Bunzl plc - BUSINESS CASE/media/Files/B/Bunzl-PLC/reports... · 2017. 5. 9. · packaging, disposable tableware, guest amenities, catering equipment, cleaning products and safety

APRIL 2017

BUSINESS CASE

Consistent and proven compounding strategy

OPERATIONAL FOCUS GLOBAL SOURCING ORGANIC GROWTH

STRONG FINANCIAL DISCIPLINE

ACQUISITION STRATEGY & TRACK RECORD

OUR PEOPLE

ATTRACTIVE CUSTOMER MARKETS

UNIQUE BUSINESS MODEL

BALANCED BUSINESS PORTFOLIO

BUNZL OVERVIEW

2

Bunzl plc is a focused and successful international distribution and outsourcing group

Headquartered in London and listed on London Stock Exchange - FTSE100 ; Support Services sector

APRIL 2017 BUSINESS CASE

BUSINESS MODEL

One-stop-shop for non-food consumables

SOU

RCE

CON

SOLD

ATE

DELI

VER

• Global suppliers • Low cost sources • Commodities • Own brands

INDIVIDUAL RANGES

CONSOLIDATED OFFER

Foodservice Grocery Cleaning & hygiene Safety Retail Healthcare

3

• Direct to site • Cross dock • Warehouse

replenishment


VALUE PROPOSITION

Outsourcing adds value for our customers

• In-house procurement and self-distribution is costly • Bunzl applies its resources and expertise to reduce or eliminate many of the "hidden" costs of

in-house procurement and self-distribution • The benefits to customers are a lower cost of doing business and reduced working capital and

carbon emissions

INVENTORY INVESTMENT CASH FLOW DIRECT LABOUR & OVERTIME INVENTORY FINANCE COST EXPEDITED ORDERS INBOUND FREIGHT PURCHASE ORDER ADMINISTRATION INVENTORY DAMAGE & SHRINKAGE ACCOUNTS PAYABLE ADMIN STORAGE SPACE CAPITAL EMPLOYED

PRODUCT COST

COST TO PROCESS

COST TO ACQUIRE

4 APRIL 2017 BUSINESS CASE

Service offering

ON-TIME IN-FULL DELIVERY

ONE ORDER ONE DELIVERY ONE INVOICE

CUSTOMISED DIGITAL SOLUTIONS

OWN BRAND AND MANUFACTURER BRANDED

LOCAL AND NATIONAL DISTRIBUTION NETWORK

DEDICATED FIELD SALES FORCE

ONE-STOP-SHOP

CUSTOMISED MANAGEMENT INFORMATION

RANGE OF DELIVERY OPTIONS INCLUDING OWN FLEET

SERVICE OFFERING


EXPERT KNOWLEDGE AND ADVICE

BUSINESS AREA ANALYSIS

Organised by geography Well diversified - 30 countries at different stages of maturity

* Adjusted operating profit - before adjusting items (customer relationships amortisation and acquisition related costs) and corporate costs

REST OF WORLD 8% Revenue 9% Operating profit*

UK & IRELAND 15% Revenue 15% Operating profit*

CONTINENTAL EUROPE 18% Revenue 23% Operating profit*

NORTH AMERICA 59% Revenue 53% Operating profit*


Based on 2016 FY

4%

30%

26% 12%

11%

10%

7%

Foodservice Non-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.

CUSTOMER MARKETS

resilient Foodservice Grocery Cleaning & hygiene Healthcare

75%

Cleaning & hygiene Cleaning and hygiene materials, including chemicals and hygiene paper ,to cleaning and facilities management companies and industrial and public sector customers

Grocery Goods not for resale (items which are used, but not actually sold), including food packaging, films, labels and cleaning and hygiene supplies, to grocery stores, and supermarkets

Retail Goods 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

Other

Safety A complete range of personal protection equipment, including gloves, boots, ear and eye protection and other workwear, to industrial and construction markets

Healthcare Disposable healthcare consumables, including gloves, swabs, gowns, bandages and other healthcare related equipment and cleaning & hygiene products to hospitals, care homes and other facilities serving the healthcare sector

7

Based on 2016 FY Revenue


TYPICAL PRODUCTS

6%†

8

A broad range of non-food consumable products


GLOBAL SOURCING

Partner with leading manufacturers Sourcing via our own Shanghai sourcing office

9

PREFERRED SUPPLIERS SOURCING

Own brands Commodities

Low cost sources Eco-friendly products


http://www.pactiv.com/

CONSISTENT AND PROVEN COMPOUNDING STRATEGY

High ROIC despite significant acquisition spend

PROFITABLE ORGANIC GROWTH

Use competitive

advantage to grow market

share in a profitable way

OPERATING MODEL IMPROVEMENTS

Daily focus on making

our business more efficient

ACQUISITION GROWTH

Use strong balance sheet and excellent

cash flow to consolidate

our markets further

ROIC 16.7%


Based on 2016 FY

12

ORGANIC GROWTH

Organic growth typically real GDP +

11

SELL MORE TO EXISTING CUSTOMERS

EXPAND PRODUCT RANGE

WIN NEW CUSTOMERS

MARKET LEADING CUSTOMERS

GROWING SECTORS

TREND TO OUTSOURCING

INFLATION / DEFLATION

MARKET DYNAMICS

OWN BRAND / IMPORTS

MANUFACTURER BRANDS

GEOGRAPHIES AND SECTORS

VOLUME

MIX

PRICE

FX IMPACT


• Close smaller and less efficient facilities

• Continually evaluate and upgrade warehousing

OPERATING MODEL IMPROVEMENTS

Small improvements every day everywhere lead to significant progress over time

CONSOLIDATING WAREHOUSES

• Warehouse management systems

• Vehicle routing and safety systems

• CRM systems

ERP IMPLEMENTATIONS

• Investment in e-commerce capabilities

• Focus on digital marketing

• Opportunity for efficiency gains

DIGITAL CAPABILITIES

• Make use of collective resources, experience and expertise

• Global collaboration

SHARING BEST PRACTICE

• Substantial purchasing synergies with suppliers

• Benefit from Bunzl Shanghai sourcing facility

GLOBAL PURCHASING


ACQUISITION GROWTH

136* acquisitions 2004 - 2016; total committed spend of £2.5bn

* Includes two committed acquisitions in 2016 which completed in January 2017 04-05 continuing operations only

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Number of acquisitions 7 7 9 8 7 2 9 10 13 11 17 22 14

Committed acquisition spend (£m)

302 129 162 197 123 6 126 185 277 295 211 327 184

Annualised acquisition revenue (£m)

430 270 386 225 151 27 154 204 518 281 223 324 201


• Anchor − New geographies − New sectors

• Bolt-on − Existing geographies or sectors − Extending product range − Consolidating markets

Disciplined approach to acquisitions

FURTHER MARKET CONSOLIDATION AND SYNERGIES

RESILIENT AND GROWING MARKETS

FRAGMENTED CUSTOMER BASE

ATTRACTIVE FINANCIAL RETURNS (ROIC, ROACE)

SMALL % OF TOTAL CUSTOMER SPEND

OPPORTUNITY FOR ‘OWN LABEL’ PRODUCTS

CONSOLIDATED PRODUCT OFFERING (‘ONE- STOP-SHOP’)

B2B GOODS NOT-FOR-RESALE

ACQUISITION PARAMETERS

14

• Extracting Value − Purchasing synergies − Warehouse & distribution

efficiencies − Back office integration − Product range extension − Sharing best practice − Investment in infrastructure, IT

& e-commerce


North America Continental Europe UK & Ireland Rest of World

COUNTRIES

COUNTRIES 7 1997*

COUNTRIES 12 2003*

COUNTRIES 18 2005*

COUNTRIES 27 2012

COUNTRIES 30 2017

GEOGRAPHIC EXPANSION

Significant scope for future geographic expansion

Revenue

2004*

2010

2016

* Continuing operations only


SIGNIFICANT OPPORTUNITIES TO GROW IN EXISTING COUNTRIES

16

COUNTRY FOODSERVICE GROCERY C&H SAFETY RETAIL HEALTHCARE

USA ●

Canada ●

Mexico ● ● ●

UK

Ireland

Germany ● ●

France ● ●

Italy ● ● ● ●

Spain ● ●

Netherlands

Belgium ●

Denmark ● ●

Switzerland

Austria ● ● ● ● ●

Czech Republic ● ● ● ●

COUNTRY FOODSERVICE GROCERY C&H SAFETY RETAIL HEALTHCARE

Romania ● ● ●

Hungary ● ●

Slovakia ● ● ● ●

Israel ● ● ● ● ●

Turkey ● ● ● ●

Brazil ● ● ●

Chile ● ● ● ●

Colombia ● ● ● ● ●

Argentina ● ● ● ● ●

Peru ● ● ● ● ●

Uruguay ● ● ● ● ●

Australia

New Zealand ●

Hong Kong ● ● ● ● ●

Singapore ● ● ● ● ●

● No existing presence


EXPERIENCED MANAGEMENT

service on average within the management team

17

Brian May Finance Director

Frank van Zanten Chief Executive

Patrick Larmon President and CEO

North America

Julie Welch Director of Group Human Resources

Paul Hussey General Counsel & Company Secretary

Andrew Tedbury Managing Director

UK & Ireland

Andrew Mooney Director of Corporate

Development

Paul Budge Managing Director Continental Europe

Jonathan Taylor Managing Director

Latin America

Kim Hetherington Managing Director

Australasia

>15 yrs


• Flat organisational structure

• Clear lines of responsibility

• Excellent customer service

VALUING OUR PEOPLE

Our people are our greatest asset c. 16,000 employees

CLEAR ROLES AND OBJECTIVES

• High retention rate of owners post acquisition

• Business model relies on knowledge and expertise in local markets

• Ensures customer relationships maintained

RETENTION OF FORMER OWNERS

• Sharing of best practice across the Group

• Facilitating collaboration across sectors via formal and informal forums

GLOBAL COLLABORATION

• Make use of collective resources, experience and expertise

• Focus on career development and succession plans

• Management development programmes at various levels across the Group

DEVELOPMENT AND TRAINING OPPORTUNITIES


STRONG FINANCIAL DISCIPLINE

6%†

19

* Before adjusting items (customer relationships amortisation and acquisition related costs) and the associated taxation, where relevant . 04-05 continuing operations only † Operating cash flow before acquisition related costs to adjusted operating profit 04-05 continuing operations only All data FY 2016 unless otherwise stated

HIGH RETURN ON CAPITAL

• RETURN ON OPERATING CAPITAL : 55.9% • RETURN ON INVESTED CAPITAL (PRE-TAX): 16.7%

STRONG BALANCE SHEET • NET DEBT / EBITDA: 2.0X

LOW WORKING CAPITAL AND CAPEX REQUIREMENTS

• AVERAGE WORKING CAPITAL TO SALES AT 10.8% • AVERAGE CAPEX OF £25M OVER PAST 3 YEARS

HIGH LEVEL OF CASH CONVERSION

• OPERATING CASH FLOW † TO ADJUSTED OPERATING PROFIT* AVERAGE : 97% 2004 -2016

GROWING DIVIDEND STREAM

• DIVIDEND PER SHARE CAGR > 10% (92-16) • 24 YEARS DIVIDEND GROWTH

UNIFORM FINANCIAL REPORTING SYSTEM • ACROSS ALL GEOGRAPHIES


93% 95% 92%

103%

92%

102%

93%

110%

93%

102% 95% 97% 99%

04 05 06 07 08 09 10 11 12 13 14 15 16

CASH CONVERSION

Average cash conversion*

97% TARGET 90%

* Operating cash flow before acquisition related costs to adjusted operating profit 04 – 05 continuing operations only


92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

DIVIDEND PER SHARE (p)

of consecutive dividend increases

24 years

4.0

42.0

CAGR

> 10%


2.4

7.4

04 05 06 07 08 09 10 11 12 13 14 15 16

FINANCIAL TRACK RECORD 2004-2016

Proven compounding strategy CAGR

* Before adjusting items (customer relationships amortisation and acquisition related costs) and the associated taxation, where relevant 04-05 continuing operations only

REVENUE (£bn) ADJUSTED OPERATING PROFIT* (£m)

ADJUSTED EPS* (p) DIVIDEND PER SHARE (p) 04-12 restated on adoption of IAS 19 (revised 2011)

169

525

04 05 06 07 08 09 10 11 12 13 14 15 16

31.7

106.1

04 05 06 07 08 09 10 11 12 13 14 15 16

13.3

42.0

04 05 06 07 08 09 10 11 12 13 14 15 16

22

10%-11%


CONTACTS

23

Bunzl plc +44 20 7725 5000

Frank van Zanten – Chief Executive Brian May – Finance Director

[email protected] www.bunzl.com


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.

DISCLAIMER


Documents

Bunzl plc - BUSINESS CASE/media/Files/B/Bunzl-PLC/reports... · 2017. 5. 9. · packaging, disposable tableware, guest amenities, catering equipment, cleaning products and safety