first quarter 2004
DESCRIPTION
First Quarter 2004. Amsterdam, 6 May 2004. “Safe Harbour” Statement under the Private Securities Litigation Reform Act of 1995. - PowerPoint PPT PresentationTRANSCRIPT
First Quarter 2004
Amsterdam, 6 May 2004
2
“Safe Harbour” Statementunder the Private Securities Litigation Reform Act of 1995
Statements included in this presentation which are not historical facts are forward-looking statements made pursuant to the safe harbour provisions of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Such forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting Buhrmann and therefore involve a number of uncertainties and risks, including, but not limited to industry conditions, changes in product supply, pricing and customer demand, competition, risks in integrating new businesses, currency fluctuations and the other risks described from time to time in the Company’s filings with the US Securities and Exchange Commission, including the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 27, 2003. As a result, the actual results of operations or financial conditions of the Company could differ materially from those expressed or implied in such forward-looking statements. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update publicly or revise any forward-looking statements.
3
Q1 2004 sales and EBITAE
64%
7%
29%
Office Products North America
Office Products Europe/Australia
Graphic Systems
Sales EUR 1,348 mln EBITAE EUR 51 mln-1%
76%25%
Holding cost EUR 6mln
4
Summary - First quarter 2004“We are encouraged by the overall performance”
Increase in organic sales
Profitability improved substantially
Sales EUR 1,348 million (-37%) Mainly due to divestment Paper Merchanting, currency impact
Organic sales growth +2% - best performance in 12 quarters Office Supplies Australia, ASAP software and Graphic Systems
Office Supplies North America and Office Supplies Europe
5
Summary - First quarter 2004 (Cont’d)
EBITA(E) flat at EUR 51mln, at constant rates +12% Strong improvement in continued operations
Divested Paper Merchanting contributed EUR 15 mln in Q1-03
Working capital (4 quarter rolling average) further improved to 10.1% (from 11.1% Q1-03)
Substantial increase in net profit* to EUR 25.7 mln Q1-03 EUR 5.1 mln
Substantially lower financing costs, lower interest charges, cost reduction measures, efficiency gains
EPS* EUR 0.13 (Q1 2003 EUR 0.02) * On ordinary operations before amortisation goodwill and exceptional items
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-10%
-5%
0%
5%
10%
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
Organic growth
-10%
-5%
0%
5%
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
-30%
-20%
-10%
0%
10%
20%
30%
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
Graphic Systems Q1 2004 7% of total Group’s sales
OP Europe/AustraliaQ1 2004 29% of total Group’s sales
-10%
-5%
0%
5%
10%
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
OP North AmericaQ1 2004 64% of total Group’s sales
Buhrmann
Office ProductsIncludesPaper Merchanting
7
First quarter trends return on sales %
8
Cash Flow and financing
Available cash flow EUR (27) mln Increase in working capital of EUR 41 mln (seasonal decrease in
creditors)
Capex EUR 15 mln
Interest-bearing net debt at EUR 893 mln Increase due to currency fluctuations and cash outflow
In % of group equity 58% (Q1-2003 88%)
Net financing costs more than halved to EUR 20.1 mln Lower level of debt
Optimisation of debt portfolio conducted in Q4 2003
9
Cash flow statement
in EUR mln Q1 2004 Q1 2003
Operating result on cash basis 72.7 138.9 Change in inventories 28.2 (6.2)
Change in trade receivables 43.0 119.3
Change in trade creditors (158.3) (163.9)
Change in other receivables/liabilities 45.7 41.6
Change in working capital (41.4) (9.2)
Financial payments (24.3) (35.5)
Other operational payments (7.7) (11.3)
Cash Flow from operational activities (0.7) 82.9
Investments in tangible fixed assets (15.1) (18.1)
Acquisitions, integration, divestments (11.5) (6.8)
Available Cash Flow (27.3) 58.0
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Average working capital as % of sales4 quarter rolling average / Excl. Paper Merchanting Division
-150
-50
50
150
10%
11%
12%
13%
14%
Q32001
Q42001
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
From 11.1% to 10.1%
From 12.1% to 11.1%
EUR mln
Working capital outflow
Working capital inflow
11
Net debt development
2,0042,183
1,616 1,7681,679 1,667
1,576 1,533 1,493 1,464
856 893
1,636
1,9001,893
836
1,4981,5481,735
500
1,000
1,500
2,000
2,500
Q42001
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
Fixed Rates EUR/USD 1.22, EUR/GBP 0.67Actual rates
Debt reduction EUR 743 mln
At fixed ratesDebt reduction EUR 640 mln
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Total Office Products
Q1 2004 Sales EUR 1,252 mln
EBITAE EUR 58 mln
Q1 2003 Sales EUR 1,381 mln
EBITA EUR 51 mln
Q1 2002 Sales EUR 1,667 mln
EBITA EUR 86 mln
Sales (in EUR)
1000
1200
1400
1600
1800
Sales (at constant rates)
1,000
1,200
1,400
1,600
13
Total Office ProductsMarket conditions remained soft in most of our countries
Organic growth flat y-on-y
EBITAE +13% to EUR 58 mln (at constant rates +25%) Margin improvements through expansion private brand offering
Successful reduction in cost base
Efficiency gains
Average capital employed down 11% year-on-year at constant rates Actual numbers -19% to EUR 785 mln
eCommerce up to 34% of global office products sales
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Private brands
Advantages customers: Broaden the selection of high quality products
Quality product at lower price compared to manufacturer brand
Same specifications as manufacturer brand
Advantages Buhrmann: Increase brand awareness / customer loyalty
Consistent ‘Value for money offer’
Contribute to improving margins
15
Private brands (cont’d)
Office Products Europe: Corporate Express 1,100 sku’s to be expanded to 1,600 Roll-out started early 2003 as replacement for local private
brands
Office Products North America: multiple brand strategy Corporate Express Signature, Corporate Express Brand,
EXP, DPS EXP (good quality, value pricing) and DPS (sourced from
diversity manufacturers) are existing brands Roll-out Corporate Express Brand started in Q4 2003 Up to 1,300 sku’s will be released throughout 2004
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Office Products North America
Q1 2004 Sales EUR 866 mln
EBITAE EUR 43 mln
Q1 2003 Sales EUR 1,003 mln
EBITA EUR 43 mln
Q1 2002 Sales EUR 1,271 mln
EBITA EUR 71 mln
Sales (in EUR)
600
800
1000
1200
1400
Sales (in USD)
800
900
1000
1100
1200
17
Organic growth 2% (ASAP +21%, Office Products -2%)
-2% organic growth in Office Products primarily due to Accelerated shift to private brand products
Softness in furniture business
Lower paper prices
Added Value excl. ASAP improved 0.2% to 30.8%
EBITAE flat at EUR 43 mln, at constant rates +16.5%
Another strong quarter ASAP software Sales almost flat in euros. In US dollars +15%
EBITAE EUR 5.0 mln (Q1-03 EUR 4.6 mln). In USD +28%
Office Products North America
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Office Products Europe / Australia
Q1 2004 Sales EUR 386 mln
EBITAE EUR 15 mln
Q1 2003 Sales EUR 378 mln
EBITA EUR 8 mln
Q1 2002 Sales EUR 396 mln
EBITA EUR 15 mln
% Added value / Sales
20.0%
22.0%
24.0%
26.0%
28.0%
30.0%
Sales
300
350
400
450
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Organic decline 2% (OP Europe down, OP Australia up)
UK: Sequential positive sales trend, confirms management actions taken
Benelux: market conditions remained weak Germany: Office supplies business performed better, while
demand for furniture and copiers remained weak Other European countries generally continued to do well
EBITAE up over 60% at constant rates Profitability European office products increased due to
Restructuring implemented last year
Success of margin enhancement initiatives such as private brand
Office Products Europe / AustraliaListed CE Australia discloses on semi-annual basis
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Graphic Systems
Q1 2004 Sales EUR 96.7 mln
EBITA EUR (1) mln
Q1 2003 Sales EUR 62 mln
EBITA EUR (9) mln
Q1 2002 Sales EUR 100 mln
EBITA EUR 1 mln
% Added value / Sales
20.0%
22.0%
24.0%
26.0%
Sales
0
50
100
150
200
21
Sales up 56% to EUR 97 mln, Organic growth 27% Q1-03 EUR 13 mln negative impact from new revenue recognition rule
Too early to determine if market recovery is imminent given
• Late cyclical nature of business
• General economic circumstances have not improved
DRUPA (6-19 May) may stimulate order intake in H2-04
Continue to reinforce “triple S” strategy
EBITAE loss EUR 1 mln versus loss of EUR 9 mln in Q1-03
Graphic Systems
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Closing remarks From a stronger financial and operational base, the re-aligned
and more focused marketing and sales efforts targeted at specific customer segments are having a positive effect on sales volumes
Global sourcing initiatives and growth in our private brands are beneficiary to our absolute margins, although on average selling prices are lower for our private brands than for manufacturers’ brands
We expect available cash flow to be positive for 2004
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Leaders in business services
and distribution
www.Buhrmann.com
Corporate Communications +31.20.651.1034
Investor Relations +31.20.651.1042
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Financial considerations
Effective tax rate (on EBTAE) full year 2004 about 15-20% Medium term around 25%
Capex* 2004 about EUR 80 mln 2003 EUR 79 mln (of which Paper Merchanting EUR 11 mln)
Goodwill amortisation* 2004 about EUR 50 mln 2003 EUR 52 mln (of which Paper Merchanting EUR 2 mln)
Depreciation 2004* about EUR 87 mln 2003 EUR 104 mln (of which Paper Merchanting EUR 17 mln)
Holding costs about EUR 23 mln on annual basis US Dollar exposure
A 10% change in USD/EUR exchange rate affects net result from ordinary operations before goodwill amortisation by approximately 7%
* Subject to currency fluctuations
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ASAP Software
In EUR mln Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004
Sales 149 246 164 229 147
Added value 14.4 18.1 14.6 18.4 15.3
As % of sales 9.6% 7.4% 8.9% 8.0% 10.4%
EBITAE 4.6 7.7 4.5 8.4 5.0
As % of sales 3.0% 3.1% 2.7% 3.7% 3.4%
In USD mln
Sales 160 277 184 270 184
Added value 15.4 20.5 16.4 21.8 19.1
EBITAE 4.9 8.7 5.0 9.8 6.3
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Change in number of employeesExcluding Paper Merchanting Division
Number of employees decreased 4,005
(2,270) (1,614) (121)
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Funding (per 31-03-2004)
in EUR mln Actual Applicable Interest %
Revolver (EUR 255 mln facility) - Commitment fee 0.75%
Drawings: EURIBOR + 2.50%
Term Loans Total 478
Term Loan A 118 EURIBOR + 2.50%
Term Loan B 360 EURIBOR + 2.75%
Convertible (subordinated) 115 2.00%
Securitisation (ARSP) 82 LIBOR + 0.50%
High Yield ($ 350mln)(subordinated) 286 12.25%
Other Debt
Cash
62
<130>
Interest-Bearing Net Debt 893
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(Cumulative) redemption schemeARSP is considered to be a permanent programme
0
100
200
300
400
500
Other 2004 2005 2006 2007 2008 2009 2010 >2010
0
250
500
750
1000
1250
Other 2004 2005 2006 2007 2008 2009 2010 >2010
Cumulative redemption scheme
Redemption scheme
29
Details on Credit Facility
End of Minimum Interest
Coverage
Maximum Leverage
Ratio
2004 2.40 4.45
2005 2.65 4.10
2006 3.20 3.70
2007 3.50 3.25
2008 + thereafter
3.50 3.00
Applicable Margin for
Leverage Ratio
Term Loan A and
Revolver
Term Loans B
Commitment Fee
Revolver
> 3.50 2.50% 2.75% 0.75%
3.00 - 3.50 2.25% 2.75% 0.75%
2.50 - 3.00 2.00% 2.50% 0.75%
2.00 - 2.50 1.75% 2.50% 0.75%
< 2.00 1.50% 2.50% 0.75%
Definitions for Credit Facility purposes may differ from published figures Interest Coverage = EBITDA / Interest Expense Leverage Ratio = Gross Debt / EBITDA Calculated on 4 quarter rolling basis
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Accounting policies• Exceptional items – during the course of a year, certain events take place that may be
viewed as part of a company’s normal business operations. these events however, have unique characteristics that set them apart from the company’s standard day-to-day operations, these events may be so infrequent and of such a size that reporting them as exceptional items provides the opportunity to give a more operationally oriented view on the results of the business. other events, such as restructurings are so large and impact the company’s operations and cost structure so significantly, that reporting them as exceptional items aims to clarify the effect of these decisions on the results of operations. In order to increase transparency these events have been separately disclosed as exceptional results
• Revenue recognition (for equipment sales of the Graphic Systems Division) – Following the release of the new Guideline for Annual Reporting on Revenue Recognition (270.2) from 2003 onwards the equipment sales are recorded after installation, instead of at delivery.
• Organic growth rates exclude all factors that disturb a like-for-like comparison, such as: currency exchange rate movements, acquisitions, divestments, variations in the number of working days, the change- to a commission-based model at our ASAP Software subsidiary, and the change in the sales recognition of the Graphic Systems Division
• Non-GAAP measures: Figures are often presented before exceptional items and where applicable before amortisation and impairment of goodwill. These figures are regarded by Buhrmann as key performance indicators increasing the transparency of the reporting.
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Drivers of value creation
Focus on profitable organic growth Consolidate in large client segment and win new accounts
Grow mid-market segment
Product range extension & margin management
Private brands
Focus on cost control Continued re-engineering
Customer profitability
Focus on cash generation Working capital management
Selective capital expenditure
32
Financial targets
EBITDA / cash interest > 3 times
Debt /enterprise value < 50%
Operational targets per division
EBITAE ROCE*
Office Products 6.5% 32.5%
Graphic Systems 3 - 8% 15 - 40%*pre goodwill