUSTOMERS’ CUSTOMISED SERVICES STOCKED DELIVERY SLOTS MANAGEMENT WORKING CAPITAL PRODUCT BULKY LOW INNOVATION ESSENTIAL PRODUCT TRAINING VALUE CENTRES ITEMS AVAILABILITY PRODUCTS CONTRACT MO
Slide 48: Sustainable Product Solutions
APPENDIX 17 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: Acquisition Parameters
APPENDIX 18 ACQUISITION PARAMETERS B2B GOODS CONSOLIDATED Disciplined NOT-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 F
Slide 50: 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 2019. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the sli