Berendsen plc. Timetable

Transcription

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2 Timetable 14:00 14:10 Trading Update & Q&A 14:10 15:20 Group Strategy Update & Q&A 15:20 15:30 Break 15:30 17:20 Breakout session by Business Line Workwear Facility Cleanroom Mats Washroom Hospitality Healthcare 17:20 17:30 Round up 17:30 19:00 Drinks Reception 2

3 Trading update to 31 October 2015 Underlying group revenue growth of 2.4% and adjusted operating margin up 30bps for 10 month period Post tax ROIC is now in excess of 10% on a rolling 12-month basis Investment in UK Hotel capacity to develop a superior operating model based on lean linen processing technology to deliver more customised services Reported results adversely impacted by translation Board expects to achieve a further year of good underlying progress 3

4 4 Strategy Update Introduction

5 Management team Presentation team James Drummond, CEO Kevin Quinn, CFO Peter Havéus, MD Workwear Christian Ellegaard, MD Facility Niels Peter Hansen, MD Hospitality Steve Finch, MD Healthcare Cleanroom Mats Washrooms Recruitment process underway TBD, Director Business Development Claude Sada, Director Berendsen Excellence Chris Thrush, Director HR David Lawler, Company Secretary 5

6 CEO observations Good quality business - well positioned for growth Strong foundations Proven business model Leading position in attractive markets Well invested business with a strong balance sheet Experienced management team with proven execution capabilities 6

7 Background to Strategy Update: Strategy results to date: Objective Target (set 2010) Deliver sustainable organic revenue growth GDP +1-2% pa 2% CAGR Improve capital efficiency Cash conversion of >100% Average: 124% Achieve post tax ROIC towards double-digits Towards double-digits +250bps (2014: 9.9%) Maintain sound financial position Net debt to EBITDA (<3x) Average: 1.44x Leverage operational efficiency High single-digit EPS growth 8.3% CAGR Improve returns to shareholders Pursue progressive dividend policy 7.2% CAGR 7

8 Background to Strategy Update Further quantify the scope of markets in which we operate Top down and bottom-up analysis of opportunities Continued development of organisational structure Build further capabilities to accelerate pace of delivery Review of capital deployment and priorities 8

9 CEO perspective Experience in building and growing B2B contracting businesses Building superior operating models Deploying LEAN management principles Public and private sector knowledge across a broad range of sectors International experience Strategy development and execution track record 9

10 10 Strategy Update Evolution of a successful strategy

11 Approach: A differentiated and superior service Vision Through great customer partnership and innovation, we will be respected for being the best, setting new standards and developing services that benefit all our stakeholders Strategy: Establish Berendsen Excellence Customer/Market Focus Growth Mission We are here to develop and provide value-added textile, hygiene and safety solutions Operational Excellence Organisation Capability/ People Development Values 1. Determination 2. Caring 3. Empowerment 4. Teamwork 5. Safety 6. Integrity Effective Use of Capital 11

12 Development of Strategy starts with Customer Focus Customer focus enables deeper and more insightful understanding of their requirements Which customers we can serve best and with what proposition Alignment of organisation design and resources allocation to create focus on customer requirements complete Business Line organisation Design and implement superior operating models to best deliver customer requirements, enables value creating organic and acquisition growth Delivers: Improved growth potential Volume Quality Improved margins Improved capital efficiency Improved competitiveness Drives data driven innovation in service offering and continuous improvement in service delivery Proven success with Workwear and Cleanroom Business Lines 12

13 Completing Business Line Focus Proven success of Business Line model in Workwear and Cleanroom Moving to 4 Business Lines Superior operating models most developed in Workwear and Cleanroom Deeper market and customer insights and requirements Differentiated delivery models and service solutions Service flexibility through CL2000 Productivity increase Better quality of textiles Increased volume capacity Delivering financial performance Workwear best practice differentials and improving margin Cleanroom growth and market improvement Facility Workwear Cleanroom Mats Washroom Hospitality Healthcare 13

14 14 Strategy Update

15 Strategic actions 1. Customer / market focus Growth Group Business Line Establish new Group structure 4 business lines Develop leading product and customer innovation Develop bolt-on acquisition opportunities Further develop customer specific segment execution Leverage existing relationships Develop thought leadership schemes particularly in Healthcare 15

16 Market opportunity: Customer Focus will drive growth Business Line Key customer requirements Berendsen s market segment focus Workwear Hygiene and protective workwear, distinct product range to meet corporate branding Food and Beverages, Metal & Machinery, Catering, Petrochemical & Utilities Facility: Cleanroom Facility: Mats Facility: Washroom Compliance with strict legislation and certification requirements Focus on indoor climate and reduce wear and need for cleaning, driving cost efficiency Product range matching increased hygiene awareness and improving cost efficiency Pharmaceutical, Hi-tech, Hospitals Hospitality, Healthcare, Trade/Industry/Services, Offices Hospitality, Healthcare, Trade/Industry/Services, Offices Hospitality Healthcare Increasing need for product distinction and diversification to support customer branding and image Supply complete range of textile and specialised equipment within care sector, driving up quality standards and patient safety Hotels, Restaurants, Serviced apartments Hospitals, Private medical/dental clinics, Care Homes 16

17 Market opportunity: Attractive markets The European textile rental market has an estimated value of bn* Grow with customers and greater share of wallet Sources for future growth Gain market share (organic and bolt-on acquisitions) c. 6.8bn^ addressable market Convert virgin market Long term growth drivers Focus on core activities c. 1bn Berendsen existing business c. 2.7bn of existing outsourced market c. 3.1bn virgin opportunities Complying with regulation Robust operating platform Well positioned to benefit Diverse range of sectors Diverse geographic footprint Market leading positions Wide-ranging customer base Sustainability Source: *ETSA Deloitte study, May 2014 ^ Internal analysis and includes Care Homes and Decontamination markets 17

18 Market opportunity: Addressable market Business Lines Capital allocation: Our operating models are most advanced in Workwear and Facility million BRSN Revenue 2014* Currently outsourced market^ Virgin opportunities^ Operating returns Workwear 350 1,850 1,600 Attractive Growth drivers Strong Economic improvement Virgin opportunities Market share gains Growth with key account customers Competitive strength / Market position High Leading (excl Germany) Investment priorities Accelerate CL2000 roll out Bolt-on acquisitions Facility Cleanroom Attractive Strong Customer development New geographies Service extensions High Leader Accelerate Capacity investments Facility Mats Attractive Moderate Efficiency of sales force Market share High Leader Moderate Bolt-on acquisitions Facility Washroom Attractive Moderate Efficiency of sales force Developing Leader Low capital intensity Bolt-on acquisitions Source: *Internal analysis of Berendsen revenue by end market ^ Internal analysis 18

19 Market opportunity: Addressable market Business Lines million BRSN Revenue 2014* Currently outsourced market^ Virgin opportunities^ Operating returns Growth drivers Competitive strength / Market position Investment priorities Hospitality Moderate Moderate Market growth via customer base Market share Developing Leader Moderate Investment to establish lean batch production Healthcare Linen Moderate Moderate Demographics Service extensions Further outsourcing Moderate Leader Low Healthcare New markets Care home Limited Limited 350 Evaluate Strong - Untapped market need Innovate Evaluate Healthcare Decontamination Evaluate Moderate Further outsourcing of sterile services Service extensions Strong Leading (UK) Evaluate Consolidation opportunities Healthcare Clinical solutions 50 Significant Limited Low Low Competitive Managed Leading Limited Healthcare Germany Significant but fragmented Weak Weak Highly competitive Managed Leading Limited Source: *Internal analysis of Berendsen revenue by end market ^ Internal analysis 19

20 Manage / Evaluate Capital allocation Develop / Maintain Accelerate Berendsen plc Market opportunity: Capital allocation priorities Workwear Cleanroom Hospitality Mats Washroom Healthcare Linen Healthcare Germany Healthcare Clinical Healthcare Care Homes Healthcare Decontamination Lower Moderate High Market attractiveness 20

21 Market opportunity: Bolt-on acquisitions A broad pipeline of bolt-on opportunities Fewer opportunities in recent years but more focus on organic growth and returns Increasing signs of vendor engagement; invest or sell decisions Well positioned for larger scale consolidation Acquisition Disciplined Approach Bolt-on acquisitions New countries & new markets Compatible & cultural fit Targeted pipeline Execution team Robust Integration plan 21

22 22 Strategy Update

23 Strategic actions 2. Operational excellence Group Business Line Establish Berendsen Excellence Develop differentiated superior operating models Enhance service delivery through the use of IT 23

24 Operational excellence Superior operating models for each Business Line focused on delivering customer requirements: Enable value creation Eliminate waste Operational flexibility Better quality Reduce customer loss Gain market share through both organic and bolt-on acquisition growth opportunities Ability to add value to acquired companies Ability to compete for bolt-on acquisitions if required Competitive advantage to gain market share Continuous improvement in service delivery 24

25 Berendsen Excellence Berendsen plc Berendsen Excellence (BE): Developing our model 5 year horizon Many building blocks for BE are already in place. Evolve focus from internal best practice sharing to structured development of Superior Operating Models across all Business Lines Health, Safety & Environment LEAN Procurement & Supply Chain Business Improvement Programme LEAN experts ( Black Belts ) Developing Superior Operating Models Group Business Line KPIs BE Build & Roll Out Process & Systems 5 Year Plan 25

26 Berendsen Superior Operating Models Progress so far CL 2000 in Workwear and Cleanroom Built on LEAN principles Better designed to meet customer requirements Significant benefits: Greater service flexibility Higher productivity (+ 30%) Better quality textiles and output (customer experience) Work in progress CL 3.0 for Workwear and Cleanroom Apply LEAN principles to newly defined Business Lines Hospitality blueprint in process Acquisition of LEAN plant investment in Reading Healthcare blueprint to follow Care homes pilot underway Additional volume capacity 26

27 27 Strategy Update

28 Strategic actions 3. Organisation capability / people development Group Business Line Establish Berendsen Excellence LEAN experts (Black Belts/ Green Belts) Enhance business development capability Training based on LEAN principles Strengthen use and scope of shared services Talent management and succession planning 28

29 Establish Berendsen Excellence Bring building blocks of LEAN under Executive Board Director Identify internal LEAN experts (Black Belt capability) Recruit additional LEAN expertise (Black Belt capability) Black belt training LEAN Training Berendsen Academy LEAD training Sales Academy Pricing & Commercial terms 29

30 Enhance Group Business Development Group Director recruitment Staff with high potential internal candidates Approach Business development to support local teams Disciplined approach Enhance local management capacity Acquisitions Compatible and cultural fit Strict operational and financial criteria Managing bolt-on acquisition pipeline Post acquisition integration Organic Operational efficiency Existing services, new markets New services, current markets Pricing initiatives 30

31 Use of Shared Services capability to maintain overhead efficiency Shared services in each country to serve each Business Line Shared scope includes: Management and transactional accounting Health & Safety support to the business IT services HR Already established in UK, Denmark, Sweden and The Netherlands 31

32 32 Strategy Update

33 Strategic actions 4. Effective use of capital Group Business Line Clear prioritisation and focus of capital investment Working capital management Maintain financial and capital discipline Operational excellence and margin improvement Financial objectives set Execution of organic capital investment plans Strong balance sheet and funding profile 33

34 'm Berendsen plc Generation and uses of cash ,587m 37m ( 669m) 1400 Free Cash Flow 737m 1200 Net Debt Reduction 140m 1000 ( 208m) m Dividends 205m 600 Acquisitions 128m 400 Employee shares and Pension 83m 200 Organic Capital Investment 181m 0 EBITDA Working Capital and Other Textile Spend Interest and Tax Payments Free Cash Flow Uses of Free Cash Flow 34

35 Revenue ( m) EPS (p) Berendsen plc Maintaining progress on returns % % % Revenue ( m) 1,054 EPS (p) 1, % 15.3%% Performance driven by self-help. Limited GDP growth and adverse exchange Well placed should economies pick up, but resilience also demonstrated Underlying organic revenue growth of 2.5% on average from 2011 Further progress expected though organic growth and acquisitions Revenue growth at least 2% above GDP Opportunities to increase margins further and achieve levels of underlying EPS growth ahead of revenue Adjusted Operating Margin (%) GBP:EUR Exchange Rate 35

36 Cash discipline remains core Cash generation model with disciplines improved over period Further initiatives in working capital and textiles Accelerate investment over the next 24 months to: Complete CL 2000 conversion in UK Workwear Expand capacity in German Workwear Expand capacity in Cleanroom Development investment to extend lean production in Hospitality Strong underlying cash flows. Cash conversion range 75% - 90% after these investments Cash Conversion (%) Adjusted Free Cash Flow 36

37 Increasing shareholder value by driving returns on investment % 19.4% 22.2% 24.0% 26.3% Double-digit ROIC achieved in line with objectives Maintain double-digit returns going forward based on the existing ROIC definition (including goodwill) Will also report Return on Operating Capital going forward (excluding goodwill) reflecting high levels of returns available from organic investment 15 Progressive dividend policy maintained with around 2x cover % 7.9% 8.5% 9.3% 9.9% Return on Invested Capital (post tax) % Return on Operating Capital (post tax) % 37

38 Strong balance sheet maintained Leverage (net debt/ebitda) reduced over the period 800m of funding available with good duration and spread of maturities Strong balance sheet priority: Range of 1x to 2x leverage Net Debt Leverage 38

39 Implementation Financial implications Capability investments c. 2 million in Benefits accrue from 2017 Further cash costs expected in range of 5-10 million over the next 24 months Some costs from workstream activities (change management) Aligning Business Line teams and their operating models Continued focus on shared services Segment reporting P& L accountability at plant level is the key building block 2015 reported on existing Business line segments 2016 reported on existing and new Business Line segments 2017 reported on new Business Line Segments 39

40 Financial summary Sustainable revenue growth Berendsen Excellence to drive margin improvements Aligning Business Line teams and their operating models Invest for growth with capital allocation prioritised within Business Lines Future reporting of Return on Operating Capital Robust balance sheet Increase returns to shareholders 40

41 41 Summary

42 Roadmap Strategic initiatives Q Q Q Q Q Group Strategy Strategy review Implement new group structure - 4 business lines Group Business Development team Group Berendsen Excellence (BE) Group Shared Services Establish team and prioritises for organic and bolt-on acquisition opportunities Establish BE director and team to support lean/continuous improvement model Establish Shared Services director to strengthen use and scope of shared services 5 Business Line Workwear Team AS IS Accelerate CL2000 rollout across UK and Germany network Complete CL3.0 design and implementation 6 Business Line Hospitality Team in place Complete business line blueprint Complete design of operating model 7 Business Line Healthcare Team in place Complete business line blueprint Complete design of operating model 8 Business Line Facilities Team AS IS Accelerate investments in Cleanroom Further Focus through separation of Mats and Washroom organisations 42

43 Extending and developing a successful clear and focused strategy: continuing improved returns to shareholders Customer / market focus growth Increase market and customer focus with move to Business Line Structure Sustainable revenue growth of at least GDP +2% pa Operational excellence Continued margin improvement and targeting levels of underlying EPS growth ahead of revenue Strong underlying cashflows with cash conversion range 75% to 90% after targeted investments Organisation capability / people development Build strong management team with planned succession Effective use of capital Net debt to EBITDA range of 1x to 2x Post tax ROIC maintained in double-digit Progressive dividend policy 43

44 44 Q&A

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46 Return measures million NOPAT return Adjusted operating profit Add back: Pension interest less returns on investment (1.8) (0.9) Less tax at effective rates (36.8) (39.5) Net operating profit after tax Operating capital and Invested Capital Total equity Add back: Net debt Retirement benefit obligations Derivatives Intangible assets (9.0) (5.1) (450.6) (0.9) 7.2 (487.5) Operating capital Add back: Intangible assets (including goodwill previously written off, amortisation and other) Invested capital 1, ,279.5 Return on Operating Capital (post tax) 26.3% 24.0% ROIC on Invested Capital (post tax) 9.9% 9.3%

47 Important notice This presentation has been prepared by Berendsen plc (the Company ). It contains summary information only, has not been independently verified and does not purport to contain all of the information that you may require. No person shall have any right of action (except in the case of fraud) against the Company or any other person in relation to the accuracy or completeness of the information contained herein. This presentation does not constitute an offer of securities, and should not be construed as an invitation, inducement or recommendation to any person to underwrite, subscribe for, or otherwise acquire or deal in any securities of the Company. The information contained herein is subject to change without notice and past performance is not indicative of future results. This presentation is only being made to, and is only directed at, persons to whom this presentation may lawfully be communicated ( relevant persons ), being (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 19 of the Order. This presentation must not be acted on or relied on by persons who are not relevant persons. This presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. In particular, this presentation is not intended for distribution in the United States or to U.S. persons (as defined in Regulation S) under the United States Securities Act of 1933, as amended. Certain statements made in this presentation are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results expressed or implied in this presentation. Forward-looking statements speak only as of the date of this presentation, and the Company assumes no obligation to update or provide any additional information in relation to such statements. This presentation is confidential and is being made available to selected recipients only. It may not be reproduced (in whole or in part), distributed or transmitted to any other person without the prior written consent of the Company. 47