Bunzl plc · LSE:BNZL
Bunzl — FY2014 Earnings Presentation
50 slides from Bunzl's earnings presentation, February 2015
Slide 1: 2014 Annual Results
2014 Annual Results February 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 2014 Annual Results 1
Slide 3: Highlights
Highlights Excellent Consistent £211m spent set of and proven on 17 results strategy acquisitions Adjusted earnings per Dividend share* up up 10% 11%† * Before intangible amortisation and acquisition related costs † At constant exchange rates 2014 Annual Results 2
Slide 4: Financial results
Financial results Brian May, FD 2014 Annual Results 3
Slide 5: Income statement
Growth % Income Constant statement £m 2014 2013 Reported Exchange Revenue 6,156.5 6,097.7 1 7 Adjusted operating profit* 429.8 414.4 4 10 Net finance cost (42.0) (42.2) Adjusted profit before tax* 387.8 372.2 4 11 Operating margin* 7.0% 6.8% Effective tax rate 27.4% 27.9% Adjusted earnings per 86.2p
Slide 6: Operating margin
Operating margin* 6.9% 7.0% 6.8% 6.8% 6.8% 7.0% 6.7% 6.4% 6.4% 6.6% 6.6% Stable operating margin* 04 05 06 07 08 09 10 11 12 13 14 * Before intangible amortisation and acquisition related costs 04-05 continuing operations only 2014 Annual Results 5
Slide 7: Income statement
Growth % Income Constant statement £m 2014 2013 Reported Exchange Revenue 6,156.5 6,097.7 1 7 Adjusted operating profit* 429.8 414.4 4 10 Net finance cost (42.0) (42.2) Adjusted profit before tax* 387.8 372.2 4 11 Operating margin* 7.0% 6.8% Effective tax rate 27.4% 27.9% Adjusted earnings per 86.2p
Slide 8: Dividend per share
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 2014 Annual Results 7
Slide 9: Balance sheet
Balance £m Dec 14 Dec 13 sheet Intangibles 1,478.8 1,456.9 Intangibles Additions of £112.2m from Tangibles 119.2 118.8 acquisitions partially offset by amortisation and foreign Working capital 557.4 520.3 exchange Working capital Other liabilities (223.8) (261.6) Increases from acquisitions Retu
Slide 10: Cash flow
Cash flow £m 2014 2013 Operating cash flow* 407.7 421.1 Interest (41.4) (39.0) Tax (89.8) (80.3) Free cash flow 276.5 301.8 Cash conversion Dividends (105.6) (91.8) over target threshold of 90% Acquisitions (168.1) (279.9) at 95% Employee share schemes Net cash flow (21.8) (19.0) (43.3) (113.2) Oper
Slide 11: Cash conversion
Cash 110% 103% conversion* 102% 102% 93% 95% 93% 95% 92% 92% 93% 90% Average cash conversion* of 97% funds growing dividend and acquisitions 04 05 06 07 08 09 10 11 12 13 14 * Operating cash flow before acquisition related costs to adjusted operating profit 04 - 05 continuing operations only 2014 An
Slide 12: Uses of free cash 2004 to 2014
Uses of free cash 2004 to 2014 Dividends Dividend per share CAGR >10% Stable dividend cover – c.2.5 x £762m Acquisition 100 acquisitions since 2004 spend Self funded £1.9bn 2014 Annual Results 11
Slide 13: Financial summary
Financial 12 summary Capital ROACE Cash Acquisition management conversion** spend and Cash flow 80bp 95% £211m Dec 14 v Dec 13 Revenue and Revenue Adjusted Operating Operating profit operating margin* profit* %† 7 10% † 20bp EPS and Adjusted Dividend Dividend EPS* per share 11% † 10% † A
Slide 14: Business review
Business review Michael Roney, CEO 2014 Annual Results 13
Slide 15: Business review: Operations review, Strategy, Acquisitions, Prospects
Business review 1 Operations review 2 Strategy 3 Acquisitions 4 Prospects 2014 Annual Results 14
Slide 16: Revenue growth
Revenue growth £m 7,000 2.7% 4.0% 6.7% 6,000 155 233 5,000 4,000 6,157 5,769 3,000 2,000 1,000 Revenue 2013 Organic* Acquisitions Revenue (FX Adjusted) 2014 * Adjusting for Q1 adverse weather in North America, underlying organic revenue growth c.2.9% 2014 Annual Results 15
Slide 17: Broad based growth
Broad £m based 6,400 6,200 98 growth 6,000 175 52 63 5,800 5,600 6,157 5,400 5,769 5,200 5,000 Revenue NA CE UK&I ROW Revenue 2013 2014 (FX adjusted) £m 500 11 10 11 9 450 400 350 450 300 409 250 200 Adjusted NA CE UK&I ROW Adjusted operating operating profit* profit* 2013 (FX 2014 adjusted) * Befor
Slide 18: Revenue by customer
Revenue Healthcare Other by customer markets 3% 7% 28% c.75% resilient 11% Grocery Safety Foodservice Cleaning & hygiene Foodservice Healthcare 12% Retail 13% 26% Grocery Cleaning & hygiene 2014 FY Revenue 2014 Annual Results 17
Slide 19: Business area analysis
Business area analysis NORTH AMERICA CONTINENTAL EUROPE Well diversified by geography and 55% Revenue 19% Revenue sector 47% Adjusted profit* operating 23% Adjusted profit* operating UK & IRELAND REST OF WORLD 17% Revenue 9% Revenue 18% Adjusted Profit* operating 12% Adjusted profit* operating * Bef
Slide 20: Overview: strong overall performance
Overview Strong overall performance North America – good growth* from existing and new customers, as well as acquisitions made in 2013 and 2014 Continental Europe – excellent increase in operating margin, up 60bp to 9.0% UK & Ireland – organic revenue growth* at highest level since 2007 with s
Slide 21: North America
North Growth % America £m 2014 2013 Reported Constant Exchange Revenue 3,372.1 3,401.7 (1) 5 Adjusted operating profit* 211.1 213.6 (1) 5 Operating margin* 6.3% 6.3% Return on operating capital 59.6% 61.2% Recent acquisitions extend product and service offering Existing and new customers drive g
Slide 22: Continental Europe
Continental Growth % Europe £m 2014 2013 Reported Constant Exchange Revenue 1,146.3 1,151.5 0 5 Adjusted operating profit* 103.2 97.0 6 12 Operating margin* 9.0% 8.4% Return on operating capital 52.3% 47.5% Excellent increase in operating margin, up 60bp France ̶ Significant increased profit in
Slide 23: UK & Ireland
UK & Ireland Growth % Constant £m 2014 2013 Reported Exchange Revenue 1,078.5 1,018.5 6 6 Adjusted operating profit* 80.1 71.6 12 12 Operating margin* 7.4% 7.0% Return on operating capital 111.7% 98.8% Organic revenue growth at highest level since 2007 with operating margin up 40bp Safety and cl
Slide 24: Rest of the World
Rest of the Growth % World £m 2014 2013 Reported Constant Exchange Revenue 559.6 526.0 6 21 Adjusted operating profit* 55.5 51.2 8 24 Operating margin* 9.9% 9.7% Return on operating capital 41.8% 47.1% Overall strong growth with substantial acquisition impact despite exchange rate volatility Lat
Slide 25: Consistent and proven strategy
Consistent and proven strategy Organic growth Acquisition growth Operating By outsourcing to Bunzl Since 2004 we have model efficiencies the purchase, announced 100 We constantly strive consolidation and acquisitions with total to make our business delivery of a broad spend of £1.9bn more efficient
Slide 26: Acquisition growth 2014
Business Acquired Country Sector Revenue* Acquisition Bäumer January Germany Cleaning & hygiene £10m growth Oskar Plast February Czech Rep. Grocery £12m 2014 Lamedid March Brazil Healthcare £13m Nelson Packaging March NZ Cleaning & hygiene £3m Plast Techs March USA Cleaning & hygiene £14m Tecno Boga
Slide 27: Annualised acquisition revenue
Annualised £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 acquisition North 115 198 103 15 - - 35 7 410 89 84 America revenue Continental 301 61 7 100 52 - 115 96 23 5 46 Europe UK & - 2 267 110 39 27 - 39 16 32 40 Ireland Rest of the Acquisitions 14 9 9 - 60 - 4 62 69 155 53 World across
Slide 28: Acquisition growth
Acquisition 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 growth Number of 7 7 9 8 7 2 9 10 13 11 17 acquisitions Committed acquisition 302 129 162 197 123 6 126 185 277 295 211 spend (£m) Average annual Annualised acquisition spend acquisition 430 270 386 225 151 27 154 204 518 281 223 ove
Slide 29: Acquisition activity
Acquisition activity External sources Bunzl Bunzl subsidiaries central team 500+ Pool of opportunities c.50 Initial discussions c.35 Further discussions c.25 Active engagement 2014 17 Completed 2014 Annual Results 28
Slide 30: Acquisition growth potential
Existing market examples Potential market examples Acquisition growth GDP GDP 2014 scaled scaled potential Country revenues revenues* Country revenues* France Poland £410m £1,050m £200m Significant scope Germany Sweden for future acquisition £75m £1,400m £220m growth Brazil Turkey £150m £420m £150m
Slide 31: Acquisition discipline
Acquisition discipline Say “no” many Very selective more times than about countries “yes” and sectors 100 acquisitions since 2004 Review Retention of Thorough due performance vs management diligence investment case and customers with Board is key 2014 Annual Results 30
Slide 32: Financial track record 2004-2014
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 430 414 2004 - 2014 5.1 5.4 04-05 continuing operations only 4.8 352 4.6 336 4.2 307 296 281 3.6 3.3 243 2.9 226 203 2.4 169 All C
Slide 33: Prospects
Prospects Group – further growth at constant exchange rates due to strong market position and acquisition impact North America – good growth from organic revenue and recent acquisitions Continental Europe – continued growth despite challenging economic outlook UK & Ireland – further organic
Slide 34: Appendices
Appendices 2014 Annual Results 33
Slide 35: Appendix 1: Exchange rates
Appendix 1 2014 2013 Average rate Exchange US $ 1.65 1.56 rates Euro 1.24 1.18 Canadian $ 1.82 1.61 Brazilian Real 3.87 3.38 Australian $ 1.83 1.62 Closing rate US $ 1.56 1.66 Euro 1.29 1.20 Canadian $ 1.81 1.76 Brazilian Real 4.14 3.91 Australian $ 1.91 1.85 2014 Annual Results 34
Slide 36: Appendix 2: Adjusted profit measures
Appendix 2 £m 2014 2013 Operating profit 341.8 332.1 Adjusted profit Adjusted for: measures Intangible amortisation 61.9 58.3 Acquisition related costs 26.1 24.0 Adjusted operating profit 429.8 414.4 Operating margin 7.0% 6.8% Net finance cost (42.0) (42.2) Adjusted profit before income tax 387.8 37
Slide 37: Appendix 3: Net debt
Appendix 3 £m 2014 2013 Opening net debt (849.5) (738.1) Net debt Net cash outflow (19.0) (113.2) Currency (outflow)/inflow (8.9) 1.8 Closing net debt (877.4) (849.5) 2014 Annual Results 36
Slide 38: Appendix 4: Cash flow
Appendix 4 £m 2014 2013 Adjusted operating profit* 429.8 414.4 Cash flow Depreciation 24.4 25.9 Working capital movement (15.6) 16.8 Other (7.0) (10.7) Cash flow from operations 431.6 446.4 Net capital expenditure (23.9) (25.3) Operating cash flow† 407.7 421.1 Operating cash flow to adjusted operati
Slide 39: Appendix 5: Funding
Appendix 5 Committed facilities maturity profile (£m) Funding Funding headroom £780m 420 Bank facilities - undrawn Bank facilities - drawn 90 US private placement notes denominated in US dollars, sterling and euros 87 150 65 50 55 108 106 101 69 61 71 69 61 48 34 32 33 15 16 17 18 19 20 21 22 23 24
Slide 40: Appendix 6: Historical data
Appendix 6 £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 (%) * Bef
Slide 41: Appendix 7: Geographic expansion timeline
Appendix 7 1997* 2003* 2005* 2008 2012 Geographic 7 countries 12 countries 18 countries 23 countries 27 countries expansion timeline Revenue 2014 2010 2005* North America Continental Europe UK & Ireland Rest of the world * Continuing operations only 2014 Annual Results 40
Slide 42: Appendix 8: Business model
Appendix 8 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 2014 Annual Results 41
Slide 43: Appendix 9: Value proposition
Appendix 9 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 44: 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 45: Appendix 11: Key competitive advantages
Appendix 11 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 2014 Annual Results 44
Slide 46: 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 47: Appendix 13: Development of a business area
Appendix 13 2008 to 2010 – Brazil market entry Development of a business Protcap – Entry into safety sector AM Supply – Expansion in safety sector area COLOMBIA BRAZIL First entry into BRAZIL Latin America by PERU anchor acquisition in Brazil safety sector in 2008 CHILE 2011 – Expansion in Brazi
Slide 48: Appendix 13: Development of a business area
MEXICO Appendix 13 2012 – Expansion outside Brazil Vicsa – Entry into safety sector in Chile, Development Colombia, Peru, Argentina and Mexico and expansion in Brazil of a business area COLOMBIA 2013 – Consolidation BRAZIL Labor – Entry into healthcare sector in 12 PERU BRAZIL Brazil Espomega
Slide 49: Appendix 13: Development of a business area
Appendix 13 Revenue Lamedid Development Labor Tecno Boga of a business Espomega JPLUS ProEpta area De Santis Ideal Vicsa Danny AM Supply Latin America Prot-Cap annualised revenue now £234m with 2008 2010 2011 2012 2013 2014 CAGR of Safety 30% Cleaning & hygiene Foodservice Healthcare Retail 2014 Ann
Slide 50: 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 2014. For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the s