BUSINESS CASE APRIL 2017
BUNZL OVERVIEW Consistent and proven compounding strategy
UNIQUE BUSINESS MODEL
BALANCED BUSINESS PORTFOLIO
ATTRACTIVE CUSTOMER MARKETS
GLOBAL SOURCING
ORGANIC GROWTH
OPERATIONAL FOCUS
ACQUISITION STRATEGY & TRACK RECORD
OUR PEOPLE
STRONG FINANCIAL DISCIPLINE
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
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BUSINESS MODEL • • • •
SOURCE
One-stop-shop for non-food consumables
Global suppliers Low cost sources Commodities Own brands
INDIVIDUAL RANGES
CONSOLDATE
• Direct to site • Cross dock • Warehouse replenishment
DELIVER
CONSOLIDATED OFFER
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Foodservice
Grocery
Cleaning & hygiene
Safety
Retail
Healthcare
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VALUE PROPOSITION Outsourcing adds value for our customers
COST TO ACQUIRE
PRODUCT COST
COST TO PROCESS
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
• 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 BUSINESS CASE
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SERVICE OFFERING ONE-STOP-SHOP
ON-TIME IN-FULL DELIVERY
DEDICATED FIELD SALES FORCE
ONE ORDER ONE DELIVERY ONE INVOICE
Service offering
RANGE OF DELIVERY OPTIONS INCLUDING OWN FLEET
CUSTOMISED MANAGEMENT INFORMATION
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LOCAL AND NATIONAL DISTRIBUTION NETWORK
EXPERT KNOWLEDGE AND ADVICE
CUSTOMISED DIGITAL SOLUTIONS
OWN BRAND AND MANUFACTURER BRANDED
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BUSINESS AREA ANALYSIS Organised by geography Well diversified 30 countries at different stages of maturity
NORTH AMERICA
59% Revenue 53% Operating profit*
UK & IRELAND
15% Revenue 15% Operating profit*
* Adjusted operating profit - before adjusting items (customer relationships amortisation and acquisition related costs) and corporate costs
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CONTINENTAL EUROPE 18% Revenue 23% Operating profit*
REST OF WORLD
8% Revenue 9% Operating profit*
Based on 2016 FY
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CUSTOMER MARKETS
75%
Healthcare
resilient Foodservice Grocery Cleaning & hygiene Healthcare
Other
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
Foodservice 7%
Retail
4%
10%
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 11% companies, retail chains and home improvement chains
12%
30%
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.
26%
Grocery
Safety
A complete range of personal protection equipment, including gloves, boots, ear and eye protection and other workwear, to industrial and construction markets BUSINESS CASE
APRIL 2017
Cleaning & hygiene
Cleaning and hygiene materials, including chemicals and hygiene paper ,to cleaning and facilities management companies and industrial and public sector customers
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 Based on 2016 FY Revenue 7
TYPICAL PRODUCTS A broad range of non-food consumable products
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6%†
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GLOBAL SOURCING Partner with leading manufacturers Sourcing via our own Shanghai sourcing office
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PREFERRED SUPPLIERS
SOURCING
Own brands Commodities Low cost sources Eco-friendly products
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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
ROIC 16.7%
Use strong balance sheet and excellent cash flow to consolidate our markets further
Based on 2016 FY BUSINESS CASE
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ORGANIC GROWTH SELL MORE TO EXISTING CUSTOMERS
Organic growth typically real GDP +
EXPAND PRODUCT RANGE VOLUME
12
WIN NEW CUSTOMERS MARKET LEADING CUSTOMERS GROWING SECTORS TREND TO OUTSOURCING OWN BRAND / IMPORTS
MIX
MANUFACTURER BRANDS GEOGRAPHIES AND SECTORS INFLATION / DEFLATION
PRICE
MARKET DYNAMICS FX IMPACT
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OPERATING MODEL IMPROVEMENTS Small improvements every day everywhere lead to significant progress over time
CONSOLIDATING WAREHOUSES • Close smaller and less efficient facilities • Continually evaluate and upgrade warehousing ERP IMPLEMENTATIONS • Warehouse management systems • Vehicle routing and safety systems • CRM systems
SHARING BEST PRACTICE • Make use of collective resources, experience and expertise • Global collaboration GLOBAL PURCHASING • Substantial purchasing synergies with suppliers • Benefit from Bunzl Shanghai sourcing facility
DIGITAL CAPABILITIES • Investment in e-commerce capabilities • Focus on digital marketing • Opportunity for efficiency gains
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ACQUISITION GROWTH 136* acquisitions 2004 - 2016; total committed spend of £2.5bn
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
* Includes two committed acquisitions in 2016 which completed in January 2017 04-05 continuing operations only
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ACQUISITION PARAMETERS Disciplined approach to acquisitions
B2B
GOODS NOT-FOR-RESALE
CONSOLIDATED PRODUCT OFFERING (‘ONESTOP-SHOP’)
RESILIENT AND GROWING MARKETS
FRAGMENTED CUSTOMER BASE
FURTHER MARKET CONSOLIDATION AND SYNERGIES
SMALL % OF TOTAL CUSTOMER SPEND
OPPORTUNITY FOR ‘OWN LABEL’ PRODUCTS
ATTRACTIVE FINANCIAL RETURNS (ROIC, ROACE)
• Anchor − New geographies − New sectors • Bolt-on − Existing geographies or sectors − Extending product range − Consolidating markets BUSINESS CASE
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• Extracting Value − Purchasing synergies − Warehouse & distribution efficiencies − Back office integration − Product range extension − Sharing best practice − Investment in infrastructure, IT & e-commerce
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GEOGRAPHIC EXPANSION Significant scope for future geographic expansion
1997*
2003*
7
12
2012
2017
COUNTRIES
27
COUNTRIES
Revenue
2005*
18
COUNTRIES
COUNTRIES
30
COUNTRIES 2016 2010
2004*
North America
* Continuing operations only BUSINESS CASE
APRIL 2017
Continental Europe
UK & Ireland
Rest of World 15
SIGNIFICANT OPPORTUNITIES TO GROW IN EXISTING COUNTRIES COUNTRY
FOODSERVICE
GROCERY
C&H
SAFETY
RETAIL
HEALTHCARE
COUNTRY
USA
●
Romania
Canada
●
Hungary
●
Slovakia
●
Mexico
●
FOODSERVICE
GROCERY
C&H
●
●
●
●
●
●
Ireland
Turkey
●
●
France
●
●
Chile
Italy
●
●
●
●
●
Spain
●
Netherlands
●
Belgium
●
Denmark
●
●
●
●
●
●
●
Colombia
●
●
●
●
●
Argentina
●
●
●
●
●
Peru
●
●
●
●
●
Uruguay
●
●
●
●
●
Australia
●
New Zealand
Switzerland
●
Austria Czech Republic
●
●
● ●
●
● ●
●
Brazil
● ●
●
●
●
●
Israel
●
● ●
UK
Germany
SAFETY RETAIL HEALTHCARE
●
●
Hong Kong
●
●
●
●
●
Singapore
●
●
●
●
● ●
●
● No existing presence BUSINESS CASE
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EXPERIENCED MANAGEMENT
>15 yrs service on average within the management team
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Frank van Zanten Chief Executive
Brian May Finance Director
Patrick Larmon President and CEO North America
Julie Welch Director of Group Human Resources
Paul Hussey General Counsel & Company Secretary
Andrew Mooney Director of Corporate Development
Paul Budge Managing Director Continental Europe
Andrew Tedbury Managing Director UK & Ireland
Jonathan Taylor Managing Director Latin America
Kim Hetherington Managing Director Australasia
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VALUING OUR PEOPLE Our people are our greatest asset
CLEAR ROLES AND OBJECTIVES • Flat organisational structure • Clear lines of responsibility • Excellent customer service
c. 16,000 employees
RETENTION OF FORMER OWNERS • High retention rate of owners post acquisition
DEVELOPMENT AND TRAINING OPPORTUNITIES • Make use of collective resources, experience and expertise • Focus on career development and succession plans • Management development programmes at various levels across the Group
• Business model relies on knowledge and expertise in local markets • Ensures customer relationships maintained GLOBAL COLLABORATION • Sharing of best practice across the Group • Facilitating collaboration across sectors via formal and informal forums BUSINESS CASE
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STRONG FINANCIAL DISCIPLINE
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HIGH RETURN ON CAPITAL
• RETURN ON OPERATING CAPITAL : 55.9% • RETURN ON INVESTED CAPITAL (PRE-TAX): 16.7%
STRONG BALANCE SHEET
6%†2.0X • NET DEBT / EBITDA:
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
* 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
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CASH CONVERSION Average cash conversion*
97%
110% 103% 93%
95%
04
05
92%
06
102% 93%
92%
07
08
102%
09
10
95%
93%
11
12
97%
99% TARGET 90%
13
14
15
16
* Operating cash flow before acquisition related costs to adjusted operating profit 04 – 05 continuing operations only
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DIVIDEND PER SHARE (p) 42.0
24 years
CAGR
of consecutive dividend increases
> 10%
4.0 92 BUSINESS CASE
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93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16 21
FINANCIAL TRACK RECORD 2004-2016 Proven compounding strategy CAGR
10%-11%
REVENUE (£bn)
ADJUSTED OPERATING PROFIT* (£m) 7.4
2.4
04
169
05
06
07
08
09
10
11
12
13
14
15
16
ADJUSTED EPS* (p)
04
05
06
07
08
09
10
11
12
13
14
15
16
DIVIDEND PER SHARE (p)
04-12 restated on adoption of IAS 19 (revised 2011)
42.0
106.1
13.3
31.7
04
525
05
06
07
08
09
10
11
12
13
14
15
16
04
05
06
07
08
09
10
11
12
13
14
15
16
* Before adjusting items (customer relationships amortisation and acquisition related costs) and the associated taxation, where relevant 04-05 continuing operations only
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CONTACTS
Bunzl plc
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+44 20 7725 5000 Frank van Zanten – Chief Executive Brian May – Finance Director
[email protected] www.bunzl.com
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DISCLAIMER 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.
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