TIDMBNZL
RNS Number : 5303K
Bunzl PLC
29 August 2023
29 August 2023
HALF YEARLY FINANCIAL REPORT FOR SIX MONTHSED 30 JUNE 2023
Bunzl plc, the specialist international distribution and
services Group, today publishes its half yearly financial report
for the six months ended 30 June 2023.
Growth
Growth as at constant
Financial results H1 23 H1 22 reported exchange
------------------------------
Revenue GBP5,906.8m GBP5,650.8m 4.5% 0.6%
------------ ------------ ------------ -------------
Adjusted operating profit* GBP438.3m GBP411.4m 6.5% 2.5%
------------ ------------ ------------ -------------
Adjusted profit before
income tax* GBP395.6m GBP380.5m 4.0% (0.8)%
------------ ------------ ------------ -------------
Adjusted earnings per share* 88.3p 85.7p 3.0% (1.7)%
------------ ------------ ------------ -------------
Interim dividend 18.2p 17.3p 5.2%
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Statutory results
------------------------------ ------------ ------------ ------------
Operating profit GBP359.8m GBP327.5m 9.9%
------------ ------------ ------------
Profit before income tax GBP317.1m GBP296.6m 6.9%
------------ ------------ ------------
Basic earnings per share 70.8p 66.2p 6.9%
------------ ------------ ------------
Highlights include:
-- Revenue grew by 0.6% at constant exchange rates, and grew by 2.4% excluding
the UK healthcare disposal(!=)
-- Adjusted operating profit* increased by 2.5% at constant exchange rates,
with growth of 4.1% excluding the UK healthcare disposal(!=) ; reported
operating profit increased by 9.9%
-- Operating margin increased from 7.3% to 7.4%
-- Adjusted earnings per share* declined by 1.7% at constant exchange rates,
and grew by 0.2% excluding the UK healthcare disposal(!=) , due to an
expected increase in net finance expense and tax rate; reported basic
earnings per share rose 6.9%
-- Free cash flow* grew by 21% at actual exchange rates to GBP286.3 million;
supported by a substantial reduction in inventory
-- Interim dividend per share grew by 5.2%, extending 30 consecutive years
of annual dividend growth
-- 12 acquisitions announced August year-to-date, including two announced
today, with a total committed spend of more than GBP350 million; our
pipeline remains active
-- Net debt to EBITDA* of 1.1 times providing substantial headroom for acquisitions
; resilient return on invested capital* of 14.9% compared to 13.6% at
the end of 2019, prior to the pandemic
-- 2023 outlook: adjusted operating profit guidance upgraded, driven by
a meaningful increase in operating margin expectations
Commenting on today's results, Frank van Zanten, Chief Executive
Officer of Bunzl, said:
"I am pleased with our first half performance, with good
adjusted operating profit growth and an operating margin
significantly ahead of that achieved prior to the comparable period
of 2019. The Group's performance continues to be supported by the
strength of our customer focused value proposition, including our
sustainability expertise and range of innovative products and
solutions, and the continued success of our acquisition strategy.
We have an active pipeline of attractive opportunities, and I am
delighted to announce two additional acquisitions today, including
our first acquisition in Poland, meaning Bunzl will operate from 32
countries upon completion. As a result of our successes over the
period, we are upgrading our 2023 adjusted operating profit
guidance, supported by a meaningful increase in our operating
margin expectations. I remain confident in Bunzl's medium-term
growth opportunities which are underpinned by our differentiated
value-added proposition and a strong balance sheet to support
significant consolidation opportunities."
* Alternative performance measure (see Note 2).
Growth at constant exchange rates is calculated by comparing the
H1 23 results to the H1 22 results retranslated at the average
exchange rates used for H1 23.
At average exchange rates and based on historical accounting
standards, in accordance with the Group's external debt
covenants.
!= The Group disposed of its UK healthcare business in December
2022.
H1 23 performance highlights:
Underlying revenue growth(*) H1 23 Underlying revenue growth(*) H1 23
contribution by sector
Base business 1.6% Foodservice and Retail (4)%
------ ----------------------------- -----
Cleaning & Hygiene, Safety
Covid-19 related orders (2.0)% and Healthcare 2%
------ ----------------------------- -----
Group total (0.4)% Grocery and other 2%
------ ----------------------------- -----
-- Group underlying revenue (*) declined by 0.4% with growth in the base
business, which benefited underlying revenue growth by 1.6%, offset
by a 2.0% negative impact from the expected decline in Covid-19 related
sales, with much of this occurring in the first quarter of the year
-- Base business growth was impacted by a reducing benefit from inflation,
as well as wider post-pandemic related normalisation trends which drove
some volume weakness in the North American foodservice sector
-- Operating margin increased as a result of margin management initiatives,
inclusive of an increase in own brands. Furthermore, the impact of operating
cost inflation reduced and was moderate over the period
-- Group revenues were supported by 2.8% growth from the incremental impact
of acquisitions, partially offset by the 1.8% negative impact to revenue
from the UK healthcare disposal in December 2022
Business area highlights:
Growth Underlying O perating Growth at
at revenue profit* constant
constant (GBPm) Operating margin*
-------------
Revenue (GBPm) exchange growth (*) H1 23 H1 22 exchange* H1 23 H1 22
H1 23 H1 22 (*)
------------- ------------- --------------- -------- ------- ---------- ---------- ----------
North
America 3,514.4 3,435.9 (2.9)% (3.1)% 245.6 231.5 0.4% 7.0% 6.7%
------- ------- ------------- --------------- -------- ------- ---------- ---------- ----------
Continental
Europe 1,179.1 1,026.1 12.4% 3.7% 106.8 97.7 7.8% 9.1% 9.5%
------- ------- ------------- --------------- -------- ------- ---------- ---------- ----------
UK & Ireland 663.8 687.1 (3.7)% 11.6% 44.7 40.6 9.6% 6.7% 5.9%
------- ------- ------------- --------------- -------- ------- ---------- ---------- ----------
Rest of the
World 549.5 501.7 7.6% (4.1)% 57.1 53.9 2.7% 10.4% 10.7%
------- ------- ------------- --------------- -------- ------- ---------- ---------- ----------
North America (60% of revenue and 54% of adjusted operating
profit* )
-- Underlying revenue decline driven by wider post-pandemic related normalisation
trends, which resulted in some volume weakness in the foodservice sector,
and moderating product cost inflation benefit over the period
-- Strong operating margin increase supported by margin management, including
further expansion of own brands
-- Limited operating cost inflation driven by a meaningful reduction in
freight costs and wage growth that was closer to more typical historical
levels
Continental Europe (20% of revenue and 23% of adjusted operating
profit(*) )
-- Good underlying revenue growth driven by the benefit of product cost
inflation, and despite the impact of the reduction in Covid-19 related
sales, particularly in Q1
-- Weakening volumes in Continental Europe with trading impacted in France
by reduced public sector activity
-- Operating margin decline driven by hyperinflation accounting in the
Turkish businesses, the decline in Covid-19 related orders and an impact
from the sector mix
UK & Ireland (11% of revenue and 10% of adjusted operating
profit(*) )
-- Strong underlying revenue growth driven by product cost inflation, alongside
continued recovery in certain markets, in particular foodservice, cleaning
& hygiene and safety
-- Very strong operating margin increase supported by underlying sales
growth and increased own brand penetration
-- Excluding the impact of the UK healthcare disposal, adjusted operating
profit increased by 31%
Rest of the World (9% of revenue and 13% of adjusted operating
profit(*) )
-- Underlying revenue decline driven by further Covid-19 related product
sales normalisation, largely in Asia Pacific, due to the non-repeat
of some larger orders that were fulfilled in the prior year
-- Latin America business impacted by lower selling prices resulting from
reduced inbound freight costs and currency movements
-- Overall, operating margin decrease reflective of the reduction in Covid-19
related sales; operating margin remains well ahead of pre-pandemic levels
in 2019
Strategic progress:
-- First half operating margin growth supported by margin management initiatives,
including increasing penetration of own brand
-- 12 acquisitions signed August year-to-date, including our first entry
into Poland, highlighting the breadth of Bunzl's opportunity; Bunzl
will operate, upon completion, in 32 countries globally
-- A continued focus on warehouse optimisation, with 12 warehouse relocations
and consolidations in the first half of the year. In addition, further
investments into digital solutions and automation continue to improve
the efficiency of our operations
-- Processed 71% of orders digitally compared to 68% in the first half
of 2022, supporting customer retention and enhancing operational efficiency
* Alternative performance measure that excludes charges for
customer relationships, brands and technology amortisation,
acquisition related items, non-recurring pension scheme charges and
the profit or loss on disposal of businesses and any associated
tax, where relevant. None of these items relate to the underlying
operating performance of the business and, as a result, they
distort comparability between businesses and reporting periods.
Accordingly, these items are not taken into account by management
when assessing the results of the business and are removed in
calculating the profitability measures by which management assesses
the performance of the Group. Further details of these alternative
performance measures are set out in Note 2. Unless otherwise stated
operating margin in this review refers to adjusted operating profit
as a percentage of revenue.
Growth at constant exchange rates is calculated by comparing the
H1 23 results to the results for H1 22 retranslated at the average
exchange rates used for H1 23.
Underlying revenue is a measure of revenue over comparative
periods at constant exchange rates, excluding the incremental
impact of acquisitions and disposals and adjusted for differences
in trading days between periods as well as for growth delivered in
excess of 26% per annum in hyperinflationary economies.
Base business defined as underlying revenue excluding the top
Covid-19 related products.
Based on adjusted operating profit and before corporate costs
(see Note 3).
Enquiries:
Bunzl plc Teneo
Frank van Zanten, Chief Executive Martin Robinson
Officer Richard Howes, Chief Olivia Peters
Financial Officer Sunita Entwisle, Tel: +44 (0)20 7353
Head of Investor Relations 4200
Tel: +44 (0)20 7725 5000
Note: A live webcast of today's presentation to analysts will be
available on www.bunzl.com, commencing at 9.30 am.
CHAIRMAN'S STATEMENT
Bunzl has had another successful first half, delivering
resilient financial results and making strong strategic progress.
At constant exchange rates, Bunzl delivered revenue growth in the
first half of 2023 of 0.6% (4.5% at actual exchange rates) and
growth of 2.4% excluding the strategic disposal of the UK
healthcare business. Over the period, adjusted operating profit
grew by 2.5% at constant exchange rates, with 4.1% growth excluding
the disposal. Operating margins remain strong at 7.4%, with the
substantial increase since the comparable pre-pandemic period in
2019 partially supported by acquisitions made over the period. At
constant exchange rates, adjusted operating profit was 45% higher
than the comparable period in 2019, and is equivalent to a c.10%
Compound Annual Growth Rate (CAGR) over that period. The continued
resilience of the Group's performance and strategic progress,
despite varying external factors over this period, demonstrates the
strength of the business model and gives me confidence that the
agility of our people, the diversification of our portfolio, the
strength of our culture and our dedication to customer service will
continue to drive success for the Group over the long-term.
Strategic priorities
We continue to pursue a strategy of targeting organic growth and
operational improvements while developing the business through
acquisitions. The Group has announced 12 acquisitions August
year-to-date, including the two announced today, with committed
spend of more than GBP350 million and inclusive of our entry into
Poland with the anchor acquisition of Safety First. The Group has
achieved the significant milestone of completing more than 200
acquisitions since 2004. Bunzl's depth of opportunity is
significant and further consolidation of its fragmented end markets
is a key driver of growth for the Group. The Group also continued
to pursue operational efficiencies, including further warehouse
relocations and consolidations to partially offset property cost
inflation, and investments into digital technologies over the
period. Bunzl ended the half year with a net debt to EBITDA ratio
of 1.1 times, affording Bunzl the balance sheet strength to
allocate substantial capital to our active pipeline of acquisition
opportunities.
Bunzl's operating companies continue to focus on providing
value-added services to customers and helping them to achieve their
own strategic goals. The North America team demonstrated this
during their Insight Event for investors, hosted in June 2023,
which showcased how the value proposition continues to support
organic growth and enhance profitability in the business area,
providing exciting medium-term growth opportunities and margin
upside. Our own brand ranges and sustainability capabilities are
two areas that increasingly strengthen Bunzl's competitive
advantage and the Group continues to focus on pursuing these
strategic opportunities to further enhance our proposition.
The Group's focus on helping customers transition to packaging
and products made from alternative materials that are better suited
to a circular economy, as well as reducing carbon emissions
associated with our deliveries, remains important to our customers.
Over the period, the Group has continued to make progress with
further implementation of data tools to support customer visibility
of their packaging exposures and opportunities for transition, as
well as making further progress with our climate change objectives
within our supply chains.
Shareholder returns
The Board is recommending an interim dividend of 18.2p, 5.2%
higher than the prior year, following on from the Group's 30(th)
consecutive year of annual dividend growth in 2022. The Group
remains committed to ensuring sustainable dividend growth, with
dividend cover starting to normalise towards the pre-pandemic
level. Between 2004 and 30 June 2023, Bunzl has returned GBP2.1
billion to shareholders through dividends and has committed GBP4.9
billion in acquisitions to support a growth strategy that has
delivered an annual adjusted earnings per share CAGR between 2004
and 2022 of c.10%.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
The resilient results we have achieved once again demonstrate
Bunzl's operational and financial strength. We have again
demonstrated good adjusted operating profit growth with margin
improvement, building on the strong performance we have already
delivered over the last few years. I remain impressed with our
people who continue to react to the constantly evolving external
environment to effectively support both our customers and the
business. Whilst, as expected, the benefit of inflation reduced
over the period, our teams have been effective in pursuing margin
management initiatives, such as increasing the penetration of our
own brand products, which have supported our operating margin, and
we have achieved a good outcome from the elevated number of
customer tenders we have seen following a period of reduced
activity. Acquisitions have also helped us to deliver higher
margins over recent years, supporting a sustainably higher
operating margin compared to pre-pandemic levels. Furthermore,
whilst the Group's financial strength had enabled our teams to
invest in inventory during the supply chain disruption over the
last few years, as this has eased, a number of teams have
demonstrated very strong operational discipline, achieving a
meaningful reduction in our inventory towards pre-pandemic levels
over the first half, supporting a 21% rise in free cash flow over
the period. I am also very pleased that our acquisition strategy
continues to complement the organic growth of the business, with 12
deals already announced August year-to-date, including our first
acquisition in Poland which has been a target market for expansion,
and taking the Group to 207 acquisitions announced since 2004. With
a net debt to EBITDA of 1.1 times at the end of the period
we maintain substantial headroom to allocate significant capital
to our active pipeline of acquisition opportunities.
Operating performance
With approximately 90% of adjusted operating profit generated
outside the UK, profits and earnings were positively impacted
between c.4% and c.6% by currency translation over the period. The
commentary below is stated at constant exchange rates unless
otherwise highlighted.
In the first half of 2023, revenue increased by 0.6% (4.5% at
actual exchange rates) to GBP5,906.8 million. Within this,
underlying revenue declined by 0.4%, while acquisitions contributed
revenue growth of 2.8%. The disposal of our UK healthcare business
in December 2022 impacted revenue by 1.8%. Within the underlying
revenue decline of 0.4%, growth in the base business benefited
underlying revenue growth by 1.6%, offset by a 2.0% impact to
underlying growth from the expected decline in Covid-19 related
sales, with much of this occurring in the first quarter of the year
with limited impact in the second quarter. The base business growth
was impacted by the reducing benefit from inflation, as expected,
as well as wider post-pandemic related normalisation trends which
have resulted in volume weakness in the North America foodservice
sector. Covid-19 related sales have reduced significantly since
their peak in 2020 and are now at a more typical level, although
remain ahead of 2019 levels which represents a small benefit to
Group revenue.
The Group has managed inflation on plastics, paper and chemicals
well and successfully implemented product cost driven selling price
increases. During the first half of 2023, the year-on-year benefit
of prior year product cost increases continued to reduce, with
North America seeing only a small year-on-year benefit by the
second quarter. Other regions, in which inflation had lagged North
America, also started to see some annualisation towards the end of
2022, however Continental Europe growth continued to see good
support from inflation, and inflation remained strong in the UK
& Ireland. Over the period we saw good outcomes from the
elevated number of customer tenders, following reduced activity
during the pandemic. Alongside these product cost trends, we saw
limited operating cost growth in North America as freight cost
reductions partially offset wage growth, which was closer to
typical historical levels, and continued property cost inflation
linked to renewals. Wage inflation in Continental Europe over the
period increased but was significantly less than the inflation we
had previously experienced in North America. Overall, Group
operating costs grew only moderately despite the backdrop. Combined
with the positive contribution that product cost inflation has made
to revenue, inflation dynamics have remained somewhat supportive to
margins.
The foodservice and retail sectors combined, saw underlying
revenue decline by 4% compared to the prior year. Foodservice was
impacted by the decline of Covid-19 related products, but also some
wider post-pandemic related volume weakness in North America,
driven by the decline in takeaway packaging sales, as dining habits
have continued to shift following the pandemic, as well as customer
destocking activity earlier in the period. We expect the sales of
takeaway packaging to normalise during the first half of 2024.
Strong growth across Continental Europe's retail base businesses
was more than offset by a reduction in Covid-19 related sales and
actions taken to focus on more profitable customers in North
America. Total underlying revenue in the grocery and other sectors
grew by 2%, driven by further year-on-year inflation benefit.
Overall, total underlying revenue in the cleaning & hygiene,
safety and healthcare sectors also grew by 2% year-on-year despite
an impact from lower Covid-19 related sales which partly offset
base business growth across all these sectors. Our healthcare base
businesses are performing well, with the backlog of elective
surgeries remaining a tailwind. Our safety base businesses have
seen improvement as the supply chain disruption and labour
shortages that impacted 2022 have eased for customers; we expect
the safety business in North America to benefit from increased
infrastructure spend in the medium term. The cleaning & hygiene
sector saw very strong base business growth over the period, with
continued inflation.
Adjusted operating profit was GBP438.3 million, an increase of
2.5% (6.5% at actual exchange rates), and operating margin
increased to 7.4% compared to 7.3% in the prior period. The Group's
operating margin was supported by successful margin management
initiatives, including the increase in own brand penetration.
Operating margins remain substantially higher compared with the
6.6% achieved in the first half of 2019, at constant exchange
rates, driven by margins attributable to acquisitions made over
that period, as well as an underlying margin increase. Excluding
the UK healthcare disposal, adjusted operating profit grew by 4.1%.
Reported operating profit was GBP359.8 million, an increase of 5.5%
(9.9% at actual exchange rates), reflecting the 2.5% increase in
adjusted operating profit and a reduction in customer
relationships, brands and technology amortisation and acquisition
related items compared to the prior year period.
Adjusted profit before income tax was GBP395.6 million, a
decrease of 0.8% (4.0% increase at actual exchange rates) and an
increase of 0.9% excluding the UK healthcare disposal. Adjusted
profit before income tax was impacted by a GBP13.7 million increase
in net finance expense, at constant exchange rates, to GBP42.7
million, driven by increases in interest rates on floating debt and
increases in interest rates on refinancing long-term debt, fair
value losses on interest rate derivatives partly offset by lower
average debt during the period. The Group continues to expect a net
finance expense in 2023 of GBP90 million to GBP95 million,
predominantly reflecting the non-repeat of financial derivative
benefit seen in 2022 and higher interest rates on the floating
portion of Bunzl's Group debt. Reported profit before income tax
was GBP317.1 million, an increase of 1.6% (6.9% at actual exchange
rates).
The effective tax rate of 25.2% was higher than the 24.6% in the
prior period, reflecting the UK corporate tax increase. Adjusted
earnings per share were 88.3p, a decline of 1.7% (3.0% increase at
actual exchange rates) and an increase of 0.2% excluding the UK
healthcare disposal. Basic earnings per share were 70.8p, an
increase of 1.6% (6.9% at actual exchange rates).
The Group's cash generation continues to be strong, with
GBP286.3 million of free cash flow generated, representing 21%
growth at actual exchange rates compared to the comparable period
in 2022. The improved level of cash generation reflects good
underlying cash generation, including an improvement in working
capital in the first half of the year, enabled by easing supply
chain constraints particularly in comparison to the first half of
2022, as well as actions taken by the Group to meaningfully reduce
inventory towards pre-pandemic levels. Cash conversion (operating
cash flow as a percentage of lease adjusted operating profit) over
the period was 93% compared to 86% last year. The Group ended the
period with net debt, excluding lease liabilities, of GBP1,020.4
million compared to GBP1,160.1 million in December 2022. Net debt
to EBITDA, calculated at average exchange rates and in accordance
with the Group's external debt covenants, which are based on
historical accounting standards, was 1.1 times compared to 1.2
times at the end of 2022. This provides substantial headroom to
allocate significant capital to our active pipeline of acquisitions
and to consider other potential capital allocation options . The
structure of recent acquisitions, with increasing earn-outs and
options to be exercised to buy out minorities in future years,
gives rise to both deferred consideration payable, which is held on
the balance sheet, and future contingent consideration which, in
accordance with accounting standards, is not held on the balance
sheet. Deferred consideration, based on the expected earnings to be
achieved by these businesses over the respective earn out and
option terms, was GBP140.2 million at the end of the period,
compared to GBP139.9 million at the end of 2022, and was not
included within the Group's external debt covenant definition. At
the end of the period, total deferred and contingent consideration
relating to acquisitions was GBP224.1 million compared to GBP216.2
million at the end of 2022.
Return on average operating capital increased slightly to 43.2%
compared to 43.0% at 31 December 2022, whilst return on invested
capital was 14.9% compared to 15.0% at 31 December 2022. Return on
average operating capital and return on invested capital both
remain significantly higher than in December 2019, when these
metrics were 36.9% and 13.6% respectively.
Organic growth and operational efficiency
We remain committed to delivering growth through our consistent
compounding strategy which focuses on organic growth, operational
efficiency and acquisitions. Our colleagues around the world
continue to provide our customers with innovative products and
services, including those within our strong sustainability
offering, which enhances our competitive advantage as evidenced by
the good outcome of recent tenders. Furthermore, digital sales
accounted for 71% of orders over the period compared to 68% in the
first half of 2022. Our continued focus on warehouse optimisation
included the consolidation of six warehouses and the relocation of
a further six. In addition, we continued to implement new
technologies and automation to drive more efficient processes.
Acquisitions
Over the first six months of the year, Bunzl announced and
completed six acquisitions and signed one additional acquisition,
with a total committed spend of GBP211.5 million. Bunzl has
continued to see strong momentum since the end of June, with 12
acquisitions now announced August year-to-date, with a total
committed spend of more than GBP350 million. This includes the
acquisitions we have announced today of EcoTools.nl and Safety
First. The 12 acquisitions announced August year-to-date are across
seven countries and four sector verticals, highlighting the breadth
of consolidation opportunity. The combined revenue of these
businesses was c.GBP237 million in 2022 . We are particularly
pleased to be entering the Polish market with the acquisition of
Safety First, meaning Bunzl will, upon completion, operate from 32
countries globally.
Acquisition Completion Description
Capital Paper January 2023 Distributor of foodservice packaging and consumables,
cleaning & hygiene supplies, and industrial
packaging products in Canada, with revenue of
CAD 26 million (c.GBP16 million) in 2022
----------------- ------------------------------------------------------
Arbeitsschutz-Express April 2023 A fast-growing online distributor of workwear
and Personal Protective Equipment (PPE) in Germany,
which generated EUR 41 million (c.GBP35 million)
of revenue in 2022
----------------- ------------------------------------------------------
Dimasa April 2023 Distributor of cleaning and hygiene products
in the Andalusia region of Spain with revenue
of EUR 4 million (c.GBP3 million) in 2022
----------------- ------------------------------------------------------
Irudek April 2023 Distributor of safety and PPE in Spain, specialising
in fall protection equipment, with revenue of
EUR 17 million (c.GBP15 million) in 2022
----------------- ------------------------------------------------------
EHM June 2023 Distributor of a wide range of PPE products
in the UK with revenue in 2022 of GBP18 million
----------------- ------------------------------------------------------
La Cartuja Complementos June 2023 Foodservice and hospitality equipment provider
Hosteleria in Spain with revenue of EUR 5 million (c.GBP4
million) in 2022
----------------- ------------------------------------------------------
EcoTools.nl July 2023 High growth Netherlands specialist online distributor
of tool accessories and industrial consumables
to customers across the Benelux region. In 2022,
the business generated revenue of EUR 20 million
(c.GBP17 million) with very high double digit
margins
----------------- ------------------------------------------------------
Leal Equipamentos August 2023 A specialised high margin safety distributor
de Proteção in Brazil with a strong own brand portfolio
which generated revenue of BRL 216 million (c.GBP34
million) in 2022
----------------- ------------------------------------------------------
Groveko August 2023 Distributor of cleaning and hygiene products
in the Netherlands with both a traditional cleaning
and hygiene product offering, as well as robotic
and smart cleaning solutions. The business generated
revenue of EUR 23 million (c.GBP20 million)
in 2022
----------------- ------------------------------------------------------
PackPro August 2023 Distributor of packaging solutions to a diverse
customer base, including food processor and
industrial customers in Canada. In 2022 the
business generated revenue of CAD 33 million
(c.GBP20 million)
----------------- ------------------------------------------------------
Safety First Signed July 2023 One of the largest distributors of PPE in Poland
to a range of end markets. This is Bunzl's anchor
acquisition into Poland, with revenue generated
in 2022 of PLN 121 million (c.GBP22 million).
Completion of the acquisition is subject to
competition authority clearance
----------------- ------------------------------------------------------
Grupo Lanlimp Signed July 2023 A market leading distributor of cleaning and
hygiene products in Brazil with revenue of BRL
210 million (c.GBP33 million) in 2022. Completion
of the acquisition is subject to competition
authority clearance
----------------- ------------------------------------------------------
The strength of the Group's cash conversion and balance sheet
continues to enable the Group to fund further acquisitions, largely
through cash generated in the year. Bunzl ended the first half of
2023 with net debt to EBITDA of 1.1 times, providing the Group with
substantial capacity to fund further acquisitions and to consider
other potential capital allocation options. Our pipeline is active,
and we see significant opportunities for continued acquisition
growth in our existing markets where we have opportunity to
increase our presence, as well as potential to expand into new
markets.
Our capital allocation priorities are to: reinvest our cash into
the business to support organic growth and operational
efficiencies; pay a progressive dividend; self-fund value accretive
acquisitions; and distribute excess cash. Our framework favours the
first three methods of investment, with GBP2.1 billion of cash
distributed to shareholders through dividends and GBP4.9 billion
committed acquisition spend between 2004 and the first half of
2023, alongside a return on invested capital of 14.9%. Whilst the
Board is committed to an efficient balance sheet which supports
organic investment and value-accretive acquisitions, it also
continually assesses the appropriateness of the return of excess
capital to shareholders.
Prospects
Given performance year to date, we upgrade our 2023 adjusted
operating profit guidance, driven by a meaningful increase in
operating margin expectations. We now expect adjusted operating
profit to be moderately higher than in 2022 at constant exchange
rates, with operating margin remaining strong and moderately higher
than that achieved in the prior year. At constant exchange rates we
expect Group revenue in 2023 to be slightly higher than in 2022,
driven by announced acquisitions, partially offset by a slight
organic decline, following strong organic growth in recent years,
and a small impact from the UK healthcare disposal.
BUSINESS AREA REVIEW
North America
Growth at
H1 23 H1 22 constant Underlying
GBPm GBPm exchange* growth*
--------------------------- ------- ------- ---------- ------------
Revenue 3,514.4 3,435.9 (2.9)% (3.1)%
Adjusted operating profit* 245.6 231.5 0.4%
--------------------------- ------- ------- ---------- ------------
Operating margin* 7.0% 6.7%
--------------------------- ------- ------- ---------- ------------
* Alternative performance measure (see Note 2)
In North America, revenue declined by 2.9% to GBP3,514.4
million, with underlying revenue declining by 3.1%. Underlying
revenue continues to benefit from prior year product price
increases, although this moderated over the period and was only a
small benefit by the second quarter. Despite the benefit of a
significant new business win in our processor segment at the start
of the year, volumes were impacted by weakness in the foodservice
sector, driven by a reduction in takeaway packaging and customer
destocking activity, as well as a further reduction in Covid-19
related sales . Adjusted operating profit improved by 0.4%, to
GBP245.6 million with an operating margin of 7.0%, up from 6.7% in
the prior year. This operating margin improvement was driven by a
strong benefit from margin management initiatives, inclusive of an
increase in own brands, particularly in our grocery, foodservice
and safety segments, and supported by limited operating cost
inflation. During the period, wage inflation, which was closer to
typical historical levels, and continued property cost inflation
linked to renewals were largely offset by freight cost
reductions.
Our largest business, which supports the US grocery sector,
experienced stable consumer demand, supported by the moderating
impact of product cost inflation. Operating margin was supported by
good margin management initiatives, including the expansion of own
brands, driving an overall improvement in operating margins and
operating profits. We agreed new terms with our largest customer by
revenue in January 2023 that reduce our sensitivity to product and
operating cost movements, and provide opportunities to support them
with our own brand range going forward. Our convenience store
sector declined moderately.
Our foodservice redistribution business declined, with the
moderating impact of prior year product cost inflation offset by
the reversal in pandemic-related growth in takeaway packaging, as
customers adjusted inventories to take account of a shift back to
in-restaurant dining, as well as customer destocking activity. Our
food processor sector saw good growth, driven by the favourable
impact of a large customer win in Q3 2022 and product cost
inflation, although this was partially offset by continued
temporary market weakness. Our businesses serving the agriculture
sector saw revenues decline significantly owing to the historic
flooding in California in H1 2023.
Our cleaning & hygiene redistribution business grew
moderately, as base business product cost inflation was offset by
volume declines in Covid-19 related sales, and continued high
levels of remote working.
Revenue in our retail supplies business was impacted by some
lost business following actions taken to focus on more profitable
customers. However, adjusted operating profit grew as cost
management initiatives more than offset the decline in
revenues.
Our safety business revenue declined, driven by a reduction in
Covid-19 related sales, although operating margins and operating
profit improved as supply chains stabilised.
Lastly, our business in Canada grew modestly, with the
underlying business flat and growth driven by the January 2023
acquisition of Capital Paper. Growth in grocery, cleaning &
hygiene and redistribution was offset by declines in the safety and
industrial sectors, the latter having performed particularly
strongly in the last few years.
Continental Europe
Growth at
H1 23 H1 22 constant Underlying
GBPm GBPm exchange* growth*
--------------------------- ------- ------- ---------- ----------
Revenue 1,179.1 1,026.1 12.4% 3.7%
Adjusted operating profit* 106.8 97.7 7.8%
--------------------------- ------- ------- ---------- ----------
Operating margin* 9.1% 9.5%
--------------------------- ------- ------- ---------- ----------
* Alternative performance measure (see Note 2)
Revenue in Continental Europe grew by 12.4% to GBP1,179.1
million, due to the benefit of acquisitions and the support of
product cost inflation offsetting the expected reduction in
Covid-19 related sales. Underlying revenue growth was impacted by
weakening volumes due to the expected decline in Covid-19 related
sales, as well as reduced public sector activity in France.
Adjusted operating profit increased by 7.8% to GBP106.8m with
operating margin decreasing from 9.5% to 9.1% driven by
hyperinflation accounting in the Turkish businesses, the decline in
Covid-19 related orders and an impact from sector mix.
In France, revenue grew moderately in our cleaning & hygiene
businesses, driven by product cost inflation and growth from
foodservice and healthcare customers offsetting a decline in
Covid-19 related sales and reduced activity with public sector
customers. Our safety business saw a significant reduction in sales
of Covid-19 related products, as well as an impact from reduced
public sector activity, but successfully moved to a new IT platform
enabling more efficient digital tools to be used to support its
operations. The foodservice businesses have grown sales, supported
by inflation.
In the Netherlands, there was very strong growth in our
foodservice and non-food retail businesses, driven by a number of
new business wins at our retail business and good growth with
hotel, travel and leisure customers in our foodservice business.
Our grocery and e-commerce fulfilment businesses saw more limited
growth, with the prior year benefitting very strongly from the
reduction in Covid-19 restrictions. In our safety businesses, sales
grew moderately despite a significant decline of Covid-19 related
items. In Belgium, our cleaning & hygiene businesses have grown
strongly with healthcare and contract cleaning customers, and in
Germany our foodservice business has grown significantly across all
sectors but in particular with hotel customers.
In Denmark, we have seen moderate growth in our foodservice,
cleaning and hygiene and grocery businesses as inflation has offset
a reduction in Covid-19 related product sales. Revenues in our
safety business have grown strongly due to increased activities
from customers in the renewable energy and pharmaceutical
sectors.
Sales in Spain saw good growth, driven by strong foodservice
growth and despite a reduction in Covid-19 related sales, as well
as reduced activities and some selling price decreases with
industrial and disposable packaging customers. Our safety end-user
and redistribution businesses were impacted by the reduction of
Covid-19 related sales but still delivered moderate growth overall
with increased volumes in the base business.
In Turkey, revenue has declined as we focus on business that can
be profitable in a hyperinflationary environment.
In all other countries we have seen growth in foodservice aided
by inflation and volume growth but partially offset by lower
Covid-19 related sales. We have continued to increase the share of
digital orders from customers and have launched a number of new
webshops, supporting improved customer retention and enhancing the
efficiency of our business. Our digital capabilities have also been
enhanced with the recent acquisitions of Hygi.de and Queralto in
2022, and Arbeitsschutz-Express and EcoTools.nl in 2023.
UK & Ireland
Growth at
H1 23 H1 22 constant Underlying
GBPm GBPm exchange* growth*
----------------------------- ------- ------- ---------- --------------
Revenue 663.8 687.1 (3.7)% 11.6%
Adjusted operating profit* 44.7 40.6 9.6%
----------------------------- ------- ------- ---------- --------------
Operating margin* 6.7% 5.9%
----------------------------- ------- ------- ---------- --------------
* Alternative performance measure (see Note 2)
In UK & Ireland, revenue declined by 3.7%, however excluding
the disposal of our UK healthcare business in December 2022 revenue
rose by 13.0%. Excluding the impact of acquisitions and last year's
disposal, underlying revenue increased by 11.6%. This growth was
driven by strong product cost inflation, alongside continued
recovery in certain markets, in particular foodservice, cleaning
& hygiene and safety. This positive sales growth, supported by
an increase in own brand penetration, delivered a significant
increase in operating margin which improved from 5.9% to 6.7%, with
adjusted operating profit increasing by 9.6% to GBP44.7m, and by
31.1% excluding the UK healthcare disposal.
In our cleaning & hygiene businesses, we delivered strong
growth, supported by several new customer wins as well as the
benefit of product cost inflation. We have continued to develop
attractive sustainable products which allow our customers to
achieve their own sustainability goals as well as working jointly
to reduce the number of deliveries by consolidating a greater
assortment of products into one shipment.
In safety, we have started to see underlying volume growth,
enabled by better product availability. More customers continue to
utilise our comprehensive range of digital solutions making
procurement easier in this technically demanding space. Our recent
acquisition of EHM in June this year continues to enhance our
presence in the construction market as we look to invest further in
sustainable PPE products for our customers as supply chain
disruptions ease.
Our grocery and non-food retail businesses saw good growth over
the period as we secured some of our larger customers on long term
contracts as well as growing the number of product categories
provided. Despite a weakening within the online retail marketplace,
given the shift to the channel during the pandemic, and some
selling price decreases in corrugates, our related packaging
businesses grew revenue in the first six months.
Our foodservice businesses witnessed strong growth as
hospitality continued to recover following the pandemic and despite
food inflation and industry labour shortages. These businesses
continue to win new customers with their high service levels,
product expertise and well-regarded sustainable solutions.
Furthermore, we continue to expand our re-usable ranges to
complement existing recyclable and compostable products.
Ireland grew strongly over the period and we have continued to
invest in developing our operations with the introduction of new
warehouse management systems, which have further enhanced our
service following the recent launch of innovative stock management
technology. Data provides us with valuable insights into our
customers' purchasing habits which allows us to recommend valuable
and sustainable delivery solutions to support a growing need to
reduce carbon emissions.
Rest of the World
Growth at
H1 23 H1 22 constant Underlying
GBPm GBPm exchange* growth*
----------------------------- ------- ------- ---------- ------------
Revenue 549.5 501.7 7.6% (4.1)%
Adjusted operating profit* 57.1 53.9 2.7%
----------------------------- ------- ------- ---------- ------------
Operating margin* 10.4% 10.7%
----------------------------- ------- ------- ---------- ------------
* Alternative performance measure (see Note 2)
In Rest of the World, revenue increased 7.6% to GBP549.5
million, driven by acquisitions, with underlying revenue growth
declining by 4.1% as a result of a further reduction in Covid-19
related sales which more than offset growth in both the Asia
Pacific and Latin America base businesses. The negative impact of
Covid-19 related sales decline was driven largely by Asia Pacific,
due to the non-repeat of some larger orders in the prior year. The
Latin America businesses were also impacted by lower selling prices
resulting from reduced inbound freight costs and currency movements
over the period. Overall, the Rest of World's adjusted operating
profit grew by 2.7% to GBP57.1 million with operating margin
decreasing from 10.7% to 10.4%, due to the reduction in higher
margin Covid-19 related sales. However, operating margin remains
well ahead of 2019 levels.
In Brazil, our safety businesses saw good sales growth and
stronger margins despite the impact on selling prices from lower
inbound freight costs and currency movements. Our healthcare
businesses continued to be impacted by reducing sales of vaccine
related products. Our foodservice business similarly saw freight
and currency related selling price reductions but was able to
improve margins, resulting in operating profit growth.
In Chile, our safety businesses saw good volume-driven sales
growth and increased margins, although our catering supplies
business was unable to offset the impact on selling prices from
lower inbound freight costs and currency movements.
Our largest business in Asia Pacific experienced a temporary
decline in revenue in healthcare as both the government and private
sectors utilised excess Covid-19 related stock. However, the
business experienced solid growth in cleaning and hygiene and
overall has continued developing specialisation in its core market
sectors which has resulted in a strong pipeline of new
business.
Our Australian speciality healthcare business was impacted by
reduced government and private spending, as these customers
continue to utilise stock procured during the pandemic, but
remained focused on delivering improvements in its supply chain and
continued exploring potential new opportunities.
Our safety business units delivered a strong base business
performance, maintaining good momentum and benefiting from new
business wins and a continued focus on developing own brands. Our
emergency services business was impacted by the timing of orders,
with more orders falling into the second half of the year.
In New Zealand, our MedTech healthcare business continued to
experience an extended slowdown, with hospitals initially delaying
elective surgeries to allow beds for potential Covid-19 outbreaks
and then subsequently impacted by a shortage of clinical staff. USL
Medical, a specialist medical consumables business acquired in June
2022 has had good growth in the first half across its
portfolio.
FINANCIAL REVIEW
As in previous years this review refers to a number of
alternative performance measures which management uses to assess
the performance of the Group. Details of the Group's alternative
performance measures are set out in Note 2 to the interim financial
statements.
Currency translation
Currency translation had a positive impact on the Group's
reported results, increasing revenue, profits and earnings by
between c4% and c6%. The positive exchange rate impact was
principally due to the effect on average exchange rates of the
weakening of sterling against the US dollar, Euro and Brazilian
real, partly offset by the adverse impact of the strengthening of
sterling against the Australian dollar and Canadian dollar.
Six Six months
months to
Average exchange rates to 30.6.22
30.6.23
--------------------------- ----------------------------------------------------------------- ----------------------
US$ 1.23 1.30
Euro 1.14 1.19
Canadian$ 1.66 1.65
Brazilian real 6.25 6.59
Australian$ 1.83 1.80
--------------------------- ----------------------------------------------------------------- ----------------------
Closing exchange rates 30.6.23 30.6.22
------------------------- ------- -------
US$ 1.27 1.21
Euro 1.17 1.16
Canadian$ 1.68 1.57
Brazilian real 6.13 6.35
Australian$ 1.91 1.77
------------------------- ------- -------
Revenue
Revenue increased to GBP5,906.8 million (2022 H1: GBP5,650.8
million), an increase of 0.6% at constant exchange rates (up 4.5%
at actual exchange rates), due to acquisitions adding 2.8% partly
offset by the impact from the disposal of the UK Healthcare
business at the end of 2022 reducing revenue by 1.8% and an
underlying decline of 0.4%. The underlying decline was impacted by
a reducing benefit from inflation, as well as wider post-pandemic
related normalisation trends which drove some volume weakness in
the North American foodservice sector, and a negative impact from
the expected decline in Covid-19 related sales.
Movement in revenue GBPm
----------------------------------------------- -------
2022 H1 revenue 5,650.8
Currency translation 217.9
Excess growth in hyperinflationary economies 0.6
Underlying revenue decline (25.5)
Acquisitions 165.0
Disposal of business (102.0)
----------------------------------------------- -------
2023 H1 revenue 5,906.8
----------------------------------------------- -------
Operating profit
Adjusted operating profit increased to GBP438.3 million (2022
H1: GBP411.4 million), an increase of 2.5% at constant exchange
rates and 6.5% at actual exchange rates. At both constant and
actual exchange rates the operating margin increased to 7.4% from
7.3%.
During the six months to 30 June 2023, the Group has seen a net
utilisation of approximately GBP5 million in slow moving inventory
and trade receivables provisions, with usage of these provisions
exceeding net charges to increase the provisions. In addition, the
Group has seen some utilisation of the additional provisions set up
in the prior year as a result of market price movements on certain
Covid-19 products.
Movement in adjusted operating profit GBPm
---------------------------------------------------- -----
2022 H1 adjusted operating profit 411.4
Currency translation 16.3
Increase in hyperinflation accounting adjustments (1.1)
Growth in the period 11.7
---------------------------------------------------- -----
2023 H1 adjusted operating profit 438.3
---------------------------------------------------- -----
Operating profit was GBP359.8 million (2022 H1: GBP327.5
million), an increase of 5.5% at constant exchange rates and 9.9%
at actual exchange rates.
Movement in operating profit GBPm
------------------------------------------------------------------------- -----
2022 H1 operating profit 327.5
Currency translation 13.7
Increase in hyperinflation accounting adjustments (0.7)
Growth in adjusted operating profit 11.7
Decrease in customer relationships, brands and technology amortisation
and acquisition related items* 7.6
------------------------------------------------------------------------- -----
2023 H1 operating profit 359.8
------------------------------------------------------------------------- -----
Customer relationships, brands and technology amortisation and
acquisition related items are excluded from the calculation of
adjusted operating profit as they do not relate to the underlying
operating performance and distort comparability between businesses
and reporting periods. Accordingly, these items are not taken into
account by management when assessing the results of the business
and are removed in calculating adjusted operating profit and other
alternative performance measures by which management assesses the
performance of the Group.
Net finance expense
The net finance expense of GBP42.7 million increased by GBP13.7
million at constant exchange rates (up GBP11.8 million at actual
exchange rates), mainly due to increases in interest rates on
floating debt, increases in interest rates on refinancing long-term
debt, and fair value losses on interest rate derivatives partly
offset by lower average debt during the period.
Profit before income tax
Adjusted profit before income tax was GBP395.6 million (2022 H1:
GBP380.5 million), down 0.8% at constant exchange rates (up 4.0% at
actual exchange rates) due to the increase in net finance expense
partly offset by growth in adjusted operating profit. Profit before
income tax increased to GBP317.1 million (2022 H1: GBP296.6
million), an increase of 1.6% at constant exchange rates (up 6.9%
at actual exchange rates).
Taxation
The Group's tax strategy is to comply with tax laws in all
countries in which it operates and to balance its responsibilities
for controlling the tax costs with its responsibilities to pay the
appropriate level of tax where it does business. No companies are
established in tax havens or other countries for tax purposes where
the Group does not have an operational presence and the Group's
de-centralised operational structure means that the level of
intragroup trading transactions is very low. The group does not use
intragroup transfer prices to shift profit into low tax
jurisdictions. The Group's tax strategy has been approved by the
Board and tax risks are reviewed by the Audit Committee. In
accordance with UK legislation, the strategy is published on the
Bunzl plc website within the Investors section.
The effective tax rate (being the tax rate on adjusted profit
before income tax) for the period was 25.2% (2022 H1: 24.6%) and
the reported tax rate on statutory profit was 25.2% (2022 H1:
25.3%). The increase in effective tax rate for the Group is
attributable to the increase in UK statutory tax rate from 19% to
25% in April 2023. The effective tax rate for the full year is
likely to be similar to the half year.
The Group notes the enactment of UK legislation for a global
minimum tax rate of 15% applying to profits from 2024 and is
monitoring the progress of similar legislation in other
jurisdictions. Profits generated in countries with a tax rate below
this level are likely to be an insignificant proportion of the
Group as a whole, and the Group does not benefit to any significant
extent from any tax incentives. Based on analysis to date the Group
does not expect a material impact of the global minimum tax.
Earnings per share
Profit after tax increased to GBP237.2 million (2022 H1:
GBP221.6 million), up 1.6% and an increase of GBP3.7 million at
constant exchange rates (up 7.0% at actual exchange rates), due to
a GBP4.9 million increase in profit before income tax partly offset
by a GBP1.2 million increase in the tax charge at constant exchange
rates. Profit after tax for the year bears a GBP5.1 million adverse
impact from hyperinflation accounting adjustments (2022 H1: GBP11.3
million adverse impact).
Adjusted profit after tax was GBP295.9 million (2022 H1:
GBP286.9 million), down 1.6% and a decrease of GBP4.7 million at
constant exchange rates (up 3.1% at actual exchange rates), due to
a GBP3.1 million decrease in adjusted profit before income tax and
a GBP1.6 million increase in the tax on adjusted profit before
income tax at constant exchange rates. Adjusted profit after tax
for the year bears a GBP5.0 million adverse impact from
hyperinflation accounting adjustments (2022 H1: GBP10.4 million
adverse impact), comprising a GBP4.7 million adverse impact to
adjusted profit before tax (2022 H1: GBP9.4 million adverse impact)
and a GBP0.3 million increase in the tax charge (2022 H1: GBP1.0
million increase).
The weighted average number of shares in issue increased from
334.9 million in the period ended 30 June 2022 to 335.1 million due
to employee share option exercises partly offset by share purchases
into the employee benefit trust.
Basic earnings per share were 70.8p (2022 H1: 66.2p), up 1.6% at
constant exchange rates (up 6.9% at actual exchange rates).
Adjusted earnings per share were 88.3p (2022 H1: 85.7p), a decrease
of 1.7% at constant exchange rates (up 3.0% at actual exchange
rates).
Movement in basic earnings per share Pence
--------------------------------------------------- ---------
2022 H1 basic earnings per share 66.2
Currency translation 3.5
Decrease in adjusted profit before income tax* (0.9)
Decrease in adjusting items 1.8
Decrease in hyperinflation accounting adjustments 0.5
Increase in reported tax rate (0.3)
Increase in weighted average number of shares -
--------------------------------------------------- ---------
2023 H1 basic earnings per share 70.8
---------------------------------------------------- ---------
Movement in adjusted earnings per share Pence
--------------------------------------------------- ---------
2022 H1 adjusted earnings per share 85.7
Currency translation 4.1
Decrease in adjusted profit before income tax (0.9)
Decrease in hyperinflation accounting adjustments 0.4
Increase in effective tax rate (0.9)
Increase in weighted average number of shares (0.1)
---------------------------------------------------- ---------
2023 H1 adjusted earnings per share 88.3
---------------------------------------------------- ---------
Dividends
The Company's practice in recent years has been to pay a
progressive dividend, delivering year-on-year increases. The Board
is proposing a 2023 interim dividend of 18.2p, an increase of 5.2%
on the amount paid in relation to the 2022 interim dividend.
Before approving any dividends, the Board considers the level of
borrowings of the Group by reference to the ratio of net debt to
EBITDA, the ability of the Group to continue to generate cash and
the amount required to invest in the business, in particular into
future acquisitions. The Group's long-term track record of strong
cash generation provides the Company with the financial flexibility
to fund a growing dividend.
Acquisitions
The Group completed seven acquisitions during the period ended
30 June 2023 with a total committed spend of GBP127.3 million.
Including the acquisition of Leal, which was agreed in the first
half of 2023 but completed on 31 July 2023, and excluding the
acquisition of GRC, which was agreed in 2022 but completed on 1
January 2023, total committed spend on acquisitions agreed during
the period was GBP211.5 million. The estimated annualised revenue
and adjusted operating profit of the acquisitions agreed during the
period were GBP136 million and GBP23 million respectively.
A summary of the effect of acquisitions completed in the period
is as follows:
GBPm
------------------------------------------------------------------ ------
Fair value of net assets acquired 61.4
Goodwill 37.8
------------------------------------------------------------------ ------
Consideration 99.2
Satisfied by:
cash consideration 76.5
deferred consideration 22.7
------------------------------------------------------------------ ------
99.2
Contingent payments relating to the retention of former owners 26.5
Net cash acquired (10.4)
Transaction costs and expenses 12.0
------------------------------------------------------------------ ------
Total committed spend in respect of acquisitions completed
in the current period 127.3
------------------------------------------------------------------ ------
Spend on acquisitions committed but not completed at the period
end 87.1
Spend on acquisitions committed at prior year end but completed
in the current period (2.9)
------------------------------------------------------------------ ------
Total committed spend in respect of acquisitions agreed in
the current period 211.5
------------------------------------------------------------------ ------
The net cash outflow in the period in respect of acquisitions
comprised:
GBPm
------------------------------------------------ ------
Cash consideration 76.5
Net cash acquired (10.4)
Deferred consideration payments 6.1
------------------------------------------------ ------
Net cash outflow in respect of acquisitions 72.2
Acquisition related items* 23.5
------------------------------------------------ ------
Total cash outflow in respect of acquisitions 95.7
------------------------------------------------ ------
*Acquisition related items comprised GBP11.8 million of
transaction costs and expenses paid and GBP11.7 million of payments
relating to the retention of former owners.
Cash flow
A summary of the cash flow for the period is shown below:
Six months Six months
to to
30.6.23 30.6.22
GBPm GBPm
------------------------------------------------------------ ---------- ----------
Cash generated from operations 514.6 444.6
Payment of lease liabilities (91.9) (82.5)
Net capital expenditure (25.4) (18.9)
------------------------------------------------------------ ---------- ----------
Operating cash flow 397.3 343.2
Net interest paid excluding interest on lease liabilities (29.7) (24.2)
Income tax paid (81.3) (82.8)
------------------------------------------------------------ ---------- ----------
Free cash flow 286.3 236.2
Dividends paid (57.9) (54.3)
Net payments relating to employee share schemes (48.8) (59.8)
------------------------------------------------------------ ---------- ----------
Net cash inflow before acquisitions 179.6 122.1
Acquisitions (95.7) (84.5)
------------------------------------------------------------ ---------- ----------
Net cash inflow 83.9 37.6
------------------------------------------------------------ ---------- ----------
Before acquisition related items.
Including acquisition related items.
The Group's free cash flow of GBP286.3 million was GBP50.1
million higher than in the comparable period, driven primarily by
an increase in operating cash flow. The Group's free cash flow was
used to finance dividend payments of GBP57.9 million in respect of
2022 dividends (2022 H1: GBP54.3 million in respect of 2021
dividends), an acquisition cash outflow of GBP95.7 million (2022
H1: GBP84.5 million) and net payments of GBP48.8 million (2022 H1:
GBP59.8 million) relating to employee share schemes. Cash
conversion (being the ratio of operating cash flow to lease
adjusted operating profit) for the six months to 30 June 2022 was
93% (2022 H1: 86%, 2022 YE: 107%).
Six months Six months
to to
30.6.23 30.6.22
GBPm GBPm
----------------------------------------------- ---------- ----------
Operating cash flow 397.3 343.2
----------------------------------------------- ---------- ----------
Adjusted operating profit 438.3 411.4
Add back depreciation of right-of-use assets 80.7 70.2
Deduct payment of lease liabilities (91.9) (82.5)
----------------------------------------------- ---------- ----------
Lease adjusted operating profit 427.1 399.1
----------------------------------------------- ---------- ----------
Cash conversion* 93% 86%
----------------------------------------------- ---------- ----------
* O perating cash flow as a percentage of lease adjusted
operating profit.
Net debt
Net debt excluding lease liabilities decreased by GBP139.7
million during the period to GBP1,020.4 million (31 December 2022:
GBP1,160.1 million), due to a net cash inflow of GBP83.9 million, a
GBP56.2 million decrease due to currency translation and a GBP0.4
million increase due to non-cash movements in debt. Net debt
including lease liabilities was GBP1,638.1 million (31 December
2022: GBP1,730.0 million).
Net debt to EBITDA calculated at average exchange rates and
based on historical accounting standards, in accordance with the
Group's external debt covenants, was 1.1 times (31 December 2022:
1.2 times). Net debt to EBITDA calculated at average exchange rates
including lease liabilities was 1.5 times (31 December 2022: 1.5
times).
Balance sheet
30.6.23 30.6.22 31.12.22
Summary balance sheet GBPm GBPm GBPm
---------------------------------------- --------- --------- ---------
Intangible assets 3,011.6 2,938.3 3,093.9
Right-of-use assets 574.9 477.0 529.6
Property, plant and equipment 141.1 129.9 137.2
Working capital 1,088.8 1,204.2 1,096.6
Deferred consideration (140.2) (79.1) (139.9)
Other net liabilities (455.0) (411.1) (306.4)
---------------------------------------- --------- --------- ---------
4,221.2 4,259.2 4,411.0
---------------------------------------- --------- --------- ---------
Net pensions asset 47.0 37.7 39.9
Net debt excluding lease liabilities (1,020.4) (1,374.6) (1,160.1)
Lease liabilities (617.7) (518.0) (569.9)
---------------------------------------- --------- --------- ---------
Equity 2,630.1 2,404.3 2,720.9
---------------------------------------- --------- --------- ---------
Return on average operating capital 43.2% 43.5% 43.0%
Return on invested capital 14.9% 14.9% 15.0%
---------------------------------------- --------- --------- ---------
Return on average operating capital increased to 43.2% from
43.0% at 31 December 2022 driven by a positive impact from currency
translation. Return on invested capital decreased slightly to 14.9%
from 15.0% at 31 December 2022 due to the impact of higher capital
employed from acquisitions.
Intangible assets decreased by GBP82.3 million from 31 December
2022 to GBP3,011.6 million due to currency translation of GBP122.1
million and an amortisation charge of GBP70.3 million, partly
offset by GBP99.9 million of additions to goodwill, customer
relationships, brands, technology and software arising on
acquisitions in the period.
Right-of-use assets increased by GBP45.3 million from 31
December 2022 to GBP574.9 million due to new leases during the
period of GBP52.2 million, an increase from acquisitions of GBP14.7
million, an increase from remeasurement adjustments of GBP83.6
million partly offset by a depreciation charge of GBP80.7 million
and a decrease from currency translation of GBP24.5 million.
Working capital decreased by GBP7.8 million from 31 December
2022 to GBP1,088.8 million mainly due to a decrease from currency
translation of GBP43.0 million partly offset by an underlying
increase of GBP27.4 million as shown in the cash flow statement and
GBP7.1 million from acquisitions.
Deferred consideration increased by GBP0.3 million from 31
December 2022 to GBP140.2 million due to GBP22.7m of deferred
consideration recognised on acquisitions partly offset by deferred
consideration and retention payments of GBP17.4 million, a decrease
from currency translation of GBP4.8 million and a net credit of
GBP0.2 million relating to adjustments to previously estimated earn
outs and the retention of former owners. Including expected future
payments which are contingent on the continued retention of former
owners of businesses acquired of GBP83.9m, total deferred and
contingent consideration as at 30 June 2023 was GBP224.1m.
The Group's net pension asset of GBP47.0 million at 30 June 2023
was GBP7.1 million higher than at 31 December 2022, largely due to
cash contributions of GBP6.1 million.
Shareholders' equity decreased by GBP90.8 million from
GBP2,720.9 million at 31 December 2022 to GBP2,630.1 million.
Movement in shareholders' equity GBPm
------------------------------------------------ -------
Shareholders' equity at 31 December 2022 2,720.9
Profit for the period 237.2
Dividends (209.7)
Currency (net of tax) (92.3)
Hyperinflation accounting adjustment 8.6
Actuarial gain on pension schemes (net of tax) 0.4
Share based payments (net of tax) 11.6
Employee share schemes (net of tax) (46.6)
------------------------------------------------ -------
Shareholders' equity at 30 June 2023 2,630.1
------------------------------------------------ -------
Capital management
The Group's policy is to maintain a strong capital base to
maintain investor, creditor and market confidence and to sustain
future development of the business. The Group funds its operations
through a mixture of shareholders' equity and bank and capital
market borrowings. The Group's funding strategy is to maintain an
investment grade credit rating and the Company's current credit
rating with Standard & Poor's is BBB+. All borrowings are
managed by a central treasury function and funds raised are lent
onward to operating subsidiaries as required. The overall objective
is to manage the funding to ensure the borrowings have a range of
maturities, are competitively priced and meet the demands of the
business over time. There were no changes to the Group's approach
to capital management during the period and the Group is not
subject to any externally imposed capital requirements.
Treasury policies and controls
The Group has a centralised treasury department to control
external borrowings and manage liquidity, interest rate, foreign
currency and credit risks. Treasury policies have been approved by
the Board and cover the nature of the exposure to be hedged, the
types of financial instruments that may be employed and the
criteria for investing and borrowing cash. The Group uses
derivatives to manage its foreign currency and interest rate risks
arising from underlying business activities. No transactions of a
speculative nature are undertaken. The treasury department is
subject to periodic independent review by the internal audit
department. Underlying policy assumptions and activities are
periodically reviewed by the executive directors and the Board.
Controls over exposure changes and transaction authenticity are in
place.
The Group continually monitors net debt and forecast cash flows
to ensure that sufficient facilities are in place to meet the
Group's requirements in the short, medium and long term and, in
order to do so, arranges borrowings from a variety of sources.
Additionally, compliance with the Group's biannual debt covenants
is monitored on a monthly basis and formally tested at 30 June and
31 December. The principal covenant limits are net debt, calculated
at average exchange rates, to EBITDA of no more than 3.5 times and
interest cover of no less than 3.0 times. Sensitivity analyses
using various scenarios are applied to forecasts to assess their
impact on covenants and net debt. During the six months ended 30
June 2023 all covenants were complied with and based on current
forecasts it is expected that such covenants will continue to be
complied with for the foreseeable future. Debt covenants are based
on historical accounting standards. The US private placement notes
(USPPs) issued in March 2022 contains a clause whereby upon
maturity of the previously issued USPPs, the latest maturity being
in 2028, the principal financial covenants referred to above will
no longer apply.
The Group has substantial funding available comprising
multi-currency credit facilities from the Group's banks, USPPs and
senior bonds. At 30 June 2023 the nominal value of USPPs
outstanding was GBP917.5 million (31 December 2022: GBP1,126.4
million) with maturities ranging from 2024 to 2032. The GBP700
million senior bonds mature in 2025 and 2030. The Group's committed
bank facilities mature between 2023 and 2028. At 30 June 2023 the
available committed bank facilities totalled GBP947.2 million (31
December 2022: GBP963.6 million), none of which was drawn down (31
December 2022: none drawn down), providing headroom of GBP947.2
million (31 December 2022: GBP963.6 million). During the period
GBP75 million of bank facilities were extended from 2025 to 2028,
in addition during July the Group extended an additional GBP179
million of bank facilities to 2028. The Group expects to make
repayments in the 18 month period from the date of these interim
financial statements to the end of 31 December 2024 of
approximately GBP130 million relating to maturing USPPs.
Going concern
The directors, having reassessed the principal risks and
uncertainties, consider it appropriate to adopt the going concern
basis of accounting in the preparation of the financial statements.
In reaching this conclusion, the directors noted the Group's cash
performance in the period, the substantial funding available to the
Group as described above and the resilience of the Group to a range
of severe but plausible downside scenarios. Further details are set
out in Note 1 to the interim financial statements.
Risks and uncertainties
The principal risks and uncertainties affecting the business
activities of the Group for the remaining six months of the
financial year are unchanged from those detailed in the section
entitled 'Principal risks and uncertainties' on pages 74 to 82 of
the Annual Report for the year ended 31 December 2022. These were
the risks of competitive pressures in the countries and markets in
which the Group operates, financial collapse of either a large
customer and/or a significant number of small customers, product
cost deflation, cost inflation, the ability of the Group to
complete and successfully integrate acquisitions, the risk of
sustainability driven market changes, the risk of cyber-attacks on
the Group's operations, the financial risks associated with the
availability of funding, the currency translation impact on the
Group's results and debt covenants and risk of business disruption
caused by climate change. A copy of the 2022 Annual Report is
available on the Company's website at www.bunzl.com.
Consolidated income statement
for the period ended 30 June 2023
Six
Six months months Year to
to 30.6.23 to 30.6.22 31.12.22
Notes GBPm GBPm GBPm
-------------------------------------------------------- ----------- --------------- ---------------
Revenue 3 5,906.8 5,650.8 12,039.5
-------------------------------------------------- ---- ----------- --------------- ---------------
Operating profit 3 359.8 327.5 701.6
Finance income 4 23.8 7.4 22.3
Finance expense 4 (66.5) (38.3) (90.2)
Disposal of business 9 - - 0.9
-------------------------------------------------- ---- ----------- --------------- ---------------
Profit before income tax 317.1 296.6 634.6
Income tax 5 (79.9) (75.0) (160.2)
-------------------------------------------------- ---- ----------- --------------- ---------------
Profit for the period attributable to the Company's
equity holders 237.2 221.6 474.4
Earnings per share attributable to the Company's
equity holders
Basic 7 70.8p 66.2p 141.7p
-------------------------------------------------- ---- ----------- --------------- ---------------
Diluted 7 70.2p 65.6p 140.7p
-------------------------------------------------- ---- ----------- --------------- ---------------
Dividend per share 6 18.2p 17.3p 62.7p
-------------------------------------------------- ---- ----------- --------------- ---------------
Alternative performance measures*
Operating profit 3 359.8 327.5 701.6
Adjusted for:
Customer relationships, brands and technology
amortisation 3 65.6 61.5 128.4
Acquisition related items 3 12.9 22.4 55.9
Adjusted operating profit 3 438.3 411.4 885.9
Finance income 4 23.8 7.4 22.3
Finance expense 4 (66.5) (38.3) (90.2)
-------------------------------------------------- ---- ----------- --------------- ---------------
Adjusted profit before income tax 395.6 380.5 818.0
-------------------------------------------------- ---- ----------- --------------- ---------------
Tax on adjusted profit 5 (99.7) (93.6) (201.2)
-------------------------------------------------- ---- ----------- --------------- ---------------
Adjusted profit for the period 295.9 286.9 616.8
-------------------------------------------------- ---- ----------- --------------- ---------------
Adjusted earnings per share 7 88.3p 85.7p 184.3p
-------------------------------------------------- ---- ----------- --------------- ---------------
* See Note 2 for further details of the alternative performance
measures.
Consolidated statement of comprehensive income
for the period ended 30 June 2023
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
--------------------------------------------------- ----------- ----------- ---------
Profit for the period 237.2 221.6 474.4
--------------------------------------------------- ----------- ----------- ---------
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss:
Actuarial gain on defined benefit pension schemes 0.6 3.8 6.9
(Loss)/gain recognised in cash flow hedge reserve (0.5) 7.7 10.3
Tax on items that will not be reclassified
to profit or loss (0.1) (3.0) (4.0)
--------------------------------------------------- ----------- ----------- ---------
Total items that will not be reclassified
to profit or loss - 8.5 13.2
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences on
foreign operations (129.8) 202.9 232.9
Gain/(loss) taken to equity as a result of
effective net investment hedges 37.0 (28.1) (38.2)
Tax on items that may be reclassified to profit
or loss (0.3) - 0.3
--------------------------------------------------- ----------- ----------- ---------
Total items that may be reclassified subsequently
to profit or loss (93.1) 174.8 195.0
--------------------------------------------------- ----------- ----------- ---------
Other comprehensive (expense)/income for the
period (93.1) 183.3 208.2
--------------------------------------------------- ----------- ----------- ---------
Total comprehensive income attributable to
the Company's equity holders 144.1 404.9 682.6
--------------------------------------------------- ----------- ----------- ---------
Consolidated balance sheet
at 30 June 2023 30.6.23 30.6.22 31.12.22
Notes GBPm GBPm GBPm
-------------------------------------------- ------ -------- -------- ---------
Assets
Property, plant and equipment 141.1 129.9 137.2
Right-of-use assets 10 574.9 477.0 529.6
Intangible assets 11 3,011.6 2,938.3 3,093.9
Defined benefit pension assets 65.0 69.2 60.5
Derivative financial assets 13 - 1.6 -
Deferred tax assets 5.5 3.2 4.0
-------------------------------------------- ------ -------- -------- ---------
Total non-current assets 3,798.1 3,619.2 3,825.2
Inventories 1,519.9 1,809.2 1,748.6
Trade and other receivables 1,605.3 1,577.5 1,557.4
Income tax receivable 6.7 9.7 12.6
Derivative financial assets 13 31.9 14.1 19.0
Cash at bank and in hand 15 1,481.1 1,040.2 1,504.0
Total current assets 4,644.9 4,450.7 4,841.6
-------------------------------------------- ------ -------- -------- ---------
Total assets 8,443.0 8,069.9 8,666.8
-------------------------------------------- ------ -------- -------- ---------
Equity
Share capital 108.6 108.5 108.5
Share premium 203.8 197.0 199.4
Translation reserve (167.3) (94.4) (74.2)
Other reserves 18.5 22.6 17.7
Retained earnings 2,466.5 2,170.6 2,469.5
-------------------------------------------- ------ -------- -------- ---------
Total equity attributable to the Company's
equity holders 2,630.1 2,404.3 2,720.9
Liabilities
Interest bearing loans and borrowings 15 1,386.6 1,301.3 1,574.0
Defined benefit pension liabilities 18.0 31.5 20.6
Other payables 125.9 68.9 117.2
Income tax payable 1.1 1.7 1.1
Provisions 57.4 59.7 50.5
Lease liabilities 14 470.0 381.1 424.0
Derivative financial liabilities 13 112.6 66.4 100.5
Deferred tax liabilities 189.5 164.4 192.7
-------------------------------------------- ------ -------- -------- ---------
Total non-current liabilities 2,361.1 2,075.0 2,480.6
Bank overdrafts 15 887.5 812.2 825.9
Interest bearing loans and borrowings 15 131.8 215.4 161.0
Trade and other payables 2,217.0 2,336.6 2,249.4
Income tax payable 40.4 42.8 40.6
Provisions 15.2 19.1 24.2
Lease liabilities 14 147.7 136.9 145.9
Derivative financial liabilities 13 12.2 27.6 18.3
Total current liabilities 3,451.8 3,590.6 3,465.3
-------------------------------------------- ------ -------- -------- ---------
Total liabilities 5,812.9 5,665.6 5,945.9
-------------------------------------------- ------ -------- -------- ---------
Total equity and liabilities 8,443.0 8,069.9 8,666.8
-------------------------------------------- ------ -------- -------- ---------
Consolidated statement of changes in equity
for the period ended 30 June 2023
Share Share Translation Other Retained Total
capital premium reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2023 108.5 199.4 (74.2) 17.7 2,469.5 2,720.9
Profit for the period 237.2 237.2
Actuarial gain on defined benefit
pension schemes 0.6 0.6
Foreign currency translation
differences on foreign operations (129.8) (129.8)
Gain taken to equity as a result
of effective net investment hedges 37.0 37.0
Loss recognised in cash flow
hedge reserve (0.5) (0.5)
Income tax charge on other comprehensive
income (0.3) 0.1 (0.2) (0.4)
----------------------------------------- -------- -------- ----------- --------- --------- -------
Total comprehensive income (93.1) (0.4) 237.6 144.1
2022 interim dividend (57.9) (57.9)
2022 final dividend (151.8) (151.8)
Movement from cash flow hedge
reserve to inventory 1.2 1.2
Hyperinflation accounting adjustment(1) 8.6 8.6
Issue of share capital 0.1 4.4 4.5
Employee trust shares (51.1) (51.1)
Share based payments 11.6 11.6
At 30 June 2023 108.6 203.8 (167.3) 18.5 2,466.5 2,630.1
----------------------------------------- -------- -------- ----------- --------- --------- -------
Share Share Translation Other Retained Total
capital premium reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
At 31 December 2021 108.4 194.2 (269.2) 19.0 2,151.5 2,203.9
Adjustment to 2021 closing equity
in respect of hyperinflation
in Turkey(1) 14.0 14.0
Restated equity at 1 January
2022 108.4 194.2 (269.2) 19.0 2,165.5 2,217.9
Profit for the period 221.6 221.6
Actuarial gain on defined benefit
pension schemes 3.8 3.8
Foreign currency translation
differences on foreign operations 202.9 202.9
Loss taken to equity as a result
of effective net investment hedges (28.1) (28.1)
Gain recognised in cash flow
hedge reserve 7.7 7.7
Income tax charge on other comprehensive
income - (1.9) (1.1) (3.0)
----------------------------------------- -------- -------- ----------- --------- --------- -------
Total comprehensive income 174.8 5.8 224.3 404.9
2021 interim dividend (54.3) (54.3)
2021 final dividend (136.2) (136.2)
Movement from cash flow hedge
reserve to inventory (2.2) (2.2)
Hyperinflation accounting adjustment(1) 25.8 25.8
Issue of share capital 0.1 2.8 2.9
Employee trust shares (61.2) (61.2)
Share based payments 6.7 6.7
At 30 June 2022 108.5 197.0 (94.4) 22.6 2,170.6 2,404.3
----------------------------------------- -------- -------- ----------- --------- --------- -------
Share Share Translation Other Retained Total
capital premium reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------- ----------- --------- --------- -------
At 31 December 2021 108.4 194.2 (269.2) 19.0 2,151.5 2,203.9
Adjustment to 2021 closing equity
in respect of hyperinflation
in Turkey(1) 12.6 12.6
----------------------------------------- -------- -------- ----------- --------- --------- -------
Restated equity at 1 January
2022 108.4 194.2 (269.2) 19.0 2,164.1 2,216.5
Profit for the year 474.4 474.4
Actuarial gain on defined benefit
pension schemes 6.9 6.9
Foreign currency translation
differences
on foreign operations 232.9 232.9
Loss taken to equity as a result
of effective
net investment hedges (38.2) (38.2)
Gain recognised in cash flow
hedge reserve 10.3 10.3
Income tax charge on other
comprehensive income 0.3 (2.6) (1.4) (3.7)
Total comprehensive income 195.0 7.7 479.9 682.6
2021 interim dividend (54.3) (54.3)
2021 final dividend (136.2) (136.2)
Movement from cash flow hedge
reserve
to inventory (9.0) (9.0)
Hyperinflation accounting adjustments(1) 34.9 34.9
Issue of share capital 0.1 5.2 5.3
Employee trust shares (34.2) (34.2)
Share based payments 15.3 15.3
At 31 December 2022 108.5 199.4 (74.2) 17.7 2,469.5 2,720.9
----------------------------------------- -------- -------- ----------- --------- --------- -------
(1) During 2022, IAS 29 'Financial Reporting in
Hyperinflationary Economies' became applicable for entities with a
functional currency of the Turkish Lira. Following this, the
results of the Group's businesses in Turkey, along with its
business in Argentina which has been subject to hyperinflation
accounting since 2018, have been adjusted for the effects of
inflation in accordance with IAS 29. See Note 1 for further
details.
Other reserves comprise merger reserve of GBP2.5m (30 June 2022:
GBP2.5m; 31 December 2022: GBP2.5m), capital redemption reserve of
GBP16.1m (30 June 2022: GBP16.1m; 31 December 2022: GBP16.1m) and a
negative cash flow hedge reserve of GBP0.1m (30 June 2022: positive
GBP4.0m; 31 December 2022: negative GBP0.9m).
Retained earnings comprise earnings of GBP2,566.0m (30 June
2022: GBP2,268.1m; 31 December 2022: GBP2,532.9m), offset by own
shares of GBP99.5m (30 June 2022: GBP97.5m; 31 December 2022:
GBP63.4m).
Consolidated cash flow statement
for the period ended 30 June 2023
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
Notes GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- ---------
Cash flow from operating activities
Profit before income tax 317.1 296.6 634.6
Adjusted for:
net finance expense 4 42.7 30.9 67.9
customer relationships, brands and technology
amortisation 11 65.6 61.5 128.4
acquisition related items 3 12.9 22.4 55.9
disposal of business - - (0.9)
Adjusted operating profit 438.3 411.4 885.9
Adjustments:
depreciation and software amortisation 17 100.5 88.5 189.5
other non-cash items 17 3.2 13.5 15.9
working capital movement 17 (27.4) (68.8) 54.5
Cash generated from operations before
acquisition related items 514.6 444.6 1,145.8
Cash outflow from acquisition related
items 8 (23.5) (11.0) (20.6)
Income tax paid (81.3) (82.8) (173.6)
------------------------------------------------ --- ----------- ----------- ---------
Cash inflow from operating activities 409.8 350.8 951.6
------------------------------------------------ --- ----------- ----------- ---------
Cash flow from investing activities
Interest received 21.7 5.1 16.2
Purchase of property, plant and equipment
and software (25.7) (19.4) (46.7)
Sale of property, plant and equipment 0.3 0.5 1.0
Purchase of businesses 8 (72.2) (73.5) (243.6)
Disposal of business - - 49.9
Cash outflow from investing activities (75.9) (87.3) (223.2)
------------------------------------------------ --- ----------- ----------- ---------
Cash flow from financing activities
Interest paid excluding interest on
lease liabilities (51.4) (29.3) (61.9)
Dividends paid 6 (57.9) (54.3) (190.5)
Increase in borrowings 5.2 26.5 346.4
Repayment of borrowings (159.1) (72.1) (131.8)
Receipts/(payments) on settlement of foreign
exchange contracts 12.0 (26.5) (86.2)
Payment of lease liabilities - principal 14 (78.8) (72.3) (153.1)
Payment of lease liabilities - interest 14 (13.1) (10.2) (22.0)
Proceeds from issue of ordinary shares
to settle share options 4.5 2.9 5.3
Proceeds from exercise of market purchase
share options 23.1 11.3 36.8
Purchase of employee trust shares (76.4) (74.0) (74.0)
Cash outflow from financing activities (391.9) (298.0) (331.0)
------------------------------------------------ --- ----------- ----------- ---------
(Decrease)/increase in cash and cash
equivalents (58.0) (34.5) 397.4
------------------------------------------------ --- ----------- ----------- ---------
Cash and cash equivalents at start of
the period 678.1 225.3 225.3
(Decrease)/increase in cash and cash
equivalents (58.0) (34.5) 397.4
Currency translation (26.5) 37.2 55.4
------------------------------------------------ --- ----------- ----------- ---------
Cash and cash equivalents at end of
the period 15 593.6 228.0 678.1
------------------------------------------------ --- ----------- ----------- ---------
Six months Six months to 30.6.22 Year to 31.12.22
to 30.6.23 GBPm GBPm
Alternative performance measures* Notes GBPm
------ ------------ ----------------------
Cash generated from operations before acquisition
related items 514.6 444.6 1,145.8
Purchase of property, plant and equipment and
software (25.7) (19.4) (46.7)
Sale of property, plant and equipment 0.3 0.5 1.0
Payment of lease liabilities 14 (91.9) (82.5) (175.1)
----------------------------------------------------- ------ ------------ ---------------------- -----------------
Operating cash flow 397.3 343.2 925.0
----------------------------------------------------- ------ ------------ ---------------------- -----------------
Adjusted operating profit 438.3 411.4 885.9
Add back depreciation of right-of-use assets 10 80.7 70.2 151.1
Deduct payment of lease liabilities 14 (91.9) (82.5) (175.1)
Lease adjusted operating profit 427.1 399.1 861.9
----------------------------------------------------- ------ ------------ ---------------------- -----------------
Cash conversion (operating cash flow as a percentage
of lease adjusted operating profit) 93% 86% 107%
----------------------------------------------------- ------ ------------ ---------------------- -----------------
Operating cash flow 397.3 343.2 925.0
Net interest paid excluding interest on lease
liabilities (29.7) (24.2) (45.7)
Income tax paid (81.3) (82.8) (173.6)
----------------------------------------------------- ------ ------------ ---------------------- -----------------
Free cash flow 286.3 236.2 705.7
----------------------------------------------------- ------ ------------ ---------------------- -----------------
* See Note 2 for further details of the alternative performance
measures.
Notes
1. Basis of preparation and accounting policies
The condensed interim financial statements (the 'interim
financial statements') of Bunzl plc ('the Company') for the six
months ended 30 June 2023, with comparative figures for the six
months ended 30 June 2022, are unaudited and do not constitute
statutory accounts. However the external auditors have carried out
a review of the interim financial statements and their report in
respect of the six months ended 30 June 2023 is set out in the
Independent review report. The comparative figures for the year
ended 31 December 2022 do not constitute the Company's statutory
accounts for the year. Those accounts have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified, did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain
statements under Section 498(2)(3) of the Companies Act 2006.
The interim financial statements for the six month period ended
30 June 2023 have been prepared in accordance with UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting'
(IAS 34), and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. The
interim financial statements also comply with IAS 34 as issued by
the International Accounting Standards Board. The interim report
does not include all of the notes of the type normally included in
the Annual Report. Accordingly, this report is to be read in
conjunction with the Annual Report for the year ended 31 December
2022, which has been prepared in accordance with UK-adopted
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and the applicable legal
requirements of the Companies Act 2006.
The accounting policies adopted are consistent with those of the
corresponding interim reporting period and also the previous
financial year except for the estimation of income tax (see Note
5). The Group has adopted all relevant amendments to existing
standards issued by the IASB and UK Endorsement Board that are
effective from 1 January 2023 with no material impact on its
consolidated results or financial position .
On 23 May 2023, the IASB issued narrow-scope amendments to IAS
12. The amendments provide a temporary exception from the
requirement to recognise and disclose deferred taxes arising from
enacted or substantively enacted tax law that implements the Pillar
two model rules published by the OECD, including tax law that
implements qualified domestic minimum top-up taxes described in
those rules. The amendments to IAS 12 are required to be applied
immediately and retrospectively in accordance with IAS 8,
'Accounting Policies, Changes in Accounting Estimates and Errors',
including the requirement to disclose the fact that the exception
has been applied if the entity's income taxes will be affected by
enacted or substantively enacted tax law that implements the OECD's
Pillar two model rules. However, the group has developed an
accounting policy on the recognition of deferred taxes arising from
the Pillar two model rules according to which no deferred taxes are
provided.
Going Concern
The directors, having reassessed the principal risks and
uncertainties, consider it appropriate to adopt the going concern
basis of accounting in the preparation of the interim financial
statements.
In reaching this conclusion, the directors noted the Group's
operating cash flow performance in the first half of the year and
the substantial funding available to the Group as described in the
Financial Review. The directors also considered a range of
different forecast scenarios for the 18 month period from the date
of these financial statements to the end of December 2024 starting
with a base case projection derived from the Group's 2023 forecasts
excluding any non-committed acquisition spend or changes in
funding. The resilience of the Group to a range of severe but
plausible downside scenarios was factored into the directors'
considerations through two levels of stress testing against the
base case projection.
These severe but plausible downside scenarios included the
following assumptions:
- A 15% reduction in adjusted operating profit from the potential for adverse impacts from the crystallisation of the principal strategic and operational risks to the Group's organic growth and a 10% increase in working capital
- A 25% reduction in adjusted operating profit from more severe
adverse impacts from the crystallisation of the principal strategic
and operational risks to the Group's organic growth and a 20%
increase in working capital
In addition, the group has carried out reverse stress tests
against the base case to determine the level of performance that
would result in a breach of financial covenants. In order for a
breach of covenants to occur during the 18 month period to the end
of December 2024 the Group would need to experience a reduction in
EBITDA of over 55% compared to the base case.
In the first two stress tests it was found that the Group was
resilient and in particular it remained in compliance with the
relevant financial covenants. The conditions required to create the
reverse stress test scenario were so severe that they were
considered to be implausible. The directors are therefore satisfied
that the Group's forecasts, which take into account reasonably
possible changes in trading performance, show that there are no
material uncertainties over going concern, including no anticipated
breach of covenants, and therefore the going concern basis of
preparation continues to be appropriate.
Impact of Hyperinflation on the financial statements at 30 June
2023
The Group's interim financial statements include the results and
financial position of its Turkish and Argentinian operations
restated to the measuring unit current at the end of the period,
with hyperinflationary gains and losses in respect of monetary
items being reported in finance expense. Comparative amounts
presented in the interim financial statements have not been
restated. The inflation rates used by the Group are the official
rates published by the Turkish Statistical Institute and the
Argentine Federation of Professional Councils of Economic Sciences.
The movement in the publicly available official price index for the
six months to 30 June 2023 was an increase of 20% (six months to 30
June 2022: increase of 42%) in Turkey and was an increase of 56%
(six months to 30 June 2022: increase of 46%) in Argentina.
IAS 29 requires that the income statement is adjusted for
inflation in the period and translated at the period-end foreign
exchange rates and that non-monetary assets and liabilities on the
balance sheet are inflated to reflect the change in purchasing
power caused by inflation from the date of initial recognition. For
the period ended 30 June 2023, this resulted in an increase in
goodwill of GBP3.5m (six months to 30 June 2022: GBP14.7m) and a
net increase in other intangibles of GBP0.3m (six months to 30 June
2022: GBP11.0m). The impacts on other non-monetary assets and
liabilities were immaterial. The impact to retained earnings during
the period was a gain of GBP8.6m (six months to 30 June 2022: gain
of GBP39.8m). The total impact to the Consolidated income statement
during the period was a charge of GBP5.1m (six months to 30 June
2022: GBP11.3m) to profit after tax from hyperinflation accounting
adjustments, comprising a GBP5.0m adverse impact (six months to 30
June 2022: GBP10.4m adverse impact) on adjusted profit before tax
and increased customer relationships amortisation of GBP0.1m (six
months to 30 June 2022: GBP0.8m).
When applying IAS 29 on an ongoing basis, comparatives in a
stable currency are not restated with the translation effect
presented within other comprehensive income during the period, and
the effect of inflating opening balances to the measuring unit
current at the end of the reporting period presented as a change in
equity.
2. Alternative performance measures
In addition to the various performance measures defined under
IFRS, the Group reports a number of other measures that are
designed to assist with the understanding of the underlying
performance of the Group and its businesses. These measures are not
defined under IFRS and, as a result, do not comply with Generally
Accepted Accounting Practice ('GAAP') and are therefore known as
'alternative performance measures'. Accordingly, these measures,
which are not designed to be a substitute for any of the IFRS
measures of performance, may not be directly comparable with other
companies' alternative performance measures. The principal
alternative performance measures used within the interim financial
statements and the location of the reconciliation to equivalent
IFRS measures are shown and defined in the table below:
Underlying Revenue excluding the incremental impact of acquisitions
revenue growth and disposals compared to revenue in prior years at constant
exchange, adjusted for differences in trading days between
years and adjusted to exclude growth in excess of 26% per
annum in hyperinflationary economies (reconciled in the
Financial review)
------------------- ------------------------------------------------------------------
Adjusted operating Operating profit before customer relationships, brands
profit and technology amortisation, acquisition related items,
non-recurring pension scheme charges and profit or loss
on disposal of businesses (reconciled in the following
tables and in the Consolidated income statement)
------------------- ------------------------------------------------------------------
Operating margin Adjusted operating profit as a percentage of revenue
------------------- ------------------------------------------------------------------
Adjusted profit Profit before income tax, customer relationships, brands
before income and technology amortisation, acquisition related items,
tax non-recurring pension scheme charges and profit or loss
on disposal of businesses (reconciled in the following
tables)
------------------- ------------------------------------------------------------------
Adjusted profit Profit for the period before customer relationships, brands
for the period and technology amortisation, acquisition related items,
non-recurring pension scheme charges, profit or loss on
disposal of businesses and the associated tax (reconciled
in the following tables)
------------------- ------------------------------------------------------------------
Effective tax Tax on adjusted profit before income tax as a percentage
rate of adjusted profit before income tax (reconciled in Note
5)
------------------- ------------------------------------------------------------------
Adjusted earnings Adjusted profit for the period divided by the weighted
per share average number of ordinary shares in issue (reconciled
in the following tables and in Note 7)
------------------- ------------------------------------------------------------------
Adjusted diluted Adjusted profit for the period divided by the diluted weighted
earnings per average number of ordinary shares (reconciled in Note 7)
share
------------------- ------------------------------------------------------------------
Operating cash Cash generated from operations before acquisition related
flow items after deducting purchases of property, plant and
equipment and software and adding back the proceeds from
the sale of property, plant and equipment and software
and deducting the payment of lease liabilities (as shown
in the Consolidated cash flow statement)
------------------- ------------------------------------------------------------------
Free cash flow Operating cash flow after deducting payments for income
tax and net interest excluding interest on lease liabilities
(as shown in the Consolidated cash flow statement)
------------------- ------------------------------------------------------------------
Lease adjusted Adjusted operating profit after adding back the depreciation
operating profit of right-of-use assets and deducting the payment of lease
liabilities (as shown in the Consolidated cash flow statement)
------------------- ------------------------------------------------------------------
Cash conversion Operating cash flow as a percentage of lease adjusted operating
profit (as shown in the Consolidated cash flow statement)
------------------- ------------------------------------------------------------------
Working capital Inventories and trade and other receivables less trade
and other payables, excluding non-operating related receivables,
non-operating related payables (including those relating
to acquisition payments) and dividends payable (reconciled
in Note 12)
------------------- ------------------------------------------------------------------
Return on average The ratio of adjusted operating profit to the average of
operating capital the month end operating capital employed (being property,
plant and equipment, right-of-use assets, software, inventories
and trade and other receivables less trade and other payables)
------------------- ------------------------------------------------------------------
Return on invested The ratio of adjusted operating profit to the average of
capital the month end invested capital (being equity after adding
back net debt, lease liabilities, net defined benefit pension
scheme liabilities, cumulative customer relationships,
brands and technology amortisation, acquisition related
items and amounts written off goodwill, net of the associated
tax)
------------------- ------------------------------------------------------------------
EBITDA Adjusted operating profit on a historical GAAP basis, before
depreciation of property, plant and equipment and software
amortisation and after adjustments as permitted by the
Group's debt covenants, principally to exclude share option
charges and to annualise for the effect of acquisitions
and disposal of businesses
------------------- ------------------------------------------------------------------
Net debt excluding Net debt excluding the carrying value of lease liabilities
lease liabilities (reconciled in Note 15)
------------------- ------------------------------------------------------------------
Constant exchange Growth rates at constant exchange rates are calculated
rates by retranslating the results for the prior periods at the
average exchange rates for the period ended 30 June 2023
so that they can be compared without the distorting impact
of changes caused by foreign exchange translation. The
exchange rates used for 2023 and 2022 can be found in the
Financial review
------------------- ------------------------------------------------------------------
There have been no new alternative performance measures during
the period and all alternative performance measures have been
calculated consistently with the methods applied in the
consolidated financial statements for the year ended 31 December
2022.
The alternative performance measures listed above exclude the
charge for customer relationships, brands and technology
amortisation, acquisition related items, non-recurring pension
scheme charges, profit or loss on disposal of businesses and any
associated tax, where relevant.
Acquisition related items comprise deferred consideration
payments relating to the retention of former owners of businesses
acquired, transaction costs and expenses, adjustments to previously
estimated earn outs, customer relationships asset impairment
charges, goodwill impairment charges and interest on acquisition
related income tax. Customer relationships, brands and technology
amortisation, acquisition related items and any associated tax are
considered by management to form part of the total spend on
acquisitions or are non-cash items resulting from acquisitions. The
non-recurring pension scheme charges relate to non-recurring
charges arising from the Group's participation in a number of
defined benefit pension schemes. In the period ended 30 June 2023,
period ended 30 June 2022 and year end 31 December 2022 there were
no non-recurring pensions scheme charges. Disposal of business
relates to the profit on disposal of the Group's UK Healthcare
division in the year ended 31 December 2022. None of these items
relate to the underlying operating performance of the business and,
as a result, they distort comparability between businesses and
reporting periods. Accordingly, these items are not taken into
account by management when assessing the results of the business
and are removed in calculating the profitability measures by which
management assesses the performance of the Group. However, it
should be noted that they do exclude income and charges that
nevertheless do impact the Group's cash flow and GAAP financial
performance.
Reconciliation of alternative performance measures to statutory
measures
The principal profit related alternative performance measures,
these being adjusted operating profit, adjusted profit before
income tax, adjusted profit for the period and adjusted earnings
per share are reconciled to the most directly reconcilable
statutory measures in the tables below.
Six months ended 30 June 2023
Adjusting items
--------------------------------
Customer
relationships,
Alternative brands and
performance technology Acquisition Disposal of Statutory
measures amortisation related items business measures
GBPm GBPm GBPm GBPm GBPm
--------------- --------------- -------------- --------------- --------------- --------------- ---------------
Adjusted
operating Operating
profit 438.3 (65.6) (12.9) 359.8 profit
Finance income 23.8 23.8 Finance income
Finance expense (66.5) (66.5) Finance expense
Disposal of - - - Disposal of
business business
Adjusted profit
before income Profit before
tax 395.6 (65.6) (12.9) - 317.1 income tax
Tax on adjusted
profit (99.7) 17.3 2.5 - (79.9) Income tax
--------------- --------------- -------------- --------------- --------------- --------------- ---------------
Adjusted profit Profit for the
for the period 295.9 (48.3) (10.4) - 237.2 period
--------------- --------------- -------------- --------------- --------------- --------------- ---------------
Adjusted
earnings per Basic earnings
share 88.3p (14.4)p (3.1)p - 70.8p per share
--------------- --------------- -------------- --------------- --------------- --------------- ---------------
Six months ended 30 June 2022
Adjusting items
Customer
relationships,
brands and Acquisition Disposal
Alternative performance technology related of Statutory
measures amortisation items business measures
GBPm GBPm GBPm GBPm GBPm
------------------- ------------------------- -------------- ----------- ----------- ------------ --------------
Adjusted operating Operating
profit 411.4 (61.5) (22.4) 327.5 profit
Finance income 7.4 7.4 Finance income
Finance
Finance expense (38.3) (38.3) expense
Disposal of - - Disposal of
business - business
Adjusted profit Profit before
before income tax 380.5 (61.5) (22.4) - 296.6 income tax
Tax on adjusted
profit (93.6) 15.2 3.4 - (75.0) Income tax
------------------- ------------------------- -------------- ----------- ----------- ------------ --------------
Adjusted profit for Profit for the
the period 286.9 (46.3) (19.0) - 221.6 period
------------------- ------------------------- -------------- ----------- ----------- ------------ --------------
Adjusted earnings Basic earnings
per share 85.7p (13.8)p (5.7)p - 66.2p per share
------------------- ------------------------- -------------- ----------- ----------- ------------ --------------
Year ended 31 December 2022
Adjusting items
Customer
relationships,
Alternative brands and
performance technology Acquisition Disposal of Statutory
measures amortisation related items business measures
GBPm GBPm GBPm GBPm GBPm
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Adjusted
operating Operating
profit 885.9 (128.4) (55.9) 701.6 profit
Finance income 22.3 22.3 Finance income
Finance expense (90.2) (90.2) Finance expense
Disposal of Disposal of
business - 0.9 0.9 business
Adjusted profit
before income Profit before
tax 818.0 (128.4) (55.9) 0.9 634.6 income tax
Tax on adjusted
profit (201.2) 34.7 6.3 - (160.2) Income tax
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Adjusted profit Profit for the
for the year 616.8 (93.7) (49.6) 0.9 474.4 year
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Adjusted
earnings per Basic earnings
share 184.3p (28.0)p (14.8)p 0.2p 141.7p per share
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
3. Segment analysis
The Group results are reported as four business areas based on
geographical regions which are reviewed regularly by the Company's
chief operating decision maker, the Board of directors. Across the
Group, the vast majority of revenue is generated from the delivery
of goods to customers representing a single performance obligation
which is satisfied upon delivery of the relevant goods. The Group's
revenue and financial results have not historically been subject to
significant seasonal trends. The principal results reviewed for
each business area are revenue and adjusted operating profit.
Six months ended 30 June North Continental UK & Rest of
2023 America Europe Ireland the Corporate Total
World
---------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ----------- -------- ------- ----------- -------
Revenue 3,514.4 1,179.1 663.8 549.5 5,906.8
Adjusted operating profit/(loss) 245.6 106.8 44.7 57.1 (15.9) 438.3
-------- ----------- -------- ------- -----------
Customer relationships, brands
and technology amortisation (28.6) (21.1) (5.5) (10.4) (65.6)
Acquisition related items (2.3) (4.3) 2.1 (8.4) (12.9)
Operating profit/(loss) 214.7 81.4 41.3 38.3 (15.9) 359.8
Finance income 23.8
Finance expense (66.5)
Profit before income tax 317.1
--------------------------------- -------- ----------- -------- ------- ----------- -------
Adjusted profit before income
tax 395.6
--------------------------------- -------- ----------- -------- ------- ----------- -------
Income tax (79.9)
--------------------------------- -------- ----------- -------- ------- ----------- -------
Profit for the period 237.2
--------------------------------- -------- ----------- -------- ------- ----------- -------
Operating margin 7.0% 9.1% 6.7% 10.4% 7.4%
Return on average operating
capital 46.4% 42.1% 57.7% 34.9% 43.2%
--------------------------------- -------- ----------- -------- ------- ----------- -------
Six months ended 30 June 2022 North Continental UK & Rest of
America Europe Ireland the Corporate Total
World
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ----------- -------- ------- ----------- -------
Revenue 3,435.9 1,026.1 687.1 501.7 5,650.8
Adjusted operating profit/(loss) 231.5 97.7 40.6 53.9 (12.3) 411.4
-------- ----------- -------- ------- -----------
Customer relationships, brands
and technology amortisation (27.4) (18.9) (6.0) (9.2) (61.5)
Acquisition related items (10.9) (4.8) (3.6) (3.1) (22.4)
Operating profit/(loss) 193.2 74.0 31.0 41.6 (12.3) 327.5
Finance income 7.4
Finance expense (38.3)
Profit before income tax 296.6
--------------------------------- -------- ----------- -------- ------- ----------- -------
Adjusted profit before income
tax 380.5
--------------------------------- -------- ----------- -------- ------- ----------- -------
Income tax (75.0)
--------------------------------- -------- ----------- -------- ------- ----------- -------
Profit for the period 221.6
--------------------------------- -------- ----------- -------- ------- ----------- -------
Operating margin 6.7% 9.5% 5.9% 10.7% 7.3%
Return on average operating
capital 43.6% 48.5% 49.3% 38.9% 43.5%
--------------------------------- -------- ----------- -------- ------- ----------- -------
Year ended 31 December 2022 North Continental UK & Rest of
America Europe Ireland the World Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ----------- -------- ---------- ----------- ---------
Revenue 7,366.0 2,173.4 1,442.5 1,057.6 12,039.5
Adjusted operating profit/(loss) 511.5 195.1 95.3 111.7 (27.7) 885.9
-------- ----------- -------- ---------- -----------
Customer relationships, brands
and technology amortisation (57.3) (40.6) (11.0) (19.5) (128.4)
Acquisition related items (15.8) (27.5) (7.4) (5.2) (55.9)
Operating profit/(loss) 438.4 127.0 76.9 87.0 (27.7) 701.6
Finance income 22.3
Finance expense (90.2)
Disposal of business 0.9
Profit before income tax 634.6
--------------------------------- -------- ----------- -------- ---------- ----------- ---------
Adjusted profit before income
tax 818.0
--------------------------------- -------- ----------- -------- ---------- ----------- ---------
Income tax (160.2)
--------------------------------- -------- ----------- -------- ---------- ----------- ---------
Profit for the year 474.4
--------------------------------- -------- ----------- -------- ---------- ----------- ---------
Operating margin 6.9% 9.0% 6.6% 10.6% 7.4%
Return on average operating
capital 45.4% 43.7% 52.2% 35.3% 43.0%
--------------------------------- -------- ----------- -------- ---------- ----------- ---------
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
Acquisition related items GBPm GBPm GBPm
----------------------------------------------- ----------- ----------- ---------
Deferred consideration payments relating to
the retention of former owners of businesses
acquired 17.6 8.7 24.9
Transaction costs and expenses 12.0 7.2 10.9
Adjustments to previously estimated earn outs (16.7) 6.5 7.1
----------------------------------------------- ----------- ----------- ---------
12.9 22.4 42.9
Customer relationship impairment charges - - 13.0
----------------------------------------------- ----------- ----------- ---------
12.9 22.4 55.9
----------------------------------------------- ----------- ----------- ---------
4. Finance income/(expense)
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- ---------
Interest on cash and cash equivalents 15.2 2.1 10.5
Interest income from foreign exchange contracts 6.6 4.3 9.2
Net interest income on defined benefit pension
schemes in surplus 1.6 0.5 1.2
Other finance income 0.4 0.5 1.4
-------------------------------------------------- ---------- ---------- ---------
Finance income 23.8 7.4 22.3
-------------------------------------------------- ---------- ---------- ---------
Interest on loans and overdrafts (47.2) (21.7) (58.5)
Lease interest expense (13.1) (10.2) (22.0)
Interest expense from foreign exchange contracts (0.6) (1.0) (0.8)
Net interest expense on defined benefit pension
schemes in deficit (0.4) (0.3) (0.8)
Fair value gain on US private placement notes
and senior bond in a hedge relationship 10.5 47.3 83.2
Fair value loss on interest rate swaps in a hedge
relationship (12.1) (44.7) (79.2)
Foreign exchange (loss)/gain on intercompany
funding (58.3) 99.8 126.7
Foreign exchange gain/(loss) on external debt
and foreign exchange forward contracts 58.0 (99.8) (126.7)
Monetary loss from hyperinflation accounting(1) (2.5) (7.3) (10.7)
Other finance expense (0.8) (0.4) (1.4)
-------------------------------------------------- ---------- ---------- ---------
Finance expense (66.5) (38.3) (90.2)
-------------------------------------------------- ---------- ---------- ---------
Net finance expense (42.7) (30.9) (67.9)
-------------------------------------------------- ---------- ---------- ---------
(1) See Note 1 for further details.
The foreign exchange loss on intercompany funding in the six
month period to 30 June 2023 arises as a result of the
retranslation of foreign currency intercompany loans. This loss on
intercompany funding is substantially matched by the foreign
exchange gain on external debt and foreign exchange forward
contracts not in a hedge relationship, which minimises the foreign
currency exposure in the Consolidated income statement.
5. Income tax
The tax charge for the interim financial statements is
determined by applying the weighted average statutory tax rate
based on full year forecast profits to the actual profits for the
first half of the year, and then adjusting for non-taxable or
deductible items that affect the profits of the first half of the
year. Where tax balances are revised due to changes in tax rates or
estimates of tax liabilities for prior periods, the full effect on
the income statement is included in the tax charge for the first
half of the year.
The adjustments to the tax charge at the weighted average rate
to determine the income tax on profit for the period are as
follows:
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
----------------------------------------- ----------- ---------- ----------
Profit before income tax 317.1 296.6 634.6
Weighted average rate 25.5% 24.5% 24.6%
Tax charge at weighted average rate 81.0 72.7 156.1
Effects of:
non-deductible expenditure 0.9 3.5 8.9
impact of intercompany finance 0.1 (0.2) (2.0)
change in tax rates - 0.2 0.4
hyperinflation accounting adjustments 1.1 3.2 4.7
prior year adjustments (3.1) (4.0) (7.7)
other current year items (0.1) (0.4) (0.2)
Income tax on profit 79.9 75.0 160.2
----------------------------------------- ----------- ---------- ----------
In assessing the underlying performance of the Group, management
uses adjusted profit before income tax. The tax effect of the
adjusting items (see Note 2) is excluded in monitoring the
effective tax rate (being the tax rate on adjusted profit before
income tax) which is shown in the table below:
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
------------------------------------ ----------- ---------- --------
Income tax on profit 79.9 75.0 160.2
Tax associated with adjusting items 19.8 18.6 41.0
------------------------------------ ----------- ---------- --------
Tax on adjusted profit 99.7 93.6 201.2
------------------------------------ ----------- ---------- --------
Profit before income tax 317.1 296.6 634.6
Adjusting items 78.5 83.9 183.4
------------------------------------ ----------- ---------- --------
Adjusted profit before income tax 395.6 380.5 818.0
------------------------------------ ----------- ---------- --------
Reported tax rate 25.2% 25.3% 25.2%
Effective tax rate 25.2% 24.6% 24.6%
------------------------------------ ----------- ---------- --------
The group is within the scope of the OECD Pillar two model
rules. Pillar two legislation was recently substantively enacted in
some of the territories in which the group operates and will come
into effect in these territories from 1 January 2024. At the
interim reporting date, none of the Pillar two legislation is
effective and so the group has no related current tax exposure. In
light of IAS 12 recent amendments which clarify that Pillar two
related balances are not within the scope of IAS 12 for deferred
tax purposes and provide an exception on this basis, the group has
developed an accounting policy where no deferred taxes arising from
the implementation of the Pillar two model rules are provided.
6. Dividends
Total dividends for the periods in which they are recognised
are:
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
-------------- ----------- ----------- ---------
2021 interim 54.3 54.3
2021 final 136.2 136.2
2022 interim 57.9
2022 final 151.8
Total 209.7 190.5 190.5
-------------- ----------- ----------- ---------
Total dividends per share for the periods to which they relate
are:
Per share
----------- ----------- -------------
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
-------------- ----------- ----------- -------------
2022 interim 17.3p 17.3p
2022 final 45.4p
2023 interim 18.2p
-------------- ----------- ----------- -------------
Total 18.2p 17.3p 62.7p
-------------- ----------- ----------- -------------
The 2023 interim dividend of 18.2p per share will be paid on 3
January 2024 to shareholders on the register at the close of
business on 17 November 2023. The 2023 interim dividend will
comprise approximately GBP61m of cash.
7. Earnings per share
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
--------------------------------------------------- ---------- ---------- --------
Profit for the period 237.2 221.6 474.4
Adjusted for:
customer relationships, brands and technology
amortisation 65.6 61.5 128.4
acquisition related items 12.9 22.4 55.9
profit on disposal of business - - (0.9)
tax credit on adjusting items (19.8) (18.6) (41.0)
--------------------------------------------------- ---------- ---------- --------
Adjusted profit for the period 295.9 286.9 616.8
--------------------------------------------------- ---------- ---------- --------
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
--------------------------------------------------- ---------- ---------- --------
Basic weighted average number of ordinary shares
in issue (million) 335.1 334.9 334.7
Dilutive effect of employee share plans (million) 2.8 2.8 2.5
--------------------------------------------------- ---------- ---------- --------
Diluted weighted average number of ordinary
shares (million) 337.9 337.7 337.2
--------------------------------------------------- ---------- ---------- --------
Basic earnings per share 70.8p 66.2p 141.7p
Adjustment 17.5p 19.5p 42.6p
--------------------------------------------------- ---------- ---------- --------
Adjusted earnings per share 88.3p 85.7p 184.3p
--------------------------------------------------- ---------- ---------- --------
Diluted basic earnings per share 70.2p 65.6p 140.7p
Adjustment 17.4p 19.4p 42.2p
--------------------------------------------------- ---------- ---------- --------
Adjusted diluted earnings per share 87.6p 85.0p 182.9p
--------------------------------------------------- ---------- ---------- --------
8. Acquisitions
Acquisitions involving the purchase of the acquiree's share
capital or, as the case may be, the relevant assets of the
businesses acquired, have been accounted for under the acquisition
method of accounting. A key part of the Group's strategy is to grow
through acquisition. The Group has developed a process to assist
with the identification of the fair values of the assets acquired
and liabilities assumed, including the separate identification of
intangible assets in accordance with IFRS 3 'Business Combinations'
as revised. This formal process is applied to each acquisition and
involves an assessment of the assets acquired and liabilities
assumed with assistance provided by external valuation specialists
where appropriate. Until this assessment is complete, the
allocation period remains open up to a maximum of 12 months from
the relevant acquisition date. At 30 June 2023 the allocation
period for all acquisitions completed since 1 July 2022 remained
open and accordingly the fair values presented are provisional.
Adjustments are made to the assets acquired and liabilities
assumed during the allocation period to the extent that further
information and knowledge come to light that more accurately
reflect conditions at the acquisition date. Adjustments are made to
the value of assets acquired to reflect more accurately the
estimated realisable or settlement value. Similarly, adjustments
are made to acquired liabilities to record onerous commitments or
other commitments existing at the acquisition date but not
recognised by the acquiree. Adjustments are also made to reflect
the associated tax effects. During the six months to 30 June 2023
adjustments have been recognised to the fair value of assets and
liabilities acquired related to acquisitions made in the prior
year, resulting in a net increase to goodwill of GBP0.8m. Given the
immaterial amounts involved the fair value of assets and
liabilities acquired as reported in the prior year have not been
restated.
The consideration in respect of acquisitions comprises amounts
paid on completion and deferred consideration. The consideration
has been allocated against the identified net assets, with the
balance recorded as goodwill. Any payments that are contingent on
future employment, including payments which are contingent on the
retention of former owners of businesses acquired, are charged to
the income statement. Transaction costs and expenses such as
professional fees are charged to the income statement.
For each of the businesses acquired and announced during the
period, the name of the business, the market sector served, its
location and date of acquisition, as well as the estimated
annualised revenue are separately disclosed. The remaining
disclosures required by IFRS 3 are provided separately for those
individual acquisitions that are considered to be material and in
aggregate for individually immaterial acquisitions. An acquisition
would generally be considered individually material if the impact
on the Group's revenue or profit measures (on an annualised basis)
or the relevant amounts on the balance sheet is greater than 5%.
Management also applies judgement in considering whether there are
any material qualitative differences from other acquisitions
made.
There were no individually significant acquisitions during the
six months ended 30 June 2023, the six months ended 30 June 2022
and the year ended 31 December 2022.
Six months ended 30 June 2023
Summary details of the businesses acquired or agreed to be
acquired during the period ended 30 June 2023 are shown in the
table below:
Annualised
Acquisition date Percentage of share revenue
Business Sector Country 2023 capital acquired GBPm
----------------------- -------------------- ----------- -------------------- ----------------------- -----------
GRC Healthcare Australia 1 January 100% 2.7
Capital Paper Foodservice Canada 31 January 100% 15.8
Arbeitsschutz-Express Safety Germany 3 April 66% 40.1
Dimasa Cleaning & Hygiene Spain 28 April 100% 3.8
Irudek Safety Spain 28 April 75% 16.0
EHM Safety UK 5 June 100% 18.6
La Cartuja
Complementos
Hostelería Foodservice Spain 30 June 100% 5.2
----------------------- -------------------- ----------- -------------------- ----------------------- -----------
Acquisition completed in the current period 102.2
--------------------------------------------- -------------------------------- ----------------------- -----------
Leal Equipamentos de
Proteção Safety Brazil 1 August 100% 36.7
GRC Healthcare Australia 1 January 100% (2.7)
Acquisitions agreed in the current period 136.2
--------------------------------------------- -------------------------------- ----------------------- -----------
A summary of the effect of acquisitions in the six months ended
30 June 2023 and 30 June 2022 and for the year ended 31 December
2022 is shown below:
Total
30.6.23 30.6.22 31.12.22
GBPm GBPm GBPm
--------------------------------------------------- -------- --------- ----------
Customer relationships 61.4 14.8 107.7
Brands - 4.2 11.6
Technology - - 9.1
Property, plant and equipment and software 4.9 1.0 4.8
Right-of-use assets 14.7 5.4 21.5
Inventories 9.7 8.5 44.9
Trade and other receivables 15.1 5.6 27.0
Trade and other payables (17.7) (5.6) (30.9)
Net cash/(loans and overdrafts) 10.4 (7.2) (6.8)
Provisions (5.7) (1.7) (7.9)
Lease liabilities (14.7) (5.6) (21.5)
Derivative assets/(liabilities) - 0.2 0.4
Income tax payable and deferred tax liabilities (16.7) (3.3) (31.3)
--------------------------------------------------- -------- --------- ----------
Fair value of net assets acquired 61.4 16.3 128.6
Goodwill 37.8 6.7 106.6
--------------------------------------------------- -------- --------- ----------
Consideration 99.2 23.0 235.2
--------------------------------------------------- -------- --------- ----------
Satisfied by:
cash consideration 76.5 14.6 180.6
deferred consideration 22.7 8.4 54.6
99.2 23.0 235.2
Contingent payments relating to the retention
of former owners 26.5 1.4 66.4
Net (cash)/loans and overdrafts acquired (10.4) 7.2 6.8
Transaction costs and expenses 12.0 7.2 10.9
--------------------------------------------------- -------- --------- ----------
Total committed spend in respect of acquisitions
completed in the current period 127.3 38.8 319.3
--------------------------------------------------- -------- --------- ----------
Spend on acquisitions committed but not completed
at the period end 87.1 144.7 2.9
Spend on acquisitions committed at the prior
period end but completed in the current period (2.9) - -
--------------------------------------------------- -------- --------- ----------
Total committed spend in respect of acquisitions
agreed in the current period 211.5 183.5 322.2
--------------------------------------------------- -------- --------- ----------
The net cash outflow in respect of acquisitions comprised:
Total
Six Year
months Six months to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
------------------------------------------------- ------------ ------------ ----------
Cash consideration 76.5 14.6 180.6
Net (cash)/loans and overdrafts acquired (10.4) 7.2 6.8
Deferred consideration payments 6.1 51.7 56.2
------------------------------------------------- ------------ ------------ ----------
Purchase of businesses 72.2 73.5 243.6
------------------------------------------------- ------------ ------------ ----------
Transaction costs and expenses paid 11.8 7.4 11.0
Payments relating to retention of former owners 11.7 3.6 9.6
------------------------------------------------- ------------ ------------ ----------
Cash outflow from acquisition related items 23.5 11.0 20.6
------------------------------------------------- ------------ ------------ ----------
Total cash outflow in respect of acquisitions 95.7 84.5 264.2
------------------------------------------------- ------------ ------------ ----------
Acquisitions completed in the six months ended 30 June 2023
contributed GBP21.4m (six months ended 30 June 2022: GBP4.7m; year
ended 31 December 2022: GBP115.8m) to the Group's revenue, GBP2.3m
(six months ended 30 June 2022: GBP0.3m; year ended 31 December
2022: GBP9.5m) to the Group's adjusted operating profit and GBP1.3m
(six months ended 30 June 2022: GBP0.2m; year ended 31 December
2022: GBP5.9m) to the Group's operating profit for the six months
ended 30 June 2023.
The estimated contributions from acquisitions completed in the
period to the results of the Group if such acquisitions had been
made at the beginning of the respective periods, are as
follows:
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
GBPm GBPm GBPm
--------------------------- ------------ ------------ ----------
Revenue 49.6 26.1 296.3
--------------------------- ------------ ------------ ----------
Adjusted operating profit 5.4 1.5 28.8
--------------------------- ------------ ------------ ----------
Deferred Consideration
The table below gives further details of the Group's deferred
consideration liabilities.
Six months Six months Year ended
ended 30.6.23 ended 30.6.22 31.12.22
GBPm GBPm GBPm
------------------------------------------- --------------- --------------- -----------
Minority options 114.0 54.7 92.4
Earnouts 17.4 16.9 39.3
------------------------------------------- --------------- --------------- -----------
Deferred consideration held at fair value 131.4 71.6 131.7
Other 8.8 7.5 8.2
------------------------------------------- --------------- --------------- -----------
Total Deferred Consideration 140.2 79.1 139.9
------------------------------------------- --------------- --------------- -----------
Current 33.4 24.9 42.0
Non-Current 106.8 54.2 97.9
------------------------------------------- --------------- --------------- -----------
Total Deferred Consideration 140.2 79.1 139.9
------------------------------------------- --------------- --------------- -----------
Including expected future payments which are contingent on the
continued retention of former owners of businesses acquired of
GBP83.9m (Year ended 31 December 2022: GBP76.3m), total deferred
and contingent consideration as at 30 June 2023 was GBP224.1m (Year
ended 31 December 2022: GBP216.2m).
Year ended 31 December 2022
Summary details of the businesses acquired or agreed to be
acquired during the year ended 31 December 2022 are shown in the
table below:
Percentage of share Annualised
Acquisition date capital acquired revenue
Business Sector Country 2022 GBPm
------------------- -------------------- ---------------- -------------------- ---------------------- -----------
USL Healthcare New Zealand 31 May 90% 56.0
Hygi.de Cleaning & Hygiene Germany 11 July 75% 94.3
AFL Groep Other Netherlands 20 July 90% 18.1
LCHS Cleaning & Hygiene United Kingdom 29 July 100% 5.4
Containit Safety Australia 1 August 80% 12.9
Corsul Group Safety Brazil 2 September 100% 42.3
Enviropack Foodservice United Kingdom 13 October 85% 6.9
VM Footwear Safety Czech Republic 31 October 70% 14.2
PM Pack Foodservice Denmark 30 November 70% 16.3
Toomac Healthcare New Zealand 2 December 100% 6.6
Grupo R. Queralto Healthcare Spain 21 December 85% 23.3
------------------- -------------------- ---------------- -------------------- ---------------------- -----------
Acquisitions completed in the current year 296.3
----------------------------------------------------------- -------------------- ---------------------- -----------
GRC Healthcare Australia 1 January 2023 100% 2.7
Acquisitions agreed in the current year 299.0
----------------------------------------------------------- -------------------- ---------------------- -----------
9. Disposal of business
The Group did not dispose of any businesses during the six
months to 30 June 2023. Disposal of business in the year ended 31
December 2022 related to UK Healthcare division, a business that
was no longer considered to be a strategic fit within the portfolio
of the Group's businesses, the disposal was completed on 19
December 2022.
10. Right-of-use assets
Six months ended 30 June 2023
Property Motor Vehicles Equipment Total
Net book value GBPm GBPm GBPm GBPm
----------------------------------- --------- --------------- ---------- --------
Beginning of the period 439.6 63.3 26.7 529.6
Acquisitions (Note 8) 14.6 0.1 - 14.7
Additions 25.9 20.0 6.3 52.2
Depreciation charge in the period (60.2) (14.6) (5.9) (80.7)
Remeasurement adjustments 84.4 (0.8) - 83.6
Currency translation (20.2) (2.9) (1.4) (24.5)
----------------------------------- --------- --------------- ---------- --------
As at 30 June 2023 484.1 65.1 25.7 574.9
----------------------------------- --------- --------------- ---------- --------
Six months ended 30 June 2022
Property Motor Vehicles Equipment Total
Net book value GBPm GBPm GBPm GBPm
----------------------------------- --------- --------------- ---------- --------
Beginning of the period 366.4 57.8 24.1 448.3
Acquisitions (Note 8) 5.4 - - 5.4
Additions 22.9 13.8 5.8 42.5
Depreciation charge in the period (51.5) (13.6) (5.1) (70.2)
Remeasurement adjustments 24.3 (0.3) (0.3) 23.7
Currency translation 21.7 3.5 2.1 27.3
----------------------------------- --------- --------------- ---------- --------
As at 30 June 2022 389.2 61.2 26.6 477.0
----------------------------------- --------- --------------- ---------- --------
Year ended 31 December 2022
Property Motor Vehicles Equipment Total
Net book value GBPm GBPm GBPm GBPm
----------------------------------- --------- --------------- ---------- --------
Beginning of the year 366.4 57.8 24.1 448.3
Acquisitions (Note 8) 20.9 0.3 0.3 21.5
Disposal of business (Note 9) (1.5) (0.2) - (1.7)
Additions 84.2 28.1 11.0 123.3
Depreciation charge in the year (111.7) (28.6) (10.8) (151.1)
Remeasurement adjustments 54.7 1.9 - 56.6
Currency translation 26.6 4.0 2.1 32.7
----------------------------------- --------- --------------- ---------- --------
As at 31 December 2022 439.6 63.3 26.7 529.6
----------------------------------- --------- --------------- ---------- --------
11. Intangible assets
Six months ended 30 June 2023
Customer
Goodwill relationships Brands Technology Software Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- --------------- ------- ----------- --------- --------
Cost
Beginning of the period 1,944.4 2,349.0 39.7 9.5 107.4 4,450.0
Acquisitions (Note 8) 37.8 61.4 - - 0.7 99.9
Adjustment for hyperinflation
accounting(1) 3.5 1.2 - - - 4.7
Additions 6.4 6.4
Disposals (0.5) (0.5)
Currency translation (74.3) (100.3) (1.9) (0.4) (4.5) (181.4)
End of the period 1,911.4 2,311.3 37.8 9.1 109.5 4,379.1
------------------------------- --------- --------------- ------- ----------- --------- --------
Accumulated amortisation and impairment
Beginning of the period 12.8 1,258.1 4.8 0.4 80.0 1,356.1
Amortisation charge
in the period 62.5 1.7 1.4 4.7 70.3
Adjustment for hyperinflation
accounting(1) - 0.9 - - - 0.9
Disposals (0.5) (0.5)
Currency translation (1.2) (54.8) (0.2) - (3.1) (59.3)
--------- --------------- ----------- ---------
End of the period 11.6 1,266.7 6.3 1.8 81.1 1,367.5
------------------------------- --------- --------------- ------- ----------- ---------
Net book value at 30
June 2023 1,899.8 1,044.6 31.5 7.3 28.4 3,011.6
------------------------------- --------- --------------- ----------- ---------
Six months ended 30
June 2022
Customer
Goodwill relationships Brands Technology Software Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------- --------
Cost
At 31 December 2021 1,710.9 2,055.2 25.0 - 90.2 3,881.3
Adjustment to opening
balances in respect
of hyperinflation in
Turkey(1) 7.5 11.1 - - - 18.6
---------
Restated at 1 January
2022 1,718.4 2,066.3 25.0 - 90.2 3,899.9
Acquisitions (Note 8) 6.7 14.8 4.2 - - 25.7
Adjustment for hyperinflation
accounting(1) 7.2 10.0 - - - 17.2
Additions - 3.7 3.7
Disposals - (0.6) (0.6)
Currency translation 103.8 136.4 2.8 - 5.5 248.5
End of the period 1,836.1 2,227.5 32.0 - 98.8 4,194.4
--------- --------
Accumulated amortisation and -
impairment
At 31 December 2021 12.4 1,033.2 1.0 - 67.9 1,114.5
Adjustment to opening
balances in respect
of hyperinflation in
Turkey(1) - 4.9 - - - 4.9
---------
Restated at 1 January
2022 12.4 1,038.1 1.0 - 67.9 1,119.4
Amortisation charge
in the period 60.1 1.4 - 4.1 65.6
Adjustment for hyperinflation
accounting(1) - 5.2 - - - 5.2
Disposals - (0.6) (0.6)
Currency translation 0.8 60.8 0.7 - 4.2 66.5
---------
End of the period 13.2 1,164.2 3.1 - 75.6 1,256.1
---------
Net book value at 30
June 2022 1,822.9 1,063.3 28.9 - 23.2 2,938.3
---------
Year ended 31 December
2022
Customer
Goodwill relationships Brands Technology Software Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------- ----------- --------- --------
Cost
At 31 December 2021 1,710.9 2,055.2 25.0 - 90.2 3,881.3
Adjustment to opening
balances in respect
of hyperinflation in
Turkey(1) 6.7 10.0 - - - 16.7
--------------- ----------- ---------
Restated at 1 January
2022 1,717.6 2,065.2 25.0 - 90.2 3,898.0
Acquisitions (Note 8) 106.6 107.7 11.6 9.1 0.7 235.7
Disposal of business
(Note 9) (17.0) (5.1) - - (0.8) (22.9)
Adjustment for hyperinflation
accounting(1) 9.7 13.5 - - - 23.2
Additions 12.0 12.0
Disposals (3.4) (3.4)
Currency translation 127.5 167.7 3.1 0.4 8.7 307.4
End of the year 1,944.4 2,349.0 39.7 9.5 107.4 4,450.0
--------------- ------- ----------- --------- --------
Accumulated amortisation and -
impairment
At 31 December 2021 12.4 1,033.2 1.0 - 67.9 1,114.5
Adjustment to opening
balances in respect
of hyperinflation in
Turkey(1) - 4.4 - - - 4.4
--------------- ----------- ---------
Restated at 1 January
2022 12.4 1,037.6 1.0 - 67.9 1,118.9
Amortisation charge
in the year 124.8 3.2 0.4 8.8 137.2
Impairment charge in
the year - 13.0 - - - 13.0
Disposal of business
(Note 9) - (2.9) - - (0.6) (3.5)
Adjustment for hyperinflation
accounting(1) - 6.8 - - - 6.8
Disposals - (3.4) (3.4)
Currency translation 0.4 78.8 0.6 - 7.3 87.1
--------------- ----------- ---------
End of the period 12.8 1,258.1 4.8 0.4 80.0 1,356.1
--------------- ------- ----------- ---------
Net book value at
31 December 2022 1,931.6 1,090.9 34.9 9.1 27.4 3,093.9
--------------- ----------- ---------
(1) See Note 1 for further details.
Goodwill, customer relationships, brands and technology
intangible assets have been acquired as part of business
combinations. Further details of acquisitions made in the period
are set out in Note 8.
The Group has completed an impairment assessment in relation to
the carrying value of goodwill as at 30 June 2023. Based on this
assessment, no impairment was identified and there were no
reasonably possible changes in key assumptions that would result in
a material change to the carrying amounts of goodwill in the next
12 months. The Group also considered whether there were any
indicators that individual customer relationships, brands and
technology intangible assets were impaired. Based on our impairment
testing, no impairments were identified to the carrying value of
customer relationships, brands and technology intangible assets as
at 30 June 2023.
12. Working Capital
30.6.23 30.6.22 31.12.22
GBPm GBPm GBPm
----------
Inventories 1,519.9 1,809.2 1,748.6
Trade and other receivables 1,605.3 1,577.5 1,557.4
Trade and other payables - current (2,217.0) (2,336.6) (2,249.4)
Add back net non-trading related receivables
and payables 28.8 17.9 40.0
Add back dividends payable 151.8 136.2 -
1,088.8 1,204.2 1,096.6
See Note 17 for the cash flow impact of movements in working
capital which exclude the impact from foreign exchange movements
and acquisitions.
13. Financial instruments
The following financial assets and liabilities are held at fair
value:
30.6.23 30.6.22 31.12.22
Financial assets GBPm GBPm GBPm
-------- ---------
Interest rate derivatives in fair value hedges - 0.4 -
Foreign exchange derivatives in cash flow hedges 1.3 5.6 1.5
Foreign exchange derivatives in net investment
hedges 14.7 5.6 8.3
Other foreign exchange and interest rate derivatives 15.9 4.1 9.2
-------- ---------
Total derivative financial assets 31.9 15.7 19.0
-------- ---------
Current derivative financial assets 31.9 14.1 19.0
Non-current derivative financial assets - 1.6 -
Total derivative financial assets 31.9 15.7 19.0
30.6.23 30.6.22 31.12.22
Financial liabilities GBPm GBPm GBPm
-------- ---------
Interest rate derivatives in fair value hedges (112.6) (66.4) (100.5)
Foreign exchange derivatives in cash flow hedges (1.5) (0.4) (2.7)
Foreign exchange derivatives in net investment
hedges (6.8) (15.8) (5.7)
Other foreign exchange derivatives (3.9) (11.4) (9.9)
-------- ---------
Total derivative financial liabilities (124.8) (94.0) (118.8)
Other payables (131.4) (71.6) (131.7)
-------- ---------
(256.2) (165.6) (250.5)
-------- ---------
Current derivative financial liabilities (12.2) (27.6) (18.3)
Non-current derivative financial liabilities (112.6) (66.4) (100.5)
-------- ---------
Total derivative financial liabilities (124.8) (94.0) (118.8)
-------- ---------
Financial assets and liabilities stated as being measured at
fair value in the tables above (including all derivative financial
instruments), with the exception of other payables, have carrying
amounts where the fair value is, and has been throughout the
period, a level two fair value measurement. Level two fair value
measurements use inputs other than quoted prices that are
observable for the relevant asset or liability, either directly or
indirectly. The fair values of financial assets and liabilities
stated at level two fair value have been determined by discounting
expected future cash flows, translated at the appropriate balance
sheet date exchange rates and adjusted for counterparty or own
credit risk as applicable. Other payables measured at fair value
relate to earn outs and options on businesses acquired. This is a
level three fair value which is initially measured based on the
expected future profitability of the businesses acquired at the
acquisition date and subsequently reassessed at each reporting date
based on the most recent data available on the expected
profitability of the businesses acquired. These balances are
sensitive to a change in the expected profitability of the
businesses acquired. A 1% increase in the expected profitability of
the relevant businesses acquired would result in an increase to
other payables of GBP2.6m and 1% decrease in the expected
profitability would result in a decrease of GBP2.6m.
There were no transfers between levels for recurring fair value
measurements during the period.
The fair values of all financial instruments approximate to
their book values, with the exception of the US private placement
notes and the senior bonds which are held at amortised cost. The
fair value of all US private placement notes which are held at
amortised cost, using market prices at 30 June 2023, was GBP859.6m
(30 June 2022: GBP831.9m; 31 December 2022: GBP1,063.4m), compared
to a carrying value of GBP925.5m (30 June 2022: GBP860.5m; 31
December 2022: GBP1,136.7m). The fair value of the senior bonds
which are held at amortised cost, using market prices at 30 June
2023, was GBP567.5m (30 June 2022: GBP619.9m, 31 December 2022:
GBP572.7m) compared to a carrying value of GBP588.4m (30 June 2022:
GBP629.7m; 31 December 2022: GBP598.3m).
14. Lease liabilities
The Group leases certain property, plant, equipment and vehicles
under non-cancellable operating lease agreements. These leases have
varying terms and renewal rights.
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
Movement in lease liabilities GBPm GBPm GBPm
----------
Beginning of the period 569.9 488.7 488.7
Acquisitions (Note 8) 14.7 5.6 21.5
Disposal of business (Note 9) - - (2.1)
New leases 52.2 42.5 123.3
Interest charge in the period 13.1 10.2 22.0
Payment of lease liabilities (91.9) (82.5) (175.1)
Remeasurement adjustments 84.9 23.7 56.6
Currency translation (25.2) 29.8 35.0
End of the period 617.7 518.0 569.9
Ageing of lease liabilities:
Current lease liabilities 147.7 136.9 145.9
Non-current lease liabilities 470.0 381.1 424.0
End of the period 617.7 518.0 569.9
15. Cash and cash equivalents and net debt
30.6.23 30.6.22 31.12.22
GBPm GBPm GBPm
---------- ---------- ----------
Cash at bank and in hand 1,481.1 1,040.2 1,504.0
Bank overdrafts (887.5) (812.2) (825.9)
---------- ---------- ----------
Cash and cash equivalents 593.6 228.0 678.1
Interest bearing loans and borrowings - current
liabilities (131.8) (215.4) (161.0)
Interest bearing loans and borrowings - non-current
liabilities (1,386.6) (1,301.3) (1,574.0)
Derivatives managing interest rate risk and
currency profile of the debt (95.6) (85.9) (103.2)
Net debt excluding lease liabilities (1,020.4) (1,374.6) (1,160.1)
---------- ---------- ----------
Lease liabilities (617.7) (518.0) (569.9)
---------- ---------- ----------
Total net debt including lease liabilities (1,638.1) (1,892.6) (1,730.0)
---------- ---------- ----------
The cash at bank and in hand and bank overdrafts amounts
included in the table above include the amounts associated with the
Group's cash pool. The cash pool enables the Group to access cash
in its subsidiaries to pay down the Group's borrowings. The Group
has the legal right of set-off of balances within the cash pool
which is an enforceable right. The cash at bank and in hand and
bank overdrafts figures net of the amounts in the cash pool are
disclosed below for reference:
30.6.23 30.6.22 31.12.22
GBPm GBPm GBPm
-------- -------- ---------
Cash at bank and in hand net of amounts in
the cash pool 621.0 308.3 700.5
Bank overdrafts net of amounts in the cash
pool (27.4) (80.3) (22.4)
-------- -------- ---------
Cash and cash equivalents 593.6 228.0 678.1
-------- -------- ---------
16. Movement in net debt
Cash and
cash Other
Net debt equivalents components
Six months ended 30 June 2023 GBPm GBPm GBPm
---------
Beginning of the period excluding lease liabilities (1,160.1) 678.1 (1,838.2)
Net cash inflow/(outflow) 83.9 (58.0) 141.9
Non-cash movement in debt (0.4) - (0.4)
Realised gains on foreign exchange contracts 12.0 - 12.0
Currency translation 44.2 (26.5) 70.7
---------
End of the period excluding lease liabilities (1,020.4) 593.6 (1,614.0)
---------
Lease liabilities (617.7) - (617.7)
---------
End of the period including lease liabilities (1,638.1) 593.6 (2,231.7)
---------
Cash and cash Other
Net debt equivalents components
Six months ended 30 June 2022 GBPm GBPm GBPm
---------
Beginning of the period excluding lease liabilities (1,337.4) 225.3 (1,562.7)
Net cash inflow/(outflow) 37.6 (34.5) 72.1
Non-cash movement in debt 4.7 - 4.7
Realised losses on foreign exchange contracts (26.5) - (26.5)
Currency translation (53.0) 37.2 (90.2)
---------
End of the period excluding lease liabilities (1,374.6) 228.0 (1,602.6)
---------
Lease liabilities (518.0) - (518.0)
---------
End of the period including lease liabilities (1,892.6) 228.0 (2,120.6)
---------
Cash and cash Other
Net debt equivalents components
Year ended 31 December 2022 GBPm GBPm GBPm
---------
Beginning of the year excluding lease liabilities (1,337.4) 225.3 (1,562.7)
Net cash inflow 269.0 397.4 (128.4)
Non-cash movement in debt 8.2 - 8.2
Realised losses on foreign exchange contracts (86.2) - (86.2)
Currency translation (13.7) 55.4 (69.1)
---------
End of the year excluding lease liabilities (1,160.1) 678.1 (1,838.2)
---------
Lease liabilities (569.9) - (569.9)
---------
End of the year including lease liabilities (1,730.0) 678.1 (2,408.1)
---------
17. Cash flow from operating activities
The tables below give further details on the adjustments for
depreciation and software amortisation , other non-cash items and
the working capital movement shown in the Consolidated cash flow
statement:
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
Depreciation and software amortisation GBPm GBPm GBPm
Depreciation of right-of-use assets 80.7 70.2 151.1
Other depreciation and software amortisation 19.8 18.3 38.4
100.5 88.5 189.5
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
Other non-cash items GBPm GBPm GBPm
Share based payments 7.6 6.6 14.1
Provisions (5.7) 7.8 (3.9)
Retirement benefit obligations (4.4) (4.7) (3.9)
Hyperinflation accounting adjustments 2.2 2.1 8.0
Other 3.5 1.7 1.6
3.2 13.5 15.9
Six months Six months Year to
to 30.6.23 to 30.6.22 31.12.22
Working capital movement GBPm GBPm GBPm
Decrease/(increase) in inventories 173.2 (191.0) (118.7)
Increase in trade and other receivables (87.5) (49.2) (13.0)
(Decrease)/increase in trade and other payables (113.1) 171.4 186.2
(27.4) (68.8) 54.5
18. Related party disclosures
As disclosed in the Annual Report for the year ended 31 December
2022, the Group has identified the directors of the Company, their
close family members, the Group's defined benefit pension schemes
and its key management as related parties for the purpose of IAS 24
'Related Party Disclosures'. There have been no material
transactions with those related parties during the six months ended
30 June 2023. Details of the relevant relationships with those
related parties will be disclosed in the Annual Report for the year
ending 31 December 2023. All transactions with subsidiaries are
eliminated on consolidation.
Responsibility statement of the directors in respect of the half
yearly financial report
The directors confirm to the best of their knowledge that these
condensed interim financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as issued by
the International Accounting Standards Board ('IASB'), UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and that the
interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements,
and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- material related-party transactions in the first six months and any
material changes in the related-party transactions described in the
last annual report.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of a condensed set of financial statements may
differ from legislation in other jurisdictions.
For and on behalf of the Board
Frank van Zanten Richard Howes
Chief Executive Officer Chief Financial Officer
29 August 2023
Independent review report to Bunzl plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Bunzl plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
half yearly financial report of Bunzl plc for the 6 month period
ended 30 June 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as issued by the IASB, UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2023;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half yearly
financial report of Bunzl plc have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as issued by the IASB, UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the Group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by the directors. The directors are responsible for
preparing the half yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the half yearly
financial report, including the interim financial statements, the
directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the half yearly financial report based on
our review. Our conclusion, including our Conclusions relating to
going concern, is based on procedures that are less extensive than
audit procedures, as described in the Basis for conclusion
paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
29 August 2023
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