Interim Results
Bunzl PLC
28 August 2001
Tuesday 28 August 2001
INTERIM RESULTS FOR SIX MONTHS TO 30 JUNE 2001
Bunzl plc, the international Group supplying business to business consumables,
today announces its interim results for the six months ended 30 June 2001.
* Operating profit on continuing operations before goodwill up 20% to
£104.8 million on sales up 21% to £1,403.0 million
* Total operating profit before goodwill up 18% on sales up 20%
* Profit before tax and goodwill up 16% to £96.9 million
* Another period of outstanding growth for Outsourcing Services with
sales up 27% and profits up 31%
* £38 million spent on acquisitions since December, largely in
Outsourcing Services
* Adjusted earnings per share up 17% to 13.8p
* Dividend up 11% to 3.4p
Commenting on today's results, Anthony Habgood, Chairman of Bunzl, said:
'These are strong results reflecting our strategy of growing the business both
organically and by adding appropriate acquisitions.
Although the economic outlook remains uncertain, we are continuing to see
volume growth in our major markets, the trend towards outsourcing is set to
continue and we have the ability to make further acquisitions. I therefore
remain confident about the prospects for the Group.'
Enquiries:
Bunzl plc Finsbury
Anthony Habgood, Chairman Roland Rudd
David Williams, Finance Director Morgan Bone
Tel: 020 7495 4950 Tel: 020 7251 3801
RESULTS
Operating profit from continuing operations before goodwill amortisation rose
by 20% to £104.8 million (2000: £87.6 million) on sales up 21% to £1,403.0
million (2000: £1,159.2 million) as organic volume growth was supplemented by
the successful integration of recent acquisitions and a stronger US dollar.
Total profit increased 18% to £104.8 million (2000: £88.7 million) on sales up
20% to £1,403.0 million (2000: £1,165.7 million). After goodwill amortisation,
profit on continuing operations rose 17% to £99.1 million (2000: £85.0
million) while total operating profit was up 15% to £99.1 million (2000: £86.1
million). Higher interest charges resulted in profit before tax being 12%
higher at £91.2 million (2000: £81.2 million). Earnings per share rose 12% to
12.5p (2000: 11.2p) while adjusted earnings per share after eliminating
goodwill amortisation rose 17% to 13.8p (2000: 11.8p).
Cash generated by operations exceeded continuing spend on acquisitions
resulting in net debt falling from £240.4 million in December 2000 to £225.3
million. This reduction in debt combined with increased shareholders' funds
resulted in gearing falling from 60.8% in December 2000 to 51.8%.
DIVIDEND
The Board has decided to increase the interim dividend to 3.4p (2000: 3.05p).
Eligible shareholders will again be able to participate in our dividend
reinvestment plan.
ACQUISITIONS
The cost of acquisitions made since December was £38 million. These included
ICCS MacGregor in February, the 51% of Filtrati which we did not already own
in May, Godin in June and the UK carrier bag supply business of BPI in July.
ICCS MacGregor is a distributor of supplies to hotels, nursing homes and
contract cleaners in Scotland which had sales in 2000 of £17 million and
strengthens our position in Outsourcing Services in the Scottish market.
Filtrati, which had sales in 2000 of £15 million, supplies both cigarette
filters and ink reservoirs from its plants in Italy and, renamed Filtrona
Italia, has become a full member of our global Filtrona network. Godin, which
supplies supermarkets, food processors and industrial companies in Quebec, had
sales in the year to August 2000 of C$30 million. It further enhances the
capability of our North American Outsourcing Services business. The UK carrier
bag supply business of BPI had sales of £35 million in the year to June 2001.
It significantly expands our retail supply business in the UK and builds on
our successful international sourcing operation.
PROSPECTS
The Group once again expanded during the first half of 2001 through organic
growth and the successful integration of acquisitions despite the much
publicised economic slowdown in the US and more recently in Europe. The net
translation impact of exchange rate movements was beneficial to the results
while there was some overall deflationary price effect.
We continue to see volume growth in our major markets particularly as a result
of the increasing use of outsourcing. Price trends generally are mixed with
deflation emerging in the second quarter in the US. Continued volume growth
combined with the successful identification and integration of acquisitions
enables us to look to the future with confidence.
OPERATING REVIEW
Sales of continuing operations rose 21%, operating profit before goodwill
amortisation was up 20%, Group margin was 7.5% and Group return on capital was
38.1%. Outsourcing Services in North America and Europe performed extremely
well both through successful integration of acquisitions and underlying
growth. Filtrona also showed continuing robust organic growth.
Outsourcing Services
Operating across North America, Europe and Australia, Bunzl is the leading
supplier of a range of business to business consumable products including
outsourced food packaging, disposable supplies and cleaning and hygiene
products for supermarkets, caterers, hotels, contract cleaners and other
industrial users.
Our largest and most successful business area achieved an outstanding set of
results with profits up 31% on sales up 27%. Underlying organic growth,
favourable currency movements and the successful integration of acquisitions
combined to cause the sales increase. With continuing excellent control of
operating costs and recent acquisitions also contributing strongly, the margin
rose from 7.0% to 7.2%.
North America
Despite the most difficult economic conditions in North America for a decade,
we experienced volume growth as consumers' preference for takeout foods
continued with our customers favouring outsourced solutions. With case-ready
meats gaining some acceptance in the market, our growing business with food
processors assumed increasing importance. In this context, the successful
integration of Koch which we acquired in December has given us critical mass
in certain product lines and with key suppliers. We now have a base in the
food processor segment from which to continue to grow.
Schrier, also acquired in December, has now been successfully integrated. It
provides us with a powerful base in the New England redistribution market
while the purchase of Godin in June gives us the ability to serve national
grocery customers in Canada by providing a facility in Quebec. This will
enable us to fulfil the sole supply contract with Sobeys, Canada's second
largest grocery company with 1,300 stores across the country, which we have
recently been awarded and gives us a base for further expansion.
With operating costs continuing to fall in proportion to sales, efficiency of
operations remains the most important factor that enables us to gain business
by providing the service our customers require.
Europe
Good organic growth, as our customers made further use of outsourcing and one
stop shopping, was supplemented by the successful integration of acquisitions
to produce substantial increases in both sales and profits. Organic growth
boosted sales particularly in the hotel & catering supplies businesses across
Europe, in retail and in vending while the successful integration of Shermond
and Greenham boosted sales in the healthcare and cleaning & industrial
markets.
With established presence in the UK, Germany, Holland, Ireland and Scandinavia
and strong bases in a number of market segments, we are now well positioned
for the future as the logical partner of international customers and
suppliers.
The acquisition of the retail bag business of BPI in July further strengthens
our position in the supply of carrier bags and other products to the retail
sector. In addition, it will build on our successful international sourcing
operations in Hong Kong.
Filtrona
Filtrona is the world's leading supplier of outsourced cigarette filters
especially for the growing low tar market while Supastrip(R) is the leading
brand of self-adhesive tear tape. We are also the world's leading supplier of
ink reservoirs and certain other bonded fibre products.
Profits rose 7% on sales up 11% as a result of good underlying growth in the
business aided by the acquisition of the 51% of our Italian joint venture that
we did not already own. The change in accounting treatment from an associate
to a subsidiary following this acquisition was the principal reason for the
small decline in margin.
Our filters and fibres businesses in North America and Europe performed
particularly strongly. Growth in demand for special filters in Russia and the
integration of Filtrona Italia into our worldwide network boosted our European
business, while Far Eastern demand for Western brands with special filters
continued to be strong. Our new facility in Richmond, Virginia was opened
during the period providing our fibres business with an upgraded facility as
well as some new technology and the organisation was changed to reflect
greater accountability by product and market.
The tear tape business continued to develop successfully with growth of both
standard and message tapes. The value-added in tear tapes when they are used
for brand security or promotional purposes makes these an attractive and
growing part of the business.
Paper Distribution
Bunzl is one of the largest independent fine paper merchants in the UK and
Ireland, distributing a wide range of high quality printing, writing and
copier papers primarily to printers.
Sales were up 6% reflecting good volume growth with prices marginally ahead of
last year. Profits rose 2% as a result of both the sales growth and an
increase in efficiency.
A number of factors caused volumes to increase. These included successes with
certain key customers in specific geographic regions and, latterly, in winning
national accounts through our recently set up national accounts team. Both of
these contributed to sales and profits during the period and, in particular,
our national accounts should continue to grow into the future.
Purchase prices remained strong despite falling pulp prices, reflecting the
consolidation of the supplier base and downtime being taken by the paper
manufacturers. The profit effect of a slight reduction in gross margin was
offset by increased sales on a more efficient operating cost base.
Key to the future remains our ability to add value to the distribution
function and to monitor and respond to the changing needs of our market. Our
overall focus remains on providing service from a broad stockholding across
the country and the rapid delivery of customer requirements.
Plastics
Bunzl is a world leader in plastic caps and plugs for protecting engineering
products in manufacture or transit. We are also a leading extruder of custom
plastic profiles for a range of uses including transport, lighting and retail.
Against the toughest manufacturing background for a number of years, operating
profit decreased 7% on sales up 7%. The strong US dollar had a favourable
translation impact although this was partially offset by the weakness of the
Brazilian real. The persistently weak euro and the manufacturing downturn in
the US and more recently in Europe caused margins to be squeezed.
Sales of the caps and plugs business were relatively buoyant with increases on
both sides of the Atlantic. The environment for the extrusion businesses was
more difficult with dollar sales in the US flat while the new operation in
Mexico made a successful start. General manufacturing weakness especially in
Germany also caused some sales weakness in Holland. Our Brazilian business,
which provides packaging for the cosmetics and toiletry industries in South
America, performed strongly. It is set to continue to grow as we have
invested to support the requirements of our major customers.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six Six
months to months to Year to
30.6.01 30.6.00 31.12.00
£m £m £m
Sales
Existing businesses 1,393.4 1,159.2 2,492.7
Acquisitions 9.6
Continuing operations 1,403.0 1,159.2 +21% 2,492.7
Discontinued operations - 6.5 10.9
Total sales 1,403.0 1,165.7 +20% 2,503.6
Operating profit
Existing businesses 98.5 85.0 181.9
Acquisitions 0.6
Continuing operations 99.1 85.0 +17% 181.9
Discontinued operations - 1.1 1.7
Total operating profit 99.1 86.1 +15% 183.6
Profit on sale of discontinued - - 7.1
operations
Loss on disposal of fixed assets - - (4.8)
Profit on ordinary activities before 99.1 86.1 185.9
interest
Net interest payable (7.9) (4.9) (12.5)
Profit on ordinary activities before 91.2 81.2 +12% 173.4
taxation
Profit before taxation, goodwill
amortisation and exceptional items 96.9 83.8 +16% 178.2
Taxation on profit on ordinary (33.6) (29.7) (64.9)
activities
Profit on ordinary activities after 57.6 51.5 108.5
taxation
Profit attributable to minorities (0.1) (0.4) (0.6)
Profit for the period 57.5 51.1 107.9
Dividends paid and proposed (15.6) (14.0) (43.0)
Retained profit for the period 41.9 37.1 64.9
Earnings per share 12.5p 11.2p +12% 23.7p
Adjusted earnings per share 13.8p 11.8p +17% 25.0p
Diluted earnings per share 12.4p 11.1p 23.5p
Dividends per share 3.4p 3.05p +11% 9.4p
CONSOLIDATED BALANCE SHEET
30.6.01 30.6.00 31.12.00
£m £m £m
Fixed assets
Intangible assets - goodwill 224.9 108.3 203.6
Tangible fixed assets 225.5 198.2 215.2
Associated undertakings 9.5 13.9 12.8
Investments 18.4 11.9 15.0
478.3 332.3 446.6
Current assets
Stocks 233.2 187.8 218.0
Debtors: amounts receivable within one year 434.7 362.0 403.7
Debtors: amounts receivable after more than one year 16.3 16.6 22.0
Investments 15.7 7.8 16.7
Cash at bank and in hand 41.2 28.6 37.1
741.1 602.8 697.5
Current liabilities (512.2) (443.5) (569.5)
Net current assets 228.9 159.3 128.0
Total assets less current liabilities 707.2 491.6 574.6
Creditors: amounts falling due after more than one (213.2) (79.3) (126.4)
year
Provisions for liabilities and charges (57.0) (44.9) (50.8)
Net assets 437.0 367.4 397.4
Capital and reserves
Called up share capital 115.5 114.6 115.2
Other reserves 319.4 250.4 279.9
Shareholders' funds: equity interests 434.9 365.0 395.1
Minority equity interests 2.1 2.4 2.3
437.0 367.4 397.4
CONSOLIDATED CASH FLOW STATEMENT
Six Six
months months Year
to to to
30.6.01 30.6.00 31.12.00
£m £m £m
Total operating profit 99.1 86.1 183.6
Adjustments for non-cash items 20.2 15.0 36.5
Working capital movements (1.7) (16.1) (34.8)
Other cash movements (2.2) (3.5) (8.8)
Net cash inflow from operating activities 115.4 81.5 176.5
Net cash outflow for returns on investments (9.0)
and servicing of finance (6.4) (13.2)
Tax paid (25.8) (21.7) (50.8)
Net cash outflow for capital expenditure (19.0) (21.9) (46.2)
Purchase of businesses (19.9) (34.0) (170.9)
Disposal of businesses - - 11.5
Other acquisition and disposal cash flows (1.0) (2.2) (2.5)
Equity dividends paid (14.0) (12.5) (38.0)
Net cash inflow/(outflow) before use of liquid
resources and financing 26.7 (17.2) (133.6)
Management of liquid resources 2.1 0.1 (3.1)
Net cash (outflow)/inflow from financing (23.9) 14.2 141.2
Increase/(decrease) in cash 4.9 (2.9) 4.5
Reconciliation of net cash flow to movement
in net debt
Increase/(decrease) in cash in the period 4.9 (2.9) 4.5
Decrease/(increase) in debt due within one year 102.8 1.3 (139.2)
(Increase)/decrease in debt due after one year (76.2) (12.3) 4.4
(Decrease)/increase in current asset investments (2.1) (0.1) 3.1
Exchange and other movements (14.3) (11.5) (13.2)
Movement in net debt in the period 15.1 (25.5) (140.4)
Opening net debt (240.4) (100.0) (100.0)
Closing net debt (225.3) (125.5) (240.4)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six Six
months months Year
to to to
30.6.01 30.6.00 31.12.00
£m £m £m
Profit for the period 57.5 51.1 107.9
Currency translation differences on foreign
currency net investments (4.8) 0.3 (2.3)
Total recognised gains and losses for the period 52.7 51.4 105.6
ANALYSIS OF SALES AND OPERATING PROFIT
Sales Operating profit
Six months Six months Year Six months Six months Year
to to to to to to
30.6.01 30.6.00 31.12.00 30.6.01 30.6.00 31.12.00
£m £m £m £m £m £m
Continuing
operations
Outsourcing 1,023.1 807.2 1,783.1 73.7 56.2 131.1
Services
Filtrona 109.9 98.8 199.0 15.4 14.4 26.8
Paper 162.7 153.0 310.3 10.2 10.0 18.5
Distribution
Plastics 107.3 100.2 200.3 12.6 13.6 26.9
Goodwill (5.7) (2.6) (7.1)
Corporate (7.1) (6.6) (14.3)
activities
1,403.0 1,159.2 2,492.7 99.1 85.0 181.9
Discontinued - 6.5 10.9 - 1.1 1.7
operations
Total 1,403.0 1,165.7 2,503.6 99.1 86.1 183.6
Notes
Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2000 statutory accounts and was
approved by the Board on 28 August 2001.
The Accounting Standards Board issued FRS 17 - 'Retirement Benefits' in
November 2000 and the Group intends to adopt the transitional rules in the
2001 annual accounts which will require additional balance sheet disclosure.
FRS 18 - 'Accounting Policies' was issued in December 2000 and its
requirements have been adopted by the Group.
The figures for the six months to 30 June 2001 and 30 June 2000 are unaudited
and do not constitute statutory accounts. However, the auditors have carried
out a review of the figures to 30 June 2001 and their report is set out below.
The figures for the year to 31 December 2000 are taken from the statutory
accounts which have been filed with the Registrar of Companies. The auditors'
report on those accounts was unqualified and did not contain any statement
under Section 237(2) or (3) of the Companies Act 1985.
Adjusted earnings per share
Basic and diluted earnings per share are calculated using a weighted average
number of shares of 458.1m and 464.1m respectively (2000: 455.3m and 459.6m).
Adjusted earnings per share is based on earnings of £63.2m (2000: £53.7m),
being the earnings for the six months to 30 June 2001 excluding the goodwill
amortisation charge of £5.7m (2000: £2.6m).
Taxation
A taxation charge of 34.7% (2000: 35.5%) on the profit on underlying
operations excluding goodwill amortisation has been provided based on the
estimated effective rate of taxation for the year, the UK taxation charge
being £4.4m (2000: £3.9m).
Dividends
An interim dividend of 3.4p per share has been declared and will be paid on 2
January 2002 to shareholders on the register on 23 November 2001.
Independent review report by KPMG Audit Plc to Bunzl plc
Introduction - We have been instructed by the Company to review the financial
information set out in the Consolidated Profit and Loss Account, Consolidated
Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of
Total Recognised Gains and Losses, Analysis of Sales and Operating Profit and
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.
Directors' responsibilities - The interim report, including the financial
information contained therein, is the responsibility of, and has been approved
by, the directors. The Listing Rules of the Financial Services Authority
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 they are to be changed in the next annual
accounts, in which case any changes, and the reasons for them, are to be
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. 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 is substantially
less in scope than an audit performed in accordance with Auditing Standards
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 2001.
KPMG Audit Plc
Chartered Accountants
London
28 August 2001
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