Brambles Limited · ASX:BXB
Brambles — H1 2006 Earnings Presentation
52 slides from Brambles's earnings presentation, Feb 23, 2006
Slide 1: 2006 Interim Results
2006 Interim Results 23 February 2006
Slide 2: David Turner, Chief Executive Officer
2006 Interim Results David Turner Chief Executive Officer
Slide 3: 2006 is a year of change
2006 is a year of change Focusing on CHEP and Recall – Greatest medium/long term growth potential Selling other businesses – In good shape – Strong demand for quality assets – Already sold – Cleanaway Germany* – BIS Northern Hemisphere – Eurotainer Unifying DLC – Later this year * Subject to c
Slide 4: Interim results for the group as a whole
Interim results for the group as a whole… Sales US$3 billion (up 6%) Comparable operating profit US$470m (up 25%) PAT (before special items) US$266m (up 31%) Dividend – 11.5 Australian cents (up 15%) – 4.887 pence (up 18%) Continuing operations – Sales up 8% – Operating profit up 22% – PAT
Slide 5: Business highlights
Business highlights CHEP Americas – Sales growth 11%, profits up 48% – Volume growth and cost efficiency improvements continued CHEP Europe – Sales growth 5%, profits up 16% – Further improvements in pricing, cost efficiencies and asset control Recall – North America weaker; good profit growth
Slide 6: Mike Ihlein, Chief Financial Officer
2006 Interim Results Mike Ihlein Chief Financial Officer
Slide 7: IFRS and change of presentation currency
IFRS and change of presentation currency Adoption of IFRS and US$ presentation currency – Restatement of all FY05 comparatives Major changes to Income Statement include: – No systematic goodwill arising on business combinations – All option and performance shares now expensed – Treatment of Disc
Slide 8: Strong growth in profit and BVA
Strong growth in profit and BVA Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % Continuing operations1 Sales revenue 1,707.6 1,729.3 1,601.1 8 Operating profit 342.3 347.3 285.0 22 PBT 280.6 285.0 215.6 32 PAT 180.1 181.8 141.4 29 BVA (June 05 rates) 136 75 Brambles Total PAT (after spec
Slide 9: Solid sales growth in continuing operations
Solid sales growth in continuing operations Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % CHEP 1,445.0 1,467.5 1,351.4 9 Recall 262.6 261.8 249.7 5 Continuing operations 1,707.6 1,729.3 1,601.1 8 Cleanaway 947.3 979.1 937.8 4 Brambles Industrial Services 272.5 276.0 269.6 2 Regional Bu
Slide 10: With CHEP driving operating profit growth
… with CHEP driving operating profit growth Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % CHEP 317.8 321.6 252.7 27 Recall 38.1 38.0 41.5 (8) Continuing (pre corporate) 355.9 359.6 294.2 22 Unallocated corporate costs (13.6) (12.3) (9.2) (34) Continuing operations 342.3 347.3 285.0 22
Slide 11: Free cash flow again exceeds dividends
Free cash flow again exceeds dividends… Actual 1H06 1H05 Change IFRS US$m US$m US$m Operating profit (pre special items) 470.5 382.5 88.0 Depreciation and amortisation1 273.8 299.3 (25.5) Capital expenditure (413.8) (382.3) (31.5) Proceeds from disposals 62.8 48.0 14.8 Working capital movement (67.4
Slide 12: As capex picks up in CHEP
…as capex picks up in CHEP US$m Cash flow from operations 300 1H04 1H05 1H06 250 200 150 100 50 0 CHEP Recall 12
Slide 13: CHEP Europe continues to improve capital productivity
CHEP Europe continues to improve capital productivity US$m Capital expenditure 200 2004 2005 2006 150 100 50 0 1H 1H CHEP Americas1 CHEP Europe 1 Americas FY04 includes B stock reduction benefit of US$42m 13
Slide 14: BVA – CHEP delivers
BVA – CHEP delivers 1H06 1H05 Growth US$m US$m US$m IFRS, June 05 rates CHEP Americas 67 21 46 CHEP Europe 43 25 18 CHEP RoW 37 32 5 CHEP 147 78 69 Recall - 5 (5) Continuing (pre corporate) 147 83 64 Unallocated corporate costs (11) (8) (3) Total Continuing operations 136 75 61 14
Slide 15: Financial ratios continue to strengthen
Financial ratios continue to strengthen Facilities/ Dec 05 Dec 04 Covenants IFRS, 6 months ending Closing Net Debt (US$m) 2,023.1 2,569.0 3,710 Interest cover (x) Operating profit 7.6 5.5 EBITDA 12.1 9.8 x 3.5 (min) Net Debt / EBITDA (x) 1.4 1.9 x 3.5 (max) Gearing (%) 45.3 51.5 (Net Debt/Net De
Slide 16: Robust sales growth continues
Robust sales growth continues Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % Americas 651.0 641.3 579.4 11 Europe 608.0 637.1 604.0 5 RoW 186.0 189.1 168.0 13 Sales 1,445.0 1,467.5 1,351.4 9 Operating profit 317.8 321.6 252.7 27 Profit margin (%) 22 22 19 3 pp Growth % calculated on US$
Slide 17: Americas strong profit growth continues
Americas strong profit growth continues Operating profit Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % Americas 145.0 142.1 96.3 48 Europe 117.3 122.9 106.0 16 RoW 55.5 56.6 50.4 12 Total 317.8 321.6 252.7 27 Growth % calculated on US$ constant currency basis 17
Slide 18: Americas – Volume and efficiencies deliver gains
Americas – Volume and efficiencies deliver gains US$m 15 142 29 7 96 (5) 1H05 Volume, Price Transportation Plant costs Other 1H06 Operating & Mix Operating profit profit All numbers are calculated at constant currency 18
Slide 19: Europe – Gaining from new pricing architecture
Europe – Gaining from new pricing architecture 4 31 US$m 123 106 (1) (17) 1H05 Volume, Price Transportation Plant costs Other 1H06 Operating & Mix Operating profit profit All numbers are calculated at constant currency 19
Slide 20: Rest of World – Continued growth
Rest of World – Continued growth US$m 14 57 50 (1) (2) (4) 1H05 Volume, Price Transportation Plant costs Other 1H06 Operating & Mix Operating profit profit All numbers are calculated at constant currency 20
Slide 21: Cost increases impact profitability
Cost increases impact profitability Actual Constant 1H06 1H06 1H05 Growth Organic growth IFRS US$m US$m US$m % % Sales 262.6 261.8 249.7 5 2 Operating profit 38.1 38.0 41.5 (8) Profit margin % 15 15 17 (2)pp Growth % calculated on US$ constant currency basis 21
Slide 22: Discontinued operations - Sales
Discontinued operations - Sales Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % Cleanaway UK 443.0 461.5 441.1 5 Cleanaway Germany 302.8 318.4 302.7 5 Cleanaway RoW 201.5 199.2 194.0 3 Total Cleanaway 947.3 979.1 937.8 4 Brambles Industrial Services 272.5 276.0 269.6 2 Regional Businesse
Slide 23: Discontinued operations – Operating profits as reported
Discontinued operations – Operating profits as reported Actual Constant 1H06 1H06 1H05 Growth IFRS US$m US$m US$m % Cleanaway UK 30.7 32.2 15.3 110 Cleanaway Germany 38.2 40.8 32.5 26 Cleanaway RoW 23.9 23.7 14.6 62 Total Cleanaway 92.8 96.7 62.4 55 Brambles Industrial Services 32.0 32.2 31.2 3 Regi
Slide 24: Discontinued operations - Operating profits excluding divestment adjustments
Discontinued operations - Operating profits excluding divestment adjustments Constant Adj. Underlying1 Constant 1H06 1H06 1H06 1H05 Growth IFRS US$m US$m US$m US$m % Cleanaway UK 32.2 (5.5) 26.7 15.3 75 Cleanaway Germany 40.8 (6.8) 34.0 32.5 5 Cleanaway RoW 23.7 (3.6) 20.1 14.6 38 Total Cleanaway 96
Slide 25: Effective tax rate – Continuing operations
Effective tax rate – Continuing operations Actual Actual 1H06 1H05 IFRS US$m US$m PBT1 280.6 215.6 Tax1 100.5 74.2 Effective tax rate % of PBT 35.8% 34.4% 1. Before special items Actual exchange rates used 25
Slide 26: Special items
Special items Actual Actual 1H06 1H06 IFRS US$m US$m Amortisation of acquired non goodwill intangibles (1.1) Restructuring and unification costs (9.4) AUSDOC (amort’n of brands/software & other) (12.2) Special items on continuing operations (22.7) Business divestments 45.7 Impairments (14.0) Special
Slide 27: David Turner, Chief Executive Officer
2006 Interim Results David Turner Chief Executive Officer
Slide 28: CHEP delivers strong growth
CHEP delivers strong growth Actual Constant Growth IFRS US$m % Sales 1,445.0 9 Operating profit 317.8 27 BVA 147 88 28
Slide 29: Improvement through Global Councils
Improvement through Global Councils Sharing best practice to achieve best performance Plant Operations Perfect Plant Logistics Manugistics Rail/Road Sales and Marketing Customer Satisfaction Plus – Asset Management – Perfect Trip – Sourcing – Communications – Human Resources – Health, Safety a
Slide 30: Perfect Plant
Perfect Plant 10/10 GENERATION GENERATIONXX • • Fully Fullyautomated automated GENERATION element elementremoval GENERATIONIIII removal &&replacement • • Fully replacement Fullyautomated automated with element withADI ADI 7/10 GENERATION elementremoval removal integration GENERATIONI I • • Semi-auto
Slide 31: Americas – Performance summary
Americas – Performance summary USA Pallet pooling sales revenue +9%, mostly volume – More than 200 new accounts signed up Higher damage ratio but further transport efficiency Assets remain tightly controlled Increased capex to support growth 31
Slide 32: USA - Plant operations & transportation trends
USA - Plant operations & transportation trends Plant cost ratio Gross transportation cost ratio (Plant costs / Sales) (Transportation costs / Sales) 35% 32% 28% 30% 24% 25% 20% FY02 FY03 FY04 FY05 1H06 FY02 FY03 FY04 FY05 1H06 Damage reduction project Dedicated transportation Service Centre be
Slide 33: USA - Asset productivity trends
USA - Asset productivity trends Control ratio New equipment issue ratio (Returns + Recoveries / Total Issues) (Pallets purchased / Total issues) 98% 12% 10% 96% 8% 6% 94% 4% 2% 92% 0% FY02 FY03 FY04 FY05 1H06 FY02 FY03 FY04 FY05 1H06 Improved asset controls Improved asset utilisation Lower pla
Slide 34: Americas – Performance summary (contd.)
Americas – Performance summary (contd.) USA Sale of RPC business Canada and Latin America Continued volume growth 34
Slide 35: Americas – Critical success factors
Americas – Critical success factors Further controlled volume growth Expansion of TPM advocacy Sustained momentum on cost efficiencies Continued investment in new technology Continued growth in Latin America – Maintaining tight control over asset movements – Building infrastructure to keep
Slide 36: Europe - Performance summary
Europe - Performance summary Significant improvements in results driven by pricing initiatives New pricing architecture leading to improvement in invoicing process Improving asset productivity trends Global best practice and use of “Perfect Trip” initiatives leading to cost reductions 36
Slide 37: Europe – Asset productivity trends
Europe – Asset productivity trends Control ratio New equipment issue ratio (Returns + Recoveries / Total Issues) (Pallets purchased / Total issues) 96% 12% 10% 94% 8% 6% 92% 4% 2% 90% 0% FY02 FY03 FY04 FY05 1H06 FY02 FY03 FY04 FY05 1H06 Improved asset controls Improved asset utilisation and coll
Slide 38: Europe - Plant operations & transportation trends
Europe - Plant operations & transportation trends Plant cost ratio Gross transportation cost ratio (Plant costs / Sales) (Transportation costs / Sales) 35.0% 32.0% 28.0% 30.0% 24.0% 20.0% 25.0% 16.0% FY02 FY03 FY04 FY05 1H06 FY02 FY03 FY04 FY05 1H06 Plant Network optimisation project Benefits of
Slide 39: Europe – Critical success factors
Europe – Critical success factors Increase customer satisfaction Keep improving asset utilisation Reduce cost to serve Grow in existing markets with current offers Design and introduce enhanced service offers 39
Slide 40: Rest of World – Performance summary
Rest of World – Performance summary South Africa – Strong growth across pallets, RPCs & autocrates – Significant capital efficiency improvements Australia – Good growth in pallets – Automotive crates impacted by extended shutdown Asia – Small presence 40
Slide 41: Recall – Performance summary
Performance summary Europe performed well North America weak start – Loss of one large customer – Paper prices down from US$125 to US$97 per tonne AUSDOC acquisition effective 29 November Business potential strong 41
Slide 42: Potential and growth opportunities
Potential and growth opportunities Total Market Document Management Solutions US$0.2bn North America US$1.9bn US$3.4bn US$4.1bn US$9.0bn Europe Unvended US$0.2bn Vended US$0.9bn Recall US$2.9bn Total global market size = US$12.4bn Recall currently only 4% of potential market 42
Slide 43: Critical success factors
Critical success factors Successful integration of AUSDOC acquisition Restore profitable growth in North America – Focus on sales growth and operating cost efficiencies Build upon profitable base in Europe – Particular focus on UK and France Use of Six Sigma across all regions 43
Slide 44: Divestment status
Divestment status Proceeds Business Status US$m BIS Northern Hemisphere Sold December 2005 242 Eurotainer Sold December 2005 106 Sold October 2005. Completion Cleanaway Germany 675 subject to approval of authorities Interlake In progress TCR In progress Cleanaway UK Process started Australia – BIS/C
Slide 45: Unification status
Unification status Expect to complete by end of November 2006, subject to shareholder approval Priority remains to complete business divestments in an orderly manner for maximum value New Brambles expected to commence trading on the ASX, with a secondary LSE listing, by the end of November 45
Slide 46: Outlook for 2006 Full Year
Outlook for 2006 Full Year CHEP Americas – continued strong growth – Sales growth and operational improvements CHEP Europe – ongoing profit growth – Efficiencies, improved customer service and sales growth CHEP RoW – trading well Recall – improved performance expected in 2H06 Discontinued
Slide 47: Disclaimer statement
Disclaimer statement The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about and observe such restrict
Slide 48: 2006 Interim Results
2006 Interim Results 23 February 2006
Slide 49: Glossary of terms & measures
Appendix 1a Glossary of terms & measures Except where noted, common terms and measures used in this presentation are based upon the following definitions: Sales revenue Excludes Associates’ revenues and non trading revenue Comparable Profit before special items, finance costs and tax. Includes Assoc
Slide 50: Glossary of terms & measures
Appendix 1b Glossary of terms & measures Except where noted, common terms and measures used in this presentation are based upon the following definitions: Constant Translation of local currencies into US dollars for current and comparative period at currency actual monthly exchange rates applicable
Slide 51: Glossary of terms & measures
Appendix 1c Glossary of terms & measures Except where noted, common terms and measures used in this presentation are based upon the following definitions: Unallocated costs Head Office costs which are not allocated back to the divisions. These are excluded from the segmental analyses. Associates 50%
Slide 52: Contact details
Contact details Sydney London John Hobson Sue Scholes Head of Investor Relations – Australia Head of Investor Relations – UK [email protected] [email protected] +61 (02) 9256 5216 +44 (0)20 7659 6000 Michael Sharp Vice President Corporate Affairs [email protected] +61 (02) 925