bunzl business case may 2016

Business CaseJune 2016

About us

Bunzl is a growingand successful Group providing outsourcing solutions and value added distribution across the Americas, Europe and Australasia

Business Case May 2016 1

Source Consolidate Deliver

Business overview

2

Sales channel

Products

Sourcing

Footprint

Key facts

Financials

Business to business distribution £6.5bn revenue in 2015

Wide range of non-food consumable products

From leading brand manufacturers Own brands and unbranded products Sourcing centre in Shanghai – no own manufacturing

c.15,000 employees (2015 average) International diversification: 29 countries, 4

continents

UK plc headquartered in London Listed on LSE; FTSE 100; Support Services sector

Revenue growth: 9% (CAGR 04-15) Adjusted operating profit growth*: 9% (CAGR 04-15) Average annual cash conversion† of 97% (04-15)

* Before intangible amortisation and acquisition related costs† Operating cash flow before acquisition related costs to adjusted operating profit2004-2005 continuing operations only

Business Case May 2016

Benefits to customers:Supply Chain

Customer

Global sourcing& procurement

International warehousing& distribution infrastructure

3

Consolidationof consumables

Range of delivery options


Supported by integratedIT and e-commerce systems

Value proposition

In-house procurement andself-distribution is costly

Bunzl applies its resourcesand expertise to reduce or eliminate many of the “hidden” costs of in-house procurement and self-distribution

The benefits to customers area lower cost of doing business and reduced working capital and carbon emissions

Outsourcingadds value forour customers

4

Product cost

Inventory investmentCash flowDirect labour & overtimeInventory finance costExpedited ordersInbound freightPurchase order administrationInventory damage & shrinkageAccounts payable adminStorage spaceCapital employed

Cost to acquire

Cost to process


Market environment

5

Growing market sectors Fragmented competitors

Customer baseOutsourcing trend

Exposed to growing sectors including– Foodservice – away from

home– Cleaning & hygiene – away

from home– Healthcare – demographics– Safety – increased

legislation

None do what we do, on our scale and across our markets

Bunzl’s national footprints provides competitive advantage

Strong customer base Working with national and

international leaders Aligned with customer growth

Customers and manufacturers focusing on their core business

Multiple growth drivers


Operatingmodel efficienciesWe constantly striveto make our business more efficient and environmentally friendly

Acquisition growthBetween 2004 and 2015 we have announced 122 acquisitions with total spend of £2.2bn

GDP+ organic growthOrganic revenue growth exceeded relevant GDP for 9 of the last 11 years

Consistent and proven strategy

ROIC17.1%

6

Compounding growth model at high ROIC


Key competitive advantages

7

A platform for growth

Unique business

model

Strong financial discipline

Acquisition strategy &

track record

Operational focus

PeopleGlobal sourcing

Attractive customer markets

Balanced business portfolio


Business model

One-stop-shopfor non-food consumables

8

Source

Consolidate

Deliver

Global suppliers Low cost sources Commodities Own brands

Foodservice Grocery Cleaning& hygiene Retail Safety Healthcare

Individual rangesto

Consolidated offerto


Attractive customer markets

28%

26%12%

12%

11%

7% 4%

HealthcareDisposable healthcare consumables, including gloves, swabs, gowns and bandages and other healthcare related equipment to hospitals, care homes and other facilities serving the healthcare sector.

SafetyA complete range of personal protection equipment, including hard hats, gloves, boots, ear and eye protection and other workwear, to industrial and construction markets.

RetailGoods not for resale, including packaging and other store supplies and a full range of cleaning and hygiene products, to department stores, boutiques, office supply companies, retail chains and home improvement chains.

Cleaning & hygieneCleaning and hygiene materials, including chemicals and hygiene paper, to cleaning and facilities management companies and industrial and healthcare customers.

FoodserviceNon-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.

GroceryGoods not for resale (items which are used but not actually sold), including food packaging, films, labels and cleaning and hygiene supplies, to grocery stores, supermarkets and retail chains.

OtherA variety of product ranges supplied to other end user markets such as government and education establishments.

9Business Case May 2016

c.75% resilient Grocery FoodserviceCleaning & hygiene Healthcare

2015 FY Revenue

Typical Products

10

A broad range of non-food consumable products


Balanced business portfolio

11

Geographic balance

Our markets are at different stages of maturity National footprints International brands and local products

Regional diversification

Customer markets balance

Six market sectors with numerous sub-sectors Products and markets – specialist distributors Direct to customer or through a sub-distributor

Diversified by both geography and sector

58%17%

17%8% North America

Continental Europe

UK & Ireland

Rest of the World


2015 FY Revenue

Operational focus

12

Hands-on management with clear customer focus

Full P&L and working capital responsibility Aligned incentive measurement with profit and

ROCE

Decentralised operating structure

Investing

Majority of capex spend on IT systems and warehouse facilities

Robust IT and systems strategy e.g. warehouse management

Investment in e-commerce systems Interfacing IT with customers and suppliers Order systems and vehicle routing Continually evaluating and upgrading our

warehousing

Sharing best practice across all business areas


Global sourcing

13

+Own brands

CommoditiesLow cost sources

Eco-friendly products

SourcingPreferred suppliers


Acquisition strategy

14

Key acquisition parameters

Acquisition types

Business to business Consolidated “not-for-resale” product offering Resilient and growing markets Fragmented customer base Scope for further consolidation and synergies Small % of total customer spend Opportunity for “own label” products Attractive financial returns

Retention of managers and customers is key

Anchor– New geographies– New markets

Bolt-on – existing geography and market– Extending product range– Consolidating markets

Extracting value

Purchasing synergies Warehouse & distribution efficiencies Back office integration Customer overlays Product range extensions Sharing best practice Investment in infrastructure, IT & e-commerce


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

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

Committed acquisition spend (£m)

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

Annualised acquisition revenue (£m)

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

Acquisition growth

15

04-05 continuing operations only

Average annual acquisition spend over the last four years

£278m


2015

Geographic expansion timeline

16

Revenue2010

North America Continental Europe UK & Ireland Rest of the world

2005*

* Continuing operations only

1997*7 countries

2003*12 countries

201529 countries

201227 countries

2005*18 countries

Continued geographic expansion though acquisitions


Flat organisational structure Clear lines of responsibility Excellent customer service

Valuing our people

17

Clear roles and objectives

Retention of former owners

High retention rate of owners post acquisition Business model is capital light and relies on knowledge and

expertise in local markets Ensures customer relationships are maintained

Development and training opportunities

Personal responsibility to grow within roles Focus on internal appointments and promotions Formal training programmes


Experienced management

18

Experienced executive directors and management team

Brian MayFinance Director

Patrick LarmonPresident and

CEO North America

Celia BaxterDirector of Group

Human Resources

Paul HusseyGeneral Counsel

& Company Secretary

Paul Budge Managing Director

Continental Europe

Andrew Mooney Director of Corporate

Development

Andrew TedburyManaging Director

UK & Ireland

Rodrigo Mascarenhas

Managing Director Latin

America

Kim Hetherington Managing Director

Australasia


Frank van Zanten Chief Executive

Strong financial discipline

19

High return on capital

Strong balance sheet

Low working capital requirements

Low capex

High level of cash conversion

Uniform financial reporting system

Return on operating capital: 55.5% Return on invested capital (pre-tax): 17.1%

(2015)

Net debt/EBITDA 2.1x year end 2015

Average working capital to sales at 11% in 2015

Average of £24m p.a. over past 3 years

Operating cash flow† to adjusted operating profit* average of 97% 2004 - 2015

Across all geographies

†Before acquisition related costs*Before intangible amortisation and acquisition related costs

Growing dividend stream

Dividend per share CAGR of 10% since 2004


Consistently high cash conversion funds growing dividend and acquisitionsAverage cash conversion* of

Cash conversion

20

93% 95% 92%

103%

92%

102%

93%

110%

93%

102%95% 97%

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

* Operating cash flow before acquisition related costs to adjusted operating profit 04-05 continuing operations only

90%

97%


Revenue (£bn)Financial track record 2004 - 2015

21

2.42.9

3.33.6

4.24.6 4.8

5.15.4

6.1 6.26.5

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

31.738.2 41.1

44.451.8

55.459.7

67.6 70.6

82.486.2

91.0

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

Adjusted eps (p)

Adjusted operating profit (£m)

Dividend per share (p)CAGR

04-05 continuing operations only

04-12 restated on adoption of IAS 19 (revised 2011)

169203

226243

281296 307

336352

414430

455

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

Before intangible amortisation and acquisition related costs04-05 continuing operations only

13.315.7 17.0

18.720.6 21.6

23.426.4

28.2

32.435.5

38.0

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

9%-10%


Business case summary

22

Clear strategy for growth Entering new markets/product groups Expansion/penetration of established

markets Strong operational focus

Attractive business model

Strong business model Clear value added for customers and

suppliers Recurring revenues “Big in the middle”

Attractive markets Resilient and growing markets Multiple growth drivers Fragmented markets with opportunity to

consolidate

Balanced portfolio Product diversification Geographical presence Independence from customers and

suppliers

Robust financial performance

Consistent revenue and earnings growth High cash conversion Cash reinvested at high return on capital Strong and growing dividend stream


Contacts

23

Bunzl plc+44 20 7725 5000

Frank van Zanten – Chief ExecutiveBrian May – Finance Director

[email protected]


Disclaimer

24

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.


bunzl business case may 2016

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