Brambles Limited · ASX:BXB
Brambles — H1 FY2003 Earnings Presentation
54 slides from Brambles's earnings presentation, Feb 26, 2003
Slide 1: A Global Leader in Support Services
A Global Leader in Support Services London 26 February 2003
Slide 2: CK Chow, Chief Executive Officer: Interim Results
CK Chow Chief Executive Officer Interim Results 6 months to 31 December 2002
Slide 3: Trading Highlights
Trading Highlights Trading performance in line with November statement CHEP Americas EBITA up 33% CHEP Europe EBITA 32% behind last year, 25% if fires excluded Recall continues to grow Steady performance from Cleanaway and Brambles Industrial Services Group capex 20% below prior year, with CHEP cape
Slide 4: Continuing Businesses
Continuing Businesses Revenue: £1,453m 6 months to EBITA*: £182m December 2002 9% 5% 7% 3% CHEP Cleanaway 11% 8% 44% Recall 54% Industrial Services 25% 34% Other Continuing *Unallocated Corporate excluded from pie chart data All % shown are constant currency 3
Slide 5: Trading Highlights: CHEP
Trading Highlights 6 months to CHEP revenue grew 9% to £620m Dec 02 Like for like EBITA at £103m was 7% Revenue £620m lower than last year 10% Strong improvement from CHEP Americas with Chep USA – Sales up by 11% 50% – EBITA up by 44% 40% Restructuring programme underway in Europe Good performance f
Slide 6: Cleanaway UK
6 months to UK Dec 02 Dry Waste Revenue: £246m Growth in Municipal 10% • New contract Thurrock £32m over 5 years • Municipal contract order bank 18% at £583 million Technical Waste 54% 5% Some short term adverse impact from Landfill Directive 12% Lower volume from chemical 1% industry, unfavourable
Slide 7: Cleanaway Germany
Germany 6 months to Dec 02 DSD and municipal waste Revenue: £172m performed strongly C&I volumes affected by weaker economy 33% 32% Qtr 1 saw higher average paper trading prices Negative impact expected from new Bottle Deposit Scheme 35% Waste Collection Sorting/Recycling Other Note: Associates incl
Slide 8: Germany DSD
Germany DSD DSD revenue was £40 million in the 6 months to Dec 02 Retendering now expected to commence in early March New contracts expected to be awarded in September, with services commencing January 2004. 7
Slide 9: Australia and Asia Pacific
Australia and Asia Pacific Revenue up 4% New contract wins including Blacktown, Canberra, Alice Springs Benefited from end of loss making contract in Brisbane Current order book in Australia A$453 million Asia Pacific continuing to do well All % shown are in constant currency 8
Slide 10: Recall
Data Protection 6 months to Document Management Services Dec 02 Services Revenue + 4% Revenue: £118m Revenue + 12%; Internal 8% 2% PRSI acquisition gives 14% coverage in Washington DC Secure Destruction Services New operations in Sweden and Finland. Coverage now Revenue + 37% 23 Countries Internal 5
Slide 11: Brambles Industrial Services and Regional Businesses
Brambles Industrial Services and Regional Businesses Brambles Industrial Services Excellent performance from Australia – New Contract ramp ups including Alcoa, MIM and Woodside LNG – PCI Project in BHP Steel above expectations UK Steel Services – Impact of ASW bankruptcy £2m – Lower Volume in Teesid
Slide 12: David Turner, Chief Financial Officer: Interim Results
David Turner Chief Financial Officer Interim Results 6 months to 31 December 2002
Slide 13: Interim Results
Interim Results Actual Fx Effect Constant Currency Rate Dec 02 Dec 02 Dec 02 Dec 01 Growth UK GAAP, 6 months ending £m £m £m £m % Revenue 1,474 (34) 1,508 1,619 (7) EBITA 184 (5) 187 189 (1) Profit Before Tax 142 (2) 144 137 5 Profit After Tax 97 (1) 98 102 (4) Basic EPS (p) 5.7 (0.1) 5.8 6.0 (3) Ne
Slide 14: Sales Growth
Sales Growth Dec 2002 Dec 2001 Growth As Reported Constant Constant UKGAAP, 6 months £m £m £m % ending Americas 294 322 286 13 Europe 264 260 249 4 RoW 62 64 56 14 Total 620 646 591 9 13
Slide 15: EBITA
EBITA Dec 2002 Dec 2001* Growth As Reported Constant Constant UKGAAP, 6 months £m £m £m % ending Americas 43 48 36 33 Europe 44 43 63 (32) RoW 16 16 16 - Total 103 107 115 (7) 14 * Pre one-off CHEP Accounting Harmonisation
Slide 16: Margins by Half Year
Margins by Half Year Dec 2002 Dec 2001* Jun 02* As Reported Constant Constant UKGAAP, 6 months % % % % ending Americas 15 15 13 16 Europe 17 17 25 20 RoW 26 25 29 27 Total 17 17 19 18 * Pre one-off CHEP Accounting Harmonisation 15
Slide 17: EBITA Movements
EBITA Movements CHEP CHEP CHEP Americas Europe Total £m £m £m EBITA December 2001* 36 63 115 • Sales Price - 1 3 • Sales Volume 10 4 17 • Effect of “Magnificent 5” 11 - 11 • Service Centre/Transport Activity (5) (8) (17) • SAP Implementation/IT (4) (4) (8) • One Off Fires - (4) (4) • Overheads/Other
Slide 18: Europe Restructuring Programme Costs & Benefits
Europe Restructuring Programme Costs & Benefits EBITA Total Benefit £ million Cost FY03 FY04 FY05 Overhead costs (19) - 6 10 Pallet network optimisation (8) - 3 4 Information Systems (SAP) (4) 1 1 1 Service/product offering/price (9) 1 3 7 Total Reorganisation (40) 2 13 22 17
Slide 19: Europe Restructuring: Asset Productivity
Europe Restructuring Programme Costs & Benefits Asset Productivity Asset productivity programme is costed at £45m over 30 months EBITA and cash benefits expected from asset productivity programme. 2 million pallets within CHEP already 18
Slide 20: Cleanaway Sales Growth and Margins
Sales Growth and Margins Dec 2002 Dec 2001 Growth As Reported Constant UKGAAP, 6 months ending £m £m £m % Sales UK 246 245 237 3 Germany 172 168 162 4 RoW 87 88 79 11 Total 505 501 478 5 EBITA 50 49 51 (4) EBITA Margin (%) 10 10 11 (1)pp 19
Slide 21: Revenue Segmentation
Revenue Segmentation 2002: £505m 6 months to 2001: £478m December Waste Collection 15% 17% Sorting/Recycling 9% 9% Landfill 48% 52% 6% Other Disposal 6% 6% Facilities Management 6% 14% Other 12% *All % shown are in Constant Currency, excluding Dassler 20 ** All Associate Revenue included in ‘Other’
Slide 22: Recall Sales Growth and Margins
Sales Growth and Margins Dec 2002 Dec 2001 Growth Organic Constant Reported Constant Currency Growth UKGAAP, 6 months ending £m £m £m % % Sales 118 125 107 17 7 EBITA 19 21 18 17 EBITA Margin 16 17 17 - pp 21
Slide 23: Revenue Segmentation
Revenue Segmentation 2002: £118m 6 months to 2001: £107m December 2% 2% Document Management 15% 14% Secure Destruction 55% Data Protection 57% 29% 26% Integrated Document Solutions 22 All % shown are constant currency
Slide 24: Exceptional Items
Exceptional Items Dec Dec 2002 2001 UK GAAP, 6 months ending £m £m Divestments & rationalisation 11 (35) DLC costs - (30) Write down of equipment division - (23) Total pre-tax 11 (88) Income tax (2) 17 Total 9 (71) 23 CHEP Accounting Harmonisation now shown as an operating cost
Slide 25: Taxation
Taxation Dec 2002 Dec 2001 £m £m UK GAAP, 6 months ending PBTA^ 142 137 Tax – pre exceptional 45 35 Effective Tax Rate % of PBTA 32 26 ^ Pre Exceptional 24 Actual exchange rates used
Slide 26: Operating Cash Flow by Business
Operating Cash Flow by Business CHEP Cleanaway Recall Ind Serv Other 0 50 100 150 200 £m Capex Operating Cashflow Operating cash flows are based on EBITDA, working capital movements, proceeds on sale of plant and equipment, provision/other movements, before capex and are pre acquisition/business dis
Slide 27: Capital Expenditure by Businesses
Capital Expenditure by Businesses* December December 2002 2001 UKGAAP, 6 months ending £m £m CHEP Americas 94 106 CHEP Europe 77 98 CHEP RoW 12 16 CHEP 183 220 Cleanaway 33 43 Recall 13 6 Industrial Services 9 19 Other ^ 2 6 Continuing Business 240 294 Divesting activities 2 10 Total 242 304 * Exclu
Slide 28: Cashflow from Operations
Cashflow from Operations Actual Fx Effect Constant Currency Rate Dec 02 Dec 02 Dec 02 Dec 01 UK GAAP, 6 months ending £m £m £m £m EBITDA* 333 (8) 341 351 Working capital movement (68) 4 (72) (108) Provisions/other (7) (2) (5) 21 Capex (242) 10 (252) (304) Regular asset disposals 22 - 22 36 C/flow fr
Slide 29: Net Cashflow
Net Cashflow Actual Fx Effect Constant Currency Rate Dec 02 Dec 02 Dec 02 Dec 01 UK GAAP, 6 months ending £m £m £m £m C/Flow from Ops after Capex 38 4 34 (4) Business Disposals 39 - 39 97 Acquisitions (42) 1 (43) (24) C/Flow before fixed charges 35 5 30 69 Interest (41) 2 (43) (45) Tax Paid (74) - (
Slide 30: Return on Net Assets
Return on Net Assets Net EBITA RONA (%) Assets* UK GAAP, 6 Months ending Dec 02 6 months 12 months £m £m to Dec 02 to Jun 02 CHEP 1,726 103 12 14 Cleanaway 667 50 15 15 Recall 311 19 12 14 Industrial Services 233 13 11 12 Regional Businesses 119 6 10 14 Unallocated (59) (9) n/a n/a Continuing Busine
Slide 31: Net Debt, Interest Cover and Gearing
Net Debt, Interest Cover and Gearing December 2002 December 2001 UK GAAP, 6 months ending £m £m Opening net debt – June 1,581 1,863 Movements in Net Debt 107 9 Closing Net Debt – December 1,688 1,872 Interest Cover (x) • EBIT 4.0 3.3 • EBITDA 8.1 7.3 • EBITA 4.4 3.6 Net Debt/EBITDA (annualised) 2.5
Slide 32: Dividends
Dividends Interim 2003 Interim 2003 Period to Dec 2002 BIL BIP Dividend per share 10 cents 3.757 p Franking 100% n/a 31
Slide 33: CHEP – Update on Performance
CK Chow Chief Executive Officer CHEP – Update on Performance
Slide 34: Critical Success Factors for CHEP
Critical Success Factors for CHEP Pool Control Customer Satisfaction Asset Productivity Operational Efficiency Profitable Growth – Segmentation – Technology – Innovative Products 33
Slide 35: USA: Magnificent 5
USA: Magnificent 5 Wal*Mart Contract Revision… Done NPD Channel Management… Improving New Service Center Network… Almost complete Transport Optimisation… Producing substantial savings New Pallet Return Policy… Exceeding expectations 34 NPD = Non Participating Distributor
Slide 36: USA: NPD Channel
USA: NPD Channel 71% NPD 58% 60% Flow-Through 55% Ratio NPD 5.5% 5.6% Transfer 4.7% 4.3% Ratio JAN-JUN 2001 JUL-DEC 2001 JAN-JUN 2002 JUL-DEC 2002 NPD = Non Participating Distributor 35
Slide 37: USA: New Service Center Network
USA: New Service Center Network Returns to new SC as % total returns 100% Issues from new SC as % total issues 90% 84.2% 80.1% 78.8% 80% 76.8% 76.9% 70% 70.4%68.6% 60% 66.7% 50% 40% 30% 20% 10% 0% 4/6 4/13 4/20 4/27 5/4 5/11 5/18 5/25 6/1 6/8 6/15 6/22 6/29 7/6 7/13 7/20 7/27 8/3 8/10 8/17 8/24 8/31
Slide 38: USA: Transport Optimisation
USA: Transport Optimisation Jun 2002 Nov - Dec Average Length of haul (miles) 2002 Interplant Movements 548 347 Deliveries 207 195 Collections 217 95 37
Slide 39: USA: New Pallet Return Policy
USA: New Pallet Return Policy 100% 86.6% Distributors 90% Converted 80% 70% 60% 50% 42.8% 40% 30% 20% 10% 0% Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 38
Slide 40: Europe: Key Programmes
Europe Key Programmes Pan-European Organisation Complete Overhead Cost Reduction In Progress Asset Productivity Improvement In Progress Service Centre Network Optimisation Early Stage Service/ Product Offering and Pricing Ongoing Service Quality and Customer Satisfaction Ongoing 39
Slide 41: Functional Organisation Europe
Functional Organisation Europe Mendes Luby European Executive Team Asset Sales & Project Container Finance IT HR Ops. Mktg. Mgmt. CS Mgmt. 40
Slide 42: Functional Organisation Europe
Functional Organisation Europe Mendes Finance IT HR Ops. Mktg. Legal Luby European Executive Team Finance IT HR Ops. Mktg. Asset Sales & Project Container Mgmt. CS Mgmt. 1CHEP Mgr. Country Level Team Asset Sales & Container Finance HR Ops. Mgmt. CS 41
Slide 43: Europe Overhead Cost Reduction
Europe Overhead Cost Reduction Preliminary plans announced to Works Councils on February 14 along with economic and social plans 400 - 500 departures planned in total About 100 additions planned, including Asset Management 300 - 400 net overhead reduction Gradual implementation concurrent with stand
Slide 44: Asset Productivity Improvement
Growth in Pool Size has exceeded Revenue Growth Productivity Improvement Asset Sales growth Entry into new geographic markets Entry into new, slower moving channels X Excess stock levels in CHEP service centres Sub optimal collection leaving pallets in field 43
Slide 45: Europe Asset Productivity Improvement – Pool Growth Efficiency
Europe Asset Productivity Improvement – Pool Growth Efficiency Improvement Increase Revenue Growth Emitters Add excess pallets at Emitter to hire account Implement channel pricing Decrease Growth in Pallet Pool Distributors Collect excess pallets from major Distributors Develop “collection engine” f
Slide 46: Service Centre Network Optimisation Europe
Service Centre Network Optimisation Europe 169 pallet service centres in Europe currently – 18 CHEP owned, 151 subcontracted – 33% perform repairs, 67% storage only – Network designed for in-country flow optimisation Appointed Bain Consulting to support project (same consultants as for USA project)
Slide 47: Summary
Summary European Restructuring Programme underway USA on track with further improvements to come Healthy growth in Canada and Latin America Model for pool growth remains Australia/ NZ – Sales growth in double digits – Strong EBITA margins and RONA 46
Slide 48: Outlook
Outlook Assuming continued global political and economic stability, the outlook for the group for the financial year is unchanged since our AGM and trading statements in November 2002 Good growth in CHEP Americas and the Rest of the World, and lower comparable operating profits from CHEP Europe Clea
Slide 49: Forward-looking statements
This presentation may contain certain “forward-looking statements” with respect to certain of Brambles’ plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward- looking statements involve risk and uncertainty beca
Slide 50: A Global Leader in Support Services
A Global Leader in Support Services London 26 February 2003
Slide 51: Glossary of Terms & Measures
Appendix 1a Glossary of Terms & Measures Except where noted, common terms and measures used in this presentation are based upon the following definitions: Revenue Includes Associates revenues but excludes non trading revenue EBITA Earnings before interest, tax, exceptional items, and goodwill amorti
Slide 52: Glossary of Terms & Measures
Appendix 1b Glossary of Terms & Measures Except where noted, common terms and measures used in this presentation are based upon the following definitions: Non Trading In A GAAP, this represents revenues from divestments, sale Revenue of assets and interest income. Only the profit/(loss) on asset sal
Slide 53: Glossary of Terms & Measures
Appendix 1c Glossary of Terms & Measures Except where noted, common terms and measures used in this presentation are based upon the following definitions: Unallocated Head Office costs which cannot be allocated back to the Costs divisions. These are excluded from the segmental analyses. Associates 5
Slide 54: Contact Details
Contact Details London Sydney Cassini House Level 40, Gateway Building 57 – 59 St James St 1 Macquarie Place London SW1A 1LD Sydney NSW 2001 +44 (0)20 7659 6000 +61 2 9256 5222 Sue Scholes Richard Manson Head of Investor Group Financial Planning & Relations Analysis Manager 53