bunzl business case may 2016 (v4) · brian may – finance director investor@bunzl.com business...
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About us
Bunzl is a growingand successful Group providing outsourcing solutions and value added distribution across the Americas, Europe and Australasia
Business Case May 2016 1
Source Consolidate Deliver
Business overview
2
Sales channel
Products
Sourcing
Footprint
Key facts
Financials
Business to business distribution £6.5bn revenue in 2015
Wide range of non-food consumable products
From leading brand manufacturers Own brands and unbranded products Sourcing centre in Shanghai – no own manufacturing
c.15,000 employees (2015 average) International diversification: 29 countries, 4
continents
UK plc headquartered in London Listed on LSE; FTSE 100; Support Services sector
Revenue growth: 9% (CAGR 04-15) Adjusted operating profit growth*: 9% (CAGR 04-15) Average annual cash conversion† of 97% (04-15)
* Before intangible amortisation and acquisition related costs† Operating cash flow before acquisition related costs to adjusted operating profit2004-2005 continuing operations only
Business Case May 2016
Benefits to customers:Supply Chain
Customer
Global sourcing& procurement
International warehousing& distribution infrastructure
3
Consolidationof consumables
Range of delivery options
Business Case May 2016
Supported by integratedIT and e-commerce systems
Value proposition
In-house procurement andself-distribution is costly
Bunzl applies its resourcesand expertise to reduce or eliminate many of the “hidden” costs of in-house procurement and self-distribution
The benefits to customers area lower cost of doing business and reduced working capital and carbon emissions
Outsourcingadds value forour customers
4
Product cost
Inventory investmentCash flowDirect labour & overtimeInventory finance costExpedited ordersInbound freightPurchase order administrationInventory damage & shrinkageAccounts payable adminStorage spaceCapital employed
Cost to acquire
Cost to process
Business Case May 2016
Market environment
5
Growing market sectors Fragmented competitors
Customer baseOutsourcing trend
Exposed to growing sectors including– Foodservice – away from
home– Cleaning & hygiene – away
from home– Healthcare – demographics– Safety – increased
legislation
None do what we do, on our scale and across our markets
Bunzl’s national footprints provides competitive advantage
Strong customer base Working with national and
international leaders Aligned with customer growth
Customers and manufacturers focusing on their core business
Multiple growth drivers
Business Case May 2016
Operatingmodel efficienciesWe constantly striveto make our business more efficient and environmentally friendly
Acquisition growthBetween 2004 and 2015 we have announced 122 acquisitions with total spend of £2.2bn
GDP+ organic growthOrganic revenue growth exceeded relevant GDP for 9 of the last 11 years
Consistent and proven strategy
ROIC17.1%
6
Compounding growth model at high ROIC
Business Case May 2016
Key competitive advantages
7
A platform for growth
Unique business
model
Strong financial discipline
Acquisition strategy &
track record
Operational focus
PeopleGlobal sourcing
Attractive customer markets
Balanced business portfolio
Business Case May 2016
Business model
One-stop-shopfor non-food consumables
8
Source
Consolidate
Deliver
Global suppliers Low cost sources Commodities Own brands
Foodservice Grocery Cleaning& hygiene Retail Safety Healthcare
Individual rangesto
Consolidated offerto
Business Case May 2016
Attractive customer markets
28%
26%12%
12%
11%
7% 4%
HealthcareDisposable healthcare consumables, including gloves, swabs, gowns and bandages and other healthcare related equipment to hospitals, care homes and other facilities serving the healthcare sector.
SafetyA complete range of personal protection equipment, including hard hats, gloves, boots, ear and eye protection and other workwear, to industrial and construction markets.
RetailGoods not for resale, including packaging and other store supplies and a full range of cleaning and hygiene products, to department stores, boutiques, office supply companies, retail chains and home improvement chains.
Cleaning & hygieneCleaning and hygiene materials, including chemicals and hygiene paper, to cleaning and facilities management companies and industrial and healthcare customers.
FoodserviceNon-food consumables, including food packaging, disposable tableware,guest amenities, catering equipment, cleaning products and safety items, to hotels, restaurants, contract caterers, food processors and the leisure sector.
GroceryGoods not for resale (items which are used but not actually sold), including food packaging, films, labels and cleaning and hygiene supplies, to grocery stores, supermarkets and retail chains.
OtherA variety of product ranges supplied to other end user markets such as government and education establishments.
9Business Case May 2016
c.75% resilient Grocery FoodserviceCleaning & hygiene Healthcare
2015 FY Revenue
Balanced business portfolio
11
Geographic balance
Our markets are at different stages of maturity National footprints International brands and local products
Regional diversification
Customer markets balance
Six market sectors with numerous sub-sectors Products and markets – specialist distributors Direct to customer or through a sub-distributor
Diversified by both geography and sector
58%17%
17%8% North America
Continental Europe
UK & Ireland
Rest of the World
Business Case May 2016
2015 FY Revenue
Operational focus
12
Hands-on management with clear customer focus
Full P&L and working capital responsibility Aligned incentive measurement with profit and
ROCE
Decentralised operating structure
Investing
Majority of capex spend on IT systems and warehouse facilities
Robust IT and systems strategy e.g. warehouse management
Investment in e-commerce systems Interfacing IT with customers and suppliers Order systems and vehicle routing Continually evaluating and upgrading our
warehousing
Sharing best practice across all business areas
Business Case May 2016
Global sourcing
13
+Own brands
CommoditiesLow cost sources
Eco-friendly products
SourcingPreferred suppliers
Business Case May 2016
Acquisition strategy
14
Key acquisition parameters
Acquisition types
Business to business Consolidated “not-for-resale” product offering Resilient and growing markets Fragmented customer base Scope for further consolidation and synergies Small % of total customer spend Opportunity for “own label” products Attractive financial returns
Retention of managers and customers is key
Anchor– New geographies– New markets
Bolt-on – existing geography and market– Extending product range– Consolidating markets
Extracting value
Purchasing synergies Warehouse & distribution efficiencies Back office integration Customer overlays Product range extensions Sharing best practice Investment in infrastructure, IT & e-commerce
Business Case May 2016
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of acquisitions 7 7 9 8 7 2 9 10 13 11 17 22
Committed acquisition spend (£m)
302 129 162 197 123 6 126 185 277 295 211 327
Annualised acquisition revenue (£m)
430 270 386 225 151 27 154 204 518 281 223 324
Acquisition growth
15
04-05 continuing operations only
Average annual acquisition spend over the last four years
£278m
Business Case May 2016
2015
Geographic expansion timeline
16
Revenue2010
North America Continental Europe UK & Ireland Rest of the world
2005*
* Continuing operations only
1997*7 countries
2003*12 countries
201529 countries
201227 countries
2005*18 countries
Continued geographic expansion though acquisitions
Business Case May 2016
Flat organisational structure Clear lines of responsibility Excellent customer service
Valuing our people
17
Clear roles and objectives
Retention of former owners
High retention rate of owners post acquisition Business model is capital light and relies on knowledge and
expertise in local markets Ensures customer relationships are maintained
Development and training opportunities
Personal responsibility to grow within roles Focus on internal appointments and promotions Formal training programmes
Business Case May 2016
Experienced management
18
Experienced executive directors and management team
Brian MayFinance Director
Patrick LarmonPresident and
CEO North America
Celia BaxterDirector of Group
Human Resources
Paul HusseyGeneral Counsel
& Company Secretary
Paul Budge Managing Director
Continental Europe
Andrew Mooney Director of Corporate
Development
Andrew TedburyManaging Director
UK & Ireland
Rodrigo Mascarenhas
Managing Director Latin
America
Kim Hetherington Managing Director
Australasia
Business Case May 2016
Frank van Zanten Chief Executive
Strong financial discipline
19
High return on capital
Strong balance sheet
Low working capital requirements
Low capex
High level of cash conversion
Uniform financial reporting system
Return on operating capital: 55.5% Return on invested capital (pre-tax): 17.1%
(2015)
Net debt/EBITDA 2.1x year end 2015
Average working capital to sales at 11% in 2015
Average of £24m p.a. over past 3 years
Operating cash flow† to adjusted operating profit* average of 97% 2004 - 2015
Across all geographies
†Before acquisition related costs*Before intangible amortisation and acquisition related costs
Growing dividend stream
Dividend per share CAGR of 10% since 2004
Business Case May 2016
Consistently high cash conversion funds growing dividend and acquisitionsAverage cash conversion* of
Cash conversion
20
93% 95% 92%
103%
92%
102%
93%
110%
93%
102%95% 97%
04 05 06 07 08 09 10 11 12 13 14 15
* Operating cash flow before acquisition related costs to adjusted operating profit 04-05 continuing operations only
90%
97%
Business Case May 2016
Revenue (£bn)Financial track record 2004 - 2015
21
2.42.9
3.33.6
4.24.6 4.8
5.15.4
6.1 6.26.5
04 05 06 07 08 09 10 11 12 13 14 15
31.738.2 41.1
44.451.8
55.459.7
67.6 70.6
82.486.2
91.0
04 05 06 07 08 09 10 11 12 13 14 15
Adjusted eps (p)
Adjusted operating profit (£m)
Dividend per share (p)CAGR
04-05 continuing operations only
04-12 restated on adoption of IAS 19 (revised 2011)
169203
226243
281296 307
336352
414430
455
04 05 06 07 08 09 10 11 12 13 14 15
Before intangible amortisation and acquisition related costs04-05 continuing operations only
13.315.7 17.0
18.720.6 21.6
23.426.4
28.2
32.435.5
38.0
04 05 06 07 08 09 10 11 12 13 14 15
9%-10%
Business Case May 2016
Business case summary
22
Clear strategy for growth Entering new markets/product groups Expansion/penetration of established
markets Strong operational focus
Attractive business model
Strong business model Clear value added for customers and
suppliers Recurring revenues “Big in the middle”
Attractive markets Resilient and growing markets Multiple growth drivers Fragmented markets with opportunity to
consolidate
Balanced portfolio Product diversification Geographical presence Independence from customers and
suppliers
Robust financial performance
Consistent revenue and earnings growth High cash conversion Cash reinvested at high return on capital Strong and growing dividend stream
Business Case May 2016
Contacts
23
Bunzl plc+44 20 7725 5000
Frank van Zanten – Chief ExecutiveBrian May – Finance Director
investor@bunzl.comwww.bunzl.com
Business Case May 2016
Disclaimer
24
No representation or warranty (express or implied) of any nature can be given, nor is any responsibility or liability of any kind accepted, by Bunzl plc with respect to the completeness or accuracy of the content of or omissions from this presentation.
This presentation is for information purposes only and does not constitute and shall not be deemed to constitute an offer document or an offer in respect of securities or an invitation to purchase or subscribe for any securities in any jurisdiction. Persons in a jurisdiction other than the United Kingdom should ensure that they inform themselves about and observe any relevant securities laws in that jurisdiction in respect of this presentation.
The presentation does not constitute an offer of securities for sale in the United States. None of the securities described in the presentation have been registered under the U.S. Securities Act of 1933. Such securities may not be offered or sold in the United States except pursuant to an exemption from such registration.
This presentation contains forward-looking statements. They are subject to risks and uncertainties that might cause actual results and outcomes to differ materially from the expectations expressed in them. You are cautioned not to place undue reliance on such forward-looking statements which speak only as of the date hereof. Bunzl undertakes no obligation to revise or update any such forward-looking statements.
Where this presentation is being communicated as a financial promotion it will only be made to and directed at: (i) those persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); (ii) those persons falling within Article 49 of the Order; or (iii) to persons outside of the United Kingdom only where permitted by applicable law (all such persons together being referred to as “relevant persons”) and must not be acted on or relied on by persons who are not relevant persons.
Business Case May 2016
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