Bunzl Plc · LSE:BNZL
Bunzl — H1 2015 Earnings Presentation
48 slides from Bunzl's earnings presentation, August 2015
Slide 1: 2015 Half Year Results
2015 Half Year Results August 2015
Slide 2: Agenda
Agenda 1 Philip Rogerson, Chairman: Welcome 2 Brian May, FD: Financial Results 3 Michael Roney, CEO: Business Review 4 Q&A 2015 Half Year Results 1
Slide 3: Highlights
Highlights Consistent £241m spent Good set of and proven ytd on 14 results strategy acquisitions Adjusted Dividend earnings per up 7% share* up 6%† * Before intangible amortisation and acquisition related costs † At constant exchange rates 2015 Half Year Results 2
Slide 4: Financial results
Financial results Brian May, FD 2015 Half Year Results 3
Slide 5: Income statement
Growth % Income Constant statement £m Jun 15 Jun 14 Reported Exchange Revenue 3,135.2 2,938.7 7 5 Adjusted operating profit* 208.4 197.2 6 5 Net finance cost (21.4) (20.6) Adjusted profit before tax* 187.0 176.6 6 6 Operating margin* 6.6% 6.7% Effective tax rate 27.5% 28.0% Adjusted earnings per 41.
Slide 6: Dividend per share (p)
Dividend per share (p) CAGR 35.5 >10% Consistently 22 years of growth strong dividend growth 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 2015 Annual Results 5
Slide 7: Balance sheet
Intangibles Balance £m Jun 15 Dec 14 Additions of £176.5m from sheet Intangibles 1,546.8 1,478.8 acquisitions partially offset by amortisation and foreign Tangibles 122.8 119.2 exchange translation Working capital Working capital 621.6 557.4 Increases primarily from acquisitions, partially offse
Slide 8: Cash flow
Cash flow £m Jun 15 Jun 14 Operating cash flow* 199.7 200.2 Interest (20.0) (19.7) Tax (45.5) (47.1) Free cash flow 134.2 133.4 96% Dividends Acquisitions (36.0) (263.1) (32.6) (118.7) cash conversion over target Employee share schemes (45.0) (34.7) threshold of 90% Net cash flow (209.9) (52.6) Oper
Slide 9: Cash conversion
Cash 110% conversion 103% 102% 102% 95% 95% 96% 93% 92% 92% 93% 93% 90% High cash conversion funds growing dividend and acquisitions Average cash conversion* 97% 04 05 06 07 08 09 10 11 12 13 14 H1 15 * Operating cash flow before acquisition related costs to adjusted operating profit 04 - 05 continu
Slide 10: Uses of cash since 2004
Uses of cash since 2004 Dividends Dividend per share CAGR >10% (2004 - 2014) £798m Stable dividend cover – c.2.5x Acquisitions 110 acquisitions since 2004 (to 30 June 2015) £2.1bn Self funded 2015 Half Year Results 9
Slide 11: Financial summary
Financial Capital ROACE Cash Acquisition summary management conversion** spend ytd and Cash flow 56.9% 96% £241m 20bpunderlying† Revenue and Revenue Adjusted Operating Operating profit operating margin* profit* %† 5 %† 5 6.6% In line with 2014† EPS and Adjusted Dividend Dividend EPS* per share
Slide 12: Business review
Business review Michael Roney, CEO 2015 Half Year Results 11
Slide 13: Business review: Operations review, Strategy, Prospects
Business review 1 Operations review 2 Strategy 3 Prospects 2015 Half Year Results 12
Slide 14: Revenue growth
Revenue growth £m 3,500 1.2% 3.5% 4.7% 3,000 35 106 2,500 2,000 2,994 3,135 1,500 1,000 Revenue Organic Acquisitions Revenue HY14 HY15 (FX adjusted) 2015 Half Year Results 13
Slide 15: Revenue by customer markets
Revenue by Healthcare Other customer markets 3% 7% 10% 28% Retail Foodservice 12% Safety 13% 27% Grocery Cleaning & hygiene 2015 HY Revenue 2015 Half Year Results 14
Slide 16: Business area analysis
Business area analysis NORTH AMERICA CONTINENTAL EUROPE Well diversified by geography and 57% Revenue 18% Revenue Adjusted operating sector 50% Adjusted profit* operating 23% profit* UK & IRELAND REST OF WORLD 17% Revenue 8% Revenue 17% Adjusted profit* operating 10% Adjusted profit* operating * Bef
Slide 17: Overview of business areas
Overview Significant acquisition spend year to date of £241m on 14 businesses with entry into two new countries North America – Revenue increase from recent acquisitions and organic growth, partially offset by some lost business and price declines in plastic products Continental Europe – Stron
Slide 18: North America
North Growth % America £m June 15 June 14 Reported Constant Exchange Revenue 1,792.6 1,590.1 13 4 Adjusted operating profit* 109.1 97.4 12 3 Operating margin* 6.1% 6.1% Return on operating capital 58.9% 61.2% Revenue increase from recent acquisitions and organic growth with operating margin* stabl
Slide 19: Continental Europe
Continental Growth % Europe £m June 15 June 14 Reported Constant Exchange Revenue 545.6 573.3 (5) 5 Adjusted operating profit* 50.2 50.1 0 10 Operating margin* 9.2% 8.7% Return on operating capital 53.7% 49.6% Strong constant exchange profit growth with operating margin* up 50bp to 9.2% Impact o
Slide 20: UK & Ireland
UK & Ireland Growth % Constant £m June 15 June 14 Reported Exchange Revenue 535.1 507.8 5 6 Adjusted operating profit* 37.3 33.7 11 11 Operating margin* 7.0% 6.6% Return on operating capital 106.8% 107.5% Strong profit growth with operating margin* up 40bp to 7.0% Significant profit increase in
Slide 21: Rest of the World
Rest of the Growth % World £m June 15 June 14 Reported Constant Exchange Revenue 261.9 267.5 (2) 7 Adjusted operating profit* 22.0 26.1 (16) (7) Operating margin* 8.4% 9.8% Return on operating capital 37.6% 45.5% Margins under pressure due to challenging macroeconomic conditions and currency weakn
Slide 22: Rest of the World currency depreciation
Rest of the Brazilian real : US dollar Australian dollar : US dollar World 0.50 1.00 currency depreciation 0.45 0.90 0.40 0.80 50%+ 0.35 0.70 Rest of the World purchases are imported 0.30 0.60 Brazilian real Australian dollar 0.25 37% 0.50 22% depreciation vs. depreciation vs. US dollar* US dollar*
Slide 23: Consistent and proven strategy
Consistent and proven strategy GDP+ organic Acquisition growth Operating growth Since 2004 we have model efficiencies Organic revenue growth announced 114 We constantly strive has exceeded relevant acquisitions with total to make our business GDP growth in 9 of the spend of £2.1bn more efficient and
Slide 24: Acquisition growth 2015 ytd
Business Acquired Country Sector Revenue* Acquisition growth Quirumed January Spain Healthcare £15m 2015 ytd Jan-Mar January Canada Cleaning & hygiene £6m Janssen March Holland Retail £7m Prescott March Canada Cleaning & hygiene £9m Maska March Canada Cleaning & hygiene £17m 14 acquisitions so Istan
Slide 25: Acquisition growth
2015 Acquisition 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ytd growth Number of 7 7 9 8 7 2 9 10 13 11 17 14 acquisitions Committed acquisition 302 129 162 197 123 6 126 185 277 295 211 241 spend (£m) Annualised Average annual acquisition acquisition spend 430 270 386 225 151 27 154 204
Slide 26: Geographic expansion timeline
Geographic expansion timeline 1997* 2003* 2005* 2012 2015 7 countries 12 countries 18 countries 27 countries 29 countries Continued geographic expansion as Bunzl enters two promising new countries * Continuing operations only 2015 Half Year Results 25
Slide 27: Entry into Turkey and Austria
Entry into 28 29 Turkey and Austria Safety distributor to end users and Well-established packaging solutions distributors located in Istanbul distributor G20 country with a population of Strong entry point into the Austrian 78m, 40% of which are under 25 market and sizeable base to expand vi
Slide 28: Continental Europe development of a business area (2004)
Continental Country Europe - Foodservice Retail C&H Healthcare Safety Grocery development of a business Germany area France Netherlands 2004 revenue Denmark €0.5bn 2015 Half Year Results 27
Slide 29: Continental Europe development of a business area (2010)
Continental Country Europe - Foodservice Retail C&H Healthcare Safety Grocery development of a business Germany area France Netherlands 2010 revenue Denmark Belgium €1.1bn Spain Czech Romania Hungary Slovakia Switzerland Israel 2015 Half Year Results 28
Slide 30: Continental Europe development of a business area (2015)
Continental Country Europe - Foodservice Retail C&H Healthcare Safety Grocery development of a business Germany area France Netherlands 2015 revenue* Denmark Belgium €1.5bn Spain Czech Romania Hungary Slovakia Switzerland Israel Turkey Austria 2015 Half Year Results * Annualised proforma revenue bas
Slide 31: Continental Europe development: Spain
Continental Spain Cleaning & hygiene Europe - development 2007: Iberlim 2008: Hicosa of a business 2008: Sudecol area €100m+ Safety 2008: Marca Business in Spain developed 2010: Juba since 2007 Foodservice 2011: King Healthcare 2015: Quirumed 2015 Half Year Results 30
Slide 32: Continental Europe revenue and profit growth
Continental Revenue Europe - 1,600 1,400 development 1,200 CAGR of a business 1,000 area 12% EURm 800 600 400 200 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Adjusted operating profit 140 120 CAGR 100 16% EURm 80 60 40 20 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Hal
Slide 33: Financial track record
Financial Revenue (£bn) Adjusted operating profit (£m) track record 04 - 05 continuing operations only 6.1 6.2 Before intangible amortisation and acquisition related costs 430 04 - 05 continuing operations only 414 5.4 5.1 4.8 352 4.6 336 4.2 307 296 281 3.6 3.3 243 2.9 226 203 2.4 169 All CAGRs gre
Slide 34: Prospects
Prospects Group – continued growth at constant exchange rates North America – very strong performance led by acquisitions despite net impact of some lost business and resin price declines Continental Europe – further strong performance principally due to the benefit of acquisitions UK & Irel
Slide 35: Appendices
Appendices 2015 Half Year Results 34
Slide 36: Appendix 1 Exchange rates
Appendix 1 Jun 15 Jun 14 Average rate Exchange US $ 1.52 1.67 rates Euro 1.37 1.22 Canadian $ 1.88 1.83 Brazilian real 4.52 3.83 Australian $ 1.95 1.82 Closing rate US $ 1.57 1.71 Euro 1.41 1.25 Canadian $ 1.96 1.82 Brazilian real 4.89 3.77 Australian $ 2.05 1.81 2015 Half Year Results 35
Slide 37: Appendix 2 Adjusted profit measures
Appendix 2 £m Jun 15 Jun 14 Operating profit 168.5 152.9 Adjusted profit Adjusted for: measures Intangible amortisation 32.7 30.1 Acquisition related costs 7.2 14.2 Adjusted operating profit 208.4 197.2 Operating margin 6.6% 6.7% Net finance cost (21.4) (20.6) Adjusted profit before income tax 187.0
Slide 38: Appendix 3 Net debt
Six months Year to Six months Appendix 3 £m to Jun 15 Dec 14 to June 14 Opening net debt (877.4) (849.5) (849.5) Net debt Net cash outflow (209.9) (19.0) (52.6) Currency translation 20.0 (8.9) 22.0 Closing net debt (1,067.3) (877.4) (880.1) 2015 Half Year Results 37
Slide 39: Appendix 4 Cash flow
Appendix 4 £m Jun 15 Jun 14 Adjusted operating profit* 208.4 197.2 Cash flow Depreciation 12.2 11.7 Working capital movement (11.3) 5.5 Other 1.4 (2.9) Cash flow from operations 210.7 211.5 Net capital expenditure (11.0) (11.3) Operating cash flow** 199.7 200.2 Operating cash flow** to adjusted oper
Slide 40: Appendix 5 Historical data
Appendix 5 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Historical Revenue 2,439 2,924 3,333 3,582 4,177 4,649 4,830 5,109 5,359 6,098 6,157 data Adjusted operating 169 203 226 243 281 296 307 336 352 414 430 profit* Operating Margin* 6.9 7.0 6.8 6.8 6.7 6.4 6.4 6.6 6.6 6.8 7.0 (%) * Be
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 Non-food Foodservice Grocery Safety Healthcare & hygiene retail 2015 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 Expedited orders process our customers Inbound freight Purchase order administration Inventory damage & shrinkage Accounts payab
Slide 43: Appendix 8 Key acquisition parameters
Appendix 8 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 (RO
Slide 44: Appendix 9 Annualised acquisition revenue
2015 Appendix 9 £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ytd North 115 198 103 15 - - 35 7 410 89 84 142 America Annualised Continental acquisition Europe 301 61 7 100 52 - 115 96 23 5 46 79 revenue UK & - 2 267 110 39 27 - 39 16 32 40 - Ireland Rest of the Acquisitions 14 9 9 - 60
Slide 45: Appendix 10 Acquisition discipline
Appendix 10 Acquisition discipline Say “no” many Very selective more times than about countries “yes” and sectors 114 acquisitions announced since Review Retention of 2004 Thorough due performance vs management diligence investment case and customers with Board is key 2015 Half Year Results 44
Slide 46: Appendix 11 Key competitive advantages
Appendix 11 Key Choice of Decentralised customer management competitive sectors model advantages Expertise Alignment of in making management acquisitions incentives Ex-owners Global stay with sourcing Bunzl 2015 Half Year Results 45
Slide 47: Appendix 12 Why invest in Bunzl?
Appendix 12 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 t
Slide 48: 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 six months ended 30 June 2015. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the