Interim Results
Bunzl PLC
27 August 2002
Tuesday 27 August 2002
INTERIM RESULTS FOR SIX MONTHS TO 30 JUNE 2002
Bunzl plc, the international distribution and outsourcing Group, today announces
its interim results for the six months ended 30 June 2002.
• Operating profit from continuing operations before goodwill up 6% to
£100.4 million on sales up 7% to £1,328.6 million
• Profit before tax and goodwill up 8% to £104.2 million
• Outsourcing Services confirms its resilience with sales and profits up
7%
• Strong Group cash generation funded £51 million spend on acquisitions,
largely in Outsourcing Services
• Disposal of Paper Distribution in July for about £139 million
• Adjusted earnings per share up 9% to 15.0p
• Dividend up 7% to 3.65p
Commenting on today's results, Anthony Habgood, Chairman of Bunzl, said:
'These are good results in difficult general economic conditions. They reflect
our strategy of growing the business both organically and by adding appropriate
acquisitions while simultaneously increasing the Group's focus and streamlining
its operations.
Despite the somewhat weaker dollar and mild dilution from selling Paper
Distribution, volume growth in our major businesses, good cash generation and
incremental growth from acquisitions give me confidence in the future
satisfactory development of 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
As difficult general economic conditions persisted, operating profit from
continuing operations before goodwill amortisation rose 6% to £100.4 million
(2001: £94.6 million) on sales up 7% to £1,328.6 million (2001: £1,240.3
million). Strong organic volume growth and the effect of acquisitions more than
offset the impact of price deflation and the slightly weaker US dollar.
Including discontinued operations, total profit increased 3% to £108.2 million
(2001: £104.8 million) on sales up 6% to £1,490.3 million (2001: £1,403.0
million). After higher goodwill amortisation and lower interest charges, profit
before tax rose 6% to £96.3 million (2001: £91.2 million). Profit before tax
and goodwill amortisation rose 8% to £104.2 million (2001: £96.9 million).
Earnings per share rose 6% to 13.3p (2001: 12.5p) while adjusted earnings per
share, after eliminating goodwill amortisation, rose 9% to 15.0p (2001: 13.7p).
After strong cash generation from our operations and spending £51 million on
acquisitions, net debt after currency movements fell from £234.5 million on 31
December 2001 to £230.5 million. With shareholders' funds rising to £500.9
million (December 2001: £456.5 million), gearing fell from 51.4% to 46.0%.
DIVIDEND
The Board has decided to increase the interim dividend by 7% to 3.65p (2001:
3.4p). Eligible shareholders will again be able to participate in our dividend
reinvestment plan.
ACQUISITIONS
The cost of acquisitions during the period was £51 million. This included the
acquisition of Lockhart in May and of Kenco in June. Lockhart, based at Theale,
near Reading, is the UK's leading supplier of catering equipment to the
foodservice industry including hotels, caterers, restaurants, retailers and the
licensed trade. It had sales in 2001 of £59 million and enhances our one stop
shop offering to customers in the UK and Ireland. Kenco, based in Seattle,
Washington, had sales in 2001 of $32 million, is focused on the redistribution
market and strengthens our position in that business in the Pacific North West.
DISPOSALS
Immediately following the end of the period, we completed the disposal of our
Paper Distribution business to PaperlinX for approximately £139 million. While
Paper Distribution represented only 7% of Group operating profit in the period,
this disposal marks an important stage in our evolution representing the final
break with the paper industry with which Bunzl has been associated for over 100
years. It is the last step of a process which has seen Bunzl reducing its
commitment to paper and channelling resources into our higher return, higher
growth businesses, particularly outsourcing.
REORGANISATION
Following the simplification of both Plastics and Filtrona over the past few
years and the increasing internationalisation of their remaining businesses, we
are combining the two areas this month. Operating as Filtrona, the new entity
will constitute a small number of international niche businesses in service
oriented supply and light manufacture with a number of technical and market
overlaps. As such, a single management structure is more appropriate and cost
effective.
PROSPECTS
Our major businesses have again demonstrated their resilience in hard economic
times. Continuing volume growth has offset deflationary pressures and results
were further enhanced by the successful integration of acquisitions. The
incremental acquisitions were again financed by strong internal cash flow
generation.
Prices, which fell steeply in our major businesses in 2001, have remained under
pressure in 2002 as weak demand in the economy has provided little relief for
many of our suppliers. While some have announced price increases, relatively
few of these have been implemented, largely in paper based products and
chemicals.
Despite the somewhat weaker US dollar and the mildly dilutive effect of the sale
of Paper Distribution, the combination of robust volume growth in our major
businesses, our strong international market positions, good internal cash
generation and our continuing incremental growth from focused acquisitions gives
us confidence in the future satisfactory development of the Group.
OPERATING REVIEW
Sales of continuing operations rose 7% and operating profit before goodwill
amortisation increased 6%. Margin on continuing operations remained at 7.6%
while Group return on capital employed rose to 38.5%. Outsourcing Services in
both North America and Europe performed well, while Filtrona had excellent
results and Plastics, although lower than the comparative period, showed a
substantial recovery from the second half of 2001.
Outsourcing Services
Operating across North America, Europe and Australia, Bunzl is the leading
supplier of a range of consumable products including outsourced food packaging,
disposable supplies and cleaning and safety products for supermarkets,
redistributors, caterers, food processors, hotels, contract cleaners and other
industrial users.
Sales rose by 7% as robust volume growth, which more than offset price
deflation, combined with the successful integration of acquisitions to produce
another excellent set of results. Profits also rose 7% as operating costs were
closely controlled and margin was maintained at 7.2%.
North America
While general economic conditions in North America remained difficult, we again
experienced good volume growth. Our customers continued to favour outsourced
solutions as these are often the most cost effective way of meeting their
service requirements. At the same time their need for specialised packaging for
fresh and freshly prepared foods continued to increase. Dollar sales were
somewhat held back as a result of lower prices relative to last year. These
were primarily the result of an imbalance in the demand and supply relationship
in our supplier base so the price at which we purchased products was lower than
a year earlier and, if anything, fell during the period.
The processor business continued to grow, in part helped by the successful
integration of Koch and Packers. These acquisitions in plant supply, combined
with the strong organic growth of our packaging supplies business, enable us to
provide a full product offering to food processor customers.
The acquisition of Kenco in June further strengthens our position serving
redistribution customers in the Pacific North West. This redistribution
business, servicing subdistributors, has been a growing activity across the US.
Cost reduction remains a focus as we continuously seek to increase the
efficiency of our operations so that we can provide our customers with the
service they require.
Europe
Organic growth was once again supplemented by acquisitions to produce a
substantial increase in sales across our European business. This organic growth
resulted from our customers making further use of outsourcing and one stop
shopping while the acquisition growth came from the integration of acquisitions
made in 2001 as well as the first contribution from Lockhart which we acquired
in May.
Our hotel and catering supplies business, which is now well established across
Northern Europe and in Australia, continued its successful development. The
acquisition of Lockhart, the UK's leading supplier of catering equipment, adds
to our ability to provide fully one stop shop solutions to our customers in the
UK and Ireland in this sector. It similarly adds to our offering to the retail
sector where we also continued successfully to develop our customer base which
included the full implementation of a goods not for resale consolidation
programme with one of the UK's major supermarket groups.
Our cleaning and safety supplies business developed strongly as Greenham
continued its successful integration into the Group and was supplemented by the
further integration of Blyth. Our growing presence in this area provides us
with a strong base to serve leading cleaning and facilities management groups.
Our vending business also developed very satisfactorily to become the largest
independent vending operator in the UK, with strong organic growth in the retail
and catering sectors. As part of this expansion, we took on the servicing and
maintenance of all vending machines in the UK for one of the world's principal
contract catering groups.
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.
Sales rose 14% as a result of good underlying growth in the three worldwide
businesses combined with the full period impact of the acquisition in 2001 of
the 51% of Filtrona Italia that we did not already own. Profits rose 16%.
Overall, our filters business performed strongly. Demand for special filters in
Russia continued to develop as the share of international cigarette companies
expanded and the Russian taste for charcoal filters has grown. Western brands
in the Far East, particularly in Korea, also continued to expand benefiting our
sales of special filters in both North America and Europe, while volumes in
South America were significantly ahead serving local markets. Sales of our
fibres business increased as products for inkjet printing systems supplemented
continuing demand for writing instrument, medical and other fibre products.
The tear tape business performed particularly well reflecting the growth of
security, brand awareness and promotion products worldwide. With our ability to
coat in Richmond, Virginia as well as in the UK and our finishing capacity
around the world, we now have an infrastructure to service the demands of our
international customers both for standard self-adhesive tear tapes and for value
added products.
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.
In a continuing tough manufacturing environment, sales fell 3% largely as a
result of currency movements reflecting the weaker dollar and especially the
Brazilian real. Profits were down 8% although these results represented a
substantial increase over the difficult second half of 2001 in both major
international businesses.
The caps and plugs business was relatively resilient in North America and Europe
except where sales to the oil sector were weaker compared to their unusually
strong level a year earlier.
The extrusion business in North America continued to suffer somewhat from weaker
general economic activity although demand in the medical, fence panel and
highway sectors remained good. Demand in Europe was strong, particularly in
scanning profiles, and enabled our Dutch operation to increase sales
substantially. While our Brazilian business, which provides packaging for the
cosmetics and toiletries industries, grew sales in local currency, translation
resulted in lower sterling sales.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months to Year to
Six months to 30.6.01 31.12.01
30.6.02 *Restated *Restated
£m £m £m
Sales
Existing businesses 1,323.5 1,240.3 2,558.3
Acquisitions 5.1
Continuing operations 1,328.6 1,240.3 +7% 2,558.3
Discontinued operations 161.7 162.7 318.2
Total sales 1,490.3 1,403.0 +6% 2,876.5
Operating profit
Existing businesses 92.5 89.2 186.9
Acquisitions 0.3
Continuing operations 92.8 89.2 186.9
Discontinued operations 7.5 9.9 14.9
Total operating profit 100.3 99.1 201.8
Net interest payable (4.0) (7.9) (14.1)
Profit on ordinary activities
before taxation 96.3 91.2 +6% 187.7
Profit before taxation and goodwill
amortisation 104.2 96.9 +8% 200.5
Taxation on profit on ordinary activities (34.9) (34.0) (70.4)
Profit on ordinary activities after taxation 61.4 57.2 117.3
Profit attributable to minorities (0.2) (0.1) (0.4)
Profit for the period 61.2 57.1 116.9
Dividends paid and proposed (17.0) (15.6) (48.0)
Retained profit for the period 44.2 41.5 68.9
Basic earnings per share 13.3p 12.5p +6% 25.5p
Adjusted earnings per share 15.0p 13.7p +9% 28.3p
Diluted earnings per share 13.1p 12.3p 25.2p
Dividends per share 3.65p 3.4p +7% 10.35p
* Restated on adoption of FRS19 - 'Deferred Tax'
CONSOLIDATED BALANCE SHEET
30.6.01 31.12.01
30.6.02 *Restated *Restated
£m £m £m
Fixed assets
Intangible assets - goodwill 292.6 224.9 258.8
Tangible fixed assets 220.8 225.5 226.0
Investments 32.2 27.9 29.6
545.6 478.3 514.4
Current assets
Stocks 245.8 233.2 241.7
Debtors: amounts receivable within one year 452.7 434.7 439.0
Debtors: amounts receivable after more than one year 16.8 16.3 15.0
Investments 34.6 15.7 30.2
Cash at bank and in hand 52.8 41.2 49.8
802.7 741.1 775.7
Creditors: amounts falling due within one year (544.0) (512.2) (514.3)
Net current assets 258.7 228.9 261.4
Total assets less current liabilities 804.3 707.2 775.8
Creditors: amounts falling due after more than one year (243.5) (213.2) (255.1)
Provisions for liabilities and charges (57.7) (65.4) (62.1)
Net assets 503.1 428.6 458.6
Capital and reserves
Called up share capital 116.3 115.5 116.0
Share premium account 71.4 60.7 67.3
Revaluation reserve 1.6 1.6 1.6
Profit and loss account 311.6 248.7 271.6
Shareholders' funds: equity interests 500.9 426.5 456.5
Minority equity interests 2.2 2.1 2.1
503.1 428.6 458.6
* Restated on adoption of FRS19 - 'Deferred Tax'
CONSOLIDATED CASH FLOW STATEMENT
Six months to Six months to Year to
Reconciliation of total operating profit to net 30.6.02 30.6.01 31.12.01
cash inflow from operating activities £m £m £m
Total operating profit 100.3 99.1 201.8
Adjustments for non-cash items 24.2 20.2 43.9
Working capital movements (7.9) (1.7) (1.0)
Other cash movements (4.8) (2.2) (8.6)
Net cash inflow from operating activities 111.8 115.4 236.1
Consolidated cashflow statement
Net cash inflow from operating activities 111.8 115.4 236.1
Net cash outflow for returns on investments (6.2) (9.0)
and servicing of finance (13.9)
Tax paid (25.8) (25.8) (54.9)
Net cash outflow for capital expenditure (18.4) (19.0) (37.7)
Purchase of businesses (51.1) (19.9) (79.8)
Disposal of businesses - - 1.2
Other acquisition and disposal cash flows (0.2) (1.0) (0.9)
Equity dividends paid (15.6) (14.0) (43.0)
Net cash (outflow)/inflow before use of liquid resources
and financing (5.5) 26.7 7.1
Net cash (outflow)/inflow from management of liquid
resources (17.7) 2.1 (6.4)
Net cash (outflow)/inflow from financing (3.0) (23.9) 19.9
(Decrease)/increase in cash in the period (26.2) 4.9 20.6
Reconciliation of net cash flow to movement
in net debt
(Decrease)/increase in cash in the period (26.2) 4.9 20.6
Decrease in debt due within one year 8.8 102.8 110.7
Increase in debt due after one year (3.2) (76.2) (123.4)
Increase/(decrease) in current asset investments 17.7 (2.1) 6.4
Exchange and other movements 6.9 (14.3) (8.4)
Movement in net debt in the period 4.0 15.1 5.9
Opening net debt (234.5) (240.4) (240.4)
Closing net debt (230.5) (225.3) (234.5)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months to Year to
Six months to 30.6.01 31.12.01
30.6.02 *Restated *Restated
£m £m £m
Profit for the period 61.2 57.1 116.9
Currency translation differences on foreign currency net
investments (2.6) (4.8) (5.4)
Total recognised gains and losses for the period 58.6 52.3 111.5
Prior year adjustment (10.0) - -
Total recognised gains and losses since last directors'
report and accounts 48.6 52.3 111.5
* Restated on adoption of FRS19 - 'Deferred Tax'
ANALYSIS OF SALES AND OPERATING PROFIT
Sales Operating profit
Six months to Six months to Year to Six months to Six months to Year to
30.6.02 30.6.01 31.12.01 30.6.02 30.6.01 31.12.01
£m £m £m £m £m £m
Continuing operations
Outsourcing Services 1,099.1 1,023.1 2,129.1 78.6 73.7 161.9
Filtrona 125.8 109.9 224.5 17.8 15.4 29.6
Plastics 103.7 107.3 204.7 11.6 12.6 22.7
Goodwill (7.6) (5.4) (12.2)
Corporate activities (7.6) (7.1) (15.1)
1,328.6 1,240.3 2,558.3 92.8 89.2 186.9
Discontinued
operations 161.7 162.7 318.2 7.8 10.2 15.5
Goodwill (0.3) (0.3) (0.6)
Total 1,490.3 1,403.0 2,876.5 100.3 99.1 201.8
Notes
Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2001 statutory accounts, with the
exception of the accounting for deferred tax, and was approved by the Board on
27 August 2002.
During the period the Group adopted FRS19 - 'Deferred Tax'. As a result,
deferred tax liabilities at 30 June 2001 and 31 December 2001 have been
increased by £8.4m and £10.0m respectively. Accordingly, the opening profit and
loss account reserve at 1 January 2002 has been reduced by £10.0m to £271.6m.
The impact on the Consolidated profit and loss accounts for the six months to 30
June 2001 and the year to 31 December 2001 was £0.4m and £0.8m respectively.
The figures for the six months to 30 June 2002 and 30 June 2001 are unaudited
and do not constitute statutory accounts. However, the auditors have carried out
a review of the figures to 30 June 2002 and their report is set out in the
Independent review report. The figures for the year to 31 December 2001 are
taken from the statutory accounts which have been filed with the Registrar of
Companies, as restated for FRS19 referred to above. 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 460.8m and 466.4m respectively (2001: 458.1m and 464.1m).
Adjusted earnings per share is based on earnings of £69.1m (2001: £62.8m), being
the earnings for the six months to 30 June 2002 excluding the goodwill
amortisation charge of £7.9m (2001: £5.7m).
Taxation
A taxation charge of 33.5% (Restated 2001: 35.1%) 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
£5.0m (Restated 2001: £4.8m).
Dividends
An interim dividend of 3.65p per share has been declared and will be paid on 2
January 2003 to shareholders on the register on 22 November 2002.
Post balance sheet events
On 1 July 2002 the Group completed the sale of its Paper Distribution business,
as announced on 26 June 2002, for a consideration of approximately £139m.
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 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 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 2002.
KPMG Audit Plc
Chartered Accountants
London
27 August 2002
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