BUSINESS CASE APRIL 2018

Transcription

1 BUSINESS CASE

2 BUNZL OVERVIEW Consistent and proven compounding strategy UNIQUE, CUSTOMER FOCUSED BUSINESS MODEL GLOBAL SOURCING BALANCED BUSINESS PORTFOLIO ORGANIC GROWTH ATTRACTIVE CUSTOMER MARKETS OPERATIONAL FOCUS ACQUISITION STRATEGY & TRACK RECORD OUR PEOPLE STRONG FINANCIAL DISCIPLINE Bunzl plc is a focused and successful international distribution group providing customised solutions to B2B customers in 30 countries and six market sectors Headquartered in London and listed on the London Stock Exchange - FTSE100 ; Support Services sector 2

3 BUSINESS MODEL One-stop-shop for essential everyday items supported by: 3,000 sales specialists and 2,500 locally based customer service specialists SOURCE CONSOLDATE DELIVER INDIVIDUAL RANGES a CONSOLIDATED OFFER Global suppliers Low cost sources Commodities Own brands Direct to site Cross dock Warehouse replenishment Foodservice Grocery Cleaning & hygiene Safety Retail Healthcare 3

4 VALUE PROPOSITION Outsourcing to Bunzl 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 4

5 BUNZL UNIQUE SERVICE OFFERING RANGE RATIONALISATION INNOVATION CENTRES INDIVIDUAL PRODUCT KNOWLEDGE HEALTH AND SAFETY REQUIREMENTS INDUSTRY LEADING SPECIALISED SALES FORCE LOCAL CUSTOMER SERVICE SPECIALISTS DIRECT TO SITE X DOCK WAREHOUSE REPLENISHMENT BESPOKE / PRINTED PRODUCT MANAGEMENT PRODUCT TRAINING CONTRACT MOBILISATIONS MATERIAL CONSOLIDATION EXPERT KNOWLEDGE AND ADVICE USAGE CONSUMPTION VS CUSTOMER BUDGET COMPLIANCE BY UNITS TO HEAD OFFICE DELIVERY OPTIONS DESIGN / INSTALLATION SERVICES ECONOMIC DENSITY ANALYSIS INNOVATION CENTRES VALUE ADDED SERVICES CUSTOMISED MANAGEMENT INFORMATION MARKET INTELLIGENCE SUPPLY CHAIN STUDIES FULL RANGE STOCKED BULKY LOW VALUE PRODUCTS ONE-STOP-SHOP CUSTOMISED SOLUTIONS NATIONAL FOOTPRINT LOCAL AND NATIONAL DISTRIBUTION NETWORK MULTIPLE DELIVERY LOCATIONS MINIMISE CUSTOMERS WORKING CAPITAL ESSENTIAL ITEMS OWN FLEET ON-TIME IN-FULL DELIVERY MANUFACTURER BRANDED CUSTOMISED DELIVERY SLOTS COMPETITIVELY PRICED PRODUCTS EXCLUSIVE DISTRIBUTION DIRECT DEALS WITH MANUFACTURERS DELIVERED BY BUNZL ONE ORDER ONE DELIVERY ONE INVOICE OWN BRAND PRODUCT AVAILABILITY DELIVERY BEYOND BACK DOOR CUSTOMISED DIGITAL SOLUTIONS BENEFIT OF BUNZL SCALE SHANGHAI SOURCING OFFICE - QC/QA RIGHT PRODUCT RIGHT PRICE DEDICATED CALL CENTRES PRODUCTS STOCKED IN BUNZL WAREHOUSE EDI APP WEBSHOP EXCEED BUDGET ALERTS VALUE ALTERNATIVE OWN BRAND QUASI MANUFACTURER OWN BRAND 5

6 BUSINESS AREA ANALYSIS Well diversified by geography NORTH AMERICA 59% Revenue 52% Operating profit* CONTINENTAL EUROPE 19% Revenue 25% Operating profit* UK & IRELAND 14% Revenue 14% Operating profit* REST OF WORLD 8% Revenue 9% Operating profit* * Adjusted operating profit - before adjusting items (customer relationships amortisation and acquisition related items) and corporate costs 6

7 CUSTOMER MARKETS 75% resilient Foodservice Grocery Cleaning & hygiene Healthcare Well diversified by sector Healthcare Healthcare consumables, including gloves, swabs, gowns, bandages and other healthcare related equipment and cleaning and hygiene products to hospitals, care homes and other facilities serving the healthcare sector Retail Goods not for resale, including packaging and other store supplies and a full range of cleaning and hygiene products, to retail chains, boutiques, office supply companies, department stores, home improvement chains and related e-commerce sales channels 10% 12% 3% 7% 12% Other 27% 29% 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 Safety A complete range of personal protection equipment, including gloves, boots, hard hats, ear and eye protection and other workwear, to industrial and construction markets 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 Based on 2017 FY Revenue 7

8 TYPICAL PRODUCTS A broad range of essential every day items 6% 8

9 GLOBAL SOURCING Partner with leading manufacturers PREFERRED SUPPLIERS SOURCING Sourcing via our own Shanghai sourcing office Own brands Commodities Low cost sources Eco-friendly products 9

10 CONSISTENT AND PROVEN COMPOUNDING STRATEGY High ROIC despite significant acquisition spend PROFITABLE ORGANIC GROWTH OPERATING MODEL IMPROVEMENTS Use competitive advantage to grow market share in a profitable way Daily focus on making our business more efficient ROIC 16.0% ACQUISITION GROWTH Use strong balance sheet and excellent cash flow to consolidate our markets further 10

11 ORGANIC GROWTH Organic growth typically real GDP + VOLUME SELL MORE TO EXISTING CUSTOMERS EXPAND PRODUCT RANGE 12 WIN NEW CUSTOMERS MARKET LEADING CUSTOMERS GROWING SECTORS TREND TO OUTSOURCING MIX OWN BRAND / IMPORTS MANUFACTURER BRANDS GEOGRAPHIES AND SECTORS PRICE INFLATION / DEFLATION MARKET DYNAMICS FX IMPACT 11

12 OPERATING MODEL IMPROVEMENTS Small improvements every day everywhere lead to significant progress over time WAREHOUSING Consolidation of warehouse footprint Continually evaluate and upgrade facilities including environmental initiatives ERP IMPLEMENTATIONS Warehouse management systems Vehicle routing and safety systems CRM systems DIGITAL CAPABILITIES Investment in e-commerce capabilities Focus on digital marketing Opportunity for efficiency gains SHARING BEST PRACTICE Make use of collective resources, experience and expertise Global collaboration GLOBAL PURCHASING Substantial purchasing synergies with suppliers Benefit from Bunzl Shanghai facility (sourcing, QA and QC) 12

13 ACQUISITION GROWTH 3.1bn total committed spend 151 * acquisitions Number of acquisitions Committed acquisition spend ( m) Annualised acquisition revenue ( m) * * Includes two committed acquisitions in 2017 which completed in January continuing operations only 13

14 ACQUISITION PARAMETERS Disciplined approach to acquisitions B2B RESILIENT AND GROWING MARKETS GOODS NOT-FOR-RESALE FRAGMENTED CUSTOMER BASE CONSOLIDATED PRODUCT OFFERING ( ONE- STOP-SHOP ) 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 Extracting Value Purchasing synergies Warehouse & distribution efficiencies Back office integration Product range extension Sharing best practice Investment in infrastructure, IT & e-commerce 14

15 GEOGRAPHIC EXPANSION Significant scope for future geographic expansion 1997* 7 COUNTRIES COUNTRIES 2003* 12 COUNTRIES COUNTRIES 2005* 18 COUNTRIES 2017 Revenue * North America Continental Europe UK & Ireland Rest of World * Continuing operations only 15

16 SIGNIFICANT OPPORTUNITIES TO GROW IN EXISTING COUNTRIES 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 Hungary Romania Slovakia Israel Turkey Brazil Chile Colombia Argentina Peru Uruguay Australia New Zealand China / Hong Kong Singapore No existing presence 16

17 EXPERIENCED MANAGEMENT >15 yrs service on average within the management team 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 17

18 VALUING OUR PEOPLE Our people are our greatest asset c. 19,000 employees CLEAR ROLES AND OBJECTIVES Flat organisational structure Clear lines of responsibility Excel at customer service RETENTION OF FORMER OWNERS High retention rate of owners post acquisition 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 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 Targeted activities to increase the number of women in senior leadership roles 18

19 STRONG FINANCIAL DISCIPLINE HIGH RETURN ON CAPITAL RETURN ON OPERATING CAPITAL : 53.1% RETURN ON INVESTED CAPITAL (PRE-TAX): 16.0% NET DEBT / EBITDA TARGET RANGE: 2.0x 2.5x 6% LOW WORKING CAPITAL AND CAPEX REQUIREMENTS HIGH LEVEL OF CASH CONVERSION GROWING DIVIDEND UNIFORM FINANCIAL REPORTING SYSTEM AVERAGE WORKING CAPITAL TO SALES AT 11.2% AVERAGE CAPEX OF 28M OVER PAST 3 YEARS OPERATING CASH FLOW TO ADJUSTED OPERATING PROFIT* AVERAGE : 97% DIVIDEND PER SHARE CAGR > 10% (92-17) 25 CONSECUTIVE YEARS OF DIVIDEND GROWTH ACROSS ALL GEOGRAPHIES * Before adjusting items (customer relationships amortisation and acquisition related items) and the associated taxation, where relevant (04-05 continuing operations only) Operating cash flow before acquisition related items to adjusted operating profit (04-05 continuing operations only) All data FY 2017 unless otherwise stated 19

20 CASH CONVERSION Average cash conversion* 97% 93% 95% 92% 103% 92% 102% 93% 110% 93% 102% 95% 97% 99% 97% TARGET 90% * Operating cash flow before acquisition related items to adjusted operating profit continuing operations only 20

21 DIVIDEND PER SHARE (p) 25 years 46.0 of consecutive dividend increases CAGR > 10%

22 FINANCIAL TRACK RECORD Proven compounding growth strategy REVENUE ( bn) 8.6 ADJUSTED OPERATING PROFIT* ( m) 589 CAGR %-11% ADJUSTED EPS* (p) DIVIDEND PER SHARE (p) restated on adoption of IAS 19 (revised 2011) * Before adjusting items (customer relationships amortisation and acquisition related items) and the associated taxation, where relevant continuing operations only 22

23 CONTACTS Bunzl plc Frank van Zanten Chief Executive Brian May Finance Director 23

24 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 ( Bunzl ) 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 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. All statements other than statements of historical fact are, or may be deemed to be, 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 to whom under Article 49 of the Order financial promotions may be made as an exception to the general prohibition under Article 21 of the Order; or (iii) to persons outside of the United Kingdom but in the European Economic Area ( EEA ) who are qualified investors within the meaning of Article 2(1)(e) of EU Directive 2003/71/EC, as modified by EU Directive 2010/73/EU, in each case as implemented in the relevant jurisdiction (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. If you are not resident in an EEA member state or you are viewing this presentation in a country that is not an EEA member state, information displayed in this presentation contains material that may be interpreted by the relevant authorities in the country from which you are viewing the presentation as a financial promotion or an offer to purchase securities. Accordingly, the information in this presentation is only intended to be viewed by persons who fall outside the scope of any law that seeks to regulate financial promotions in your country of residence or in the country in which this presentation is being viewed. 24