Bunzl plc · LSE:BNZL
Bunzl — FY2015 Earnings Presentation
53 slides from Bunzl's earnings presentation, February 2016
Slide 1: 2015 Annual Results
2015 Annual Results February 2016
Slide 2: Agenda
Agenda 1 Philip Rogerson, Chairman: Introduction 2 Brian May, FD: Financial Results 3 Michael Roney, CEO: Business Review 4 Q&A 2015 Annual Results 1
Slide 3: Introduction
Introduction Philip Rogerson, Chairman 2015 Annual Results 2
Slide 4: Financial results
Financial results Brian May, FD 2015 Annual Results 3
Slide 5: Income statement
Growth Income Constant statement £m 2015 2014 Reported Exchange Revenue 6,489.7 6,156.5 5% 5% Adjusted operating profit* 455.0 429.8 6% 7% Net finance cost (43.8) (42.0) Adjusted profit before tax* 411.2 387.8 6% 8% Operating margin* 7.0% 7.0% +10bp Effective tax rate 27.5% 27.4% Adjusted earnings p
Slide 6: Operating margin
Operating margin* 6.9% 7.0% 6.8% 6.8% 6.7% 6.8% 7.0% 7.0% 6.6% 6.6% 6.4% 6.4% Long term stable operating margin 04 05 06 07 08 09 10 11 12 13 14 15 * Before intangible amortisation and acquisition related costs 04-05 continuing operations only 2015 Annual Results 5
Slide 7: 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 2015 Annual Results 6
Slide 8: Balance sheet
Balance £m Dec 15 Dec 14 sheet Intangibles 1,632.0 1,478.8 Intangibles Additions of £281m from Tangibles 126.7 119.2 acquisitions partially offset by amortisation and foreign Working capital 655.0 557.4 exchange Working capital Other liabilities (250.2) (223.8) Working capital increase Return on
Slide 9: Cash flow
Cash flow £m 2015 2014 Operating cash flow* 442.6 407.7 Interest (39.9) (41.4) Tax (92.5) (89.8) Free cash flow 310.2 276.5 Increase in Dividends (116.1) (105.6) operating cash flow* of Acquisitions (371.2) (168.1) 9% Employee share schemes (29.5) (21.8) Net cash flow (206.6) (19.0) Operating cash f
Slide 10: Cash conversion
Cash 110% 103% conversion 102% 102% 97% 93% 95% 93% 95% 92% 92% 93% 90% Consistently high cash conversion funds growing dividend and acquisitions Average cash conversion* of 97% 04 05 06 07 08 09 10 11 12 13 14 15 * Operating cash flow before acquisition related costs to adjusted operating profit 04
Slide 11: Uses of free cash 2004 to 2015
Uses of free cash 2004 to 2015 Dividends Dividend per share CAGR >10% Stable dividend cover – c.2.5x £878m Acquisition 122 acquisitions since 2004 spend Self funded £2.2bn 2015 Annual Results 10
Slide 12: Financial summary
Financial Revenue and Revenue Adjusted summary Operating operating profit profit* %† 5 7 %† Cash flow and Cash Acquisition Acquisitions conversion** spend 97% £327m Record spend 22 acquisitions EPS and Adjusted Dividend Dividend EPS* per share %† 7 %7 † At constant exchange rates * Before in
Slide 13: Business review
Business review Michael Roney, CEO 2015 Annual Results 12
Slide 14: Business review: Operations, Strategy and acquisitions, Prospects
Business review 1 Operations review 2 Strategy and acquisitions 3 Prospects 2015 Annual Results 13
Slide 15: Revenue growth
Revenue growth £m 7,000 0.4% 4.5% 4.9% 6,000 27 275 5,000 4,000 6,188 6,490 3,000 2,000 1,000 Revenue 2014 Underlying Acquisitions Revenue (FX Adjusted) 2015 2015 Annual Results 14
Slide 16: Revenue by customer
Revenue Healthcare Other by customer markets 4% 7% 28% c.75% resilient 11% Foodservice Safety Grocery Cleaning & hygiene Foodservice Healthcare 12% Retail 12% 26% Grocery Cleaning & hygiene 2015 FY Revenue 2015 Annual Results 15
Slide 17: Business area analysis
Business area analysis NORTH AMERICA CONTINENTAL EUROPE Well diversified by 58% Revenue 17% Revenue geography and sector 51% Adjusted profit* operating 22% Adjusted profit* operating UK & IRELAND REST OF WORLD 17% Revenue 8% Revenue 18% Adjusted profit* operating 9% Adjusted operating profit* * Befo
Slide 18: Overview
Overview Record acquisition spend of £327m on 22 businesses with entry into two new countries North America – Revenue increase from recent acquisitions and underlying volume growth, partially offset by price declines in plastic products and some lost business Continental Europe – Strong revenu
Slide 19: North America
North Growth % America £m 2015 2014 Reported Constant Exchange Revenue 3,751.8 3,372.1 11 5 Adjusted operating profit* 244.0 211.1 16 9 Operating margin* 6.5% 6.3% Return on operating capital 58.3 % 59.6% Revenue increase principally from recent acquisitions with operating margin* up 30bp at const
Slide 20: Raw materials
Raw materials Plastic product price declines slows organic growth in North America US$ natural gas price decline* year on year drives plastic price deflation of 1% - 2% of revenue in North America Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 *Source: Henry Hub
Slide 21: Continental Europe
Continental Growth % Europe £m 2015 2014 Reported Constant Exchange Revenue 1,121.0 1,146.3 (2) 7 Adjusted operating profit* 104.5 103.2 1 10 Operating margin* 9.3% 9.0% Return on operating capital 54.2% 52.3% Strong constant exchange revenue and profit growth with operating margin* up 20bp at con
Slide 22: UK & Ireland
UK & Ireland Growth % Constant £m 2015 2014 Reported Exchange Revenue 1,102.4 1,078.5 2 3 Adjusted operating profit* 84.9 80.1 6 6 Operating margin* 7.7% 7.4% Return on operating capital 99.8% 111.7% Good profit growth with operating margin* up 30bp to 7.7% Significant profit increase in safety
Slide 23: Rest of the World
Rest of the Growth % World £m 2015 2014 Reported Constant Exchange Revenue 514.5 559.6 (8) 6 Adjusted operating profit* 42.1 55.5 (24) (11) Operating margin* 8.2% 9.9% Return on operating capital 31.3% 41.8% Margins under pressure due to challenging macroeconomic conditions and currency weakness a
Slide 24: Rest of the World currency
Rest of the Brazilian real : US dollar Australian dollar : US dollar 0.50 1.00 World currency 0.45 0.90 depreciation 0.40 0.80 0.35 0.70 50%+ 0.30 0.60 Rest of the 0.25 0.50 World purchases 0.20 0.40 are imported 0.15 Brazilian real 0.30 Australian dollar 0.10 40% 0.20 18% 0.05 depreciation vs. 0.10
Slide 25: Consistent and proven strategy
Consistent and proven strategy GDP+ organic Acquisition growth Operating growth Since 2004 we have model efficiencies Organic revenue growth announced 122 We constantly strive exceeded relevant GDP acquisitions with total to make our business for 9 of the last 11 years spend of £2.2bn more efficient
Slide 26: Acquisition growth 2015
Acquisition Business Country Sector Revenue* growth Cordova USA Safety £55m 2015 GF Canada Retail £42m Meier Verpackungen Austria Foodservice £29m DPS Chile Foodservice £25m Istanbul Ticaret Turkey Safety £24m £327m spent on Maska Canada Cleaning & hygiene £16m Casa do EPI Brazil Safety £16m 22 acqu
Slide 27: Acquisition growth
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Acquisition Number of growth acquisitions 7 7 9 8 7 2 9 10 13 11 17 22 Committed acquisition 302 129 162 197 123 6 126 185 277 295 211 327 spend (£m) Annualised acquisition 430 270 386 225 151 27 154 204 518 281 223 324 revenue (£m) Average
Slide 28: Acquisition activity
Acquisition activity External sources Bunzl Bunzl subsidiaries central team Pool of opportunities 500+ c.40 Meaningful discussions c.35 Active engagement 2015 Completed 22 2015 Annual Results 27
Slide 29: Geographic expansion timeline
Geographic expansion 1997* 2003* 2005* 2012 2015 timeline 7 countries 12 countries 18 countries 27 countries 29 countries Continued geographic expansion as Revenue 2015 Bunzl enters two 2010 promising new countries 2005* North America Continental Europe UK & Ireland Rest of the world * Continuing op
Slide 30: Entry into Turkey and Austria
Entry into 28 29 Turkey and Austria G20 country with a population of Well-established packaging solutions 78m, 40% of which are under 25 distributor 7th largest economy in Europe Strong entry point into the Austrian market and sizeable base to expand Average GDP growth 2010-2014 of via fut
Slide 31: Market expansion
Market expansion 2011 – Majestic First entry into the North American own brand Safety sector Entry into own brand safety supplies in North America 2012 - McCordick Expansion of own brand product range and increased Canadian presence 2015 Annual Results 30
Slide 32: Market expansion
Market 2013 – SAS Safety expansion 25 own brands and innovative product range 2015 – Tillman Significant Tillman brand well expansion in recognised nationally, products and particularly in the coverage since welding market 2014 2015 – Cordova Well developed own brand product range Product de
Slide 33: Market expansion
Market Revenue expansion $375m+ annualised revenues in North America own brand safety sector 2011 2012 2013 2014 2015 developed since 2011 2015 Annual Results 32
Slide 34: Why invest in Bunzl?
Why invest in Bunzl? …. because Bunzl is the leader in the market with consistently good growth, stable operating margins, a very high return on operating capital and it turns on average more than 90% of the operating profit into cash which can be reinvested at a rate well in excess of the cost of c
Slide 35: Financial track record
Financial Revenue (£bn) Adjusted operating profit (£m) track record 04-05 continuing operations only 6.5 Before intangible amortisation and acquisition related costs 455 6.1 6.2 430 2004 - 2015 5.4 04-05 continuing operations only 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 1
Slide 36: Prospects
Prospects Group – continued growth due to strong competitive position, acquisition impact and opportunities to consolidate markets further North America – good performance from recent acquisitions and underlying volume growth Continental Europe – strong performance due to both organic growth a
Slide 37: Appendices
Appendices 2015 Annual Results 36
Slide 38: Appendix 1 Exchange rates
Appendix 1 2015 2014 Average rate Exchange US $ 1.53 1.65 rates Euro 1.38 1.24 Canadian $ 1.95 1.82 Brazilian real 5.10 3.87 Australian $ 2.03 1.83 Closing rate US $ 1.47 1.56 Euro 1.36 1.29 Canadian $ 2.05 1.81 Brazilian real 5.90 4.14 Australian $ 2.03 1.91 2015 Annual Results 37
Slide 39: Appendix 2 Adjusted profit measures
Appendix 2 £m 2015 2014 Operating profit 366.5 341.8 Adjusted profit Adjusted for: measures Intangible amortisation 66.8 61.9 Acquisition related costs 21.7 26.1 Adjusted operating profit 455.0 429.8 Operating margin 7.0% 7.0% Net finance cost (43.8) (42.0) Adjusted profit before income tax 411.2 38
Slide 40: Appendix 3 Net debt
Appendix 3 £m 2015 2014 Opening net debt (877.4) (849.5) Net debt Net cash outflow (206.6) (19.0) Currency outflow (23.2) (8.9) Closing net debt (1,107.2) (877.4) 2015 Annual Results 39
Slide 41: Appendix 4 Cash flow
Appendix 4 £m 2015 2014 Adjusted operating profit* 455.0 429.8 Cash flow Depreciation 24.1 24.4 Working capital movement (9.8) (15.6) Other (4.3) (7.0) Cash flow from operations 465.0 431.6 Net capital expenditure (22.4) (23.9) Operating cash flow 442.6 407.7 Operating cash flow to adjusted operatin
Slide 42: Appendix 5 Funding
Appendix 5 Committed facilities maturity profile (£m) 400 Funding Funding headroom 350 £814m 300 250 241 200 100 191 150 60 157 100 55 65 94 6 50 115 111 102 106 119 72 63 75 71 65 34 35 34 0 16 17 18 19 20 21 22 23 24 25 26 27 28 Bank facilities - undrawn Bank facilities - drawn US dollar, sterling
Slide 43: Appendix 6 Historical data
Appendix 6 £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 44: Appendix 7 Business model
Appendix 7 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 2015 Annual Results 43
Slide 45: Appendix 8 Value proposition
Appendix 8 Cost to acquire Product cost Value proposition Inventory investment Cash flow Direct labour & overtime Outsourcing Inventory finance cost Cost to adds value for Expedited orders process our customers Inbound freight Purchase order administration Inventory damage & shrinkage Accounts payab
Slide 46: Appendix 9 Key competitive advantages
Appendix 9 Key Choice of Decentralised competitive customer management advantages sectors model Expertise Alignment of in making management acquisitions incentives Ex-owners Global stay with sourcing Bunzl 2015 Annual Results 45
Slide 47: Appendix 10 Key acquisition parameters
Appendix 10 Consolidated Key B2B Goods not-for product offering acquisition resale (‘one-stop-shop’) parameters Further market Sectors with Fragmented consolidation and growth customer base synergies Opportunity for Attractive Small % of total ‘own label’ financial returns customer spend products (R
Slide 48: Appendix 11 Acquisition discipline
Appendix 11 Acquisition discipline Say “no” many Very selective more times than about countries “yes” and sectors 122 acquisitions since 2004 Review Retention of Thorough due performance vs management diligence investment case and customers with Board is key 2015 Annual Results 47
Slide 49: Appendix 12 Annualised acquisition revenue
Appendix 12 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 North Annualised America 115 198 103 15 - - 35 7 410 89 84 153 acquisition Continental 301 61 7 100 52 - 115 96 23 5 46 98 revenue Europe UK & - 2 267 110 39 27 - 39 16 32 40 - Ireland Acquisitions Rest of the across all busi
Slide 50: Appendix 13 Acquisition growth 2015
Appendix 13 Business Acquired Country Sector Revenue* Quirumed January Spain Healthcare £15m Acquisition Jan-Mar January Canada Cleaning & hygiene £6m growth Janssen March Holland Retail £6m 2015 Prescott March Canada Cleaning & hygiene £9m Maska March Canada Cleaning & hygiene £16m 2015 acquisition
Slide 51: Appendix 13 Acquisition growth 2015 (continued)
Appendix 13 Business Acquired Country Sector Revenue* Continued Acquisition Planet Clean September Canada Cleaning & hygiene £13m growth ICB October New Zealand Cleaning & hygiene £2m 2015 Cemelim November Spain Cleaning & hygiene £3m Casa do EPI November Brazil Safety £16m 2015 acquisition Faru Nov
Slide 52: Appendix Continental Europe development
Appendix 14 Revenue 1,800 1,600 Continental 1,400 CAGR Europe 1,200 development 1,000 12% EURm 800 600 400 200 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted operating profit 160 140 CAGR 120 100 15% EURm 80 60 40 20 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20
Slide 53: Disclaimer
This document has been prepared by Bunzl plc (the “Company”) solely for use at the presentation Disclaimer of the Company’s results announcement in respect of the year ended 31 December 2015. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the s