BUSINESS CASE - bunzl.com/media/Files/B/Bunzl-PLC/reports-and... · PORTFOLIO . BUNZL OVERVIEW ......

APRIL 2018

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, CUSTOMER FOCUSED BUSINESS MODEL

BALANCED BUSINESS PORTFOLIO

BUNZL OVERVIEW

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 APRIL 2018 BUSINESS CASE

a

One-stop-shop for essential everyday items supported by:

3,000 sales specialists and

2,500 locally based customer service specialists

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

• Direct to site • Cross dock • Warehouse

replenishment

BUSINESS MODEL


VALUE PROPOSITION

Outsourcing to Bunzl 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


OWN BRAND

CUSTOMISED SOLUTIONS

BUNZL UNIQUE SERVICE OFFERING

EXPERT KNOWLEDGE AND ADVICE

“QUASI MANUFACTURER”

OWN BRAND

EDI

PRODUCTS STOCKED IN

BUNZL WAREHOUSE

DELIVERY OPTIONS

OWN FLEET

INDIVIDUAL PRODUCT

KNOWLEDGE

CUSTOMISED MANAGEMENT INFORMATION

VALUE ALTERNATIVE OWN BRAND

APP

DEDICATED CALL CENTRES

MANUFACTURER BRANDED

LOCAL AND NATIONAL

DISTRIBUTION NETWORK

ONE ORDER ONE DELIVERY ONE INVOICE

ONE-STOP-SHOP ON-TIME IN-FULL

DELIVERY

DIRECT TO SITE

WAREHOUSE REPLENISHMENT

X DOCK

PRODUCT AVAILABILITY

DELIVERY BEYOND BACK

DOOR

FULL RANGE

STOCKED CUSTOMISED

DELIVERY SLOTS

HEALTH AND SAFETY

REQUIREMENTS

CONSUMPTION VS CUSTOMER

BUDGET

COMPLIANCE BY UNITS TO HEAD

OFFICE

WEBSHOP

NATIONAL FOOTPRINT

MULTIPLE DELIVERY

LOCATIONS

INNOVATION CENTRES

CONTRACT MOBILISATIONS

SHANGHAI SOURCING

OFFICE - QC/QA

DESIGN / INSTALLATION

SERVICES

RANGE RATIONALISATION

DIRECT DEALS WITH MANUFACTURERS

DELIVERED BY BUNZL

BULKY LOW VALUE

PRODUCTS

PRODUCT TRAINING

USAGE

EXCEED BUDGET ALERTS

CUSTOMISED DIGITAL

SOLUTIONS

BENEFIT OF BUNZL SCALE

EXCLUSIVE DISTRIBUTION

INDUSTRY LEADING

SPECIALISED SALES FORCE

MATERIAL CONSOLIDATION

VALUE ADDED SERVICES

ESSENTIAL ITEMS

COMPETITIVELY PRICED PRODUCTS

MARKET INTELLIGENCE

MINIMISE CUSTOMERS’

WORKING CAPITAL

BESPOKE / PRINTED PRODUCT

MANAGEMENT

INNOVATION CENTRES

RIGHT PRODUCT RIGHT PRICE

SUPPLY CHAIN

STUDIES

ECONOMIC DENSITY

ANALYSIS

LOCAL CUSTOMER

SERVICE SPECIALISTS


BUSINESS AREA ANALYSIS

Well diversified by geography

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

UK & IRELAND 14% Revenue 14% Operating profit*

CONTINENTAL EUROPE 19% Revenue 25% Operating profit*

NORTH AMERICA 59% Revenue 52% Operating profit*

REST OF WORLD 8% Revenue 9% Operating profit*


3%

29%

27% 12%

12%

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 Well diversified by sector

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 retail chains, boutiques, office supply companies, department stores, home improvement chains and related e-commerce sales channels

Other

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

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

Based on 2017 FY Revenue


TYPICAL PRODUCTS

6%†

A broad range of essential every day items


GLOBAL SOURCING

Partner with leading manufacturers Sourcing via our own Shanghai sourcing office

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 16.0%


12

ORGANIC GROWTH

Organic growth typically real GDP +

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


• Consolidation of warehouse footprint

• Continually evaluate and upgrade facilities including environmental initiatives

OPERATING MODEL IMPROVEMENTS

Small improvements every day everywhere lead to significant progress over time

WAREHOUSING

• 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 facility (sourcing, QA and QC)

GLOBAL PURCHASING


ACQUISITION GROWTH

* Includes two committed acquisitions in 2017 which completed in January 2018 04-05 continuing operations only

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Number of acquisitions 7 7 9 8 7 2 9 10 13 11 17 22 14 15

Committed acquisition spend (£m)

302 129 162 197 123 6 126 185 277 295 211 327 184 616

Annualised acquisition revenue (£m)

430 270 386 225 151 27 154 204 518 281 223 324 201 621

total committed spend

£3.1bn

acquisitions 2004 - 2017

151 *


• 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

• 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

2017

* Continuing operations only 15 APRIL 2018 BUSINESS CASE

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


EXPERIENCED MANAGEMENT

service on average within the management team

>15 yrs

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

APRIL 2018 BUSINESS CASE

• Flat organisational structure

• Clear lines of responsibility

• Excel at customer service

VALUING OUR PEOPLE

Our people are our greatest asset c. 19,000 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

• Targeted activities to increase the number of women in senior leadership roles

DEVELOPMENT AND TRAINING OPPORTUNITIES

APRIL 2018 BUSINESS CASE 18

STRONG FINANCIAL DISCIPLINE

* 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

6%†

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

LOW WORKING CAPITAL AND CAPEX REQUIREMENTS

• AVERAGE WORKING CAPITAL TO SALES AT 11.2% • AVERAGE CAPEX OF £28M OVER PAST 3 YEARS

HIGH LEVEL OF CASH CONVERSION

• OPERATING CASH FLOW † TO ADJUSTED OPERATING PROFIT* AVERAGE : 97% 2004 -2017

GROWING DIVIDEND • DIVIDEND PER SHARE CAGR > 10% (92-17) • 25 CONSECUTIVE YEARS OF DIVIDEND GROWTH

UNIFORM FINANCIAL REPORTING SYSTEM • ACROSS ALL GEOGRAPHIES


93% 95%92%

103%

92%

102%

93%

110%

93%

102%95% 97% 99% 97%

04 05 06 07 08 09 10 11 12 13 14 15 16 17

CASH CONVERSION

Average cash conversion*

97% TARGET 90%

* Operating cash flow before acquisition related items to adjusted operating profit 04 – 05 continuing operations only 20 APRIL 2018 BUSINESS CASE

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 17

DIVIDEND PER SHARE (p)

of consecutive dividend increases

25 years

4.0

46.0

CAGR

> 10%


2.4

8.6

04 05 06 07 08 09 10 11 12 13 14 15 16 17

FINANCIAL TRACK RECORD 2004-2017

Proven compounding growth strategy CAGR

* Before adjusting items (customer relationships amortisation and acquisition related items) 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

589

04 05 06 07 08 09 10 11 12 13 14 15 16 17

31.7

119.4

04 05 06 07 08 09 10 11 12 13 14 15 16 17

13.3

46.0

04 05 06 07 08 09 10 11 12 13 14 15 16 17

10%-11%


CONTACTS

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 (“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 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. 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.

DISCLAIMER


BUSINESS CASE - bunzl.com/media/Files/B/Bunzl-PLC/reports-and... · PORTFOLIO . BUNZL OVERVIEW ......

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