BUNZL PLC/media/Files/B/Bunzl-PLC/reports-and... · Brian May - Finance Director [email protected]...

Bunzl Business Case March 2013

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BUNZL PLC

BUSINESS CASE March 2013


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Bunzl is a growing and successful Group providing

outsourcing solutions and value added distribution

across the Americas, Europe and Australasia

About Us


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Sales channel

Business Overview

Business to business distribution

£5.4bn revenue in 2012

Revenue growth (CAGR 04-12): 11%

Operating profit growth* (CAGR 04-12): 9%

Average annual cash conversion† (04-12) of 97%

Products Wide range of non-food consumable products

Sourcing From leading brand manufacturers

Own brands and unbranded products

Sourcing centre in Shanghai – no own manufacturing

Footprint More than 12,800 employees

International diversification: 27 countries, 4 continents

Key Facts UK plc headquartered in London

Listed on LSE; FTSE 100; Support Services sector

Financials

*Before intangible amortisation and acquisition related and corporate costs †Operating cash flow before acquisition related costs to operating profit before intangible amortisation and acquisition related costs

04-05 continuing operations only


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Supported by an integrated I.T. platform

Global sourcing

& procurement

International

warehousing

& distribution

infrastructure

Consolidation

of consumables

Customer Range of

delivery options

Benefits to Customers: Supply Chain


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Outsourcing adds value to the customer

Value Proposition

INVENTORY INVESTMENT PRODUCT COST

COST

TO

ACQUIRE

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


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Market Environment

Multiple growth drivers

Customer base

Fragmented competitors

• Exposed to growing sectors including

• Foodservice – away from home

• Cleaning & Hygiene – away from home

• Healthcare – demographics

• Safety – increased legislation

Growing market sectors

Outsourcing trend

• Customers and manufacturers

focusing on their core business

• None do what we do, on our scale

and across our markets

• Bunzl’s national footprint provides

competitive advantage

• Strong customer base

• Working with national and

international leaders

• Aligned with customer growth


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Strategy

Consistent and proven strategy

ROIC

17.9%

GDP+ Organic Growth

Operating Model

Efficiencies

Acquisition Growth


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Strategy Building Blocks

Unique

business

model

Balanced

business

portfolio

Operational

focus

Attractive

markets

portfolio

Acquisition

strategy &

track record

Global

procurement

Strong financial

discipline &

track record

Experienced

management

A platform for growth


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Business Model

TO TO

• Global suppliers

• Low cost sources

• Commodities

• Own brands

• International warehousing

& distribution infrastructure

• Consolidation

• Supply chain management

• Range of delivery options

Consolidated

offer

Individual

ranges

Suppliers Bunzl Customers

One stop shop for non-food consumables

Safety

Foodservice

Cleaning & Hygiene

Healthcare

Non-food Retail

Grocery


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Attractive Customer Markets Portfolio

c.80% resilient – Grocery, Foodservice, C&H, Healthcare

Non-Food Retail 8%

Goods not for resale, including packaging

and full range of cleaning and hygiene

products, to department stores, boutiques,

office supply companies, retail chains

and home improvement chains

Safety 9%

A complete range of personal protection

equipment, including hard hats, gloves,

boots and workwear, to industrial and

construction markets.

Cleaning & Hygiene 14%

Cleaning and hygiene materials, including

chemicals and hygiene paper, to cleaning and

facilities management companies, and industrial

and healthcare customers.

Foodservice 29%

Non-food consumables, including food

packaging, disposable tableware, guest

amenities, catering equipment,

cleaning products and safety items, to

hotels, restaurants, contract caterers,

leisure sectors and food processors

Grocery 29%

Goods not for resale (items grocers

use but do not actually sell), including

food packaging, films, labels and cleaning

and hygiene supplies, to

grocery stores, supermarkets

and retail chains

Healthcare 7%

Disposable healthcare consumables

range, including gloves, swabs, gowns

and bandages, to the healthcare sector

Other 4%

A variety of product ranges supplied

to other markets such as government

and education establishments


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Typical Products

Foodservice

Non-food Retail Healthcare

Cleaning & Hygiene Safety

Grocery

http://www.bunzlmediamanager.com/lightbox/index.php?pageId=100&id=2295&start=288&lightbox=&search_mode=


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Regional diversification

Geographic balance

Balanced Business Portfolio

• 6 market sectors with numerous sub-sectors

• Products and markets - specialist distributors

• Direct to customer or through a sub-distributor

Diversified by geography and sector

54%

20%

19%

7% North America

Continental Europe

Rest of the World

UK & Ireland

• Our markets are at different stages of maturity

• National footprints

• International brands and local products

Customer markets balance


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Investing

Decentralised operational structure

Sharing best practice

Operational Focus

• Hands on management with clear customer focus

• Full P&L and working capital responsibility

• Aligned incentive measurement with profit and ROCE

• Majority of capex spend on IT systems and warehouse facilities

• Robust IT and systems strategy e.g. Warehouse management,

order systems and vehicle routing

• Continually evaluating and upgrading our warehousing facilities

http://www.bunzlmediamanager.com/lightbox/index.php?pageId=100&id=2295&start=288&lightbox=&search_mode=


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+

Global Procurement

Preferred suppliers Sourcing

Own brands

Commodities

Low cost sources

Eco-friendly products

http://www.pactiv.com/


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Acquisition Strategy

Acquired businesses continue to feel ‘local’

• Purchasing synergies

• Warehouse & distribution

efficiencies

• Back office integration

• Customer overlays

• Product range extensions

• Sharing best practice

• Investment in infrastructure

• Bolt-on – existing geography

and market

• Extending product range

• Consolidating markets

• Anchor – new geography or

market

• Entering new geographies

• Entering new markets

• Financial returns

• In resilient and growth markets

• Business to business

• Consolidated “not-for-resale”

product offering

• Similar model – no manufacturing

• Fragmented customer base

• Strong local management

• Scope for further consolidation

Key attributes Acquisition types Extracting value


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Acquisition Track Record


Average acquisition spend £167m p.a.

2004 2005 2006 2007 2008 2009 2010 2011 2012

Number of acquisitions 7 7 9 8 7 2 9 10 13

Committed acquisition

spend (£m) 302 129 162 197 123 6 126 185 272

Annualised acquisition

revenue (£m) 430 270 386 225 151 27 154 204 518


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Geographic expansion

* Continuing operations

Continuing geographic expansion

1997* 2003* 2005* 2008 2012

7 countries

23 countries

18 countries

12 countries

27 countries


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Brian May

Finance Director

Michael Roney

Chief Executive

Patrick Larmon

Executive Director

Experienced executive directors and management team

Experienced Management


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Strong Financial Discipline

Return on operating capital 56.4%

Return on invested capital (pre-tax) 17.9%

Strong financial model

High return on capital

†Before acquisition related costs

*Before intangible amortisation and acquisition related costs

Strong balance sheet Net debt/EBITDA 1.8x year end 2012

Average working capital to sales at 9.6% in 2012 Low working capital requirements

Low capex Average of £23m p.a. over past 3 years

High free cash flow yield Operating cash flow† to operating profit* average

of 97% over past 9 years

Uniform financial reporting system Across all geographies

Growing dividend stream Dividend per share CAGR of 10% over past 8 years


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*Operating cash flow before acquisition related costs to operating profit before intangible amortisation and acquisition related costs

**04-05 continuing operations only

Average Cash Conversion* 97%

Strong Financial Discipline

Consistently strong cash conversion

93% 95%

92%

103%

92%

102%

93%

110%

93%

2004** 2005** 2006 2007 2008 2009 2010 2011 2012


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Revenue (£bn)

2.4

2.9

3.3 3.6

4.2

4.6 4.8

5.1 5.4

2004 2005 2006 2007 2008 2009 2010 2011 2012

Operating profit (£m)

183

218

241 259

297 312

323

353 371

2004 2005 2006 2007 2008 2009 2010 2011 2012

32.1

38.7 41.7

45.1

52.7 55.9

60.6

68.5 71.8

2004 2005 2006 2007 2008 2009 2010 2011 2012

04-05 continuing operations only Before amortisation and acquisition

related and corporate costs


As reported

Adjusted eps (p)

Financial Track Record

13.3

15.7 17.0

18.7

20.6 21.6

23.4

26.4 28.2

2004 2005 2006 2007 2008 2009 2010 2011 2012

As reported

Dividend per share (p)

CAGRs 9% to 11%


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• Clear value added for customers and suppliers

• Recurring revenues

• “Big in the middle”

Clear strategy for growth

Strong business model

Attractive markets

Balanced portfolio

Robust financial performance

Business Case Summary

• Entering new markets/product groups

• Expansion/penetration of established markets

• Strong operational focus

Attractive business model

• Product diversification

• Geographical presence

• Independence from customers and suppliers

• Resilient and growing markets

• Multiple growth drivers

• Fragmented with opportunity to consolidate

• Consistent revenue and earnings growth

• High cash generation

• Cash reinvested at high return on capital

• Strong and growing dividend stream


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Bunzl plc +44 20 7725 5000

Michael Roney - Chief Executive

Brian May - Finance Director

[email protected]

www.bunzl.com

Contacts


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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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