Interim Results
Bunzl PLC
28 August 2007
Tuesday 28 August 2007
INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2007
Bunzl plc, the international distribution and outsourcing Group, today announces
its interim results for the six months ended 30 June 2007.
• Revenue was £1,725.6 million (2006: £1,603.2 million), up 14% at
constant exchange rates
• Operating profit before intangible amortisation was £111.7 million
(2006: £104.8 million), up 13% at constant exchange rates
• Profit before tax and intangible amortisation was £100.3 million (2006:
£97.8 million), up 9% at constant exchange rates
• Profit before tax was £89.1 million (2006: £88.1 million), up 8% at
constant exchange rates
• Earnings per share were 18.3p (2006: 17.5p), up 12% at constant exchange
rates
• Adjusted earnings per share* were 20.7p (2006: 19.3p), up 14% at
constant exchange rates
• Interim dividend up 9% to 5.8p
Other highlights include:
• Underlying operating margin* excluding acquisitions up from 6.5% to 6.8%
• Competition clearance obtained for King Benelux acquisition which is
expected to complete this week
• Recent acquisitions of King Benelux and Coffee Point take 2007
acquisition spend to over £140 million
• £90 million spent year to date on share buy back
* before intangible amortisation
Commenting on today's results, Anthony Habgood, Chairman of Bunzl, said:
'These are good results from Bunzl. They combine strong revenue growth with
improving underlying margins and a good level of acquisition spend. They
position the Group well for the future.'
Michael Roney, Chief Executive of Bunzl, said:
'I am very pleased to report that in the first half we have delivered double
digit growth at constant exchange rates in revenue, operating profit and
adjusted earnings per share. This growth, together with the two recently
announced acquisitions of King Benelux and Coffee Point, give us a strong
platform and momentum for further success.'
Enquiries:
Bunzl plc Tulchan
Michael Roney, Chief Executive David Allchurch
Brian May, Finance Director Stephen Malthouse
Tel: 020 7495 4950 Tel: 020 7353 4200
Note:
A webcast of today's presentation to analysts will be available on www.bunzl.com
by 12 noon today
CHAIRMAN'S STATEMENT
In our 50th year as a listed company on the London Stock Exchange, I am pleased
to announce that overall trading in the first half of 2007 has continued to be
strong with revenue of £1,725.6 million (2006: £1,603.2 million), up 14% at
constant exchange rates. This increase was the result of a combination of
organic growth and acquisition activity. The translation effect of the weak US
dollar, which averaged $1.97 compared to $1.79 in 2006, caused a 6% reduction in
the sales increase from 14% to 8%. Once again demonstrating our strength across
our international markets, all four geographic business areas showed increased
revenues in local currencies over the comparable period last year.
Operating profit before intangible amortisation was £111.7 million (2006: £104.8
million), up 13% at constant exchange rates with each business area ahead of
2006. Profit before tax increased to £89.1 million (2006: £88.1 million), up 8%
at constant exchange rates. This was impacted by an increase of 63% in the
interest charge to £11.4 million as a result of higher interest rates combined
with a higher level of debt, due to both acquisitions and the purchase of
shares, and amortisation up 15% as a result of acquisition activity. With less
shares in issue, due to the ongoing buy back programme, earnings per share rose
to 18.3p (2006: 17.5p), up 12% at constant exchange rates. Adjusted earnings per
share, after eliminating intangible amortisation, increased to 20.7p (2006:
19.3p), up 14% at constant exchange rates. We have continued with the share buy
back during the second half and have bought 12.7 million shares into treasury in
the year to date at a cost of £90 million. We are currently expecting to spend a
total of about £100 million during the year.
Strategy
We continue to pursue our well defined strategy of focusing on our strengths and
consolidating our markets while also logically extending the product and
geographic areas in which we compete both organically and by acquisition.
Expanding our geographic spread, increasingly co-ordinating our procurement and
international sourcing and continually redefining and deepening our commitment
to our customers and markets remain important ongoing elements of our success.
Delisting from the New York Stock Exchange
In June the Company delisted its American Depositary Shares (ADSs) from the New
York Stock Exchange and ended the registration of its securities under the
Securities Exchange Act of 1934. The Board believed that the administrative
burden and costs associated with the ADSs and the Exchange Act registration
outweighed the benefits to the Company and its shareholders.
Dividend
The Board has decided to increase the interim dividend by 9% to 5.8p (2006:
5.3p). Shareholders will again be able to participate in our dividend
reinvestment plan.
Board
We have recently added to the independent element of our Board with the
appointment of David Sleath as a non-executive director with effect from
September. David is Group Finance Director of SEGRO plc. A former partner at
Arthur Andersen, he was Finance Director of Wagon plc before joining SEGRO in
2005. He has a strong finance background and broad international experience and
we welcome him to the Board.
CHIEF EXECUTIVE'S REVIEW
Operating performance
The translation effects of the weak US dollar and overall currency movements
significantly reduced the reported growth rates of revenue and operating profit.
The operations, including the relevant growth rates, are therefore reviewed
below at constant exchange rates to remove the distorting impact of these
currency movements and, unless otherwise stated, in this review references to
operating profit are to operating profit before intangible amortisation. The
following table compares the half year growth rates of revenue and operating
profit as reported in sterling with those at constant exchange rates:
Actual exchange rates Constant exchange rates
Operating erating
Revenue profit* Revenue profit*
% Growth % Growth % Growth % Growth
-------------------------------------------------------------------------------
North America -3 -6 +7 +4
UK & Ireland +40 +26 +40 +26
Continental Europe +5 +17 +6 +18
Australasia +10 +15 +12 +15
Group +8 +7 +14 +13
-------------------------------------------------------------------------------
*Before intangible amortisation
Changes in the level of revenue and profits at constant exchange rates have been
calculated by retranslating the results for the six months to 30 June 2006 at
the average exchange rates used for the six months to 30 June 2007.
Revenue was £1,725.6 million, up 14%, and operating profit was £111.7 million,
up 13%. While the overall operating margin was steady at 6.5%, the operating
margin excluding the impact of acquisitions rose by 30 basis points from 6.5% to
6.8%.
In North America revenue and operating profit rose by 7% and 4% respectively,
with the lower level of profit increase largely due to the impact of lower
margin acquisitions made in the second half of 2006. In the UK & Ireland revenue
increased by 40% while operating profit rose less, by 26%, as a result of the
impact of Southern Syringe which has improved margins during the first half but,
on acquisition in July 2006, was operating at margins much lower than the
business area average. Revenue in Continental Europe was up 6% with an operating
profit increase of 18% due to margin improvements in France and elsewhere in the
region. In Australasia the revenue and operating profit increased by 12% and 15%
respectively due principally to good organic growth with some new contract wins.
Operating cash generation partly funded our ongoing share buy back activity of
£72.6 million and acquisition
spend of £19.2 million during the first half. As a result our net debt rose from
£430.7 million at the year end to £495.4 million with a net debt to EBITDA ratio
of just under two times.
Return on operating capital was down marginally to 60.8% compared to 62.7% in
the first half of 2006 and 61.7% for the year, due to the impact of recent
acquisitions which have been operating at lower returns.
Acquisitions
Following the acquisition of King Benelux and Coffee Point, spend on
acquisitions to date will be over £140 million adding annualised revenue in
excess of £150 million.
In January we announced two acquisitions in North America. Tec Products, with
revenue of $14 million in 2006, is principally engaged in the supply of jan/san
and associated products through distributors. We also purchased Westgate which
is a supplier of personal protection equipment through distributors in the
eastern US and Canada and had revenue of $18 million in 2006. At the end of
February we acquired Iberlim based in Barcelona, Spain with revenue of €9
million in 2006. This distributor of cleaning and hygiene products marks our
entry into the promising Spanish market. In mid-August we completed the purchase
of Coffee Point, a growing vending business based in London with revenue of £45
million in the year ended March 2007. This substantially increases the size of
our vending business which is now the largest vending operator in the UK.
Finally, clearance from the relevant competition authority has now been obtained
for the acquisition of King Benelux, announced in July, which had proforma
revenue in 2006 of €125 million. The business is principally engaged in the
distribution of products to the healthcare and contract cleaning sectors in the
Netherlands and the foodservice, retail and healthcare sectors in Belgium. This
is an important strategic acquisition, which we expect to complete shortly,
since it will not only expand our successful business in the Netherlands into
the healthcare and contract cleaning sectors but will also provide a significant
business in Belgium.
Prospects
We are well positioned in the markets where we compete and the opportunities for
continued growth both organically and by acquisition remain good. In North
America, although we anticipate that growth will remain below that of the other
business areas for the rest of the year, margins from the larger acquisitions
made in 2005 and 2006 are expected to improve and the 2007 acquisitions are
integrating well. In the UK & Ireland good organic growth should continue,
resulting from increased volumes and new customers. Southern Syringe, while
operating at lower than the business area average margins, is continuing to
improve and the results for the year should be well ahead of our initial plan.
The performance of Keenpac, acquired in December 2006, is proceeding in line
with expectations. Organic growth in Continental Europe should continue to be
strong especially in the countries outside France and we remain confident that
our operational initiatives recently implemented in France will continue to
improve the business. Organic growth in Australasia is expected to remain strong
and the 2006 acquisitions are continuing to develop well. The recent
acquisitions of King Benelux and Coffee Point will also contribute to the
results in the second half.
The current value of the US dollar is somewhat weaker than the average for the
second half of 2006 and, should that continue, although the adverse impact will
be less in the second half than it has been in the first six months, it would
have a negative translation effect on our full year results for 2007. Given our
strong competitive position in the markets in which we operate, the Board is
confident that the Group will continue to develop in a positive way.
North America
A combination of acquisitions and organic growth contributed to a US dollar
increase in revenue of 7% and in operating profit of 4%. In a mixed input
pricing environment, competitive pricing pressure and slower economic growth
impacted our results as compared to a very strong first half in 2006. In
particular our businesses serving redistribution, non-food retail and
convenience stores grew well through the continued development of new
opportunities.
Early in the year two acquisitions were completed that have augmented our
growing redistribution business. New Jersey-based Tec Products is principally
engaged in the supply of jan/san and associated products while Westgate, also
based in New Jersey, has advanced our safety products and PPE redistribution
business. These follow the acquisitions of Morgan Scott, UASI and Cole Harford
in the second half of 2006 that are integrating well into our business.
The demand for redistribution of disposable packaging products for the
foodservice and jan/san sectors has grown in recent years, due partly to the
increase in suppliers' distribution costs, and our most recent acquisitions have
been more concentrated in this area. Recognising that we need to organise these
and previous acquisitions together into one business, we have combined
Papercraft, our long standing redistribution business, with more recently
acquired brands into a new, dynamic organisation. Based in Chicago, this
provides comprehensive redistribution services under the name R3 which stands
for Reliable Redistribution Resource. This development gives us the ability to
fulfil redistribution orders and manage the supply chain more efficiently and
cost effectively. A new marketing support programme is underway with a customer
friendly R3 website and a new R3 catalogue. Customer feedback to date has been
positive.
Forty managers have now been certified as master trainers under the VIP (value,
integrity and performance) training programme. We are currently evaluating
additional training for sales representatives that will reinforce what they
learned in VIP, as well as take them to the next level to drive sales and
increase margins. VIP training has also recently been expanded to all customer
service and purchasing personnel.
Promoting an exceptional safety culture is of the utmost importance. Our goal is
to achieve a significant reduction in accidents, temporary personnel costs and
insurance premiums. Beginning with our drivers and warehouse personnel, we are
increasing safety awareness in all our locations through training, on-site
audits and award programmes.
Although fuel costs have now stabilised, they remain high and standardised
practices and procedures for our drivers have been implemented to improve fuel
economy. Our environmental initiatives are continuing to move forward. Many
branches conserve natural resources by recycling paper and we are investigating
recycling the plastic and cardboard waste from our warehouse operations. The
installation of high efficiency, low energy lights will reduce our operating
costs and conserve energy in locations where we have new leases or move to new
facilities. We have also made available to our customers a broad range of
products considered to be environmentally friendly. We will continue to build
this programme and adapt it to our customers' needs.
We continue to develop further paperless systems to reduce our administration
costs. Our e-warehouse radio frequency, scan-based technology is currently live
in nearly two dozen branch locations. This technology increases warehouse
efficiencies, reduces costs and improves customer service and has allowed us to
meet the e-commerce and labelling requirements of several large national
customers.
UK & Ireland
The benefit of acquisitions completed in 2006, together with customer wins and
operational initiatives and restructuring, has led to significant revenue growth
of 40% and operating profit growth of 26%.
Our retail supplies business had a good start to the year helped partly by
account wins achieved last year. We successfully renewed one of our largest
contracts and expanded into additional product categories with another existing
customer that will benefit the second half. The acquisition of Keenpac in
December extended our product offering to premium retail packaging. The business
has continued to develop since acquisition due to a new contract with a leading
supermarket and additional luxury brand customers.
Following a difficult 2006, the hotel, restaurant and catering (horeca) business
has benefited from the restructuring activity undertaken last year. With an
improved operational base we have won significant new business and a major
restaurant contract has been renewed with additional product categories awarded
for the second half. Operational improvements are continuing and, after a
successful pilot, a new vehicle routing and loading system is being rolled out
to improve fuel and vehicle usage.
The cleaning and safety businesses also performed well with additional account
wins and the impact of the new Essex warehouse opened last year. The cleaning
and hygiene business has started the transition to the safety business's
computer system and this will be completed by the end of 2007. Greenham, our UK
safety business, renewed its largest contract which is within the public sector
and continues to grow within the construction sector securing another
significant national account during the period.
In Ireland the horeca business continued to grow despite fewer new hotel
openings. The cleaning and safety business benefited from the rationalisation to
a single site at the end of the first half last year. The retail business, which
was refocused under new management at the end of 2006, had a positive start to
the year with new customer wins and the appointment of a sales manager to
promote the Keenpac range.
Our vending business benefited from Midshires which was acquired early last year
and work is underway to introduce a new computer system across the business that
will improve operating efficiencies. The recently completed acquisition of
Coffee Point, which has a reputation for providing excellent service and
innovative products with a strong and growing customer base, has expanded our
business to become the largest vending operator in the UK.
The revenue for both our healthcare business and for the business area overall
was significantly enhanced by the acquisition of Southern Syringe at the
beginning of July 2006. While we have not yet finished the integration, with the
IT system implementation still in progress, costs are under control, operating
margins have improved and performance is well ahead of our initial plan.
Continental Europe
At constant exchange rates revenue increased by 6% and operating profit rose by
18% as good organic sales growth was accompanied by both improved margins and
tight cost control.
The cleaning and hygiene business in France experienced strong margin
improvement and improved cost efficiencies against a background of difficult
market conditions resulting in slower sales growth compared to the rest of
Continental Europe. Sales of our Techline own brand products have continued to
grow well and the product range has been extended. Investment in a new IT system
continues and the first locations have gone live. Improved margins and cost
control have also enabled our personal protection equipment/safety products
business in France to increase profits during the period.
In the Netherlands our retail business continues to generate excellent results
from strong organic growth following contract wins and extensions to the product
range. Our horeca business also continues to deliver strong organic growth and
has won a number of new accounts. The business in the Netherlands will be
expanded considerably by the acquisition of King Benelux which will extend the
business into the healthcare and contract cleaning sectors and also provide a
significant business in Belgium.
In Germany, revenue growth was good despite increased competition and the
exceptional benefits in 2006 from the FIFA World Cup. Improvement has come in
particular from regional accounts and tight cost control which has led to
improved returns.
The retail business in Denmark has continued to deliver good profit growth
following recent account wins in higher margin sectors. Our business supplying
horeca customers has also achieved above average sales growth and improved
margins.
Our businesses in central Europe are performing very strongly and are benefiting
from the roll-out of a new IT system. Beltex, our cleaning and safety products
business in Hungary and Romania, has enjoyed high levels of organic sales growth
as well as delivering improved margins. Tecep, our retail business covering the
main central European countries, has also delivered improved returns on high
levels of organic growth.
Iberlim, our cleaning and hygiene business in Spain acquired at the end of
February, is performing in line with expectations.
Australasia
During the first half revenue increased by 12% and operating profit rose by 15%
at constant exchange rates due principally to strong organic growth.
Our largest business benefited from new contract wins within its core sectors of
healthcare, industrial, horeca and retail across the region. During the second
half of last year we expanded into the catering equipment sector, where the
product range complements our already strong and growing position within horeca
and healthcare, and this business has continued to develop during the first
half.
Our food processor supplies businesses, Lesnies and Allcare, have progressed
despite the effects of the drought conditions throughout most of Australia.
Allcare has increased its market coverage and service offering by utilising the
national infrastructure of Lesnies. These two businesses are complementary in
this sector and this creates opportunities for wider distribution of existing
product categories.
Our specialist healthcare supplies business, Sanicare, has introduced an
electronic ordering and reporting system which will enhance their offering as a
market leader in the aged care sector.
To support our organic growth objectives we have recently introduced the VIP
sales training programme to our national salesforce following its success in
North America. We are confident that this programme will benefit our sales teams
by improving the skills and techniques required to establish and maintain
preferred relationships with our key customers.
Consolidated income statement
Growth
Six months to Six months to Actual Constant Year to
30.6.07 30.6.06 exchange exchange 31.12.06
Notes £m £m rates rates £m
------------------------------------------------------------------------------------------
Revenue 2 1,725.6 1,603.2 8% 14% 3,333.2
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Operating profit before
intangible amortisation 111.7 104.8 7% 13% 226.3
------------------------------------------------------------------------------------------
Intangible amortisation (11.2) (9.7) (19.9)
------------------------------------------------------------------------------------------
Operating profit 2 100.5 95.1 6% 12% 206.4
Finance income 3 10.1 9.5 19.6
Finance cost 3 (21.5) (16.5) (36.3)
------------------------------------------------------------------------------------------
Profit before income
tax 89.1 88.1 1% 8% 189.7
------------------------------------------------------------------------------------------
Profit before income
tax and intangible
amortisation 100.3 97.8 3% 9% 209.6
------------------------------------------------------------------------------------------
UK income tax (5.7) (5.3) (9.1)
Overseas income tax (22.5) (22.8) (51.2)
------------------------------------------------------------------------------------------
Total income tax 4 (28.2) (28.1) (60.3)
------------------------------------------------------------------------------------------
Profit for the period 60.9 60.0 2% 8% 129.4
------------------------------------------------------------------------------------------
Earnings per share
Basic 6 18.3p 17.5p 5% 12% 37.8p
------------------------------------------------------------------------------------------
Diluted 6 18.1p 17.4p 4% 11% 37.5p
------------------------------------------------------------------------------------------
Proposed dividend
per share relating
to the period 5.8p 5.3p 9% 9% 17.0p
------------------------------------------------------------------------------------------
Consolidated statement of recognised income and expense
Six months to Six months to Year to
30.6.07 30.6.06 31.12.06
£m £m £m
-------------------------------------------------------------------------------
Profit for the period 60.9 60.0 129.4
Actuarial gain on pension schemes 12.6 20.0 17.4
Deferred tax on actuarial gain (3.8) (6.2) (5.5)
Currency translation differences* 3.3 (3.3) (7.1)
Loss recognised in cash flow hedge
reserve (0.3) (0.3) (0.3)
Movement from cash flow hedge
reserve to income statement 0.3 (0.3) (0.3)
-------------------------------------------------------------------------------
Net income recognised directly in
equity 12.1 9.9 4.2
-------------------------------------------------------------------------------
Total recognised income for the
period 73.0 69.9 133.6
-------------------------------------------------------------------------------
*Currency translation differences for the six months to 30 June 2007 of £3.3m
(six months to 30 June 2006: £(3.3)m; year to 31 December 2006: £(7.1)m) are net
of losses of £0.3m (six months to 30 June 2006: gains of £9.1m; year to 31
December 2006: gains of £17.6m) taken to equity as a result of designated
effective net investment hedges.
Consolidated balance sheet 30.6.07 30.6.06 31.12.06
£m £m £m
-------------------------------------------------------------------------------
Assets
Property, plant and equipment 76.3 72.7 74.3
Intangible assets 784.4 699.1 776.7
Derivative assets 2.1 - 5.4
Deferred tax assets 1.0 9.0 4.1
-------------------------------------------------------------------------------
Total non-current assets 863.8 780.8 860.5
Inventories 280.7 247.2 290.8
Income tax receivable 1.7 2.1 2.7
Trade and other receivables 534.2 468.4 521.2
Derivative assets 0.1 0.6 0.1
Cash and deposits 39.2 66.6 49.0
-------------------------------------------------------------------------------
Total current assets 855.9 784.9 863.8
-------------------------------------------------------------------------------
Total assets 1,719.7 1,565.7 1,724.3
-------------------------------------------------------------------------------
Equity
Share capital 112.3 111.7 112.0
Share premium 123.7 115.8 119.8
Merger reserve 2.5 2.5 2.5
Capital redemption reserve 8.6 8.6 8.6
Cash flow hedge reserve (0.3) (0.3) (0.3)
Translation reserve 4.7 5.2 1.4
Retained earnings 203.6 260.1 244.0
-------------------------------------------------------------------------------
Total equity 455.1 503.6 488.0
Liabilities
Interest bearing loans and borrowings 519.6 289.0 456.9
Retirement benefit obligations 13.8 39.9 37.5
Other payables 4.7 2.0 5.6
Derivative liabilities 2.4 2.2 -
Provisions 47.6 34.3 44.6
Deferred tax liabilities 67.9 72.3 73.0
-------------------------------------------------------------------------------
Total non-current liabilities 656.0 439.7 617.6
Bank overdrafts 11.0 25.0 23.9
Interest bearing loans and borrowings 3.8 49.2 4.3
Income tax payable 49.9 52.0 58.4
Trade and other payables 537.6 490.2 524.5
Derivative liabilities 0.3 0.3 0.7
Provisions 6.0 5.7 6.9
-------------------------------------------------------------------------------
Total current liabilities 608.6 622.4 618.7
-------------------------------------------------------------------------------
Total liabilities 1,264.6 1,062.1 1,236.3
-------------------------------------------------------------------------------
Total equity and liabilities 1,719.7 1,565.7 1,724.3
-------------------------------------------------------------------------------
Consolidated cash flow statement
Six months to Six months to Year to
30.6.07 30.6.06 31.12.06
£m £m £m
-------------------------------------------------------------------------------
Cash flow from operating activities
Profit before income tax 89.1 88.1 189.7
Adjustments for non-cash items:
depreciation 7.4 7.1 14.6
intangible amortisation 11.2 9.7 19.9
share based payments 2.0 1.6 3.0
other (1.3) (0.9) 1.0
Working capital movement (13.0) (17.2) (20.0)
Finance income (10.1) (9.5) (19.6)
Finance cost 21.5 16.5 36.3
Provisions and pensions (4.2) (5.0) (5.7)
Special pension contribution (9.5) - (5.0)
-------------------------------------------------------------------------------
Cash generated from operations 93.1 90.4 214.2
Income tax paid (32.9) (11.4) (40.5)
-------------------------------------------------------------------------------
Cash inflow from operating activities 60.2 79.0 173.7
Cash flow from investing activities
Interest received 2.5 3.4 8.5
Purchase of property, plant and
equipment (9.4) (8.0) (15.8)
Sale of property, plant and equipment 0.9 0.3 4.3
Purchase of businesses (19.2) (24.0) (156.7)
Other investment cash flows - - (1.0)
-------------------------------------------------------------------------------
Cash outflow from investing
activities (25.2) (28.3) (160.7)
Cash flow from financing activities
Interest paid (14.8) (6.0) (24.9)
Dividends paid (17.6) (16.5) (53.3)
(Decrease)/increase in short term loans (0.4) 4.2 (28.5)
Increase/(decrease) in long term loans 69.6 (31.9) 141.4
Net proceeds from employee shares 3.7 5.1 5.2
Purchase of own shares into treasury (72.6) - (63.1)
-------------------------------------------------------------------------------
Cash outflow from financing activities (32.1) (45.1) (23.2)
Net exchange gain/(loss) on cash and
cash equivalents 0.2 (0.7) (1.4)
Increase/(decrease) in cash and cash
equivalents 3.1 4.9 (11.6)
-------------------------------------------------------------------------------
Cash and cash equivalents at start
of period 25.1 36.7 36.7
-------------------------------------------------------------------------------
Increase/(decrease) in cash and cash
equivalents 3.1 4.9 (11.6)
-------------------------------------------------------------------------------
Cash and cash equivalents at end of
period 28.2 41.6 25.1
-------------------------------------------------------------------------------
Notes
1. Basis of preparation
The figures for the six months to 30 June 2007 and 30 June 2006 are unaudited
and do not constitute statutory accounts. However, the auditors have carried out
a review of the figures to 30 June 2007 and their report is set out in the
Independent review report. The comparative figures for the year to 31 December
2006 are not the Company's statutory accounts for the year. Those accounts have
been reported on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was unqualified and did not contain
statements under Section 237(2) or (3) of the Companies Act 1985. The interim
financial information has been prepared on the basis of the accounting policies
set out in the Group's 2006 statutory accounts.
2. Segment analysis
Revenue Operating profit
--------------------------------------------------------------------------------------
Six months to Six months to Year to Six months to Six months to Year to
30.6.07 30.6.06 31.12.06 30.6.07 30.6.06 31.12.06
£m £m £m £m £m £m
---------------------------------------------------------------------------------------------------
North America 905.1 934.3 1,896.8 58.5 62.0 131.2
UK & Ireland 467.2 334.3 774.6 32.1 25.5 59.7
Continental
Europe 291.4 278.3 544.7 24.4 20.9 40.9
Australasia 61.9 56.3 117.1 4.5 3.9 9.6
---------------------------------------------------------------------------------------------------
1,725.6 1,603.2 3,333.2 119.5 112.3 241.4
Corporate (7.8) (7.5) (15.1)
Intangible
amortisation* (11.2) (9.7) (19.9)
---------------------------------------------------------------------------------------------------
1,725.6 1,603.2 3,333.2 100.5 95.1 206.4
---------------------------------------------------------------------------------------------------
*For the six months to 30 June 2007 the intangible amortisation related to North
America £2.9m, UK & Ireland £1.0m, Continental Europe £6.7m and Australasia
£0.6m. For the six months to 30 June 2006 the intangible amortisation related to
North America £2.1m, UK & Ireland £0.4m, Continental Europe £6.7m and
Australasia £0.5m. For the year to 31 December 2006 the intangible amortisation
related to North America £4.8m, UK & Ireland £0.8m, Continental Europe £13.3m
and Australasia £1.0m.
3. Finance income/(cost)
Six months to Six months to Year to
30.6.07 30.6.06 31.12.06
£m £m £m
--------------------------------------------------------------------------------
Deposits 0.3 0.2 1.2
Interest income from foreign
exchange contracts 2.7 3.3 6.2
Foreign exchange gains - - 0.4
Expected return on pension scheme
assets 6.9 5.7 11.6
Other finance income 0.2 0.3 0.2
--------------------------------------------------------------------------------
Finance income 10.1 9.5 19.6
--------------------------------------------------------------------------------
Bank loans and overdrafts (14.8) (10.4) (22.4)
Interest expense from foreign
exchange contracts (0.3) (0.1) (0.3)
Interest charge on pension scheme
liabilities (6.3) (5.8) (12.0)
Other finance expense (0.1) (0.2) (1.6)
--------------------------------------------------------------------------------
Finance cost (21.5) (16.5) (36.3)
--------------------------------------------------------------------------------
4. Income tax
A tax charge of 31.3% (six months to 30 June 2006: 32.0%; year to 31 December
2006: 32.0%) on the profit on underlying operations excluding the impact of
intangible amortisation of £11.2m (six months to 30 June 2006: £9.7m; year to 31
December 2006: £19.9m) and related deferred tax of £3.2m (six months to 30 June
2006: £3.2m; year to 31 December 2006: £6.7m) has been provided based on the
estimated effective rate of tax for the year. Including the impact of intangible
amortisation and related deferred tax, the overall tax rate is 31.6% (six months
to 30 June 2006: 31.9%; year to 31 December 2006: 31.8%). Of the decrease in
these tax rates compared to the rates applied to the prior periods, 0.2% of the
reduction is due to a decrease in deferred tax provisions as a result of the
recently announced change in the UK corporation tax rate to 28% which will take
effect from April 2008.
5. Dividends
Dividends for the period in which they were declared are:
Per share Total
-------------------------------------------------------------------------------------
Six months to Six months to Year to Six months to Six months to Year to
30.6.07 30.6.06 31.12.06 30.6.07 30.6.06 31.12.06
£m £m £m
------------------------------------------------------------------------------------------------
2005 final 10.8p 10.8p 36.5 36.5
2006 interim 5.3p 17.6
2006 final 11.7p 38.6
------------------------------------------------------------------------------------------------
11.7p 10.8p 16.1p 38.6 36.5 54.1
------------------------------------------------------------------------------------------------
The 2007 interim dividend of 5.8p will be paid on 4 January 2008 to shareholders
on the register on 16 November 2007.
6. Earnings per share
Six months to Six months to Year to
30.6.07 30.6.06 31.12.06
£m £m £m
-------------------------------------------------------------------------------
Profit for the period 60.9 60.0 129.4
Adjustment 8.0 6.5 13.2
-------------------------------------------------------------------------------
Adjusted profit* 68.9 66.5 142.6
-------------------------------------------------------------------------------
Basic weighted average ordinary
shares in issue (million) 333.1 343.7 342.1
Dilutive effect of employee share
plans (million) 2.7 1.5 2.6
-------------------------------------------------------------------------------
Diluted weighted average ordinary
shares (million) 335.8 345.2 344.7
-------------------------------------------------------------------------------
Basic earnings per share 18.3p 17.5p 37.8p
Adjustment 2.4p 1.8p 3.9p
-------------------------------------------------------------------------------
Adjusted earnings per share* 20.7p 19.3p 41.7p
-------------------------------------------------------------------------------
Diluted basic earnings per share 18.1p 17.4p 37.5p
-------------------------------------------------------------------------------
*Adjusted profit and adjusted earnings per share exclude the charge for
intangible amortisation and the related deferred tax. This adjustment removes a
non-cash charge which is not used by management to assess the underlying
performance of the businesses.
7. Cash and cash equivalents and net debt
30.6.07 30.6.06 31.12.06
£m £m £m
--------------------------------------------------------------------------------
Cash at bank and in hand 36.5 27.4 45.2
Short term deposits repayable in less than
three months 2.7 39.2 3.8
--------------------------------------------------------------------------------
Cash and deposits 39.2 66.6 49.0
Bank overdrafts (11.0) (25.0) (23.9)
--------------------------------------------------------------------------------
Cash and cash equivalents 28.2 41.6 25.1
--------------------------------------------------------------------------------
Interest bearing loans and borrowings
Current liabilities (3.8) (49.2) (4.3)
Non-current liabilities (519.6) (289.0) (456.9)
Derivative assets - fair value of
interest rate swaps hedging fixed
interest rate borrowings 2.1 0.3 5.4
Derivative liabilities - fair value of
interest rate swaps hedging fixed
interest rate borrowings (2.3) (2.2) -
--------------------------------------------------------------------------------
Net debt (495.4) (298.5) (430.7)
--------------------------------------------------------------------------------
Net debt includes the fair value of interest rate swaps hedging fixed interest
rate borrowings. Net debt at 30 June 2006 has been re-presented on a consistent
basis.
8. Movement in reserves
Six months to Six months to Year to
30.6.07 30.6.06 31.12.06
£m £m £m
--------------------------------------------------------------------------------
Beginning of period 488.0 460.4 460.4
Total recognised income for the period 73.0 69.9 133.6
Final dividend (38.6) (36.5) (36.5)
Interim dividend - - (17.6)
Issue of share capital 4.2 3.3 7.6
Employee trust shares (2.9) 2.3 (1.5)
Share based payments 4.0 4.2 5.1
Purchase of own shares into treasury (72.6) - (63.1)
--------------------------------------------------------------------------------
End of period 455.1 503.6 488.0
--------------------------------------------------------------------------------
Independent review report
by KPMG Audit Plc to Bunzl plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the Consolidated income
statement, the Consolidated statement of recognised income and expense, the
Consolidated balance sheet, the Consolidated cash flow statement and the related
notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4:
'Review of interim financial information' issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
KPMG Audit Plc
Chartered Accountants
London
28 August 2007
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