26
February 2024
ANNUAL RESULTS
ANNOUNCEMENT
Strong 2023 results: record
operating margin and successful year for
acquisitions
Bunzl plc, the specialist
international distribution and services Group, today publishes its
annual results for the year ended 31 December 2023.
|
Financial results
|
2023
|
2022
|
Growth
as
reported
|
Growth
at
constant
exchange◊
|
|
Revenue
|
£11,797.1m
|
£12,039.5m
|
(2.0)%
|
(1.9)%
|
|
Adjusted operating
profit*
|
£944.2m
|
£885.9m
|
6.6%
|
6.2%
|
|
Adjusted profit before income
tax*
|
£853.7m
|
£818.0m
|
4.4%
|
3.4%
|
|
Adjusted earnings per
share*
|
191.1p
|
184.3p
|
3.7%
|
2.7%
|
|
Dividend for the
year∆
|
68.3p
|
62.7p
|
8.9%
|
|
|
Statutory results
|
|
|
|
|
|
Operating profit
|
£789.1m
|
£701.6m
|
12.5%
|
|
|
Profit before income tax
|
£698.6m
|
£634.6m
|
10.1%
|
|
|
Basic earnings per share
|
157.1p
|
141.7p
|
10.9%
|
|
Highlights include:
|
•
|
Revenue declined by 1.9% at
constant exchange rates and by 0.4% excluding the UK healthcare
disposal≠; revenue remains significantly ahead of
2019
|
|
•
|
Adjusted operating profit*
increased by 6.2% at constant exchange rates, with growth of 7.6%
excluding the UK healthcare disposal≠; reported
operating profit rose by 12.5%
|
|
•
|
Operating margin increased from
7.4% to 8.0%
|
|
•
|
Adjusted earnings per share*
increased by 2.7% at constant exchange rates; reported basic
earnings per share increased by 10.9%
|
|
•
|
Continued strong free cash flow*
driven by cash conversion of 96%
|
|
•
|
31st consecutive year
of annual dividend growth; total dividend per share growth of
8.9%
|
|
•
|
19 acquisitions agreed in 2023,
with a committed spend of £468 million; two acquisitions announced
today
|
|
•
|
Net debt to EBITDA*† of
1.1 times provides substantial headroom for acquisitions and other
capital allocation options
|
|
•
|
Maintaining our 2024 profit
guidance published in our pre-close statement
|
Commenting on today's results, Frank
van Zanten, Chief Executive Officer of Bunzl, said:
"I am proud of the Group's
performance during 2023; the efforts of Bunzl colleagues around the
world have resulted in a strong profit performance for the Group,
underpinned by a record operating margin of 8.0%. Over the year we
saw overall good outcomes on tendering activity reflecting the
strength of our value-added proposition, including our
sustainability expertise and digital capabilities.
We agreed 19 acquisitions in the
year, taking our total committed acquisition spend to £1.7 billion
over the last four years. Despite the significant acquisition
spend, we ended 2023 with a net debt to EBITDA of 1.1 times,
providing the Group with substantial capacity to self-fund further
acquisitions. Our pipeline remains active, with two additional
acquisitions announced today. Firstly, Nisbets, a well-established,
high quality, own brand focused omnichannel distributor of catering
equipment and consumables that operates in the UK and Ireland,
Northern Europe, and Australasia. Secondly, Pamark Group; an anchor
acquisition for us in Finland, bringing the total number of
countries we operate in to 33. Return on invested capital has
remained strong at 15.5%, demonstrating our continued track record
of acquisition discipline.
Bunzl's consistent, compounding
model drives both growth and resilience, and the progress we have
made in recent years, combined with the strength of our financial
position, means that we have a stronger platform than ever to drive
market share, consolidate fragmented markets and continue to extend
our successful track record for creating long term sustainable
value."
* Alternative performance measure
(see Note 2).
◊ Growth
at constant exchange rates is calculated by comparing the 2023
results to the 2022 results retranslated at the average exchange
rates used for 2023.
† At average exchange rates and
based on historical accounting standards, in accordance with the
Group's external debt covenants.
∆ The Board is recommending a 2023
final dividend of 50.1p per share. Including the 2023 interim
dividend per share of 18.2p the total dividend per share of 68.3p
represents an 8.9% increase compared to the 2022 total dividend per
share.
≠ The Group disposed of its UK
healthcare business in December 2022.
2023 performance highlights:
|
Underlying revenue
growth*ⱡ
contribution
|
2023
|
|
Underlying revenue
growth*ⱡ
by sector
|
2023
|
|
Base
business♯
|
(1.5)%
|
Cleaning
& Hygiene, Safety and Healthcare
|
(1)%
|
|
Covid-19
related sales
|
(1.4)%
|
Grocery
and other
|
2%
|
|
Group total
|
(2.9)%
|
Foodservice and Retail
|
(8)%
|
|
•
|
Following Bunzl's strong
performance in recent years, the Group's revenue was resilient in
2023. At constant exchange rates and excluding the UK healthcare
disposal, total revenue declined by 0.4%; Group revenue is c.28%
higher than in 2019
|
|
|
•
|
Group underlying revenue declined
by 2.9%, with a 1.5% impact due to a decline in base business sales
and a 1.4% impact due to the decline in Covid-19 related
sales
|
|
|
•
|
Covid-19 related sales continued
to normalise over the year and are now broadly in line with
pre-pandemic levels
|
|
|
•
|
The base business was impacted by
volume loss in our North America foodservice redistribution
business due to deflationary pressure increasing price competition,
post-pandemic normalisation trends, and a reduced level of
inflation benefit
|
|
|
•
|
Group revenue was supported by
2.5% growth from the incremental impact of acquisitions, partially
offset by the 1.5% negative impact to revenue from the UK
healthcare disposal in December 2022⌂
|
|
|
2023 strategic progress
|
•
|
Operating margin was supported by
good margin management, including increasing penetration of own
brands, higher margin acquisitions, and some one-off benefits in
the second half of the year
|
|
•
|
19 acquisitions agreed during
2023, across multiple sectors and geographies, including our first
entry into Poland. Strong acquisition
momentum maintained into 2024 with the acquisitions of Nisbets,
which is based in the UK and Pamark Group,
our anchor acquisition in Finland, bringing the total number of
countries we operate in to 33
|
|
•
|
24 warehouse relocations and
consolidations along with further investments into digital
solutions and automation, continued to drive operating
efficiencies
|
|
•
|
Continued development of
sustainability offering to support customers' transition to
alternative products
|
|
•
|
Processed 72% of orders digitally
(69% in 2022), supporting customer retention and enhancing
operational efficiency
|
|
Business area
highlights:
|
|
Revenue
(£m)
|
Growth at constant
|
Underlying revenue
|
Operating
profit* (£m)
|
Growth at
constant
|
Operating margin*
|
|
|
2023
|
2022
|
exchange*◊
|
growth*ⱡ
|
2023
|
2022
|
exchange*◊
|
2023
|
2022
|
|
North
America
|
6,973.5
|
7,366.0
|
(5.3)%
|
(5.6)%
|
528.0
|
511.5
|
2.9%
|
7.6%
|
6.9%
|
|
Continental Europe
|
2,354.9
|
2,173.4
|
8.4%
|
1.0%
|
224.7
|
195.1
|
14.1%
|
9.5%
|
9.0%
|
|
UK &
Ireland
|
1,365.5
|
1,442.5
|
(5.4)%
|
6.1%
|
103.4
|
95.3
|
8.4%
|
7.6%
|
6.6%
|
|
Rest of
the World
|
1,103.2
|
1,057.6
|
5.7%
|
(3.2)%
|
119.6
|
111.7
|
7.5%
|
10.8%
|
10.6%
|
|
|
|
|
|
|
|
|
|
|
| |
North America (59% of revenue and
54% of adjusted operating profit*†)
|
•
|
Underlying revenue decline was
driven by volume weakness in the foodservice redistribution
business, a reduction in retail revenues from planned strategic
actions, and a decline in Covid-19 related product sales, partly
offset by a slight product cost inflation benefit in the base
business during the year
|
|
•
|
Strong operating margin increase
supported by good margin management, including strong growth in own
brands
|
|
•
|
Moderating operating cost
inflation driven by wage inflation that was
closer to more typical levels. Property inflation remains high, but
was partially offset by fuel and freight rates declining
meaningfully
|
Continental Europe (20% of revenue and 23% of adjusted
operating profit*†)
|
•
|
Underlying revenue growth driven
by the benefit of product cost inflation, partially offset by
volume weakness which impacted trading in most markets and a
reduction in Covid-19 related sales
|
|
•
|
Overall revenue growth was driven
by the positive contributions from acquisitions and slight organic
revenue growth
|
|
•
|
Strong operating margin increase
driven by good margin management, and a focus on improving the
business in Turkey given the hyperinflationary
environment
|
UK & Ireland (12% of revenue and 11% of adjusted
operating profit*†)
|
•
|
Good underlying revenue growth
driven by strong product cost inflation, alongside continued
recovery in certain markets, particularly grocery, foodservice and
cleaning & hygiene, partly offset by volume weakness in some
markets
|
|
•
|
Strong operating margin increase
supported by underlying sales growth, increased own brand
penetration and good margin management
|
|
•
|
Excluding the impact of
acquisitions and the UK healthcare disposal, adjusted operating
profit* increased by 21.2%
|
Rest of the World (9% of revenue and 12% of adjusted
operating profit*†)
|
•
|
Revenue growth at constant
exchange rates is driven by acquisitions. The decline in underlying
revenue is caused by further normalisation
of Covid-19 related product sales, largely in Asia Pacific,
reflecting the non-repeat of some larger orders that were fulfilled
in the prior year
|
|
•
|
Our Latin America business was
impacted by lower selling prices resulting from reduced inbound
freight costs, weaker demand in our foodservice and specialty
footwear businesses, and currency movements during the
year
|
|
•
|
Small operating margin increase
driven by acquisitions
|
|
⃰
|
Alternative performance measure
which 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 trading performance of the business.
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 2023 results to the results for 2022
retranslated at the average exchange rates used for 2023.
|
|
ⱡ
|
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
(including, masks, sanitisers, disposable gloves, disinfectants,
coveralls, disposable wipes, face shields and eye
protection).
|
|
⌂
|
In addition to underlying revenue
change of (2.9)% and acquisition growth of 2.5%, growth at constant
exchange was impacted negatively by 1.5% due to the disposal of the
UK healthcare business in 2022. There was minimal impact from
growth in excess of 26% per annum in hyperinflationary
economies.
|
|
†
|
Based on adjusted operating profit
and before corporate costs (see Note 3).
|
Enquiries:
|
Bunzl
plc
Frank van
Zanten, Chief Executive Officer Richard Howes, Chief Financial
Officer
Tel: +44
(0)20 7725 5000
|
Teneo
Martin
Robinson Olivia Peters
Tel: +44
(0)20 7353 4200
|
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
year, delivering good adjusted operating profit growth and making
further strategic progress across the business, including
surpassing the milestone of £5 billion of committed acquisition
spend since 2004, and extending its track record of consecutive
annual dividend growth to 31 years.
At constant exchange rates,
revenue in 2023 declined by 1.9% (2.0% at actual exchange rates)
and declined by 0.4% compared to the prior year excluding the
disposal of the UK healthcare business. Adjusted operating profit
grew by 6.2% at constant exchange rates (6.6% at actual exchange
rates), with 7.6% growth excluding the disposal. An operating
margin of 8.0% was supported by good margin management, including
increasing penetration of own brands, higher margin acquisitions,
operational efficiencies and inventory driven one-off benefits in
the second half of 2023. At constant exchange rates, adjusted
operating profit was 46.3% higher than the comparable period in
2019, and is equivalent to a c.10% Compound Annual Growth Rate
('CAGR') over that period. This performance gives
me continued confidence in the Group's ability to continue to
deliver long term growth, supported by the agility of our
people, the diversification of our portfolio, the strength of our
culture and our dedication to customer service.
Strategic priorities
We continue to pursue a strategy
of developing the business through a combination of organic growth,
operational improvements and acquisition-led growth. The Group
agreed 19 acquisitions in the year, across 11 countries and five
sectors, highlighting the breadth of Bunzl's consolidation
opportunities. This included the Group's first acquisition in
Poland, Safety First, one of the country's
largest distributors of personal protection equipment
('PPE'). This anchor acquisition
provides a good platform from which to develop Bunzl's operations in this attractive market. Total committed
spend for the year was £468 million, resulting in a total committed
spend of £1.7 billion over the last four years.
Bunzl's acquisition momentum has continued into 2024, with the
announcement of two new acquisitions today, Nisbets and Pamark Group. Nisbets
is a well-established,
high quality and own brand focused omnichannel distributor
of catering equipment and consumables
that operates in the UK and Ireland, Northern Europe,
and Australasia. The second acquisition is our anchor
acquisition in Finland, a leading distributor called Pamark. This takes
the number of
countries in which we
operate to 33. Bunzl's depth of opportunity is significant and further consolidation
of the Group's fragmented end markets is a key growth opportunity.
The continued sector and geographic expansion further enhances our
available acquisition opportunities.
Bunzl's operating companies have
continued to develop their value-added services to customers,
supporting organic growth, customer retention, and margin
opportunities. Alongside our sustainability and digital
capabilities, developing innovative, own brand ranges is an area
that continues to strengthen Bunzl's competitive advantage, with
penetration today at c.25% of Group revenue. We also continue to
collaborate with our strategic third-party branded suppliers, to
provide unparalleled choice for our customers. The proportion of total Group revenue attributable to
non-packaging products or packaging made from alternative materials
remained high at 85%, while 72% of
customer orders were received digitally. The Group
also continues to drive operational efficiencies, including further
warehouse relocations and consolidations which partially offsets
property cost inflation, as well as making further investments into
automation. Bunzl ended the year with a net debt to EBITDA
of 1.1 times, providing substantial headroom for further
self-funded acquisitions and other capital allocation
options.
People and culture
Bunzl's most important asset is
its people, who remain committed to providing customers with a
reliable and value-added service. People continue to find Bunzl a
fulfilling place to work, as demonstrated by the results from the
Group's participation in the external 'Great Place to Work' scheme
in 2023. After an initial trial in Continental Europe in 2022, the
Group opened up the scheme more broadly in 2023. Around 75% of our
operating companies that participated were accredited by the 'Great
Place to Work' programme. We also continued to accelerate our
diversity and inclusion agenda to ensure that we have a working
environment which supports individual well-being, growth and career
progression. In 2023, the percentage of women within our senior
leadership team of 506 leaders (defined as those receiving long
term incentives) was 22%. This is an increase of two percentage
points compared to the equivalent population in 2022.
Shareholder returns
The Board is recommending a final
dividend of 50.1p, 10.4% higher than the prior year, resulting in a
full year dividend of 68.3p. This represents an 8.9% increase in
the total dividend compared to 2022 and is Bunzl's 31st
consecutive year of annual dividend growth. The Group remains
committed to ensuring sustainable dividend growth.
Since 2004, Bunzl has returned
£2.2 billion to shareholders through dividends and has committed
over £5 billion to self-funded acquisitions to support a growth
strategy that has delivered an adjusted earnings per share CAGR of
c.10% over that period and achieved a return on invested capital of
15.5% in 2023.
Governance
Vanda Murray joined the Board in
February 2015 and is currently the Chair of the Remuneration
Committee and the Senior Independent Director. She has served on
the Board for just over nine years and her term of office will end
after the 2024 AGM. Vanda's independent advice and significant
contribution to the Board's deliberations over the years have been
greatly appreciated and she will leave with our best wishes. A
robust recruitment process for a new non-executive director is now
underway and an announcement will be released in due course, once a
suitable candidate has been identified.
On the 1st of March 2023, Jacky
Simmonds was appointed as a non-executive director of the Group.
She has significant knowledge and experience of working in
international and listed companies, and across all aspects of HR,
with particular expertise in employee engagement, talent and
succession planning. The proportion of female directors on the
Board is now 44%, while representation on our Executive Committee
remains at 40%.
Vanda will be succeeded as Chair
of the Remuneration Committee by Jacky, and Pam Kirby will succeed
her as the Board's new Senior Independent Director. The timing of
the changes allows for a meaningful handover period with Vanda as
part of a planned succession.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
The Group delivered a strong
operating margin in 2023, despite revenue performance being
impacted by a reducing benefit from
inflation, volume loss in the North America foodservice
redistribution business, and some post-pandemic related
normalisation trends. I am proud of the
success our teams have had with margin
management initiatives which have contributed to the margin
performance, such as increasing the penetration of our own brand
products, and continued strategic focus on operational
efficiencies.
We have achieved overall good
outcomes from the elevated number of customer tenders we have seen
following a period of reduced activity, which is testament to the
strong value proposition we provide our customers, supported by the
strength of our supply chain. While 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, our
teams have also demonstrated a strong commitment to operational
discipline, delivering a meaningful reduction in inventory days
towards 2019 levels, particularly in the first half of the year. I
am also very pleased with the continued success of our acquisition
strategy, including surpassing the milestone of £5 billion of
committed spend since 2004.
Our performance in 2023 continues
to highlight the strength of Bunzl's compounding growth strategy
and this strengthens my confidence in the Group's medium term
outlook. Our organic revenue growth will continue to be supported
by investments in our value-added proposition, and a net
inflationary environment is potentially a further medium term
support. Furthermore, we continue to see substantial opportunities
for consolidation of our fragmented markets, and the Group has
achieved a step-change in the level of committed acquisition spend
in recent years. The expansion of our footprint resulting from
acquisitions continues to enhance the number of future
opportunities available through our locally driven approach to
sourcing acquisitions.
Operating performance
With approximately 90% of adjusted
operating profit generated outside the UK, profits and earnings
were positively impacted between 0% and 3% by currency translation
in 2023. The commentary below is stated at constant exchange rates
unless otherwise highlighted. Performance in 2023 also reflects the
disposal of our UK healthcare business in December 2022, which had
revenue of £176 million in 2022.
Over 2023, revenue declined by
1.9% (2.0% at actual exchange rates) to £11,797.1 million. Within
this, acquisition growth of 2.5% was offset by underlying revenue
decline of 2.9% and the impact of the UK healthcare business
disposal in December 2022 which impacted revenue by 1.5%. Within
the underlying revenue decline of 2.9%, the decline in Covid-19
related sales impacted underlying revenue by 1.4%, with Covid-19
related sales now broadly in line with 2019 levels. The base
business contributed 1.5% of the decline, driven by volume loss in
the North America foodservice redistribution business due to
deflationary pressure increasing price competition, post-pandemic
normalisation trends, as well as a reducing benefit from inflation.
Furthermore, volumes were impacted by planned strategic actions in
the North America retail business to focus on more profitable
customers and the decision to transition ownership of customer
specific inventory to certain customers, as well as some volume
weakness in Continental Europe and UK & Ireland.
In recent years, the Group has
managed inflation on paper, plastics and chemicals well, and
successfully implemented product cost driven selling price
increases. Over the year, the benefit of inflation continued to
reduce, with some deflation in the final quarter, particularly in
North America, which was no longer fully offset by inflation
benefit elsewhere. While other regions saw lagged inflation
compared to North America, all regions experienced a reducing
benefit over the course of the year. During the year, we achieved
good overall outcomes from the elevated number of customer tenders,
following reduced activity during the pandemic. We saw moderating
operating cost inflation in North America with wage inflation back
to more typical levels. Property cost inflation linked to lease
renewals remained high, but was partially offset by fuel and
freight rates declining meaningfully. Wage inflation in UK &
Ireland and Continental Europe increased over the year but was
manageable.
The foodservice and retail
businesses combined saw underlying revenue decline by 8% compared
to the prior year. There was volume weakness in North America
foodservice due to deflationary pressure
increasing price competition, which alongside process changes in
the business to drive more own brand penetration, resulted in lower
volumes. We also saw an impact to volumes from post-pandemic normalisation trends, driven by a reduction in
takeaway packaging sales as dining habits have continued to shift
following the pandemic, and customer destocking activity early in
the first half. The retail sector saw a decline in
revenues, mainly in North America, as a result of
planned strategic actions to focus on more profitable customers and
transitioning ownership of customer specific inventory to certain
customers. In addition, there was a
reduction in Covid-19 related sales in most business areas. 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 healthcare, safety and cleaning &
hygiene sectors declined by 1% year-on-year, with an impact from
lower Covid-19 related sales. Our safety base businesses have seen
a slight decline, with continued recovery in some business areas
offset by normalising Covid-19 related sales. Increased
infrastructure spend in North America is a potential medium term
support for our safety business. The cleaning & hygiene sector
saw some growth over the year, mainly due to acquisitions and
inflation benefits in UK & Ireland and Continental
Europe.
Adjusted operating profit was
£944.2 million, an increase of 6.2% (6.6% at actual exchange
rates), and operating margin increased to 8.0% compared to 7.4% in
the prior year. The Group's operating margin was supported by good
margin management, including increasing penetration of own brands,
higher margin acquisitions, operational efficiencies, and inventory
driven one-off benefits in the second half of 2023. Operating
margins remain substantially higher compared with the 6.9% achieved
in 2019, at constant exchange rates. Of the 110bps increase, around
half is driven by margins attributable to acquisitions made over
that period. Excluding the UK healthcare disposal, adjusted
operating profit grew by 7.6%. Reported operating profit was £789.1
million, an increase of 11.0% (12.5% at actual exchange rates),
reflecting the 6.2% increase in adjusted operating profit (at
constant exchange rates) and a reduction in customer relationships,
brands and technology amortisation and acquisition related items
compared to the prior year.
Adjusted profit before income tax
was £853.7 million, an increase of 3.4% (4.4% increase at actual
exchange rates). Adjusted profit before income tax was impacted by
a £27.2 million increase in net finance expense, at constant
exchange rates, to £90.5 million, driven by increases in interest
rates and fair value movements on interest rate derivatives, partly
offset by lower average debt during the year. Reported profit
before income tax was £698.6 million, an increase of 7.8% (10.1% at
actual exchange rates).
The effective tax rate of 25.0%
was higher than the 24.6% in the prior year, reflecting the UK
corporate tax increase. This will also have a further impact next
year, so the effective tax rate is expected to be around 26% in
2024. Adjusted earnings per share were 191.1p, an increase of 2.7%
(3.7% at actual exchange rates). Reported basic earnings per share
were 157.1p, an increase of 8.2% (10.9% at actual exchange
rates).
The Group's cash generation
continues to be strong, with 96% cash conversion (operating cash
flow as a percentage of lease adjusted operating profit) ahead of
our 90% target, and £643.5 million free cash flow generated. The
level of cash generated remains strong, but a higher cash outflow
relating to income tax and interest paid resulted in free cash flow
declining 8.8% at actual exchange rates compared to 2022. The
strength of our underlying free cash flow generation continues to
enable our investment in the business, progressive dividends and
acquisitions.
The Group ended the year with net
debt, excluding lease liabilities, of £1,085.5 million compared to
£1,160.1 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 the Group with substantial capacity to fund further
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 and future contingent consideration. At the
end of the year, a deferred consideration payable of £175.6 million
was held on our balance sheet compared to £139.9 million at the end
of 2022; deferred consideration is not included within the Group's
external debt covenant definition. The total amount of deferred and
contingent consideration relating to acquisitions was £258.8
million at the end of the year compared to £216.2 million at the
end of 2022. The incremental leverage from deferred and contingent
consideration expected to be paid was c.0.2 times.
Return on average operating
capital increased moderately to 46.1% compared to 43.0% at 31
December 2022, mainly due to higher
returns in the underlying business driven by an increase in
operating margin. Return on invested
capital was 15.5% compared to 15.0% at 31 December 2022, similarly
due to higher returns in the underlying business driven by an
increase in operating profit.
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 have continued to focus on increasing digital sales,
which accounted for 72% of orders over 2023 compared to 69% in
2022. We also continue to provide our customers with innovative
products and services, including those within our strong
sustainability offering, which enhance our competitive advantage
supporting the overall good outcome of recent tenders.
Our continued focus on operational
efficiencies included the consolidation of 13 warehouses and the
relocation of 11 warehouses, as well as continuing to implement new
technologies and automation that drive more efficient
processes.
Acquisitions
Over the year, Bunzl agreed 19
acquisitions with a total committed spend of £468 million, adding
estimated annualised revenue of £325 million. These acquisitions,
which span 11 countries and five sectors, further expanding our
customer reach, strategic capabilities, geographic and sector
diversification and highlight the breadth
of our consolidation opportunities.
We are pleased with the
acquisition of Safety First, one of the largest distributors of PPE
in Poland. This is our first acquisition
in Poland, providing access to a potential market of more than
38 million people. Following this acquisition, there are
significant opportunities for Bunzl to grow in this market.
Bunzl continued to expand its digital
capabilities with the acquisitions of specialist online
distributors in Germany (Arbeitsschutz-Express) and the Netherlands
(EcoTools.nl). Bunzl also completed three acquisitions in Brazil,
adding a further c.£124 million of annualised revenue in a country
in which we have grown revenue CAGR by 17% since 2019, with plenty
of further opportunities for growth.
Overall, acquisitions made during the year have enhanced the Group's
digital capabilities and expanded our geographic coverage, own
brand ranges and expertise.
|
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.£16 million) in
2022
|
|
Arbeitsschutz-Express
|
April
2023
|
Online
distributor of workwear and PPE in Germany, which generated EUR 41
million (c.£35 million) of revenue in 2022
|
|
Dimasa
|
April
2023
|
Distributor of cleaning & hygiene products in the
Andalusia region of Spain, with revenue of EUR 4 million (c.£3
million) in 2022
|
|
Irudek
Group
|
April
2023
|
Distributor of safety and PPE in Spain, specialising in fall
protection equipment, with revenue of EUR 17 million (c.£15
million) in 2022
|
|
EHM
|
June
2023
|
Distributor of a wide range of PPE products in the UK, with
revenue in 2022 of £18 million
|
|
La
Cartuja Complementos Hostelerίa
|
June
2023
|
Foodservice and hospitality equipment provider in Spain, with
revenue of EUR 5 million (c.£4 million) in 2022
|
|
EcoTools.nl
|
July
2023
|
High
growth Netherlands based 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.£17 million) with very high double digit
margins
|
|
Leal
Equipamentos de Proteção
|
August
2023
|
A
specialised high margin safety distributor in Brazil with a strong
own brand portfolio, which generated revenue of BRL 216 million
(c.£34 million) in 2022
|
|
Groveko
|
August
2023
|
Distributor of cleaning & hygiene products in the
Netherlands with both a traditional cleaning & hygiene product
offering, as well as robotic and smart cleaning solutions. The
business generated revenue of EUR 23 million (c.£20 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.£20
million)
|
|
Pittman
Traffic & Safety Equipment**
|
August
2023
|
Distributor of safety and asset protection solutions in
Ireland and the UK, such as bollards, speed bumps and workplace
barriers, with revenue in 2022 of EUR 7 million (c.£6
million)
|
|
FlexPost
|
October
2023
|
A higher
margin distributor of flexible signposts and bollards in North
America with a strong own brand portfolio. FlexPost generated
revenue of USD 4 million (c.£3 million) in 2022 and follows other
recent acquisitions focused on asset protection
solutions
|
|
Safety
First
|
November
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.£22
million)
|
|
Grupo
Lanlimp
|
November
2023
|
A market
leading distributor of cleaning & hygiene products in Brazil,
with revenue of BRL 210 million (c.£33 million) in 2022
|
|
Melbourne
Cleaning Supplies
|
November
2023
|
A
distributor of cleaning & hygiene supplies in Australia. This
acquisition expands our customer proposition and complements our
existing businesses. In 2022, the business generated revenue of AUD
18 million (c.£10 million)
|
|
Miracle
Sanitation Supply
|
December
2023
|
A
cleaning & hygiene distributor in the Canadian province of
Manitoba, which strengthens Bunzl's presence in the region. The
business generated CAD 11 million revenue in 2022 (c.£7
million)
|
|
CT
Group
|
December
2023
|
A higher
margin distributor of surgical and medical devices and provider of
value-added logistics services to health providers
in Brazil, with revenue of BRL 269 million (c.£42
million) in 2022
|
*In addition to the above
acquisitions, two small acquisitions were agreed in 2023 with a
combined revenue of c.£4 million in 2022.
**The acquisition supports the
expansion of our North America based McCue business and is
therefore reported as part of the North America business
area.
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.
This ongoing strength has supported the self-funding of one of
Bunzl's most successful acquisition periods. Over the last four
years combined committed spend on acquisitions was approximately
£1.7 billion.
Bunzl ended 2023 with net debt to EBITDA of 1.1 times, providing
the Group with substantial capacity to self-fund further
acquisitions. 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.
Today, Bunzl announces the
acquisitions of Nisbets and Pamark Group. Nisbets is a leading
omnichannel distributor of catering equipment and consumables in
the UK and Ireland, Northern Europe, and Australasia. This is a
high quality business that will complement the Group's existing
businesses in the catering distribution sector. Their extensive
range of own brand products are a good addition to our portfolio
and their digital marketing and sales capabilities will complement
other online-focused businesses within the Group.
Pamark is Bunzl's first acquisition in Finland,
bringing the Group's operations to a total of 33 countries.
It is a leading distributor that provides us with
opportunities to expand in multiple end markets, including cleaning
& hygiene, healthcare, foodservice and safety.
Capital allocation
Our capital allocation priorities
remain unchanged and focused on the following: to reinvest our cash
into the business to support organic growth and operational
efficiencies; to pay a progressive dividend; to self-fund value
accretive acquisitions; and to distribute excess cash. Our
framework favours the first three methods of investment, with £2.2
billion of cash distributed to shareholders through dividends and
£5.2 billion committed acquisition spend between 2004 and 2023,
while maintaining a good return on invested capital of 15.5% (2022:
15.0%). With the strength of Bunzl's
performance in recent years resulting in a comfortable leverage
position compared to a net debt to EBITDA target of 2.0 to 2.5
times, there is significant financial headroom remaining to commit
to self-funded value accretive acquisitions in our active pipeline
of attractive opportunities. The Board is committed to an efficient
balance sheet which supports investment into the business and
maintains flexibility for value accretive acquisitions, and also
continually assesses the appropriateness of the return of excess
capital to shareholders.
Equitable and sustainable growth
Sustainability remains a key
strategic priority, and the Group is committed to helping lead the
transition to a more sustainable and equitable future by continuing
to direct our efforts into the four key areas where we believe we
can make the greatest positive contribution: providing alternative
packaging solutions; ensuring responsible supply chains; investing
in our people; and taking action on climate change.
The Group remains focused on
transitioning customers to packaging that is better suited to a
circular economy, with revenue from packaging made from alternative
materials accounting for 55% of the Group's total packaging sales.
The proportion of total Group revenue attributable to non-packaging
products or packaging made from alternative materials remained high
at 85%, with a further 10% of the Group's revenue attributable
to single-use plastic consumables which
are likely to transition to products made from alternative
materials. We continue to increase our competitive advantage by
sourcing innovative products, including from within our own brand
portfolio, as well as with our expert advice, data tools and
investments in our supplier auditing programme.
We have made good progress towards
our 2030 scope 1 and 2 carbon emissions reduction targets that were
approved by the Science Based Targets initiative ('SBTi') in 2022.
Currently we are progressing well to achieve our target of a 27.5%
absolute emissions reduction and becoming 50% more carbon efficient
by 2030, having reduced absolute emissions by 18% and become 30%
more carbon efficient against a 2019 baseline. We continue to aim
to be net zero by 2050 at the latest, inclusive of scope 3
emissions. We believe that long term net zero targets need to be
aligned with climate science and as such we have followed the
SBTi's Net Zero Standard to develop our transition plan, which
details how we will achieve our 2050 net zero commitment. As with
our near term carbon reduction targets, we have submitted our net
zero transition plan for approval with the SBTi.
The Group continues to carry out
ethical and quality audits of its suppliers. In 2023, 1,022 of
these audits were completed through our Shanghai based Global
Supply Chain Solutions team. The majority took place in Asia, as
this is the most significant high risk sourcing market for Bunzl by
spend, but audits were also performed in other high risk regions.
In total, c.96% of our overall purchasing spend today is either
purchases from low risk regions or with assessed or compliant
suppliers in high risk regions, or on other non-product related
costs.
Our people strategy also continues
to drive strong engagement, as indicated by 75% of our operating
companies that participated in the 'Great
Place to Work' programme becoming accredited. We continue to see encouraging
retention levels across the Group and good progress was made on our
diversity plans.
Prospects
We are maintaining our 2024 profit
guidance published in our pre-close
statement1.
Following a slower than expected
start to the year in North America, we now expect to deliver slight
revenue growth in 2024, at constant exchange rates, driven by
acquisitions announced in 2023; with underlying revenue, which is
organic revenue adjusted for trading days, declining
slightly. Group operating margin is now
expected to be slightly below 2023.
Looking ahead, the Group's longer
term prospects remain attractive, with the Group committed to its
proven and consistent strategy which supports Bunzl's continued
track record of value creation. Organic growth, is supported by new
business opportunities, continual product innovation,
sustainability expertise, and the Group's daily focus on becoming
more efficient. Our acquisition growth is driven by our position as
the leading operator of scale in highly fragmented markets, with a
strong balance sheet and demonstrable track record of our ability
to consolidate. We believe the merits of
joining the Bunzl family have only been strengthened as a result of
the pandemic and supply chain disruptions, and this is reflected in
our recent acquisition success. We have an
active pipeline of acquisition opportunities in our existing
markets, supplemented by potential acquisitions in new geographies
and adjacent sectors. Our capital allocation and portfolio
optimisation discipline ensures we are investing to drive a strong
return.
1The guidance does not include the acquisitions announced
today
BUSINESS AREA REVIEW
North America
|
|
2023
£m
|
2022
£m
|
Growth
at
constant
exchange*
|
Underlying
growth*
|
|
Revenue
|
6,973.5
|
7,366.0
|
(5.3)%
|
(5.6)%
|
|
Adjusted operating
profit*
|
528.0
|
511.5
|
2.9%
|
|
|
Operating margin*
|
7.6%
|
6.9%
|
|
|
* Alternative performance measure
(see Note 2)
In North America, revenue declined
5.3% to £6,973.5 million, with underlying revenue declining by
5.6%. The benefit of a significant new
business win in our processor segment in the second half of 2022
and modest growth from current year acquisitions was more than
offset by volume loss in the foodservice
redistribution business. In retail, revenue was also
impacted by planned strategic actions to
focus on more profitable customers and transitioning ownership of
customer specific inventory to certain customers. Finally, we
saw a further decline in Covid-19 related
product sales, driven by the return to historical price levels of
disposable glove categories. Despite the revenue decline, adjusted
operating profit improved by 2.9%, to £528.0 million with operating
margin increasing to 7.6%, up from 6.9% in
the prior year. This was primarily driven by margin management
initiatives and strong growth in own brands, particularly in our
grocery and foodservice segments, which more than
offset moderating operating cost inflation,
driven by wage inflation being at a more typical level. Property
cost inflation linked to lease renewals remained high, but was
partially offset by fuel and freight rates declining
meaningfully.
Our business which supports the
US grocery sector, declined modestly as we
experienced reducing inflation benefit and some price
deflation towards the end of the year,
primarily driven by the carrier bag and disposable glove
categories. Strong margin management, as well as strong growth in
own brands, drove overall improvement in operating margin and
adjusted operating profit. Our convenience store sector declined
moderately.
Our foodservice redistribution
business declined. Deflationary pressure increased price
competition, which alongside process changes in the business, to
drive more own brand penetration, resulted in lower volumes. We
also saw an impact on volumes from post-pandemic normalisation
trends, as a result of a reduction in takeaway packaging sales as
dining habits have continued to shift following the pandemic
and customer destocking activity early in
the first half. Our food processor sector
grew modestly, as the favourable impact of a large customer win in
Q3 2022 more than offset continued temporary market weakness in the
segment. Our businesses serving the agriculture sector saw revenues
decline significantly due to the flooding in California in the
first half of 2023 and year-on-year
price deflation as a result of the normalisation
of supply chains.
Our cleaning & hygiene
business declined moderately, as year-on-year product costs reduced,
along with Covid-19 related sales and the impact from continued
high levels of remote working.
Revenue in our retail supplies
business declined following planned strategic actions taken to
focus on more profitable customers, transitioning ownership of
customer specific inventory to certain
customers, and some lost business.
However, adjusted operating profit declined only modestly, amidst a
favourable mix shift toward higher margin packaging and value added
services, increased own brands and well-controlled operating
costs.
Our safety business revenue
declined, due to a reduction in Covid-19 related sales, although
operating margins and operating profit improved as a result of good
margin management as supply chains stabilised and strong growth in
our asset protection business.
Finally, our business in Canada
experienced slight revenue growth, with Covid-19 related sales
decreases offset by growth driven by the 2023 acquisitions of
Capital Paper and PackPro, with operating profit improved due to
increased product margins and well controlled operating
costs.
Continental Europe
|
|
2023
£m
|
2022
£m
|
Growth
at constant
exchange*
|
Underlying
growth*
|
|
Revenue
|
2,354.9
|
2,173.4
|
8.4%
|
1.0%
|
|
Adjusted operating
profit*
|
224.7
|
195.1
|
14.1%
|
|
|
Operating margin*
|
9.5%
|
9.0%
|
|
|
* Alternative performance measure (see Note
2)
Revenue in Continental Europe grew
by 8.4% to £2,354.9 million, primarily driven by the benefit of
acquisitions. Underlying revenue grew by 1.0%, with the support of
product cost inflation partially offset by volume weakness in most
markets and the decline in Covid-19 related sales.
Adjusted operating profit
increased by 14.1% to £224.7 million, with operating margin
increasing from 9.0% to 9.5% driven by good margin management, and
a focus on improving our businesses in Turkey to drive
profitability in a hyperinflationary environment.
Overall revenue and adjusted operating profit
growth were mainly driven by the positive contributions from
acquisitions made in 2022 and throughout 2023 and good margin
management.
In France, there was some revenue
growth in our cleaning & hygiene businesses. Good growth with
foodservice and healthcare customers and a benefit from product
inflation was largely offset by the expected 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 specific businesses have grown sales,
supported by inflation.
In the Netherlands, there was very
strong growth in our foodservice business, driven by hotel, travel
and leisure customers, and also in our non-food retail business,
where we had a number of new business wins. We saw some volume
weakness in other sectors, with the prior year benefitting very
strongly from the reduction in Covid-19 restrictions and deflation
impacting our e-commerce fulfilment businesses. Our grocery and
e-commerce fulfilment businesses successfully consolidated a number
of warehouses into a new facility in the second half of the year.
In Belgium, our cleaning & hygiene businesses have grown
moderately with contract cleaning and catering customers. In
Germany, growth has been driven by our foodservice business, which
has grown significantly across all sectors but with hotel customers
in particular, and has also launched a new web platform targeting
smaller customers.
In Denmark, we have seen a slight
decline in our foodservice business as inflation benefits were more
than offset by a reduction in Covid-19 related product sales.
Revenues in our safety business have grown very strongly due to
increased activities from customers in the renewable energy and
pharmaceutical sectors.
Sales in Spain saw very strong
growth, driven by an acquisition and good organic growth despite a
reduction in Covid-19 related sales and reduced activities with
industrial packaging customers. Our safety end user and
redistribution businesses were impacted by the reduction of
Covid-19 related sales but still delivered growth overall with
increased volumes in the base business. Our online healthcare
business has grown strongly on the back of improved pricing
management and better inventory availability.
In Turkey, volumes have declined
as we focus on business that can be profitable in a
hyperinflationary environment, while in Israel, where we have two
small businesses, sales have declined significantly since the start
of the Gaza conflict.
In all other countries we have
seen a decline in foodservice aided by inflation and volume growth
but partially offset by lower Covid-19 related sales. We have
continued to increase the percentage 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 through
recent acquisitions (Arbeitsschutz-Express
and EcoTools.nl) and the introduction of digital and demand
management tools.
UK &
Ireland
|
|
2023
£m
|
2022
£m
|
Growth at constant
exchange*
|
Underlying growth*
|
|
Revenue
|
1,365.5
|
1,442.5
|
(5.4)%
|
6.1%
|
|
Adjusted
operating profit*
|
103.4
|
95.3
|
8.4%
|
|
|
Operating
margin*
|
7.6%
|
6.6%
|
|
|
* Alternative performance measure (see Note
2)
In UK & Ireland, revenue
declined by 5.4%
as a result of the disposal of the UK healthcare business.
Excluding the impact of acquisitions and last year's disposal of
the UK healthcare business, underlying revenue increased by 6.1%.
This growth was driven by strong product cost inflation, alongside
continued recovery in certain markets, in particular grocery,
foodservice and cleaning & hygiene. This positive sales growth,
supported by a continual focus on developing own brands and good
margin management, delivered a significant increase in operating
margin which improved from 6.6% to 7.6%, with adjusted operating
profit increasing by 8.4% to £103.4
million, and by 21.2% excluding
acquisitions and the UK healthcare disposal.
Our cleaning & hygiene and
care businesses continued to grow with the full year effect of new
customer wins and category additions. The benefit of inflation
reduced in the second half of the year, reflecting the timing of
price increases in the equivalent period last year. Our carbon
forecasting tools alongside the introduction of many
environmentally friendly products have enabled our customers to
further improve upon their own climate targets. The launch of some
new labour-saving cleaning technologies has also allowed
our customers to invest for the future. Within
our care businesses we have also seen growth with the onboarding of
some large exclusive supplier contracts that launched in the second
half of the year.
Our safety businesses grew despite
a reduction in government infrastructure spending and the slowdown
in house building, as a result of new wins in the transport and
building materials sectors. Work continues in developing a strong
sustainable range of own brand products as demand in this area
grows. The business has continued to invest in new operationally
efficient locations to deliver outstanding levels of service to
customers alongside an increasing shift towards buying
online.
Our grocery and non-food retail
businesses saw slight growth from more business with existing
customers and the securing of a large new category from an existing
grocery customer. We continued to invest in improving our sourcing
credentials and expanded our work with sister companies to provide
pick and pack services in-house to enhance the levels of service
available. We saw some new customer wins in our national online
packaging business leveraging our ability to source globally
delivered cost-effective solutions. Our other packaging businesses
achieved good outcomes on customer tenders to secure long term
contracts with many existing customers, despite the deflationary
environment.
Our foodservice businesses saw a
softening of demand as the cost-of-living issues coincided with
high cost inflation in both food supplies and labour. Despite this
trend, these businesses delivered strong growth as a result of good
customer tender retention and new customer wins, with customers
impressed with our sustainability offering, including our ability
to provide sustainable product alternatives. The quality of our
data has also allowed us to work closely with customers as they
seek to reduce their impact on the climate and their emissions.
Increased focus on developing more cost-effective and sustainable
own brands is also making an impact as sales of these products
continued to improve.
Our businesses in Ireland
continued to see good growth, driven by increasing business with
existing customers and by securing new customers. 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 inventory
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. The launch of several new own
brand and sustainable product ranges has landed well with
customers seeking stronger environmental solutions for the future.
Rest of the World
|
|
2023
£m
|
2022
£m
|
Growth at constant
exchange*
|
Underlying growth*
|
|
Revenue
|
1,103.2
|
1,057.6
|
5.7%
|
(3.2)%
|
|
Adjusted
operating profit*
|
119.6
|
111.7
|
7.5%
|
|
|
Operating
margin*
|
10.8%
|
10.6%
|
|
|
* Alternative performance measure (see Note
2)
In Rest of the World, revenue
increased by 5.7% to £1,103.2 million, driven by
acquisitions, with underlying revenue declining by 3.2%,
caused by further normalisation of
Covid-19 related product sales, largely in Asia Pacific, reflecting
the non-repeat of some large orders that were fulfilled 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 year. Overall, the Rest of the World's adjusted operating
profit increased by 7.5% to £119.6 million with operating margin
increasing from 10.6% to 10.8%, driven by acquisitions.
In Brazil, our safety businesses
experienced some organic sales growth and strong margins as market
conditions remained stable. Our healthcare businesses had mixed
results with difficult trading in our private label import business
as prices post-pandemic continued to normalise, contrasting with
strong performances from our more technical branded medical
distributors. Our hygiene and foodservice businesses saw lower
sales due to increased competitive pressure, but in both cases
margins increased. Our safety, hygiene and healthcare presence in
Brazil has been significantly bolstered by three new acquisitions
completed during the year.
In Chile, our safety businesses
saw mixed results. Our full-range PPE business experienced good
organic growth and improved margins while our specialty footwear
business saw more difficult trading due to weaker demand in the
retail channel. Our foodservice business also declined due to
weaker consumer demand across the country and higher competition,
although profitability is still well ahead of 2019.
Our largest business in Asia
Pacific, Bunzl Australia and New Zealand,
experienced a temporary decline in healthcare revenue in the first
half of the year as both the government and private sectors
utilised excess Covid-19 related inventory. However, the business
experienced very strong growth in cleaning & hygiene and has
continued developing specialisation in its core market sectors,
which has resulted in a strong pipeline of new business. The
acquisition of Melbourne Cleaning Supplies in November 2023 further
strengthened our cleaning & hygiene businesses.
Our Australian speciality
healthcare business was impacted by reduced government and private
spending, as these customers continue to utilise inventory procured
during the pandemic, but remained focused on delivering
improvements in its supply chain and continued exploring potential
new opportunities.
Our Australian safety business
realised sales growth in its underlying business, benefitting from
several new business wins in its direct to end user division.
However, this was offset by a reduction in Covid-19 related product
sales and customers reducing their inventory holdings in our
redistribution division. Our emergency services business had a very
strong finish to the year, securing several key government orders
in the fire and rescue segment.
In New Zealand, our MedTech and
specialist healthcare businesses had strong results for the year as
demand returned in the public health sector. Both businesses
benefitted from improved supply chains and a strong portfolio of
brands that are well supported in our specialist
segments.
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.
Currency translation
Currency translation has had a
small positive impact on the Group's reported profits, increasing
the reported profit growth rates by between 0% and 3%. This
positive exchange impact to profit is primarily due to the
weakening of sterling against the euro and Brazilian real, partly
offset by the strengthening of sterling against the Australian
dollar and Canadian dollar. The US dollar average exchange rates
remained in line with last year.
|
Average
exchange rates
|
2023
|
2022
|
|
US$
|
1.24
|
1.24
|
|
Euro
|
1.15
|
1.17
|
|
Canadian$
|
1.68
|
1.61
|
|
Brazilian real
|
6.21
|
6.38
|
|
Australian$
|
1.87
|
1.78
|
|
Closing
exchange rates
|
2023
|
2022
|
|
US$
|
1.27
|
1.20
|
|
Euro
|
1.15
|
1.13
|
|
Canadian$
|
1.68
|
1.63
|
|
Brazilian real
|
6.19
|
6.35
|
|
Australian$
|
1.87
|
1.77
|
Revenue
Revenue decreased to £11,797.1
million (2022: £12,039.5 million), a decrease of 1.9% at constant
exchange rates (down 2.0% at actual exchange rates), due to an
underlying decline of 2.9% and impact from the disposal of the UK
Healthcare business at the end of 2022 reducing revenue by 1.5%
partly offset by acquisitions adding 2.5%. The underlying decline
was impacted by a decline in Covid-19 related sales, which are now
broadly in line with 2019 levels, volume loss in the North America
foodservice redistribution business due to deflationary pressure
increasing price competition, post-pandemic normalisation trends,
as well as a reducing benefit from inflation. Furthermore, volumes
were impacted by planned strategic actions in the North America
retail business to focus on more profitable customers and the
decision to transition ownership of customer specific inventory to
certain customers, as well as some volume weakness in Continental
Europe and UK & Ireland.
|
Movement in
revenue
|
|
£m
|
|
2022 revenue
|
|
12,039.5
|
|
Currency translation
|
|
(17.9)
|
|
Disposal of business
|
|
(176.1)
|
|
Excess growth in hyperinflationary
economies
|
|
5.8
|
|
Underlying decline
|
|
(347.7)
|
|
Acquisitions
|
|
293.5
|
|
2023 revenue
|
|
11,797.1
|
Operating profit
Adjusted operating profit was
£944.2 million (2022: £885.9 million), an increase of 6.2% at
constant exchange rates and 6.6% at actual exchange rates. At both
constant and actual exchange rates operating margin increased to
8.0% from 7.4% in 2022. The operating margin of 8.0% was supported
by good margin management, including increasing penetration of own
brands, higher margin acquisitions made, operational efficiencies
and inventory driven one-off benefits in the second half of
2023.
During 2023, the Group has seen a
net utilisation of approximately £25 million in trade receivables
and slow moving inventory provisions. Usage of these provisions,
including some releases to profit, exceeded net charges to increase
the provisions. In addition, the Group has seen some utilisation of
the residual provisions set up in prior years as a result of market
price movements on certain Covid-19 products; the remaining market
price risk on these products is no longer significant.
|
Movement in
adjusted operating profit
|
|
£m
|
|
2022 adjusted operating
profit
|
|
885.9
|
|
Currency translation
|
|
3.2
|
|
Disposal of business
|
|
(11.9)
|
|
Decrease in hyperinflation
accounting adjustments
|
|
2.5
|
|
2023 growth
|
|
64.5
|
|
2023 adjusted operating profit
|
|
944.2
|
Operating profit was £789.1
million (2022: £701.6 million), an increase of 11.0% at constant
exchange rates and 12.5% at actual exchange rates.
|
Movement in
operating profit
|
|
£m
|
|
2022 operating profit
|
|
701.6
|
|
Currency translation
|
|
9.1
|
|
Disposal of business
|
|
(11.6)
|
|
Decrease in hyperinflation
accounting adjustments and impairment
|
|
11.1
|
|
Growth in adjusted operating
profit
|
|
64.5
|
|
Net decrease in customer
relationships, brands and technology amortisation and acquisition
related items excluding impairment
|
|
14.4
|
|
2023 operating profit
|
|
789.1
|
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 trading performance of the business. 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 assess the performance of the Group.
Net finance expense
The net finance expense for the
year was £90.5 million, an increase of £27.2 million at constant
exchange rates (up £22.6 million at actual exchange rates), mainly
due to increases in interest rates and fair value movements on
interest rate derivatives, partly offset by lower average debt
during the year.
Profit before income
tax
Adjusted profit before income tax
was £853.7 million (2022: £818.0 million), up 3.4% at constant
exchange rates (up 4.4% at actual exchange rates), due to the
growth in adjusted operating profit partly offset by the increase
in net finance expense. Profit before income tax was £698.6 million
(2022: £634.6 million), an increase of 7.8% at constant exchange
rates (up 10.1% 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 Corporate governance section.
The effective tax rate (being the
tax rate on adjusted profit before income tax) for the year was
25.0% (2022: 24.6%) and the reported tax rate on statutory profit
was 24.7% (2022: 25.2%). The effective tax rate for 2023 is higher
than for 2022 primarily due to the increase in the UK statutory tax
rate from 19% to 25% from April 2023. The Group's effective tax
rate is expected to increase to be around 26% in 2024.
The Group is within the scope of
the OECD Pillar Two model rules which take effect from 1 January
2024. Most countries in which the Group operates are expected to
report an effective tax rate in excess of 15% and therefore to
qualify for a safe harbour exemption such that no top-up tax should
apply. In countries where this is not the case there is the
potential for Pillar Two taxes to apply, but these are not expected
to be material.
Earnings per share
Profit after tax increased to
£526.2 million (2022: £474.4 million), up 8.2% and an increase of
£40.1 million at constant exchange rates (up 10.9% at actual
exchange rates), due to a £50.3 million increase in profit before
income tax, partly offset by a £10.2 million increase in the tax
charge at constant exchange rates. Profit after tax for the year
bears an £11.0 million adverse impact from hyperinflation
accounting adjustments (2022: £21.2 million adverse impact and a
£13.0 million hyperinflation accounting related impairment charge
to the customer relationships assets in the Group's businesses in
Turkey partly offset by a tax credit of £2.5 million related to the
impairment charge).
Adjusted profit after tax was
£640.3 million (2022: £616.8 million), up 2.8% and an increase of
£17.6 million at constant exchange rates (up 3.8% at actual
exchange rates), due to a £27.9 million increase in adjusted profit
before income tax, partly offset by a £10.3 million increase in the
tax on adjusted profit before income tax at constant exchange
rates. Adjusted profit before income tax for the year bears an
£11.0 million adverse impact from hyperinflation accounting
adjustments (2022: £19.4 million adverse impact).
The weighted average number of
shares in issue increased to 335.0 million from 334.7 million in
2022 due to employee share option exercises partly offset by share
purchases into the employee benefit trust.
Basic earnings per share were
157.1p (2022: 141.7p), up 8.2% at constant exchange rates (up 10.9%
at actual exchange rates). Adjusted earnings per share were 191.1p
(2022: 184.3p), an increase of 2.7% at constant exchange rates (up
3.7% at actual exchange rates).
|
Movement in
basic earnings per share
|
|
Pence
|
|
2022 basic earnings per
share
|
|
141.7
|
|
Currency translation
|
|
3.5
|
|
Increase in adjusted profit before
income tax excluding hyperinflation accounting
adjustments
|
|
6.1
|
|
Decrease in adjusting
items
|
|
3.1
|
|
Decrease in hyperinflation
accounting adjustments and impairment
|
|
2.1
|
|
Decrease in reported tax
rate
|
|
0.7
|
|
Increase in weighted average number
of shares
|
|
(0.1)
|
|
2023 basic earnings per share
|
|
157.1
|
|
Movement in
adjusted earnings per share
|
|
Pence
|
|
2022 adjusted earnings per
share
|
|
184.3
|
|
Currency translation
|
|
1.7
|
|
Increase in adjusted profit before
income tax excluding hyperinflation accounting
adjustments
|
|
6.1
|
|
Movement in hyperinflation
accounting adjustments
|
|
-
|
|
Increase in effective tax
rate
|
|
(0.8)
|
|
Increase in weighted average number
of shares
|
|
(0.2)
|
|
2023 adjusted earnings per share
|
|
191.1
|
Dividends
An analysis of dividends per share
for the years to which they relate is shown below:
|
|
2023
|
2022
|
Growth
|
|
Interim dividend (p)
|
18.2
|
17.3
|
5.2%
|
|
Final dividend (p)
|
50.1
|
45.4
|
10.4%
|
|
Total dividend (p)
|
68.3
|
62.7
|
8.9%
|
|
Dividend cover (times)
|
2.8
|
2.9
|
|
The Company's practice is to pay a
progressive dividend, delivering year-on-year increases. The Board
is proposing a 2023 final dividend of 50.1p, an increase of 10.4%
on the amount paid in relation to the 2022 final dividend. The 2023
total dividend of 68.3p is 8.9% higher than the 2022 total
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, coupled
with the Group's substantial borrowing facilities, provides the
Company with the financial flexibility to fund a growing dividend.
After the further growth in 2023, Bunzl has sustained 31 years of
consecutive annual dividend growth to shareholders.
The risks and constraints to
maintaining a growing dividend are principally those linked to the
Group's trading performance and liquidity, as described in Note 19
(Principal risks and uncertainties). The Group has substantial
distributable reserves within Bunzl plc and there is a robust
process of distributing profits generated by subsidiary
undertakings up through the Group to Bunzl plc. At 31 December 2023
Bunzl plc had sufficient distributable reserves to cover more than
six years of dividends at the levels of those delivered in 2023,
which is expected to be approximately £230 million.
Acquisitions
The Group completed 20
acquisitions during the year ended 31 December 2023 with a total
committed spend of
£470.3 million. Excluding the acquisition of GRC, which was agreed
in 2022 but completed on 1 January 2023, total committed spend on
acquisitions agreed and completed during the year was £467.5
million. The estimated annualised revenue and adjusted operating
profit of the acquisitions agreed during the year were £325 million
and £51 million, respectively.
A summary of the effect of
acquisitions is as follows:
|
|
£m
|
|
Fair value of net assets
acquired
|
281.9
|
|
Goodwill
|
130.6
|
|
Consideration
|
412.5
|
|
Satisfied by:
|
|
|
cash consideration
|
343.0
|
|
deferred consideration
|
69.5
|
|
|
412.5
|
|
Contingent payments relating to
retention of former owners
|
59.5
|
|
Net cash acquired
|
(19.8)
|
|
Transaction costs and
expenses
|
18.1
|
|
Total committed spend in respect of acquisitions completed in
the current year
|
470.3
|
|
Spend on acquisition committed at
prior year end but completed in the current year
|
(2.8)
|
|
Total committed spend in respect of acquisitions agreed in
the current year
|
467.5
|
The net cash outflow in the year
in respect of acquisitions comprised:
|
|
£m
|
|
Cash consideration
|
343.0
|
|
Net cash acquired
|
(19.8)
|
|
Deferred consideration
payments
|
14.5
|
|
Net cash outflow on purchase of
businesses
|
337.7
|
|
Cash outflow from acquisition
related items*
|
36.9
|
|
Total cash outflow in respect of
acquisitions
|
374.6
|
* Acquisition related items
comprise £18.1 million of transaction costs and expenses paid and
£18.8 million of payments relating to retention of former
owners.
Cash flow
A summary of the cash flow for the
year is shown below:
|
|
2023
£m
|
2022
£m
|
|
Cash generated from
operations†
|
1,129.5
|
1,145.8
|
|
Payment of lease
liabilities
|
(188.0)
|
(175.1)
|
|
Net capital expenditure
|
(56.2)
|
(45.7)
|
|
Operating cash
flow†
|
885.3
|
925.0
|
|
Net interest paid excluding interest
on lease liabilities
|
(53.2)
|
(45.7)
|
|
Income tax paid
|
(188.6)
|
(173.6)
|
|
Free cash flow
|
643.5
|
705.7
|
|
Dividends paid
|
(209.7)
|
(190.5)
|
|
Net payments relating to employee
share schemes
|
(23.7)
|
(31.9)
|
|
Net cash inflow before acquisitions
and disposals
|
410.1
|
483.3
|
|
Acquisitions◊
|
(374.6)
|
(264.2)
|
|
Disposals
|
-
|
49.9
|
|
Net
cash inflow on net debt excluding lease
liabilities
|
35.5
|
269.0
|
† Before acquisition related items.
◊ Including acquisition related items.
The Group's free cash flow of
£643.5 million was £62.2 million lower than in 2022, due to the
decrease in operating cash flow of £39.7 million, a £15.0
million higher cash outflow relating to tax, and an increase in net
interest paid excluding interest on lease liabilities of £7.5
million. The Group's free cash flow was used to finance an
acquisition cash outflow of £374.6 million (2022: £264.2
million), dividend payments of £209.7 million in respect of 2022
(2022: £190.5 million in respect of 2021) and net payments of £23.7
million (2022: net payments of £31.9 million) relating to employee
share schemes. Cash conversion (being the ratio of operating cash
flow as a percentage of lease adjusted operating profit) was 96%
(2022: 107%).
|
|
2023
£m
|
2022
£m
|
|
Operating cash flow
|
885.3
|
925.0
|
|
|
|
|
|
Adjusted operating profit
|
944.2
|
885.9
|
|
Add back depreciation of
right-of-use assets
|
166.1
|
151.1
|
|
Deduct payment of lease
liabilities
|
(188.0)
|
(175.1)
|
|
Lease adjusted operating profit
|
922.3
|
861.9
|
|
|
|
|
|
Cash conversion (operating cash flow as a percentage of
lease
adjusted operating profit)
|
96%
|
107%
|
Net debt
Net debt excluding lease
liabilities decreased by £74.6 million during the year to £1,085.5
million (2022: £1,160.1 million), due to a net cash inflow of
£35.5 million, a £38.4 million decrease due to currency translation
and a non-cash decrease in debt of £0.7 million. Net debt including
lease liabilities was £1,750.0 million (2022: £1,730.0
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 (2022: 1.2 times). Net debt to EBITDA calculated at
average exchange rates including lease liabilities was 1.5 times
(2022: 1.5 times).
Balance sheet
Summary balance sheet at 31
December:
|
|
2023
£m
|
2022
£m
|
|
Intangible assets
|
3,242.1
|
3,093.9
|
|
Right-of-use-assets
|
616.3
|
529.6
|
|
Property, plant and
equipment
|
159.4
|
137.2
|
|
Working capital
|
1,158.1
|
1,096.6
|
|
Deferred consideration
|
(175.6)
|
(139.9)
|
|
Other net liabilities
|
(333.4)
|
(306.4)
|
|
|
4,666.9
|
4,411.0
|
|
Net pension surplus
|
49.4
|
39.9
|
|
Net debt excluding lease
liabilities
|
(1,085.5)
|
(1,160.1)
|
|
Lease liabilities
|
(664.5)
|
(569.9)
|
|
Equity
|
2,966.3
|
2,720.9
|
|
|
|
|
|
Return on average operating
capital
|
46.1%
|
43.0%
|
|
Return on invested
capital
|
15.5%
|
15.0%
|
Return on average operating
capital increased to 46.1% from 43.0% in 2022 mainly due to higher
returns in the underlying business driven by an increase in
operating margin. Return on invested capital was 15.5% compared to
15.0% in 2022, similarly due to higher returns in the underlying
business driven by an increase in operating profit.
Intangible assets increased by
£148.2 million to £3,242.1 million due to intangible assets arising
on acquisitions in the year of £372.0 million, a net increase from
hyperinflation adjustments of £8.8 million and software additions
of £15.5 million, partly offset by an amortisation charge of £145.0
million and a decrease from currency translation of £103.1
million.
Right-of-use assets increased by
£86.7 million to £616.3 million due to additional right-of-use
assets from new leases during the year of £136.7 million, an
increase from remeasurement adjustments of £119.8 million and an
increase from acquisitions of £16.2 million, partly offset by a
depreciation charge of £166.1 million and a decrease from currency
translation of £19.9 million.
Working capital increased from the
prior year end by £61.5 million to £1,158.1 million driven by an
increase of £61.2 million from acquisitions and an underlying
increase of £28.4 million as shown in the cash flow statement,
partly offset by a decrease from currency translation of £43.9
million.
Deferred consideration increased
by £35.7 million to £175.6 million due to £69.5 million of deferred
consideration recognised on current year acquisitions, partly
offset by deferred consideration and retention payments of £30.0
million, a credit from adjustments to previously estimated earn
outs net of charges relating to the retention of former owners of
£1.4 million and a decrease from currency translation of £2.4
million. Including expected future payments which are contingent on
the continued retention of former owners of businesses acquired of
£83.2m, total deferred and contingent consideration at 31 December
2023 was £258.8m (2022: £216.2m).
The Group's net pension surplus of
£49.4 million at 31 December 2023 has increased by £9.5 million
from the net pension surplus of £39.9 million at 31 December 2022,
largely due to cash contributions of £6.9 million.
Shareholders' equity increased by £245.4
million during the year to £2,966.3 million.
|
Movement in
shareholders' equity
|
£m
|
|
Shareholders' equity at 31 December
2022
|
2,720.9
|
|
Currency (net of tax)
|
(97.0)
|
|
Profit for the year
|
526.2
|
|
Dividends
|
(209.7)
|
|
Hyperinflation accounting
adjustments
|
21.6
|
|
Actuarial gain on pension schemes
(net of tax)
|
2.8
|
|
Share based payments (net of
tax)
|
20.8
|
|
Employee share schemes (net of
tax)
|
(19.3)
|
|
Shareholders' equity at 31 December 2023
|
2,966.3
|
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 year 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 Board. Controls over
exposure changes and transaction authenticity are in
place.
During the year, the Group's USD
interest rate swaps and committed USD bank facility, which
previously referenced the discontinued USD LIBOR, have been
renegotiated to reference SOFR, the new USD benchmark. This has not
had an impact on the financial results for the year ended 31
December 2023.
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
financial 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 year ended 31 December
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 contain 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. In addition, the principle financial covenants
were removed from the Group's committed bank facilities in
2022.
The Group has substantial funding
available comprising multi-currency credit facilities from the
Group's banks, US private placement notes and senior bonds. At 31
December 2023 the nominal value of US private placement notes
outstanding was £917.5 million (2022: £1,126.4 million) with
maturities ranging from 2024 to 2032. At 31 December 2023 the
available committed bank facilities totalled £852.6 million
(2022: £963.6 million) of which none (2022: none) was drawn
down, providing headroom of £852.6 million (2022: £963.6 million).
During 2023, £365 million of bank facilities were signed with
maturities between 2026 to 2028. The Group expects to make
repayments in the 18 month period from the date of these financial
statements to the end of 30 June 2025 of approximately £302 million
relating to maturing USPPs. In addition, the current intention is
that the £300 million Senior Bond maturing in 2025 will be
refinanced in the capital markets before maturity.
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 strong cash performance in the year,
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.
Consolidated income statement
for the year ended 31 December
2023
|
|
|
|
2023
|
2022
|
|
|
|
Notes
|
£m
|
£m
|
|
Revenue
|
|
3
|
11,797.1
|
12,039.5
|
|
|
|
|
|
|
|
Operating profit
|
|
3
|
789.1
|
701.6
|
|
Finance income
|
|
4
|
60.4
|
22.3
|
|
Finance expense
|
|
4
|
(150.9)
|
(90.2)
|
|
Disposal of business
|
|
9
|
-
|
0.9
|
|
Profit before income tax
|
|
|
698.6
|
634.6
|
|
Income tax
|
|
5
|
(172.4)
|
(160.2)
|
|
Profit for the year attributable to the Company's equity
holders
|
|
|
526.2
|
474.4
|
|
|
|
|
|
|
|
Earnings per share attributable to the Company's equity
holders
|
|
|
|
|
|
Basic
|
|
7
|
157.1p
|
141.7p
|
|
Diluted
|
|
7
|
156.0p
|
140.7p
|
|
|
|
|
|
|
|
Dividend per share
|
|
6
|
68.3p
|
62.7p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative performance measures†
|
|
|
|
|
|
Operating profit
|
|
3
|
789.1
|
701.6
|
|
Adjusted for:
|
|
|
|
|
|
Customer relationships, brands and
technology amortisation
|
|
3
|
135.6
|
128.4
|
|
Acquisition related items
|
|
3
|
19.5
|
55.9
|
|
Adjusted operating profit
|
|
|
944.2
|
885.9
|
|
Finance income
|
|
4
|
60.4
|
22.3
|
|
Finance expense
|
|
4
|
(150.9)
|
(90.2)
|
|
Adjusted profit before income tax
|
|
|
853.7
|
818.0
|
|
Tax on adjusted profit
|
|
5
|
(213.4)
|
(201.2)
|
|
Adjusted profit for the year
|
|
|
640.3
|
616.8
|
|
Adjusted earnings per share
|
|
7
|
191.1p
|
184.3p
|
† See Note 2 for further details of the alternative performance
measures.
Consolidated statement of comprehensive
income
for the year ended 31 December
2023
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Profit for the year
|
526.2
|
474.4
|
|
|
|
|
|
Other comprehensive income/(expense)
|
|
|
|
Items that will not be reclassified
to profit or loss:
|
|
|
|
Actuarial gain on defined benefit
pension schemes
|
2.9
|
6.9
|
|
(Loss)/gain recognised in cash flow
hedge reserve
|
(2.3)
|
10.3
|
|
Tax on items that will not be
reclassified to profit or loss
|
0.5
|
(4.0)
|
|
Total items that will not be reclassified to profit or
loss
|
1.1
|
13.2
|
|
Items that may be reclassified
subsequently to profit or loss:
|
|
|
|
Foreign currency translation
differences on foreign operations
|
(126.9)
|
232.9
|
|
Gain/(loss) taken to equity as a
result of effective net investment hedges
|
31.4
|
(38.2)
|
|
Tax on items that may be
reclassified to profit or loss
|
(0.5)
|
0.3
|
|
Total items that may be reclassified subsequently to profit
or loss
|
(96.0)
|
195.0
|
|
Other comprehensive (expense)/income for the
year
|
(94.9)
|
208.2
|
|
Total comprehensive income attributable to the Company's
equity holders
|
431.3
|
682.6
|
Consolidated balance sheet
at 31 December 2023
|
|
|
|
2023
|
2022
|
|
|
|
Notes
|
£m
|
£m
|
|
Assets
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
159.4
|
137.2
|
|
Right-of-use assets
|
|
10
|
616.3
|
529.6
|
|
Intangible assets
|
|
11
|
3,242.1
|
3,093.9
|
|
Defined benefit pension
assets
|
|
|
69.0
|
60.5
|
|
Derivative financial
assets
|
|
|
0.1
|
-
|
|
Deferred tax assets
|
|
|
14.2
|
4.0
|
|
Total non-current assets
|
|
|
4,101.1
|
3,825.2
|
|
|
|
|
|
|
|
Inventories
|
|
|
1,621.1
|
1,748.6
|
|
Trade and other
receivables
|
|
|
1,578.5
|
1,557.4
|
|
Income tax receivable
|
|
|
8.7
|
12.6
|
|
Derivative financial
assets
|
|
|
11.7
|
19.0
|
|
Cash and cash equivalents
|
|
14
|
1,426.1
|
1,504.0
|
|
Total current assets
|
|
|
4,646.1
|
4,841.6
|
|
Total assets
|
|
|
8,747.2
|
8,666.8
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Share capital
|
|
|
108.6
|
108.5
|
|
Share premium
|
|
|
205.2
|
199.4
|
|
Translation reserve
|
|
|
(170.2)
|
(74.2)
|
|
Other reserves
|
|
|
16.7
|
17.7
|
|
Retained earnings
|
|
|
2,806.0
|
2,469.5
|
|
Total equity attributable to the Company's equity
holders
|
|
|
2,966.3
|
2,720.9
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Interest bearing loans and
borrowings
|
|
14
|
1,417.1
|
1,574.0
|
|
Defined benefit pension
liabilities
|
|
|
19.6
|
20.6
|
|
Other payables
|
|
|
176.1
|
117.2
|
|
Income tax payable
|
|
|
0.5
|
1.1
|
|
Provisions
|
|
|
75.8
|
50.5
|
|
Lease liabilities
|
|
13
|
512.4
|
424.0
|
|
Derivative financial
liabilities
|
|
|
78.7
|
100.5
|
|
Deferred tax liabilities
|
|
|
190.1
|
192.7
|
|
Total non-current liabilities
|
|
|
2,470.3
|
2,480.6
|
|
|
|
|
|
|
|
Bank overdrafts
|
|
14
|
874.2
|
825.9
|
|
Interest bearing loans and
borrowings
|
|
14
|
130.0
|
161.0
|
|
Trade and other payables
|
|
|
2,071.6
|
2,249.4
|
|
Income tax payable
|
|
|
47.0
|
40.6
|
|
Provisions
|
|
|
10.0
|
24.2
|
|
Lease liabilities
|
|
13
|
152.1
|
145.9
|
|
Derivative financial
liabilities
|
|
|
25.7
|
18.3
|
|
Total current liabilities
|
|
|
3,310.6
|
3,465.3
|
|
Total liabilities
|
|
|
5,780.9
|
5,945.9
|
|
Total equity and liabilities
|
|
|
8,747.2
|
8,666.8
|
Consolidated statement of changes in equity
for the year ended 31 December
2023
|
|
Share
capital
£m
|
Share
premium
£m
|
Translation
reserve
£m
|
Other
reserves◊
£m
|
Retained
earnings†
£m
|
Total
equity
£m
|
|
At
31 December 2022
|
108.5
|
199.4
|
(74.2)
|
17.7
|
2,469.5
|
2,720.9
|
|
Profit for the year
|
|
|
|
|
526.2
|
526.2
|
|
Actuarial gain on defined
benefit
pension
schemes
|
|
|
|
|
2.9
|
2.9
|
|
Foreign currency translation
differences
on foreign
operations
|
|
|
(126.9)
|
|
|
(126.9)
|
|
Gain taken to equity as a result of
effective
net investment
hedges
|
|
|
31.4
|
|
|
31.4
|
|
Loss recognised in cash flow hedge
reserve
|
|
|
|
(2.3)
|
|
(2.3)
|
|
Income tax charge on
other
comprehensive
expense
|
|
|
(0.5)
|
0.6
|
(0.1)
|
-
|
|
Total comprehensive income
|
|
|
(96.0)
|
(1.7)
|
529.0
|
431.3
|
|
2022 interim dividend
|
|
|
|
|
(57.9)
|
(57.9)
|
|
2022 final dividend
|
|
|
|
|
(151.8)
|
(151.8)
|
|
Movement from cash flow hedge
reserve
to inventory (net of
tax)
|
|
|
|
0.7
|
|
0.7
|
|
Hyperinflation accounting
adjustments1
|
|
|
|
|
21.6
|
21.6
|
|
Issue of share capital
|
0.1
|
5.8
|
|
|
|
5.9
|
|
Employee trust shares
|
|
|
|
|
(25.2)
|
(25.2)
|
|
Share based payments (net of
tax)
|
|
|
|
|
20.8
|
20.8
|
|
At 31 December 2023
|
108.6
|
205.2
|
(170.2)
|
16.7
|
2,806.0
|
2,966.3
|
|
|
Share
capital
£m
|
Share
premium
£m
|
Translation
reserve
£m
|
Other
reserves◊
£m
|
Retained
earnings†
£m
|
Total
equity
£m
|
|
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 Turkey1
|
|
|
|
|
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 (net of
tax)
|
|
|
|
(9.0)
|
|
(9.0)
|
|
Hyperinflation accounting
adjustments1
|
|
|
|
|
34.9
|
34.9
|
|
Issue of share capital
|
0.1
|
5.2
|
|
|
|
5.3
|
|
Employee trust shares
|
|
|
|
|
(34.2)
|
(34.2)
|
|
Share based payments (net of
tax)
|
|
|
|
|
15.3
|
15.3
|
|
At 31 December 2022
|
108.5
|
199.4
|
(74.2)
|
17.7
|
2,469.5
|
2,720.9
|
1During 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 £2.5m (2022:
£2.5m), capital redemption reserve of £16.1m (2022: £16.1m) and a
negative cash flow hedge reserve of £1.9m (2022: negative
£0.9m).
† Retained earnings
comprise earnings of £2,876.9m (2022: £2,532.9m), offset by own
shares of £70.9m (2022: £63.4m).
Consolidated cash flow statement
for the year ended 31 December
2023
|
|
|
|
2023
|
2022
|
|
|
|
Notes
|
£m
|
£m
|
|
Cash flow from operating activities
|
|
|
|
|
|
Profit before income tax
|
|
|
698.6
|
634.6
|
|
Adjusted for:
|
|
|
|
|
|
net finance
expense
|
|
4
|
90.5
|
67.9
|
|
customer
relationships, brands and technology amortisation
|
|
|
135.6
|
128.4
|
|
acquisition related
items
|
|
3
|
19.5
|
55.9
|
|
disposal of
business
|
|
9
|
-
|
(0.9)
|
|
Adjusted operating
profit
|
|
|
944.2
|
885.9
|
|
Adjustments:
|
|
|
|
|
|
depreciation and
software amortisation
|
|
16
|
207.2
|
189.5
|
|
other non-cash
items
|
|
16
|
6.5
|
15.9
|
|
working capital
movement
|
|
16
|
(28.4)
|
54.5
|
|
Cash generated from operations before acquisition related
items
|
|
|
1,129.5
|
1,145.8
|
|
Cash outflow from acquisition
related items
|
|
8
|
(36.9)
|
(20.6)
|
|
Income tax paid
|
|
|
(188.6)
|
(173.6)
|
|
Cash inflow from operating activities
|
|
|
904.0
|
951.6
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
Interest received
|
|
|
54.4
|
16.2
|
|
Purchase of property, plant and
equipment and software
|
|
|
(58.3)
|
(46.7)
|
|
Sale of property, plant and
equipment
|
|
|
2.1
|
1.0
|
|
Purchase of businesses
|
|
8
|
(337.7)
|
(243.6)
|
|
Disposal of business
|
|
9
|
-
|
49.9
|
|
Cash outflow from investing activities
|
|
|
(339.5)
|
(223.2)
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
Interest paid excluding interest on
lease liabilities
|
|
|
(107.6)
|
(61.9)
|
|
Dividends paid
|
|
|
(209.7)
|
(190.5)
|
|
Increase in borrowings
|
|
|
-
|
346.4
|
|
Repayment of borrowings
|
|
|
(159.5)
|
(131.8)
|
|
Receipts/(payments) on settlement of
foreign exchange contracts
|
|
|
21.6
|
(86.2)
|
|
Payment of lease liabilities -
principal
|
|
13
|
(159.4)
|
(153.1)
|
|
Payment of lease liabilities -
interest
|
|
13
|
(28.6)
|
(22.0)
|
|
Proceeds from issue of ordinary
shares to settle share options
|
|
|
5.9
|
5.3
|
|
Proceeds from exercise of market
purchase share options
|
|
|
46.8
|
36.8
|
|
Purchase of employee trust
shares
|
|
|
(76.4)
|
(74.0)
|
|
Cash outflow from financing activities
|
|
|
(666.9)
|
(331.0)
|
|
|
|
|
|
|
|
(Decrease)/increase in cash, cash equivalents and
overdrafts
|
|
|
(102.4)
|
397.4
|
|
|
|
|
|
|
|
Cash, cash equivalents and
overdrafts at start of year
|
|
|
678.1
|
225.3
|
|
(Decrease)/increase in cash, cash
equivalents and overdrafts
|
|
|
(102.4)
|
397.4
|
|
Currency translation
|
|
|
(23.8)
|
55.4
|
|
Cash, cash equivalents and overdrafts at end of
year
|
|
14
|
551.9
|
678.1
|
Consolidated cash flow statement
(continued)
for the year ended 31 December
2023
|
|
|
2023
|
2022
|
|
Alternative performance
measures†
|
Notes
|
£m
|
£m
|
|
Cash generated from operations before acquisition related
items
|
|
1,129.5
|
1,145.8
|
|
Purchase of property, plant and
equipment and software
|
|
(58.3)
|
(46.7)
|
|
Sale of property, plant and
equipment
|
|
2.1
|
1.0
|
|
Payment of lease
liabilities
|
13
|
(188.0)
|
(175.1)
|
|
Operating cash flow
|
|
885.3
|
925.0
|
|
|
|
|
|
|
Adjusted operating profit
|
|
944.2
|
885.9
|
|
Add back depreciation of
right-of-use assets
|
10
|
166.1
|
151.1
|
|
Deduct payment of lease
liabilities
|
13
|
(188.0)
|
(175.1)
|
|
Lease adjusted operating profit
|
|
922.3
|
861.9
|
|
|
|
|
|
|
Cash conversion (operating cash flow as a percentage of
lease
adjusted operating profit)
|
|
96%
|
107%
|
|
|
|
|
|
|
Operating cash flow
|
|
885.3
|
925.0
|
|
Net interest paid excluding interest
on lease liabilities
|
|
(53.2)
|
(45.7)
|
|
Income tax paid
|
|
(188.6)
|
(173.6)
|
|
Free cash flow
|
|
643.5
|
705.7
|
† See Note 2 for further details of the alternative performance
measures.
Notes
1. Basis of preparation and accounting
policies
a) Basis of accounting
The consolidated financial
statements for the year ended 31 December 2023 have been approved
by the Board of directors of Bunzl plc. They are prepared in
accordance with UK-adopted International Accounting Standards
('IASs') in conformity with the requirements of the Companies Act
2006 and the applicable legal requirements of the Companies Act
2006. The consolidated financial statements also comply fully with
International Financial Reporting Standards ('IFRSs') as issued by
the International Accounting Standards Board ('IASB'). They are
prepared under the historical cost convention with the exception of
certain items which are measured at fair value.
Bunzl plc's 2023 Annual Report
will be published in March 2024. The financial information set out
herein does not constitute the Company's statutory accounts for the
year ended 31 December 2023 but is derived from those accounts and
the accompanying directors' report. Statutory accounts for 2023
will be delivered to the Registrar of Companies following the
Company's Annual General Meeting which will be held on 24 April
2024. The auditors have reported on those accounts; their report
was unqualified and did not contain statements under Section 495
(4)(b) of the Companies Act 2006.
The comparative figures for the
year ended 31 December 2022 are not the Company's statutory
accounts for the financial year but are derived from those accounts
which have been reported on by the Company's auditors and delivered
to the Registrar of Companies. The report of the auditors was
unqualified and did not contain statements under Section 495 (4)(b)
of the Companies Act 2006.
(i) 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 strong operating cash flow performance
in 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 June 2025
starting with a base case projection derived from the Group's 2024
Budget 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 a more severe impact 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 June 2025 the Group would need to
experience a reduction in EBITDA of over 65% 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.
(ii) Impact of Hyperinflation on the financial
statements at 31 December 2023
The Group's 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 year, with hyperinflationary gains and losses in
respect of monetary items being reported in finance expense.
Comparative amounts presented in the 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 year ended 31 December 2023 was an increase of 65%
(2022: increase of 64%) in Turkey and an increase of 210% (2022:
increase of 95%) in Argentina.
IAS 29 requires that the income
statement is adjusted for inflation in the year and translated at
the year 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 year ended 31 December 2023, this
resulted in an increase in goodwill of £8.4m (2022: £16.4m) and a
net increase in other intangibles of £0.4m (2022: £12.3m before
impairment charges). The impacts on other non-monetary assets and
liabilities were immaterial. The impact to retained earnings during
the year was a gain of £21.6m (2022: gain of £47.5m). The total
impact to the Consolidated income statement during the year was a
charge of £11.0m (2022: £21.2m) to profit after tax from
hyperinflation accounting adjustments, comprising a £9.5m adverse
impact (2022: £18.7m adverse impact) on adjusted profit before tax,
increased customer relationships amortisation of £0.2m (2022:
£1.8m) and an increased tax charge of £1.3m (2022:
£0.7m).
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 year, 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.
b) Newly adopted accounting
policies
There are no new standards or
amendments to existing standards that are effective that have had a
material impact on the Group, nor does the Group anticipate any new
or revised standards and interpretations that are effective from 1
January 2024 and beyond to have a material impact on its
consolidated results or financial position.
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 consolidated financial statements and the
location of the reconciliation to equivalent IFRS measures are
shown and defined in the table below:
|
Underlying revenue growth
|
Revenue excluding the incremental
impact of acquisitions 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 profit
|
Operating profit before customer
relationships, brands 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 before income tax
|
Profit before income tax, customer
relationships, brands and technology amortisation, acquisition
related items, non-recurring pension scheme charges and profit or
loss on disposal of businesses (reconciled in the following
tables)
|
|
Adjusted profit for the year
|
Profit for the year before
customer relationships, brands 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 rate
|
Tax on adjusted profit before
income tax as a percentage of adjusted profit before income tax
(reconciled in Note 5)
|
|
Adjusted earnings per share
|
Adjusted profit for the year
divided by the weighted average number of ordinary shares in issue
(reconciled in the following tables and in Note 7)
|
|
Adjusted diluted earnings per share
|
Adjusted profit for the year
divided by the diluted weighted average number of ordinary shares
(reconciled in Note 7)
|
|
Operating cash flow
|
Cash generated from operations
before acquisition related 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 operating profit
|
Adjusted operating profit after
adding back the depreciation 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 operating capital
|
The ratio of adjusted operating
profit to the average of 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 capital
|
The ratio of adjusted operating
profit to the average of 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)
|
|
Dividend cover
|
The ratio of adjusted earnings per
share to the total dividend per share
|
|
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 lease liabilities
|
Net debt excluding the carrying
value of lease liabilities (reconciled in Note 14)
|
|
Constant exchange rates
|
Growth rates at constant exchange
rates are calculated by retranslating the results for prior years
at the average rates for the year ended 31 December 2023 so that
they can be compared without the distorting impact of changes
caused by foreign exchange translation. The principal exchange
rates used for 2023 and 2022 can be found in the Financial
review.
|
The definition of 'Dividend cover'
has been added to the list of alternative performance measures in
the year. All other alternative performance measures have been
calculated consistently with the methods applied in the
consolidated financial statements for the year ended 31 December
2022. The amendments to the list of alternative performance
measures and an assessment of the relevance of the existing
alternative performance measures, were agreed with the Audit
Committee.
A number of 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 year ended 31 December 2023 and the year ended 31 December 2022
there were no non-recurring pension 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 trading performance of the business.
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 charges that nevertheless do impact the Group's cash
flow and GAAP financial performance.
Reconciliation of alternative performance measures to IFRS
measures
The principal profit related
alternative performance measures, being adjusted operating profit,
adjusted profit before income tax, adjusted profit for the year and
adjusted earnings per share, are reconciled to the most directly
reconcilable statutory measures in the tables below:
Year ended 31 December 2023
|
|
|
Adjusting
items
|
|
|
|
|
Alternative performance
measures
£m
|
Customer relationships,
brands and technology amortisation
£m
|
Acquisition related
items
£m
|
Disposal of
business
£m
|
Statutory
measures
£m
|
|
|
Adjusted operating profit
|
944.2
|
(135.6)
|
(19.5)
|
|
789.1
|
Operating profit
|
|
Finance income
|
60.4
|
|
|
|
60.4
|
Finance income
|
|
Finance expense
|
(150.9)
|
|
|
|
(150.9)
|
Finance expense
|
|
Adjusted profit before income tax
|
853.7
|
(135.6)
|
(19.5)
|
-
|
698.6
|
Profit before income tax
|
|
Tax on adjusted profit
|
(213.4)
|
36.7
|
4.3
|
-
|
(172.4)
|
Income tax
|
|
Adjusted profit for the year
|
640.3
|
(98.9)
|
(15.2)
|
-
|
526.2
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share
|
191.1p
|
(29.5)p
|
(4.5)p
|
-
|
157.1p
|
Basic earnings per share
|
Year ended 31 December
2022
|
|
|
Adjusting items
|
|
|
|
|
Alternative performance measures
£m
|
Customer
relationships, brands and technology amortisation
£m
|
Acquisition related items
£m
|
Disposal
of business
£m
|
Statutory measures
£m
|
|
|
Adjusted operating
profit
|
885.9
|
(128.4)
|
(55.9)
|
|
701.6
|
Operating profit
|
|
Finance income
|
22.3
|
|
|
|
22.3
|
Finance income
|
|
Finance expense
|
(90.2)
|
|
|
|
(90.2)
|
Finance expense
|
|
Disposal of business
|
-
|
|
|
0.9
|
0.9
|
Disposal of business
|
|
Adjusted profit before income
tax
|
818.0
|
(128.4)
|
(55.9)
|
0.9
|
634.6
|
Profit before income
tax
|
|
Tax on adjusted profit
|
(201.2)
|
34.7
|
6.3
|
-
|
(160.2)
|
Income tax
|
|
Adjusted profit for the
year
|
616.8
|
(93.7)
|
(49.6)
|
0.9
|
474.4
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
share
|
184.3p
|
(28.0)p
|
(14.8)p
|
0.2p
|
141.7p
|
Basic earnings 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. The principal results reviewed for each
business area are revenue and adjusted operating profit.
Year ended 31 December 2023
|
|
North
America
|
Continental
Europe
|
UK &
Ireland
|
Rest of
the
World
|
Corporate
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
6,973.5
|
2,354.9
|
1,365.5
|
1,103.2
|
|
11,797.1
|
|
Adjusted operating profit/(loss)
|
528.0
|
224.7
|
103.4
|
119.6
|
(31.5)
|
944.2
|
|
Customer relationships,
brands
|
|
|
|
|
|
|
|
and technology
amortisation
|
(57.1)
|
(43.7)
|
(11.1)
|
(23.7)
|
|
(135.6)
|
|
Acquisition related
items
|
(5.5)
|
(0.3)
|
(3.1)
|
(10.6)
|
|
(19.5)
|
|
Operating profit/(loss)
|
465.4
|
180.7
|
89.2
|
85.3
|
(31.5)
|
789.1
|
|
Finance income
|
|
|
|
|
|
60.4
|
|
Finance expense
|
|
|
|
|
|
(150.9)
|
|
Disposal of business
|
|
|
|
|
|
-
|
|
Profit before income tax
|
|
|
|
|
|
698.6
|
|
Adjusted profit before income tax
|
|
|
|
|
|
853.7
|
|
Income tax
|
|
|
|
|
|
(172.4)
|
|
Profit for the year
|
|
|
|
|
|
526.2
|
|
|
|
|
|
|
|
|
|
Operating margin
|
7.6%
|
9.5%
|
7.6%
|
10.8%
|
|
8.0%
|
|
Return on average operating
capital
|
49.6%
|
45.4%
|
65.5%
|
35.5%
|
|
46.1%
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
12.3
|
13.5
|
8.7
|
8.1
|
0.2
|
42.8
|
|
Depreciation of property, plant
and equipment
|
12.0
|
10.3
|
4.7
|
4.6
|
0.1
|
31.7
|
|
Additions to right-of-use
assets
|
34.0
|
41.5
|
42.4
|
18.8
|
-
|
136.7
|
|
Depreciation of right-of-use
assets
|
83.4
|
38.9
|
24.3
|
18.8
|
0.7
|
166.1
|
|
Purchase of software
|
3.1
|
8.7
|
2.4
|
1.0
|
0.3
|
15.5
|
|
Software amortisation
|
3.4
|
2.7
|
2.1
|
0.9
|
0.3
|
9.4
|
|
|
|
|
|
|
|
| |
Year ended 31 December
2022
|
|
North
America
|
Continental
Europe
|
UK
&
Ireland
|
Rest of
the
World
|
Corporate
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
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%
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
13.0
|
9.7
|
5.9
|
5.8
|
0.3
|
34.7
|
|
Depreciation of property, plant and
equipment
|
11.3
|
9.1
|
4.8
|
4.3
|
0.1
|
29.6
|
|
Additions to right-of-use
assets
|
65.8
|
15.3
|
18.9
|
23.3
|
-
|
123.3
|
|
Depreciation of right-of-use
assets
|
74.7
|
33.6
|
23.8
|
18.4
|
0.6
|
151.1
|
|
Purchase of software
|
3.1
|
5.2
|
2.6
|
0.9
|
0.2
|
12.0
|
|
Software amortisation
|
3.7
|
2.2
|
1.6
|
1.1
|
0.2
|
8.8
|
|
|
2023
|
2022
|
|
Acquisition related items
|
£m
|
£m
|
|
Deferred consideration payments
relating to the retention of
former owners of businesses acquired
|
37.3
|
24.9
|
|
Transaction costs and
expenses
|
18.1
|
10.9
|
|
Adjustments to previously estimated
earn outs
|
(35.9)
|
7.1
|
|
|
19.5
|
42.9
|
|
Customer relationships impairment
charges (Note 11)
|
-
|
13.0
|
|
|
19.5
|
55.9
|
4.
Finance income/(expense)
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Interest on cash and cash
equivalents
|
|
40.3
|
10.5
|
|
Interest income from foreign
exchange contracts
|
|
16.0
|
9.2
|
|
Net interest income on defined
benefit pension schemes in surplus
|
|
3.2
|
1.2
|
|
Other finance income
|
|
0.9
|
1.4
|
Finance income
|
|
60.4
|
22.3
|
|
|
|
|
|
|
Interest on loans and
overdrafts
|
|
(106.7)
|
(58.5)
|
|
Lease interest expense
|
|
(28.6)
|
(22.0)
|
|
Interest expense from foreign
exchange contracts
|
|
(1.5)
|
(0.8)
|
|
Net interest expense on defined
benefit pension schemes in deficit
|
|
(1.0)
|
(0.8)
|
|
Fair value (loss)/gain on US
private placement notes and senior bond in a hedge
relationship
|
|
(24.4)
|
83.2
|
|
Fair value gain/(loss) on interest
rate swaps in a hedge relationship
|
|
21.8
|
(79.2)
|
|
Foreign exchange (loss)/gain on
intercompany funding
|
|
(41.1)
|
126.7
|
|
Foreign exchange gain/(loss) on
external debt and foreign exchange forward contracts
|
|
40.5
|
(126.7)
|
|
Interest related to income
tax
|
|
(0.1)
|
(0.5)
|
|
Monetary loss from hyperinflation
accounting1
|
|
(7.2)
|
(10.7)
|
|
Other finance expense
|
|
(2.6)
|
(0.9)
|
Finance expense
|
|
(150.9)
|
(90.2)
|
Net finance expense
|
|
(90.5)
|
(67.9)
|
1See Note 1 for further details.
The foreign exchange loss on
intercompany funding 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
income statement.
5. Income tax
The Group operates in many
countries and is subject to different rates of income tax in those
countries. The expected tax rate is calculated as a weighted
average of the tax rates in the tax jurisdictions in which the
Group operates, most of which are higher than the UK statutory rate
for the year of 23.5% (2022: 19.0%). The adjustments to the tax
charge at the weighted average rate to determine the income tax on
profit are as follows:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Profit before income
tax
|
698.6
|
634.6
|
|
|
|
|
|
Weighted average rate
|
25.2%
|
24.6%
|
|
|
|
|
|
Tax charge at weighted average
rate
|
176.0
|
156.1
|
|
Effects of:
|
|
|
|
non-deductible
expenditure
|
0.5
|
8.9
|
|
impact of intercompany
finance
|
1.2
|
(2.0)
|
|
change in tax rates
|
(0.7)
|
0.4
|
|
hyperinflation accounting
adjustments
|
3.8
|
4.7
|
|
prior year adjustments
|
(7.0)
|
(7.7)
|
|
other current year items
|
(1.4)
|
(0.2)
|
|
Income tax on profit
|
172.4
|
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.
|
|
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
Income tax on profit
|
|
172.4
|
160.2
|
|
Tax associated with adjusting
items
|
|
41.0
|
41.0
|
|
Tax
on adjusted profit
|
|
213.4
|
201.2
|
|
|
|
|
|
|
Profit before income tax
|
|
698.6
|
634.6
|
|
Adjusting items
|
|
155.1
|
183.4
|
|
Adjusted profit before income tax
|
|
853.7
|
818.0
|
|
|
|
|
|
|
Reported tax rate
|
|
24.7%
|
25.2%
|
|
Effective tax rate
|
|
25.0%
|
24.6%
|
6. Dividends
Total dividends for the years in
which they are recognised are:
|
|
|
|
|
2023
|
2022
|
|
|
|
|
|
£m
|
£m
|
|
2021 interim
|
|
|
|
|
54.3
|
|
2021 final
|
|
|
|
|
136.2
|
|
2022 interim
|
|
|
|
57.9
|
|
|
2022 final
|
|
|
|
151.8
|
|
|
Total
|
|
|
|
209.7
|
190.5
|
Total dividends per share for the
year to which they relate are:
|
|
|
|
|
Per
share
|
|
|
|
|
2023
|
2022
|
|
Interim
|
|
|
18.2p
|
17.3p
|
|
Final
|
|
|
50.1p
|
45.4p
|
|
Total
|
|
|
68.3p
|
62.7p
|
The 2023 interim dividend of 18.2p
per share was paid on 3 January 2024 and comprised £61.0m of cash.
The 2023 final dividend of 50.1p per share will be paid on 2 July
2024 to shareholders on the register at the close of business on 17
May 2024. The 2023 final dividend will comprise approximately £168m
of cash.
7. Earnings per share
|
|
|
|
2023
|
2022
|
|
|
|
|
£m
|
£m
|
|
Profit for the year
|
|
|
526.2
|
474.4
|
|
Adjusted for:
|
|
|
|
|
|
customer
relationships, brands and technology amortisation
|
|
|
135.6
|
128.4
|
|
acquisition related
items
|
|
|
19.5
|
55.9
|
|
profit on disposal of
business
|
|
|
-
|
(0.9)
|
|
tax credit on
adjusting items
|
|
|
(41.0)
|
(41.0)
|
|
Adjusted profit for the year
|
|
|
640.3
|
616.8
|
|
|
|
|
|
|
|
|
|
|
2023
|
2022
|
|
Basic weighted average number of
ordinary shares in issue (million)
|
|
|
335.0
|
334.7
|
|
Dilutive effect of employee share
plans (million)
|
|
|
2.2
|
2.5
|
|
Diluted weighted average number of
ordinary shares (million)
|
|
|
337.2
|
337.2
|
|
Basic earnings per share
|
|
|
157.1p
|
141.7p
|
|
Adjustment
|
|
|
34.0p
|
42.6p
|
|
Adjusted earnings per share
|
|
|
191.1p
|
184.3p
|
|
|
|
|
|
|
|
Diluted basic earnings per
share
|
|
|
156.0p
|
140.7p
|
|
Adjustment
|
|
|
33.9p
|
42.2p
|
|
Adjusted diluted earnings per
share
|
|
|
189.9p
|
182.9p
|
8.
Acquisitions
2023
Summary details of the businesses
acquired during the year ended 31 December 2023 are shown in the
table below:
|
Business
|
Sector
|
Country
|
Acquisition date 2023
|
Percentage of share capital
acquired
|
Annualised
revenue
£m
|
|
GRC
|
Healthcare
|
Australia
|
1 January
|
100%
|
4.4
|
|
Capital Paper
|
Foodservice
|
Canada
|
31 January
|
100%
|
16.0
|
|
Arbeitsschutz-Express
|
Safety
|
Germany
|
3 April
|
66%
|
33.1
|
|
Dimasa
|
Cleaning & Hygiene
|
Spain
|
28 April
|
100%
|
3.1
|
|
Irudek
|
Safety
|
Spain
|
28 April
|
75%
|
16.7
|
|
EHM
|
Safety
|
UK
|
5 June
|
100%
|
19.5
|
|
La Cartuja Complementos
Hostelería
|
Foodservice
|
Spain
|
30 June
|
100%
|
4.4
|
|
EcoTools.nl
|
Other
|
Netherlands
|
31 July
|
100%
|
17.8
|
|
Leal Equipamentos de
Proteção
|
Safety
|
Brazil
|
1 August
|
100%
|
33.1
|
|
PackPro
|
Foodservice
|
Canada
|
10 August
|
85%
|
20.1
|
|
Groveko
|
Cleaning & Hygiene
|
Netherlands
|
11 August
|
93.75%
|
21.0
|
|
Pittman Traffic & Safety
Equipment*
|
Safety
|
Ireland
|
28 August
|
100%
|
6.2
|
|
FlexPost
|
Safety
|
USA
|
31 October
|
100%
|
3.0
|
|
Grupo Lanlimp
|
Cleaning & Hygiene
|
Brazil
|
1 November
|
70%
|
37.8
|
|
Melbourne Cleaning
Supplies
|
Cleaning & Hygiene
|
Australia
|
6 November
|
100%
|
9.7
|
|
Safety First
|
Safety
|
Poland
|
30 November
|
65%
|
24.9
|
|
Miracle Sanitation
Supply
|
Cleaning & Hygiene
|
Canada
|
1 December
|
100%
|
7.6
|
|
CT Group
|
Healthcare
|
Brazil
|
1 December
|
100%
|
47.8
|
|
Others**
|
|
|
|
100%
|
3.3
|
|
Acquisitions completed in the current year
|
|
|
329.5
|
|
GRC
|
Healthcare
|
Australia
|
1 January
|
100%
|
(4.4)
|
|
Acquisitions agreed in the current year
|
|
|
325.1
|
*The acquisition supports the
expansion of our North America based McCue business and is
therefore reported as part of the North America business
area.
**Others includes two small
acquisitions agreed in 2023.
There were no individually
significant acquisitions in 2023. A summary of the effect of
acquisitions in 2023 and 2022 is shown below:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Customer relationships
|
229.5
|
107.7
|
|
Brands
|
10.6
|
11.6
|
|
Technology
|
-
|
9.1
|
|
Property, plant and equipment and
software
|
16.6
|
4.8
|
|
Right-of-use assets
|
16.2
|
21.5
|
|
Inventories
|
44.7
|
44.9
|
|
Trade and other
receivables
|
57.0
|
27.0
|
|
Trade and other payables
|
(40.5)
|
(30.9)
|
|
Net cash/(overdrafts)
|
19.8
|
(6.8)
|
|
Provisions
|
(26.2)
|
(7.9)
|
|
Lease liabilities
|
(16.2)
|
(21.5)
|
|
Derivative assets
|
-
|
0.4
|
|
Income tax payable and deferred tax
liabilities
|
(29.6)
|
(31.3)
|
|
Fair value of net assets
acquired
|
281.9
|
128.6
|
|
Goodwill
|
130.6
|
106.6
|
|
Consideration
|
412.5
|
235.2
|
|
|
|
|
|
Satisfied by:
|
|
|
|
cash
consideration
|
343.0
|
180.6
|
|
deferred
consideration
|
69.5
|
54.6
|
|
|
412.5
|
235.2
|
|
Contingent payments relating to
retention of former owners
|
59.5
|
66.4
|
|
Net (cash)/overdrafts
acquired
|
(19.8)
|
6.8
|
|
Transaction costs and
expenses
|
18.1
|
10.9
|
|
Total committed spend in respect of acquisitions completed in
the year
|
470.3
|
319.3
|
|
Spend on acquisitions committed
but not completed at the year end
|
-
|
2.9
|
|
Spend on acquisitions committed at
prior year but not completed in the current year
|
(2.8)
|
-
|
|
Total committed spend in respect of acquisitions agreed in
the year
|
467.5
|
322.2
|
The net cash outflow in the year
in respect of acquisitions comprised:
|
|
2023
|
2022
|
|
|
Total
|
Total
|
|
|
£m
|
£m
|
|
Cash consideration
|
343.0
|
180.6
|
|
Net (cash)/ overdrafts
acquired
|
(19.8)
|
6.8
|
|
Deferred consideration
payments
|
14.5
|
56.2
|
|
Net
cash outflow from purchase of businesses
|
337.7
|
243.6
|
|
Transaction costs and expenses
paid
|
18.1
|
11.0
|
|
Payments relating to retention of
former owners
|
18.8
|
9.6
|
|
Cash outflow from acquisition related items
|
36.9
|
20.6
|
|
Total cash outflow in respect of
acquisitions
|
374.6
|
264.2
|
Acquisitions completed in the year
ended 31 December 2023 contributed £120.5m (2022: £115.8m) to the
Group's revenue, £16.1m (2022: £9.5m) to the Group's adjusted
operating profit and £8.7m (2022: £5.9m) to the Group's operating
profit for the year ended 31 December 2023.
The estimated contributions from
acquisitions completed and agreed during the year to the results of
the Group for the year if such acquisitions had been made at the
beginning of the year, are as follows:
|
|
2023
£m
|
2022
£m
|
|
Revenue
|
325.1
|
299.0
|
|
Adjusted operating profit
|
51.4
|
29.3
|
Deferred consideration
The table below gives further
details of the Group's deferred consideration
liabilities:
|
|
2023
£m
|
2022
£m
|
|
Minority options
|
124.7
|
92.4
|
|
Earn outs
|
36.9
|
39.3
|
|
Deferred consideration held at fair value
|
161.6
|
131.7
|
|
Other
|
14.0
|
8.2
|
|
Total deferred consideration
|
175.6
|
139.9
|
|
|
|
|
|
Current
|
32.3
|
42.0
|
|
Non-current
|
143.3
|
97.9
|
|
Total deferred consideration
|
175.6
|
139.9
|
Including expected future payments
which are contingent on the continued retention of former owners of
businesses acquired of £83.2m (2022: £76.3m), total deferred and
contingent consideration at 31 December 2023 is £258.8m (2022:
£216.2m).
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:
|
Business
|
Sector
|
Country
|
Acquisition date
2022
|
Percentage of share capital acquired
|
Annualised
revenue
£m
|
|
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
|
|
London Catering & Hygiene
Solutions
|
Cleaning & Hygiene
|
UK
|
29 July
|
100%
|
5.4
|
|
Containit
|
Safety
|
Australia
|
1 August
|
80%
|
12.9
|
|
Corsul Group
|
Safety
|
Brazil
|
2 September
|
100%
|
42.3
|
|
Enviropack
|
Foodservice
|
UK
|
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 Ophthalmic &
Solutions
|
Healthcare
|
New Zealand
|
2 December
|
100%
|
6.6
|
|
Grupo R. Queralto
|
Healthcare
|
Spain
|
21 December
|
85%
|
23.3
|
|
Acquisitions completed in
2022
|
|
|
|
296.3
|
|
GRC
|
Healthcare
|
Australia
|
1 January 2023
|
100%
|
2.7
|
|
Acquisitions agreed in
2022
|
|
|
299.0
|
9.
Disposal of business
The Group did not dispose of any
businesses during the year ended 31 December 2023. Disposal of
business in the year ended 31 December 2022 related to the 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
|
|
Property
|
Motor
Vehicles
|
Equipment
|
Total
|
|
2023
|
£m
|
£m
|
£m
|
£m
|
|
Net book value at beginning of
year
|
439.6
|
63.3
|
26.7
|
529.6
|
|
Acquisitions (Note 8)
|
15.9
|
0.3
|
-
|
16.2
|
|
Additions
|
87.5
|
37.1
|
12.1
|
136.7
|
|
Depreciation charge in the
year
|
(125.1)
|
(30.0)
|
(11.0)
|
(166.1)
|
|
Remeasurement adjustments
|
118.6
|
0.4
|
0.8
|
119.8
|
|
Currency translation
|
(16.5)
|
(2.3)
|
(1.1)
|
(19.9)
|
|
Net
book value at 31 December 2023
|
520.0
|
68.8
|
27.5
|
616.3
|
|
|
Property
|
Motor
Vehicles
|
Equipment
|
Total
|
|
2022
|
£m
|
£m
|
£m
|
£m
|
|
Net book value at beginning of
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
|
|
Net book value at 31 December
2022
|
439.6
|
63.3
|
26.7
|
529.6
|
11.
Intangible assets
|
Year ended 31 December 2023
|
|
|
|
|
|
|
|
|
|
Goodwill
|
Customer
relationships
|
Brands
|
Technology
|
Software
|
Total
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
Cost
|
|
|
|
|
|
|
|
|
Beginning of year
|
1,944.4
|
2,349.0
|
39.7
|
9.5
|
107.4
|
4,450.0
|
|
|
Acquisitions (Note 8)
|
130.6
|
229.5
|
10.6
|
-
|
1.3
|
372.0
|
|
|
Adjustment for hyperinflation
accounting1
|
8.4
|
1.6
|
-
|
-
|
-
|
10.0
|
|
|
Additions
|
|
|
|
|
15.5
|
15.5
|
|
|
Disposals
|
|
|
|
|
(4.6)
|
(4.6)
|
|
|
Currency translation
|
(62.7)
|
(85.6)
|
(1.8)
|
(0.2)
|
(2.8)
|
(153.1)
|
|
|
End
of year
|
2,020.7
|
2,494.5
|
48.5
|
9.3
|
116.8
|
4,689.8
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation and
impairment
|
|
|
|
|
|
|
Beginning of year
|
12.8
|
1,258.1
|
4.8
|
0.4
|
80.0
|
1,356.1
|
|
|
Amortisation charge in
year
|
|
130.2
|
4.0
|
1.4
|
9.4
|
145.0
|
|
|
Adjustment for hyperinflation
accounting1
|
-
|
1.2
|
-
|
-
|
-
|
1.2
|
|
|
Disposals
|
|
|
|
|
(4.6)
|
(4.6)
|
|
|
Currency translation
|
(1.0)
|
(45.8)
|
(1.4)
|
-
|
(1.8)
|
(50.0)
|
|
|
End
of year
|
11.8
|
1,343.7
|
7.4
|
1.8
|
83.0
|
1,447.7
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value at
31
December 2023
|
2,008.9
|
1,150.8
|
41.1
|
7.5
|
33.8
|
3,242.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year ended 31 December
2022
|
|
|
|
|
|
|
|
|
Goodwill
|
Customer
relationships
|
Brands
|
Technology
|
Software
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
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 Turkey1
|
6.7
|
10.0
|
-
|
-
|
-
|
16.7
|
|
Restated as 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
accounting1
|
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 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 Turkey1
|
-
|
4.4
|
-
|
-
|
-
|
4.4
|
|
Restated as 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
accounting1
|
-
|
6.8
|
-
|
-
|
-
|
6.8
|
|
Disposals
|
|
|
|
|
(3.4)
|
(3.4)
|
|
Currency translation
|
0.4
|
78.8
|
0.6
|
-
|
7.3
|
87.1
|
|
End of year
|
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 year are set out in Note 8.
12.
Working capital
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Inventories
|
1,621.1
|
1,748.6
|
|
Trade and other
receivables
|
1,578.5
|
1,557.4
|
|
Trade and other payables -
current
|
(2,071.6)
|
(2,249.4)
|
|
Add back net non-trading related
receivables and payables
|
30.1
|
40.0
|
|
|
1,158.1
|
1,096.6
|
See Note 16 for the cash flow
impact of movements in working capital which exclude the impact
from foreign exchange movements, acquisitions and the disposal of
business.
13.
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.
Details of the Group's right-of-use assets recognised under these
lease agreements are shown in note 10.
|
|
2023
|
2022
|
|
Movement in lease liabilities
|
£m
|
£m
|
|
Beginning of year
|
569.9
|
488.7
|
|
Acquisitions (Note 8)
|
16.2
|
21.5
|
|
Disposal of business (Note
9)
|
-
|
(2.1)
|
|
New leases
|
136.7
|
123.3
|
|
Interest charge in the
year
|
28.6
|
22.0
|
|
Payment of lease
liabilities
|
(188.0)
|
(175.1)
|
|
Remeasurement adjustments
|
122.1
|
56.6
|
|
Currency translation
|
(21.0)
|
35.0
|
|
End
of year
|
664.5
|
569.9
|
|
Ageing of lease
liabilities:
|
|
|
|
Current lease liabilities
|
152.1
|
145.9
|
|
Non-current lease
liabilities
|
512.4
|
424.0
|
|
End
of year
|
664.5
|
569.9
|
14.
Cash, cash equivalents and overdrafts and net
debt
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Cash at bank and in hand
|
1,377.1
|
1,504.0
|
|
Money market funds
|
49.0
|
-
|
|
Cash and cash equivalents
|
1,426.1
|
1,504.0
|
|
Bank overdrafts
|
(874.2)
|
(825.9)
|
|
Cash, cash equivalents and overdrafts
|
551.9
|
678.1
|
|
Interest bearing loans and
borrowings - current liabilities
|
(130.0)
|
(161.0)
|
|
Interest bearing loans and
borrowings - non-current liabilities
|
(1,417.1)
|
(1,574.0)
|
|
Derivatives managing the interest
rate risk and currency profile of the debt
|
(90.3)
|
(103.2)
|
|
Net
debt excluding lease liabilities
|
(1,085.5)
|
(1,160.1)
|
|
Lease liabilities
|
(664.5)
|
(569.9)
|
|
Net
debt including lease liabilities
|
(1,750.0)
|
(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:
|
|
2023
£m
|
2022
£m
|
|
Cash at bank and in hand net of
amounts in the cash pool
|
520.8
|
700.5
|
|
Money market funds
|
49.0
|
-
|
|
Bank overdrafts net of amounts in
the cash pool
|
(17.9)
|
(22.4)
|
|
Cash, cash equivalents and overdrafts
|
551.9
|
678.1
|
15.
Movement in net debt
|
|
Cash, cash equivalents
and
|
Interest
bearing
loans and
|
|
|
|
|
overdrafts
|
borrowings
|
Derivatives
|
Net debt
|
|
2023
|
£m
|
£m
|
£m
|
£m
|
|
Beginning of year excluding lease
liabilities
|
678.1
|
(1,735.0)
|
(103.2)
|
(1,160.1)
|
|
Cash flow excluding movements in
other components of net debt
|
143.1
|
-
|
-
|
143.1
|
|
Interest paid excluding interest
on lease liabilities
|
(107.6)
|
-
|
-
|
(107.6)
|
|
Repayment of borrowings
|
(159.5)
|
159.5
|
-
|
-
|
|
Receipts on settlement of foreign
exchange contracts
|
21.6
|
-
|
(21.6)
|
-
|
|
Net cash (outflow)/
inflow
|
(102.4)
|
159.5
|
(21.6)
|
35.5
|
|
Non-cash movement in debt
|
-
|
(20.8)
|
21.5
|
0.7
|
|
Realised gains on foreign exchange
contracts
|
-
|
-
|
21.6
|
21.6
|
|
Currency translation
|
(23.8)
|
49.2
|
(8.6)
|
16.8
|
|
End
of year excluding lease liabilities
|
551.9
|
(1,547.1)
|
(90.3)
|
(1,085.5)
|
|
Lease liabilities
|
-
|
(664.5)
|
-
|
(664.5)
|
|
End
of year including lease liabilities
|
551.9
|
(2,211.6)
|
(90.3)
|
(1,750.0)
|
|
|
|
|
|
|
|
|
Cash,
cash equivalents and
|
Interest
bearing
loans
and
|
|
|
|
|
overdrafts
|
borrowings
|
Derivatives
|
Net
debt
|
|
2022
|
£m
|
£m
|
£m
|
£m
|
|
Beginning of year excluding lease
liabilities
|
225.3
|
(1,545.6)
|
(17.1)
|
(1,337.4)
|
|
Cash flow excluding movements in
other components of net debt
|
330.9
|
-
|
-
|
330.9
|
|
Interest paid excluding interest
on lease liabilities
|
(61.9)
|
-
|
-
|
(61.9)
|
|
Increase in borrowings
|
346.4
|
(346.4)
|
-
|
-
|
|
Repayment of borrowings
|
(131.8)
|
131.8
|
-
|
-
|
|
Payments on settlement of foreign
exchange contracts
|
(86.2)
|
-
|
86.2
|
-
|
|
Net cash inflow/(outflow)
|
397.4
|
(214.6)
|
86.2
|
269.0
|
|
Non-cash movement in debt
|
-
|
87.4
|
(79.2)
|
8.2
|
|
Realised losses on foreign exchange
contracts
|
-
|
-
|
(86.2)
|
(86.2)
|
|
Currency translation
|
55.4
|
(62.2)
|
(6.9)
|
(13.7)
|
|
End of year excluding lease
liabilities
|
678.1
|
(1,735.0)
|
(103.2)
|
(1,160.1)
|
|
Lease liabilities
|
-
|
(569.9)
|
-
|
(569.9)
|
|
End of year including lease
liabilities
|
678.1
|
(2,304.9)
|
(103.2)
|
(1,730.0)
|
16. 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.
|
Depreciation and software amortisation
|
|
2023
£m
|
2022
£m
|
|
Depreciation of right-of-use
assets
|
|
166.1
|
151.1
|
|
Other depreciation and software
amortisation
|
|
41.1
|
38.4
|
|
|
|
207.2
|
189.5
|
|
Other non-cash items
|
|
2023
£m
|
2022
£m
|
|
Share based payments
|
|
15.4
|
14.1
|
|
Provisions
|
|
(13.1)
|
(3.9)
|
|
Retirement benefit
obligations
|
|
(3.5)
|
(3.9)
|
|
Hyperinflation accounting
adjustments
|
|
2.1
|
8.0
|
|
Other
|
|
5.6
|
1.6
|
|
|
|
6.5
|
15.9
|
|
Working capital movement
|
|
2023
£m
|
2022
£m
|
|
Decrease/(increase) in
inventories
|
|
108.1
|
(118.7)
|
|
Increase in trade and other
receivables
|
|
(9.9)
|
(13.0)
|
|
(Decrease)/increase in trade and
other payables
|
|
(126.6)
|
186.2
|
|
|
|
(28.4)
|
54.5
|
17.
Related party disclosures
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 transactions with those related parties during
the year ended 31 December 2023 that have materially affected the
financial position or performance of the Group during this period.
All transactions with subsidiaries are eliminated on
consolidation.
18.
Post balance sheet event
On 26 February 2024, Bunzl signed
an agreement to acquire an 80% stake in Nisbets and associated
entities for an initial consideration of £339m. The purchase price
will be settled in cash. Founded in 1983 by Andrew Nisbet, Nisbets
is a highly respected omni-channel distributor of catering
equipment and consumables in the UK & Ireland, Northern Europe
and Australasia, offering an extensive product range including a
wide range of own-brand products to foodservice customers. It has
over 1,800 employees and an experienced management team that will
remain with the Group post-acquisition, with Andrew Nisbet acting
as a non-executive director and the family continuing to hold a
minority interest in Nisbets. For the year ended 31 December 2023,
Nisbet generated revenue of £498m with a profit before interest,
tax, amortisation and exceptional items of £35.5m and total gross
assets of £242m, based on unaudited management accounts. An
additional earn-out amount may be payable based on Nisbets'
financial performance in 2024. The transaction includes put / call
options that enable Bunzl to acquire the remaining 20% stake in the
future, subject to certain conditions.
19.
Principal risks and uncertainties
The Group operates in six core
market sectors in 33 countries which exposes it to risks and
uncertainties, many of which are not fully within the Group's
control. The risks summarised below represent the principal risks
and uncertainties faced by the Group, being those which are
material to the development, performance, position or future
prospects of the Group, and the steps taken to mitigate such risks.
However, these risks do not comprise all of the risks that the
Group may face and accordingly this summary is not intended to be
exhaustive.
In addition, the Group's financial
performance is partially dependent on general global economic
conditions, the deterioration of which could have an adverse effect
on the Group's business and results of operations. Although this is
not considered by the Board to be a specific principal risk in its
own right, many of the risks referred to below could themselves be
impacted by the economic environment prevailing in the Group's
markets from time to time.
The risks are presented by
category of risk (Strategic, Operational and Financial) and are not
presented in order of probability or impact. The relevant component
of the Group's strategy that each risk impacts is also
noted:
O - Organic growth
A - Acquisition growth
M - Operating model
improvements
S - Sustainability
The nature and type of the
principal risks and uncertainties affecting the Group are
considered to be unchanged compared to the 2022 Annual
Report.
Monitoring risks
The Board reviews each risk and
assesses the gross impact, applying the hypothetical assumption
that there are no mitigating controls in place, the net impact
after mitigating controls and the probability to set the Group's
mitigation priorities. The register of principal risks and
uncertainties was updated following review by the Executive
Committee and approval by the Board.
Emerging risks
In addition to the principal risks
faced by the Group, there are risks which are more uncertain in
nature and difficult to assess or that have the potential to
develop and increase in severity over time.
One such risk is that due to
ongoing and new geopolitical conflicts arising in 2023, market
shortages or other adverse events in the supply chain impacting the
sourcing and delivery of our products emerged as a risk that may
impact
Bunzl's operations. Failure to
supply and deliver the required volumes could adversely impact
revenue, profit, and customer relationships. Management will
continue to monitor this risk and the impact on operations and any
other
uncertainties that may impact
Bunzl's operations.
As part of the ongoing risk
management processes, the Board closely monitors all emerging risks
that have the potential to increase in significance and affect the
performance of the Group and its ability to meet its strategic
objectives.
|
Principal risks facing the Group
|
Description of risk and how it might affect the Group's
prospects
|
How the risk is managed or mitigated
|
Developments in 2023
|
|
Strategic risks
|
|
|
1. Competitive
pressures
Revenue and profits are reduced as
the Group loses a customer or lowers prices due to competitive
pressures
Risk owner:
CEO and Business Area
Heads
Change to risk level:
No change
Included in viability statement: Yes
O
|
·
The Group operates in highly competitive markets
and faces price competition from international, national, regional
and local companies in the countries and markets in which it
operates
·
Unforeseen changes in the competitive landscape
could also occur, such as an existing competitor or new market
entrant introducing disruptive technologies or changes in routes to
market
·
Customers, especially large or growing customers,
could exert pressure on the Group's selling prices, thereby
reducing its margins, switch to a competitor or ultimately choose
to deal directly with suppliers
·
Any of these competitive pressures could lead to a
loss of market share and a reduction in the Group's revenue and
profits
|
·
The Group's geographic and market sector
diversification allow it to withstand shifts in demand, while this
global scale across many markets also enables the Group to provide
the broadest possible range of customer specific solutions to suit
their exacting needs
·
The Group maintains high service levels and close
contact with its customers to ensure that their needs are being met
satisfactorily. This includes continuing to invest in e-commerce
and digital platforms to enhance further its service offering to
customers
·
The Group maintains strong relationships with a
variety of different suppliers, thereby enabling the Group to offer
a broad range of products to its customers, including own brand
products, in a consolidated one-stop-shop offering at competitive
prices
|
· The Group's large sales force connected with customers to help
them understand the range of products available to meet their
needs
· The Group continued to invest in technology to streamline
customers' experience
· The Group continued to develop its sustainable product
assortment and tools to assist customers in meeting their
sustainability goals
|
|
2. Financial
collapse of either a large customer and/or a significant
number of small customers
Revenue and profits are reduced as
the Group loses customers
Risk owner:
CEO and Business Area
Heads
Change to risk level: No change
Included in viability statement: Yes
O
|
·
An unexpected insolvency of either a large
customer or a significant number of small customers, particularly
within the retail and foodservice sectors, could lead to a sudden
reduction in revenue and profits, including the cost of impairing
any irrecoverable receivables balances, as well as operating margin
erosion due to under-used capacity
·
The Group's revenue and profits may be affected as
well as receivables and inventory (if customer specific inventory
is held)
|
·
The Group monitors significant developments in
relationships with key customers, including credit checks and
limits set for each customer
·
Delegation of authority limits mean that there is
oversight of all material customer contracts at business area and
local level
|
· In 2023 the Group did not encounter material insolvencies of
either a large customer or a significant number of smaller
customers. However, this remains a significant risk given the
potential for global economic downturn
· In 2023, provisions relating to the Group's credit exposure
from customers remained broadly unchanged
·
|
|
3. Product cost
deflation
Revenue and profits are reduced
due to the Group's need to pass on cost price reductions
Risk owner:
CEO and Business Area
Heads
Change to risk level:
Increasing
Included in viability statement: Yes
O, M
|
·
In the event of a reduction in the cost of
products bought by the Group, due to suppliers passing on lower
commodity prices (such as plastic or paper) or other price
reductions, lower trade tariffs and/or foreign currency
fluctuations, coupled with actions of competitors or customers,
indexed or cost plus contracts may require the Group to pass on
such cost reductions to customers, resulting in a reduction in the
Group's revenue and profits
·
Operating profits may also be lower due to the
above factors if operating costs are not reduced commensurate with
the reduction in revenue
|
·
The Group uses its considerable experience in
sourcing and selling products to manage prices during periods of
deflation in order to minimise the impact on profits
·
Focus on the Group's own brand products, together
with the reinforcement of the Group's service and product offering
to customers, helps to minimise the impact of price
deflation
·
The Group continually looks at ways to improve
productivity and implement other efficiency measures to manage and,
where possible, reduce its operating costs
|
· In 2023 the Group experienced a higher level of price
volatility compared to recent years. During the second half of
2023, the Group began experiencing product cost deflation,
particularly in North America. The outlook for product costs,
however, remains uncertain
|
|
4. Cost inflation
Profits are reduced due to the
Group's inability to pass on product or operating cost
increases
Risk owner:
CEO and Business Area
Heads
Change to risk level:
Decreasing
Included in viability statement: Yes
O, M
|
·
Significant or unexpected cost increases by
suppliers, due to the pass through of higher commodity prices (such
as plastic or paper) or other price increases, higher trade tariffs
and/or foreign currency fluctuations, could adversely impact
profits if the Group is unable to pass on such product cost
increases to customers
·
Operating profits may also be lower due to the
above factors if selling prices are not increased commensurate with
the increases in operating costs
|
·
The Group sources its products from a number of
different suppliers based in different countries so that it is not
dependent on any one source of supply for any particular product,
or overly exposed to a particular country changing trade tariffs,
and can purchase products at the most competitive prices
·
The majority of the Group's transactions are
carried out in the functional currencies of the Group's operations,
but for foreign currency transactions some forward purchasing of
foreign currencies is used to reduce the impact of short term
currency volatility
·
The Group will, where possible, pass on price
increases from its suppliers to its customers
·
The Group continually looks at ways to improve
productivity and implement other efficiency measures to manage and,
where possible, reduce its operating costs
|
· The Group experienced significant product cost inflation in
recent years. Selling prices to customers were continually
evaluated and updated to ensure that profitability levels were at
least maintained
· The Group's ongoing focus on own brand product development was
an important part of the discussion with customers about price
increases
· Overall, the Group was very successful in passing on product
cost inflation, which has eased considerably during 2023
· Inflation in operating costs remained elevated in 2023, but
has started to normalise during the year
· To mitigate the operating costs increases the Group drives
efficiencies by consolidating facilities and implementing IT
systems and solutions to improve productivity
|
|
5. Inability to make further acquisitions
Profit growth is reduced from the
Group's inability to acquire new companies
Risk owner:
CEO and Business Area
Heads
Change to risk level:
No change
Included in viability statement: Yes
A
|
·
Acquisitions are a key component of the Group's
growth strategy and one of the key sources of the Group's
competitive advantage, having announced 214 acquisitions since
2004
·
Insufficient acquisition opportunities, through a
lack of availability of suitable companies to acquire or an
unwillingness of business owners to sell their companies to Bunzl,
could adversely impact future profit growth
|
·
The Group maintains a large acquisition database
which continues to grow with targets identified by managers of
current Bunzl businesses, research undertaken by the Group's
dedicated and experienced in-house corporate development team and
information received from banking and corporate finance
contacts
·
The Group has a strong track record of
successfully making acquisitions. At the same time the Group
maintains a decentralised management structure which facilitates a
strong entrepreneurial culture and encourages former owners to
remain within the Group after acquisition, which in turn encourages
other companies to consider selling to Bunzl
|
· The acquisition pipeline is closely monitored with continued
research of any available opportunities for investment
· During 2023, the Group's committed acquisition spend was £468
million and the pipeline remains active
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6. Unsuccessful acquisition
Profits are reduced, including by
an impairment charge, due to an unsuccessful acquisition or
acquisition integration
Risk owner:
CEO and Business Area
Heads
Change to risk level:
No change
Included in viability statement: Yes
O, A
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·
Inadequate pre-acquisition due diligence related
to a target company and its market, or an economic decline shortly
after an acquisition, could lead to the Group paying more for a
company than its fair value
·
Furthermore, the loss of key people or customers,
exaggerated by inadequate post-acquisition integration of the
business, could in turn result in underperformance of the acquired
company compared to pre-acquisition expectations which could lead
to lower profits as well as a need to record an impairment charge
against any associated intangible assets
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·
The Group has established processes and procedures
for detailed pre-acquisition due diligence related to acquisition
targets and the post-acquisition integration thereof
·
The Group's acquisition strategy is to focus on
those businesses which operate in sectors where it has or can
develop competitive advantage and which have good growth
opportunities
·
The Group endeavours to maximise the performance
of its acquisitions through the recruitment and retention of high
quality and appropriately incentivised management combined with
effective strategic planning, investment in resources and
infrastructure and regular reviews of performance by both business
area and Group management
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· The acquisition pipeline is reviewed by Exco, and for any new
acquisitions that are proposed, the Board reviews the potential
acquisition in detail
· The CEO and the CFO review the performance of all acquisitions
with business area management teams on a quarterly basis
· Internal Audit reviews acquisitions within 12 to 18 months of
the sale
· The Board reviews performance of recent acquisitions annually.
In 2023, the Board reviewed the principal acquisitions made in 2021
and noted that performance was in line with expectations
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7. Sustainability driven market
changes
Revenue and profits are reduced
due to the Group's inability to offer sustainable products in
response to changes in legislation, consumer preferences or the
competitive environment
Risk owner:
CEO and Business Area
Heads
Change to risk level:
No change
Included in viability statement: Yes
O, S
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·
New legislation introduced outside Europe and the
UK in countries where Bunzl operates mirrors (and in some cases
goes further than) the legislation previously introduced in Europe
and the UK. The scope of new legislation tends to cover a wider
range of products than that previously introduced. Legislation
related to packaging still remains extremely fragmented across
different regions
·
Some legislation seeking to restrict the use of
plastics has been challenged and overturned in Court. However, it
can be expected that the legislation will be reintroduced in some
form and as such it is not anticipated that there will be a
widespread removal of the legislative measures already in place
across the Group
·
Consumer sentiment and customer targets are likely
to lead to a reduction in demand for single-use plastic-based
products that the Group sells while, at the same time, increase
demand for renewable, recyclable or reusable
alternatives
·
The Group's revenue and profits could be reduced
if it is unable to offer packaging and products made from
alternative materials that will replace products that cannot be
sold due to legislation, or products where demand is lower due to
changes in consumer preferences, for example a move to more
reusable packaging
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·
Bunzl is well positioned to support its customers
with the legislative complexity thanks to its material agnostic
position and network strength, allowing it to deliver the right
products across large multi-site customer operations
·
Bunzl's scale and unique position at the centre of
the supply chain, supported by expert sustainability managers,
gives the Group an opportunity to provide customers with advice
about alternative products which are recyclable, compostable,
biodegradable or reusable
·
The Group has access to an extensive supply chain
of product and packaging manufacturers who are innovating the range
of products they produce to satisfy the increased focus on
sustainability. This means the Group can offer the broadest
possible range of products whether in response to legislative
changes, consumer preference driven changes or a desire to offer
market-leading products to the Group's customers
·
The Group has access to the proprietary data on
the packaging and products our customers need. That coupled with
the Group's detailed product knowledge and data on customer product
usage, ensures that the Group is well-positioned to be able to
support its customers in shaping and achieving their sustainability
strategies
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· The majority of the Group's businesses in the retail,
foodservice and grocery sectors now employ material footprint tools
that explain how legislation will impact the products and packaging
a customer uses, while promoting the alternatives we have in our
ranges
· In response to a larger number of customers setting
increasingly ambitious targets for their packaging, the Group has
continued to strengthen its expert sustainability teams who train
customers on incoming legislation, hold customer forums where they
showcase the latest products, and support customers to report
effectively against their goals and participation in
industry-leading external schemes such as the New Plastics Economy
and B-Corp certification
· The Group continued to expand and introduced new ranges of own
brand products made from alternative materials
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Operational
risks
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8. Cyber security failure
Revenue and profits are reduced as
the
Group is unable to operate and
serve its customers' needs due to being impacted by a
cyber-attack
Risk owner:
CIO
Change to risk level:
No change
Included in viability statement: Yes
O, M
|
·
The frequency, sophistication and impact of
cyber-attacks on businesses are rising at the same time as Bunzl is
increasing its connectivity with third parties and its digital
footprint through acquisition and investment in e-commerce
platforms and efficiency enhancing IT systems
·
Weak cyber defences, both now and in the future,
through a failure to keep up with increasing cyber risks and
insufficient IT disaster recovery planning and testing, could
increase the likelihood and severity of a cyber-attack leading to
business disruption, reputational damage and loss of customers
and/or a fine under applicable data protection
legislation
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·
Concurrent with the Group's IT investments, the
Group is continuing to improve information security policies and
controls to improve its ability to monitor, prevent, detect and
respond to cyber threats
·
Cyber security awareness campaigns have been
deployed across all regions to enhance the knowledge of Bunzl
personnel and their resilience to phishing attacks
·
IT disaster recovery and incident management
plans, which would be implemented in the event of any such failure,
are in place and periodically tested. The Group Chief Information
Officer and Chief Information Security Officer coordinate activity
in this area
|
· The Group continued to improve cyber security and data privacy
governance, architecture, and controls, along with increasing
awareness of both cyber security and data privacy across the
Group
· Investments were made in modern cyber security technologies
that address current and emerging threats while improving
operational processes and procedures
· The Group focused on improving cyber security and data privacy
due diligence processes during the acquisition process, along with
improving security posture for acquired companies
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Financial risks
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9. Availability of funding
Insufficient liquidity in
financial markets leading to insolvency
Risk owner:
CFO
Change to risk level:
No change
Included in viability statement: Yes
O, A, M
|
·
Insufficient liquidity in financial markets could
lead to banks and institutions being unwilling to lend to the
Group, resulting in the Group being unable to obtain necessary
funds when required to repay maturing borrowings, thereby reducing
the cash available to meet its trading obligations, make
acquisitions and pay dividends
|
·
The Group arranges a mixture of borrowings from
different sources and continually monitors net debt and forecast
cash flows to ensure that it will be able to meet its financial
obligations as they fall due and that sufficient facilities are in
place to meet the Group's requirements in the short, medium and
long term
|
· The availability of funding to the Group remains
strong
· During 2023, £365m of bank facilities were signed with
maturities between 2026 and 2028. The group expects to extend and
finance additional bank facilities during 2024. There is £130m of
debt maturing in the next 12 months which can be repaid from free
cash flow. The group maintains a BBB+ rating from S&P and
therefore access to the Eurobond public market
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10. Currency translation
Significant change in foreign
exchange rates leading to a reduction in reported results and/or a
breach of banking covenants
Risk owner:
CFO
Change to risk level:
No change
Included in viability statement: No
O, A, M
|
·
The majority of the Group's revenue and profits
are earned in currencies other than sterling, the Group's
presentation currency
·
As a result, a significant strengthening of
sterling against the US dollar and the euro in particular could
have a material translation impact on the Group's reported results
and/or lead to a breach of net debt to EBITDA banking
covenants
|
·
The Group does not hedge the impact of exchange
rate movements arising on translation of earnings into sterling at
average exchange rates. The Board believes that the benefits of its
geographical spread outweigh the risks
·
The Group's borrowings are denominated in US
dollars, sterling and euros in similar proportions to the relative
profit contribution of each of these currencies to the Group's
EBITDA. This reduces the volatility of the ratio of net debt to
EBITDA from foreign exchange movements. In addition, net debt for
the purposes of covenant calculations in the Group's financing
documents is calculated using average rather than closing exchange
rates. Consequently, any significant movement in exchange rates
towards the end of an accounting period should not materially
affect the ratio of net debt to EBITDA. Both these factors minimise
the risk that banking covenants will be breached as a result of
foreign currency fluctuations
|
· In 2023 currency translation had a small positive impact on
the Group's reported profits, increasing the reported profit growth
rates by between 0% and 3%
· The Group's results are reviewed at constant exchange rates to
show the underlying performance of the Group excluding the currency
translation impact
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11. Climate change
Change in temperature and climate
conditions that causes business disruption and economic loss for
the Group
Risk owner:
CEO and Business Area
Heads
Change to risk level:
No change
Included in viability statement: No
O, M, S
|
·
Certain markets and regions are increasingly
affected by extreme weather (e.g. suppliers and customers in areas
impacted by wildfires and flooding) which could impact the Group's
commercial strategy
·
Failing to align with our customers' ambitions
could lead to reputational damage and loss of sales
·
The Group may face increased indirect costs from
carbon intensive products where carbon prices increase and no
suitable substitute materials exist
|
·
Bunzl's supply chain flexibility and lack of fixed
manufacturing assets provide operational resilience to the physical
impacts of climate change. Our established business continuity
planning has helped to ensure continued service to customers in
cases of weather-related disruptions, such as hurricanes in North
America and the Australian wildfires
·
Setting emissions reduction targets to decarbonise
our operations and those of the supply chain helps to ensure our
activities meet or exceed customer expectations
·
The ability to pass through any increased costs of
products in our supply chain (for example due to carbon pricing
mechanisms) to our customers
·
Bunzl assesses and monitors the impact of climate
change on GDP at the regional level, the impact of carbon pricing
on total supply chain carbon dioxide emissions, and the trajectory
of the reduction of carbon emissions over time based on data from
the Network for Greening the Financial System (NGFS)
|
· The Group's modelling of the impact of climate change has been
updated to include the latest data available from the Network for
Greening the Financial System (NGFS)
· The Group has re-evaluated the different transition scenarios
in light of COP27 and other commitments by leading nations and has
concluded that there should be no changes made to the likelihood of
the scenarios
|
20.
Forward-looking statements
This announcement contains certain
statements about the future outlook for the Group. Although the
Company believes that the expectations are based on reasonable
assumptions, any statements about future outlook may be influenced
by factors that could cause actual outcomes and results to be
materially different.
21. Responsibility statements
The Annual Report, which includes
the financial statements, complies with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority in respect of the requirement to produce an annual
financial report.
Each of the directors, whose names
and functions are set out in the 2023 Annual Report, confirm that,
to the best of their knowledge:
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•
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the Group financial statements,
which have been prepared in accordance with UK-adopted
International Accounting Standards and International Financial
Reporting Standards issued by the IASB, give a true and fair view
of the assets, liabilities, financial position and profit of the
Group;
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•
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the Company financial statements,
which have been prepared in accordance with United Kingdom
Accounting Standards, comprising FRS 101, 'Reduced Disclosure
Framework', give a true and fair view of the assets, liabilities,
financial position and profit of the Company; and
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•
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the Annual Report includes a fair
review of the development and performance of the business and the
position of the Group and Company, together with a description of
the principal risks and uncertainties that they face.
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On behalf of the Board
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Frank van Zanten
Chief Executive Officer
26 February 2024
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Richard Howes
Chief Financial Officer
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