Annual Report 2014
KEEPING
BUSINESSES
MOVING
We are a focused
and successful
international distribution
and outsourcing group
keeping businesses
moving across the
Americas, Europe
and Australasia.
STRATEGIC REPORT
01 Financial highlights
02 Group at a glance
04 Chairman’s statement
08 Business model and strategy
10 Organic growth
11 Operating model efficiencies
12 Acquisition growth
14 Key performance indicators
18 Chief Executive’s review
30 Financial review
34 Principal risks and uncertainties
37 Corporate responsibility
DIRECTORS’ REPORT
42 Board of directors
43 Corporate governance report
48 Audit Committee report
52 Directors’ remuneration report
73 Other statutory information
FINANCIAL STATEMENTS
76 Consolidated income statement
Consolidated statement of
77
comprehensive income
78 Consolidated balance sheet
Consolidated statement
79
of changes in equity
Consolidated cash flow
statement
80
81 Notes
113 Company balance sheet
114 Notes to the Company financial
statements
120 Statement of directors’
responsibilities
121 Independent auditors’ report
to the members of Bunzl plc
127 Five year review
128 Shareholder information
The Annual Report can be downloaded online.
To find out more visit www.bunzl.com
We support our customers all over the
world with a variety of products that are
essential for the successful operation
of their businesses.
By outsourcing the purchasing,
consolidation and delivery of a broad
range of everyday items, our customers
are able to focus on their core businesses,
achieve purchasing efficiencies and
savings, free up working capital, improve
distribution capabilities, reduce carbon
emissions and simplify their internal
administration.
FINANCIAL HIGHLIGHTS
REVENUE
OPERATING PROFIT
£6,156.5m +7%
£341.8m +9%
(2013: £6,097.7m)
(2013: £332.1m)
Growth at constant exchange rates
(Actual exchange rates +1%)
Growth at constant exchange rates
(Actual exchange rates +3%)
ADJUSTED OPERATING PROFIT*
PROFIT BEFORE TAX
£429.8m +10%
£299.8m +10%
(2013: £414.4m)
(2013: £289.9m)
Growth at constant exchange rates
(Actual exchange rates +4%)
Growth at constant exchange rates
(Actual exchange rates +3%)
ADJUSTED PROFIT*
BEFORE INCOME TAX
BASIC EARNINGS
PER SHARE
£387.8m +11%
64.5p +8%
(2013: £372.2m)
(2013: 63.5p)
Growth at constant exchange rates
(Actual exchange rates +4%)
Growth at constant exchange rates
(Actual exchange rates +2%)
ADJUSTED EARNINGS
PER SHARE*
86.2p +11%
(2013: 82.4p)
Growth at constant exchange rates
(Actual exchange rates +5%)
DIVIDEND PER SHARE
35.5p +10%
(2013: 32.4p)
* Before intangible amortisation and acquisition related costs.
Changes at constant exchange rates have been calculated by retranslating the results
for 2013 at the average exchange rates used for 2014.
BUNZL PLC ANNUAL REPORT 2014
01
GROUP AT A GLANCE
We provide a one-stop-shop distribution and outsourcing service across
27 countries, supplying a broad range of internationally sourced non-food
products to a variety of market sectors.
Where we operate
55%
of 2014 revenue
NORTH
AMERICA
• Revenue increased 5%
at constant exchange rates.
• Adjusted operating profit* up
5% at constant exchange rates.
• Operating margin* unchanged
at 6.3%.
• Return on operating capital down
from 61.2% to 59.6%.
19%
of 2014 revenue
CONTINENTAL
EUROPE
• Revenue up 5% at constant
exchange rates.
• Adjusted operating profit* increased
12% at constant exchange rates.
• Improvement in operating margin*
from 8.4% to 9.0%.
• Return on operating capital up
from 47.5% to 52.3%.
REVENUE
£3,372.1m
ADJUSTED OPERATING PROFIT*
£211.1m
REVENUE
£1,146.3m
ADJUSTED OPERATING PROFIT*
£103.2m
Read more about North America on page 20
Read more about Continental Europe on page 22
Our market sectors
% OF 2014 REVENUE
28%
26%
13%
12%
11%
FOODSERVICE
Non-food consumables,
including food packaging,
disposable tableware,
guest amenities, catering
equipment, cleaning
products and safety
items, to hotels,
restaurants, contract
caterers, food processors
and the leisure sector.
GROCERY
Goods not for resale
(items which are used
but not actually sold),
including food packaging,
films, labels and cleaning
and hygiene supplies,
to grocery stores,
supermarkets and
retail chains.
CLEANING & HYGIENE
Cleaning and hygiene
materials, including
chemicals and hygiene
paper, to cleaning and
facilities management
companies and
industrial and
healthcare customers.
RETAIL
Goods not for resale,
including packaging and
other store supplies and
a full range of cleaning
and hygiene products,
to department stores,
boutiques, office
supply companies,
retail chains and home
improvement chains.
SAFETY
A complete range of
personal protection
equipment, including
hard hats, gloves, boots,
ear and eye protection
and other workwear,
to industrial and
construction markets.
02 BUNZL PLC ANNUAL REPORT 2014
*Before intangible amortisation and acquisition related costs.
17%
of 2014 revenue
UK &
IRELAND
• Revenue increased 6% at
constant exchange rates.
• Adjusted operating profit* up
12% at constant exchange rates.
• Increase in operating margin*
from 7.0% to 7.4%.
• Return on operating capital
improved from 98.8% to 111.7%.
9%
of 2014 revenue
REST OF
THE WORLD
• Revenue up 21% at constant
exchange rates.
• Adjusted operating profit* increased
24% at constant exchange rates.
• Increase in operating margin*
from 9.7% to 9.9%.
• Return on operating capital down
from 47.1% to 41.8%.
REVENUE
£1,078.5m
ADJUSTED OPERATING PROFIT*
£80.1m
REVENUE
£559.6m
ADJUSTED OPERATING PROFIT*
£55.5m
Read more about UK & Ireland on page 24
Read more about Rest of the World on page 26
7%
3%
HEALTHCARE
Disposable healthcare
consumables, including
gloves, swabs, gowns
and bandages, and other
healthcare related
equipment to hospitals,
care homes and other
facilities serving the
healthcare sector.
OTHER
A variety of product
ranges to other end
user markets such
as government
and education
establishments.
Market environment
GROWTH DRIVERS
• Increasing trend to
outsourcing.
• Global legislative trends for
health & safety and the
environment.
COMPETITIVE ADVANTAGE
• No one does what we do,
on our scale, across our
international markets.
• Expertise in making
successful acquisitions.
• Favourable demographics
• Global sourcing capabilities.
in healthcare.
• Bunzl’s national distribution
• Underlying growth in key
networks.
sectors including:
− Foodservice – away from
home;
− Cleaning & hygiene
– away from home;
− Safety – increased
legislation;
CUSTOMERS
• Strong national, regional
and local customer base.
• Working with national and
international leading
companies.
• Aligned with customer
− Healthcare – demographics.
growth.
• Focus on customer service.
BUNZL PLC ANNUAL REPORT 2014
03
CHAIRMAN’S STATEMENT
RESULTS
Despite mixed macroeconomic conditions persisting throughout
the year in many of the countries where we operate and challenging
market conditions continuing to affect some of our sectors, I am
pleased to report another excellent set of results at constant exchange
rates. Significant currency translation movements, principally in the
US dollar and euro, reduced the constant exchange Group growth
rates by between 6% and 7%.
Group revenue increased to £6,156.5 million (2013: £6,097.7 million),
and adjusted operating profit before intangible amortisation and
acquisition related costs was £429.8 million (2013: £414.4 million).
Adjusted earnings per share before intangible amortisation and
acquisition related costs were 86.2p (2013: 82.4p).
At constant exchange rates revenue increased by 7%, due to organic
growth of 3% combined with the impact of acquisitions, and adjusted
operating profit rose by 10% as the Group operating margin improved
from 6.8% to 7.0%. Adjusted earnings per share were up 11%.
DIVIDEND
The Board is recommending a final dividend of 24.5p. This brings
the total dividend for the year to 35.5p, up 10% compared to 2013.
Shareholders will again have the opportunity to participate in our
dividend reinvestment plan.
STRATEGY
Our consistent and proven strategy of developing the business
through organic growth, consolidating our markets through
focused acquisitions and continuously improving the efficiency
of our operations has delivered another successful year of growth for
the Group with all four business areas ahead of 2013 in both revenue
and profits at constant exchange rates.
Organic growth is achieved by continually redefining and deepening
our commitment to our customers. By enabling our customers to
outsource to Bunzl the purchasing, consolidation and distribution
of a broad range of goods not for resale, they are able to benefit
by achieving purchasing efficiencies and savings while at the
same time freeing up working capital, improving their distribution
capabilities, reducing carbon emissions and simplifying their
internal administration.
Acquisition activity continued at a good pace throughout 2014.
Including Tillman, which we agreed to acquire in December 2014 and
completed at the beginning of January 2015, we made 17 acquisitions
with a total committed spend of £211 million, thereby adding
annualised revenue of over £220 million. These acquisitions have
helped to strengthen our position in many of the market sectors
that we serve.
INVESTMENT
Over time we have steadily invested in the business to support our
growth strategy and to expand and enhance our asset base. During
the year we have extended and improved our warehouses and opened
new ones, both as a result of acquisitions and by consolidating our
existing warehouse footprint. Our ability to serve our customers in
the most efficient and appropriate manner is critical to our success
and, as a result, we continuously upgrade our IT systems as we
integrate new businesses into the Group and increase the
functionality of our existing operations, thereby enhancing our
customer offering.
Revenue £bn
05 continuing operations
£6.2bn
Adjusted operating profit* £m
05 continuing operations
* Before amortisation and acquisition related costs.
6.1
6.2
£430m
430
414
5.4
5.1
4.8
4.6
4.2
3.6
3.3
2.9
352
336
296
307
281
243
226
203
05
06
07
08
09
10
11
12
13
14
05
06
07
08
09
10
11
12
13
14
04 BUNZL PLC ANNUAL REPORT 2014
‘ As a focused organisation we have once
again demonstrated the strength of our
customer proposition and shown our
ability to grow and develop across our
international portfolio of businesses.’
CORPORATE RESPONSIBILITY
Sustainable business practice is important to Bunzl and refining
our processes and operations to ensure improvements in this
area is ongoing. Our ability to measure the improvement in our
performance relies on the availability of high quality data for our key
indicators and in this regard our environmental and accident data are
now both subject to external assurance. We continue to engage with
our suppliers to encourage them to adopt appropriate sustainable
practices and ensure compliance with regulations. In this connection,
our quality assurance/quality control team based in Shanghai
regularly undertakes supplier audits to assist our suppliers in
meeting our required standards.
EMPLOYEES
Although we are a large group, we strive to preserve the advantages
and style of a small business, maintaining a flat organisation
structure with decentralised decision making and clear lines of
responsibility. In this way we are able to provide a responsive and
tailored service offering to our customers. Bunzl is a service
business and accordingly our employees across the world are our
ambassadors. We are therefore very grateful for the knowledge,
experience and continued enthusiasm shown by our employees who
have played an important part in our strong performance. Further,
we have welcomed a number of new employees through acquisitions
we have made. In our view, the retention of employees post
acquisition is key to the successful integration of newly acquired
businesses and to bring in new ideas and improved processes that
can then be applied elsewhere in the Group.
BOARD
Peter Johnson, who has served as a non-executive director since
2006, will be retiring after the Company’s Annual General Meeting
in April 2015. During his time he has also served as Chairman of the
Remuneration Committee and senior independent director. We thank
Peter for his guidance and wise counsel over many years and he will
leave the Board with our gratitude and best wishes for the future.
Vanda Murray was appointed as a non-executive director with effect
from February 2015. Based in the UK, Vanda is presently a non-
executive director of Exova Group plc, Manchester Airports Holdings
Limited, Microgen plc, where she is Chair of the Remuneration
Committee, and Fenner PLC, where she is the senior independent
director. She was previously Chief Executive Officer of Blick plc
from 2001 to 2004 and subsequently the UK Managing Director of
Ultraframe PLC from 2004 to 2006. She was appointed OBE in 2002
for Services to Industry and to Export and has over 20 years of senior
management experience across a range of industrial, manufacturing
and support services sectors in Europe, the US and Asia which will
be of great value to Bunzl as we continue to expand and develop.
Upon Peter’s retirement in April, Vanda will become Chair of the
Remuneration Committee and David Sleath, who was appointed as
a non-executive director in September 2007 and is Chairman of the
Audit Committee, will assume the role of senior independent director.
Philip Rogerson
Chairman
23 February 2015
Adjusted earnings per share p
05–12 restated on adoption of IAS 19 (revised 2011)
86.2p
59.7
55.4
51.8
41.1
38.2
44.4
86.2
82.4
70.6
67.6
05
06
07
08
09
10
11
12
13
14
Read more about our key performance indicators on pages 14 and 15
Share price range p
1,367p – 1,820p
1,820
1,450
1,167
1,367
1,014
852
12
13
14
710
742
757
675
643
884
777
443
05
578
06
627
07
542
08
482
09
616
10
676
11
BUNZL PLC ANNUAL REPORT 2014
05
ADAPTING TO
CHANGING MARKET
CONDITIONS AND
CUSTOMER NEEDS
06 BUNZL PLC ANNUAL REPORT 2014
We do business in
multiple regions within
varied market sectors
which makes us adaptable
enough to withstand shifts
and changes in demand.
Growing both organically
and through acquisitions,
we are a balanced and
resilient business.
Read more about our acquisition growth
on pages 12 and 13
6+ SECTORS
BALANCED PORTFOLIO
BUNZL PLC ANNUAL REPORT 2014
07
ADAPTING TO
CHANGING MARKET
CONDITIONS AND
CUSTOMER NEEDS
BUSINESS MODEL AND STRATEGY
For many years we have followed a well established and successful business model and
pursued a consistent and proven strategy. By doing so we have delivered strong growth
across our selected international markets as we have looked to develop both in existing
and new geographies.
Our business model
SHAREHOLDER RETURNS
Our shareholders have
enjoyed significant returns
on their investment over
time with sustained growth
in Bunzl’s share price and
year-on-year increases
in dividends.
CUSTOMER BENEFITS
Our customers benefit
from a lower cost of doing
business by reducing or
eliminating many of the
hidden costs of in-house
procurement and
distribution and reducing
carbon emissions.
LEDGE
W
O
N
K
E
F
F
I
C
I
E
N
C
I
E
S
C U S T O MER BENEFITS
I N V ESTMENTS
ONE-STOP-SHOP
FOR NON-FOOD
CONSUMABLES
RELIABIL I T Y
RELIABIL I T Y
SHAREHOLDER R E T U R N S
SHAREHOLDER R E T U R N S
SHAREHOLDER R E T U R N S
R
R
E
E
S
S
O
O
U
U
R
R
C
C
E
E
S
S
E
TIS
R
EXPE
WE SOURCE
We source and procure branded, own brand
and unbranded products globally, working
with both multinational and local suppliers,
to ensure that our customers have access
to the best and most suitable products to
meet their needs.
WE CONSOLIDATE
By applying our resources and consolidating
a broad range of products into our extensive
warehousing infrastructure, we are able
to offer our customers a one-stop-shop
solution which reduces or eliminates many
of the hidden costs of self-distribution.
WE DELIVER
We offer several delivery options, including
direct store delivery, cross dock and
warehouse replenishment programmes, on
a local, regional, national and international
basis, to ensure that our customers get their
products when and where they are needed.
08 BUNZL PLC ANNUAL REPORT 2014
SOURCECONSOLIDATEDELIVER By following a strategy of focusing on our strengths and consolidating the markets in which
we compete, we are able to create long term shareholder value.
Our strategy
ORGANIC
GROWTH
We achieve organic growth
by applying our resources
and expertise to enable
customers to outsource
to Bunzl the purchasing,
consolidation and
delivery of a broad range
of products, thereby
enabling them to achieve
efficiencies and savings.
ACQUISITION
GROWTH
Since 2004 we have made
100 acquisitions with an
average annual spend
of £183 million, adding
average annualised
revenue of £261 million.
OPERATING
MODEL
EFFICIENCIES
We continually strive
to make our businesses
more efficient and
environmentally friendly
by investing in new IT
systems and warehouse
facilities and implementing
best practice operational
procedures.
Read more on page 10
Read more on pages 12 and 13
Read more on page 11
Our strategy building blocks
UNIQUE BUSINESS MODEL
Our supply chain management and
one-stop-shop offering allows our customers
to focus on their core businesses more
effectively and at the same time reduce their
working capital and carbon emissions.
OPERATIONAL FOCUS
With a decentralised operational structure,
our management are able to focus on our
customers’ needs while retaining full
responsibility for the financial performance
of their businesses.
BALANCED BUSINESS PORTFOLIO
We have a geographically balanced and
diversified business portfolio operating
across 27 countries.
EXPERIENCED MANAGEMENT
Our executive directors and business area
heads have extensive experience in managing
the Group’s businesses with an average
of 17 years’ service with Bunzl.
ACQUISITION STRATEGY AND
TRACK RECORD
Our acquisition strategy is to seek out those
businesses that satisfy key criteria, including
having good financial returns in resilient and
growing markets, while at the same time
providing opportunities to extract further
value as part of the Bunzl Group.
STRONG FINANCIAL DISCIPLINE
Since 2004 we have delivered consistently
good results with very high returns on capital
and operating cash flow conversion.
ATTRACTIVE MARKETS
We operate across six core fragmented
markets sectors, many of which are
growing and resilient to challenging
economic conditions.
To find out how we are making progress on our strategic priorities through our key performance indicators, see pages 14 and 15
BUNZL PLC ANNUAL REPORT 2014
09
ORGANIC GROWTH
Growing Bunzl organically, either by expanding and developing our business with existing
customers or by gaining new business with additional customers, is an integral part of our
strategy to enhance shareholder value.
BUILDING RELATIONSHIPS
One of the greatest opportunities for organic sales growth comes
from building long term relationships with existing customers.
By being both flexible and reliable and by providing excellent levels
of service, we gain our customers’ trust and confidence to meet
their future needs over a sustained period of time through a broad
and effective product and service offering.
ACQUIRING NEW CUSTOMERS
We are constantly striving to expand and gain market share
by winning business with new customers. Our well established
business model allows us to show potential customers that we can
apply our resources and expertise to reduce or eliminate many of
the hidden costs of in-house procurement and distribution or satisfy
their requirements more cost-effectively than their current suppliers.
EXPANDING OUR OFFERING
Once we have established a good relationship with a particular
customer and successfully demonstrated that we are able to improve
their operational efficiency, we endeavour to increase our levels of
business with that customer by extending the range of products and
services we supply. This can be achieved by expanding our offering
to other parts of their business, where we might not have previously
been a recognised supplier, or by increasing the type and variety
of products which are available to them, whether branded or own
brand. We do this either by extending the range of products within
a particular category or adding new categories of products to those
already supplied, often by optimising cross-selling opportunities
across other Bunzl businesses.
Case study – customer development
Supporting customers as they expand
Case study – product development
Smart, simple, safe solutions
WHAT BUNZL DID TO GROW THE BUSINESS
Bunzl began providing outsourcing solutions to a large facilities
management company in the UK in 2002. During the first year
of operation, annual revenue reached £5 million as we provided
cleaning and hygiene supplies in support of their contract
cleaning business. Over the last 12 years, as the customer
has developed and grown its business, we have been able
to extend our own business by expanding the product range
supplied into catering and healthcare related products.
By doing so, we have steadily increased our annual sales
to over £18 million today, with in excess of 85,000 deliveries
being made each year to more than 8,000 delivery points.
WHAT BUNZL DID TO GROW THE BUSINESS
FoodHandler is a leading supplier of high quality disposable
products to the foodservice sector in the US that was purchased
by Bunzl in 2012. Through the use of patented and proprietary
technology, over the last three years FoodHandler has increased
its sales through the design and development of a variety of new,
innovative products. These include hybrid technology gloves
and a single glove dispensing system, that have improved food
safety standards by cutting down on cross-contamination, and
antimicrobial paper that extends the shelf life of fresh food by
two to three days. These types of creative sales and marketing
initiatives have enabled FoodHandler to grow and enhance its
penetration in the key markets that it serves.
‘ We provide our customers with peace
of mind by listening to their needs
and understanding their requirements
whilst providing dedicated account
management and exceptional service.’
Paul Budge
Managing Director UK & Ireland
ALIGNED WITH CUSTOMER GROWTH
EXPANDING OUR PRODUCT RANGE
10 BUNZL PLC ANNUAL REPORT 2014
OPERATING MODEL EFFICIENCIES
We are continually looking to refine and develop our processes and procedures to make our operations
more efficient. By doing so, we are able to gain a competitive advantage, by offering our customers more
cost-effective solutions, while at the same time improve our profitability.
WAREHOUSE LIGHTING
Recent improvements in lighting
technology have meant we are able to
make significant savings in electricity
costs by installing energy efficient
and environmentally friendly lighting
systems either by retrofitting existing
warehouses or requiring landlords of
new facilities to provide such lighting
as part of the warehouse fit out.
CONSOLIDATING WAREHOUSES
As warehouse lease terms come to an
end, we are often able to consolidate our
warehouse footprint in a particular area
by closing a number of smaller and less
efficient facilities and relocating our
operations into a single, larger and more
efficient building while at the same time
improving the working conditions for
our employees.
SHARING BEST PRACTICE
As we have continued to expand
internationally, we are increasingly
making use of our collective resources,
experience and expertise to share
best practice across the Group and
collaborate between our different
businesses in order to maximise our
potential opportunities to grow and
develop in the most cost-effective way.
SAVINGS
EFFICIENCIES
DEVELOPMENT
ROUTING AND SAFETY SYSTEMS
By installing state-of-the-art routing
and safety systems in our facilities and
delivery vehicles, we are able to plan
our delivery routes to minimise the
distances travelled and encourage safe
and efficient driving practices, thereby
reducing fuel and other transport costs
which represent a significant part of our
operating expenses.
GLOBAL PURCHASING
With the annual cost of the goods we
sell exceeding £4.6 billion, our global
scale provides substantial purchasing
synergies with our international suppliers
which many of our smaller competitors
are unable to achieve and which we are
able to share with our customers in the
form of more competitive selling prices.
IT SYSTEMS
Systems are critical to our ability to serve
our customers in the most cost-effective
and efficient manner and accordingly
we are continually improving and
upgrading our IT systems in order to
increase functionality and enhance
customer service and thereby maintain
our leadership position in the marketplace.
SAFETY
SCALE
INVESTMENT
BUNZL PLC ANNUAL REPORT 2014
11
ACQUISITION GROWTH
Expanding and developing the Group through acquiring businesses is also a key component
of our growth strategy. Historically, approximately two thirds of our year-on-year increase
in earnings has been achieved through an ongoing programme of focused and targeted
acquisitions in both new and existing geographies.
Acquisition growth track record
COMMITTED ACQUISITION SPEND £M
ANNUALISED ACQUISITION REVENUE £M
302
197
185
162
129
123
126
295
277
430
386
211
518
270
225
204
151
154
281
223
04
05
06
07
08
6
09
10
11
12
13
14
04
05
06
07
08
27
09
10
11
12
13
14
Acquisition growth year by year
COUNTRIES
YEAR
ACQUISITIONS
12
2003
2
14
2004
7
18
2005
7
21
2006
9
22
2007
8
‘ Our ability to find the right targets
in the right markets at the right time
has enabled us to build a substantial
regional business over the last seven
years and establish a strong platform
for future growth.’
Rodrigo Mascarenhas
Managing Director Latin America
CONTINUING OUR
GEOGRAPHIC EXPANSION
Case study – Latin America
Extending the operational footprint
WHAT BUNZL DID TO GROW THE BUSINESS
Prior to 2008 our only business in Latin America was a relatively
small operation serving the grocery sector in Mexico. Having
conducted a detailed market study of the potential to develop
our business more widely in the region, we entered the safety
market in Brazil through the purchase of Prot-Cap in 2008 and
strengthened our position in this sector with the acquisition of
AM Supply in 2010 and Danny in 2011. Over the next two years
we expanded our business in Brazil into the cleaning & hygiene
and healthcare sectors while at the same time entering the
foodservice sector in Mexico and extending our safety business
into Chile, Colombia, Peru, Argentina and Mexico through the
acquisition of Vicsa Safety. By the end of 2014 we had made
12 acquisitions in the region and now operate in six countries
across four market sectors.
FOOTPRINT
2008
2014
12 BUNZL PLC ANNUAL REPORT 2014
12 ACQUISITIONS SINCE 2008
FROM 1 TO 6 COUNTRIES
Acquisition strategy
Opportunity for growth
KEY ACQUISITION PARAMETERS
In considering potential acquisition opportunities, we only target
those businesses which meet the specific parameters that fit our
business model and growth strategy. These include businesses:
• that sell business to business (‘B2B’);
• with a consolidated ‘not-for-resale’ product offering;
• in resilient and growing markets;
• with a fragmented customer base;
• which operate in markets with scope for consolidation
and synergies;
• whose products represent a small % of total customer spend;
• that have opportunities for ‘own label’ products; and
• with attractive financial returns.
ACQUISITION TYPES
There are two different types of acquisition that we undertake
depending on whether we are already present in the country
or market sector in which the target business is operating:
• Anchor
GROWTH IN EXISTING COUNTRIES
Unlike many industries which are characterised by a relatively small
number of large businesses, the markets in which we compete are
very fragmented. As a result, there are numerous opportunities
for us to develop through acquisitions in those countries where we
already have a presence. We do this either by extending our existing
operations in a particular market sector or by acquiring a business
in a sector in which we do not currently operate within that country.
GROWTH IN NEW COUNTRIES
In 1992, the business which now comprises the continuing operations
of the Bunzl Group was only operational in the US and Australia.
By 1997 the business had expanded through acquisitions into seven
countries and grew further to cover 12 countries by 2003. The
development of the Group since then is shown in the timeline below.
We are now a truly international business with operations in 27
countries but there are a number of potentially attractive countries
where we do not yet have a presence. In evaluating whether to enter
a new country through acquisition, we consider a number of different
criteria including a detailed analysis of our market sectors, the local
macroeconomic indicators and the ease of doing business in, and the
political risks and business practices associated with, the particular
country under review.
23
2010
9
23
2011
10
27
2012
13
27
2013
11
27
2014
17
YEAR
− new geographies; or
− new market sectors.
• Bolt-on
− existing geographies; or
− existing market sectors.
23
2008
7
23
2009
2
‘ After an initial anchor acquisition
in 2007, which has been followed by
the successful integration of six further
bolt-on acquisitions, we have developed
a national business in Spain with annual
revenue in excess of €100 million.’
Frank van Zanten
Managing Director Continental Europe
ACQUIRED BUSINESSES
CONTINUE TO FEEL ‘LOCAL’
Case study – Spain
Developing in a new country
WHAT BUNZL DID TO GROW THE BUSINESS
Although we had progressively expanded our business in
Continental Europe since 1994, we did not enter the Spanish
market until 2007 with the acquisition of Iberlim, a cleaning
and hygiene distributor based near Barcelona. Between 2008
and 2011 our business in Spain grew rapidly with two further
acquisitions in the cleaning & hygiene sector, an entry into the
foodservice sector and the purchase of two businesses serving
the safety sector. Including Quirumed, a healthcare business
based in Valencia which was acquired in January 2015, we have
made seven acquisitions in Spain over the last eight years and
now operate in four market sectors.
SECTOR SPLIT 2014 (PRO FORMA)
17%
20%
Cleaning & Hygiene
Safety
Foodservice
Healthcare
SECTOR ENTRY
25%
38%
2007
2008
2011
2015
7 ACQUISITIONS SINCE 2007
FROM 0 TO 4 SECTORS
BUNZL PLC ANNUAL REPORT 2014
13
KEY PERFORMANCE INDICATORS
We use the following key performance indicators (‘KPIs’) to measure our progress
in delivering the successful implementation of our strategy and to monitor and drive
performance. These KPIs reflect our strategic priorities of developing the business
through organic and acquisition led growth and improving the efficiency of our
operations as well as other financial and environmental metrics.
Organic growth
Organic revenue growth %
Organic operating margin %
Increase in revenue for the year
excluding the impact of currency
translation, acquisitions during the
first 12 months of ownership and
disposal of business.
4.0
2.6
2.7
2.0
Current year operating margin
excluding the impact of acquisitions
during the first 12 months of ownership
compared to the prior year operating
margin restated at constant
exchange rates.
6.8
6.8
Acquisition growth
Acquisition spend £m
Consideration paid and payable,
together with net debt assumed,
in respect of businesses acquired
or agreed to be acquired during
the year.
11
12
13
14
13
14
Annualised revenue
from acquisitions £m
295
277
185
211
Estimated revenue which would have
been contributed by acquisitions made
or agreed to be made during the year if
such acquisitions had been completed
at the beginning of the relevant year.
518
281
223
204
11
12
13
14
11
12
13
14
Operating model efficiencies
Operating margin %
Ratio of adjusted operating profit
(being operating profit before
intangible amortisation, acquisition
related costs and disposal of
business) to revenue.
6.6
6.6
6.8
7.0
Return on average
operating capital %
Ratio of adjusted operating profit
(being operating profit before
intangible amortisation, acquisition
related costs and disposal of business)
to the average of the month end
operating capital employed, being
tangible fixed assets, inventories and
trade and other receivables less trade
and other payables.
57.4
56.5
56.9
57.7
11
12
13
14
11
12
13
14
14 BUNZL PLC ANNUAL REPORT 2014
Financial
Adjusted earnings per share p
Adjusted profit for the year (being
the profit for the year before intangible
amortisation, acquisition related
costs and disposal of business and
associated tax) divided by the weighted
average ordinary shares in issue.
2011 and 2012 have been restated
on adoption of IAS 19 (Revised 2011)
‘Employee Benefits’.
Non-financial
Scope 1 carbon emissions
Tonnes of CO2 per £m revenue
86.2
82.4
Measured in accordance with the
Greenhouse Gas Protocol applying
Defra conversion factors.
17.7
15.8
15.5◊ 15.7†
70.6
67.6
11
12
13
14
12 months to 30 September
11
12
13
14
Free cash flow £m
Cash generated from operations before
acquisition related costs less net
capital expenditure, interest and tax.
Scope 2 carbon emissions
Tonnes of CO2 per £m revenue
302
277
Measured in accordance with the
Greenhouse Gas Protocol applying
Defra conversion factors.
5.3
5.3◊
5.2†
4.6
275
235
11
12
13
14
12 months to 30 September
11
12
13
14
Fuel usage
Litres per £000 revenue
17.3
17.9
17.9
17.6
Diesel, petrol and LPG used
in the Group’s own vehicles.
6.1
5.6
5.1◊
5.0†
Return on invested
capital %
Ratio of adjusted operating profit
(being operating profit before
intangible amortisation, acquisition
related costs and disposal of business)
to the average of the month end
invested capital (being equity after
adding back net debt, retirement benefit
obligations, cumulative intangible
amortisation, acquisition related costs
and amounts written off intangible
assets, net of the related tax).
◊ Included in the external auditors’ limited assurance scope referred to on page 36 of the 2013 Annual Report.
† Included in the external auditors’ limited assurance scope referred to on page 41.
BUNZL PLC ANNUAL REPORT 2014
15
11
12
13
14
12 months to 30 September
11
12
13
14
INCREASED
EFFICIENCY
THROUGH GLOBAL
PURCHASING
EXPERTISE
16 BUNZL PLC ANNUAL REPORT 2014
INCREASED
EFFICIENCY
THROUGH GLOBAL
PURCHASING
EXPERTISE
Our global network
enables us to share expert
knowledge for the benefit
of all our businesses.
Best practice increases
efficiency across the Group,
from achieving purchasing
synergies to operating our
warehouses in the most
cost-effective way.
Read more about our operating model
efficiencies on page 11
27 COUNTRIES
SHARED KNOWLEDGE
BUNZL PLC ANNUAL REPORT 2014
17
CHIEF EXECUTIVE’S REVIEW
OPERATING PERFORMANCE
2014 has proved to be another successful year for the Group due to a
combination of good organic growth and the impact from acquisitions
made in 2013 as well as those businesses purchased during the year.
The overall negative translation effect of currency movements has
significantly decreased the reported Group growth rates of both
revenue and profit. As in previous years, the operations, including
the relevant growth rates, are reviewed below at constant exchange
rates to remove the distorting impact of these currency movements.
Changes in the level of revenue and profits at constant exchange
rates have been calculated by retranslating the results for 2013 at the
average rates used for 2014. Unless otherwise stated, all references
in this review to operating profit are to adjusted operating profit
(being operating profit before intangible amortisation and acquisition
related costs).
Revenue increased 7% (1% at actual exchange rates) to £6,156.5
million and operating profit was £429.8 million, an increase of 10%
(4% at actual exchange rates). The percentage growth in operating
profit was greater than that of revenue due to the improvement in
Group operating margin by 20 basis points to 7.0% as a result of
increases in the operating margin in Continental Europe, UK &
Ireland and Rest of the World.
In North America revenue rose 5% (down 1% at actual exchange
rates) due to good organic revenue growth and the impact of
acquisitions completed in both 2013 and 2014, while operating profit
also increased 5% (down 1% at actual exchange rates). Revenue in
Continental Europe rose 5% (unchanged at actual exchange rates)
as a result of improved organic revenue growth and the impact of
acquisitions, with operating profit up 12% (6% at actual exchange
rates) as margins improved by 60 basis points to 9.0%. In UK &
Ireland revenue was up 6% (6% at actual exchange rates) due to the
impact of strong organic growth and acquisitions, but operating profit
rose 12% at both constant and actual exchange rates as margins
improved by a further 40 basis points during the year to 7.4%. In Rest
of the World revenue increased 21% (6% at actual exchange rates)
and operating profit was up 24% (8% at actual exchange rates),
principally due to strong organic revenue growth and the substantial
impact of acquisitions in Latin America.
Basic earnings per share were 8% higher (2% at actual exchange
rates) at 64.5p. Adjusted earnings per share, after eliminating the
effect of intangible amortisation and acquisition related costs, were
86.2p, an increase of 11% (5% at actual exchange rates). The return
on average operating capital increased from 56.9% to 57.7% and
return on invested capital was 17.6%, a slight decrease from 2013
as improved returns in the underlying business were offset by
the adverse impact of recent acquisitions and exchange rates.
Our operating cash flow continued to be strong with the ratio of
operating cash flow before acquisition related costs to operating
profit at 95%. The net debt to EBITDA ratio increased marginally
to 1.9 times compared to 1.8 times as at the previous year end.
Sustainable business practice is emphasised through our ongoing
Corporate Responsibility (‘CR’) programmes. During the year we
undertook a detailed employee survey and were pleased that over
70% of our employees responded and that 93% of respondents ‘enjoy
working for Bunzl’. Our continued focus on operational excellence
allows us to reduce our environmental impact by consolidating our
warehouse footprint and, where necessary, introducing more
sustainable practices to the businesses we acquire.
ACQUISITIONS
Acquisitions are a key component of the Group’s growth strategy.
Our committed spend in 2014 was £211 million as we made 17
transactions in total, including Tillman which we agreed to acquire
in December 2014 and completed at the beginning of January 2015.
At the end of January 2014 we acquired Bäumer and its related
company Protemo in Germany. The businesses had aggregated
revenue of £10 million in 2014 and represent our first step into the
cleaning and hygiene and healthcare sectors in Germany. Oskar
Plast, which sells a variety of disposable packaging products to
customers throughout the Czech Republic, including retail food
chains, food processors and other distributors, was acquired in
February and has expanded our operations in the Czech Republic.
Revenue was £12 million in 2014.
In March we completed four acquisitions. Lamedid, a business
principally engaged in the supply and distribution throughout Brazil
of own label medical and healthcare consumable products to
hospitals, clinics and laboratories as well as to distributors, had
revenue in 2014 of £13 million. It has significantly increased the size
of our healthcare business in Brazil, the Group having entered the
healthcare sector there with the acquisition of Labor Import in 2013.
Although relatively small, the purchase of Nelson Packaging, a
business principally engaged in the distribution of packaging and
cleaning and hygiene supplies to end users in the commercial and
industrial market sectors, has provided additional scale to our
business in New Zealand. Revenue was £3 million in 2014. Plast
Techs, which is engaged in the sale of a variety of foodservice and
cleaning and hygiene supplies to distributors throughout Southern
California and had revenue of £14 million in 2014, complements our
existing business in the region and has provided access to additional
product lines. The purchase of Tecno Boga represents a significant
expansion of our operations in Chile, being a country that we entered
with the acquisition of Vicsa Safety at the end of 2012. The business
is a leading supplier of own label protective footwear, principally to
distributors, and had revenue of £23 million in 2014.
Allshoes, a distributor of both branded and own brand safety and
work shoes to a variety of wholesalers as well as to retailers,
principally in the Netherlands but also in Belgium, was acquired in
May. It represents an important development for our safety business
in the Netherlands as it extends our product range in the safety
shoes sector and provides cross-selling opportunities with Majestic,
our existing personal protection equipment business in the Benelux
region which specialises in the supply of gloves and workwear.
18 BUNZL PLC ANNUAL REPORT 2014
Revenue in 2014 was £18 million. Also in May we acquired JPLUS,
a Brazilian business with revenue of £12 million in 2014 principally
engaged in the distribution of cleaning and hygiene supplies and
disposable products to a variety of end user customers, particularly
in the contract cleaning and healthcare sectors. This acquisition
expands the geographical coverage of our cleaning and hygiene
supplies business in Brazil.
365 Healthcare, which had revenue of £12 million in 2014, was
acquired at the end of June. The business is engaged in the
distribution of own brand healthcare products to a variety of
customers in the UK and Ireland and has expanded our product
offering of medical consumables to the healthcare sector. At the
end of July we purchased Premiere Products, a cleaning and hygiene
supplies distributor in the UK principally servicing customers in
the facilities management and education sectors. The business
has extended the breadth of our own brand product offering and
has further strengthened our cleaning and hygiene supplies business
in the UK. Revenue was £4 million in 2014. We acquired two safety
businesses in the UK also at the end of July. Lee Brothers, which
had revenue of £11 million in 2014, supplies a variety of personal
protection equipment and workplace consumables to customers
largely in the construction and engineering sectors. Guardsman,
which had revenue of £9 million in 2014, is engaged in the sale
of safety equipment and workwear to customers in various
manufacturing industries as well as the construction and
engineering sectors. Together these businesses have further
extended our safety business in the UK.
At the end of September we completed the acquisition of De Ridder,
a specialist distribution business based in the Netherlands and
engaged in the supply of a wide range of products principally to
prisons, police stations and other detention centres. Revenue in 2014
was £6 million. We acquired the business of Victoria Healthcare
Products in November. Based near Melbourne, Australia, the
business had revenue of £2 million in 2014 and supplies a variety
of healthcare consumable products for people in the community
and to residential care facilities.
In North America our operations in Canada were further expanded
with the purchase of Acme Supplies, a cleaning and hygiene supplies
business based in Vancouver Island, at the beginning of December.
Revenue in 2014 was £9 million. Our marketing services business in
the UK was expanded in December with the purchase of POS Direct.
Based in Leicester and with revenue of £4 million in 2014, the
business manages and supplies a variety of point of sale and
marketing materials. At the end of December we entered into an
agreement to acquire Tillman, which supplies a variety of personal
protection equipment, principally gloves, to distributors throughout
the US who supply customers operating in the welding and industrial
sectors. The acquisition was completed at the beginning of January
2015. With revenue of £61 million in 2014, the purchase of Tillman
represents another important development for the Group‘s safety
business in the US.
Today we are announcing two more acquisitions. Quirumed, which
had revenue of £15 million in 2014, represents our first move into
the healthcare sector in Spain while Jan-Mar, based in Toronto with
revenue of £6 million in 2014, has further extended our cleaning and
hygiene supplies business in Canada.
PROSPECTS
Bunzl’s strong market position and the ongoing benefit from
acquisitions is expected to lead to further growth at constant
exchange rates in each of our business areas in 2015 despite variable
macroeconomic conditions across the countries in which we operate.
In North America the impact of organic growth and recent
acquisitions should result in a good performance. Even though
the economic outlook remains challenging in Continental Europe,
we expect to see continued growth this year. UK & Ireland should
progress as a result of further organic growth and the contribution
from acquisitions made in 2014. Although Rest of the World is likely
to experience more difficult trading conditions due to exchange rate
volatility and the slowdown in the resource sectors, it should
continue to grow.
The pipeline of potential acquisitions remains promising. Discussions
are ongoing with various targets and we expect to complete further
transactions as the year progresses.
The Board is confident that Bunzl’s well positioned businesses will
develop further and that the prospects for the Group are positive.
Michael Roney
Chief Executive
23 February 2015
Management team
Managers from across the Group meet regularly to review
performance, discuss trends affecting our businesses and seek
further opportunities for growth and competitive advantage.
Brian May
Finance Director
Patrick Larmon
President and CEO
North America
Celia Baxter
Director of Group
Human Resources
Paul Hussey
General Counsel &
Company Secretary
Paul Budge
Managing Director
UK & Ireland
Andrew Mooney
Director of Corporate
Development
Frank van Zanten
Managing Director
Continental Europe
Rodrigo Mascarenhas
Managing Director
Latin America
Kim Hetherington
Managing Director
Australasia
BUNZL PLC ANNUAL REPORT 2014
19
CHIEF EXECUTIVE’S REVIEW CONTINUED
NORTH
AMERICA
OVERVIEW
£m
Revenue
Adjusted operating
profit*
Operating margin*
Return on
operating capital
Growth %
2014
3,372.1
2013
3,401.7
Reported
(1)
Constant
exchange
5
(1)
5
211.1
6.3%
213.6
6.3%
59.6%
61.2%
*Before intangible amortisation and acquisition related costs.
In North America revenue increased by 5% to £3,372.1 million due
to organic revenue growth with new and existing customers and
additional sales provided by acquisitions made in both 2013 and 2014.
Each of these acquisitions has allowed us to expand our product and
service offerings through their unique capabilities and strong market
presence. With the operating margin stable, the operating profit also
increased 5% to £211.1 million.
Our largest business, which serves the grocery sector, was impacted
by the severe winter weather which affected much of the US in the
first quarter of the year but continued to experience sales growth in
an environment of mergers and acquisitions, expansion and channel
diversification amongst our customer base. During 2014 we renewed
several supply agreements with national and regional grocery
wholesalers and retailers. At the same time we maintained strong
business relationships with many long term customers, including
some of the largest supermarket chains and discount supercentres
in the US and Canada, although margins came under pressure. To
promote our capabilities within the grocery sector, we launched our
‘Think Big’ branding campaign targeting executive leadership. The
campaign’s message emphasises our ability to help our customers’
decision makers decrease costs and reduce the levels of inventories
while increasing revenues through better merchandising and
category management.
Our business serving the retail sector continued to drive strong
organic growth. We secured a substantial new agreement with a
leading North American home improvement retailer and expanded
business with existing customers. Our unique ability to deliver a
combination of custom store supply programmes, branded
packaging, display solutions and fixture consolidation services has
allowed us to solidify our position as a preferred business partner
for retailers seeking a one-stop-shop to serve all of their locations.
Both our grocery and retail sector customers value the advantages
we provide through our customised distribution platform, including
our product and sourcing expertise, high fill rates and bespoke
reporting capabilities as well as the reliable delivery service provided
by our own large transport fleet which together give us a real
competitive advantage.
20 BUNZL PLC ANNUAL REPORT 2014
3 ACQUISITIONS
+5% increase in adjusted operating
profit at constant exchange rates
DRIVING INNOVATIONS
Our redistribution business, which serves distributors in the
foodservice, cleaning and hygiene and safety sectors, was also
affected by the unfavourable weather conditions early in the year.
In a competitive and challenging market, the business experienced
a slight increase in revenue as a result of the impact of recent
acquisitions. We are working to stimulate sales growth by increasing
our marketing activities, expanding our category management
initiatives and adding complementary businesses to extend our
product range and market reach. With our ‘R3 Factor’ branding
campaign, we engaged with our foodservice and cleaning and
hygiene distribution customers about the advantages of using our
coast-to-coast branch network as their ‘virtual warehouse’. This
provides our customers with access to an unmatched range of
products and supply chain services they can leverage to increase
their sales and profitability while managing their working capital
more efficiently. In addition, our expanded category management
practice positions us well to use our distribution expertise to help
customers rationalise their inventories, manage their warehouse
space more effectively and gain a competitive advantage. The
acquisition in March of Plast Techs, a supplier of foodservice and
cleaning and hygiene products to distributors in Southern California,
has augmented our redistribution business in the region while
providing access to additional product lines.
SAS Safety, which we acquired in December 2013, and Tillman, which
was purchased at the beginning of 2015, have significantly broadened
our range of own brand personal protection equipment solutions and
allowed us to expand into the industrial, automotive and welding
distribution markets. FoodHandler expanded its food safety product
line with several exclusive innovative products and has become a
one-stop-shop for foodservice operators. Additionally, our expertise
in creating and distributing imported and domestic own brand
products allows us to provide our customers across all sectors with
a range of value solutions that meet their particular specifications
and budgets.
Our business supplying the food processor sector experienced
revenue growth by increasing sales to existing customers and
acquiring new customers. Our national accounts team provided
greater focus on selling our value to key customers while offering
centralised management for our customers’ extensive operations.
We also introduced a range of technical packaging that helps food
processors preserve product freshness and taste. We continue to
serve all sectors of the food processing industry, including meat
and home meal processors, bakeries, fresh produce providers
and speciality food purveyors.
3 ACQUISITIONS
+5% increase in adjusted operating
profit at constant exchange rates
DRIVING INNOVATIONS
In the agriculture sector, our business grew as a result of our
ability to provide a wider range of products to produce growers,
packers and shippers across North America. With our expertise
in customised flexible and rigid packaging design and distribution,
we are able to help our agriculture customers meet the rising
demand from health-conscious consumers who are increasing
their consumption of fresh produce.
In the convenience store sector, we experienced strong organic
growth, primarily due to new programmes distributing
consumable products through our largest convenience store
wholesale customer.
In Canada the acquisition of Wesclean in 2013 has helped us to
increase our sales in the cleaning and hygiene sector during the
year and our acquisition of Acme Supplies in December 2014 has
further increased our presence in this sector. In Mexico, ProEpta,
which we also acquired in 2013, has expanded our reach in the
hospitality sector and has increased revenue by providing
products for prominent national and international customers.
‘ Our extensive experience
in making successful
acquisitions has once
again brought additional
innovation and expertise
which have helped to
develop and expand
our business further.’
Patrick Larmon
President and CEO North America
BUNZL PLC ANNUAL REPORT 2014
21
CHIEF EXECUTIVE’S REVIEW CONTINUED
CONTINENTAL
EUROPE
4 ACQUISITIONS
+12% increase in adjusted operating
profit at constant exchange rates
REDUCING COSTS
OVERVIEW
£m
Revenue
Adjusted operating
profit*
Operating margin*
Return on
operating capital
Growth %
2014
1,146.3
2013
1,151.5
Reported
0
Constant
exchange
5
103.2
9.0%
97.0
8.4%
52.3%
47.5%
6
12
*Before intangible amortisation and acquisition related costs.
Revenue in Continental Europe rose by 5% to £1,146.3 million and
operating profit improved 12% to £103.2 million with the operating
margin increasing from 8.4% to 9.0%. Organic revenue growth for
the year was relatively low as macroeconomic conditions continued
to be difficult throughout the region, but further improvements to
gross margins and careful operating cost management contributed
to a strong increase in underlying profitability. This has been
supplemented by the full year impact of the acquisition in November
2013 of pka Klöcker and by the acquisitions in 2014 of Bäumer,
Oskar Plast, Allshoes and De Ridder.
In France, our cleaning and hygiene business saw a slight decline in
sales as good performances in the healthcare, food processor and
industrial sectors were offset by lower sales to contract cleaners
who continue to struggle in the difficult economic environment.
However, a combination of an improvement in gross margins and a
reduction in operating costs resulted in a significant improvement
in operating profit. Our personal protection equipment business both
increased sales and reduced costs such that it also delivered strong
operating profit growth.
In the Netherlands, sales improved in the food processor, retail,
healthcare and cleaning and hygiene sectors but sales declined in
the grocery sector, due to customer consolidation, and in the hotel,
restaurant and catering (‘horeca’) sector, which continues to be
under pressure in the local market. Gross margins improved,
operating costs were tightly managed and a further two businesses
successfully migrated to our IT system. Sales continued to grow
strongly at our safety products business as it gained new customers
and market share and also benefited from growth with new products.
Together with improved margins due to an increasing share of own
brand products, this led to substantially higher operating profits.
Both Allshoes and De Ridder, which were acquired during the year,
have traded as expected and are integrating well into the Group.
In Belgium, sales grew well in the cleaning and hygiene sector due
to growth with both existing and new customers, and also increased
in the grocery sector despite our customers facing continued
competition from a number of lower cost grocery chains. Although
margins were under pressure, costs were stable and the sales
growth therefore led to an improved level of overall profits.
In Germany, sales in our main business have grown significantly
in the hotel sector and with smaller regional accounts leading to
a healthy increase in operating profit and our workwear business,
pka Klöcker, which was acquired in 2013, has traded well. A number
of significant synergies have been realised in Bäumer, the cleaning
and hygiene business that was purchased in January 2014.
In Switzerland, sales have increased with a good performance in
particular in the retail sector. Gross margins were stable and costs
were well controlled which resulted in operating profit being ahead
of the previous year.
In Denmark, sales declined slightly as disappointing performances
in the retail and redistribution sectors could not be completely offset
by good sales growth of horeca products, personal protection
equipment and packaging. Sales to the public sector were stable.
However, gross margins improved and costs were further reduced
such that operating profit increased.
In Spain, trading conditions continued to improve and we recorded
good growth in our cleaning and hygiene business. Gross margins
were stable and operating profit progressed well. We also generated
excellent growth in our personal protection equipment businesses
due to exports and better domestic sales. Gross margins were also
slightly better and operating profit improved significantly.
In Central Europe, sales grew strongly, particularly in Hungary
where both our retail and cleaning and hygiene/personal protection
equipment businesses performed well. Gross margins were stable
despite ongoing margin pressure and cost increases were kept to
a minimum such that operating profit rose. Oskar Plast, which we
acquired in February 2014, and our existing Czech retail business
are in the process of being fully integrated which will lead to a
number of synergies.
In Israel, both of our businesses saw lower sales and profits due to
difficult market conditions, particularly in our business supplying the
bakery sector. Our business supplying the horeca sector successfully
relocated to a new purpose-built facility.
22 BUNZL PLC ANNUAL REPORT 2014
‘ The efficiency and profitability of the
businesses we acquire are improved by
retaining the key management and by
Bunzl providing the necessary financial
discipline, support and investment.’
Frank van Zanten
Managing Director Continental Europe
BUNZL PLC ANNUAL REPORT 2014
23
CHIEF EXECUTIVE’S REVIEW CONTINUED
UK &
IRELAND
5 ACQUISITIONS
+12% increase in adjusted operating
profit at constant exchange rates
DEVELOPING RELATIONSHIPS
OVERVIEW
£m
Revenue
Adjusted operating
profit*
Operating margin*
Return on
operating capital
Growth %
2014
1,078.5
2013
1,018.5
Reported
6
Constant
exchange
6
80.1
7.4%
71.6
7.0%
111.7%
98.8%
12
12
*Before intangible amortisation and acquisition related costs.
In UK & Ireland revenue increased 6% to £1,078.5 million and
operating profit rose 12% to £80.1 million. While our markets are
highly competitive and customers are discerning and looking at all
items of spend in great detail seeking to reduce cost, underlying
demand has grown which has helped us to deliver strong growth.
The detailed work that has been undertaken since the economic
downturn to reduce our overhead cost base and also to manage
margins closely has helped to increase the operating margin over
recent years and the margin improved further in 2014 rising from
7.0% to 7.4%.
In a number of our businesses we have continued to build actively
on our private label programme as we seek to reduce costs
for customers, enhance our own margins and maintain a quality
offering. As a consequence we have seen the sales of our private
label products grow well. During the year we launched a complete
range of glassware and crockery as well as new ranges of medical
consumables, cleaning chemical dispensers and compostable and
recyclable paper cups.
In safety supplies, we have seen a pick-up in construction activity
during the year and have been successful in winning new business
with a number of major companies. The acquisition of both Lee
Brothers and Guardsman has given us access to a number of new key
customers and both businesses have integrated into the Group well.
In cleaning and hygiene supplies, the market has continued to be
resilient although there has been further consolidation amongst our
customer base. The acquisition of Premiere Products in July has
proved to be a very good fit with our existing operations in this sector.
As has been widely reported, there has been a fair degree of market
turmoil in the grocery sector. In this environment we are pleased to
have maintained our levels of sales and profitability by continuing to
assist our customers as their models evolve. This means that we are
now offering more flexible supply solutions to help our customers
move to omni-channel retailing in the form of direct deliveries to
smaller retail outlets and also to support their online offerings.
As our customers constantly seek to reduce their costs, we have
focused on our procurement competence and successfully reduced
our input costs during the year. Scotland introduced a minimum
5p tax on single use carrier bags in 2014 and England will follow
in October 2015. This has to date, and will in future, reduce the
24 BUNZL PLC ANNUAL REPORT 2014
demand for such carrier bags but we are anticipating that this
will be largely offset by increased use of reusable ‘bags for life’
which we also supply. Our specialist retail packaging business has
performed well through winning business with a number of new
customers and continuing to develop our offering to enhance the
presentation of customers’ brands. Our sales offices in Hong Kong
and Shenzhen, China have proved to be very attractive to global
branded customers and have helped to strengthen existing
relationships and bring good opportunities for the future
development of our business.
In our marketing services businesses, point of sale activity was
strong, particularly in the consumer goods and grocery retail
sectors, and also due to the FIFA World Cup. During the year we
consolidated the number of facilities from six down to three with
new warehouses in Blackburn and Rugby. These new facilities are
of good quality and, in addition to being more efficient to service our
customers, also provide a much improved working environment for
our employees. In December 2014 we extended our offering in this
area with the acquisition of POS Direct.
There has been strong growth in our hospitality supplies business.
As markets have recovered, a number of customers have
commenced investment and refurbishment programmes. We also
achieved good sales of catering equipment supplied in response to
the government initiative of Universal Infant Free School Meals
and a broader range of foodservice products provided during the
Commonwealth Games in Glasgow. We continued to focus on the
high street coffee and quick service restaurant market and have
experienced good growth with existing customers and also added
a number of new customers to our portfolio. Part of our strategy
in this high volume and low margin market is to reduce the size of
our operating platform. In 2014 we have consolidated our national
distribution centre and two branches into a single 165,000 square
foot facility in the West Midlands.
Our healthcare supplies businesses have continued to operate in
a market with ongoing hospital spending constraints and reduced
subsidies for care homes. Despite this, we have enjoyed good growth
through securing increased supply to private hospitals and gaining
business with four additional hospital trusts. The acquisition in June
of 365 Healthcare, which specialises in drapes and gowns used in
operating theatres, has proved to be a strong addition to our private
label medical consumables offering. In our existing private label
business, there have been good results from resourcing and
subsequently launching new products in response to customers’
needs to reduce costs. We have continued to raise our profile in the
care home sector with increased marketing activity and product
range development, while also actively seeking to assist customers
in complying with care quality regulations.
In Ireland the economy has continued to improve and we have
benefited particularly from growth in the Dublin hotel market and
the investment and refurbishment programmes that have started
once again. Having taken the measures to reduce our cost base in
previous years, we now have a much stronger foundation to operate
from in Ireland which has produced substantially improved results
in a well managed and controlled business.
‘ Through further
development of
customer relationships
and by meeting and
exceeding our
customers’ needs,
our organic revenue
growth has returned
to its highest level
since 2007.’
Paul Budge
Managing Director UK & Ireland
BUNZL PLC ANNUAL REPORT 2014
25
CHIEF EXECUTIVE’S REVIEW CONTINUED
REST OF
THE WORLD
5 ACQUISITIONS
+24% increase in adjusted operating
profit at constant exchange rates
BUILDING ON SUCCESS
OVERVIEW
£m
Revenue
Adjusted operating
profit*
Operating margin*
Return on
operating capital
Growth %
2013
526.0
Reported
6
Constant
exchange
21
51.2
9.7%
8
24
2014
559.6
55.5
9.9%
41.8%
47.1%
*Before intangible amortisation and acquisition related costs.
In Rest of the World revenue increased 21% to £559.6 million and
operating profit rose 24% to £55.5 million with the results being
impacted significantly by the effect of recent acquisitions,
particularly in Latin America.
In the rest of Latin America, Vicsa Safety, our safety business with
operations in Chile, Argentina, Colombia, Peru and Mexico, had an
excellent year despite a very soft trading environment in its main
market in Chile which put margins under pressure. New customers
and continuous product development were key to the overall strong
performance.
Our ability to service the safety sector in Chile was enhanced with the
acquisition of Tecno Boga in March. The business is a market leader
in the supply of safety shoes. Although faced with difficult market
conditions as a result of a decline in the mining sector, the business
performed well and has been successfully integrated into the Group.
In Mexico, our glove safety business Espomega, which we acquired
in 2013, has also been able to maintain its margins despite much
volatility in the local market and very soft demand in the short term
caused by a slowdown in the construction sector. The business is
however well placed for when the economy starts to recover.
Our operations in Latin America have performed well despite weaker
macroeconomic conditions and considerable volatility in the foreign
exchange markets in several countries which has caused some
margin pressure within our businesses. All of our businesses have
strong market positions focused on creating value-added solutions
for our customers and we continue to be well positioned to expand
our operations further, both organically and through acquisition.
In Australia, the economy continues to be adversely affected by
the slowdown following the mining investment boom and the fall
in global commodity prices. This resources slowdown has had a
direct impact on a number of our major customers supplying into
these sectors which in turn has reduced demand for the products
we supply.
In Brazil our safety businesses had another successful year. Our new
state-of-the-art distribution centre for Protcap in the metropolitan
area of São Paulo has started operating and will be a critical platform
for our future growth for many years to come. Protcap experienced
weaker demand from the end user sector during the last quarter
of the year as many customers postponed investment decisions in
anticipation of economic adjustments to be implemented following
the recent Presidential elections in Brazil. Protcap’s new Manaus
branch has opened as scheduled in an important location. Based
in a free trade zone, the new branch is strategically placed for a
number of local manufacturing customers in the region. Danny and
Vicsa Brasil both had a very strong year with significant synergies
achieved as a result of streamlining our portfolio of brands across
both businesses.
In our cleaning and hygiene supplies business there was pressure
on margins due to the highly competitive environment in this sector.
However the acquisition of JPLUS in May has increased our market
presence and enabled us to realise a number of synergies. The
new business has integrated well and is performing above our
initial expectations.
The businesses serving the healthcare sector in Brazil produced
good results despite the uncertainty caused by the Presidential
elections and new legislation which affected the import of certain
product lines. Labor Import performed strongly and Lamedid,
which we acquired in March, also had a very good year. The business
is integrating as planned and is starting to develop synergies
with Labor Import.
Our largest business, Outsourcing Services, which supplies the
healthcare, cleaning, catering and retail sectors, while impacted by
market conditions, performed well with an improvement in revenue
and operating profit as it continued to develop its position as a
consolidator and supplier of disposable consumables throughout
Australia and New Zealand. Whilst facing challenging trading
conditions, the business has been able to offset some of the effects
of the downturn across its customer base with a number of large
customer wins. The business has continued to develop a good
position in the healthcare sector, in particular to the aged care and
private hospital markets, where we supply a wide range of disposable
and medical consumables. In November we acquired a small
business, Victoria Healthcare Products, which is a niche supplier of
medical consumables and wound care products into the community
and residential care markets. This has created an opportunity for our
business in a section of our existing market where we previously did
not have a strong presence.
Our food processor business, which is a major national supplier into
the Australian and New Zealand food industry, delivered another
improved performance with higher revenue and operating profit. We
made good progress expanding the business into non-meat and other
food processors and have invested in additional specialist resources
to help drive these opportunities. This has benefited the business
which has won a number of major customers in this market. Our
ongoing focus will be to continue to develop this strategy and further
consolidate our position as a leading national supplier into this
sector. In March, we acquired Nelson Packaging, a packaging and
cleaning and hygiene supplies company based in the South Island of
New Zealand. This business has a strong presence in the processor
26 BUNZL PLC ANNUAL REPORT 2014
5 ACQUISITIONS
+24% increase in adjusted operating
profit at constant exchange rates
BUILDING ON SUCCESS
‘ Our well established
business model, which allows
the companies we acquire to
operate on a decentralised
basis, provides an attractive
option for owners looking to
sell their businesses.’
Rodrigo Mascarenhas
Managing Director Latin America
and industrial markets in this region and has been a good addition
to our business, providing further scale, expertise and distribution
capabilities as we develop in the New Zealand market.
Our industrial and safety supplies business has been impacted
the most by the slowdown in the mining and other resource sectors
with its performance adversely affected as a result, leading to a
lower level of operating profit at a reduced profit margin. To help
offset this, we have taken a proactive approach to consolidate a
number of facilities and made a number of structural changes to
support the business performance in the current environment and
reposition it for growth. We have also benefited from having access
to and working with the wider Bunzl businesses. We have adopted
a number of better purchasing, operational and technology
initiatives, which are helping to improve our competitive position
and efficiency. Although the market conditions have impacted
volumes, the business has been successful in winning a number
of major new customers. This has created potential to build on
our strong product range offering and our market position as we
continue to develop opportunities in the more resilient market
sectors and regions.
‘ We are able to obtain
an enhanced competitive
advantage by optimising
a variety of different
synergies through
sharing best practice
across the Group and
utilising our global
purchasing scale.’
Kim Hetherington
Managing Director Australasia
BUNZL PLC ANNUAL REPORT 2014
27
BUILDING AND
DEVELOPING
LONG TERM
RELATIONSHIPS
28 BUNZL PLC ANNUAL REPORT 2014
BUILDING AND
DEVELOPING
LONG TERM
RELATIONSHIPS
By outsourcing the
purchasing, consolidation
and distribution of
everyday items, our
customers are able
to focus on their core
businesses, saving
them time and money.
REDUCING WASTE
CONSOLIDATING
EMPLOYEE ENGAGEMENT
BUNZL PLC ANNUAL REPORT 2014
29
FINANCIAL REVIEW
GROUP PERFORMANCE
Revenue increased to £6,156.5 million (2013: £6,097.7 million),
up 7% at constant exchange rates and up 1% at actual exchange
rates, reflecting organic growth of 2.7% and the benefit of
acquisitions. Adjusted operating profit (being operating profit before
intangible amortisation and acquisition related costs) increased to
£429.8 million (2013: £414.4 million), an increase of 10% at constant
exchange rates and 4% at actual exchange rates, as a result of the
revenue growth and the adjusted operating profit margin increasing
from 6.8% to 7.0% due to the impact of higher margin acquisitions.
Currency translation had a negative impact of between 6% and 7%
on the results for the year, principally due to the strengthening of
sterling against all of our major currencies.
Intangible amortisation and acquisition related costs were up
£5.7 million to £88.0 million due to a £3.6 million increase in
intangible amortisation and a £2.1 million increase in acquisition
related costs.
The net interest charge of £42.0 million was £0.2 million lower
than 2013 at actual exchange rates but up £1.5 million at constant
exchange rates due to higher average net debt from the funding of
acquisitions, partly offset by a lower interest charge on the Group’s
pension deficit.
Adjusted profit before income tax (being profit before income tax,
intangible amortisation and acquisition related costs) was £387.8
million (2013: £372.2 million), up 11% at constant exchange rates
and 4% at actual exchange rates, principally due to the growth in
adjusted operating profit.
TAX
A tax charge at a rate of 27.4% (2013: 27.9%) has been provided
on the adjusted profit before income tax. Including the impact of
intangible amortisation of £61.9 million, acquisition related costs
of £26.1 million and the associated deferred and current tax of
£17.1 million, the overall tax rate is 29.7% (2013: 28.7%). The
underlying tax rate of 27.4% is higher than the nominal UK rate of
21.5% for 2014 principally because many of the Group’s operations
are in countries with higher tax rates.
PROFIT FOR THE YEAR
Profit after tax of £210.7 million was up £3.9 million, primarily
due to a £9.7 million increase in operating profit, partly offset
by a £6.0 million increase in the tax charge.
EARNINGS
The weighted average number of shares increased to 326.6 million
from 325.8 million due to employee share option exercises partly offset
by shares being purchased from the market into the Group’s employee
benefit trust. Earnings per share were 64.5p, up 8% on 2013 at constant
exchange rates and 2% at actual exchange rates. After adjusting for
intangible amortisation, acquisition related costs and the associated
tax, adjusted earnings per share were 86.2p, an increase on 2013 of
11% at constant exchange rates and 5% at actual exchange rates.
30 BUNZL PLC ANNUAL REPORT 2014
Intangible amortisation, acquisition related costs and associated
tax are items which are not taken into account by management
when assessing the results of the business as they do not relate to
the underlying operating performance. Accordingly, such charges
are removed in calculating the adjusted earnings per share on
which management assesses the performance of the Group.
DIVIDENDS
An analysis of dividends per share for the years to which they relate
is shown below:
Interim dividend (p)
Final dividend (p)
Total dividend (p)
Dividend cover (times)*
*Based on adjusted earnings per share.
2014
11.0
24.5
35.5
2.4
Growth
10%
9%
10%
2013
10.0
22.4
32.4
2.5
ACQUISITIONS
The acquisitions made or agreed to be made in 2014 were Bäumer
and its related company Protemo, Oskar Plast, Lamedid, Nelson
Packaging, Plast Techs, Tecno Boga, Allshoes, JPLUS, 365
Healthcare, Lee Brothers, Premiere Products, Guardsman,
De Ridder, Victoria Healthcare Products, Acme Supplies, POS Direct
and Tillman. The acquisition of Tillman was agreed on 30 December
2014 and completed on 2 January 2015. Annualised revenue and
adjusted operating profit of the businesses acquired (excluding
Tillman) were £162.7 million and £20.6 million respectively. The
estimated annualised revenue including Tillman is £223.3 million.
A summary of the effect of acquisitions is as follows:
Fair value of assets acquired
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to the retention
of former owners
Net bank overdrafts acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions
completed in the current year
Spend on acquisition committed as at 31 December 2014
Total committed spend in respect of acquisitions
agreed in the current year
£m
76.9
36.2
113.1
107.1
6.0
113.1
19.1
8.9
4.1
145.2
65.8
211.0
‘ Our long term track record of strong
cash generation has enabled us to pay a
growing dividend over the past 22 years
and to support our growth strategy by
making acquisitions and reinvesting
in the underlying business.’
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net bank overdrafts acquired
Deferred consideration in respect of prior year
acquisitions
Net cash outflow in respect of acquisitions
Acquisition related costs*
Total cash outflow in respect of acquisitions
£m
107.1
8.9
38.1
154.1
14.0
168.1
* Cash flow on acquisition related costs relates to £3.5 million of transaction costs paid
and £10.5 million from payments relating to the retention of former owners.
CASH FLOW
Cash generated from operations before acquisition related costs
was £431.6 million, a £14.8 million decrease from 2013, primarily
due to a working capital outflow in 2014 of £15.6 million compared to
a £16.8 million inflow in 2013 partly offset by a £15.4 million increase
in adjusted operating profit. The working capital outflow in 2014 is
due to an increase in inventories offset by favourable movements in
receivables and payables, with underlying working capital excluding
acquisitions and exchange increasing by 3% in line with organic sales
growth. The Group’s free cash flow of £276.5 million was down £25.3
million from 2013, primarily due to the £14.8 million decrease in cash
generated from operations and a £9.5 million increase in the cash
outflow relating to tax. After payment of dividends of £105.6 million in
respect of 2013 (2013: £91.8 million in respect of 2012), an acquisition
cash outflow of £168.1 million (2013: £279.9 million) and a £21.8
million outflow on employee share schemes (2013: £43.3 million),
the net cash outflow was £19.0 million (2013: £113.2 million outflow).
The summary cash flow for the year was as follows:
Cash generated from operations*
Net capital expenditure
Operating cash flow*
Operating cash flow* to adjusted operating profit†
Net interest
Tax
Free cash flow
Dividends
Acquisitions
Employee share schemes
Net cash outflow
*Before acquisition related costs.
† Before intangible amortisation and acquisition related costs.
£m
431.6
(23.9)
407.7
95%
(41.4)
(89.8)
276.5
(105.6)
(168.1)
(21.8)
(19.0)
BALANCE SHEET
Return on average operating capital increased to 57.7% from 56.9%
in 2013, with the impact of the lower return on operating capital from
acquisitions being more than offset by improvements in the return on
operating capital in the rest of the Group. Return on invested capital
of 17.6% was slightly down from 17.9% in 2013 as improved returns
in the underlying business were offset by the lower return on recent
acquisitions and exchange rate movements. Intangible assets
increased by £21.9 million to £1,478.8 million, reflecting goodwill and
customer relationships arising on acquisitions in the year of £112.2
million, partly offset by an amortisation charge of £61.9 million and
a reduction of £28.4 million due to exchange. The Group’s pension
deficit of £70.3 million at 31 December 2014 was £25.3 million
higher than at 31 December 2013, largely due to an actuarial loss of
£30.1 million. The actuarial loss arose as a result of the impact of a
£61.4 million increase in the present value of scheme liabilities from
changes in assumptions, principally lower discount rates, partly
offset by the actual return on scheme assets being £31.3 million
higher than expected.
The net debt to EBITDA ratio was 1.9 times (2013: 1.8 times). The
movements in shareholders’ equity and net debt during the year
were as follows:
Shareholders’ equity
At 1 January 2014
Profit for the year
Dividends
Currency
Actuarial loss on pension schemes (net of tax)
Share based payments
Employee share options
At 31 December 2014
Net debt
At 1 January 2014
Net cash outflow
Currency
At 31 December 2014
Net debt to EBITDA (times)
£m
939.9
210.7
(105.6)
(38.6)
(22.1)
18.6
(19.0)
983.9
£m
(849.5)
(19.0)
(8.9)
(877.4)
1.9
BUNZL PLC ANNUAL REPORT 2014
31
FINANCIAL REVIEW CONTINUED
EXCHANGE RATES
Average
US$: £
€: £
C$: £
Brazilian real: £
A$: £
Closing
US$: £
€: £
C$: £
Brazilian real: £
A$: £
2014
1.65
1.24
1.82
3.87
1.83
2014
1.56
1.29
1.81
4.14
1.91
2013
1.56
1.18
1.61
3.38
1.62
2013
1.66
1.20
1.76
3.91
1.85
The treasury department is subject to periodic independent review
by the internal audit department. Underlying policy assumptions and
activities are periodically reviewed by the executive directors and the
Board. Controls over exposure changes and transaction authenticity
are in place.
HEDGE ACCOUNTING
The Group designates derivatives which qualify as hedges for
accounting purposes as either (a) a hedge of the fair value of
a recognised asset or liability; (b) a hedge of the cash flow risk
resulting from changes in interest rates or foreign exchange rates; or
(c) a hedge of a net investment in a foreign operation. The Group tests
the effectiveness of hedges on a prospective and retrospective basis
to ensure compliance with IAS 39 ‘Financial Instruments: Recognition
and Measurement’. Methods for testing effectiveness include dollar
offset, critical terms and hypothetical derivatives.
GROUP TAX STRATEGY
The Group’s tax strategy is principally focused on ensuring
compliance with the legal obligations of all countries in which it
operates. This extends to filings, payments and disclosures to tax
authorities. In alignment with the commercial and economic activity
of the business, the Group manages its taxes so as to maximise value
for its shareholders in a way that does not adversely impact its
reputation as a responsible taxpayer. The Board has approved the
Group’s tax strategy and regularly reviews the Group’s tax risks.
CAPITAL MANAGEMENT
The Group’s policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business.
The Group monitors the return on average operating capital
employed and the return on invested capital as well as the level
of total shareholders’ equity and the amount of dividends paid to
ordinary shareholders.
The Group funds its operations through a mixture of shareholders’
equity, bank borrowings and US private placement notes. All of the
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 Group has
a portfolio of competitively priced borrowing facilities to meet the
demands of the business over time and, in order to do so, the Group
arranges a mixture of borrowings from different sources with a
variety of maturity dates.
The Group’s businesses provide a high and consistent level of cash
generation which helps fund future development and growth. The
Group seeks to maintain an appropriate balance between the higher
returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position.
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 and foreign currency
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.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. 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. The principal
covenant limits are net debt to operating profit before depreciation,
intangible amortisation and acquisition related costs (‘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 2014 all
covenants have been complied with and based on current forecasts
it is expected that such covenants will continue to be complied with
for the foreseeable future.
The Group has substantial borrowing facilities available to it
comprising multi-currency credit facilities from the Group’s banks
and US private placement notes in US dollars, sterling and euros.
Fixed interest US private placement notes of $252.0 million
and €35.0 million were drawn down by the Group during 2014.
At 31 December 2014 the total US private placement notes
outstanding were £793.2 million (2013: £607.1 million) with
maturities ranging from 2015 to 2026. During the year the Group also
refinanced or agreed new banking facilities totalling £358.1 million.
The Group’s committed bank facilities mature between 2016 and
2020. At 31 December 2014 the available committed bank facilities
totalled £917.0 million (2013: £886.7 million) of which £136.5 million
(2013: £273.1 million) was drawn down. The committed facilities
maturity profile at 31 December 2014 is set out in the chart on
page 33.
INTEREST RATE RISK
The Group is funded by a mixture of fixed and floating rate debt.
In addition, interest rate swaps and interest rate caps are used to
manage the interest rate risk profile. At 31 December 2014 fixed
rate debt of £635.7 million (2013: £607.1 million), related to fixed
rate US private placement notes, was stated at amortised cost
with maturities ranging from 2015 to 2024.
At 31 December 2014 floating rate debt comprised £136.5 million of
floating rate bank loans (2013: £273.1 million) and £173.6 million of
fixed rate US dollar private placement notes with maturities in 2025
and 2026 which have been swapped to floating rates using interest
rate swaps (2013: £nil). Bank loans are drawn for various periods of
up to three months at interest rates linked to LIBOR. The interest rate
swaps reprice every three months.
32 BUNZL PLC ANNUAL REPORT 2014
Committed facilities maturity profile
2015–2026 £m
Bank facilities – undrawn
Bank facilities – drawn
US private placement notes denominated in US dollars,
sterling and euros
420
90
87
108
150
50
69
55
61
65
71
69
48
106
101
61
24
25
26
33
23
34
15
16
17
32
18
19
20
21
22
The interest rate risk on the floating rate debt is managed using
interest rate options. Borrowings with a notional principal of
£45.5 million were capped at 31 December 2014 (2013: £60.0 million).
Hedge accounting is not applied to the interest rate caps since the
majority of their value is related to time value. The strike rates of
these options are based on LIBOR repricing every three months.
FOREIGN CURRENCY RISK
The majority of the Group’s sales are made and income is earned in
US dollars, euros and other foreign currencies. The Group does not
hedge the impact of exchange rate movements arising on translation
of earnings into sterling at average exchange rates. For the year
ended 31 December 2014, a movement of one cent in the US dollar
and euro average exchange rates would have changed profit before
income tax by £0.9 million and £0.4 million respectively and adjusted
profit before income tax by £1.0 million and £0.6 million respectively.
The majority of the Group’s transactions are carried out in the
respective functional currencies of the Group’s operations and so
transaction exposures are usually relatively limited. Where they do
occur, the Group’s policy is to hedge significant exposures of firm
commitments for a period of up to one year as soon as they are
committed using forward foreign exchange contracts and these are
designated as cash flow hedges. However, the economic impact of
foreign exchange on the value of uncommitted future purchases and
sales is not hedged. As a result, sudden and significant movements
in foreign exchange rates can impact profit margins where there is
a delay in passing on to customers the resulting price increases.
The majority of the Group’s borrowings are effectively denominated
in sterling, US dollars and euros, aligning them to the respective
functional currencies of the component parts of the Group’s EBITDA.
This currency profile is achieved using short-term foreign exchange
contracts, long term cross currency interest rate swaps and foreign
currency debt. This currency composition minimises the impact of
foreign exchange rates on the ratio of net debt to EBITDA.
CREDIT RISK
Credit risk is the risk of loss in relation to a financial asset due to
non-payment by the relevant counterparty. The Group’s objective is
to reduce its exposure to counterparty default by restricting the type
of counterparty it deals with and by employing an appropriate policy
in relation to the collection of financial assets.
The Group’s principal financial assets are cash and deposits,
derivative financial instruments and trade and other receivables
which represent the Group’s maximum exposure to credit risk in
relation to financial assets. The maximum exposure to credit risk
for these financial assets is their carrying amount.
Dealings are restricted to those banks with the relevant combination
of geographic presence and suitable credit rating. The Group
continually monitors the credit ratings of its counterparties and the
credit exposure to each counterparty.
For trade and other receivables, the amounts represented in the
balance sheet are net of allowances for doubtful receivables,
estimated by the Group’s management based on prior experience
and their assessment of the current economic environment.
At the balance sheet date there were no significant concentrations
of credit risk.
GOING CONCERN
Details of the Group’s activities, developments and performance are
set out on pages 4 to 33 and the Principal risks and uncertainties
are set out on pages 34 and 35. This Financial review summarises
the Group’s financial performance, balance sheet and cash flows and
provides information on its treasury policies, exposure to financial
risks, debt profile and funding headroom. Note 13 to the consolidated
financial statements provides further details of the Group’s debt
profile, capital management policy, treasury policies and controls,
hedging activities and financial instruments and its policies and
exposures to liquidity, interest rate, foreign currency and credit risks.
The Group has significant financial resources, a well established
and fragmented customer base, strong supplier relationships and
a diverse geographic presence. As a consequence, the directors
believe that the Group is well placed to manage its business risks
successfully. Based on the expected future profit generation, cash
conversion and current facilities’ headroom over the 12 months to
March 2016, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. For this reason the directors believe it is
appropriate to continue to adopt the going concern basis in preparing
the financial statements.
Brian May
Finance Director
23 February 2015
BUNZL PLC ANNUAL REPORT 2014
33
PRINCIPAL RISKS AND UNCERTAINTIES
Bunzl has an extensive risk management framework designed to identify and assess the
likelihood and consequences of risks and to manage the actions necessary to mitigate their
impact to acceptable levels. It also identifies the assurance activities relating to the relevant
mitigating actions.
RISK OVERVIEW
The effective identification, management and mitigation of risks and
uncertainties across the Group are an integral part of delivering the
Group’s strategic objectives. The ‘Risk management and internal
control’ section of the Corporate governance report on pages 46 and
47 includes further information on the specific procedures designed
to identify, manage and mitigate business risk which could have a
material impact on the Group’s business, financial condition or
results of operations.
The Company’s risk management framework provides a consistent
methodology by which every business and business area, the
Executive Committee and ultimately the Board assess the risks
that the Group faces against a defined set of probability and impact
criteria. In assessing impact, the following criteria are considered:
business continuity; health, safety and the environment; regulatory;
reputational; and financial. The probability and impact of each risk
is assessed on two bases. The first, defined as Gross Risk, is the
probability and impact of a risk if none of the mitigating actions or
internal controls designed to reduce either the probability or the
impact of a risk occurring were in place. The second, defined as
Net Risk, is the residual probability and impact of a risk assuming
that the mitigating actions and internal controls operated as
intended in an effective way.
Using this framework, every business documents their key risks
in a consistent reporting format which specifically identifies the
mitigating activities, relevant controls and related assurance
activities for each significant risk. Management then consolidates
the risk information at both a business area and Group level
using the same reporting format, culminating in the Group risk
assessment. The Executive Committee then reviews the Group risk
assessment, the relevant controls and other steps taken to mitigate
the risks identified and the assurance procedures in place over
such controls with a view to determining any further actions required
in order to reduce the levels of risk to acceptable levels. The risk
assessment is then submitted for review and approval by the Board.
THE RISK PROFILE
The Group operates in many business environments and across a
number of geographies in which risks and uncertainties exist, not
all of which are necessarily within the Company’s control. The risks
identified in the 2013 Annual Report remain those of most concern to
the business at the end of 2014. The principal risks and uncertainties
faced by the Group and the steps taken to mitigate such risks and
uncertainties are detailed below. This summary is not intended to
be exhaustive and is not presented in order of potential probability
or impact.
Market risks
Mitigating factors
Competitive pressures
The Group operates in highly competitive markets and faces
competition from international companies as well as national, regional
and local companies in the countries in which it operates. Increased
competition and unanticipated actions by competitors or customers
could lead to an adverse effect on results and hinder the Group’s growth
potential. This could result from: customer pressure on sales volumes
or margins; the loss of customers due to service or pricing issues;
increased price competition; customers and suppliers dealing directly
with one another; or unforeseen changes in the competitive landscape
due to the introduction of disruptive technologies or changes in routes
to market.
Product price changes
The purchase price of products distributed by the Group can fluctuate
from time to time, thereby potentially affecting the results of operations.
There could be significant increases in the cost of specific products
leading to a diminution in margins if cost increases cannot be passed
on in full to customers or substitute products sourced from elsewhere.
Potential causes could include changes in the input costs of products
purchased through commodity price inflation. In addition, a period of
commodity price deflation may lead to reductions in the price and value
of the Group’s products where sales prices are indexed or if competitors
reduced their selling prices. If this was to occur, the Group’s revenue
and, as a result, its profits, could be reduced and the value of inventory
held in stock may not be fully recoverable.
The Group seeks to remain competitive by maintaining high service
levels and close contacts with its customers to ensure that their needs
and demands are being met satisfactorily, developing a national
presence in the markets in which the Group operates and maintaining
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. The Group also regularly reviews the
competitive environment in which it operates.
The Group endeavours, whenever possible, to pass on price increases
from its suppliers to its customers and to source its products from
a number of different suppliers so that it is not dependent on any
one source of supply for any particular product. Increased focus
on the Group’s own import programmes and brands, together with
the reinforcement of the Group’s service and product offering to
customers, helps to minimise the impact of price deflation. The
Group also mitigates against the risk of holding overvalued inventory
in a deflationary environment by managing stock levels efficiently
and ensuring they are kept to a minimum.
The Group uses its considerable experience in sourcing and selling
products to manage prices during periods of both inflation and deflation
in order to minimise the impact on operating margins.
Economic environment
The Group’s business is partially dependent on general economic
conditions in the US, the UK, France and other important markets.
A significant deterioration in these conditions could have an adverse
effect on the Group’s business and results of operations.
The Group’s operations and its customer base are diverse, with a
variable and flexible cost base, and many of the sectors in which it
competes are traditionally, by their nature, relatively resilient to
economic downturns.
34 BUNZL PLC ANNUAL REPORT 2014
Financial risks
Mitigating factors
Foreign exchange
The majority of the Group’s sales are made and income is earned in US
dollars, euros and other foreign currencies. The Group does not hedge
the impact of exchange rate movements arising on translation of
earnings into sterling at average exchange rates.
As a result, movements in exchange rates may have a material
translation impact on the Group’s reported results.
The Group is also subject to transaction exposures where products are
purchased in one currency and sold in another. As a result movements
in exchange rates may adversely impact both operating margins and
the value of the Group’s net assets.
Financial liquidity and debt covenants
The Group needs continuous access to funding in order to meet its
trading obligations, to support investment in organic growth, to make
acquisitions when appropriate opportunities arise, and to pay dividends
to shareholders. There is a risk that the Group may be unable to obtain
the necessary funds when required or that such funds will only be
available on unfavourable terms.
The Group’s borrowing facilities include a requirement to comply
with certain specified covenants in relation to the level of net debt
and interest cover. A breach of these covenants could result from
a significant and rapid deterioration in the business’s performance,
foreign exchange rate fluctuations or the failure to manage working
capital levels. Ultimately this could result in a significant proportion
of the Group’s borrowings becoming repayable immediately.
The Group believes that the benefits of its geographical spread outweigh
the associated risks.
The majority of the Group’s transactions are carried out in the functional
currency of the Group’s operations. As a result, transaction exposures
are usually limited and exchange rate fluctuations have minimal effect
on the quality of earnings unless there is a sudden and significant
adverse movement of a foreign currency in which products are
purchased which may lead to a delay in passing on to customers
the resulting price increases. The Group undertakes some forward
purchasing of foreign currencies for identified exposures to reduce
the impact of short term volatility.
The impact of changes in foreign exchange rates and related hedging activity
is regularly monitored by senior management. The Group’s approach to
managing foreign exchange risk is reviewed annually by the Board.
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.
Compliance with the Group’s biannual debt covenants is monitored on a
monthly basis based on the management accounts. Sensitivity analyses
using various scenarios are applied to forecasts to assess their impact
on covenants.
Operational risks
Mitigating factors
Acquisitions
A significant portion of the Group’s historical growth has been achieved
through the acquisition of businesses and the Group’s growth strategy
includes additional acquisitions. Although the Group operates in a
number of fragmented markets which provide future acquisition
opportunities, there can be no assurance that the Group will be able
to make acquisitions in the future. There is also a risk that not all of
the acquisitions made will be successful due to the loss of key people
or customers after the acquisition, deterioration in the economic
environment of the acquired business or the failure to perform
adequate pre-acquisition due diligence or appropriately manage
the post-acquisition integration of the business.
In the longer term, if an acquisition consistently underperforms
compared to its original investment case, there is a risk that this will
lead to a permanent impairment in the carrying value of the intangible
assets attributed to that acquisition.
Business continuity
The Group would be adversely affected if any of its major distribution
facilities was destroyed or damaged or there was a significant failure
of its information systems resulting from either hardware failure or
a cybersecurity breach.
Laws and regulations
The international nature of the Group’s operations exposes it to
potential claims as the Group is subject to a broad range of laws
and regulations in each of the jurisdictions in which it operates.
In addition the Group faces potential claims from customers in relation
to the supply of defective products or breaches of their contractual
arrangements. The sourcing of products from lower cost countries
increases the risk of the Group being unable to recover any potential
losses relating thereto from the relevant supplier.
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 continually
reviews acquisition targets and has established processes and
procedures with regard to detailed pre-acquisition due diligence
and post-acquisition integration.
The Group endeavours to maximise the performance of an acquisition
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.
The Group seeks to reduce the impact of destruction of, or damage to,
facilities through the use of multi-site facilities with products stocked
in more than one location. The impact of information systems’ failure
is mitigated through regular renewal of hardware, layered security
measures and disaster recovery plans which are periodically tested
and which would be implemented in the event of any such failure.
Although the Group does not operate in particularly litigious market
sectors, it has in place processes to report, manage and mitigate
against third party litigation using external advisers where necessary.
The use of reputable suppliers and internal quality assurance
and quality control procedures reduce the risks associated with
defective products.
The Financial review on pages 30 to 33 and Note 13 to the consolidated financial statements include information relating to the Group’s risk
management policies so far as they relate to financial instruments.
BUNZL PLC ANNUAL REPORT 2014
35
COMMITTED TO
SUSTAINABLE
SUCCESS
HEALTH AND SAFETY
SUSTAINABLE PRODUCTS
COMMUNITY SUPPORT
36 BUNZL PLC ANNUAL REPORT 2014
CORPORATE RESPONSIBILITY
We encourage our suppliers to set similar corporate responsibility standards
to ourselves while our consolidated delivery and product solutions assist our
customers in meeting their sustainability goals.
BUSINESS CONTEXT
We are a focused and successful international distribution and
outsourcing group with operations across the Americas, Europe and
Australasia. By outsourcing the purchasing, consolidation and delivery
of a broad range of everyday items, our customers are able to focus on
their core businesses, achieve purchasing efficiencies and savings,
free up working capital, improve distribution capabilities, reduce
carbon emissions and simplify their internal administration.
We do not manufacture any products but as part of our business
strategy we source and procure branded, own brand and unbranded
products globally. These products are then consolidated into our
extensive global warehouse infrastructure, giving our customers a
one-stop-shop solution to help reduce or eliminate the hidden costs
of self-distribution and reduce their environmental impact. We also
offer several delivery options to ensure our customers get their
products when and where they are needed.
Sourcing
We source everyday essential non-food items for a number of market
sectors including grocery, foodservice, cleaning & hygiene, safety,
retail and healthcare. We liaise closely with our suppliers so that we
are able to offer a full range of items which satisfy our customers’
demands, including offering alternative products which reduce
environmental impact and thereby climate change. Our quality
assurance/quality control department based in Shanghai monitors
and works with our key suppliers in Asia to ensure that appropriate
corporate responsibility (‘CR’) standards are in place.
Consolidation
We have an extensive footprint of warehouse facilities across four
continents. As a result, our broad range of products are never far
from where they need to be, allowing us to facilitate our customers’
needs quickly and easily, as well as reducing the number of deliveries
to our customers, thereby cutting fuel usage, carbon emissions
and administration.
Distribution
With our fleets of delivery vehicles and third party carriers, we are
able to get products to our customers in a timely manner. Our flexible
delivery service allows our customers to increase the efficiency and
competitiveness of their operations.
As well as day-to-day operations, our business relies on developing
strong and stable relationships with all of our stakeholders. We
believe in managing our business with integrity, making sustainable,
long term decisions.
STRATEGY, FRAMEWORK AND MATERIALITY
We believe that positive actions with respect to CR are not only
desirable in their own right but are also of potential economic and
commercial benefit to the Group. A strong reputation for CR can
provide business advantage and contribute to shareholder value.
Conversely, perceived weakness in CR may damage our reputation
and cause risks. Bunzl’s good practice in sustainability has been
recognised by its FTSE4Good listing and Carbon Disclosure Project
(‘CDP’) score. Details of our strategy and framework in relation
to CR can be found on the Bunzl plc website in the Responsibility
section at www.bunzl.com.
Materiality
Understanding our material issues is important to enable us to
manage our CR related impacts and stakeholder relationships
effectively. It also helps to focus our resources, engagement and
reporting activities by addressing those issues most material to
our business. Our current areas of focus are:
• business conduct/code of ethics: training to ensure everyone
understands our standards;
• employees: engaging through clear communication using a variety
of channels, as well as provision of training and development
opportunities;
• health & safety: improving safety in the warehouses and on our
vehicles and ensuring that everyone takes personal responsibility
for this;
• environment: reducing our and our customers’ impacts on the
environment by reducing carbon emissions and promoting the
reduction of waste and providing innovative products to meet our
customers’ needs, for example environmentally friendly packaging;
• community: providing support by encouraging employee fund
raising, donating to charitable projects that benefit our employees
and the communities we work in and by donating stock and cash to
charitable organisations and good causes; and
• suppliers: responsible sourcing, working as partners with
our suppliers to encourage high levels of CR and ethical
trading initiatives.
These issues are governed by a policy framework, which is approved
and monitored by the Board, with implementation at a business
area level.
BUSINESS CONDUCT/CODE OF ETHICS
The Group’s business conduct/code of ethics policy is disseminated to
every employee as a guide to how employees are expected to conduct
themselves both from a corporate and individual perspective. The
policy clearly states that employees should avoid conflicts of interest,
provides guidance on the giving and receiving of gifts and entertainment,
prohibits illegal payments as well as political donations and
reinforces the need to comply with laws, rules and regulations,
protect confidential information and company assets and maintain
high standards in relationships with our customers and suppliers.
No material breaches of our business conduct/code of ethics policy
were recorded in 2014. However, some minor incidents relating to
employee conduct, such as theft or misuse of the Group’s property,
did occur and were dealt with during the normal course of business
using Group human resource (‘HR’) policies and procedures. Nine
(2013: seven) calls/letters were received through our confidential
whistle blowing process, ‘Speak Up’, none of which raised any
issues of material concern.
Performance against 2014 objectives
• Our CR policies, processes, controls and monitoring (‘CR Framework’)
were last updated in 2011. During 2014 we undertook a review of the
CR Framework taking into account feedback provided by various
bodies who report on Bunzl’s CR practices and performance. As a
result, no fundamental changes were made to the CR Framework
but a number of amendments were made to the CR policy and
some of our controls and monitoring processes were refreshed
and re-emphasised, particularly in areas related to our supply
chain. For further details see the Suppliers section on page 40.
BUNZL PLC ANNUAL REPORT 2014
37
CORPORATE RESPONSIBILITY CONTINUED
• In light of the above review, we delayed the launch of our new
e-learning module on competition law and refreshed the whole
suite of nine tailored e-learning modules, including modules which
provide an overview of the business conduct/code of ethics policy
and anti-bribery issues such as facilitation payments and gifts
and entertainment. In addition we have added a further module
on cybersecurity. Finally we refreshed the posters which are
displayed in all our facilities to advertise our whistle blowing
facility – ‘Speak Up’.
2015 objectives
• All directors, managers, sales representatives and purchasing
staff to undertake again all of the e-learning modules within the
suite. Selective modules such as introduction to CR, environment,
health & safety and cybersecurity to be viewed more widely.
• Continue to work with our supply chain to encourage our suppliers
to maintain similar CR standards to those maintained by Bunzl.
EMPLOYEES
Bunzl currently operates in 27 countries worldwide. We are a service
provider, not a manufacturer and, as such, our business relies heavily
on the skills and experience of our employees. We pride ourselves on
the fact that we run our businesses locally with local managers. We
do not unfairly discriminate and we respect human rights. We seek to
recruit the right people who are passionate about our business and to
provide opportunities for people to progress within the organisation
on the basis of their skills, experience and aptitude. We believe
that to get the best from people we need to respect each other and
encourage honest, straightforward communication. Our acquisition
pipeline continues to be a valuable source of management talent for
the Group and the completion of a number of acquisitions during the
year has brought further highly skilled people into Bunzl. Details of
the Group’s workforce diversity at 31 December 2014 are set out in
the pie charts on page 39.
Human rights
Bunzl adheres to the Universal Declaration of Human Rights (‘UDHR’)
and upholds the Fundamental Principles and Rights at Work policies,
defined by the International Labour Organization, as well as local
laws. The majority of countries in which Bunzl operates have their
own laws banning child labour and promoting human rights.
We monitor the age of our workforce across the world to ensure
compliance and identify any potential succession issues. In the
US some of our operations, particularly in the north east, are
represented by trade unions with which we have negotiated pay
contracts. Bunzl does not restrict any of its employees in any of the
countries in which it operates from joining a trade union if they wish
to do so. We also work closely with our suppliers to ensure that they
at least meet internationally recognised minimum requirements for
workers’ welfare and conditions of employment, as defined by the
International Labour Organization or the Ethical Trading Initiative.
Performance against 2014 objectives
• The Group’s annual voluntary turnover (‘Turnover’), that is the
percentage of employees resigning from the Group, in 2014 was
10.5% (2013: 7.5%). Turnover levels have increased principally
in both North America and UK & Ireland reflecting improved
economic conditions rather than any intrinsic reasons related to
the Group. As reported previously, considering the profile of our
workforce, the 2013 Turnover was thought to be artificially low due
to the prevailing economic conditions in many of the countries in
which we operate. Sickness absence has remained relatively flat
year on year. Sickness absence rates remain appreciably higher in
Continental Europe than any other part of the Group. No underlying
issues of concern have been identified and the higher levels are
thought to be attributable to the social network rather than any
intrinsic reasons relating to the Group.
38 BUNZL PLC ANNUAL REPORT 2014
• The average number of employees employed by the Group has
risen in the year principally due to acquisitions. The number of
females at senior management level has increased slightly to 10%
(2013: 9%). In February 2015 another female non-executive director
was appointed to the Board. From 1 May 2015 the Board will
comprise seven males and two females. During the year we
launched a women’s network and are currently considering piloting
some further development and training exclusively for women.
• Our Group employee engagement survey, which we periodically
carry out, was conducted in September 2014. We were pleased
with our overall response rate of 72% and an engagement index
score of 74% against a benchmark of 72%. Of those employees who
responded, 93% reported that they ‘enjoyed working for Bunzl’.
2015 objectives
• Continue to monitor key HR measures such as voluntary turnover,
sickness absence, training days, workforce gender and age mix and,
as appropriate, take action to address any issues that may arise.
• Feed back the results of the employee engagement survey and
develop action plans as appropriate.
HEALTH & SAFETY
The health and safety of our employees and other stakeholders
is a priority. Although we try to minimise the risks which occur,
particularly relating to the operation of our warehouses and vehicles,
incidents relating to manual handling, slipping and tripping remain
the highest causes of accidents. Regretfully in the 2014 reporting
period there were two fatalities (2013: one) both resulting from road
traffic accidents. In October 2013 a driver from UK & Ireland was
killed when he was involved in a multi-vehicle collision and in May
2014 a third party died when their car collided head on with a Bunzl
truck in North America. Bunzl has been advised that the drivers of
other vehicles involved have been prosecuted in relation to both of
these incidents. We continue to undertake a number of activities to
improve the safety of our employees including extending the use of
vehicle telematics to monitor driver performance, closure of older
premises and other site improvements, purchase of new equipment
and training programmes for managers and staff to raise awareness
of safety issues. Our Safety Observations Programme, introduced
initially in North America, seeks to ensure the implementation of
safe working practices. As part of our 2014 employee survey we
asked whether employees perceived that Bunzl took their health
and safety seriously and 85% of respondents scored us positively
in this area. We will be using the results of the survey to identify
whether there are any particular areas on which we need to focus.
Performance against 2014 objectives
• The 2014 target was to reduce the Group accident incidence rate
by 3% and the Group accident severity rate by 5% from the 2013
accident rates:
− for the year ended 30 September 2014 our accident incidence
rate reduced by 19%; and
− for the same period our accident severity rate reduced by 3%.
The accident incidence rate improved in excess of the target in all
business areas. North America and Latin America improved their
severity rate in excess of the target but unfortunately performance
in Continental Europe, UK & Ireland and Australasia deteriorated.
The Bunzl Risk Management Committee reviews safety performance
of the Group and reports quarterly to the Board. A number of actions
have been instigated, including site visits, communication programmes,
and in some areas the recruitment of additional technical health
and safety professionals to focus further our programmes of
improvement. Details of our performance from 2011 to 2014 are
provided in the bar charts on page 39. The accident data provided is
for the whole Group including acquisitions made during the relevant
reporting period.
2015 objectives
• Reduce the Group accident incidence rate by 3% from 2014.
• Reduce the Group accident severity rate by 5% from 2014.
ENVIRONMENT
We seek to prevent, mitigate and remediate the harmful effects of
Bunzl’s operations on the environment. To ameliorate our impact on
and exposure to climate change, our facilities operate worldwide to
Group standards, we promote environmental awareness throughout
the business and our branch network mitigates against the effects
of extreme local climate conditions. Our reported environmental
data includes all businesses that are subsidiaries of the Group for
financial reporting purposes, with the exception of those recent
acquisitions where there has been insufficient opportunity for the
acquired businesses to adopt our reporting guidelines, in which case
the revenue from those businesses is not included when calculating
the indexed emissions. Bunzl had no significant environmental
incidents in 2014.
Water usage is principally confined to workplace cleaning and
hygiene purposes. If we lease a purpose built site, wherever possible
the specification includes water harvesting to minimise further our
use and, on some large sites where there are extensive outstanding
periods on the lease term, we will investigate the cost-effectiveness
of implementing water harvesting. We continue to measure water
usage across a sample of our sites worldwide and our usage per
employee is largely unchanged since the 2011 water audit.
ISO 14001 accreditation was renewed in a number of locations
during the year. To date all sites in UK & Ireland and Australasia,
with the exception of the most recent acquisitions, and many sites
in Continental Europe are accredited. By revenue this represents
approximately 30% of the Group.
Performance against 2014 objectives
Greenhouse gas emissions data for period 1 October to 30 September
Scope 1
Scope 2
Total gross emissions
Total carbon emissions
per £m revenue
Tonnes of CO2e
Base year 2010
95,249
28,757
124,006
2013◊
89,397
30,465
119,862
2014†
93,641
31,204
124,845
26.3
20.8
20.9
◊ Included in the external auditors’ limited assurance scope referred to on page 36 of
the 2013 Annual Report.
† Included in the external auditors’ limited assurance scope referred to on page 41.
• Our target for 2014 was to reduce our Scope 1 and Scope 2 carbon
emissions relative to revenue by 26% from 2010, our base year.
This data covers around 99% of the Group by revenue. During
the reporting period, 17 acquisitions were completed adding total
revenue of c. £121 million. 12 of these acquisitions, representing
87% of this revenue, are included in the 2014 carbon emissions
data from the date of acquisition.
• Scope 1: emission rates per £m of revenue have increased
between 2013 and 2014 by 1% (see the KPI bar chart on page 15)
representing a decrease from 2010, our base year, of 22%. In 2014
the contribution of fuel for transportation to Bunzl’s Scope 1
emissions decreased slightly to around 84% (2013: 85%). The level
of fuel consumed per £000 of revenue decreased between 2013
and 2014 by 2% (see the KPI bar chart on page 15). As part of our
strategy of operational efficiency we continually review the routing
and efficiency of our fleet and will transfer to third party carriers
where this is shown to be more beneficial from a cost and carbon
emissions perspective. We focus on improved fuel efficiency
through regular renewal of our fleet, driver training and the use of
telematics providing in-cab feedback on performance. Many of the
Average number
of employees
By business area
North America (5,194)
Continental Europe (3,472)
UK & Ireland (3,569)
Rest Of The World (2,322)
16%
24%
36%
24%
Total workforce
Gender split at 31 Dec 2014
Senior management
Gender split at 31 Dec 2014
Male (343)
Female (39)
10%
Male (9,299)
Female (4,991)
35%
65%
Waste
Tonnes per £m revenue
Incinerated waste
General waste
Recovered/recycled waste
90%
Board composition
8 male, 1 female
0.16
0.80
1.73
0.08
0.14
0.73
1.30
0.93
1.14
12
13
14
Incidence rate
Average number of incidents
per month per 100,000
employees
Severity rate
Average number of days
lost per month per
100,000 employees
159
140
135
109†
3,446
3,552
3,514 3,421†
11
12
13
14
11
12
13
14
† Included in the external auditors’ limited assurance scope referred to on page 41.
BUNZL PLC ANNUAL REPORT 2014
39
CORPORATE RESPONSIBILITY CONTINUED
businesses acquired since 2010 do not operate their own transport
fleets. Gas consumption has increased by around 18% against
the previous year. North America consumes more than 80% of
the gas used by the Group and in 2014 their consumption increased
by 35%. The majority of this increase related to acquisitions,
either reporting for the first time or due to the full year impact of
acquisitions made in the previous year, as well as the very harsh
winter weather conditions in North America in early 2014. The
remainder was due to extensions in warehouse capacity to enable
us to service the organic growth within our business. These
increases far outweighed the substantial reductions in gas
consumption made in Continental Europe and UK & Ireland due
to milder weather compared with the previous year, as well as
steps taken to improve energy efficiency. We continue to focus
on improving energy consumption, taking measures which include
replacement and maintenance of boilers and heating systems
and thermostatically controlling individual radiators.
• Scope 2: emission rates per £m of revenue decreased between
2013 and 2014 by 2% (see the KPI bar chart on page 15) and from
2010, our base year, have decreased by 15%. Although there
was an increase in units of electricity consumed as the result of
acquisitions either reporting for the first time or due to the full year
effect of acquisitions made in 2013, this was offset by our continued
investment in energy improvement projects. In relation to such
projects, as we lease most of our facilities we need to ensure that
there is an appropriate level of payback on the capital expenditure
required and in the time remaining on the lease. Where it has
been shown to be cost-effective, we have installed energy efficient
lighting, making use of the technical advancements available
which reduce the cost of such programmes. In North America
wherever possible we negotiate with our landlords to make such
improvements a condition of lease renewal. Our new facility at
Birch Coppice in the UK is designed to make maximum use of
daylight and we are seeing substantial reductions in electricity as
a result of this combined with its up-to-date lighting system. Other
projects include installation of high frequency energy chargers,
voltage optimisation and the purchase of more efficient chargers
for our material handling equipment. In addition, we have run
successful ‘Switch off’ campaigns where we have involved our
staff in conserving electricity and this has resulted in savings
being made even in those facilities where physical site
improvements have not yet been implemented.
• Waste data covers around 95% (2013: 96%) of the Group by revenue.
When calculating the index, the revenue has been amended to
take account of those businesses in Latin America, Israel and
Australasia that are not currently reporting. We continue to
increase waste segregation facilities and staff are encouraged to
work towards zero waste to landfill both in our warehouses and
offices. We have reduced the amount of virgin packaging purchased
by the Group by reusing transit packaging wherever possible.
The accuracy of the waste to landfill data varies depending
on the waste contractor and wherever possible we appoint
contractors who are able to weigh waste at the point of collection.
• Scope 3: we have sought to develop our Scope 3 carbon emissions
reporting in line with our CR reporting guidelines. While much
progress has been made, we have found it difficult to obtain
suitable and consistent data from our third party carriers. We have
now identified a methodology which we will implement throughout
the Group and are in the process of developing the 2014 footprint
to form a baseline for future years.
40 BUNZL PLC ANNUAL REPORT 2014
2015 objectives
• Using the 2010 data as the baseline, reduce the Scope 1 carbon
emissions by 25% (3% from 2014 to 2015) and the Scope 2 carbon
emissions by 17% (2% from 2014 to 2015).
• Complete the development of a Scope 3 carbon emissions report
in line with the Group’s reporting guidelines.
• Implement the requirement of the Energy Saving Opportunity
Scheme (ESOS) as appropriate.
• More closely integrate the environmental reporting with our
financial reporting processes.
COMMUNITY
Although Bunzl’s operations are international, our strength is
in the local nature of our businesses. In keeping with this ethos,
we particularly support the fund raising activities championed by
our employees locally. This is supplemented by donations made at
Group level to charities predominantly in the fields of healthcare,
disability and the environment as well as benevolent societies to
support projects in communities where our operations are based.
Where possible and appropriate, Bunzl also looks to donate stock
free of charge (‘in-kind’). Group wide, Bunzl donated a total of
£572,000 (2013: £580,000) to charities in 2014, up 3% at constant
exchange rates. This does not include in-kind donations or employee
fund raising.
SUPPLIERS
Price is only one factor in our purchasing decisions and matters such
as quality, availability, our customers’ preferences and our policies
are also taken into account. The vast majority of our products are
sourced locally by our businesses but many products are sourced
elsewhere if it is appropriate to do so. In 2014 less than 20%
(2013: 18%) of our products were sourced from lower cost countries.
Each business area is responsible for implementing appropriate
processes to assess key suppliers’ compliance with the relevant CR
standards and to monitor performance and improvements against
such standards. Bunzl focuses on its key suppliers to ensure that
they meet the same CR standards we have set for ourselves. We have
written to those suppliers that provide us with 50% of our products by
value to update them on our CR aspirations and to encourage them to
adopt a similar approach.
To assist the business areas, we have our own quality assurance/
quality control team based in Shanghai whose main aim is to perform
regular audits of our suppliers in Asia to ensure that they meet
international standards, as well as testing the factories’ production
capabilities and their quality assurance and quality control systems.
Employees’ terms and conditions of work, customer service,
hygiene management systems and their policies and practices on
environmental issues are also checked. Our policy is that all our
suppliers meet internationally recognised minimum requirements
for workers’ welfare and conditions of employment, as defined by
the International Labour Organization or the Ethical Trading Initiative.
During 2014 the team has continued to grow and has further refined
its CR audit programme to categorise suppliers appropriately in
relation to their standards and practices.
Suppliers who are unable to meet all the requirements after an initial
assessment/audit are given the opportunity to comply fully within
a period which is deemed appropriate for the circumstances. If a
serious breach is identified following assessment, an action plan is
documented and the supplier is expected to commit to addressing all
the areas where discrepancies have been identified. The process of
improvement via this method is principally reliant on the commitment
of the supplier’s management team/owner/agent to ensure that all
areas are addressed. If we have reason to believe that the supplier
is not making sufficient or committed progress, this could lead to a
suspension in the relationship until such time that we are confident
that all areas are being satisfactorily addressed. Bunzl companies
reserve the right to cease a relationship with a supplier if it is found
that unacceptable practices are being employed at any sites used for
producing or sourcing Bunzl products. Such practices include use
of child labour, forced or bonded labour as well as physical abuse or
discipline and intimidation. To enhance the processes further, from
2015 any suppliers that are being monitored and assessed due to
identification of a serious breach will also be reported to the Board
and their progress tracked.
During 2014 we continued to liaise with suppliers and refined and
introduced a process to ensure that any paper or wood based
products are from sustainable sources in compliance with the
relevant timber regulations.
For more information on all of Bunzl’s CR policies and activities
please visit the Responsibility section of www.bunzl.com.
EXTERNAL ASSURANCE
We engaged PricewaterhouseCoopers LLP (‘PwC’) to undertake a
limited assurance engagement, reporting to Bunzl plc only, using
International Standard on Assurance Engagements (‘ISAE’) 3000:
‘Assurance Engagements Other Than Audits or Reviews of Historical
Financial Information’ and ISAE 3410: ‘Assurance Engagements on
Greenhouse Gas Statements’ over the three KPIs on page 15 and
the data on page 39, in each case that has been highlighted with the
symbol ‘†’. They have provided an unqualified opinion in relation
to the relevant KPIs and data and their full assurance opinion is
available in the Responsibility section of our website, www.bunzl.com.
A limited assurance engagement is substantially less in scope than
a reasonable assurance engagement in relation to both the risk
assessment procedures, including an understanding of internal control,
and the procedures performed in response to the assessed risks. In
order to reach their opinion, PwC performed a range of procedures
including making enquiries of relevant Bunzl management, and
evaluating the design of the key structures, systems, processes
and controls for managing, recording and reporting the selected
information. This included analysing and visiting three sites selected
on the basis of their inherent risk and materiality to the Group,
to understand the key processes and controls for reporting site
performance data and to obtain supporting information. Finally
PwC performed limited substantive testing on a selective basis
of the selected information in relation to the three sites.
Non-financial performance information, including greenhouse gas
quantification in particular, is subject to more inherent limitations than
financial information. It is important to read the selected corporate
responsibility information contained in this Annual Report in the
context of PwC’s full limited assurance opinion and the Company’s
Corporate Responsibility Performance Reporting Guidelines which
are also available in the Responsibility section of our website.
RISKS
The Principal risks and uncertainties section on pages 34 and 35
details the principal risks and uncertainties which could have a
material impact on the Group’s business, financial condition or
results of operations. Although many CR risks are not seen as
principal risks to the Group, as part of the Group risk analysis a
number of CR risks which could impact the Group’s business have
been identified and these are set out below together with the steps
taken by management to mitigate such risks:
Risk
Mitigating factors
CR compliance failures
Lack of adherence to the Group’s CR policies could result in a
variety of issues including those relating to inappropriate business
practices, accidents at work and increased levies due to levels of
waste or carbon emissions.
Loss of key employees
The Group is not capital intensive but the business is based on
strong customer and supplier relationships which are built up
locally. Stability of key relationship roles amongst the Group’s
employees is therefore important.
Loss of operating facilities/unavailability of staff
Climate change may result in higher frequency of extreme weather
conditions. This could result in some of the Group’s facilities being
affected or employees being unable to attend for work.
Suppliers’ non-compliance with good CR practices
The Group is not a manufacturer and has many international
suppliers across the world. The failure of one of the Group’s key
suppliers to adhere to recognised CR standards could affect the
Group’s reputation.
The Group has comprehensive CR policies and procedures
(including those relating to anti-bribery and corruption) in place
throughout the business as well as an established reporting
framework.
The Group seeks to secure key staff with appropriate incentive
packages, development opportunities and career progression.
Voluntary staff turnover is measured on a monthly basis, which
enables any issues to be identified and resolved.
The Group has multi-site facilities with products stocked in more
than one location as a result of which the Group usually has the
ability to distribute products from nearby facilities. Business
continuity plans are in place to minimise the impact of any
such issues.
The Group’s key suppliers are principally publicly owned
multinational organisations with high standards of operations.
Suppliers are monitored by the Group’s purchasing departments
and the quality assurance/quality control department based in
China audits many suppliers throughout Asia. Key suppliers are
made aware of the Group’s CR aspirations.
These risks are seen to be outweighed by a variety of opportunities that arise as a consequence of CR and its impact on the business
environment as previously outlined in this report.
BUNZL PLC ANNUAL REPORT 2014
41
BOARD OF DIRECTORS
1 Philip Rogerson
Chairman
2 Michael Roney
Chief Executive
3 Peter Johnson
Non-executive
director
4 Patrick Larmon
Executive director
5 Brian May
Finance Director
6 David Sleath
Non-executive
director
7 Eugenia Ulasewicz
Non-executive
director
8 Jean-Charles Pauze
Non-executive
director
9 Meinie Oldersma
Non-executive
director
1 PHILIP ROGERSON # (AGE 70)
Appointed to the Board in January 2010 and became Chairman in
March 2010. Chairman of the Nomination Committee. He was an
executive director of BG plc (formerly British Gas plc) from 1992 to
1998, latterly as Deputy Chairman. Since then he has held a number
of non-executive directorships and was Chairman of Aggreko plc
from 2002 to 2012 and Carillion plc from 2005 until 2014. He is
currently Chairman of De La Rue plc.
2 MICHAEL RONEY # (AGE 60)
Chief Executive since 2005 having been a non-executive director
since 2003. After holding a number of senior general management
positions within Goodyear throughout Latin America and then Asia,
he became President of their Eastern European, African and Middle
Eastern businesses and subsequently Chief Executive Officer of
Goodyear Dunlop Tires Europe BV. He was a non-executive director
of Johnson Matthey Plc from 2007 until 2014 and is currently
a non-executive director of Brown-Forman Corporation.
3 PETER JOHNSON *†#• (AGE 67)
Non-executive director since 2006, senior independent director and
Chairman of the Remuneration Committee. Having spent most of his
earlier career in the motor industry, he joined Inchcape plc in 1995,
became Chief Executive in 1999 and was Chairman from 2006 until
2009. He was the senior independent non-executive director of Wates
Group Limited from 2011 until 2013 and was Chairman of The Rank
Group Plc from 2007 until 2011. He will retire from the Board
following the Annual General Meeting on 15 April 2015.
42 BUNZL PLC ANNUAL REPORT 2014
4 PATRICK LARMON (AGE 62)
Executive director since 2004 and President and Chief Executive
Officer, North America. Having joined Bunzl in 1990 when Packaging
Products Corporation, of which he was an owner, was acquired,
he held various senior management positions over 13 years before
becoming President of North America in 2003 and additionally
assuming the role of Chief Executive Officer in 2004.
5 BRIAN MAY (AGE 50)
Finance Director since 2006. A chartered accountant, he qualified
with KPMG and joined Bunzl in 1993 as Internal Audit Manager.
Subsequently he became Group Treasurer before taking up the
role of Finance Director, Europe & Australasia in 1996 and Finance
Director designate in 2005. He is a non-executive director of
United Utilities Group PLC and United Utilities Water PLC.
6 DAVID SLEATH *†#• (AGE 53)
Non-executive director and Chairman of the Audit Committee since
2007 and senior independent director from April 2015. Formerly a
Partner and Head of Audit and Assurance for the Midlands region
of Arthur Andersen, he subsequently became Finance Director
of Wagon plc before joining SEGRO plc, the European industrial
property group, where he was Group Finance Director from 2006
and has been Chief Executive since 2011.
7 EUGENIA ULASEWICZ *†#• (AGE 61)
Non-executive director since 2011. After holding a number of senior
retail positions with Bloomingdale’s, Galeries Lafayette and Saks
Fifth Avenue, she joined Burberry Group plc and was President of
Burberry, Americas, one of three global regions of Burberry Group
plc which includes North and Latin Americas, from 1998 until 2013.
She is a non-executive director of Signet Jewelers Limited and
Vince Holding Corp.
8 JEAN-CHARLES PAUZE *†#• (AGE 67)
Non-executive director since January 2013. Having previously held a
number of senior positions with PPR Group, Strafor Facom Group and
Alfa Laval Group in France and Germany, he was Chairman and Chief
Executive of Rexel SA from 2002 until 2012. He is presently Chairman
of Europcar Groupe SA and Chairman of the Supervisory Boards of
CFAO SA and IMCD Group NV.
9 MEINIE OLDERSMA *†#• (AGE 55)
Non-executive director since April 2013. With over 20 years’
experience in the technology distribution sector, he held a variety
of senior positions with Ingram Micro and served as Chief Executive
and President of their China Group and Managing Director of their
business in Northern Europe before joining 20:20 Mobile Group
Limited where he was Chief Executive from 2008 until 2014. He is
Chairman of Kondor Limited and a non-executive director of the
Supervisory Board of Smallsteps BV.
10 VANDA MURRAY *†#• (AGE 54) (NOT PICTURED)
Non-executive director since February 2015 and Chair of the
Remuneration Committee from April 2015. Formerly Chief Executive
Officer of Blick plc from 2001 to 2004, she subsequently became UK
Managing Director of Ultraframe PLC from 2004 to 2006 and was
appointed OBE in 2002 for Services to Industry and Export. She is
presently a non-executive director of Exova Group plc, Manchester
Airports Holdings Limited, Microgen plc, where she is Chair of the
Remuneration Committee, and Fenner PLC where she is senior
independent director.
Member of the Audit Committee
*
† Member of the Remuneration Committee
# Member of the Nomination Committee
• Independent director
CORPORATE GOVERNANCE REPORT
INTRODUCTION
Bunzl’s corporate governance framework is designed to facilitate
effective, entrepreneurial and prudent management that can
safeguard shareholders’ interests and sustain the success of the
Company over the longer term. In order to achieve this the Company
is committed to high standards of corporate governance. In
September 2012 the Financial Reporting Council published the 2012
edition of the UK Corporate Governance Code (‘the Code’), a copy of
which is available at www.frc.org.uk. This contains broad principles
together with more specific provisions which set out standards of
good practice in relation to Board leadership and effectiveness,
accountability, remuneration and relations with shareholders. This
report describes how these principles have been applied by the
Company during the year ended 31 December 2014. The Financial
Reporting Council published a revised edition of the Code in
September 2014 which will apply to the Company for the year ending
31 December 2015. The Company has sought to reflect the revisions
to the Code in its practices and will aim to comply fully with the
revised Code in 2015. However all references to the Code in this
report relate to the 2012 edition of the Code.
COMPLIANCE STATEMENT
It is the Board’s view that for the year ended 31 December 2014 the
Company has been fully compliant with all of the relevant provisions
set out in the Code applicable to this reporting period. The Company’s
auditors, PricewaterhouseCoopers LLP, are required to review
whether this statement reflects the Company’s compliance with
those provisions of the Code specified for their review by the Listing
Rules of the UK Listing Authority and to report if it does not reflect
such compliance. No such report has been made.
BOARD COMPOSITION
As at 31 December 2014, the Board was made up of nine members
comprising a Chairman, a Chief Executive, two other executive
directors and five non-executive directors. As at the date of this
report the Board was made up of 10 members following the
appointment of Vanda Murray as a non-executive director with effect
from 1 February 2015. Peter Johnson, who has been a non-executive
director since 2006, will retire from the Board following the Company’s
Annual General Meeting on 15 April 2015. Brief biographical details
of the directors are given on page 42. None of the Company’s
non-executive directors had any previous connection with the
Company or its executive directors on appointment to the Board
and all of them are considered by both the Board and the criteria
set out in the Code to be independent. The Chairman and each of the
non-executive directors have a breadth of strategic, management
and financial experience gained in each of their own fields in a range
of multinational businesses. In accordance with the terms of the
Code each of the directors, with the exception of Peter Johnson who
retires at the conclusion of the Annual General Meeting, will be
subject to re-election at the forthcoming Annual General Meeting.
THE ROLE OF THE BOARD
To ensure directors maintain overall control over strategic, financial
and operational and compliance issues, the Board meets regularly
throughout the year and has formally adopted a schedule of matters
which are required to be brought to it for decision. Key aspects of the
Board’s role include:
• setting the Group’s strategic aims and ensuring that the Company
has the necessary capabilities to deliver the Group’s strategy;
• reviewing the Group’s operating performance and approving the
Group’s financial results;
• reviewing and approving larger capital expenditure and acquisition/
divestment proposals and material increases to borrowing and
loan facilities; and
• overseeing the Group’s risk management and internal controls
processes and procedures.
There is a clear division of responsibilities between the Chairman
and the Chief Executive which is set out in writing and has been
agreed by the Board and encompasses the following parameters:
• the primary job of the Chairman is to be responsible for the
leadership of the Board and ensuring its effectiveness in all
aspects of its role while the Chief Executive is responsible for the
leadership and the operational and performance management
of the Company within the strategy agreed by the Board.
• the Chairman is viewed by investors as the ultimate steward of the
business and the guardian of the interests of all the shareholders.
• the Chairman:
− takes overall responsibility for the composition and capability
of the Board and its Committees;
− consults regularly with the Chief Executive and is available on a
flexible basis to provide advice, counsel and support to the Chief
Executive; and
− ensures corporate governance is conducted in accordance with
current best practice, as appropriate to the Group.
• the Chief Executive:
− manages the executive directors and the Group’s management
and day-to-day activities;
− prepares and presents to the Board the strategy for growth in
shareholder value;
− sets the operating plans and budgets required to deliver the
agreed strategy;
− ensures that the Group has in place appropriate risk
management and control mechanisms; and
− communicates with the Company’s shareholders and analysts
on a day-to-day basis as necessary (subject to an overview of
such matters by the Chairman).
The Chief Executive is also the designated member of the Board
responsible for environmental, social and governance matters
and reports to the Board in relation to such matters.
Peter Johnson is currently the senior independent director and
is available to shareholders if they have concerns which contact
through the normal channels of Chairman, Chief Executive or
Finance Director has failed to resolve or for which such contact
is inappropriate. He is also available to the other directors should
they have any concerns which are not appropriate to raise with the
Chairman or which have not been satisfactorily resolved by the
Chairman. Upon Peter Johnson’s retirement in April 2015, David
Sleath, who was appointed as a non-executive director in September
2007 and is Chairman of the Audit Committee, will assume the role
of senior independent director.
The non-executive directors play a key role in corporate governance
and accountability through both their attendance at Board meetings
and their membership of the various Board Committees. The
non-executive directors bring a broad and diverse range of business
and financial expertise and experience to the Board which
complements and supplements the experience of the executive
directors. This enables them to evaluate information provided and
constructively challenge management’s viewpoints, assumptions
and performance.
BUNZL PLC ANNUAL REPORT 2014
43
CORPORATE GOVERNANCE REPORT CONTINUED
The Board has appointed Audit, Remuneration and Nomination
Committees, all of which comply with the provisions of the Code and
play an important governance role through the detailed work they
carry out to fulfil the responsibilities delegated to them. Briefing
papers are prepared and circulated to Committee members in
advance of each meeting and, in respect of the Audit Committee,
made available to the other directors. Further information relating
to the Board Committees is set out below.
INFORMATION AND SUPPORT
Board agendas are set by the Chairman in consultation with the
Chief Executive and with the assistance of the Company Secretary,
who maintains a rolling programme of items for discussion by the
Board to ensure that all matters reserved for the Board and other
key issues are considered at the appropriate time. The Board is
supplied with full and timely information, including detailed
financial information, to enable the directors to discharge their
responsibilities. To enable informed decision making, briefing papers
are prepared and circulated to directors approximately one week
before the scheduled Board meeting. All directors have access to
the advice and services of the Company Secretary who is tasked with
ensuring that Board procedures are complied with and the Board
is fully briefed on relevant legislative, regulatory and corporate
governance developments. Directors may also take independent
professional advice at the Company’s expense where they judge this
to be necessary in the furtherance of their duties to discharge their
responsibilities as directors.
The Board meets formally at least seven times a year and the Board
calendar is planned to ensure that the directors discuss a wide range
of topics throughout the year. Normally at least two Board meetings
a year are held at or near Group locations in the UK and overseas
where the directors have the opportunity to meet and interact with
senior executives from different businesses within the Group’s
portfolio as well as observe the operations in situ. During 2014
a number of the Group’s senior executives made presentations to
the Board about a variety of different and diverse topics including
reviews of potential acquisition opportunities, the post-acquisition
performance of businesses acquired in prior years, the Group’s
financing facilities and treasury policies and health and safety
performance metrics.
In addition to regular Board meetings, the directors meet annually
to review and discuss the Group’s overall strategy. As part of this
process, presentations are made by the Chief Executive and the
heads of each of the business areas together with the Director of
Corporate Development.
All new directors receive a tailored induction on joining the Board,
including meetings with senior management and visits to some
of the Group’s locations. They also receive a detailed information
pack which includes details of directors’ duties and responsibilities,
procedures for dealing in Bunzl’s shares and a number of other
governance related issues. Directors are continually updated on
the Group’s businesses and their markets and the changes to the
competitive and regulatory environments in which they operate.
Training and development needs of the Board are kept under review
and directors attend external courses where it is considered
appropriate for them to do so.
CONFLICTS OF INTEREST
The directors are required to avoid situations where they have, or
could have, a direct or indirect interest that conflicts, or possibly
may conflict, with the Company’s interests. In accordance with the
Companies Act 2006, the Company’s Articles of Association allow
the Board to authorise potential conflicts of interest that may arise
and to impose such limits or conditions as it thinks fit.
44 BUNZL PLC ANNUAL REPORT 2014
Directors are required to give notice of any potential situational and/
or transactional conflicts which are then considered by the Board
and, if considered appropriate, authorised accordingly. A director is
not however permitted to participate in such considerations or to vote
in relation to their own conflicts.
The Board has considered and authorised a number of potential
situational conflicts all of which relate to the holding of external
directorships and have been entered on the Company’s conflicts
register. No actual conflicts have been identified during the year.
The Board considers that these procedures operate effectively.
AUDIT COMMITTEE
The Audit Committee comprises all of the independent non-executive
directors and is chaired by David Sleath who, as Chief Executive and
formerly Group Finance Director of SEGRO plc and as a fellow of
the ICAEW, is considered by the Board to have recent and relevant
financial experience as required by the Code. While the other
directors are not members of the Committee, they normally attend
meetings of the Committee by invitation together with the Head of
Internal Audit and representatives from the external auditors. The
Secretary to the Committee is Paul Hussey, Company Secretary.
Further details about the Audit Committee and the work undertaken
by it during the year and prior to the publication of the Group’s results
for 2014 are set out in the Audit Committee report on pages 48 to 51.
Members’ attendance at the Committee meetings held during the
year is set out in the table on page 45. The terms of reference of the
Committee, which were reviewed and revised by the Board during
the year following a recommendation made by the Committee,
are available on the Company’s website, www.bunzl.com.
REMUNERATION COMMITTEE
The Remuneration Committee comprises all of the independent
non-executive directors and is currently chaired by the senior
independent director, Peter Johnson. Upon Peter Johnson’s
retirement in April 2015, Vanda Murray, who was appointed as a
non-executive director in February 2015, will assume the role of
Chair of the Remuneration Committee. While neither the Chairman of
the Company nor the Chief Executive are members of the Committee,
they normally attend meetings by invitation except when the
Committee is considering matters concerning themselves. The
Secretary to the Committee is Celia Baxter, Director of Group Human
Resources. Further details of the Remuneration Committee, the
Company’s remuneration policy and how it is applied are set out
in the Directors’ remuneration report on pages 52 to 72. Members’
attendance at the Committee meetings held during the year is
set out in the table on page 45. The terms of reference of the
Committee, which were reviewed during the year, are available
on the Company’s website.
NOMINATION COMMITTEE
Composition
The Nomination Committee comprises the Chairman of the Company,
who chairs the Committee (unless the Committee is dealing with the
matter of succession of the Chairman of the Company), the Chief
Executive and all of the non-executive directors. In accordance
with the provisions of the Code, the majority of the members are
independent non-executive directors. The Secretary to the
Committee is Paul Hussey, Company Secretary.
Role
The Committee’s principal role is to consider, and make
recommendations to the Board concerning, the composition of the
Board and its Committees including proposed appointees to the
Board, whether to fill any vacancies that may arise or to change
the number of Board members. It is the Committee’s role to ensure
that the Board and its Committees maintain the appropriate balance
of skills, knowledge, experience and diversity to ensure their
continued effectiveness.
The Committee’s responsibilities include:
• reviewing the structure, size and composition (including the
skills, knowledge, experience and diversity) of the Board and
making recommendations to the Board with regard to any
proposed changes;
• nominating, for the approval of the Board, appropriate individuals
to fill Board vacancies as and when they arise having considered
candidates with relevant experience from a wide range of
backgrounds; and
• succession planning, taking into account the challenges and
opportunities facing the Company and the background, skills and
expertise that will be required on the Board in the future, and
reviewing annually management succession planning processes
in relation to the Company’s senior executives.
The Committee meets as necessary throughout the year to discharge
its responsibilities. An external search consultancy which does not
have any other connection with the Company is retained by the
Company to assess potential candidates to be considered as
prospective non-executive directors and, when appropriate,
executive directors. This process was adopted in relation to the
appointment of Vanda Murray as a non-executive director with effect
from 1 February 2015, further details of which are set out below.
Activities
The Committee met on four occasions during 2014. Members’
attendance at those meetings is set out in the table opposite.
One of the Committee’s main responsibilities during the year was the
process of identifying and selecting a new non-executive director.
Having taken account of the existing skills, knowledge, experience
and diversity of the Board, the Committee prepared and agreed a
detailed specification for the role and appointed an external search
consultancy, Lygon Group, to assist the Committee in the recruitment
process. Lygon Group does not provide any other services to, or have
any connection with, the Company. In particular the Committee were
keen to find a successful senior business executive with extensive
international management experience. As a potential non-executive
director, it was important that the chosen candidate was able to play
a supportive role to the executive management team while at the
same time provide strategic input into the Company’s direction
and development. It was also a requirement that the prospective
director could provide wise counsel and independence of mind
and to challenge management constructively by offering impartial,
independent and objective advice. All members of the Committee
had the opportunity to meet the preferred candidate before a final
recommendation was made to the Board. Following a thorough
process Vanda Murray was recommended to the Board to be
appointed as an independent non-executive director. This
recommendation was unanimously approved by the Board with
Vanda Murray being appointed with effect from 1 February 2015.
The Board also accepted the Committee’s recommendation that
Vanda Murray be appointed to each of the three Board Committees
and that she should assume the role of Chair of the Remuneration
Committee upon Peter Johnson’s retirement in April 2015.
The Committee also reviewed and took account of the balance of
skills, knowledge, experience and diversity of the Board, the time
commitment expected of the non-executive directors and the
conclusions of the formal evaluation process which was carried
out when considering and recommending the nomination of
directors for re-election at the 2015 Annual General Meeting.
In particular the Committee reviewed the performance of
David Sleath, who was appointed to the Board in September 2007.
The Committee believes that he continues to be effective and to
demonstrate strong independence in character and judgement
in the manner in which he discharges his responsibilities as a
director. Consequently the Committee is satisfied that, despite his
length of tenure, he remains independent. Additionally, the Board
accepted the Committee’s recommendation that David Sleath should
be appointed as the Company’s senior independent director following
Peter Johnson’s retirement.
The Chief Executive presented his annual management succession
plan to the Committee. The Company recognises that having the right
directors and senior management is crucial for the Group’s success
and it is a key task of the Committee to ensure that the Company has
a robust and continuous succession planning process over both the
medium to long term to ensure that there is the right mix and skills
available as the Company evolves.
As part of the review of the composition of the Board and the
succession planning process, both the Board and the Committee
recognise the importance of gender diversity throughout the Group.
As at the date of this report, two of the 10 Board members (moving to
two of the nine Board members following Peter Johnson’s retirement
in April 2015) and one of the five Executive Committee members are
female. The Committee aims to have a Board with a broad range
of skills, backgrounds, experience and diversity and, while the
Committee will continue to follow a policy of ensuring that the
best people are appointed for the relevant roles, the Committee
recognises the benefits of greater diversity and will continue to
take account of this when considering any particular appointment.
However, the primary responsibility of the Committee in selecting
and recommending candidates to the Board when making new
appointments is to ensure the strength of the Board’s composition
and the overriding aim is to always select and recommend the best
candidate for the position. Further information about the Company’s
workforce diversity is set out on page 39.
The terms of reference of the Committee, which were reviewed by
the Board during the year, are set out on the Company’s website.
BOARD AND COMMITTEE ATTENDANCE
The following table shows the attendance in 2014 of directors at
Board meetings and at meetings of the Board Committees of which
they were members:
Number of meetings
Philip Rogerson
Michael Roney
Patrick Larmon
Peter Johnson
Brian May
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
Audit
Committee
5
Remuneration
Committee
3
Nomination
Committee
4
4
4
5
5
5
5
5
3
3
3
3
3
4
4
4
4
4
Board
9
9
9
9
9
9
9
9
9
9
In addition to the directors named above, Vanda Murray was
appointed as a non-executive director and a member of the Audit,
Remuneration and Nomination Committees with effect from
1 February 2015.
PERFORMANCE EVALUATION
The Company has a formal performance evaluation process for
the Board, its Committees and individual directors overseen by
the Chairman. This includes individual discussions between the
Chairman and each director when their individual training and
development needs are reviewed. Led by the senior independent
director, the non-executive directors also meet without the Chairman
BUNZL PLC ANNUAL REPORT 2014
45
CORPORATE GOVERNANCE REPORT CONTINUED
present at least annually to appraise the Chairman’s performance
including a review of his other commitments to ensure that he is
able to allocate sufficient time to the Company to discharge his
responsibilities effectively. The Chairman also periodically holds
meetings with the non-executive directors without the executive
directors present. All of these processes were carried out
satisfactorily during the year.
In accordance with the requirements of the Code an external
performance evaluation was carried out in 2012 and the results were
subsequently presented to the Board. The facilitator of the external
evaluation, Lintstock, does not provide any other services to, or have
any other connection with, the Company. Although the Code only
requires that the evaluation of the Board and its Committees should
be externally facilitated at least every three years, the Board has
decided to appoint Lintstock to carry out a performance evaluation
each year and accordingly external evaluations were completed in
both 2013 and 2014. By doing so, the Board is able to ensure that
there is consistency and continuity in the evaluation process and
the presentation of the results from one year to the next. Following
the evaluation which was carried out in 2014, the Board identified
a number of key priorities in order to improve the Board’s
performance, including:
• allowing more time for discussion on the key strategic issues
facing the Group both as part of the Board’s annual strategy
review and at other times of the year as appropriate;
• continuing the focus of the Nomination Committee on the
management succession plans for the Group, including in
particular maintaining the Board’s exposure to the Group’s
senior management below Board level;
• increasing the focus on both the opportunities and threats
presented by future developments in technology and digital
marketing activities and how these might best be developed
in order to maintain the continuing success of the Group; and
• arranging for more external speakers to present to the Board
from time to time on specific topics of interest.
As a result of the overall performance evaluation process carried
out in 2014, the Board concluded that both it and its Committees
are operating effectively.
FINANCIAL AND BUSINESS REPORTING
The responsibilities of the directors in respect of the preparation
of the Group and parent company financial statements are set out
on page 120 and the auditors’ report on pages 121 to 126 includes
a statement by the external auditors about their reporting
responsibilities. As set out on page 33, the directors are of the
opinion that it is appropriate to continue to adopt the going concern
basis in preparing the financial statements.
The process of preparing the Annual Report has included
the following:
From the information and assurance provided by the ongoing work of
the internal audit department, the reviews conducted by the external
auditors in relation to both the half year and full year results, the
Board’s understanding of the Group’s business and the information
provided by the senior executive management team, the Board
considers that the Annual Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s performance, business model
and strategy.
RISK MANAGEMENT AND INTERNAL CONTROL
The directors acknowledge that they have overall responsibility for
identifying and managing the risks faced by the Group and for the
Group’s system of internal control relating to those risks. However,
such a system is designed to manage rather than eliminate the risk
of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material
misstatement or loss. In accordance with Principle C.2 of the
Code and the related guidance, the Company has established the
procedures necessary to ensure that there is an ongoing process for
identifying, evaluating, managing and mitigating significant risks to
the Group and for determining the nature and extent of the significant
risks it is willing to take to achieve its strategic objectives. The
directors confirm that such procedures have been in place for the
year ended 31 December 2014 and up to the date of approval of these
financial statements and have been reviewed during the year.
Further information relating to how the directors maintain overall
control over all significant strategic, financial, operational and
compliance issues is set out in the ‘Role of the Board’ section on
page 43.
In addition, the Board has delegated to an Executive Committee,
consisting of the Chief Executive, Finance Director and other
functional managers, the responsibility for identifying, evaluating and
monitoring the risks facing the Group and for deciding how these are
managed and to establish a system of internal control appropriate
to the business environments in which the Group operates. The
principal features of this system include:
• a procedure for monitoring the effectiveness of the internal control
system through a tiered management structure with clearly
defined lines of responsibility and delegation of authority;
• clearly defined authorisation procedures for capital investment
and acquisitions;
• strategic plans and comprehensive budgets which are prepared
annually by the business areas and approved by the Board;
• formal standards of business conduct (including a code of ethics
and whistle blowing procedure) based on honesty, integrity, fair
dealing and compliance with the local laws and regulations of
the countries in which the Group operates;
• a well established consolidation and reporting system for the
statutory accounts and monthly management accounts;
• comprehensive reviews undertaken at different levels in the
• continual investment in IT systems to ensure the production
Group in order to ensure the accuracy, consistency and overall
balance of the Annual Report; and
of timely and accurate management information relating to the
operation of the Group’s businesses; and
• verification procedures, both internally and by the external
auditors, to deal with the factual content of the Annual Report.
• detailed manuals covering Group accounting policies and policies
and procedures for the Group’s treasury operations supplemented
by internal control procedures at a business area level.
46 BUNZL PLC ANNUAL REPORT 2014
Some of the procedures carried out in order to monitor the
effectiveness of the internal control system and to identify,
manage and mitigate business risk are listed below:
• central management holds regular meetings with business area
management to discuss strategic, operational and financial issues
including a review of the significant risks affecting each of the
business areas and the policies and procedures by which these
risks are managed;
• the Executive Committee meets twice per month and also reviews
the outcome of the discussions held at business area meetings on
internal control and risk management issues;
• the Board in turn reviews the outcome of the Executive Committee
discussions on internal control and risk management issues which
ensures a documented and auditable trail of accountability;
• each business area, the Executive Committee and the Board carry
out an annual fraud risk assessment;
• actual results are reviewed monthly against budget, forecasts
and the previous year and explanations obtained for all
significant variances;
• all treasury activities, including in relation to the management of
foreign exchange exposures and Group borrowings, are reported
and reviewed monthly;
• the Group’s bank balances around the world are monitored on a
weekly basis and significant movements are reviewed centrally;
• the internal audit department periodically reviews individual
businesses and procedures, makes recommendations to improve
controls and follows up to ensure that management implements
the recommendations made. The internal audit department’s work
is determined on a risk assessment basis and their findings are
reported to Group and business area management as well as
to the Audit Committee and the external auditors;
• an annual self-assessment of the status of internal controls
measured against a prescribed list of minimum standards is
performed by every business and action plans are agreed where
remedial action is required;
• the Audit Committee, which comprises all of the independent
non-executive directors of the Company, meets regularly
throughout the year. Further details of the work of the Committee,
which includes a review of the effectiveness of the Company’s
internal financial controls and the assurance procedures relating
to the Company’s risk management system, are set out in the
Audit Committee report on pages 48 to 51;
The external auditors are engaged to express an opinion on the
financial statements. The audit includes the review and evaluation of
the system of internal financial control and the data contained in the
financial statements to the extent necessary for expressing an audit
opinion on the truth and fairness of the financial statements.
RELATIONS WITH SHAREHOLDERS
The Company reports formally to shareholders twice a year with
the half year results announced normally at the end of August and
the annual results announced normally at the end of February.
In addition the Company has historically published two interim
management statements a year as required by the Disclosure
and Transparency Rules (‘the DTRs’). Although with effect from
7 November 2014 the DTRs no longer require interim management
statements to be published by listed companies, it is the Board’s
current intention to continue to issue interim management
statements on a voluntary basis in order to keep the Company’s
shareholders and the financial markets periodically updated on
the Company’s trading performance outside of the regulatory
announcements made in relation to the half year and annual results.
The Chief Executive and Finance Director have regular meetings with
representatives of institutional shareholders and report to the Board
the views of major shareholders. Additional forms of communication
include presentations of the half year and annual results. The
Chairman and the senior independent director and the other non-
executive directors are available to meet with major shareholders on
request. The Board also periodically reviews and discusses analysts’
and brokers’ reports and surveys of shareholder opinions conducted
by the Company’s own brokers.
Notice of the Annual General Meeting is sent to shareholders at
least 20 working days before the meeting. All shareholders are
encouraged to participate in the Annual General Meeting, are invited
to ask questions at the meeting and are given the opportunity to
meet all of the directors informally. Shareholders unable to attend
are encouraged to vote using the proxy card mailed to them or
electronically as detailed in the Notice of Meeting. Shareholders
are given the option to withhold their vote on the proxy form. As in
previous years, at the forthcoming Annual General Meeting each
of the resolutions put to the meeting will be taken on a poll rather
than on a show of hands as directors believe that a poll is more
representative of shareholders’ voting intentions because
shareholder votes are counted according to the number of shares
held and all votes tendered are taken into account. The results of the
poll will be publicly announced and made available on the Company’s
website as soon as practicable following the Annual General Meeting.
• regular meetings are held with insurance and risk advisers to
On behalf of the Board
assess the risks throughout the Group;
Paul Hussey
Secretary
23 February 2015
• a management committee, which oversees issues relating
principally to environment, health & safety, insurance and business
continuity planning matters, sets relevant policies and practices
and monitors their implementation;
• risk assessments, safety audits and a regular review of progress
against objectives established by each business area are
periodically carried out; and
• developments in tax, treasury and accounting are continually
monitored by Group management in association with
external advisers.
The directors confirm that they have reviewed the effectiveness of
the system of internal control and risk management in operation
during 2014.
BUNZL PLC ANNUAL REPORT 2014
47
AUDIT COMMITTEE REPORT
STATEMENT FROM DAVID SLEATH,
CHAIRMAN OF THE AUDIT COMMITTEE
I am pleased to present our Audit Committee report for 2014, the
purpose of which is to give shareholders an overview of the operation
and scope of the Committee’s function and to report on its activities
undertaken over the past year.
The UK Corporate Governance Code (the ‘Code’) issued by the
Financial Reporting Council includes a number of provisions relating
to the role and reporting requirements of Audit Committees and
accordingly this report has been prepared in accordance with the
relevant provisions of the 2012 edition of the Code which applied
to the financial year ended 31 December 2014.
Throughout 2014 our activities continued to be focused on the
integrity of the financial reporting and the related controls of the
Group. The Committee has a clearly defined role in the corporate
governance framework of listed companies and acts independently
of management to ensure that the interests of our shareholders
are properly protected in relation to financial reporting and audit
integrity and the Company’s risk management and internal
control environment.
A key aspect of the Committee’s work during the year was to
initiate and oversee a competitive tender process for the external
audit, further details of which are set out in the report that
follows. Having done so, the Company subsequently appointed
PricewaterhouseCoopers LLP (‘PwC’) as auditors to succeed KPMG
Audit Plc (‘KPMG’]. The transition to the new audit firm has gone well.
PwC have settled in quickly, having been in position for the 2014
half year review, and have invested significant time in learning about
the Group and its businesses. The Committee is pleased with their
progress to date and the insights which they have brought to the
audit process.
The significant accounting matters considered by the Committee
were the accounting for business combinations, the carrying value
of goodwill and other intangible assets, taxation, defined benefit
pension scheme obligations, supplier rebates and provisions. These
are discussed in detail in our report below and the Committee is
satisfied that these matters have been accounted for appropriately.
The role of Audit Committees is constantly changing and, as a result,
we will continue to keep our agenda under review to ensure that it
addresses the right issues going forward.
ROLE
The Committee’s principal role is to ensure that the Company has
effective governance over the Group’s financial reporting, including
the adequacy of related disclosures, the performance of both the
internal and external audit functions and the management of the
Group’s systems of internal control, business risks and related
compliance activities. In particular the Committee is responsible for:
• monitoring and reviewing the integrity of the financial statements
of the Group and the significant financial reporting judgements
contained in them;
• reviewing the effectiveness of the Company’s internal
financial controls;
• reviewing the process for the management of risk and reviewing
the assurance procedures over controls designed to manage
key risks;
• overseeing the Company’s internal audit activities;
• reviewing the appropriateness of the Company’s relationship
with the external auditors, including the auditors’ independence,
the terms of engagement and fees for the audit and the provision
of non-audit services;
• initiating and supervising a competitive tender process for the
external audit as may be required from time to time;
• making recommendations to the Board in relation to the
appointment of the external auditors; and
• developing and implementing a policy on the engagement of the
external auditors to supply non-audit services.
The Committee’s terms of reference were reviewed and revised by
the Board at the end of 2014 following a recommendation made by
the Committee to take account of the changes made to the role of
Audit Committees introduced by the Competition & Markets Authority
Order with effect from 1 January 2015. Pursuant to the Order and the
revised terms of reference, the Committee is now solely responsible
for negotiating and agreeing the external auditors’ fee, the scope of
the statutory audit and initiating and supervising a competitive tender
process for the external audit where it is appropriate to do so and to
make recommendations to the Board as to the external auditors’
appointment pursuant to any such process. The current version of
the Committee’s terms of reference is available on the Company’s
website, www.bunzl.com.
In the performance of its duties, the Committee has independent
access to the services of the Company’s internal audit function and
to the external auditors and may obtain outside professional advice
as necessary. Both the Head of Internal Audit and the external
auditors have direct access to me as the Chairman of the Committee
and I held a number of meetings with each of them during the year
outside formal Committee meetings.
48 BUNZL PLC ANNUAL REPORT 2014
‘ The Committee will remain focused on
the audit, assurance and risk processes
within the business, as well as financial
reporting itself, and will continue to evolve
its activities in line with the regulatory
framework and market practice for
Audit Committees.’
ACTIVITIES
As Chairman of the Committee, I hold preparatory discussions with
the Company’s senior management, the Head of Internal Audit and
the external auditors prior to Committee meetings to discuss the
items to be considered at the Committee meetings. In addition,
separate discussions are held between the Committee and the
Head of Internal Audit and the external auditors without management
present. I also attend the Annual General Meeting to respond to any
shareholder questions that might be raised on the Committee’s
activities. The Committee met on five occasions during the year
and members’ attendance at those meetings is set out in the table
on page 45.
The Committee’s activities included:
• overseeing a competitive tender process for the position of the
Company’s external auditors;
• following completion of the competitive tender process, making
recommendations to the Board concerning the appointment of
the external auditors and approving the remuneration and terms
of engagement of the auditors including the audit strategy and
planning process for the current financial year;
• receiving and considering reports from management and the
external auditors in relation to the half yearly financial report
and the annual financial statements;
• reviewing the half yearly financial report and the annual financial
statements and the formal announcements relating thereto;
• receiving and considering reports from the Head of Internal Audit
in relation to the work undertaken by the internal audit function
and reviewing and approving the internal audit work programme
for the year;
• reviewing the effectiveness of the Company’s internal financial
controls and the assurance procedures relating to the Company’s
risk management systems;
• reviewing the arrangements by which staff may, in confidence,
raise concerns about possible improprieties in matters of financial
reporting or other matters and receiving periodic reports relating
to the matters raised through such arrangements;
• reviewing, and making a recommendation to the Board to change,
the Committee’s terms of reference;
• reviewing the Committee’s effectiveness following an externally
facilitated performance evaluation;
• reviewing the effectiveness of both the external auditors and
the internal audit function following completion of detailed
questionnaires by both the Board and senior management
within the Company;
• reviewing and approving the level and nature of non-audit work
which the external auditors performed during the year, including
the fees paid for such work;
• reviewing the principal tax risks applicable to the Company and
the steps taken to manage such risks; and
• as part of an ongoing programme to review specific areas relating
to financial reporting matters within the Group’s businesses,
receiving and considering a presentation about the finance function
and control environment within the Group’s operations in Brazil.
Following each Committee meeting, I report any significant findings
to the Board and copies of the minutes of the Committee meetings
are circulated to all of the directors and to the external auditors.
EXTERNAL AUDIT TENDER AND APPOINTMENT OF AUDITORS
In considering whether to recommend to the Board the appointment
or re-appointment of the external auditors, the Committee takes into
account the tenure of the auditors in addition to the results of its
review of the effectiveness of the external auditors and considers
whether there should be a full tender process either as a result
of that review or as may be required by the relevant regulations.
There are no contractual obligations restricting the Committee’s
choice of external auditors.
KPMG (or its predecessor firms) had been the Company’s external
auditors since 1986 and was responsible for the audit of the
Company’s financial statements for the year ended 31 December 2013.
In line with the new provision introduced in the 2012 edition of the
Code and the report of the UK Competition Commission which
required listed companies to tender the external audit at least once
every 10 years, during the early part of 2014 the Board accepted a
recommendation from the Committee that the Company should carry
out such a tender during 2014 with a view to the successful firm
performing the external audit for the year ending 31 December 2014.
In order to comply with good governance practice and given KPMG’s
length of tenure as the Company’s auditors and the then current
regulatory environment which was expected to impose an
obligation on listed companies to rotate their auditors periodically
(such obligation having subsequently been made a mandatory
requirement), following a recommendation from the Committee
the Board decided that it intended to appoint a new audit firm as
the Company’s external auditors following the tender process.
As a result KPMG was not invited to participate in the process.
Following the agreement of a detailed timetable and step plan, a
formal Invitation to Tender document was issued to those audit firms
determined by the Committee to have the appropriate international
expertise and resources to carry out effectively the external audit
of the Company and its subsidiaries.
BUNZL PLC ANNUAL REPORT 2014
49
AUDIT COMMITTEE REPORT CONTINUED
The detailed responses to the Invitation to Tender were then
assessed and reviewed against agreed criteria and each of the
audit firms made presentations in May 2014. The Committee
subsequently recommended to the Board that PwC be appointed as
the external auditors in succession to KPMG. Following approval by
the Board, the appointment was duly notified to shareholders and to
the Financial Reporting Council and became effective on 19 May 2014.
PwC’s fees for the audit for the year ending 31 December 2014
were considered and agreed by the Committee as part of the
tender process.
Having been appointed during the year, PwC have expressed
their willingness to continue as auditors of the Company and
the Committee has therefore recommended to the Board that a
resolution proposing the re-appointment of PwC as external auditors
be put to shareholders at the forthcoming Annual General Meeting.
FINANCIAL STATEMENTS AND SIGNIFICANT
ACCOUNTING MATTERS
During the year and prior to the publication of the Group’s results
for 2014, the Audit Committee reviewed the 2014 half yearly financial
report, the 2014 Annual Report (including the financial statements),
the 2014 annual results news release and the reports from the
external auditors, PwC, on the outcomes of their half year review
and audit relating to 2014.
As part of its work, the Committee considered the following
significant accounting issues, matters and judgements in relation
to the Group’s financial statements:
Accounting for business combinations
For business combinations, the Group has a long-standing process
for the identification of the fair values of the assets acquired and
liabilities assumed including separate identification of intangible
assets using external valuation specialists where required. The
Committee reviewed this process and discussed with management
and the external auditors the methodology and assumptions used
to value the assets and liabilities of the significant acquisitions
completed in 2014. The Committee concluded that it was satisfied
with management’s valuations of these assets and liabilities,
including the degree to which such valuations are supported by
professional advice from external advisers.
The carrying value of goodwill and other intangible assets
Goodwill is allocated to cash generating units (‘CGUs’) and is tested
annually for impairment. The Committee critically reviewed and
discussed management’s report on the impairment testing of the
carrying value of goodwill and other intangible assets of each CGU
and considered the external auditors’ testing thereof including the
sensitivity of the outcome of impairment testing to the use of different
discount rates. After due challenge and debate, the Committee
concluded that it was satisfied with the assumptions and judgements
applied in relation to such testing and agreed that there was no
impairment to goodwill or other intangible assets. Details of the
key assumptions and judgements used are set out in Note 9 to the
financial statements.
Taxation
The Committee reviewed a report and received a presentation from
the Head of Tax highlighting the principal tax risks that the Group
faces, the tax strategy and a detailed risk assessment relating to
the tax risks identified including the judgements underpinning the
provisions for potential tax liabilities. The Committee also reviewed
the results of the external auditors’ assessment of provisions for
income taxes and, having done so, was satisfied with the key
judgements made by management.
Defined benefit pension scheme obligations
The Committee considered reports from management and the
external auditors in relation to the valuation of the defined benefit
pension schemes and reviewed the key actuarial assumptions
used in calculating the defined benefit pension liabilities, especially
in relation to discount rates, inflation rates and mortality/life
expectancy. The Committee discussed the reasons for the increase
in the net pension deficit and was satisfied that the assumptions
used were appropriate and were supported by independent actuarial
specialists. Details of the key assumptions used are set out in
Note 20 to the financial statements.
Supplier rebates
The Group has various rebate arrangements with a number of
suppliers. Some of these arrangements are based on the volume
of products purchased and others are based on the volume of
products sold. The recognition of supplier rebate income from these
arrangements may involve the requirement for some estimates to be
made about whether certain conditions related to such rebate income
have been, or will be, met. In reviewing the consolidated financial
statements, the Committee considered a report from management
in relation to the key financial controls over supplier rebates, the
accounting treatment for each type of rebate, the value of the
different types of rebates in the income statement for the year and
the value of supplier rebate income receivables at the year end.
The Committee discussed the findings of the external auditors in this
area and discussed with management the supplier rebate accounting
process. Having done so, the Committee concluded that it was
satisfied with the Group’s supplier rebate accounting process for
the year and with the value of rebate income recognised.
Provisions
The Group holds a number of provisions relating to properties
(including liabilities for onerous lease commitments, repairs and
dilapidations) and actual and anticipated legal, environmental and
other claims. The Committee reviewed reports from management
and the external auditors concerning the significant provisions held
for such matters including any provisions with notable movements
and those provisions requiring a greater degree of judgement.
The Committee considered the background to such provisions and
discussed with management the judgements applied in determining
the value of provisions required. The Committee enquired of
management and the external auditors as to the existence of other
matters potentially requiring a provision to be made. The Committee
concluded that it was satisfied with the value of provisions carried.
EXTERNAL AUDITORS’ INDEPENDENCE AND EFFECTIVENESS
The Committee ensures that the external auditors remain
independent of the Company and receives written confirmation
from the external auditors as to whether they consider themselves
independent within the meaning of their own internal and the relevant
regulatory and professional requirements. Key members of the audit
team rotate off the Company’s audit after a specific period of time.
In order to ensure that the objectivity and independence of the
external auditors is not compromised, the Committee has also
pre-approved the non-audit service categories that can be provided
by the external auditors and agreed monetary amounts for each
service category that can be provided by them, subject to a maximum
individual engagement value. Certain categories of services are
prohibited under the ethical standards of the Accounting Practices
Board. A permitted service requires specific authorisation from the
Committee or myself as the Committee Chairman where it does not
fall within the pre-approved categories or where its value exceeds
the maximum pre-approved individual engagement value.
50 BUNZL PLC ANNUAL REPORT 2014
INTERNAL AUDIT
The Company has an internal audit department which comprises
eight in-house auditors, including the Head of Internal Audit who
reports jointly to me, in my capacity as Chairman of the Audit
Committee, and the Finance Director. The scope of work of the
internal audit function covers all systems and activities of the Group.
Work is prioritised according to the Company’s risk profile with
the annual audit plan being approved by the Committee each year.
Internal audit reports are regularly provided to the Committee which
include details of the audit findings, and the relevant management
actions required in order to address any issues arising therefrom, as
well as updates on the progress made by management in addressing
any outstanding recommendations from previously reported findings.
In addition, the internal audit function reports on any significant
issues relating to the processes for controlling the activities of
the Group and the adequacy and effectiveness of such processes.
Together the work of the internal audit function provides the
Committee with a further means of monitoring the processes and
actions to manage and mitigate those risks identified as posing the
greatest threat to the Company.
A review by the Committee of the effectiveness of the internal audit
function was carried out during the year. The Committee considered
the results of a detailed questionnaire completed by each of the
directors and those members of the senior management team who
interact with the internal audit department and discussed generally
the work of the internal audit department, the adequacy of resources
and the skills and capabilities of the internal audit team.
David Sleath
Chairman of the Audit Committee
23 February 2015
Such non-audit service categories which are pre-approved
principally comprise tax services and further assurance services
relating to pre-acquisition due diligence and other duties carried
out in respect of acquisitions and disposals of businesses. It is the
Company’s policy to assess the services required on a case by case
basis to ensure that the most appropriate adviser is retained. As a
result the Committee believes that it is sometimes appropriate for
this additional work to be carried out by the Company’s auditors.
However other firms are also used by the Company to provide
non-audit services if such other firms are thought to be best placed
to undertake the work involved. Details of the fees paid to the
external auditors in 2014 in respect of the audit and for non-audit
services are set out in Note 4 to the financial statements.
During 2014 the Committee carried out a review of the effectiveness
of the external audit process carried out in relation to the audit of the
financial statements for the year ended 31 December 2013. As part
of this review, the Committee considered feedback on the audit
gathered through a detailed survey which was completed by each
of the directors and members of the Company’s senior management
team at both Group and business area levels. The survey covered a
total of 27 different aspects of the audit process grouped under four
separate headings; the robustness of the audit process, the quality
of delivery, the quality of reporting and the quality of people and
service. Each respondent was asked to award a rating on a scale
of 1 to 5 for each aspect reviewed and to provide any additional
comments they wished to make in relation to the questions raised.
The Committee discussed the findings of the survey and their overall
assessment of the work of the auditors. The Committee will carry
out a similar effectiveness review in 2015 in relation to the audit
of the financial statements for the year ended 31 December 2014.
INTERNAL CONTROL AND RISK MANAGEMENT
As mentioned above, the Committee is responsible for reviewing
on behalf of the Board the effectiveness of the Company’s internal
financial controls and the assurance procedures relating to the
Company’s risk management system. These controls and procedures
are designed to manage, but not eliminate, the risk of failure of the
Company to meet its business objectives and, as such, provide
reasonable, but not absolute, assurance against material
misstatement or loss. During the year, the Committee monitors the
effectiveness of the internal financial controls framework through
reports from the Finance Director, the Head of Internal Audit and the
external auditors. In particular the Committee considered the scope
and results of work of the internal audit function, the findings of the
external auditors in relation to the year end audit, the assessment
of fraud risk carried out by management, the controls over the
Company’s financial consolidation and reporting system, the
treasury controls, the tax risks and the processes for setting
strategic plans and budgets and for monitoring the ongoing
performance of the Company.
In relation to the risk management system, the Committee reviewed
the process by which significant risks had been identified by
management and the Board, the key controls and other processes
designed to manage and mitigate such risks and the assurance
provided by the internal audit function, the external auditors and
other oversight from management and the Board.
BUNZL PLC ANNUAL REPORT 2014
51
DIRECTORS’ REMUNERATION REPORT
This report has been prepared on behalf of and
has been approved by the Board. It complies
with Schedule 8 to the Large and Medium-sized
Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended) (the ‘Regulations’),
the UK Corporate Governance Code and the Financial
Conduct Authority Listing Rules and takes into
account the accompanying Directors’ Remuneration
Reporting Guidance and the relevant policies of
shareholder representative bodies. This report
is presented in three main sections: an annual
statement from the Chairman of the Committee; the
Directors’ remuneration policy report as approved
by shareholders at the 2014 Annual General Meeting
(‘AGM’); and the Annual report on remuneration for
2014. The report also contains information relating
to the directors’ remuneration for 2015 and additional
information on directors’ share interests.
During 2013 we reviewed the remuneration structure which had
served the business well over many years. Having done so, we made
a number of changes to ensure the remuneration framework
continued to support the strategic direction of the business and
further comply with good practice, while addressing various matters
previously raised by shareholder representative bodies. The principal
change related to the introduction of a revised Long Term Incentive
Plan (‘LTIP’) to be known as the 2014 LTIP. The policy report that
describes the individual elements of remuneration was approved at
the 2014 AGM for a period of three years until April 2017. No changes
to the policy are being proposed for 2015. However for ease of
reference we have included the policy report once again in the 2014
Annual Report although, in accordance with the 2013 regulations,
we will only be inviting shareholders to approve the Annual report
on remuneration for 2014 at the 2015 AGM.
The 2014 LTIP was also approved by shareholders at the 2014 AGM
for a 10 year period. Executive share options and performance shares
were awarded using this plan in August and October respectively.
The 2014 LTIP provides a clawback facility under which part or
the full amount of a vested award may be recovered in certain
circumstances. A clawback provision is already in place for the
annual bonus in relation to unvested shares under the Deferred
Annual Share Bonus Scheme (‘DASBS’).
STATEMENT FROM PETER JOHNSON,
CHAIRMAN OF THE REMUNERATION COMMITTEE
Our strategic focus places great importance on continuing to grow
organically and by acquisition in support of one of Bunzl’s main
objectives, which is to build shareholder value, and this has once
again been demonstrated in 2014. The remuneration framework
is designed to reinforce the link between pay and performance
and reward senior executives for delivering superior shareholder
returns. The Committee considers that the current remuneration
arrangements are simple and transparent for both employees and
shareholders and that performance is assessed against measures
and targets that are relevant to Bunzl’s business and are stretching,
while providing maximum clarity.
A significant amount of Bunzl’s success can be attributed to the
strong leadership of the management team. Bunzl is an international
business providing outsourcing solutions and value-added
distribution across the Americas, Europe and Australasia. It is
important that key individuals are retained and that we can attract
new talent into the business by recruitment or acquisition. The
competitiveness of the remuneration package we offer is therefore
key. The remuneration framework is structured in a way that allows
us to compete for talent across multiple geographies while also
complying with UK corporate governance good practice.
During the year the Committee reviewed the appropriateness
of the performance conditions relating to the options and awards
to be granted under the 2014 LTIP. Taking due consideration of the
prevailing economic and market conditions, the Committee decided
that the performance conditions as published in the Annual report
on remuneration for 2013 were still suitably stretching for the
2014 grant of options and performance share awards. Further the
Committee reviewed the key performance indicators (‘KPIs’) for
the 2014 annual bonus and it was agreed that adjusted earnings per
share and return on average operating capital performance for the
year relative to a target level of return were still appropriate and that
the target levels were stretching without encouraging inappropriate
levels of risk.
The Committee considers that the out-turn of our incentive plans,
appropriately reflects Bunzl’s performance in 2014. For example,
for the Chief Executive the annual bonus was 85% of the maximum
opportunity, which equated to 98% of his annual salary and 100%
of executive share options and 89% of performance shares vested.
During 2014, Bunzl’s total shareholder return (‘TSR’) performance
continued to rise against a flat performance by the FTSE Support
Services sector and the share price reached an all-time high.
The Committee has not exercised any discretion to adjust
performance targets as a result of events that have taken
place during the year.
Peter Johnson
Chairman of the Remuneration Committee
23 February 2015
52 BUNZL PLC ANNUAL REPORT 2014
‘ The out-turn of our incentive plans in 2014
appropriately reflects our performance
while the targets set are sufficiently
stretching without encouraging
inappropriate levels of risk.’
DIRECTORS’ REMUNERATION POLICY REPORT
Bunzl continues to pursue its well defined strategy of developing the business through organic growth, consolidating the markets in which
we compete through focused acquisitions in both existing and new geographies and continuously improving the efficiency of our operations.
Bunzl’s business model relies on excellent customer and supplier relationships and the skills, knowledge and experience of its directors
and employees. The Company’s remuneration policy supports this strategy by ensuring that the overall remuneration package is set at a
competitive level while ensuring that additional reward is paid for high performance over a sustained period. This policy is designed to
ensure the recruitment, retention and motivation of the executive directors and other senior executives over the long term.
The performance related elements of the remuneration package are designed to incentivise executives to meet key performance metrics
which align their interests and remuneration with those of shareholders, for example targets relating to earnings per share and TSR.
In setting such targets the Committee takes due account of the potential effect such targets could have on the attitude and behaviour of
executives to risk within the business. In addition the Committee has the discretion to take into account performance on environmental,
social and governance matters.
The following table summarises the policy for the remuneration of executive directors approved at and effective from the 2014 AGM which
is binding until the AGM to be held in 2017.
Salary
Purpose
• recognise knowledge, skills and experience as well as reflect the scope and size of the role
• reward individual performance without encouraging undue risk
• promote the importance of environmental, social and governance issues
Operation
• paid in 12 equal monthly instalments during the year
• reviewed annually, normally in December (with any changes usually effective from January)
• taking into consideration individual and Group performance, salary increases across the Group are
benchmarked for appropriate salary levels using a comparator group of similarly sized companies with a large
international presence
• pensionable
Maximum
potential value
Performance
metrics
• salary increases are normally considered in relation to the salary increases of other employees in the Group and
performance of the individual unless there has been a major change in role or responsibility or major market
movement. The annual salaries for the executive directors for 2014 and 2015 are on pages 63 and 69 respectively
• individual performance in the role, as well as the performance of the Group and achievements related to
environmental, social and governance issues, are all taken into consideration
BUNZL PLC ANNUAL REPORT 2014
53
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual bonus
Purpose
• incentivise the attainment of annual corporate targets
• retain high performing employees
• align with shareholders’ interests
Operation
• annual award based on financial targets set by the Committee at the beginning of the year
Maximum
potential value
Performance
metrics
• at the end of the performance period, which is the Group’s financial year from 1 January until 31 December, the
Committee assesses the extent to which the performance measures have been achieved. The level of bonus for
each measure is determined by reference to the actual performance relative to that measure’s performance
targets, on a pro rata basis
• any bonus is paid as 50% in cash and 50% in shares (with the shares normally deferred for three years under
the DASBS)
• a clawback facility is in operation by which part or the full deferred bonus award may be reduced or cancelled to
the extent that the value of the bonus originally awarded is subsequently found to have been overstated as a result
of a material misstatement of the financial accounts by which the bonus was originally determined
• non-pensionable
• the annual on target bonus opportunity for Michael Roney and Brian May is 70% of salary with a threshold award
of 49% of salary and a maximum award of 115% of salary and for Patrick Larmon is 65% of salary with a threshold
award of 31% of salary and a maximum award of 110% of salary
• the principal measure for performance is the growth at constant exchange rates in the Company’s earnings per
share adjusted to exclude items which do not reflect the Company’s underlying financial performance (‘eps’)
against the relevant target
• the bonus derived from constant exchange rate eps performance will be increased or decreased according
to the Company’s performance against the target return on average operating capital (‘RAOC’), referred to
as the RAOC modifier
• the use of eps and RAOC measures are seen as appropriate as they are two of Bunzl’s KPIs. The use of eps
growth aligns the executive directors’ interests with those of the shareholders and the RAOC modifier ensures
the continued focus on working capital management together with profit growth
• bonus awards are at the Committee’s discretion and may take into account performance on environmental,
social and governance matters as appropriate
• Patrick Larmon has additional measures based on the profit before interest and tax (‘pbit’) and working capital
employed in the business area for which he has direct responsibility (North America). The additional measures
relating to pbit and working capital are relevant for Patrick Larmon as these are both KPIs of the business area he
is responsible for running and these measures, together with other performance measures, are used to incentivise
the management group in North America
• the performance metrics and targets are reviewed annually to ensure they remain appropriate. The Committee
retains the discretion to set alternative metrics as appropriate
• the current relevant performance metrics are: threshold (which must be exceeded to attract any payment of bonus);
target; and maximum amount (the level at which the bonus is capped). These performance metrics are determined
at the start of the year by reference to the Group’s annual budget. No elements of the bonus are guaranteed. As in
previous years, the specific targets will not be disclosed while still commercially sensitive
54 BUNZL PLC ANNUAL REPORT 2014
Long term incentives
Purpose
• incentivise growth in longer term eps and TSR
• align with shareholders’ interests
• recruit and retain senior employees
Operation
• discretionary biannual grants of executive share option awards and performance share awards which vest subject
to performance conditions measured over three years and subject to continuous Company service. There is no
opportunity to retest
• a clawback facility is in operation under which part or the full amount of a vested award may be recovered, by
reduction in the amount of any future bonus, subsisting award, the vesting of any subsisting award or future share
awards and/or a requirement to make a cash payment, to the extent that the value of a vested award is subsequently
found to have been overstated as a result of a material misstatement of the financial accounts by which the vesting
was determined
• all awards are subject to the discretions contained in the relevant plan rules
Maximum
potential value
Executive share options
• maximum annual award of 250% of salary
• normal grant levels for executive directors are expected to be between 167% and 200% of salary and the Committee
would not grant above this level to incumbent executive directors without further consultation with shareholders
Performance shares
• maximum annual award of 150% of salary
• normal grant levels for executive directors are expected to be between 94% and 112.5% of salary and the Committee
would not grant above this level to incumbent executive directors without further consultation with shareholders
Performance
metrics
Performance and service conditions must be met over a three year performance period
Executive share options
• eps performance measure relates to the absolute growth in the Company’s eps against the targets set for the
performance period
• the vesting is scaled as follows:
− no vesting for performance below the threshold target
− 25% of an award will vest for achieving the threshold target
− 100% of an award will vest for achieving or exceeding the maximum target
− for performance between these targets, the level of vesting will vary on a straight line sliding scale
• the Committee annually reviews the performance conditions outlined above and, in line with the rules of the 2014
LTIP, reserves the right to set different targets for forthcoming annual grants provided it is deemed that the relevant
performance conditions remain appropriately challenging in the prevailing economic environment
• the targets set out in the Remuneration report on page 66 relate to the previously approved 2004 LTIP. The targets
set for the 2014 LTIP are shown on page 67
Performance shares
• TSR performance measure (50% of the total award) compares a combination of both the Company’s share price and
dividend performance during the performance period against a comparator group of the constituents of the FTSE
50 – 150 with significant international operations, excluding companies in the financial services, oil & gas and natural
resources sectors
• the other 50% of the award is subject to an eps performance measure which relates to the absolute growth in the
Company’s eps against the targets set for the performance period
• the vesting for both performance measures is scaled as follows:
− no vesting for performance below median performance (TSR) or the threshold target (eps)
− 25% of an award will vest for achieving median performance (TSR) or the threshold target (eps)
− 100% of an award will vest for achieving or exceeding upper quartile performance (TSR) or the maximum target (eps)
− for performance between these targets, the level of vesting will vary on a straight line sliding scale
• the Committee annually reviews the performance conditions outlined above and, in line with the rules of the 2014
LTIP, reserves the right to set different targets for forthcoming annual grants provided it is deemed that the relevant
performance conditions remain appropriately challenging in the prevailing economic environment
• the targets set out in the Remuneration report on page 66 relate to the previously approved 2004 LTIP. The targets
set for the 2014 LTIP are shown on page 67
BUNZL PLC ANNUAL REPORT 2014
55
DIRECTORS’ REMUNERATION REPORT CONTINUED
All employee share plans
Purpose
• encourage employees including the executive directors to build a shareholding through the operation of all employee
share plans such as the HM Revenue & Customs (‘HMRC’) tax advantaged Sharesave Scheme in the UK and the
Internal Revenue Service (‘IRS’) approved Employee Stock Purchase Plan (US) (‘ESPP’) in the US
Operation
• the Sharesave Scheme has standard terms under which participants can normally enter a savings contract, over a
period of either three or five years, in return for which they are granted options to acquire shares at a discount of up
to 20% of the market price prevailing on the day immediately preceding the date of invitation to apply for the option.
Options are normally exercisable either three or five years after they have been granted
• the ESPP provides an opportunity for employees in the US to purchase the Company’s shares in the market at a 15%
discount to the market price. The purchase of the shares is funded by after tax payroll deductions from the employee
with the employing company contributing the 15% discount
• rules of both of the above plans were approved by shareholders at the 2011 AGM
Maximum
potential value
• in the UK, the Sharesave Scheme is linked to a contract for monthly savings within the HMRC limits over a period of
either three or five years (currently £250 per month and rising to £500 per month for invitations to be made in 2015
and thereafter)
• in the US, the ESPP allows the purchase in the market of shares within IRS limits (currently up to an annual
maximum of 10% of remuneration or US$25,000 worth of shares, whichever is lower)
Performance
metrics
• service conditions apply
Retirement benefits
Purpose
• provision of competitive retirement benefits
• retain executive directors
Operation
• all defined benefit pension plans in the Group have been closed to new entrants since 2003 with any new recruits
being offered defined contribution retirement arrangements and/or a pension allowance
• legacy arrangements exist for one UK based executive director and the US based executive director as
disclosed previously
• pension contributions and allowances are normally paid monthly
Maximum
potential value
• company pension contributions to defined contribution retirement arrangements or cash allowances are capped
at 30% of annual salary
• benefits under the legacy UK defined benefit pension plan accrue at a rate of 2.4% on salary up to the notional
pensionable salary cap (from 6 April 2015 £149,400 per annum)
Performance
metrics
Not applicable
56 BUNZL PLC ANNUAL REPORT 2014
Other benefits
Purpose
Operation
• provision of competitive benefits which helps to recruit and retain executive directors
• benefits may include a car allowance or a car which may be fully expensed, various insurances such as life,
disability and medical and in some jurisdictions club expenses and other benefits provided from time to time
• some benefits may only be provided in the case of relocation, such as removal expenses, and in the case of
an international relocation might also include fees for children’s schooling, home leave, tax equalisation and
professional advice etc
Maximum
potential value
• the value of benefits is based on the cost to the Company and varies according to individual circumstances. For
example the cost of medical insurance varies according to family circumstances and the jurisdiction in which the
family is based
Performance
metrics
Not applicable
Shareholding requirement
Purpose
Operation
Maximum
potential value
Performance
metrics
• strengthen the alignment between the interests of the executive directors and those of shareholders
• executives will be normally expected to retain shares through the exercise of awards under the DASBS and the
LTIP until they attain the required holding. Three years is allowed for executives who are promoted from within
the Company to achieve the required shareholding. It is recognised that a longer time period may be required for
externally recruited executives to achieve the required shareholding
• retain shareholdings worth equal to at least 200% of annual salary. This does not include any holdings of deferred
shares or vested but unexercised share options or performance shares
Not applicable
Performance measures and targets
The key measures used by the Committee for incentivising the executive directors are: eps modified by RAOC for the annual bonus and eps
and relative TSR for the 2014 LTIP. The Committee considers that all of these measures are appropriate for incentive purposes.
• Eps is one of Bunzl’s KPIs. The use of eps aligns the executive directors’ interests with those of shareholders. In addition, one of the
executive directors, Patrick Larmon, President and Chief Executive Officer of North America, also has part of his annual bonus determined
by additional measures relating to pbit and working capital which are relevant as these are two of the KPIs of the business area he is
responsible for running.
• RAOC is another of Bunzl’s KPIs. The RAOC modifier ensures continued focus on working capital and profit growth by rewarding efficient
profit generation, taking into account acquisitions once they are established, and uses average capital employed rather than only capital
at the end of the period.
• Relative TSR provides an external assessment of the Company’s performance against similar sized companies listed in the UK. It also
aligns the rewards received by executives with the returns received by shareholders.
This combination of performance measures provides an important balance relevant to the Group’s business and market conditions as
well as providing a common goal for the executive directors, senior management and shareholders. The Committee does not feel that the
introduction of non-financial measures for the executive directors is appropriate at this time.
The Committee reviews performance targets on an annual basis taking into account the Company’s annual budgeting process, the economic
environment in the jurisdictions in which the Company operates and external expectations.
Changes to the remuneration policy
A number of changes to the Company’s remuneration policy were implemented following the 2014 AGM in accordance with the remuneration
policy approved by shareholders to bring the arrangements in line with best practice. No changes to this remuneration policy are proposed
for 2015.
BUNZL PLC ANNUAL REPORT 2014
57
DIRECTORS’ REMUNERATION REPORT CONTINUED
Differences in remuneration policy for executive directors and employees in general
The main difference in remuneration policy between the executive directors and employees in general is the split of fixed and performance
related pay such as bonus and long term incentives. Overall the percentage of performance related pay, in particular longer term incentive
pay, is greater for the executive directors. This reflects that executive directors have more freedom to act and the consequences of their
decisions are likely to have a broader and more far reaching time span of effect than those decisions made by employees with more limited
responsibility. As a consequence only executive directors, Executive Committee members and other key employees (currently 21 people)
are granted both executive share option and performance share awards. Approximately 300 senior managers are granted executive share
option awards on an annual basis, which helps to provide a common focus for management in the Company’s decentralised organisation
structure, whereas the annual bonuses are related to the performance of individual operating units.
Bonus arrangements vary throughout the Group and are related to the specific role and the country in which the employee operates.
The majority of bonus plans have quantitative targets but the performance measures and targets vary according to each specific role.
Sales representatives often have high levels of annual bonus payments which may be commission based.
When there is a critical mass of employees within a country to make it cost-effective to do so, to encourage wider employee share ownership,
an all employee share plan is offered. Currently plans are offered to all employees based in Australia, Canada, Germany, Ireland, the
Netherlands, US and UK. In France employees take part in profit sharing arrangements in accordance with local regulations.
Retirement and other benefits offered to employees across the Group differ according to the country in which the job is based, as social
provision and market norms differ, and the function and seniority of the relevant role.
Statement of consideration of employment conditions elsewhere in the Group
The Committee is provided annually with information on the salaries and proposed increases for the Executive Committee members and
other senior direct reports of the Chief Executive, as well as data on the average salary increases within each geographical region within
the Group. In addition the Committee reviews and agrees all grants of executive share option and performance share awards.
In 2015 employees across the Group have received, on average, salary increases in the range of 1.5% – 3.0%, dependent on geographical
location with the exception being those employees based in Latin America and China where, due to inflation, current market salary increases
are much higher. The actual increases received by employees have been based on each individual’s contribution and performance as well as
the market competitiveness of the salary.
The Company did not consult with employees when drawing up the directors’ remuneration policy set out in this part of the report.
Recruitment of executive directors – approach to remuneration
For the ongoing stability and growth of the Group, it is important to secure, as necessary, the appointment of high calibre executives to
the Board by either external recruitment or internal promotion. The overarching principles applied by the Committee in developing the
remuneration package will be to set an appropriate base salary together with benefits and short and long term incentives taking into
consideration the skills and experience of the individual, the complexity and breadth of the role, the particular needs and situation of the
Group, internal relativities, the marketplace in which the executive will operate and an individual’s current remuneration package and
location. In addition, the Committee recognises that it may need to meet certain relocation expenses as appropriate.
To ensure consistency across the Board, the expected components of the package would be in line with the remuneration policy as set out on
pages 53 to 57. In order to provide the Company with sufficient flexibility on the recruitment of an executive director, the Committee has set
the maximum level of variable remuneration on recruitment at 427.5% of annual salary. This covers the maximum annual bonus, including
the deferred annual share bonus award, and the maximum face value of any long term incentive awards.
For an external appointment, the Committee may consider offering additional cash and/or share based elements to the remuneration
package when it considers these to be in the best interests of the Company and its shareholders. Such elements, as appropriate, would be
made under Section 9.4.2 of the Listing Rules and take account of any remuneration relinquished when leaving the former employer and
would reflect the nature, time horizons and performance requirements attaching to that remuneration. Shareholders will be informed of
any such payments at the time of appointment.
For an internal appointment, any variable pay element or benefit awarded in respect of the prior role may be allowed to remain in place
according to its terms, adjusted as relevant to take into account the new appointment.
Executive directors’ service contracts
It is the Company’s policy that executive directors are normally employed on contracts that provide for 12 months’ notice from the Company
and six months’ notice from the executive. For Michael Roney and Brian May there is no predetermined compensation for termination of
these contracts. Patrick Larmon’s contract provides that on termination by the Company without cause he is entitled to receive payment of
12 months’ base salary plus health insurance coverage, reduced by any interim earnings. The date of each service contract is noted in the
table below.
Michael Roney
Brian May
Patrick Larmon
58 BUNZL PLC ANNUAL REPORT 2014
Date of service contract
1 September 2005
9 December 2005
1 January 2005
Policy on payment for departure from office
On termination of an executive director’s service contract, the Committee will take into account the departing director’s duty to mitigate his
loss when determining the amount of compensation. The Committee’s policy in respect of the treatment of executive directors leaving the
Group is described below and is designed to support a smooth transition from the Company taking into account the interests of shareholders:
Voluntary resignation
or termination for cause
Death, ill health, disability
(excluding redundancy)
Departure on
agreed terms
Component
of pay
Base salary,
pension and
benefits
Paid for the proportion of
the notice period worked
and any untaken holidays
pro rated to the leaving date
Annual bonus
cash
Cessation of employment
during a bonus year will
normally result in no cash
bonus being paid
Annual bonus
deferred shares
Unvested deferred shares
will lapse
Executive share
options
Unvested executive share
options will lapse
Performance
shares
Unvested performance
shares will lapse
Paid up to the date of death or leaving, including any
untaken holidays pro rated to such date. In the case of
ill health, a payment in lieu of notice may be made and,
according to the circumstances, may be subject to
mitigation. In such circumstances some benefits such as
company car or medical insurance may be retained until
the end of the notice period
Cessation of employment during a bonus year or after
the year end but prior to the normal bonus payment date
will result in cash and deferred bonus being paid and
pro rated for the relevant portion of the financial year
worked and performance achieved
In the case of the death of an executive, all deferred
shares will be transferred to the estate as soon as
possible after death. In all other cases, subject to the
discretion of the Committee, unvested deferred shares
will be transferred to the individual on a date determined
by the Committee
Tax advantaged options will vest in full on the cessation
of employment and be exercisable for the following
12 months after which any unexercised options will lapse
Subject to the discretion of the Committee, unvested
non-tax advantaged share options will normally be
retained by the individual for the remainder of the
vesting period and remain subject to the relevant
performance conditions. However in the case of the
death of an executive, the Committee will determine the
extent of vesting within 12 months of the date of death
Subject to the discretion of the Committee, unvested
performance shares will normally be retained by the
individual for the remainder of the vesting period and
remain subject to the relevant performance conditions.
However in the case of the death of an executive, the
Committee will determine the extent of vesting within
12 months of the date of death
Treatment will normally
fall between the two
treatments described in
the previous columns,
subject to the discretion
of the Committee and the
terms of any termination
agreement
Options under
Sharesave
As per HMRC regulations
As per HMRC regulations
Other
None
Disbursements such as legal costs and outplacement fees
Notes
a) For share options granted under Part A of the 2004 LTIP, any unvested executive share options which are subject to the discretion of the Committee may vest in full on
the termination date and be exercisable for the following 12 months following which any unexercised options will lapse.
b) The Committee will have the authority to settle any legal claims against the Company, e.g. for unfair dismissal etc, that might arise on termination.
Discretions retained by the Committee in operating the incentive plans
The Committee operates the Group’s various incentive plans according to their respective rules and in accordance with HMRC and IRS
rules where relevant. To ensure the efficient administration of these plans, the Committee may apply certain operational discretions.
These include the following:
• selecting the participants in the plans;
• determining the timing of grants and/or payments;
• determining the quantum of grants and/or payments (within the limits set out in the policy table above);
BUNZL PLC ANNUAL REPORT 2014
59
DIRECTORS’ REMUNERATION REPORT CONTINUED
• adjusting the constituents of the TSR comparator group;
• determining the extent of vesting based on the assessment of performance;
• determining ‘good leaver’ status and the extent of vesting in the case of the share based plans;
• determining the extent of vesting of awards under share based plans in the event of a change of control;
• making the appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events, variation of
capital and special dividends); and
• under the annual review of weighting of performance measures, setting targets for the annual bonus plan and 2014 LTIP from year to year.
The Committee may vary the performance conditions applying to share based awards if an event occurs which causes the Committee to
consider that it would be appropriate to amend the performance conditions, provided the Committee considers the varied conditions are
fair and reasonable and not materially less challenging than the original conditions would have been but for the event in question.
Remuneration overview
The remuneration package comprises both core fixed elements (base salary, pension and other benefits) and performance based variable
elements (cash bonus, the DASBS and the LTIP). The Committee has set a guideline that for on target performance approximately half of the
remuneration package should be performance related. The structure of the remuneration packages for on target and stretch performance
for each of the executive directors is illustrated in the bar charts below.
Michael Roney
Threshold performance
(Total £1,207,327)
Target performance
(Total £2,509,652)
Stretch performance
(Total £3,858,077)
Brian May
Threshold performance
(Total £703,442)
Target performance
(Total £1,407,705)
Stretch performance
(Total £2,129,992)
Patrick Larmon
Threshold performance
(Total £657,992)
Target performance
(Total £1,516,616)
Stretch performance
(Total £2,365,822)
78%
37%
11%
26%
24%
7%
28%
41%
76%
38%
12%
26%
25%
8%
28%
39%
22%
26%
24%
24%
98%
2%
42%
27%
1%
1%
29%
29%
28%
43%
Salary and benefits
Pension
Bonus (Cash/DASBS)
LTIP
Notes
a) Salary represents annual salary for 2015. Patrick Larmon’s salary is paid in US dollars but has been translated at the exchange rate of £1: US$1.65. Benefits such as a car
or car allowance and private medical insurance are as shown on page 63.
b) Pension represents the cost of pension accrued in 2014 in the Defined Benefit Section of the Bunzl Pension Plan for Brian May, the value of the annual pension allowance for
Michael Roney and Brian May, the contributions to the Defined Contribution Section of the Bunzl Pension Plan for Michael Roney and the total of Company contributions to
Patrick Larmon’s 401K Plan and Retirement Savings Benefit (the ‘RSB’). No further contributions were made through the Defined Contribution Senior Executive Retirement
Agreement (‘SERA’), further details of which are shown on page 65. Although there has been no change to the remuneration policy related to Patrick Larmon, the effect of the
cessation of payments to the SERA has been to alter the relevant percentages of his remuneration package shown above.
c) Below threshold performance comprises salary, benefits and pension only with no bonus awarded and no LTIP awards vested.
d) Target performance comprises annual bonus awarded at target level (i.e. 70% of base salary comprised of 50% cash and 50% deferred shares under the DASBS) and, for
the LTIP, an assumption that 50% of performance shares will vest and that 50% of the share options will vest and deliver 30% of their face value in gain to the executives.
e) Stretch performance comprises annual bonus awarded at maximum level (i.e. 115% of base salary for Michael Roney and Brian May and 110% of base salary for Patrick Larmon
comprised of 50% cash and 50% deferred shares under the DASBS) and, for the LTIP, an assumption that 100% of performance shares will vest delivering 100% of their face
value in gain to the executive directors and 100% of share options will vest which will deliver 30% of their face value in gain to the executives.
60 BUNZL PLC ANNUAL REPORT 2014
Legacy arrangements
The Remuneration policy report was approved by shareholders at the 2014 AGM and, by doing so, authority was given to the Company to
honour any commitments entered into with current or former directors (that have been disclosed to shareholders in previous remuneration
reports) or internally promoted future directors (in each case, such as the payment of a pension or the unwind of legacy share plans).
Details of any payments to former directors will be set out in the Remuneration report as they arise.
Policy of executive directors’ external appointments
With the specific approval of the Board in each case, executive directors may accept external appointments as non-executive directors
of other companies and retain any related fees paid to them.
Non-executive directors’ terms of appointment
On appointment of a new Chairman of the Board or non-executive director, the fees will be set taking into account the experience and calibre
of the individual and the prevailing fee rates of the other non-executive directors at that time.
The non-executive directors do not have service contracts with the Company but instead have letters of appointment. The date of
appointment and the most recent re-appointment and the length of service for each non-executive director are shown in the table below.
Philip Rogerson
Peter Johnson
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
Date of
appointment
1 January 2010
1 January 2006
1 September 2007
1 April 2011
1 January 2013
1 April 2013
Date of last
re-appointment
at AGM
16 April 2014
16 April 2014
16 April 2014
16 April 2014
16 April 2014
16 April 2014
Length of
service as at
2015 AGM
5 years 3 months
9 years 3 months
7 years 7 months
4 years
2 years 3 months
2 years
Notes
a) Peter Johnson will retire from the Board at the conclusion of the 2015 AGM.
b) Vanda Murray was appointed as a non-executive director with effect from 1 February 2015.
On termination, at any time, a non-executive director is entitled to any accrued but unpaid director’s fees but not to any other compensation.
Fees policy for Chairman and non-executive directors (the ‘NEDs’)
Purpose
• provision of a competitive fee to attract NEDs who have a broad range of experience and skills to oversee the
implementation of the Company’s strategy
Operation
• determined in light of market practice and with reference to time commitment and responsibilities associated with
the roles
• annual fees are paid in 12 equal monthly instalments during the year
• the senior independent director and Chairman of the Audit and Remuneration Committees are paid an extra fee to
reflect their additional responsibilities
• the NEDs and the Chairman are not eligible to receive benefits and do not participate in pension or incentive plans.
Expenses incurred in respect of their duties as directors of the Company are reimbursed
• the NEDs’ fees are reviewed annually in January each year and the Chairman’s fee is reviewed biennially, the last
date being February 2014
• the Board as a whole considers the policy and structure for the NEDs’ fees on the recommendation of the Chairman
and the Chief Executive. The NEDs do not participate in discussions on their specific levels of remuneration; the
Chairman’s fees are set by the Committee
• determined within the overall aggregate annual limit of £1,000,000 authorised by shareholders with reference to the
Company’s Articles of Association
• not eligible to participate in any performance related elements of remuneration
Maximum
potential value
Performance
metrics
Statement of consideration of shareholder views
The Committee considers shareholder feedback received in relation to the AGM each year and guidance from shareholder representative
bodies more generally. In addition the Committee consults proactively with its major shareholders prior to making significant changes to
its policy. In 2013 consultation was conducted with 19 major shareholders and two shareholder representative bodies with regard to the
proposed changes to the remuneration policy and the introduction of a new long term incentive plan. This policy and the 2014 LTIP were
approved at the 2014 AGM.
BUNZL PLC ANNUAL REPORT 2014
61
DIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION FOR 2014
Committee remit and membership
The following independent non-executive directors were members of the Committee during 2014:
Peter Johnson
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
Date of
appointment to
the Committee
18 January 2006
5 December 2007
20 April 2011
1 January 2013
1 April 2013
Meetings
eligible
to attend
3
3
3
3
3
Meetings
attendance
3
3
3
3
3
Notes
a) Peter Johnson will retire from the Board at the conclusion of the 2015 AGM.
b) Vanda Murray was appointed as a non-executive director of the Company and as a member of the Committee with effect from 1 February 2015 and will assume the role of Chair
of the Committee upon Peter Johnson’s retirement.
The Secretary to the Committee is Celia Baxter, Director of Group Human Resources. No director plays any part in determining his or her
remuneration. During the year ended 31 December 2014, both the Chief Executive and the Chairman were consulted and invited to attend
meetings of the Committee, but were not present during any part of the meeting when their own remuneration was under consideration.
The terms of reference of the Committee have been formally adopted by the Board and are available for inspection in the Investor Centre
section of the Company’s website, www.bunzl.com. The key responsibilities of the Committee include:
• ensuring that executive directors and senior executives are properly incentivised to attract, retain and fairly reward them for their
individual contribution to the Company and having due regard to the policies and practices applied to the rest of the employees within
the Group;
• determining the framework or broad policy for the remuneration of the Chairman and the executive directors of the Board including setting
their individual remuneration packages as well as their level of remuneration and overseeing all the Company’s long term incentive plans;
• ensuring that remuneration is aligned with and supports the Company’s strategy and performance, having due regard to the shareholders
and to the financial and commercial health of the Company, while at the same time not encouraging undue risk taking; and
• communicating and discussing any remuneration issues with the Company’s stakeholders as and when appropriate.
Advisers to the Remuneration Committee
In carrying out these responsibilities, the Committee seeks external remuneration advice as necessary. During the year the Committee
received advice from PwC and New Bridge Street. PwC provided external survey data on directors’ remuneration and benefit levels. New
Bridge Street drafted the rules of the 2014 LTIP and provided information to determine whether, and if so to what extent, the performance
conditions attached to existing share option and performance share awards under the 2004 LTIP had been satisfied. The fees payable to
each adviser, based on hourly rates, were: £13,500 (PwC) and £9,750 (New Bridge Street) for such work undertaken in 2014. In addition to
the work undertaken on behalf of the Committee, PwC, who were appointed from May 2014 as the Company’s external auditors, also provide
the Company with some tax related and pre-acquisition due diligence services and New Bridge Street may from time to time also provide
services to the Company on remuneration and benefit related matters that are not subject to review by the Committee. The Committee
remains satisfied that the provision of these other services does not in any way compromise the independence of their advisers.
Statement of voting at the 2014 AGM
Last year the remuneration policy received a 97.79% shareholder vote in favour, the remuneration report received a 97.81% shareholder vote
in favour and the 2014 LTIP received a 96.30% shareholder vote in favour as set out below:
Remuneration policy
Remuneration report
2014 LTIP
Votes cast
264,349,297
264,348,918
264,349,875
Votes For
258,510,901
258,552,082
254,558,125
% of shares voted
97.79
97.81
96.30
Votes Against
5,838,396
5,796,836
9,791,750
% of shares voted
2.21
2.19
3.70
Votes Withheld
600,455
600,834
593,655
Notes
a) The votes ‘For’ include votes given at the Company Chairman’s discretion.
b) A vote ‘Withheld’ is not a vote in law and is not counted in the calculation of the votes ‘For’ or ‘Against’ the resolution. Votes ‘For’ and ‘Against’ are expressed as a percentage
of the votes cast.
62 BUNZL PLC ANNUAL REPORT 2014
Single total figure of remuneration 2014 (audited information)
Executive directors
Salary
£000
Taxable benefits
£000
Michael Roney
Brian May
Patrick Larmon
Total
2014
895.0
500.0
614.5
2,009.5
2013
870.0
480.0
634.0
1,984.0
2014
16.8
16.8
17.0
50.6
2013
16.7
16.7
18.2
51.6
2014
877.1
490.0
428.4
1,795.5
Non-executive directors
Philip Rogerson
Peter Johnson
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
Total
Bonus
£000
2013
906.5
500.2
540.9
1,947.6
2014
2,560.4
1,328.9
1,408.5
5,297.8
LTIP
£000
2013
2,333.4
1,207.6
1,268.9
4,809.9
Pension
£000
2013
261.0
161.3
199.7
622.0
2014
268.5
171.6
13.2
453.3
2014
4,617.8
2,507.3
2,481.6
9,606.7
Total
£000
2013
4,387.6
2,365.8
2,661.7
9,415.1
Board fees
£000
Committee
Chair/SID fees
£000
2014
325.0
64.5
64.5
64.5
64.5
64.5
647.5
2013
310.0
63.0
63.0
63.0
63.0
47.2
609.2
2014
–
30.0
14.0
–
–
–
44.0
2013
–
29.0
13.0
–
–
–
42.0
2014
325.0
94.5
78.5
64.5
64.5
64.5
691.5
Total
£000
2013
310.0
92.0
76.0
63.0
63.0
47.2
651.2
Notes
a) The figures above represent remuneration earned as directors during the relevant financial year including the bonus of which the cash element, 50% of the bonus, is paid in
the year following that in which it is earned. The other 50% of the bonus shown above is deferred and conditionally awarded as shares under the rules of the DASBS. Shares
relating to the 2013 deferred bonus were awarded in 2014 as shown in the table on page 70 and the shares relating to the 2014 deferred bonus will be awarded in 2015.
b) Benefits provided for all executive directors are a car or car allowance and medical insurance coverage for them and their families. In addition to these benefits Patrick
Larmon’s club fees are paid by the Company.
c) The long term incentives are in the form of awards under the 2004 LTIP which were granted in 2011 and 2012. See page 64 for details of the performance conditions applicable
and for the valuation method applied to such awards. Long term incentive figures exclude any gain from the purchase of shares by Patrick Larmon through the ESPP described
on page 56.
d) The figures shown in relation to 2013 for the LTIP have been restated from those figures shown in the 2013 Annual Report to reflect the difference between the relevant grant
price and the value of the LTIP awards on the actual date of vesting on 3 March 2014 and 2 September 2014 at the closing mid-market share price of 1,543p and 1,664p
respectively. Consequently the 2013 total figures have also been restated to reflect the change in the LTIP valuations.
e) The remuneration for Patrick Larmon is determined and paid in US dollars and has been translated at the average exchange rates for the year of £1: US$1.65 in respect of 2014
and £1: US$1.56 in respect of 2013.
f) There were no payments made to former directors during the year and no payments were, or are due to be, made in respect of loss of office.
g) In addition to the remuneration paid to directors in 2013 shown above, Ulrich Wolters, who retired as non-executive director during the year, received remuneration of £21,000
in respect of the period 1 January 2013 to 30 April 2013, the date of his retirement.
Executive directors’ annual salary (audited information)
Executive directors’ salaries were reviewed with effect from 1 January 2014 in accordance with normal policy and were increased taking into
account the average salary increases for employees across the Group.
Michael Roney
Brian May
Patrick Larmon
Salary from
1 January
2014
£895,000
£500,000
US$1,014,000
Salary from
1 January
2013
£870,000
£480,000
US$989,000
Increase in salary
2013 to 2014
%
2.9
4.2
2.5
Executive directors’ salaries were also reviewed with effect from 1 January 2015 and the increases awarded are shown on page 69.
Executive directors’ external appointments
Michael Roney served as a non-executive director of Johnson Matthey Plc until 23 July 2014 and retained fees of £38,285 and of
Brown–Forman Corporation from 27 March 2014 and retained fees of US$19,667 and was awarded 2,490 deferred stock units which will
be paid to him upon completion of his service subject to the terms of the Deferred Stock Unit programme for non-employee directors.
Brian May served as a non-executive director of United Utilities Group PLC throughout 2014 and retained fees of £75,350. Patrick Larmon
does not hold any such appointments.
BUNZL PLC ANNUAL REPORT 2014
63
DIRECTORS’ REMUNERATION REPORT CONTINUED
Non-executive directors’ fees (audited information)
The Chairman’s fee is reviewed every two years and the last review was in 2014. The fees for the non-executive directors were reviewed with
effect from 1 January 2014 in accordance with normal policy.
Chairman’s fee
Non-executive director fee
Supplements:
Senior independent director
Audit Committee Chairman
Remuneration Committee Chairman
With effect from
January 2014
£
325,000
64,500
16,000
14,000
14,000
Fees paid
in 2013
£
310,000
63,000
16,000
13,000
13,000
Increase in fees
2013 to 2014
%
4.8
2.4
–
7.7
7.7
The non-executive directors’ fees were reviewed with effect from 1 January 2015 and the increases awarded are shown on page 70.
Performance against annual bonus targets (audited information)
The annual bonus plan and DASBS operate as set out in the policy section on page 54. All of Michael Roney’s and Brian May’s and 25% of
Patrick Larmon’s bonus potential in 2014 related to the growth in the Company’s constant exchange rate eps relative to budget which was
modified by the achievement of the Group’s RAOC relative to budget. This resulted in a bonus payment between the target and maximum
bonus opportunity. Eps performance was 5% above target and RAOC was 3% above target. For Patrick Larmon, a further 75% of his bonus
potential related to the pbit performance of North America which was modified by the achievement of North America’s return on average
operating capital relative to the target set. Pbit performance for North America resulted in a bonus payment 1.6% below target and the
return on average operating capital slightly exceeded target as a result of which the bonus related to North America’s performance was
increased by 1.1%. Accordingly the total payments under the annual bonus plan were:
Michael Roney
Brian May
Patrick Larmon
Total bonus payment (cash and deferred shares) as a % of salary
2014
%
98.0
98.0
69.7
2013
%
104.2
104.2
85.3
2012
%
77.0
77.0
85.9
2011
%
114.0
114.0
110.0
2010
%
81.6
81.6
76.7
The monetary values of the bonus payments for 2014 and 2013 are included in the table on page 63.
LTIP grants/awards with performance periods ending in 2014 (audited information)
Executive share options – LTIP Part A
Executive share option awards, granted three years previously, are due to vest on 1 March 2015 and 31 August 2015. The Committee assessed
the relevant performance of the Company against the performance conditions. Eps (restated on adoption of IAS 19 (revised 2011)) growth
was 27.52% for the three years ended 31 December 2014 which compared to an increase in RPI of 7.56% over the same period. Since the
performance condition would have been satisfied if eps had grown by at least 16.83% over the period, all of the options will vest. Included
in the single total figure of remuneration table on page 63 is the estimated value of these awards based on the difference between the grant
price and the average of the Company’s closing mid-market share price for the three month period ended 31 December 2014 (1,702p).
Performance shares – LTIP Part B
Awards of performance shares were made to the executive directors on 8 April 2011 and 11 October 2011 with the three year performance
periods being completed on 31 March 2014 and 30 September 2014 respectively. The Committee subsequently assessed the performance of
the Company against the relevant performance conditions. The extent to which half of the awards would vest was subject to a performance
condition based on eps growth relative to RPI. Eps growth was 38.02% for the three years ended 31 December 2013 compared to an increase
in RPI of 10.95% over the same period. A quarter of the award would have been exercisable if eps had grown by at least 23.44% over the
period and the whole award would have been exercisable if eps had grown by at least 44.05%. As a result of the Company’s actual growth
in eps over the period, 78.07% of this part of the awards vested (39.04% of the full awards).
The extent to which the other half of the awards vested was based on the Company’s TSR performance against the relevant comparator
group. For the April 2011 award, the Company ranked first out of the remaining 36 companies in the comparator group of companies, as a
result of which 100% of this part of the award vested (50% of the full award) for performance above the upper quartile. For the October 2011
award, the Company ranked seventh out of the remaining 34 companies in the comparator group of companies, as a result of which 100% of
this part of the award vested (50% of the full award) for performance above upper quartile.
Accordingly 89.04% of the total performance shares awarded in April and October 2011 vested in April and October 2014 respectively.
Included in the single total figure of remuneration table on page 63 is the value of these vested awards at the closing mid-market share
price on the dates of vesting, 8 April 2014 and 13 October 2014, which were 1,612p and 1,546p respectively.
64 BUNZL PLC ANNUAL REPORT 2014
Total pension entitlements (audited information)
Michael Roney
Brian May
Patrick Larmon
Defined benefit pension (DB) entitlements
Pension
plan’s
normal
retirement
age
–
60
65
Additional
value
of pension
on early
retirement
£
–
–
–
Value of cash
allowance including
any company DC
and/or 401k
contributions
in 2014
£
268,500
106,620
13,152
Pension
value in the
year from
DB scheme
£
–
64,995
–
Total
pension
2014
£
268,500
171,615
13,152
Notes
a) Michael Roney receives a pension allowance of 30% of base salary. He has chosen to join the Defined Contribution Section of the Bunzl Pension Plan (‘BPP’) and his contribution
of 5% of base salary, up to the pensionable salary cap (notionally £145,800 for tax year 2014/2015 and £141,000 for tax year 2013/2014) is matched by the Company. During 2014
such contributions amounted to £7,230 (2013: £7,005) and this amount was deducted from his pension allowance.
b) Brian May, who joined the Group in the UK prior to the closure of the defined benefit sections of the BPP, is a member of the Bunzl Senior Pension Section of the BPP. His pension
accrues at the rate of 2.4% per annum up to two thirds of the pensionable salary cap, as described above. The employee contribution rate is currently 9% of pensionable salary.
c) In addition to benefits from the BPP, Brian May receives a pension allowance of 30% of base salary above the pensionable salary cap which permits him to make provision, of his
own choice, in respect of that part of his salary which exceeds the cap.
d) Patrick Larmon originally joined the US Plan, subject to IRS limits, which accrued at a rate of 1.67% per annum up to 50% of the five year average pensionable salary less the
primary social security benefit, with a normal retirement age of 65 years. Pensionable salary in the US Plan is capped at US$140,000. On closure of the US Plan, Patrick
Larmon chose to freeze his benefit and no further benefits have accrued. Patrick Larmon is currently a member of a defined contribution plan, the Retirement Saving Benefit
(‘RSB’). Contributions to the RSB are fully funded by the employer on a sliding scale that is age related. The contributions are a percentage of base salary (maximum 5%) which
is capped at US$200,000 per annum. The Company made contributions in respect of Patrick Larmon in 2014 of £6,061 (2013: £6,410).
e) In addition, Patrick Larmon receives a supplementary pension through a defined benefit Senior Executive Retirement Agreement (‘SERA’). Patrick Larmon’s SERA, which
became fully accrued in 2012, provides for a lifetime pension of US$100,000 per annum, payable upon retirement. In 2013 the Company paid all necessary expenses, due to
changes in assumptions and other factors outside of the Company’s control such as change in market conditions, on actuarial advice, to the SERA which amounted to £47,268
(2013: £47,490). In 2007, this SERA arrangement was closed to new entrants and existing members’ benefits were frozen. A new defined contribution SERA (‘DC SERA’) was put
in place for Patrick Larmon and the final contribution of £185,897 was paid to the DC SERA in 2013.
f) Patrick Larmon also participates in the Bunzl USA, Inc Deferred Savings (401k) Plan. The Company makes matching contributions to this Plan. During 2014 contributions for
Patrick Larmon amounted to £7,091 (2013: £7,356).
LTIP grant policy
Conditional awards of executive share options and performance shares are granted twice a year to executive directors and other senior
executives. Executive share option awards are normally granted in February or March and August or September dependent on the date of
announcement of the Company’s results. Performance share awards are normally granted in April and October each year. In 2014 executive
share options were granted in February and performance share awards were granted in April under the 2004 LTIP in accordance with the
previous grant policy and performance conditions as detailed on pages 57 and 66 respectively. Executive share options were also granted
in August and performance share awards were granted in October under the 2014 LTIP in accordance with the policy and performance
conditions as approved at the 2014 AGM as detailed on pages 57 and 67 respectively.
LTIP interests awarded during the financial year (audited information)
Michael Roney
Brian May
Patrick Larmon
Plan
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
Date of grant
27.02.14
04.04.14
29.08.14
06.10.14
27.02.14
04.04.14
29.08.14
06.10.14
27.02.14
04.04.14
29.08.14
06.10.14
Basis of award
75% of salary
56.25% of salary
100% of salary
56.25% of salary
70% of salary
52.5% of salary
95% of salary
52.5% of salary
62.5% of salary
47% of salary
95% of salary
52.5% of salary
Face value
£000
673.4
505.9
895.9
504.6
352.4
265.0
475.9
263.5
399.3
297.1
582.6
333.8
% vesting at
threshold
performance
100%
25%
100%
25%
100%
25%
100%
25%
100%
25%
100%
25%
Number
of shares
43,000
31,500
54,600
31,600
22,500
16,500
29,000
16,500
25,500
18,500
35,500
20,900
Performance
period end date
31.12.16
31.03.17
31.12.16
30.09.17
31.12.16
31.03.17
31.12.16
30.09.17
31.12.16
31.03.17
31.12.16
30.09.17
Note
The face value of the awards is calculated using the closing mid-market share price on the day prior to the grant of the award. Options were awarded under the 2004 LTIP Part A
on 27 February 2014 and the 2014 LTIP Part A on 29 August 2014 at a value of 1,566p and 1,641p per share respectively. Performance shares were awarded under the 2014 LTIP
Part B on 4 April 2014 and the 2014 LTIP on 6 October 2014 at a value of 1,606p and 1,597p per share respectively.
BUNZL PLC ANNUAL REPORT 2014
65
DIRECTORS’ REMUNERATION REPORT CONTINUED
Performance conditions for 2014 awards
The performance conditions for the executive share options and performance shares awarded under the 2004 LTIP in February and April 2014
were as detailed below.
Executive share options – LTIP Part A
Executive share option awards may vest based solely on the Company’s eps growth (adjusted to exclude items which do not reflect the
Company’s underlying financial performance) relative to UK inflation (RPI) over three years, based on the following sliding scale:
Face value of annual executive share options granted as a proportion of salary
First 150% of salary
Next 75% of salary
Next 75% of salary
Total margin over UK inflation (RPI) after three years
9.3%
12.5%
19.1%
Performance share awards – LTIP Part B
The extent to which half of the awards may vest is subject to a performance condition based on the Company’s eps growth (adjusted
to exclude items which do not reflect the Company’s underlying financial performance) relative to UK inflation (RPI) over three years,
based on the following sliding scale:
Total margin over UK inflation (RPI) after three years
Below 12.5%
12.5%
Between 12.5% and 33.1%
33.1% or above
Proportion of performance share awards exercisable
Nil
25%
Pro rata between 25%–100%
100%
The extent to which the other half of the performance share awards may vest is subject to the Company’s TSR performance, a combination
of both the Company’s share price and dividend performance during the three year performance period, relative to the TSR performance
of a specified group of companies of similarly sized companies with large international presence. The comparator group consists of at least
40 UK based companies (excluding companies in the financial services, oil & gas and natural resources sectors) that have substantial
operations overseas and have at 30 September prior to the grant of the awards similar levels of revenue, profit and market capitalisation
as Bunzl. The applicable comparator group for the 2004 LTIP Part B awards in April 2014 are shown below.
Aggreko
Ashstead Group
Arm Holdings
Burberry Group
Carnival Corporation
Cobham
Computacenter
Croda International
Diageo
Dixons Retail
Easyjet
Experian
G4S
GKN
Hays
IMI
Inchcape
Informa
Inmarsat
Intercontinental Hotels Group
International Consolidated Airlines Group
Intertek Group
Johnson Matthey
Meggitt
Melrose
Millennium & Copthorne Hotels
Mondi
Pearson
Reckitt Benckiser Group
Rexam
SABMiller
SIG
Smith & Nephew
Smiths Group
Spectris
Tate & Lyle
Thomas Cook Group
Vesuvius
Weir Group
Wolseley
WPP
These performance share awards vest in line with the following vesting schedule:
TSR
Below median
Median
Between median and upper quartile
Upper quartile or above
Proportion of performance share awards exercisable
Nil
25%
Pro rata between 25%–100%
100%
Awards granted in 2012 and 2013 were subject to the same performance conditions as described above.
66 BUNZL PLC ANNUAL REPORT 2014
The performance conditions for the executive share options and performance shares awarded under the 2014 LTIP to the Company’s
executive directors, Executive Committee members and selected key employees in August and October 2014 were as detailed below.
Executive options – LTIP Part A
Executive share options may vest based solely on the Company’s eps growth (adjusted to exclude items which do not reflect the Company’s
underlying financial performance) over three years, based on the following sliding scale:
Absolute annual growth in the Company’s eps over a three year period
Below 5%
5%
Between 5% and 8%
8% or above
Proportion of share option awards exercisable
Nil
25%
Pro rata between 25%–100%
100%
Performance share awards – LTIP Part B
The extent to which half of the awards may vest is subject to a performance condition based on the Company’s eps growth (adjusted to
exclude items which do not reflect the Company’s underlying financial performance) over three years, based on the following sliding scale:
Absolute annual growth in the Company’s eps over a three year period
Below 6%
6%
Between 6% and 12%
12% or above
Proportion of performance share awards exercisable
Nil
25%
Pro rata between 25%–100%
100%
The extent to which the other half of the performance share awards may vest is subject to the Company’s TSR performance, a combination
of both the Company’s share price and dividend performance during the three year performance period, relative to the TSR performance of
a specified comparator group of similarly sized companies with large international presence. These performance share awards may vest
based on the following sliding scale:
TSR
Below median
Median
Between median and upper quartile
Upper quartile or above
Proportion of performance share awards exercisable
Nil
25%
Pro rata between 25%–100%
100%
The applicable comparator group for the October 2014 awards were those companies in the FTSE 50 – 150 with significant international
operations, excluding companies in the financial services, oil & gas and natural resources sectors.
Shareholder dilution
In accordance with The Investment Association Principles of Remuneration, the Company can satisfy awards to employees under all its share
plans with new issue shares or shares issued from treasury up to a maximum of 10% of its issued share capital (adjusted for share issuance
and cancellation) in a rolling 10 year period. Within this 10% limit, the Company can only issue (as newly issued shares or from treasury), 5%
of its issued share capital (adjusted for share issuance and cancellation) to satisfy awards under executive (discretionary) plans.
As well as the LTIP, the Company operates various all employee share schemes as described on page 56. Newly issued shares are currently
used to satisfy the exercise of options under the Sharesave Scheme and International Sharesave Scheme. Awards under the LTIP of executive
options and performance shares are principally satisfied by shares delivered from the Employee Benefit Trust which buys shares on the
market, unless security laws in relevant jurisdictions prevent this.
Limit on awards
10% in any rolling 10 year period
5% in any rolling 10 year period (executive (discretionary) plans)
Cumulative options and performance shares
granted as a percentage of issued share capital
as at 31 December 2014
(including those held in treasury)
2.0%
1.2%
BUNZL PLC ANNUAL REPORT 2014
67
DIRECTORS’ REMUNERATION REPORT CONTINUED
Statement of directors’ shareholding and share interests (audited information)
As at 31 December 2014, all executive directors and their connected persons owned shares outright at a level exceeding their required
shareholding of 200% of their annual salary.
Michael Roney
Brian May
Patrick Larmon
Actual share ownership as a percentage
of salary at 31 December 2014
at the closing mid-market price
(1,764p)
615%
371%
348%
Interests in shares and share options
The interests of the directors, and their connected persons, in the Company’s ordinary shares and share options at 31 December 2014 were:
Unvested
and subject
to holding
period
(DASBS)
103,272
57,081
70,397
–
–
–
–
–
–
Shares
Unvested
and subject to
performance
conditions
(LTIP Part B)
228,600
119,500
135,900
–
–
–
–
–
–
Owned
outright
312,263
105,240
121,216
10,000
6,630
4,000
4,000
2,500
2,500
Options (LTIP Part A and Sharesave)
Total
interests held
Unvested
and subject to
performance
conditions
321,100
167,500
191,000
–
–
–
–
–
–
Unvested
subject to
continued
employment
1,948
1,197
–
–
–
–
–
–
–
Vested
but not
exercised
162,000
–
132,000
–
–
–
–
–
–
1,129,183
450,518
650,513
10,000
6,630
4,000
4,000
2,500
2,500
Michael Roney
Brian May
Patrick Larmon
Philip Rogerson
Peter Johnson
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
Performance graph and table
Schedule 8 to the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 requires that the Company
must provide a graph comparing the TSR performance of a
hypothetical holding of shares in the Company with a broad equity
market index over a six year period. The Company’s TSR performance
against the FTSE 350 Support Services Sector over a six year period
commencing on 1 January 2009 is shown to the right.
400
350
300
250
200
150
100
Bunzl
FTSE 350 support services
2009
2010
2011
2012
2013
2014
Source: Thomson Reuters datastream
Chief Executive’s pay in last six years (audited information)
The table below summarises the Chief Executive’s single total figure of remuneration, as shown on page 63, annual bonus and long term
incentive payout as a percentage of maximum opportunity for 2014 and the previous five years.
Year
Single total figure of
remuneration £000
Annual variable element award rates
against maximum opportunity
Long term incentive vesting rates
against maximum opportunity
LTIP Part A (options)
LTIP Part B (performance shares)
2009
2010
2011
2012
2013
2014
1,943.2
2,314.2
3,394.1
3,502.9
4,387.6
4,617.8
45%
100%
84%
71%
100%
65%
99%
100%
29%
67%
100%
45%
91%
100%
62%
85%
100%
89%
Note
The single total figure of remuneration in relation to 2013 has been restated from the figure shown in the 2013 Annual Report to reflect the difference between the grant price
and the value of the relevant LTIP awards on the actual date of vesting as detailed in Note d) to the table of the single total figure of remuneration 2014 on page 63.
68 BUNZL PLC ANNUAL REPORT 2014
Percentage change in Chief Executive’s remuneration
The table below sets out the increase in the salary, benefits and bonus of the Chief Executive and that of a Bunzl UK and US management
population. This population has been selected for this comparison because it is considered to be the most relevant as these countries have
the Group’s largest concentration of employees with a similarly structured remuneration package. Employees from businesses acquired
by Bunzl in 2014 and leavers and joiners in either year have been removed from the data to prevent distortion.
Salary
Benefits
Bonus
Notes
a) US and UK management population includes any promotional increases that occurred during either year.
b) Bonus relates to the performance targets of the companies for which the relevant individuals work.
Chief Executive
Percentage change
(2014 vs 2013)
3%
1%
(3)%
UK and US
management population
Percentage change
(2014 vs 2013)
4%
6%
(3)%
Relative importance of spend on pay
The table below shows a comparison between the overall expenditure on pay and dividends paid to shareholders for 2014 and 2013 (as stated
in Note 21 and Note 17 to the financial statements on pages 107 and 102 respectively).
£ million unless otherwise stated
Overall expenditure on pay
Dividend paid in the year
2014
534.0
105.6
2013
509.4
91.8
Percentage change
5%
15%
Notes
a) Overall expenditure on pay excludes employer’s social security costs.
b) Dividends paid in the year relate to the previous financial year’s interim and final dividends.
2015 REMUNERATION (AUDITED INFORMATION)
The remuneration policy was implemented with effect from the 2014 AGM and continues to apply in 2015 as follows:
Salary
The salary increases for the executive directors for 2015, which are in line with increases that have been implemented for other employees
in the Group as discussed on page 58, are as follows:
Michael Roney
Brian May
Patrick Larmon
Salary from
1 January 2015
£922,000
£515,000
US$1,036,000
Salary from
1 January 2014
£895,000
£500,000
US$1,014,000
Increase in salary
2014 to 2015
%
3.0
3.0
2.2
2015 bonus targets
The structure for Michael Roney’s, Brian May’s and 25% of Patrick Larmon’s annual bonus for 2015 is described on page 54. The threshold
for bonus payments on growth in constant exchange rate eps has been set above the actual result achieved in 2014 on a constant exchange
rate basis. For Patrick Larmon the other 75% of his bonus will relate to the attainment of pbit performance of North America relative to
budget which will be modified, positively or negatively, by the achievement of North America’s return on average operating capital relative
to the target set. The relevant performance points are: threshold (which must be exceeded to attract any payment of bonus); target; and
maximum amount (the level at which the bonus for that measure is capped). These performance points are determined at the start of the
year by reference to the Group’s annual budget. No elements of the bonus are guaranteed. As in previous years, the specific performance
points will not be disclosed while still commercially sensitive.
BUNZL PLC ANNUAL REPORT 2014
69
DIRECTORS’ REMUNERATION REPORT CONTINUED
Performance measures for long term incentives to be awarded in 2015
Grants of executive share options and performance shares awarded to executive directors and senior executives in 2015 will be subject to
the same performance conditions as those executive share options and performance share awards granted in August and October 2014
respectively as detailed on page 67.
Non-executive directors’ fees for 2015 (audited information)
The Chairman’s fee is reviewed every two years and as a result no review of the fee took place in 2015. The non-executive directors’ fees were
reviewed with effect from 1 January 2015. The current fee structure for the non-executive directors is shown below:
Chairman’s fee
Non-executive director basic fee
Supplements:
Senior independent director
Audit Committee Chairman
Remuneration Committee Chairman
With effect from
1 January 2015
£
325,000
66,000
16,000
15,000
15,000
Fees paid
in 2014
£
325,000
64,500
16,000
14,000
14,000
Increase in fees
2014 to 2015
%
–
2.3
–
7.1
7.1
ADDITIONAL INFORMATION ON DIRECTORS’ INTERESTS
Details of the executive directors’ interests in outstanding share awards under the DASBS, LTIP and all employee share plans are set
out below.
Deferred share awards as at 31 December 2014
The outstanding awards granted to each director of the Company under the DASBS are set out in the table below. Further information
relating to the deferred bonus is provided on page 54.
Michael Roney
Brian May
Patrick Larmon
Shares held
at 1 January
2014
43,215
48,882
25,575
–
23,728
27,018
14,165
–
28,372
33,349
21,045
–
Shares
awarded
during 2014
–
–
–
28,815
–
–
15,898
–
–
–
16,003
Total number
of award
shares at
31 December
2014
–
48,882
25,575
28,815
–
27,018
14,165
15,898
–
33,349
21,045
16,003
Shares
vested
during 2014
43,215
–
–
–
23,728
–
–
–
28,372
–
–
–
Normal
vesting date
01.03.14
01.03.15
01.03.16
01.03.17
01.03.14
01.03.15
01.03.16
01.03.17
01.03.14
01.03.15
01.03.16
01.03.17
Share price
at grant
p
760
962
1,272
1,573
760
962
1,272
1,573
760
962
1,272
1,573
Market price
at vesting
p
1,554
–
–
–
1,554
–
–
–
1,554
–
–
–
Monetary
value of
vested award
£000
671
–
–
–
369
–
–
–
441
–
–
–
Note
The deferred element of the 2014 annual bonus plan as shown on page 63 is not included in the table above as the appropriate number of shares have not yet been awarded.
No shares lapsed during the year.
70 BUNZL PLC ANNUAL REPORT 2014
LTIP
The tables below show the number of executive share options and performance shares held by the executive directors under the LTIP.
Details of the relevant performance conditions of the LTIP are set out on pages 66 and 67.
Executive share options – LTIP Part A
Michael Roney
Total
Brian May
Total
Patrick Larmon
Total
Options at
1 January
2014
99,500
89,500
81,000
85,500
76,500
66,000
57,000
53,000
47,500
–
–
655,500
44,500
39,500
34,500
29,500
27,500
24,500
–
–
200,000
56,500
54,500
48,500
44,000
46,500
41,500
36,000
34,000
31,500
28,500
–
–
421,500
Grant
date
27.08.09
25.02.10
03.09.10
03.03.11
02.09.11
01.03.12
31.08.12
28.02.13
30.08.13
27.02.14
29.08.14
–
03.03.11
02.09.11
01.03.12
31.08.12
28.02.13
30.08.13
27.02.14
29.08.14
–
26.02.09
27.08.09
25.02.10
03.09.10
03.03.11
02.09.11
01.03.12
31.08.12
28.02.13
30.08.13
27.02.14
29.08.14
–
Exercise
price
p
585
676.5
746
724.5
812.5
962
1,116
1,240
1,375
1,566
1,641
–
724.5
812.5
962
1,116
1,240
1,375
1,566
1,641
–
564
585
676.5
746
724.5
812.5
962
1,116
1,240
1,375
1,566
1,641
–
Options
exercisable
between
27.08.12–26.08.19
25.02.13–24.02.20
03.09.13–02.09.20
03.03.14–02.03.21
02.09.14–01.09.21
01.03.15–28.02.22
31.08.15–30.08.22
28.02.16–27.02.23
30.08.16–29.08.23
27.02.17-26.02.24
29.08.17-28.08.24
–
03.03.14–02.03.21
02.09.14–01.09.21
01.03.15–28.02.22
31.08.15–30.08.22
28.02.16–27.02.23
30.08.16–29.08.23
27.02.17-26.02.24
29.08.17-28.08.24
–
26.02.12–25.02.19
27.08.12–26.08.19
25.02.13–24.02.20
03.09.13–02.09.20
03.03.14–02.03.21
02.09.14–01.09.21
01.03.15–28.02.22
31.08.15–30.08.22
28.02.16–27.02.23
30.08.16–29.08.23
27.02.17-26.02.24
29.08.17-28.08.24
–
Options at
31 December
2014
–
–
–
85,500
76,500
66,000
57,000
53,000
47,500
43,000
54,600
483,100
–
–
34,500
29,500
27,500
24,500
22,500
29,000
167,500
–
–
–
44,000
46,500
41,500
36,000
34,000
31,500
28,500
25,500
35,500
323,000
Notes
a) Executive share options were exercised during 2014 by:
(i)
Michael Roney on 7 March 2014 in respect of 99,500 ordinary shares at an exercise price of 585p, at a market price of 1,576p resulting in a gain of £986,045. In addition
Michael Roney exercised share options on 15 May 2014 in respect of 89,500 ordinary shares at an exercise price of 676.5p, at a market price of 1,689.5p resulting in a gain
of £906,635. Michael Roney also exercised share options on 21 November 2014 in respect of 81,000 ordinary shares at an exercise price of 746p, at a market price of
approximately 1,755p resulting in a gain of £817,451;
(ii) Brian May on 6 June 2014 in respect of 44,500 ordinary shares at an exercise price of 724.5p, at a market price of approximately 1,683p resulting in a gain of £426,647.
In addition Brian May exercised share options on 25 November 2014 in respect of 39,500 ordinary shares at an exercise price of 812.5p, at a market price of approximately
1,767p resulting in a gain of £377,065; and
(iii) Patrick Larmon on 10 March 2014 in respect of 56,500 ordinary shares at an exercise price of 564p, at a market price of 1,595p resulting in a gain of £582,515. In addition
Patrick Larmon exercised share options on 6 May 2014 in respect of 28,516 ordinary shares at an exercise price of 585p, at a market price of approximately 1,670p resulting
in a gain of £309,409. Patrick Larmon also exercised share options on 21 October 2014 in respect of 25,984 ordinary shares at an exercise price of 585p, at a market price of
approximately 1,648p resulting in a gain of £276,169 and on 2 December 2014 in respect of 48,500 ordinary shares at an exercise price of 676.5p, at a market price of
approximately 1,776p resulting in a gain of £533,247.
b) The mid-market price of a share on 31 December 2014 was 1,764p and the range during 2014 was 1,367p to 1,820p.
c) The performance conditions have been satisfied in relation to options granted prior to 2013 under the 2004 LTIP Part A.
d) Executive share options granted in February 2014 and earlier have been granted under the 2004 LTIP Part A. Executive share options granted in August 2014 have been granted
under the 2014 LTIP Part A.
BUNZL PLC ANNUAL REPORT 2014
71
DIRECTORS’ REMUNERATION REPORT CONTINUED
Performance shares – LTIP Part B
Awards
(shares)
held at
1 January
2014
64,500
59,000
48,000
42,000
38,500
37,000
–
–
289,000
33,500
30,500
25,000
22,000
20,000
19,500
–
–
150,500
35,000
32,000
26,500
25,000
23,000
22,000
–
–
163,500
Conditional
shares
awarded
during 2014
–
–
–
–
–
–
31,500
31,600
63,100
–
–
–
–
–
–
16,500
16,500
33,000
–
–
–
–
–
–
18,500
20,900
39,400
Market price
per share
at award
p
725
787
990.5
1,137
1,277
1,325
1,606
1,597
–
725
787
990.5
1,137
1,277
1,325
1,606
1,597
–
725
787
990.5
1,137
1,277
1,325
1,606
1,597
–
Award
date
08.04.11
11.10.11
05.04.12
08.10.12
05.04.13
07.10.13
04.04.14
06.10.14
–
08.04.11
11.10.11
05.04.12
08.10.12
05.04.13
07.10.13
04.04.14
06.10.14
–
08.04.11
11.10.11
05.04.12
08.10.12
05.04.13
07.10.13
04.04.14
06.10.14
–
Lapsed
awards
(shares)
during
2014
7,073
6,470
–
–
–
–
–
–
13,543
3,674
3,345
–
–
–
–
–
–
7,019
3,838
3,509
–
–
–
–
–
–
7,347
Exercised
awards
(shares)
during
2014
57,427
52,530
–
–
–
–
–
–
109,957
29,826
27,155
–
–
–
–
–
–
56,981
31,162
28,491
–
–
–
–
–
–
59,653
Market price
per share
at exercise
p
1,617
1,546
–
–
–
–
–
–
–
1,617
1,546
–
–
–
–
–
–
–
1,617
1,546
–
–
–
–
–
–
–
Awards
(shares)
held at 31
December
2014
–
–
48,000
42,000
38,500
37,000
31,500
31,600
228,600
–
–
25,000
22,000
20,000
19,500
16,500
16,500
119,500
–
–
26,500
25,000
23,000
22,000
18,500
20,900
135,900
Value at
exercise
£000
929
812
–
–
–
–
–
–
1,741
482
420
–
–
–
–
–
–
902
504
440
–
–
–
–
–
–
944
Michael Roney
Total
Brian May
Total
Patrick Larmon
Total
Notes
a) The closing mid-market price of the Company’s shares as at the vesting dates on 8 April 2014 and 13 October 2014 were 1,612p and 1,546p respectively.
b) Performance share awards granted in April 2014 and earlier have been granted under the 2004 LTIP Part B. Performance share awards granted in October 2014 have been
granted under the 2014 LTIP Part B.
All employees share scheme
Sharesave Scheme
The table below shows the number of share options granted to the executive directors under the Sharesave Scheme. Details of the Sharesave
Scheme are set out on page 56.
Options at
1 January
2014
1,948
3,462
–
Grant
date
27.03.12
24.03.09
21.03.14
Exercise
price
p
770
452
1,253
Options
exercisable between
01.05.17–31.10.17
01.05.14-31.10.14
01.05.19–31.10.19
Options at
31 December
2014
1,948
–
1,197
Michael Roney
Brian May
Peter Johnson
Chairman of the Remuneration Committee
23 February 2015
72 BUNZL PLC ANNUAL REPORT 2014
OTHER STATUTORY INFORMATION
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at The Park Suite, The
Dorchester, Park Lane, London W1K 1QA on Wednesday 15 April 2015
at 11.00 am. The Notice convening the Annual General Meeting is set
out in a separate letter from the Chairman to shareholders which
explains the items of business which are not of a routine nature.
DIVIDENDS
An interim dividend of 11.0p was paid on 2 January 2015 in respect of
2014 and the directors recommend a final dividend of 24.5p, making
a total for the year of 35.5p per share (2013: 32.4p). Dividend details
are given in Note 17 to the consolidated financial statements. Subject
to approval by the shareholders at the Annual General Meeting on
15 April 2015, the final dividend will be paid on 1 July 2015 to those
shareholders on the register at the close of business on 22 May 2015.
SHARE CAPITAL
The Company has a single class of share capital which is divided into
ordinary shares of 321⁄7p each which rank pari passu in respect of
participation and voting rights. The shares are in registered form,
are fully paid up and are quoted on the London Stock Exchange.
In addition, the Company operates a Level 1 American Depositary
Receipt programme with Citibank N.A. under which the Company’s
shares are traded on the over-the-counter (OTC) market in the form
of American Depositary Receipts.
Details of changes to the issued share capital during the year are set
out in Note 16 to the consolidated financial statements.
BUNZL GROUP GENERAL EMPLOYEE BENEFIT TRUST
Bunzl Employee Trustees Limited is trustee of the Bunzl Group
General Employee Benefit Trust (‘the EBT’) which holds shares in
respect of employee share options and awards that have not been
exercised or vested. The current position is that the EBT abstains
from voting in respect of these shares. The trustee has agreed to
waive the right to dividend payments on shares held within the EBT.
Details of the shares so held are set out in Note 16 to the consolidated
financial statements.
SUBSTANTIAL SHAREHOLDINGS
As at 31 December 2014 the directors had been notified by the
following shareholders that they were each interested in 3% or more
of the issued share capital of the Company.
Shareholder
Massachusetts Financial
Services Company
Cascade Investment LLC
Date of
notification
Number of
shares
% of issued
share capital
07.10.14
20.04.12
33,452,090
16,593,248
10.0
5.0
As at 23 February 2015 no further notifications have been received
since the year end.
RIGHTS AND OBLIGATIONS ATTACHING TO SHARES
Subject to the provisions of the Companies Act 2006 and without
prejudice to any rights attached to any existing shares, the Company
may resolve by ordinary resolution to issue shares with such rights
and restrictions as set out in such resolution or (if there is no such
resolution or so far as it does not make specific provision) as the
Board may decide. Subject to the provisions of the Companies Act
2006 and of any resolution of the Company passed pursuant thereto
and without prejudice to any rights attached to existing shares, the
Board is duly authorised to issue and allot, grant options over or
otherwise dispose of the Company’s shares on such terms and
conditions and at such times as it thinks fit. If at any time the share
capital of the Company is divided into different classes of shares, the
rights attached to any class may be varied or abrogated by special
resolution passed at a separate general meeting of such holders.
Subject to the rights attached to any existing shares, rights attached
to shares will be deemed to be varied by the reduction of capital paid
up on the shares and by the allotment of further shares ranking in
priority in respect of dividend or capital or which confer on the
holders more favourable voting rights than the first-mentioned
shares, but will not otherwise be deemed to be varied by the creation
or issue of further shares.
POWER TO ISSUE AND ALLOT SHARES
The directors are generally and unconditionally authorised under
the authorities granted at the 2014 Annual General Meeting to allot
shares or grant rights to subscribe for or to convert any security
into shares of the Company up to a maximum nominal amount of
£35.76 million. At the same meeting authority was also granted to
the directors to allot the Company’s shares for cash, up to a maximum
nominal amount of approximately £5.36 million, without regard to the
pre-emption provisions of the Companies Act 2006. No such shares
were issued or allotted under these authorities in 2014, nor is there
any current intention to do so, other than to satisfy share options
under the Company’s share option schemes and, if necessary, to
satisfy the consideration payable for businesses to be acquired.
These authorities are valid until the conclusion of the forthcoming
Annual General Meeting. The directors again propose to seek
equivalent authorities at such Annual General Meeting.
RESTRICTIONS ON TRANSFER OF SHARES
Dealings in the Company’s ordinary shares by its directors, persons
discharging managerial responsibilities, certain employees of the
Company and, in each case, their connected persons, are subject
to the Company’s dealing code which adopts the Model Code of the
Listing Rules published by the Financial Conduct Authority.
Certain restrictions, which are customary for a listed company,
apply to transfers of shares in the Company. The Board may refuse
to register an instrument of transfer of any share which is not a fully
paid share and of a certificated share at its discretion unless it is:
• lodged, duly stamped or duly certified, at the offices of the
Company’s registrar or such other place as the Board may specify
and is accompanied by the certificate for the shares to which it
relates and such other evidence as the Board may reasonably
require to show the right of the transferor to make the transfer;
• in respect of only one class of shares; and
• in favour of not more than four transferees.
BUNZL PLC ANNUAL REPORT 2014
73
OTHER STATUTORY INFORMATION CONTINUED
Registration of a transfer of an uncertificated share may be refused
in the circumstances set out in the uncertificated securities rules,
and where, in the case of a transfer to joint holders, the number of
joint holders to whom the uncertificated share is to be transferred
exceeds four.
In addition, no instrument of transfer for certificated shares shall be
registered if the transferor has been served with a restriction notice
(as defined in the Company’s Articles of Association (the ‘Articles’))
after failure to provide the Company with information concerning
certain interests in the Company’s shares required to be provided
under the Companies Act 2006, unless the transfer is shown to the
Board to be pursuant to an arm’s length sale. The Board has the
power to procure that uncertificated shares are converted into
certificated shares and kept in certificated form for as long as
the Board requires.
The Company is not aware of any agreements between
shareholders that may result in any restriction of the transfer
of shares or voting rights.
RESTRICTIONS ON VOTING RIGHTS
A member shall not be entitled to vote, unless the Board otherwise
decides, at any general meeting or class meeting in respect of any
shares held by them if any call or other sums payable remain unpaid.
Currently, all issued shares are fully paid. In addition, no member
shall be entitled to vote if he has been served with a restriction notice
after failure to provide the Company with information concerning
certain interests in the Company’s shares required to be provided
under the Companies Act 2006. Votes may be exercised in person or
by proxy. The Articles currently provide a deadline for submission of
proxy forms of 48 hours before the relevant meeting, 24 hours before
a poll is taken if such poll is taken more than 48 hours after it was
demanded or during the meeting at which the poll was demanded
if the poll is not taken straight away but is taken not more than
48 hours after it was demanded.
PURCHASE OF OWN SHARES
At the 2014 Annual General Meeting, shareholders gave the Company
authority to purchase a maximum of 33,375,000 ordinary shares.
During the year ended 31 December 2014 the Company did not
purchase any of its own shares pursuant to this authority or the
authority granted at the 2013 Annual General Meeting and no shares
have been purchased between 31 December 2014 and 23 February
2015. The Company is therefore currently authorised to buy back
33,375,000 of its own shares pursuant to the existing shareholders’
authority which is due to expire at the conclusion of the forthcoming
Annual General Meeting. The directors again propose to seek the
equivalent authority at such Annual General Meeting.
DIRECTORS
Directors may be elected by ordinary resolution at a duly convened
general meeting or appointed by the Board. Under the Articles, the
minimum number of directors shall be two and the maximum shall
be 15. In accordance with the Articles, each director is required
to retire at the Annual General Meeting held in the third calendar
year after which he or she was appointed or last appointed and
any director who has held office with the Company, other than
employment or executive office, for a continuous period of nine
years or more at the date of the Annual General Meeting is subject to
annual re-appointment. The Board may also appoint a person willing
to act as a director during the year either to fill a vacancy or as an
additional director but so that the total number of directors shall not
at any time exceed 15. However such appointee shall only hold office
until the next Annual General Meeting of the Company.
In addition to any power to remove a director from office conferred by
company law, the Company may also by special resolution remove a
director from office before the expiration of his or her period of office
under the Articles.
The office of a director shall also be vacated pursuant to the Articles
if the director:
• resigns by giving notice to the Company or is asked to resign by all
of the other directors who are not less than three in number; or
• is or has been suffering from mental or physical ill health and the
Board resolves that his or her office be vacated; or
• is absent without permission from Board meetings for six
consecutive months and the Board resolves that his or her office
be vacated; or
• becomes bankrupt or compounds with his or her creditors
generally; or
• is prohibited by law from being a director; or
• ceases to be a director by virtue of any provisions of company law
or is removed from office pursuant to the Articles.
Biographical details of the directors are set out on page 42.
Vanda Murray was appointed to the Board with effect from
1 February 2015 but all of the other directors served throughout the
year. Notwithstanding the retirement by rotation provisions in the
Articles, each of the directors will retire and offer themselves for
re-election at the forthcoming Annual General Meeting in accordance
with the UK Corporate Governance Code apart from Peter Johnson
who retires at the conclusion of the Annual General Meeting.
Directors’ interests in ordinary shares are shown in Note 19 to
the consolidated financial statements. None of the directors was
materially interested in any contract of significance with the Company
or any of its subsidiary undertakings during or at the end of 2014.
Information relating to the directors’ service agreements and their
remuneration for the year and details of the directors’ share options
under the Company’s share option schemes and awards under the
Long Term Incentive Plan and Deferred Annual Share Bonus Scheme
are set out in the Directors’ remuneration report on pages 52 to 72.
POWERS OF THE DIRECTORS
Subject to the Articles, the Companies Act 2006 and any directions
given by the Company by special resolution, the business of the
Company is managed by the Board who may exercise all powers
of the Company. The Board may, by power of attorney or otherwise,
appoint any person or persons to be the agent or agents of
the Company for such purposes and on such conditions as the
Board determines.
DIRECTORS’ INDEMNITIES
Indemnities were in force throughout 2014 and remain in force as
at the date of this report under which the Company has agreed to
indemnify the directors and the Company Secretary, in addition
to other senior executives who are directors of subsidiaries of the
Company, to the extent permitted by law and the Articles in respect
of all losses arising out of, or in connection with, the execution of
their powers, duties and responsibilities as a director or officer
of the Company or any of its subsidiaries.
AMENDMENT OF ARTICLES
Any amendments to the Articles may be made in accordance with
the provisions of the Companies Act 2006 by way of special resolution
of the Company’s shareholders.
74 BUNZL PLC ANNUAL REPORT 2014
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY
The directors recognise that the Company is part of a wider
community and that it has a responsibility to act in a way that
respects the environment and social and community issues. Further
information relating to the Company’s approach to these matters
is set out in the Corporate responsibility report on pages 37 to 41.
EMPLOYMENT POLICIES
The employment policies of the Group have been developed to
meet the needs of its different business areas and the locations in
which they operate worldwide, embodying the principles of equal
opportunity. The Group has standards of business conduct with which
it expects all its employees to comply. Bunzl encourages involvement
of its employees in the performance of the business in which they
are employed and aims to achieve a sense of shared commitment.
In addition to a regular magazine and the Company’s intranet, which
provide a variety of information on activities and developments within
the Group and incorporate half year and annual financial reports,
announcements are periodically circulated to give details of
corporate and staff matters together with a number of subsidiary
or business area publications dealing with activities in specific parts
of the Group.
It is the Group’s policy that disabled applicants should be considered
for employment and career development on the basis of their
aptitudes and abilities. Employees who become disabled during
their working life will be retained in employment wherever possible
and given help with rehabilitation and training.
SIGNIFICANT AGREEMENTS
The Company’s wholly owned subsidiary, Bunzl Finance plc,
has a number of bilateral loan facilities with a range of different
counterparties, all of which are guaranteed by the Company, are in
substantially the same form and are prepayable at the option of the
lender in the event of a change of control of the Company. Similar
change of control provisions in relation to the Company are included
in the US dollar, sterling and euro US private placement notes which
have been entered into by Bunzl Finance plc and the Company and
are also guaranteed by the Company.
POLITICAL DONATIONS
During 2014 no contributions were made for political purposes.
DISCLOSURES REQUIRED UNDER UK LISTING RULE 9.8.4
Apart from the dividend waiver which has been issued in respect
of shares held by the Bunzl Group General Employee Benefit Trust
referred to in Note 16 on page 101, there are no disclosures required
to be made under UK Listing Rule 9.8.4.
EXTERNAL AUDITORS
Each of the directors at the date of approval of this report
confirms that:
• so far as the director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
• the director has taken all steps that he or she ought to have taken
as a director in order to make the director aware of any relevant
audit information and to establish that the Company’s auditors
are aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
Resolutions are to be proposed at the forthcoming Annual General
Meeting for the re-appointment of PricewaterhouseCoopers LLP as
auditors of the Company at a rate of remuneration to be determined
by the directors.
STRATEGIC REPORT AND DIRECTORS’ REPORT
Pages 1 to 41 inclusive consist of the strategic report and pages 42 to
75 inclusive consist of the directors’ report. These reports have been
drawn up and presented in accordance with, and in reliance upon,
applicable English company law and any liability of the directors in
connection with these reports shall be subject to the limitations and
restrictions provided by such law.
Under the Companies Act 2006, a safe harbour limits the liability
of directors in respect of statements in and omissions from the
strategic report and the directors’ report. Under English law, the
directors would be liable to the Company, but not to any third party,
if the strategic report or the directors’ report contain errors as
a result of recklessness or knowing misstatement or dishonest
concealment of a material fact, but would not otherwise be liable.
The strategic report and the directors’ report were approved by the
Board on 23 February 2015.
On behalf of the Board
Paul Hussey
Secretary
23 February 2015
BUNZL PLC ANNUAL REPORT 2014
75
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Revenue
Operating profit
Finance income
Finance cost
Profit before income tax
Income tax
Profit for the year attributable to the Company’s equity holders
Earnings per share attributable to the Company’s equity holders
Basic
Diluted
Non-GAAP measures*
Operating profit
Adjusted for:
Intangible amortisation
Acquisition related costs
Adjusted operating profit
Finance income
Finance cost
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit for the year
Adjusted earnings per share
Notes
3
3
5
5
6
7
7
3
3
3
5
5
6
7
2014
£m
6,156.5
341.8
4.0
(46.0)
299.8
(89.1)
210.7
2013
£m
6,097.7
332.1
2.6
(44.8)
289.9
(83.1)
206.8
64.5p
63.7p
63.5p
62.7p
341.8
332.1
61.9
26.1
429.8
4.0
(46.0)
387.8
(106.2)
281.6
58.3
24.0
414.4
2.6
(44.8)
372.2
(103.8)
268.4
86.2p
82.4p
* See Note 2w on page 85 for further details of the non-GAAP measures.
The Accounting policies and Notes on pages 81 to 112 form part of these consolidated financial statements.
76 BUNZL PLC ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on pension schemes
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss:
Foreign currency translation differences for foreign operations
(Loss)/gain taken to equity as a result of designated effective net investment hedges
Gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve to income statement
Tax on items that may be reclassified to profit or loss
Total items that may be reclassified subsequently to profit or loss
Other comprehensive expense for the year
Total comprehensive income attributable to the Company’s equity holders
Notes
20
6
6
2014
£m
210.7
(30.1)
8.0
(22.1)
(26.1)
(17.1)
3.9
0.1
0.6
(38.6)
(60.7)
150.0
2013
£m
206.8
26.9
(10.1)
16.8
(68.6)
14.4
0.5
0.3
1.3
(52.1)
(35.3)
171.5
BUNZL PLC ANNUAL REPORT 2014
77
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2014
Assets
Property, plant and equipment
Intangible assets
Derivative financial assets
Deferred tax assets
Total non-current assets
Inventories
Income tax receivable
Trade and other receivables
Derivative financial assets
Cash and deposits
Total current assets
Total assets
Equity
Share capital
Share premium
Translation reserve
Other reserves
Retained earnings
Total equity attributable to the Company’s equity holders
Liabilities
Interest bearing loans and borrowings
Retirement benefit obligations
Other payables
Derivative financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Bank overdrafts
Interest bearing loans and borrowings
Income tax payable
Trade and other payables
Derivative financial liabilities
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
2014
£m
2013
£m
8
9
15
10
11
23
16
23
20
14
15
23
23
12
14
119.2
1,478.8
16.3
3.9
1,618.2
705.3
0.7
869.8
12.6
82.4
1,670.8
3,289.0
107.6
160.3
(87.2)
21.0
782.2
983.9
913.3
70.3
18.5
–
20.9
116.0
1,139.0
28.1
35.8
64.6
1,018.4
8.5
10.7
1,166.1
2,305.1
3,289.0
118.8
1,456.9
6.2
7.5
1,589.4
645.1
0.7
863.0
4.4
73.1
1,586.3
3,175.7
107.2
153.0
(45.4)
17.8
707.3
939.9
851.8
45.0
24.8
4.5
23.8
129.5
1,079.4
26.3
42.0
62.2
1,004.4
9.5
12.0
1,156.4
2,235.8
3,175.7
Approved by the Board of Directors of Bunzl plc (Company registration number 358948) on 23 February 2015 and signed on its behalf by
Michael Roney, Chief Executive and Brian May, Finance Director.
78 BUNZL PLC ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
At 1 January 2014
Profit for the year
Actuarial loss on pension schemes
Foreign currency translation differences for
foreign operations
Loss taken to equity as a result of designated
effective net investment hedges
Gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve
to income statement
Income tax credit/(charge) on other
comprehensive income
Total comprehensive (expense)/income
2013 interim dividend
2013 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2014
At 1 January 2013
Profit for the year
Actuarial gain on pension schemes
Foreign currency translation differences for
foreign operations
Gain taken to equity as a result of designated
effective net investment hedges
Gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve
to income statement
Income tax credit/(charge) on other
comprehensive income
Total comprehensive (expense)/income
2012 interim dividend
2012 final dividend
Issue of share capital
Cancellation of treasury shares
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2013
Share
capital
£m
107.2
Share
premium
£m
Translation
reserve
£m
Merger
£m
Other reserves
Cash flow
hedge
£m
Capital
redemption
£m
Own
shares
£m
Retained earnings
153.0
(45.4)
2.5
16.1
(0.8)
(100.0)
(26.1)
(17.1)
1.4
(41.8)
0.4
7.3
3.9
0.1
(0.8)
3.2
(26.7)
11.6
107.6
160.3
(87.2)
2.5
16.1
2.4
(115.1)
Share
premium
£m
Translation
reserve
£m
Merger
£m
Other reserves
Cash flow
hedge
£m
Capital
redemption
£m
Own
shares
£m
Retained earnings
Share
capital
£m
114.2
143.9
7.3
2.5
8.6
(1.4)
(223.4)
(68.6)
14.4
1.5
(52.7)
0.5
0.3
(0.2)
0.6
0.5
(7.5)
9.1
7.5
163.1
(50.1)
10.4
107.2
153.0
(45.4)
2.5
16.1
(0.8)
(100.0)
Earnings
£m
807.3
210.7
(30.1)
8.0
188.6
(32.6)
(73.0)
(11.6)
18.6
897.3
Earnings
£m
833.8
206.8
26.9
(10.1)
223.6
(28.8)
(63.0)
(163.1)
(10.4)
15.2
807.3
Total
equity
£m
939.9
210.7
(30.1)
(26.1)
(17.1)
3.9
0.1
8.6
150.0
(32.6)
(73.0)
7.7
(26.7)
–
18.6
983.9
Total
equity
£m
885.5
206.8
26.9
(68.6)
14.4
0.5
0.3
(8.8)
171.5
(28.8)
(63.0)
9.6
–
(50.1)
–
15.2
939.9
BUNZL PLC ANNUAL REPORT 2014
79
Notes
2014
£m
2013
£m
299.8
289.9
24.4
61.9
26.1
7.9
(4.0)
46.0
(5.0)
(8.0)
(1.9)
(15.6)
431.6
(14.0)
(89.8)
327.8
2.3
(25.1)
1.2
(154.1)
(175.7)
(43.7)
(105.6)
181.0
(170.3)
17.4
7.7
18.5
(48.0)
(143.0)
9.1
46.8
9.1
(1.6)
54.3
25.9
58.3
24.0
6.2
(2.6)
44.8
(7.8)
(7.3)
(1.8)
16.8
446.4
(26.1)
(80.3)
340.0
1.5
(26.5)
1.2
(253.8)
(277.6)
(40.5)
(91.8)
361.4
(245.1)
(9.7)
9.6
12.0
(64.9)
(69.0)
(6.6)
55.8
(6.6)
(2.4)
46.8
24
24
23
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Cash flow from operating activities
Profit before income tax
Adjustments:
depreciation
intangible amortisation
acquisition related costs
share based payments
finance income
finance cost
provisions
retirement benefit obligations
other
Working capital movement
Cash generated from operations before acquisition related costs
Cash outflow from acquisition related costs
Income tax paid
Cash inflow from operating activities
Cash flow from investing activities
Interest received
Purchase of property, plant and equipment
Sale of property, plant and equipment
Purchase of businesses
Cash outflow from investing activities
Cash flow from financing activities
Interest paid
Dividends paid
Increase in borrowings
Repayment of borrowings
Realised gains/(losses) on foreign exchange contracts
Proceeds from issue of ordinary shares to settle share options
Proceeds from exercise of market purchase share options
Purchase of employee trust shares
Cash outflow from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Increase/(decrease) in cash and cash equivalents
Exchange loss on cash and cash equivalents
Cash and cash equivalents at end of year
80 BUNZL PLC ANNUAL REPORT 2014
NOTES
1 BASIS OF PREPARATION
The consolidated financial statements for the year ended 31 December 2014 have been approved by the directors and prepared in accordance
with EU endorsed International Financial Reporting Standards (‘IFRS’) and interpretations of the International Financial Reporting Standards
Interpretations Committee (‘IFRS IC’). The consolidated financial statements have been prepared on a going concern basis (as referred to in
the Financial review on page 33) and under the historical cost convention with the exception of certain items which are measured at fair value
as disclosed in the accounting policies below. The Company has elected to prepare its parent company financial statements in accordance
with UK Generally Accepted Accounting Practice (‘UK GAAP’).
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other
standards, with a date of initial application of 1 January 2014:
IFRS 10 ‘Consolidated Financial Statements’;
IFRS 11 ‘Joint Arrangements’;
IFRS 12 ‘Disclosure of Interests in Other Entities’;
International Accounting Standard (‘IAS’) 27 (Revised) ‘Separate Financial Statements’;
IAS 28 (Revised) ‘Investments in Associates and Joint Ventures’;
Amendment to IAS 32 ‘Financial Instruments: Presentation’;
Amendments to IAS 36 ‘Impairment of Assets’; and
Amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement’.
These have not had a material impact on the Group’s overall results and financial position.
Some of the prior year numbers that were originally presented on a net basis in the Consolidated balance sheet and Consolidated cash flow
statement and the relevant Notes have been re-presented on a gross basis to more accurately reflect the underlying transactions and to be
consistent with the current year presentation.
The accounting policies set out below have, unless otherwise stated, been applied to all periods presented in the consolidated
financial statements.
2 ACCOUNTING POLICIES
a Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed or has rights to variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date. The consideration paid
or payable in respect of acquisitions comprises amounts paid on completion and deferred consideration, excluding payments which are
contingent on the continued employment of former owners of businesses acquired. The excess of the consideration (excluding payments
contingent on future employment) over the fair value of the identifiable net assets acquired is recorded as goodwill. Payments that are
contingent on future employment and transaction costs and expenses such as professional fees are charged to the income statement.
(ii) Associates
Associates are entities over which the Group is in a position to exercise significant influence. Associates are accounted for using the equity
method and are recognised initially at cost. The consolidated financial statements include the Group’s share of the income and expenses
of associates.
(iii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated
in preparing the consolidated financial statements.
b Foreign currency
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at the exchange rate prevailing at that date. Foreign exchange
differences arising on translation are recognised in the income statement, unless they qualify for cash flow or net investment hedge
accounting treatment, in which case the effective portion is recognised directly in a separate component of equity.
Assets and liabilities of foreign operations are translated at the exchange rate prevailing at the balance sheet date. Income and expenses
of foreign operations are translated at average exchange rates. All resulting exchange differences, including exchange differences arising
from the translation of borrowings and other financial instruments designated as hedges of such investments, are recognised directly in a
separate component of equity. Differences that have arisen since 1 January 2004, the date of transition to IFRS, are presented as a separate
component of equity.
BUNZL PLC ANNUAL REPORT 2014
81
NOTES CONTINUED
2 ACCOUNTING POLICIES CONTINUED
c Revenue
The Group is engaged in the delivery of goods to customers. Revenue from a sale is recognised in the income statement upon delivery
of the relevant goods, which is the point in time at which the significant risks and rewards of ownership of the goods are transferred.
Revenue is valued at invoiced amounts, excluding sales taxes, less estimated provisions for returns and trade discounts where relevant.
Returns provisions and early settlement discounts are based on experience over an appropriate period whereas volume discounts are
based on agreements with customers.
Revenue is not recognised if there is significant uncertainty regarding recovery of the consideration due.
d Cost of goods sold
Cost of goods sold consists of the cost of the inventories sold or disposed of in the period, where the cost of inventories is net of supplier
rebate income related to those inventories.
e Supplier rebates
The Group has various rebate arrangements with a number of suppliers. Some of these arrangements are based on the volume of products
purchased and others are based on the volume of products sold. Supplier rebate income is recognised in cost of goods sold concurrent
with the sale of the inventories to which it relates and is calculated by reference to the expected consideration receivable from each rebate
arrangement. Supplier rebate income is not recognised if there is significant uncertainty regarding recovery of the amount due. Supplier
rebate income accrued but not yet received is included in other receivables.
f Share based payments
The Group operates equity settled share based compensation plans. Details of these plans are outlined in Note 16 and the Directors’
remuneration report. The total expected expense is based on the fair value of options and other share based incentives on the grant date
calculated using a valuation model and is spread over the expected vesting period with a corresponding credit to equity.
g Leases
Operating lease rentals and any incentives receivable are recognised in the income statement on a straight line basis over the term of the
relevant lease. Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased assets are classified
as finance leases. Where land and buildings are held under leases, the accounting treatment of the land is considered separately from that
of the buildings due to the indefinite life of land.
h Income tax
Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except when
it relates to items reflected in equity when it is recognised in equity.
Current tax reflects tax payable on taxable income for the year using rates enacted or substantively enacted at the balance sheet date and
any adjustments in respect of prior years.
Deferred tax is provided using the balance sheet liability method providing for temporary differences arising between tax bases and carrying
amounts in the consolidated financial statements. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of
assets and liabilities that affect neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which any asset can be utilised.
i Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses.
j Depreciation
Depreciation is provided on a straight line basis to write off cost less estimated residual value over the assets’ estimated remaining useful
lives. This is applied at the following annual rates:
Buildings
Plant and machinery
Fixtures, fittings and equipment
Freehold land
2% (or depreciated over life of lease if shorter than 50 years)
8%–33%
8%–33%
Not depreciated
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
82 BUNZL PLC ANNUAL REPORT 2014
2 ACCOUNTING POLICIES CONTINUED
k Intangible assets
(i) Goodwill
Acquisitions are accounted for using the acquisition method. As permitted by IFRS 1 ‘First-time Adoption of International Financial Reporting
Standards’, the Group has chosen to apply IFRS 3 ‘Business Combinations’ from 1 January 2004 and has elected not to restate previous
business combinations. For acquisitions made before 1 January 2004, goodwill represents the amount previously recorded under UK GAAP.
For acquisitions that occurred between 1 January 2004 and 31 December 2009, goodwill represents the cost of the business combination
in excess of the fair value of the identifiable assets, liabilities and contingent liabilities acquired. For acquisitions that have occurred on or
after 1 January 2010, goodwill represents the cost of the business combination (excluding payments contingent on future employment and
other acquisition related costs) in excess of the fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is
allocated to cash generating units and is tested annually for impairment. Negative goodwill arising on acquisition is recognised immediately
in the income statement.
(ii) Other intangible assets
Intangible assets acquired in a business combination are recognised on acquisition and recorded at fair value. These principally relate to
customer relationships and are stated at cost less accumulated amortisation and any impairment losses. Amortisation is charged to the
income statement on a straight line basis over the estimated useful economic lives (which range from 10 to 19 years).
l Impairment
The carrying amounts of the Group’s assets are reviewed annually to determine if there is any indication of impairment. If any such indication
exists, the assets’ recoverable amounts are estimated. The recoverable amounts of assets carried at amortised cost are calculated as the
present value of estimated future cash flows, discounted at appropriate pre-tax discount rates. The recoverable amounts of other assets
are the greater of their fair value less the costs to sell and the value in use. In assessing the value in use, the estimated future cash flows are
discounted to their present values using appropriate pre-tax discount rates. Impairment losses are recognised when the carrying amount
of an asset or cash generating unit exceeds its recoverable amount, with impairment losses being recognised in the income statement.
m Inventories
Inventories are valued at the lower of cost and net realisable value. The cost of inventories comprises the purchase price, net of any related
supplier volume rebates, plus import duties and other taxes, inbound freight and haulage costs and other related costs incurred to bring the
product into its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated cost of completion and estimated cost necessary to make the sale.
n Trade and other receivables
Trade and other receivables are stated at cost less any impairment losses. A provision for impairment is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables or uncertainty as to
whether the Group will be able to collect all such amounts.
o Trade and other payables
Trade and other payables are stated at cost.
p Financial instruments
Under IAS 39 ‘Financial Instruments: Recognition and Measurement’, financial instruments are initially measured at fair value with
subsequent measurement depending upon the classification of the instrument. IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Other financial
assets and liabilities are held at amortised cost unless they are in a fair value hedging relationship. Derivative financial instruments are used
to hedge exposures to foreign exchange and interest rate risks.
(i) Fair value hedge
Where a derivative financial instrument is designated and qualifies as a hedge of a recognised asset or liability, all changes in the fair value
of the derivative are recognised immediately in the income statement. The carrying value of the hedged item is adjusted by the change in fair
value that is attributable to the risk being hedged with changes recognised in the income statement.
(ii) Cash flow hedge
Where a derivative that is designated and qualifies as a hedge is used to hedge forecast transactions, any effective portion of the change
in fair value is recognised in equity. The gain or loss relating to any ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled to the income statement in the period when the hedged item affects profit or loss.
(iii) Hedge of a net investment in foreign operations
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in foreign
operations are recognised directly in equity to the extent the hedge is effective. To the extent that the hedge is ineffective such differences
are recognised in the income statement.
q Cash and cash equivalents
Cash and cash equivalents comprise cash balances, bank overdrafts and short term deposits with maturities of three months or less from
the date the deposit is made.
BUNZL PLC ANNUAL REPORT 2014
83
NOTES CONTINUED
2 ACCOUNTING POLICIES CONTINUED
r Net debt
Net debt is defined as interest bearing loans and borrowings and the fair value of interest rate swaps on fixed interest rate borrowings,
less cash and cash equivalents.
s Provisions
Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event
and where it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions
are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the
unavoidable costs of meeting the Group’s obligations under the contract.
t Retirement benefit obligations
(i) Defined contribution pension schemes
Obligations for contributions to defined contribution pension schemes are charged as an expense to the income statement as incurred.
(ii) Defined benefit pension schemes
Pension liabilities are recognised in the balance sheet and represent the difference between the fair value of scheme assets and the present
value of scheme liabilities. Scheme liabilities are determined on an actuarial basis using the projected unit method and discounted using the
rate applicable to AA rated corporate bonds that have a similar maturity to the scheme liabilities.
Current service cost, past service cost/credit and gains and losses on any settlements and curtailments are credited or charged to the
income statement. Past service cost is recognised immediately to the extent benefits are already vested. Net interest on the net defined
benefit liability is included within finance cost. The net interest is calculated using the same discount rate that is used in calculating the
defined benefit obligation, applied to the net defined benefit liability at the start of the period.
Actuarial gains and losses are recognised in full in the statement of comprehensive income.
u Investment in own shares
The cost of shares held either directly (treasury shares) or indirectly (employee benefit trust shares) is deducted from equity. Repurchased
shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold
or reissued, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is recognised
in retained earnings.
At each reporting date the Group remeasures the value of the shares held in the employee benefit trust to present them in the own shares
reserve at the market value of those shares at the reporting date. This is done through a reclassification from retained earnings to the own
shares reserve. This movement has no effect on the actual numbers of shares held by the employee benefit trust.
v Dividends
The interim dividend is recognised in the statement of changes in equity in the period in which it is paid and the final dividend in the period in
which it is approved by shareholders at the Annual General Meeting.
w Non-GAAP measures
Further to the various performance measures defined under IFRS, the Group reports a number of additional performance 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 (known as ‘non-GAAP measures’) and may
not be directly comparable with other companies’ non-GAAP measures. They are not designed to be a substitute for any of the IFRS
measures of performance. The principal additional performance measures used within the consolidated financial statements include:
• adjusted operating profit;
• adjusted profit before income tax;
• adjusted profit for the year;
• adjusted earnings per share; and
• adjusted diluted earnings per share.
These measures exclude the charge for intangible amortisation, acquisition related costs and, where relevant, the associated tax. Intangible
amortisation, acquisition related costs and the associated tax are items which are not taken into account by management when assessing the
results of the business as they do not relate to the underlying operating performance. Accordingly, these items are removed in calculating
the profitability measures by which management assess the performance of the Group.
Acquisition related costs comprise transaction costs and expenses, deferred consideration payments relating to the retention of former
owners of businesses acquired and adjustments to previously estimated earn outs.
The Group’s key performance indicators are set out and defined on pages 14 and 15. A number of these are based on, or derived from,
the non-GAAP measures noted above.
84 BUNZL PLC ANNUAL REPORT 2014
2 ACCOUNTING POLICIES CONTINUED
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The following provides information on those policies that management considers critical because of the level of judgement and estimation
required which often involves assumptions regarding future events which can vary from what is anticipated. The directors review the
judgements and estimates on an ongoing basis with revisions to accounting estimates recognised in the period in which the estimates
are revised and in any future periods affected. The key sources of estimation at the balance sheet date that have risk of causing material
adjustment to the carrying amounts of assets and liabilities are set out below. The directors believe that the consolidated financial
statements reflect appropriate judgements and estimates and provide a true and fair view of the Group’s performance and financial position.
Where appropriate and practicable, sensitivities are disclosed in the relevant notes.
a Retirement benefit obligations
The cost of defined benefit pension schemes and the present value of the obligations relating thereto are determined using actuarial valuations
appropriate for each country where defined benefit pension schemes are provided. The actuarial valuations involve making assumptions
about discount rates, future salary increases, future pension increases and mortality rates. All assumptions are reviewed at each reporting
date. In determining the appropriate discount rates, management considers the interest rates of corporate bonds with an AA rating in the
relevant country. Future salary increases and future pension increases are based on expected future inflation rates for each country.
Mortality rates are based on the relevant mortality tables for each country. Further details about the assumptions used are set out in Note 20.
b Intangible assets
IFRS 3 requires the identification of acquired intangible assets as part of a business combination. The methods used to value such intangible
assets require the use of estimates including forecast performance and customer attrition rates. Future results are impacted by the
amortisation periods adopted and changes to the estimated useful lives would result in different effects on the income statement.
Goodwill is tested annually for impairment. Tests for impairment are based on discounted cash flows and assumptions (including discount
rates, timing and growth prospects) which are inherently subjective. Further details about the assumptions used are set out in Note 9.
c Acquisitions
Acquisitions are accounted for using the acquisition method based on the fair value of the consideration paid. Assets and liabilities are
measured at fair value and the purchase price is allocated to assets and liabilities based on these fair values.
Determining the fair values of assets and liabilities acquired involves the use of significant estimates and assumptions (including discount
rates, asset lives and recoverability). Assets and liabilities are measured at fair value and the value of freehold properties is typically
determined by qualified valuers on an open market basis.
d Tax
The Group is subject to income taxes in a number of jurisdictions. Management is required to make judgements and estimates in determining
the provisions for income taxes recognised in the consolidated financial statements.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
The Group is currently assessing the potential impact of other new and revised standards and interpretations issued by the International
Accounting Standards Board that will be effective from 1 January 2015 and beyond. Based on the analysis to date, the Group does not
anticipate that these will have a material impact on the Group’s overall results and financial position.
BUNZL PLC ANNUAL REPORT 2014
85
NOTES CONTINUED
3 SEGMENT ANALYSIS
Year ended 31 December 2014
Revenue
Adjusted operating profit/(loss)
Intangible amortisation
Acquisition related costs
Operating profit/(loss)
Finance income
Finance cost
Profit before income tax
Adjusted profit before income tax
Income tax
Profit for the year
Capital expenditure
Depreciation
Year ended 31 December 2013
Revenue
Adjusted operating profit/(loss)
Intangible amortisation
Acquisition related costs
Operating profit/(loss)
Finance income
Finance cost
Profit before income tax
Adjusted profit before income tax
Income tax
Profit for the year
Capital expenditure
Depreciation
North
America
£m
3,372.1
211.1
(13.4)
(5.6)
192.1
Continental
Europe
£m
1,146.3
103.2
(28.4)
(4.9)
69.9
UK &
Ireland
£m
1,078.5
80.1
(7.6)
(1.9)
70.6
Rest of the
World
£m
Corporate
£m
559.6
55.5
(12.5)
(13.7)
29.3
(20.1)
–
–
(20.1)
8.1
7.5
North
America
£m
3,401.7
213.6
(12.6)
(6.8)
194.2
7.7
9.4
Continental
Europe
£m
1,151.5
97.0
(29.1)
(3.5)
64.4
5.3
4.0
UK &
Ireland
£m
1,018.5
71.6
(7.1)
(1.6)
62.9
3.7
3.3
0.3
0.2
Rest of the
World
£m
Corporate
£m
526.0
51.2
(9.5)
(12.1)
29.6
(19.0)
–
–
(19.0)
11.2
7.8
8.7
11.1
4.3
4.0
2.3
2.8
–
0.2
Total
£m
6,156.5
429.8
(61.9)
(26.1)
341.8
4.0
(46.0)
299.8
387.8
(89.1)
210.7
25.1
24.4
Total
£m
6,097.7
414.4
(58.3)
(24.0)
332.1
2.6
(44.8)
289.9
372.2
(83.1)
206.8
26.5
25.9
Acquisition related costs for the year ended 31 December 2014 comprise transaction costs and expenses of £4.1m (2013: £8.4m), deferred
consideration payments of £21.0m (2013: £22.0m) relating to the retention of former owners of businesses acquired and a charge of £1.0m
(2013: £6.4m credit) from adjustments to previously estimated earn outs.
The Group is managed through four business areas based on geographic regions which represent the reporting segments under IFRS 8
‘Operating Segments’. The revenue presented relates to external customers. Sales between the business areas are not material. Each of the
business areas supplies a range of products to customers operating primarily in the foodservice, grocery, cleaning & hygiene, retail, safety
and healthcare market sectors. The performance of the four business areas is assessed by reference to adjusted operating profit and this
measure also represents the segment results for the purposes of reporting in accordance with IFRS 8. Debt and associated interest is
managed at a Group level and therefore has not been allocated across the business areas. In accordance with the provisions of IFRS 8,
the Company’s chief operating decision maker is the Board of Directors.
86 BUNZL PLC ANNUAL REPORT 2014
3 SEGMENT ANALYSIS CONTINUED
Within each of the four business areas, there are a number of further segments based on geography and market sector. These segments
have been aggregated into the four business areas as shown above due to the similarity between them in terms of economic characteristics
and also in respect of the nature of the products and services, types of customer and the methods used to distribute these products
and services.
There are no customers who account for more than 10% of Group revenue. Customer dependencies are regularly monitored.
Revenue by market sector
Foodservice
Grocery
Cleaning & hygiene
Retail
Safety
Healthcare
Other
2014
£m
1,709.6
1,610.8
787.4
724.4
687.0
435.6
201.7
6,156.5
The Other category covers a wide range of market sectors, none of which is sufficiently material to warrant separate disclosure.
At 31 December 2014
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
At 31 December 2013
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
North
America
£m
1,110.9
Continental
Europe
£m
879.9
UK &
Ireland
£m
659.6
Rest of
the World
£m
511.6
Unallocated
£m
1,110.9
879.9
659.6
511.6
395.5
247.9
288.2
395.5
247.9
288.2
North
America
£m
1,078.6
1,078.6
407.8
407.8
Continental
Europe
£m
920.6
920.6
246.9
246.9
UK &
Ireland
£m
624.4
624.4
270.2
270.2
96.3
96.3
Rest of
the World
£m
443.9
443.9
87.9
87.9
127.0
127.0
1,277.2
1,277.2
Unallocated
£m
108.2
108.2
1,223.0
1,223.0
Unallocated assets and liabilities include Corporate assets and liabilities, tax assets and liabilities, cash and deposits, borrowings,
derivative assets and liabilities and pension scheme assets and liabilities.
2013
£m
1,766.9
1,648.3
733.9
696.9
624.7
418.6
208.4
6,097.7
Total
£m
3,162.0
127.0
3,289.0
1,027.9
1,277.2
2,305.1
Total
£m
3,067.5
108.2
3,175.7
1,012.8
1,223.0
2,235.8
BUNZL PLC ANNUAL REPORT 2014
87
NOTES CONTINUED
4 ANALYSIS OF OPERATING INCOME AND EXPENSES
Cost of goods sold
Employee costs (see Note 21)
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Acquisition related costs
Loss on disposal of property, plant and equipment
Rentals payable under operating leases and subleases
Lease and sublease income
Other operating expenses
Net operating expenses
Auditors’ remuneration
Audit of these financial statements
Amounts receivable by the Company’s auditors and
their associates in respect of:
audit of financial statements of subsidiaries of
the Company
audit related assurance services
taxation compliance services
other tax advisory services
all other services
Total auditors’ remuneration
2014
£m
4,659.2
594.7
24.4
61.9
26.1
–
93.1
(0.3)
355.6
5,814.7
Overseas
£m
–
1.6
–
0.1
0.1
0.4
2.2
2013
£m
4,638.3
570.2
25.9
58.3
24.0
(0.2)
90.2
(0.8)
359.7
5,765.6
2013
Total
£m
0.3
2.0
0.1
0.1
0.1
0.5
3.1
UK
£m
0.3
0.3
0.1
–
0.1
0.4
1.2
Overseas
£m
–
1.5
–
–
0.2
0.2
1.9
2014
Total
£m
0.3
1.8
0.1
–
0.3
0.6
3.1
UK
£m
0.3
0.4
0.1
–
–
0.1
0.9
During 2014 the Company carried out a tender for the external audit following which PricewaterhouseCoopers LLP (‘PwC’) were appointed as
auditors of the Company in place of KPMG Audit Plc (‘KPMG’). Accordingly, the figures for auditors’ remuneration shown above relate to PwC
for 2014 and KPMG for 2013.
Non-audit services principally comprise tax services and further assurance services relating to pre-acquisition due diligence and other
duties carried out in respect of acquisitions and disposals of businesses. It is the Company’s policy to assess the services required on a case
by case basis to ensure that the most appropriate adviser is retained. As a result it is sometimes appropriate for this additional work to be
carried out by the Company’s auditors. However other firms are also used by the Company to provide non-audit services if such other firms
are thought to be best placed to undertake the work involved.
The Audit Committee, which consists entirely of independent non-executive directors, reviews and approves the level and type of non-audit
work which the external auditors perform, including the fees paid for such work, to ensure that the auditors’ objectivity and independence
are not compromised. Further information is set out in the Audit Committee’s report on pages 48 to 51.
5 FINANCE INCOME/(COST)
Interest on deposits
Interest income from foreign exchange contracts
Other finance income
Finance income
Interest on loans and overdrafts
Interest expense from foreign exchange contracts
Interest charge on retirement benefit obligations
Fair value (loss)/gain on US private placement notes in a hedge relationship
Fair value gain/(loss) on interest rate swaps in a hedge relationship
Foreign exchange (loss)/gain on intercompany funding
Foreign exchange gain/(loss) on external debt not in a hedge relationship
Other finance expense
Finance cost
2014
£m
1.6
1.4
1.0
4.0
(41.4)
(2.0)
(1.6)
(12.1)
12.1
(10.4)
9.8
(0.4)
(46.0)
2013
£m
0.8
1.4
0.4
2.6
(39.9)
(1.5)
(2.8)
2.0
(2.0)
10.9
(11.0)
(0.5)
(44.8)
The foreign exchange (loss)/gain on intercompany funding arises as a result of foreign currency intercompany loans and deposits. This is
substantially matched by external debt to minimise this foreign currency exposure in the income statement.
88 BUNZL PLC ANNUAL REPORT 2014
6 INCOME TAX
Current tax on profit
current year
prior years
Deferred tax on profit
current year
prior years
Income tax on profit
2014
£m
110.6
(5.1)
105.5
(17.1)
0.7
(16.4)
89.1
2013
£m
102.1
(10.2)
91.9
(6.7)
(2.1)
(8.8)
83.1
In assessing the underlying performance of the Group, management uses adjusted profit which excludes intangible amortisation and
acquisition related costs. Similarly the tax effect of these items is excluded in monitoring the tax rate on the adjusted profit of the Group
which is shown in the table below:
Income tax on profit
Tax associated with intangible amortisation and acquisition related costs
Tax on adjusted profit
Profit before income tax
Intangible amortisation and acquisition related costs
Adjusted profit before income tax
Reported tax rate
Tax rate on adjusted profit
Tax on other comprehensive income and equity
Actuarial (loss)/gain on pension schemes
Foreign currency translation differences for foreign operations
(Loss)/gain taken to equity as a result of designated effective
net investment hedges
Gain/(loss) recognised in cash flow hedge reserve
Movement from cash flow hedge reserve to income statement
Other comprehensive (expense)/income
Dividends
Issue of share capital
Employee trust shares
Share based payments
Other comprehensive (expense)/income and equity
Gross
2014
£m
(30.1)
(26.1)
(17.1)
3.9
0.1
(69.3)
(105.6)
7.7
(26.7)
7.9
(186.0)
Tax credit/
(charge)
2014
£m
8.0
–
1.4
(0.7)
(0.1)
8.6
–
–
–
10.7
19.3
Net
2014
£m
(22.1)
(26.1)
(15.7)
3.2
–
(60.7)
(105.6)
7.7
(26.7)
18.6
(166.7)
Gross
2013
£m
26.9
(68.6)
14.4
0.5
0.3
(26.5)
(91.8)
9.6
(50.1)
6.2
(152.6)
2014
£m
89.1
17.1
106.2
299.8
88.0
387.8
29.7%
27.4%
Tax credit/
(charge)
2013
£m
(10.1)
–
1.5
–
(0.2)
(8.8)
–
–
–
9.0
0.2
2013
£m
83.1
20.7
103.8
289.9
82.3
372.2
28.7%
27.9%
Net
2013
£m
16.8
(68.6)
15.9
0.5
0.1
(35.3)
(91.8)
9.6
(50.1)
15.2
(152.4)
BUNZL PLC ANNUAL REPORT 2014
89
NOTES CONTINUED
6 INCOME TAX CONTINUED
Factors affecting the tax charge for the year
The Group operates in many countries and is subject to income tax in many different jurisdictions. The expected tax rate is calculated as
a weighted average of the tax rates in the tax jurisdictions in which the Group operates. The adjustments to the tax charge at the weighted
average rate to determine the income tax on profit are as follows:
Profit before income tax
Tax charge at weighted average rate (2014: 31.5%; 2013: 31.4%)
Effects of:
adjustment in respect of prior years
non-taxable and non-deductible items
other
Income tax on profit
Deferred tax in the income statement
Accelerated capital allowances
Retirement benefit obligations
Intangible assets
Share based payments
Provisions
Other
Deferred tax on profit
2014
£m
299.8
94.5
(4.4)
(3.0)
2.0
89.1
2014
£m
(0.6)
–
(13.3)
(0.8)
0.5
(2.2)
(16.4)
2013
£m
289.9
91.0
(12.3)
1.6
2.8
83.1
2013
£m
1.0
(0.5)
(12.4)
(1.5)
1.5
3.1
(8.8)
UK tax rate change
Following the enactment of legislation in the UK, the corporation tax rate was reduced to 21% from 1 April 2014 and 20% from 1 April 2015.
7 EARNINGS PER SHARE
Profit for the year
Adjustment*
Adjusted profit for the year
Basic weighted average ordinary shares in issue (million)
Dilutive effect of employee share plans (million)
Diluted weighted average ordinary shares (million)
Basic earnings per share
Adjustment
Adjusted earnings per share
Diluted basic earnings per share
Adjustment
Adjusted diluted earnings per share
2014
£m
210.7
70.9
281.6
326.6
3.9
330.5
64.5p
21.7p
86.2p
63.7p
21.5p
85.2p
2013
£m
206.8
61.6
268.4
325.8
4.0
329.8
63.5p
18.9p
82.4p
62.7p
18.7p
81.4p
* Adjustment comprises intangible amortisation of £61.9m (2013: £58.3m), acquisition related costs of £26.1m (2013: £24.0m) and associated
tax credit of £17.1m (2013: £20.7m).
90 BUNZL PLC ANNUAL REPORT 2014
8 PROPERTY, PLANT AND EQUIPMENT
2014
Cost
Beginning of year
Acquisitions
Additions
Disposals
Currency translation
End of year
Depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Net book value at 31 December 2014
2013
Cost
Beginning of year
Acquisitions
Additions
Disposals
Currency translation
End of year
Depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Net book value at 31 December 2013
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
78.3
0.2
1.5
(0.2)
(1.0)
78.8
26.7
2.7
(0.1)
0.1
29.4
49.4
111.3
0.7
11.9
(4.1)
1.8
121.6
70.6
10.6
(3.5)
1.1
78.8
42.8
116.5
1.0
11.7
(4.5)
(2.5)
122.2
90.0
11.1
(4.0)
(1.9)
95.2
Total
£m
306.1
1.9
25.1
(8.8)
(1.7)
322.6
187.3
24.4
(7.6)
(0.7)
203.4
27.0
119.2
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
75.2
3.0
1.9
(1.7)
(0.1)
78.3
25.2
3.3
(1.2)
(0.6)
26.7
51.6
98.9
4.4
14.5
(2.9)
(3.6)
111.3
64.5
10.9
(2.7)
(2.1)
70.6
40.7
109.4
2.2
10.1
(3.5)
(1.7)
116.5
82.7
11.7
(3.2)
(1.2)
90.0
26.5
Total
£m
283.5
9.6
26.5
(8.1)
(5.4)
306.1
172.4
25.9
(7.1)
(3.9)
187.3
118.8
The net book value of property, plant and equipment includes assets held under finance leases and hire purchase contracts totalling £4.4m
(2013: £8.7m). Accumulated depreciation of these assets was £2.5m (2013: £5.8m). Future capital expenditure at 31 December 2014 consisted
of commitments not provided for of £1.0m (2013: £0.6m).
BUNZL PLC ANNUAL REPORT 2014
91
NOTES CONTINUED
9 INTANGIBLE ASSETS
Goodwill
Beginning of year
Acquisitions
Currency translation
End of year
Customer relationships
Cost
Beginning of year
Acquisitions
Currency translation
End of year
Amortisation
Beginning of year
Charge in year
Currency translation
End of year
Net book value at 31 December
Total net book value of intangible assets at 31 December
2014
£m
901.0
36.2
(14.9)
922.3
2014
£m
887.2
76.0
(24.3)
938.9
331.3
61.9
(10.8)
382.4
2013
£m
823.2
97.4
(19.6)
901.0
2013
£m
793.1
111.1
(17.0)
887.2
275.7
58.3
(2.7)
331.3
556.5
555.9
1,478.8
1,456.9
Both goodwill and customer relationships have been acquired as part of business combinations. Customer relationships are amortised over
their estimated useful lives which range from 10 to 19 years.
Impairment tests
The carrying amount of goodwill is allocated across cash generating units (‘CGUs’) and is tested annually for impairment.
A description of the Group’s principal activities is set out in the Chief Executive’s review. There is no significant difference in the nature of
activities across different geographies. The identification of CGUs reflects the way in which the business is managed on a geographical basis.
Given the similar nature of the activities of each CGU, a consistent methodology is applied across the Group in assessing CGU recoverable
amounts. The recoverable amount is the higher of the value in use and the fair value less the costs to sell. The value in use is the present
value of the cash flows expected to be generated by the CGU over a projection period together with a terminal value. The projection period
is the time period over which future cash flows are predicted. The Group’s methodology is to use a projection period of five years being the
maximum period over which detailed future cash flows for each CGU are prepared. For periods after this five year period, the methodology
applies a long term growth rate to derive a terminal value. Cash flow expectations exclude any future cash flows that may arise from
restructuring or other enhancements to the cash generating activities of the CGU and reflect management’s expectations of the range
of economic conditions that may exist over the projection period.
The value in use calculations are principally sensitive to revenue growth, including any significant changes to the customer base,
achievability of future margins and the discount rate used in the present value calculation. The information used for valuation purposes
takes into consideration past experience and the current economic environment with regard to customer attrition rates and additions
to the customer base, the ability to introduce price increases and new products and experience in controlling the underlying cost base.
This provides a long term growth rate which is consistent with the geographic segments in which the Group operates and management’s
assessment of future operating performance and market share movements. The growth rate has been calculated based principally
on expected inflation rates of the relevant economies.
At 31 December 2014 North America, France Hygiene and UK Hospitality carried a significant amount of goodwill in comparison with the total
value of the Group’s goodwill. At 31 December 2014 the carrying value of goodwill in respect of North America was £245.2m (2013: £233.5m),
France Hygiene was £76.5m (2013: £82.2m) and UK Hospitality was £62.5m (2013: £62.5m). At 31 December 2014 the aggregate amount
of goodwill attributable to the Group’s CGUs, excluding North America, France Hygiene and UK Hospitality, was £538.1m (2013: £522.8m).
The remaining goodwill relates to CGUs which are not individually significant.
For North America, France Hygiene and UK Hospitality the weighted average long term growth rate used in 2014 was 2.5% (2013: 2.5%).
A discount rate of 9% (2013: 9%) has been applied to the value in use calculations representing a pre-tax rate reflecting market assessments
of the time value of money at the balance sheet date. Similar assumptions have been applied to the other CGUs but where appropriate the
directors have considered alternative market risk assumptions to reflect the specific conditions arising in individual countries (with long term
growth rates ranging from 2.5%–7.2% and discount rates ranging from 9%–18%).
92 BUNZL PLC ANNUAL REPORT 2014
9 INTANGIBLE ASSETS CONTINUED
Sensitivity to changes in key assumptions
Impairment testing is dependent on management’s estimates and judgements, particularly as they relate to the forecasting of future cash
flows, the discount rates selected and expected long term growth rates. A key assumption on which value in use calculations are dependent
relates to revenue growth including the impact of changes to the underlying customer base. This assumption is sensitive to customer
attrition and the rate at which new customer relationships are introduced and established.
Based on past experience and taking into account current market conditions, management has concluded that it is reasonable to assume
that there will be no material deterioration in the customer base over the projection period which will significantly impact future cash flows
and that no reasonably possible change in key assumptions would result in impairment in any of the Group’s CGUs. Should such a change
occur, this would represent a triggering event to indicate that an impairment review may be necessary. In accordance with IAS 36
‘Impairment of Assets’, a full impairment review would then be undertaken on the relevant assets within the CGU. Any such changes
are monitored through normal monthly procedures.
10 INVENTORIES
Goods for resale
2014
£m
705.3
2013
£m
645.1
£4.7m was written off inventories during the year (2013: £2.9m) due to obsolescence or damage. The inventories provision at 31 December
2014 was £60.5m (2013: £58.3m).
11 TRADE AND OTHER RECEIVABLES
Trade receivables
Prepayments and other receivables
The ageing of trade receivables at 31 December was:
Current
0–30 days overdue
31–90 days overdue
Over 90 days overdue
Gross
2014
£m
568.0
103.0
32.3
16.0
719.3
Provision
2014
£m
0.7
0.3
1.4
16.0
18.4
The movement in the provision for doubtful debts in respect of trade receivables during the year was as follows:
Beginning of year
Acquisitions
Charge
Utilised and unused
Currency translation
End of year
2014
£m
700.9
168.9
869.8
Gross
2013
£m
542.9
126.0
28.4
13.8
711.1
2014
£m
15.9
1.0
4.1
(2.0)
(0.6)
18.4
2013
£m
695.2
167.8
863.0
Provision
2013
£m
0.4
0.4
1.3
13.8
15.9
2013
£m
14.9
2.0
1.9
(2.6)
(0.3)
15.9
BUNZL PLC ANNUAL REPORT 2014
93
NOTES CONTINUED
12 TRADE AND OTHER PAYABLES – CURRENT
Trade payables
Other tax and social security contributions
Other payables
Accruals and deferred income
2014
£m
697.2
23.8
130.8
166.6
1,018.4
2013
£m
682.9
23.8
140.1
157.6
1,004.4
13 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Group monitors the return on average operating capital employed and the return on invested capital as
well as the level of total shareholders’ equity and the amount of dividends paid to ordinary shareholders. For the year ended 31 December
2014, the return on average operating capital employed was 57.7% (2013: 56.9%), the return on invested capital was 17.6% (2013: 17.9%),
the level of total shareholders’ equity at 31 December 2014 was £983.9m (2013: £939.9m) and the amount of dividends paid in the year
ended 31 December 2014 was £105.6m (2013: £91.8m).
The Group funds its operations through a mixture of shareholders’ equity and bank and capital market borrowings. All of the 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 Group has a portfolio of competitively priced borrowing facilities to meet the demands of the business
over time and, in order to do so, the Group arranges a mixture of borrowings from different sources with a variety of maturity dates.
The Group’s businesses provide a high and consistent level of cash generation which helps fund future development and growth. The Group
seeks to maintain an appropriate balance between the higher returns that might be possible with higher levels of borrowings and the
advantages and security afforded by a sound capital position.
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 and foreign currency
risks. Treasury policies have been approved by the Board and cover the nature of the exposure to be hedged, the types of financial
instruments that may be employed and the criteria for investing and borrowing cash. The Group uses derivatives to manage its foreign
currency and interest rate risks arising from underlying business activities. No transactions of a speculative nature are undertaken. The
treasury department is subject to periodic independent review by the internal audit department. Underlying policy assumptions and activities
are periodically reviewed by the executive directors and the Board. Controls over exposure changes and transaction authenticity are in place.
Hedge accounting
The Group designates derivatives which qualify as hedges for accounting purposes as either (a) a hedge of the fair value of a recognised
asset or liability; (b) a hedge of the cash flow risk resulting from changes in interest rates or foreign exchange rates; or (c) a hedge of a net
investment in a foreign operation. The accounting treatment for hedges is set out in the financial instruments accounting policy in Note 2.
The Group tests the effectiveness of hedges on a prospective and retrospective basis to ensure compliance with IAS 39. Methods for testing
effectiveness include dollar offset, critical terms and hypothetical derivatives.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. 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 debt covenants is monitored.
During 2014 all covenants have been complied with.
The Group has substantial borrowing facilities available comprising multi-currency credit facilities from the Group’s banks and US private
placement notes denominated in US dollars, sterling and euros. Fixed interest US private placement notes of $252.0m and €35.0m were
drawn down by the Group during 2014. At 31 December 2014 the total US private placement notes outstanding were £793.2m (2013: £607.1m)
with maturities ranging from 2015 to 2026. During the year the Group also refinanced or agreed new banking facilities totalling £358.1m.
The Group’s committed bank facilities mature between 2016 and 2020. At 31 December 2014 the available committed bank facilities totalled
£917.0m (2013: £886.7m) of which £136.5m (2013: £273.1m) was drawn down.
94 BUNZL PLC ANNUAL REPORT 2014
13 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
The undrawn committed bank facilities available at 31 December were as follows:
Expiring within one year
Expiring after one year but within two years
Expiring after two years
2014
£m
–
90.0
690.5
780.5
2013
£m
40.0
245.8
327.8
613.6
In addition the Group maintains overdraft and uncommitted facilities to provide short term flexibility. At 31 December 2014 loans totalling
£0.8m were secured by fixed charges on property (2013: £0.8m).
The contractual maturity profile of the Group’s financial assets and liabilities at 31 December is set out in the tables below. The amounts
disclosed are the contractual undiscounted cash flows and therefore include interest cash flows (forecast using LIBOR interest rates at
31 December in the case of floating rate financial assets and liabilities). Derivative assets and liabilities have been included within the tables
since they predominantly relate to derivatives which are used to manage the interest cash flows on the Group’s debt. Bank loans have been
drawn under committed facilities and can be refinanced on maturity from these same facilities. Accordingly they have been aged based on
the maturity dates of the underlying facilities.
The tables below also compare the fair value and carrying amounts for financial assets and liabilities:
2014
Financial assets:
Cash and deposits
Loans and receivables
Trade receivables
Derivative financial instruments
Interest rate swaps
Cross currency interest rate swaps
Foreign exchange contracts for
net investment hedging
Foreign exchange contracts for
cash flow hedging
Financial liabilities:
Financial liabilities at amortised cost
Bank loans
US private placement notes
Bank overdrafts
Other interest bearing loans and
borrowings
Finance lease creditors
Trade payables
Other current payables
Non-current payables
Financial liabilities at fair value
US private placement notes
Derivative financial instruments
Cross currency interest rate swaps
Foreign exchange contracts for net
investment hedging
Foreign exchange contracts for
cash flow hedging
Fair value
£m
Carrying
amount
£m
Total
contractual
cash flows
£m
Within one
year
£m
82.4
82.4
82.4
82.4
700.9
700.9
700.9
700.9
16.3
2.5
7.0
3.1
812.2
(138.5)
(681.8)
(28.1)
(0.2)
(1.1)
(697.2)
(143.9)
(16.7)
16.3
2.5
7.0
3.1
812.2
(138.5)
(635.7)
(28.1)
(0.2)
(1.1)
(697.2)
(143.9)
(16.7)
57.1
2.5
7.0
3.1
853.0
(141.5)
(774.5)
(28.1)
(0.2)
(1.5)
(697.2)
(143.9)
(16.7)
(173.2)
(173.6)
(237.3)
(2.8)
(5.6)
(2.8)
(5.6)
(2.8)
(5.6)
6.9
2.5
7.0
3.1
802.8
(2.9)
(65.5)
(28.1)
(0.2)
(0.4)
(697.2)
(143.9)
–
(6.7)
(2.8)
(5.6)
Contractual cash inflows/(outflows)
After
two years
but within
five years
£m
After
more than
five years
£m
After
one year
but within
two years
£m
–
–
6.1
–
–
–
6.1
(88.4)
(135.1)
–
–
(0.7)
–
–
(16.7)
–
–
14.9
–
–
–
14.9
(50.2)
(215.2)
–
–
(0.4)
–
–
–
–
–
29.2
–
–
–
29.2
–
(358.7)
–
–
–
–
–
–
(6.7)
(20.2)
(203.7)
–
–
–
–
–
–
(0.1)
(1,889.2)
(0.1)
(1,843.5)
(0.1)
(2,049.4)
(0.1)
(953.4)
–
(247.6)
–
(286.0)
–
(562.4)
BUNZL PLC ANNUAL REPORT 2014
95
NOTES CONTINUED
13 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
2013
Financial assets:
Cash and deposits
Loans and receivables
Trade receivables
Derivative financial instruments
Interest rate swaps
Cross currency interest rate swaps
Foreign exchange contracts for
net investment hedging
Foreign exchange contracts for
cash flow hedging
Financial liabilities:
Financial liabilities at amortised cost
Bank loans
US private placement notes
Bank overdrafts
Other interest bearing loans and
borrowings
Finance lease creditors
Trade payables
Other current payables
Non-current payables
Derivative financial instruments
Cross currency interest rate swaps
Foreign exchange contracts for net
investment hedging
Foreign exchange contracts for
cash flow hedging
Fair value
£m
Carrying
amount
£m
Total
contractual
cash flows
£m
Within one
year
£m
73.1
73.1
73.1
73.1
695.2
695.2
695.2
695.2
6.0
0.5
3.0
0.8
778.6
(285.5)
(635.7)
(26.3)
(0.2)
(1.1)
(682.9)
(151.1)
(22.7)
(9.7)
(2.8)
6.0
0.5
3.0
0.8
778.6
(285.4)
(607.1)
(26.3)
(0.2)
(1.1)
(682.9)
(151.1)
(22.7)
(9.7)
(2.8)
6.4
0.7
3.0
0.8
779.2
(294.6)
(761.3)
(26.3)
(0.2)
(1.1)
(682.9)
(151.1)
(22.7)
(10.2)
(2.8)
(1.5)
(1,819.5)
(1.5)
(1,790.8)
(1.5)
(1,954.7)
2.1
0.4
3.0
0.8
774.6
(14.8)
(58.2)
(26.3)
–
(0.4)
(682.9)
(151.1)
–
(5.7)
(2.8)
(1.5)
(943.7)
Contractual cash inflows/(outflows)
After
one year
but within
two years
£m
After
two years
but within
five years
£m
After
more than
five years
£m
–
–
2.1
0.3
–
–
2.4
(4.1)
(61.2)
–
(0.2)
(0.2)
–
–
(22.7)
(4.5)
–
–
(92.9)
–
–
2.2
–
–
–
2.2
–
–
–
–
–
–
–
(275.7)
(258.8)
–
–
(383.1)
–
–
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
(535.0)
–
(383.1)
All financial assets and liabilities stated at fair value in the tables above have carrying amounts where the fair value component is, and
has been throughout the year, a level two fair value measurement. Level two fair value measurements use inputs other than quoted prices
that are observable for the relevant asset or liability, either directly or indirectly. The fair values of both financial assets and liabilities are
calculated by discounting expected future cash flows using observable inputs and translating at the appropriate balance sheet date exchange
rates. The Group has taken into account its own credit risk in the valuation of financial assets and its counterparties’ credit risk in the
valuation of financial liabilities carried at fair value.
Fair value gains and losses on interest rate caps impact the income statement immediately while all other financial assets and liabilities
stated at fair value are in hedging relationships.
96 BUNZL PLC ANNUAL REPORT 2014
13 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
Offsetting of financial assets and liabilities
The following table sets out the Group’s financial assets and financial liabilities that are subject to counterparty offsetting or master netting
agreements. The master netting agreements regulate settlement amounts in the event either party defaults on their obligations.
2014
Derivative assets
Derivative liabilities
Cash and cash equivalents
Bank overdrafts
2013
Derivative assets
Derivative liabilities
Cash and cash equivalents
Bank overdrafts
Gross amounts of
recognised financial
assets and liabilities
£m
33.9
(13.5)
298.4
(244.1)
74.7
Amounts offset in
the balance sheet
£m
(5.0)
5.0
(216.0)
216.0
–
Net amounts
recognised in the
balance sheet
£m
28.9
(8.5)
82.4
(28.1)
74.7
Amounts not
offset in
balance sheet
£m
–
–
–
–
–
17.7
(21.1)
116.7
(69.9)
43.4
(7.1)
7.1
(43.6)
43.6
–
10.6
(14.0)
73.1
(26.3)
43.4
–
–
–
–
–
Net amounts
£m
28.9
(8.5)
82.4
(28.1)
74.7
10.6
(14.0)
73.1
(26.3)
43.4
Interest rate risk
The Group is funded by a mixture of fixed and floating rate debt. In addition, interest rate swaps and interest rate caps are used to manage
the interest rate risk profile. At 31 December 2014 fixed rate debt of £635.7m (2013: £607.1m) related to fixed rate US private placement notes
denominated in US dollars, sterling and euros was stated at amortised cost with maturities ranging from 2015 to 2024.
At 31 December 2014, floating rate debt was comprised of £136.5m floating rate bank loans (2013: £273.1m) and £173.6m of fixed rate US
private placement notes with maturities in 2025 and 2026 which have been swapped to floating rates using interest rate swaps (2013: £nil).
Bank loans are drawn for various periods of up to three months at interest rates linked to LIBOR. The interest rate swaps reprice every
three months.
The interest rate risk on the floating rate debt is managed using interest rate options. Borrowings with a notional principal of £45.5m were
capped at 31 December 2014 (2013: £60.0m). Hedge accounting is not applied to the interest rate caps since the majority of their value is
related to time value. The strike rates of these options are based on LIBOR repricing every three months.
After taking account of hedge relationships, a change of 1% in the interest rate forward curves on 31 December would have increased/
(decreased) profit before tax and equity for the year by the amounts shown below as a result of changes in the fair values of derivative
assets and liabilities at that date:
2014
2013
Impact on profit before tax
–1%
£m
+1%
£m
Impact on equity
–1%
£m
+1%
£m
1.4
0.6
–
(0.1)
1.4
0.6
–
(0.1)
Foreign currency risk
The majority of the Group’s sales are made and income is earned in US dollars, euros and other foreign currencies. The Group does not
hedge the impact of exchange rate movements arising on translation of earnings into sterling at average exchange rates.
The following significant exchange rates applied during the year:
US dollar
Euro
Average rate
Closing rate
2014
1.65
1.24
2013
1.56
1.18
2014
1.56
1.29
2013
1.66
1.20
For the year ended 31 December 2014, a movement of one cent in the US dollar and euro average exchange rates would have changed profit
before income tax by £0.9m and £0.4m respectively (2013: £1.0m and £0.3m) and adjusted profit before income tax by £1.0m and £0.6m
respectively (2013: £1.1m and £0.6m).
BUNZL PLC ANNUAL REPORT 2014
97
NOTES CONTINUED
13 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
The majority of the Group’s transactions are carried out in the respective functional currencies of the Group’s operations and so transaction
exposures are usually relatively limited. Where they do occur the Group’s policy is to hedge significant exposures of firm commitments for
a period of up to one year as soon as they are committed using forward foreign exchange contracts and these are designated as cash flow
hedges. However, the economic impact of foreign exchange on the value of uncommitted future purchases and sales is not hedged. As a
result, sudden and significant movements in foreign exchange rates can impact profit margins where there is a delay in passing on to
customers the resulting price increases. For the year ended 31 December 2014 all foreign exchange cash flow hedges were effective
with a gain of £3.0m recognised in equity (2013: loss of £0.7m) which will affect the income statement during 2015.
The majority of the Group’s borrowings are effectively denominated in US dollars, sterling and euros, aligning them to the respective
functional currencies of the component parts of the Group’s EBITDA. This currency profile is achieved using short term foreign exchange
contracts, long term cross currency interest rate swaps and foreign currency debt. This currency composition minimises the impact of
foreign exchange rates on the ratio of net debt to EBITDA.
Cross currency interest rate swaps in a cash flow hedge relationship were effective during the year with no gain or loss (2013: loss of £0.4m)
being recognised in equity which will affect the income statement in 2015.
The currency profile of the Group’s net debt at 31 December is set out in the table below:
US dollar
Sterling
Euro
Other
2014
£m
398.6
261.7
133.9
83.2
877.4
2013
£m
388.2
292.7
149.9
18.7
849.5
If a 10% strengthening or weakening of sterling had taken place on 31 December it would have increased/(decreased) profit before tax and
equity for the year by the amounts shown below. The impact of this translation is much greater on equity than it is on profit before tax since
equity is translated using the closing exchange rates and profit before tax is translated using the average exchange rates for the year. As a
result the value of equity is more sensitive than the value of profit before tax to a movement in exchange rates on 31 December and the
resulting movement in profit before tax is due solely to the translation effect on monetary items. This analysis assumes that all other
variables, and in particular interest rates, remain constant.
2014
2013
Impact on profit before tax
–10%
£m
(1.4)
(0.8)
+10%
£m
1.2
0.7
Impact on equity
–10%
£m
92.4
87.5
+10%
£m
(75.6)
(71.6)
Credit risk
Credit risk is the risk of loss in relation to a financial asset due to non-payment by the relevant counterparty. The Group’s objective is to
reduce its exposure to counterparty default by restricting the type of counterparty it deals with and by employing an appropriate policy
in relation to the collection of financial assets.
The Group’s principal financial assets are cash and deposits, derivative financial instruments and trade receivables which represent
the Group’s maximum exposure to credit risk in relation to financial assets. The maximum exposure to credit risk for cash and deposits
(Note 23), derivative financial instruments (see page 95) and trade and other receivables (Note 11) is their carrying amount.
Dealings are restricted to those banks with the relevant combination of geographic presence and investment grade rating. The Group
continually monitors the credit ratings of its counterparties and the credit exposure to each counterparty.
For trade and other receivables, the amounts represented in the balance sheet are net of allowances for doubtful receivables, estimated
by the Group’s management based on prior experience and their assessment of the current economic environment. Note 11 sets out an
analysis of trade and other receivables and the provision for doubtful debts in respect of trade receivables.
At the balance sheet date there were no significant concentrations of credit risk.
98 BUNZL PLC ANNUAL REPORT 2014
14 PROVISIONS
Current
Non-current
Beginning of year
Charge
Acquisitions
Utilised or released
Currency translation
End of year
Properties
2014
£m
16.5
0.8
0.5
(3.5)
(0.1)
14.2
Claims
2014
£m
19.3
0.5
1.7
(3.1)
(1.0)
17.4
Total
2014
£m
35.8
1.3
2.2
(6.6)
(1.1)
31.6
Properties
2013
£m
17.1
0.5
2.6
(3.5)
(0.2)
16.5
2014
£m
10.7
20.9
31.6
Claims
2013
£m
25.5
2.4
1.8
(9.9)
(0.5)
19.3
2013
£m
12.0
23.8
35.8
Total
2013
£m
42.6
2.9
4.4
(13.4)
(0.7)
35.8
The properties provision includes provisions for vacant properties where amounts are held against liabilities for onerous lease
commitments, repairs and dilapidations. These provisions cover the relevant periods of the lease agreements, up to the earliest possible
termination date, which typically extend from one to 10 years.
The Group has provisions for expected legal, environmental and other claims based on management’s best estimate at the balance sheet
date of the probable loss likely to be incurred. It expects that these amounts, which are based on detailed plans or other known factors and
take account of past experience for similar items, will be settled within the next one to five years.
The Group is a defendant in a number of legal proceedings incidental to its operations. While any litigation has an element of uncertainty,
management does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material adverse
effect on the Group’s financial condition or results of operations.
15 DEFERRED TAX
Accelerated capital allowances
Defined benefit obligations
Intangible assets
Share based payments
Provisions
Inventories
Other
Deferred tax asset/(liability)
Set-off of tax
Net deferred tax asset/(liability)
Asset
£m
1.7
22.4
–
16.2
12.1
8.6
7.5
68.5
(64.6)
3.9
Liability
£m
(9.1)
–
(148.4)
–
(1.2)
(16.7)
(5.2)
(180.6)
64.6
(116.0)
2014
Net
£m
(7.4)
22.4
(148.4)
16.2
10.9
(8.1)
2.3
(112.1)
–
(112.1)
Asset
£m
1.4
14.4
–
13.6
14.0
9.2
5.9
58.5
(51.0)
7.5
Liability
£m
(7.7)
–
(147.5)
–
(1.2)
(15.5)
(8.6)
(180.5)
51.0
(129.5)
2013
Net
£m
(6.3)
14.4
(147.5)
13.6
12.8
(6.3)
(2.7)
(122.0)
–
(122.0)
Except as noted below, deferred tax is calculated in full on temporary differences under the liability method using the tax rate of the country
of operation.
The Company is able to control the dividend policy of its subsidiaries and, therefore, the timing of the remittance of the undistributed earnings
of overseas subsidiaries. In general, the Company has determined either that such earnings will not be distributed in the foreseeable future
or, where there are plans to remit those earnings, no tax liability is expected to arise. A deferred tax liability of £3.0m (2013: £3.0m) has been
recognised in exceptional cases where distribution of earnings is both planned and expected to result in a tax liability.
Deferred tax assets in respect of temporary differences have only been recognised in respect of tax losses and other temporary differences
where it is probable that these assets will be realised. No deferred tax asset has been recognised in respect of unutilised tax losses of £8.6m
(2013: £9.0m).
No deferred tax has been recognised in respect of unutilised capital losses of £96.2m (2013: £96.1m) as it is not considered probable that
there will be suitable future taxable profits against which they can be utilised.
BUNZL PLC ANNUAL REPORT 2014
99
NOTES CONTINUED
15 DEFERRED TAX CONTINUED
The movement on the net deferred tax liability is shown below:
Beginning of year
Acquisitions
Credit to income statement
Recognised in other comprehensive income and equity
Reclassification to current tax
Currency translation
End of year
16 SHARE CAPITAL AND SHARE BASED PAYMENTS
Issued and fully paid ordinary shares of 321⁄7p each
Number ordinary shares in issue and fully paid
Beginning of year
Cancelled – treasury shares
Issued – option exercises
End of year
2014
£m
122.0
12.6
(16.4)
(9.8)
4.7
(1.0)
112.1
2014
£m
107.6
2013
£m
116.7
13.2
(8.8)
3.5
(1.6)
(1.0)
122.0
2013
£m
107.2
333,515,233 355,420,634
(23,325,000)
1,419,599
333,515,233
–
1,191,643
334,706,876
The Company operates the following share plans for the benefit of employees of the Company and its subsidiaries relating to the acquisition
of shares in the Company. Further details of the share plans operated by the Company are set out in the Directors’ remuneration report.
Sharesave Scheme (2011)
The Sharesave Scheme (2011), approved by shareholders at the 2011 Annual General Meeting, is an HM Revenue & Customs (‘HMRC’) tax
advantaged scheme in the UK and is open to all UK employees, including UK based executive directors, who have completed at least three
months of continuous service. It is linked to a contract for monthly savings of up to £250 per month over a period of either three or five years.
Under the Sharesave Scheme (2011) options are granted to participating employees at a discount of up to 20% of the market price prevailing
shortly before the invitation to apply for the option. Options are normally exercisable either three or five years after they have been granted.
The Sharesave Scheme (2011) replaced the Sharesave Scheme (2001) which was approved by shareholders at the 2001 Annual General
Meeting. The Sharesave Scheme (2001) operates on a similar basis to the Sharesave Scheme (2011). Although there are a number of options
outstanding under the Sharesave Scheme (2001), no further options have been granted under this Scheme since it expired in May 2011.
International Sharesave Plan
The International Sharesave Plan was introduced following the approval of the Sharesave Scheme (2001) by shareholders and was extended
following the approval of the Sharesave Scheme (2011). The plan operates on a similar basis to both the Sharesave Scheme (2001) and the
Sharesave Scheme (2011) as described above except that it is linked to a contract for monthly savings of approximately £250 per month
(or the equivalent in other currencies) over a period of three years.
Irish Sharesave Plan
The Irish Sharesave Plan was also introduced following the approval of the Sharesave Scheme (2001) by shareholders and was extended
following the approval of the Sharesave Scheme (2011). It is approved by the Irish Revenue Commissioners and operates on a similar basis
to both the Sharesave Scheme (2001) and the Sharesave Scheme (2011) as described above except that it is linked to a contract for monthly
savings of the euro equivalent of approximately £250 per month over a period of three years.
100 BUNZL PLC ANNUAL REPORT 2014
16 SHARE CAPITAL AND SHARE BASED PAYMENTS CONTINUED
Long Term Incentive Plan 2004 (‘2004 LTIP’)
The 2004 LTIP was approved by shareholders at the 2004 Annual General Meeting and expired in May 2014. No further share options
or performance share awards have been granted under the 2004 LTIP since that date. The 2004 LTIP is divided into two parts.
Part A of the 2004 LTIP allowed the Remuneration Committee of the Board to grant market priced executive share options. In normal
circumstances options granted are only exercisable if the relevant performance condition has been satisfied. Share options granted up to
April 2014 have a performance condition attached based on the Company’s adjusted earnings per share growth exceeding UK RPI inflation
over three financial years by a specified margin.
Part B of the 2004 LTIP allowed the Remuneration Committee of the Board to grant performance share awards which are conditional rights
to receive shares in the Company for nil consideration. A performance share award will normally vest (i.e. become exercisable) on the third
anniversary of its grant to the extent that the applicable performance condition has been satisfied. The extent to which performance share
awards granted vest is normally partly subject to the Company’s total shareholder return performance relative to a comparator group of
companies over a three year period and partly subject to the Company’s adjusted earnings per share growth exceeding UK RPI inflation
over three years by a specified margin.
Long Term Incentive Plan 2014 (‘2014 LTIP’)
The 2014 LTIP was approved by shareholders at the 2014 Annual General Meeting and replaced the 2004 LTIP. The 2014 LTIP is also divided
into two parts.
Part A of the 2014 LTIP allows the Remuneration Committee of the Board to grant market priced executive share options. In normal
circumstances options granted are only exercisable if the relevant performance condition has been satisfied. The performance condition
for the share options granted to date is based on the Company’s adjusted earnings per share growth over three financial years meeting
certain specified targets.
Part B of the 2014 LTIP allows the Remuneration Committee of the Board to grant performance share awards which are conditional rights
to receive shares in the Company for nil consideration. A performance share award will normally vest (i.e. become exercisable) on the third
anniversary of its grant to the extent that the applicable performance condition has been satisfied. The extent to which performance share
awards granted vest is normally partly subject to the Company’s total shareholder return performance relative to a comparator group of
companies over a three year period and partly subject to the Company’s adjusted earnings per share growth over three financial years
meeting certain specified targets.
Investment in own shares
The Company holds a number of its ordinary shares in an employee benefit trust. The principal purpose of this trust is to hold shares in
the Company for subsequent transfer to certain senior employees and executive directors relating to options granted and awards made
in respect of market purchase shares under the LTIP and the Deferred Annual Share Bonus Scheme (‘DASBS’). Details of such plans are
set out above and in the Directors’ remuneration report. The assets, liabilities and expenditure of the trust have been incorporated in the
consolidated financial statements. Finance costs and administration charges are included in the income statement on an accruals basis.
At 31 December 2014 the trust held 6,527,329 (2013: 6,895,539) shares, upon which dividends have been waived, with an aggregate nominal
value of £2.1m (2013: £2.2m) and market value of £115.1m (2013: £100.0m).
IFRS 2 disclosures
Options granted during the year have been valued using a stochastic model. The fair value per option granted during the year and the
assumptions used in the calculations are as follows:
Grant date
Share price at grant date (£)
Exercise price (£)
Options granted during the year (shares)
Vesting period (years)
Expected volatility (%)
Option life (years)
Expected life (years)
Risk free rate of return (%)
Expected dividends expressed as a dividend yield (%)
Fair value per option (£)
2014
2013
27.02.14–06.10.14
15.69–16.46
nil–16.41
3,367,183
3–5
16–21
3–10
3.0–6.0
1.1–1.8
1.9–2.1
1.88–4.85
28.02.13–07.10.13
12.61–13.61
nil–13.75
3,569,284
3–5
18–22
3–10
3.0–6.1
0.3–2.0
2.0–2.2
1.43–3.29
The expected volatility is based on historical volatility over the last three to seven years. The expected life is the average expected period
to exercise. The risk free rate of return is the yield on zero coupon UK government bonds of a term consistent with the assumed option life.
The weighted average share price for options exercised by employees of the Company and its subsidiaries during the year was £16.43
(2013: £13.24). The total charge for the year relating to share based payments was £7.9m (2013: £6.2m). After tax the total charge was
£5.3m (2013: £3.7m).
BUNZL PLC ANNUAL REPORT 2014 101
NOTES CONTINUED
16 SHARE CAPITAL AND SHARE BASED PAYMENTS CONTINUED
Details of share options and performance share awards which have been granted and exercised, those which have lapsed during 2014 and
those outstanding and available to exercise at 31 December 2014, in each case in respect of all options and awards, whether over new issue
or market purchase shares, under the Sharesave Scheme (2001), Sharesave Scheme (2011), International Sharesave Plan, Irish Sharesave
Plan, 2004 LTIP and 2014 LTIP are set out in the following table:
Options
outstanding
at 01.01.14
Grants/awards
2014
Exercises
Lapses*
2014
2014
Options
outstanding
Options
available
to exercise
at 31.12.14
31.12.14
Number
Number
Price (p)
Number
Price (p) Number
Number
Price (p)
Number
308,257
–
–
239,369
452-580
4,849
64,039
542-580
4,550
453,484
220,258
1,253
9,010
770-1,253
47,474
617,258
770-1,253
4,133
78,107
8,063
162,829
22,811
12,526,642
1,849,391
1,253
1,253
274,980 1,566-1,597
nil
205,175
– 2,253,400 1,638-1,641
nil
–
15,323,414
327,200
3,367,183
4,850
–
580-780
–
2,133
913
3,402,492 428.75-1,375 172,700
97,997
38,300
–
233,953
29,961
9,226,430
1,322,585
2,215,100
327,200
364,366 14,036,526
633,984
–
–
4,289,705
nil
–
–
770-1,253
770-1,253
564-1,597
nil
1,638-1,641
nil
–
–
3,522,132
89,960
–
–
3,620,775
Sharesave Scheme
(2001)
Sharesave Scheme
(2011)
International
Sharesave Plan
Irish Sharesave Plan
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
*Share option lapses relate to those which have either been forfeited or have expired during the year.
The weighted average fair value and the weighted average remaining contractual lives of share options and performance share awards are
set out below:
Weighted
average
fair value
of options
granted (£)
Weighted
average
remaining
contractual
life (years)
Sharesave Scheme (2001) and (2011)
International Sharesave Plan
Irish Sharesave Plan
2004 and 2014 LTIP Part A
2004 and 2014 LTIP Part B
The outstanding share options and performance share awards are exercis able at various dates up to September 2024.
17 DIVIDENDS
2012 interim
2012 final
2013 interim
2013 final
Total
Total dividends per share for the year to which they relate are:
Interim
Final
Total
2.44
1.88
1.88
2.32
4.58
2014
£m
32.6
73.0
105.6
2.60
2.25
2.25
2.61
3.81
2013
£m
28.8
63.0
91.8
2014
11.0p
24.5p
35.5p
Per share
2013
10.0p
22.4p
32.4p
The 2014 interim dividend of 11.0p per share was paid on 2 January 2015 and comprised £36.0m of cash. The 2014 final dividend of 24.5p
per share will be paid on 1 July 2015 to shareholders on the register at the close of business on 22 May 2015.
102 BUNZL PLC ANNUAL REPORT 2014
18 CONTINGENT LIABILITIES
Bank guarantees
2014
£m
0.4
2013
£m
0.4
19 DIRECTORS’ ORDINARY SHARE INTERESTS
The interests of the directors, and their connected persons, in the share capital of the Company at 31 December were:
Philip Rogerson
Michael Roney
Patrick Larmon
Peter Johnson
Brian May
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
2014
10,000
312,263
121,216
6,630
105,240
4,000
4,000
2,500
2,500
568,349
2013
10,000
312,263
117,838
6,630
105,240
4,000
4,000
2,500
2,500
564,971
Details of directors’ options over ordinary shares and awards made under the 2004 LTIP, 2014 LTIP, Sharesave Scheme (2001), Sharesave
Scheme (2011) and DASBS are set out in the Directors’ remuneration report. Since 31 December 2014 Patrick Larmon has acquired interests
in 603 ordinary shares as a result of his election to participate in the dividend reinvestment plan in respect of the interim dividend which was
paid on 2 January 2015 and he has also acquired an interest in 280 ordinary shares pursuant to the Company’s US Employee Stock Purchase
Plan. No other changes to the directors’ ordinary share interests shown in this Note and the Directors’ remuneration report have taken place
between 31 December 2014 and 23 February 2015.
20 RETIREMENT BENEFIT OBLIGATIONS
The Group operates a number of retirement benefit schemes in the UK, the US and other countries including both defined benefit and defined
contribution schemes. The funds of the principal defined benefit schemes are administered by trustees and are held independently from
the Group. Pension costs of defined benefit schemes are assessed in accordance with the advice of independent professionally qualified
actuaries. Full triennial actuarial valuations were last carried out on the UK defined benefit schemes in April 2012 and annual actuarial
valuations are performed on the principal US defined benefit schemes. The valuation of the UK defined benefit schemes has been updated
to 31 December 2014 by the Group’s actuaries. Contributions to all schemes are determined in line with actuarial advice and local conditions
and practices. Scheme assets for the purpose of IAS 19 are stated at their bid value.
Characteristics
Europe
The Group operates a number of defined benefit pension schemes in Europe including the UK, France, the Netherlands and the Republic of
Ireland. The Group’s principal defined benefit scheme in Europe is the UK scheme. The UK defined benefit scheme is a contributory defined
benefit pension scheme providing benefits based on final pensionable pay. The scheme has been closed to new members since 2003.
The UK scheme is an HMRC registered pension scheme and is subject to standard UK pensions and tax law. This means that the payment
of contributions and benefits are subject to the appropriate tax treatments and restrictions and the scheme is subject to the scheme funding
requirements outlined in section 224 of the Pensions Act 2004.
In accordance with UK trust and pensions law, the pension scheme has a corporate trustee. Although the Company bears the financial cost
of the scheme, the responsibility for the management and governance of the scheme lies with the trustee, which has a duty to act in the best
interest of members at all times. The assets of the scheme are held in trust by the trustee who consults with the Company on investment
strategy decisions.
A de-risking strategy has been agreed for the scheme to reduce the mismatch between the assets and liabilities, whereby investments are
switched from return seeking assets to liability matching assets as the funding improves, based on pre-agreed triggers.
The last triennial review was carried out by a qualified actuary as at 5 April 2012 and showed that there was a deficit on the agreed funding
basis. To address the deficit, the Company has agreed to contribute an additional £5.5m per year from April 2013 to March 2019.
BUNZL PLC ANNUAL REPORT 2014 103
NOTES CONTINUED
20 RETIREMENT BENEFIT OBLIGATIONS CONTINUED
US
The US defined benefit scheme is a non-contributory defined benefit pension scheme providing benefits based on final pensionable pay.
The scheme has been closed to new members since 2003. The assets of the scheme are held in trust by an independent custodian.
The US scheme is a qualified pension scheme and is subject to standard regulations under the Employee Retirement Income Security Act,
the Pension Protection Act 2006 and the Department of Labor and Internal Revenue reporting requirements. The scheme pays annual
premiums to the Pension Benefit Guaranty Corporation to insure the benefits of the scheme.
The Company has established a Retirement Scheme Investment Committee. The members of the Committee are the scheme fiduciaries and
as such are ultimately responsible for the management of the scheme assets. The Committee performs the oversight function and delegates
the day-to-day management process to appropriate staff. A registered investment adviser advises the Committee regarding the investment
of scheme assets.
A de-risking strategy has been agreed for the scheme to reduce the mismatch between the assets and liabilities, whereby investments are
switched from return seeking assets to liability matching assets as the funding improves, based on pre-agreed triggers.
In 2014, a lump sum payment option was offered to deferred vested and retired participants in the scheme in satisfaction of their future
entitlements under the scheme. The total payment made to the eligible participants that elected to take the lump sum payment option was
£25.3m as a result of which, the scheme assets and liabilities have reduced by the same amount.
The last annual review was carried out by a qualified actuary as at 1 January 2014 and showed that there was a required annual contribution
of £2.4m. The Group plans to contribute £4.8m for the 2014 plan year to cover prudently this required contribution and anticipate future
funding needs. In the 2013 plan year, the Group paid a contribution of £4.8m.
Risks
The main risks to which the Group is exposed in relation to the defined benefit schemes are described below:
• Inflation risk — the majority of the UK scheme’s liabilities increase in line with inflation and, as a result, if inflation is greater than expected
the liabilities will increase. The impact of high inflation is capped each year for the UK scheme’s benefits. The US scheme‘s liabilities are
not directly tied to inflationary increases.
• Interest rate risk — a fall in bond yields will increase the value of the schemes’ liabilities. A proportion of both the UK and US schemes’
assets are invested in liability matching assets to mitigate bond yield and inflation risk.
• Mortality risk — the assumptions adopted by the Group make allowance for future improvements in life expectancy. However, if life
expectancy improves at a faster rate than assumed, this would result in greater payments from the schemes and consequently increases in
the schemes’ liabilities. The mortality assumptions are reviewed on a regular basis to minimise the risk of using an inappropriate assumption.
• Investment risk — the schemes invest in a diversified range of asset classes to mitigate the risk of falls in any one area of the investments.
In the UK, the trustee implements partial currency hedging on the overseas assets to mitigate currency risk.
The risks above could lead to a material deficit in the schemes. Given the long term time horizon of the schemes’ cash flows, the
assumptions used are uncertain and can be volatile from year to year. The Company and the trustees seek to mitigate actively the risks
associated with the schemes.
A higher retirement benefit obligation could lead to additional funding requirements in future years. Any deficit measured on a funding
valuation basis, which may differ from the actuarial valuation under IAS 19, will generally be financed over a period that ensures the
contributions are appropriate to the Group and in line with the relevant regulations.
Financial information
The amounts included in the consolidated financial statements at 31 December were:
Amounts included in net operating expenses
Defined contribution schemes
Defined benefit schemes
current service cost
past service gain
Loss on settlement
Total operating charge
Amounts included in finance cost
Net interest
Total charge
Amounts recognised in the statement of comprehensive income
Actual return less expected return on scheme assets
Experience gain on scheme liabilities
Impact of changes in assumptions relating to the present value of scheme liabilities
Actuarial (loss)/gain on pension schemes
104 BUNZL PLC ANNUAL REPORT 2014
2014
£m
12.3
5.5
(0.1)
–
17.7
1.6
19.3
2014
£m
31.3
1.5
(62.9)
(30.1)
2013
£m
12.6
6.6
(0.1)
0.3
19.4
2.8
22.2
2013
£m
18.6
0.1
8.2
26.9
20 RETIREMENT BENEFIT OBLIGATIONS CONTINUED
The cumulative amount of actuarial losses arising since 1 January 2004 recognised in the statement of comprehensive income
at 31 December 2014 was £114.1m (2013: £84.0m).
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 were:
Europe
Longevity at age 65 for current pensioners (years)
Longevity at age 65 for future pensioners (years)
US
Longevity at age 65 for current and future pensioners (years)
2014
22.6
24.4
22.8
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation rate
2014
2013
3.8%
3.0%
3.7%
2.1%
4.1%
3.2%
4.6%
2.4%
Europe
2012
3.7%
2.9%
4.5%
2.2%
2014
2013
3.0%
–
4.1%
2.5%
3.0%
–
4.9%
2.5%
2013
22.5
24.3
20.2
US
2012
3.0%
–
4.1%
2.5%
The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions which, due to the
timescales covered, may not necessarily be borne out in practice.
The impact on the net pension deficit as at 31 December 2014 of reasonably possible changes to key assumptions was:
Europe
US
Impact of change
in inflation rate
Impact of change
in discount rate
+0.25%
£m
9.8
(0.1)
–0.25%
£m
(10.5)
0.1
+0.25%
£m
(14.6)
(4.6)
–0.25%
£m
15.7
4.9
The market value of scheme assets and the present value of retirement benefit obligations at 31 December were:
Equities
Bonds
Other
Total market value of scheme assets
Present value of funded obligations
Present value of unfunded obligations
Present value of funded and unfunded obligations
Deficit
Deferred tax
Net deficit
Equities
Bonds
Other
Total market value of scheme assets
Present value of funded obligations
Present value of unfunded obligations
Present value of funded and unfunded obligations
Deficit
Deferred tax
Net deficit
Europe
2014
£m
94.5
187.2
1.7
283.4
(306.0)
(5.8)
(311.8)
(28.4)
6.4
(22.0)
Europe
2013
£m
89.7
150.5
1.4
241.6
(258.8)
(5.4)
(264.2)
(22.6)
6.8
(15.8)
US
2014
£m
51.4
27.3
3.4
82.1
(111.8)
(12.2)
(124.0)
(41.9)
16.0
(25.9)
US
2013
£m
57.8
31.4
4.8
94.0
(106.7)
(9.7)
(116.4)
(22.4)
7.6
(14.8)
Total
2014
£m
145.9
214.5
5.1
365.5
(417.8)
(18.0)
(435.8)
(70.3)
22.4
(47.9)
Total
2013
£m
147.5
181.9
6.2
335.6
(365.5)
(15.1)
(380.6)
(45.0)
14.4
(30.6)
BUNZL PLC ANNUAL REPORT 2014 105
NOTES CONTINUED
20 RETIREMENT BENEFIT OBLIGATIONS CONTINUED
Five year summary
Total market value of scheme assets
Present value of funded and unfunded obligations
Unrecognised past service cost
Deficit
2014
£m
365.5
(435.8)
–
(70.3)
2013
£m
335.6
(380.6)
–
(45.0)
2012
£m
303.8
(379.4)
0.1
(75.5)
Experience adjustments arising on scheme liabilities
(1.5)
(0.2)
(4.7)
Movement in deficit
Beginning of year
Current service cost
Past service gain
Contributions
Net interest
Actuarial (loss)/gain
Loss on settlement
Currency and other movements
End of year
Changes in the present value of defined benefit obligations
Beginning of year
Current service cost
Past service gain
Interest costs
Contributions by employees
Settlement payments
Actuarial loss/(gain)
Benefits paid
Loss on settlement
Currency translation
End of year
Changes in the fair value of scheme assets
Beginning of year
Interest income
Actuarial gain
Contributions by employer
Contributions by employees
Settlement payments
Benefits paid
Currency translation
End of year
2011
£m
272.3
(346.7)
0.1
(74.3)
0.4
2014
£m
(45.0)
(5.5)
0.1
13.5
(1.6)
(30.1)
–
(1.7)
(70.3)
2014
£m
380.6
5.5
(0.1)
17.4
0.7
(25.3)
61.4
(10.2)
–
5.8
435.8
£m
335.6
15.8
31.3
13.5
0.7
(25.3)
(10.2)
4.1
365.5
2010
£m
258.0
(310.5)
0.2
(52.3)
1.2
2013
£m
(75.5)
(6.6)
0.1
14.1
(2.8)
26.9
(0.3)
(0.9)
(45.0)
2013
£m
379.4
6.6
(0.1)
16.4
0.8
(0.6)
(8.3)
(12.6)
0.3
(1.3)
380.6
£m
303.8
13.6
18.6
14.1
0.8
(0.6)
(12.6)
(2.1)
335.6
The actual return on scheme assets was £47.1m (2013: £32.2m).
The Group expects to pay approximately £14.4m (expected as of 2013: £14.1m) in contributions to the defined benefit pension schemes in the
year ending 31 December 2015.
The weighted average duration of the defined benefit obligations at 31 December 2014 was approximately 21.0 years (2013: 19.8 years) for
Europe and 15.0 years (2013: 13.5 years) for the US.
The total retirement benefit obligations are divided between active (£172.8m (2013: £135.0m)), deferred members (£134.2m (2013: £121.0m))
and pensioners (£128.8m (2013: £124.6m)).
106 BUNZL PLC ANNUAL REPORT 2014
21 DIRECTORS AND EMPLOYEES
Average number of employees
North America
Continental Europe
UK & Ireland
Rest of the World
Corporate
Employee costs
Wages and salaries
Social security costs
Retirement benefit obligation costs
Share based payments
2014
5,194
3,472
3,569
2,322
14,557
52
14,609
2014
£m
508.4
60.7
17.7
7.9
594.7
2013
4,756
3,408
3,456
2,005
13,625
50
13,675
2013
£m
483.8
60.8
19.4
6.2
570.2
In addition to the above, acquisition related costs for the year ended 31 December 2014 include deferred consideration payments of £21.0m
(2013: £22.0m) relating to the retention of former owners of businesses acquired.
Key management remuneration
Salaries and short term employee benefits
Share based payments
Post employment benefits
2014
£m
5.9
1.9
0.9
8.7
2013
£m
5.9
1.9
1.0
8.8
The Group considers key management personnel as defined in IAS 24 ‘Related Party Disclosures’ to be the directors of the Company and
those members of the Executive Committee and the Managing Directors of the major geographic regions who are not directors of the Company.
Directors’ emoluments
Non-executive directors
Executive directors:
remuneration excluding performance related elements
annual bonus
2014
£m
0.7
2.4
1.8
4.9
2013
£m
0.7
2.4
1.9
5.0
More detailed information concerning directors’ emoluments and long term incentives is set out in the Directors’ remuneration report.
The aggregate amount of gains made by directors on the exercise of share options during the year was £5.5m (2013: £2.5m). The aggregate
market value of performance share awards exercised by directors under long term incentive schemes during the year was £3.6m
(2013: £2.0m). The aggregate market value of shares exercised by directors under the DASBS was £1.5m (2013: £0.9m).
22 LEASE COMMITMENTS
The Group leases certain property, plant and equipment under non-cancellable operating lease agreements. These leases have varying
terms and renewal rights. At 31 December the total future minimum lease payments under non-cancellable operating leases for each of the
following periods were:
Within one year
Between one and five years
After five years
Land &
buildings
2014
£m
62.4
152.9
56.6
271.9
Other
2014
£m
22.8
35.4
1.9
60.1
Land &
buildings
2013
£m
53.2
139.9
65.0
258.1
Total of future minimum sublease income under non-cancellable subleases
(0.2)
–
(0.2)
Other
2013
£m
21.0
33.3
1.9
56.2
–
BUNZL PLC ANNUAL REPORT 2014 107
NOTES CONTINUED
23 CASH AND CASH EQUIVALENTS AND NET DEBT
Cash at bank and in hand
Bank overdrafts
Cash and cash equivalents
Interest bearing loans and borrowings – current liabilities
Interest bearing loans and borrowings – non-current liabilities
Derivative assets
Derivative liabilities
Net debt
Movement in net debt
Beginning of year
Net cash outflow
Realised gains/(losses) on foreign exchange contracts
Currency translation
End of year
2014
£m
82.4
(28.1)
54.3
(35.8)
(913.3)
25.7
(8.3)
(877.4)
2014
£m
(849.5)
(19.0)
17.4
(26.3)
(877.4)
2013
£m
73.1
(26.3)
46.8
(42.0)
(851.8)
9.5
(12.0)
(849.5)
2013
£m
(738.1)
(113.2)
(9.7)
11.5
(849.5)
24 ACQUISITIONS
2014
The acquisitions made or agreed to be made in the year ended 31 December 2014 were Bäumer and its related company Protemo,
Oskar Plast, Lamedid, Nelson Packaging, Plast Techs, Tecno Boga, Allshoes, JPLUS, 365 Healthcare, Lee Brothers, Premiere Products,
Guardsman, De Ridder, Victoria Healthcare Products, Acme Supplies, POS Direct and Tillman.
Bäumer, a business principally engaged in the distribution of cleaning and hygiene and healthcare supplies to end users in various
market sectors in Germany, together with its related company Protemo, a business focusing on the sale of healthcare related products
to the healthcare sector, were acquired on 31 January 2014. Oskar Plast, a business selling a variety of disposable packaging products to
customers throughout the Czech Republic, including retail chains, food processors and other distributors, was acquired on 20 February 2014.
Lamedid, a business principally engaged in the supply and distribution throughout Brazil of medical and healthcare consumable products
to hospitals, clinics and laboratories as well as to distributors, was acquired on 13 March 2014. Nelson Packaging, a business principally
engaged in the distribution of packaging and cleaning and hygiene supplies to end users in the commercial and industrial market sectors
in New Zealand, was acquired on 27 March 2014. Plast Techs, a business engaged in the sale of a variety of foodservice and cleaning and
hygiene supplies to distributors throughout Southern California, was acquired on 31 March 2014. Tecno Boga, a leading supplier in Chile
of protective footwear, principally to distributors, was acquired on 31 March 2014.
Allshoes, a distributor of both branded and own brand safety and work shoes to a variety of wholesalers as well as to retailers, principally
in the Netherlands but also in Belgium, was acquired on 30 May 2014. JPLUS, a Brazilian business principally engaged in the distribution
of cleaning and hygiene supplies and disposable products to a variety of end user customers, particularly in the contract cleaning and
healthcare sectors, was acquired on 30 May 2014. 365 Healthcare, a UK business principally engaged in the distribution of healthcare
products to distributors and hospitals, was acquired on 30 June 2014.
Lee Brothers, a business engaged in the distribution of personal protection equipment and workplace consumables to customers largely in
the construction and engineering sectors in the UK, was acquired on 30 July 2014. Premiere Products, a business engaged in the distribution
of cleaning and hygiene products to customers throughout the UK, particularly serving the facilities management and education sectors,
was acquired on 31 July 2014. Guardsman, a company engaged in the sale of a variety of safety equipment and workwear to customers in
various manufacturing industries as well as the construction and engineering sectors throughout the UK, was also acquired on 31 July 2014.
De Ridder, a specialist distribution business engaged in the supply of a wide range of products principally to prisons, police stations and
other detention centres and based in Amsterdam, was acquired on 30 September 2014.
Victoria Healthcare Products, a business engaged in supplying a variety of healthcare consumable products for people in the community and
to residential care facilities in Australia, was acquired on 26 November 2014. Acme Supplies, a cleaning and hygiene supplies business based
in Vancouver Island, Canada, was acquired on 1 December 2014. POS Direct, a UK business which manages and supplies a variety of point
of sale and marketing materials, was acquired on 19 December 2014. The Company also entered into an agreement on 30 December 2014 to
acquire Tillman, which supplies a variety of personal protection equipment, principally gloves, to distributors throughout the US who supply
customers operating in the welding and industrial sectors. The acquisition was completed on 2 January 2015.
Acquisitions involving the purchase of the acquiree’s share capital or, as the case may be, the relevant assets of the businesses acquired,
have been accounted for under the acquisition method of accounting. Part of the Group’s strategy is to grow through acquisition. The Group
has developed a process to assist with the identification of the fair values of the assets acquired and liabilities assumed, including the
separate identification of intangible assets in accordance with IFRS 3 ‘Business Combinations’. This formal process is applied to each
acquisition and involves an assessment of the assets acquired and liabilities assumed with assistance provided by external valuation
specialists where appropriate. Until this assessment is complete, the allocation period remains open up to a maximum of 12 months from
the relevant acquisition date. At 31 December 2014 the allocation period for all acquisitions completed since 1 January 2014 remained open
and accordingly the fair values presented are provisional.
108 BUNZL PLC ANNUAL REPORT 2014
24 ACQUISITIONS CONTINUED
Adjustments are made to the assets acquired and liabilities assumed during the allocation period to the extent that further information and
knowledge come to light that more accurately reflect conditions at the acquisition date. To date the adjustments made have impacted assets
acquired to reflect more accurately the estimated realisable or settlement value. Similarly, adjustments have been made to acquired
liabilities to record onerous commitments or other commitments existing at the acquisition date but not recognised by the acquiree.
Adjustments have also been made to reflect the associated tax effects.
The consideration paid or payable in respect of acquisitions comprises amounts paid on completion, deferred consideration and payments
which are contingent on the retention of former owners of businesses acquired. IFRS 3 requires that any payments that are contingent on
future employment, including payments which are contingent on the retention of former owners of businesses acquired, are charged to
the income statement. All other consideration has been allocated against the identified net assets, with the balance recorded as goodwill.
Transaction costs and expenses such as professional fees are charged to the income statement. The acquisitions provide opportunities for
further development of the Group’s activities and create enhanced returns. Such opportunities and the workforces inherent in each of the
acquired businesses do not translate to separately identifiable intangible assets but do represent much of the assessed value that supports
the recognised goodwill.
A summary of the effect of acquisitions completed in 2014 is detailed below:
Provisional fair value of assets acquired
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Net bank overdrafts
Provisions for liabilities and charges
Tax and deferred tax
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to retention of former owners
Net bank overdrafts acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions completed in the current year
Spend on acquisition committed as at 31 December 2014
Total committed spend in respect of acquisitions agreed in the current year
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net bank overdrafts acquired
Deferred consideration in respect of prior year acquisitions
Net cash outflow in respect of acquisitions
Acquisition related costs
Total cash outflow in respect of acquisitions
£m
76.0
1.9
13.9
25.8
(15.2)
(8.9)
(2.2)
(14.4)
76.9
36.2
113.1
107.1
6.0
113.1
19.1
8.9
4.1
145.2
65.8
211.0
107.1
8.9
38.1
154.1
14.0
168.1
BUNZL PLC ANNUAL REPORT 2014 109
NOTES CONTINUED
24 ACQUISITIONS CONTINUED
Cash flow on acquisition related costs relates to £3.5m (2013: £9.6m) of transaction costs paid and £10.5m (2013: £16.5m) of payments
relating to retention of former owners.
Acquisitions made in the year ended 31 December 2014 contributed £90.6m to the Group’s revenue and £10.2m to the Group’s adjusted
operating profit for the year ended 31 December 2014.
The estimated contributions of businesses acquired during the year to the results of the Group for the year ended 31 December 2014 if such
acquisitions had been made at the beginning of the year, are as follows:
Revenue
Adjusted operating profit
£m
162.7
20.6
The estimated revenue which would have been contributed by the businesses acquired or agreed to be acquired during the year to the results
for the year ended 31 December 2014 if such acquisitions had been made at the beginning of the year is £223.3m.
2013
The acquisitions completed in the year ended 31 December 2013 were McNeil Surgical, Vicsa Brasil, Labor Import, MDA, most of the
Industrial & Safety division of Jeminex, TFS, Espomega, ProEpta, Wesclean Equipment & Cleaning Supplies, pka Klöcker, De Santis
and SAS Safety.
McNeil Surgical, a business principally engaged in the sale of healthcare consumables and equipment to aged care facilities, hospitals
and medical centres as well as to distributors throughout South Australia, was acquired on 31 January 2013. Vicsa Brasil, the proposed
acquisition of which was agreed in December 2012, was acquired on 19 February 2013. The business is engaged in the sale of personal
protection equipment throughout Brazil. Labor Import, which is principally engaged in the supply and distribution of own label medical
and healthcare consumable products to distributors as well as to hospitals, clinics, laboratories and care homes throughout Brazil,
was acquired on 1 March 2013. MDA, which is engaged in the procurement and fulfilment of promotional products and marketing point
of sale materials for a variety of customers in the UK, principally in the food and drinks industries, was acquired on 15 March 2013.
Three businesses which formed part of the Industrial & Safety division of Jeminex in Australia were acquired on 30 April 2013. The workwear
and personal safety business distributes an extensive range of specialist personal protection equipment and workwear to the mining,
resources, construction and general industrial sectors. The lifting, rigging and height safety business is principally engaged in the supply
of lifting chains and ropes, slings and load restraints as well as the provision of accredited testing and repair services. The third business
is involved in the supply of industrial packaging products to a variety of customers in different market sectors.
TFS, a business engaged in the procurement and fulfilment of promotional products and marketing point of sale materials for customers in
the UK across various market sectors, was acquired on 31 July 2013. Espomega, a business supplying a variety of safety products, including
gloves and protective clothing, to distributors throughout Mexico, was acquired on 30 August 2013. ProEpta, a leading distributor of catering
equipment throughout Mexico, principally to luxury hotels and restaurants, was acquired on 27 September 2013.
Wesclean, a business principally engaged in the distribution of cleaning and hygiene equipment and supplies to a variety of customer
markets throughout Western Canada, was acquired on 1 November 2013. pka Klöcker, a business based in Germany engaged in the sale
to distributors of personal protection equipment, principally own label workwear, was acquired on 29 November 2013. De Santis, a business
based in Brazil and principally engaged in the sale of personal protection equipment to end user customers in a number of different market
sectors, was acquired on 20 December 2013. SAS Safety, a business specialising in the sourcing and sale of a variety of own label personal
protection equipment, principally safety gloves, to distributors in the US was acquired on 23 December 2013.
110 BUNZL PLC ANNUAL REPORT 2014
24 ACQUISITIONS CONTINUED
A summary of the effect of the 2013 acquisitions is detailed below:
Fair value of assets acquired
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Net bank overdrafts
Provisions for liabilities and charges
Tax and deferred tax
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to retention of former owners
Net bank overdrafts acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions completed in the current year
Spend on acquisition committed as at 31 December 2012
Total committed spend in respect of acquisitions agreed in the current year
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net bank overdrafts acquired
Deferred consideration in respect of prior year acquisitions
Net cash outflow in respect of acquisitions
Acquisition related costs
Total cash outflow in respect of acquisitions
Fair value
of assets
acquired
£m
111.1
9.6
51.2
50.3
(38.0)
(7.5)
(4.4)
(13.2)
159.1
97.4
256.5
223.8
32.7
256.5
32.4
7.5
8.4
304.8
(9.7)
295.1
223.8
7.5
22.5
253.8
26.1
279.9
Acquisitions made in the year ended 31 December 2013 contributed £129.5m to the Group’s revenue and £16.5m to the Group’s adjusted
operating profit for the year ended 31 December 2013.
The estimated contributions of acquired businesses to the results of the Group for the year ended 31 December 2013 if such acquisitions had
been made at the beginning of the year, are as follows:
Revenue
Adjusted operating profit
£m
281.1
37.5
BUNZL PLC ANNUAL REPORT 2014 111
NOTES CONTINUED
25 RELATED PARTY DISCLOSURES
The Group has identified the directors of the Company, the Group pension schemes and its key management as related parties for the
purpose of IAS 24 ‘Related Party Disclosures’. Details of the relevant relationships with these related parties are disclosed in the Directors’
remuneration report, Note 20 and Note 21 respectively.
26 PRINCIPAL SUBSIDIARY UNDERTAKINGS
Bunzl Australasia Holdings Pty Limited
Bunzl Finance plc*
Bunzl Holding Danmark A/S
Bunzl Distribution Spain SAU
Bunzl Holdings France SNC
Bunzl Outsourcing Services BV
Bunzl UK Ltd
Bunzl USA Holdings LLC
*Direct subsidiary undertaking of Bunzl plc.
Country of incorporation
Australia
England & Wales
Denmark
Spain
France
Netherlands
England & Wales
USA
The companies named above are those undertakings whose results or financial position, in the opinion of the directors, principally affected
the figures shown in the consolidated financial statements of the Group. The investments in these companies, as shown above, relate to
ordinary shares or common stock. The principal country in which each company operates is the country of incorporation. The principal
activities of the Group are reviewed in the Chief Executive’s review. A full list of the Group’s subsidiary undertakings will be annexed to the
next annual return filed at Companies House.
112 BUNZL PLC ANNUAL REPORT 2014
COMPANY BALANCE SHEET
AT 31 DECEMBER 2014
Fixed assets
Tangible fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Provisions for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Capital redemption reserve
Profit and loss account
Shareholders’ funds
Notes
3
4
5
6
7
8
9
9
9
9
2014
£m
0.7
665.7
666.4
264.6
0.1
264.7
(97.0)
167.7
834.1
(1.7)
832.4
107.6
160.3
5.6
16.1
542.8
832.4
2013
£m
0.5
654.6
655.1
268.8
0.1
268.9
(109.6)
159.3
814.4
(2.3)
812.1
107.2
153.0
5.6
16.1
530.2
812.1
Approved by the Board of Directors of Bunzl plc (Company registration number 358948) on 23 February 2015 and signed on its behalf by
Michael Roney, Chief Executive and Brian May, Finance Director.
The Accounting policies and Notes on pages 114 to 119 form part of these financial statements.
BUNZL PLC ANNUAL REPORT 2014 113
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
The financial statements of Bunzl plc (‘the Company’) have been prepared on a going concern basis and under the historical cost convention
and have been prepared in accordance with the Companies Act 2006 and UK Generally Accepted Accounting Practice. Under section 408 of
the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account.
In accordance with the exemption allowed by paragraph 5 (a) of Financial Reporting Standard (‘FRS’) 1 ‘Cash Flow Statements’, a cash flow
statement has not been provided for the Company.
The Financial Reporting Council (‘FRC’) has published four standards which together form the basis of the new financial reporting framework
in the UK. Subject to shareholders’ notification, with effect from 1 January 2015, the Company has applied the recognition, measurement
and disclosure requirements of EU endorsed International Financial Reporting Standards (‘IFRS’) with disclosure exemptions permitted by
FRS 101 ‘Reduced Disclosure Framework’.
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the
Company’s financial statements.
2 ACCOUNTING POLICIES
a Investments in subsidiary undertakings
Investments in subsidiary undertakings are held at cost less any provisions for impairment.
b Investment in own shares
The cost of shares held either directly (treasury shares) or indirectly (employee benefit trust shares) is deducted from equity. Repurchased
shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold
or reissued, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is recognised
in retained earnings.
c Share based payments
The Company operates equity settled share based compensation plans for which the total expected expense is based on the fair value of
options and other share based incentives on the grant date, calculated using a valuation model, and is spread over the expected vesting
period with a corresponding credit to equity. The amount recognised as an expense is adjusted to reflect the number of options that are
expected to vest. Details of the relevant plans are outlined in Note 16 to the consolidated financial statements. Where the Company grants
options over its own shares to the employees of its subsidiaries these awards are accounted for by the Company as an additional investment
in the relevant subsidiary equivalent to the equity settled share based payment charge recognised in the consolidated financial statements
with the corresponding credit recognised directly in equity. Any payment made by the subsidiaries in respect of these arrangements is treated
as a return of this investment. These costs are determined in accordance with FRS 20 ‘Share-based Payment’.
d Tangible fixed assets
All tangible fixed assets are included at historical cost, less accumulated depreciation. The profit or loss on sale of tangible fixed assets
is calculated by reference to the carrying values of the assets. The carrying values of tangible fixed assets are periodically reviewed for
impairment when events or changes in circumstances indicate that the carrying values may not be recoverable.
e Depreciation
Depreciation is provided on a straight line basis to write off cost less estimated residual value over the assets’ estimated remaining useful
lives. This is applied at the following annual rates:
Buildings
Fixtures, fittings and equipment 10%–33%
2% (or depreciated over life of lease if shorter than 50 years)
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
f Leases
Operating lease rentals and any incentives receivable are recognised in the income statement on a straight line basis over the term of the
relevant lease. Leases in which the Company assumes substantially all the risks and rewards of ownership of the leased assets are
classified as finance leases. Where land and buildings are held under leases, the accounting treatment of the land is considered separately
from that of the buildings due to the indefinite life of land.
114 BUNZL PLC ANNUAL REPORT 2014
2 ACCOUNTING POLICIES CONTINUED
g Tax
The charge for tax is based on the profit or loss for the year and takes into account tax deferred due to timing differences between
the treatment of certain items for tax and accounting purposes. Deferred tax is recognised in respect of all timing differences between
the treatment of certain items for tax and accounting purposes which have arisen but not reversed by the balance sheet date, except
as otherwise required by FRS 19 ‘Deferred Tax’.
h Retirement benefit obligations
The Company participates in a Group UK defined benefit scheme providing benefits based on final pensionable pay. As the Company is
unable to identify its share of scheme assets and liabilities on a consistent and reasonable basis, the Company treats contributions to
the defined benefit scheme as if they were contributions to a defined contribution scheme in accordance with the exemptions permitted
by FRS 17 ‘Retirement Benefits’. As a result the amount charged to the profit and loss account represents the contributions payable to
the scheme in respect of the relevant accounting period.
i Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group,
the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment
under the guarantee.
j Dividends
The interim dividend is included in the financial statements in the period in which it is paid and the final dividend in the period in which
it is approved by shareholders at the Annual General Meeting.
3 TANGIBLE FIXED ASSETS
Cost
Beginning of year
Additions
Disposals
End of year
Depreciation
Beginning of year
Charge in year
Disposals
End of year
Net book value at 31 December 2014
Net book value at 31 December 2013
Short
leasehold
£m
Fixtures,
fittings and
equipment
£m
0.5
–
(0.4)
0.1
0.5
–
(0.4)
0.1
–
–
2.8
0.3
(1.5)
1.6
2.3
0.1
(1.5)
0.9
0.7
0.5
Total
£m
3.3
0.3
(1.9)
1.7
2.8
0.1
(1.9)
1.0
0.7
0.5
BUNZL PLC ANNUAL REPORT 2014 115
Investments in
subsidiary
undertakings
£m
700.2
11.1
(5.3)
706.0
45.6
(5.3)
40.3
665.7
654.6
Country of incorporation
Australia
England & Wales
Denmark
Spain
France
Netherlands
England & Wales
USA
2014
£m
262.9
1.2
0.4
0.1
264.6
2013
£m
261.1
1.1
6.4
0.2
268.8
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
4 INVESTMENTS HELD AS FIXED ASSETS
Cost
Beginning of year
Additions
Liquidations of dormant companies
End of year
Impairment provisions
Beginning of year
Decrease during year
End of year
Net book value at 31 December 2014
Net book value at 31 December 2013
The principal companies in which the Company’s interest at 31 December 2014 is more than 20% are as follows:
Bunzl Australasia Holdings Pty Limited
Bunzl Finance plc*
Bunzl Holding Danmark A/S
Bunzl Distribution Spain SAU
Bunzl Holdings France SNC
Bunzl Outsourcing Services BV
Bunzl UK Ltd
Bunzl USA Holdings LLC
*Direct subsidiary undertaking of Bunzl plc.
5 DEBTORS
Amounts owed by Group undertakings
Prepayments and other debtors
Corporation tax
Deferred tax
116 BUNZL PLC ANNUAL REPORT 2014
6 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade creditors
Amounts owed to Group undertakings
Other tax and social security contributions
Accruals and deferred income
7 PROVISIONS
Beginning of year
Utilised or released
End of year
2014
£m
0.5
85.8
1.6
9.1
97.0
2014
£m
2.3
(0.6)
1.7
2013
£m
0.2
101.1
1.6
6.7
109.6
2013
£m
2.7
(0.4)
2.3
The provisions relate to properties, where amounts are held against liabilities for onerous lease commitments, repairs and dilapidations
and other claims.
8 SHARE CAPITAL AND SHARE BASED PAYMENTS
Issued and fully paid ordinary shares of 321⁄7p each
Number of ordinary shares in issue and fully paid
Beginning of year
Cancelled – treasury shares
Issued – option exercises
End of year
2014
£m
107.6
2013
£m
107.2
333,515,233 355,420,634
(23,325,000)
1,419,599
333,515,233
–
1,191,643
334,706,876
The Company operates a number of share plans, for the benefit of employees of the Company and its subsidiaries relating to the acquisition
of shares in the Company, which are described in Note 16 to the consolidated financial statements.
BUNZL PLC ANNUAL REPORT 2014 117
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
8 SHARE CAPITAL AND SHARE BASED PAYMENTS CONTINUED
FRS 20 disclosures
Options granted to employees of the Company during the year have been valued using a stochastic model. The fair value per option granted
during the year and the assumptions used in the calculations are as follows:
Grant date
Share price at grant date (£)
Exercise price (£)
Options granted during the year (shares)
Vesting period (years)
Expected volatility (%)
Option life (years)
Expected life (years)
Risk free rate of return (%)
Expected dividends expressed as a dividend yield (%)
Fair value per option (£)
2014
27.02.14–06.10.14
15.69–16.46
nil–16.41
487,061
3–5
16–21
3–10
3.0–6.0
1.1–1.8
2.00–2.08
2.23–4.85
2013
28.02.13–07.10.13
12.61–13.61
nil–13.75
525,997
3–5
18–22
3–10
3.0–6.1
0.3–1.8
2.16–2.24
1.78–3.29
The expected volatility is based on historical volatility over the last three to seven years. The expected life is the average expected period
to exercise. The risk free rate of return is the yield on zero coupon UK government bonds of a term consistent with the assumed option life.
The weighted average share price for options exercised by employees of the Company during the year was £16.36 (2013: £13.33). The total
Company charge for the year relating to share based payments was £1.6m (2013: £1.3m).
Details of share options and awards to employees of the Company which have been granted and exercised, those which have lapsed during
2014 and those outstanding and available to exercise at 31 December 2014, in each case in respect of all options and awards, whether over
new issue or market purchase shares, under the Sharesave Scheme (2001), Sharesave Scheme (2011), 2004 Long Term Incentive Plan
(‘2004 LTIP’) and 2014 Long Term Incentive Plan (‘2014 LTIP’) are set out in the following table:
Options
outstanding
at 01.01.14†
Grants/awards
Exercises
Lapses*
Options
outstanding
Options
available
to exercise
2014
2014
2014
at 31.12.14
31.12.14
Sharesave Scheme (2001)
Sharesave Scheme (2011)
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
Number
Number
Price (p)
Number
Price (p)
Number
Number
Price (p)
Number
26,806
18,115
1,682,229
834,640
–
–
2,561,790
–
9,976
108,520
80,265
206,500
81,800
487,061
–
1,253
1,566
nil
1,641
nil
18,410
–
636,058
292,210
–
–
946,678
452-580
–
585-1,116
–
–
–
–
–
30,150
55,328
–
–
85,478
8,396
28,091
1,124,541
567,367
206,500
81,800
2,016,695
542-580
770-1,253
585-1,566
nil
1,641
nil
–
–
297,271
–
–
–
297,271
† Options outstanding at 1 January 2014 have been adjusted to include any options held by individuals whose employment has transferred
from a wholly owned subsidiary to the Company during 2014.
*Share option lapses relate to those which have either been forfeited or have expired during the year.
The weighted average fair value and the weighted average remaining contractual lives of share options and performance share awards are
set out below:
Sharesave Scheme (2001) and (2011)
2004 and 2014 LTIP Part A
2004 and 2014 LTIP Part B
The outstanding options and awards are exercis able at various dates up to September 2024.
Weighted
average
fair value
of options
granted (£)
Weighted
average
remaining
contractual
life (years)
2.57
2.30
4.58
3.37
2.49
2.51
118 BUNZL PLC ANNUAL REPORT 2014
9 CAPITAL AND RESERVES
At 1 January 2014
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
Profit for the year
2013 interim dividend
2013 final dividend
At 31 December 2014
Share
capital
£m
107.2
0.4
Share
premium
account
£m
153.0
7.3
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
Profit and loss account
Retained
earnings
£m
Own
shares
£m
16.1
(100.0)
630.2
(26.7)
11.6
107.6
160.3
5.6
16.1
(115.1)
(11.6)
12.7
132.2
(32.6)
(73.0)
657.9
Total
£m
812.1
7.7
(26.7)
–
12.7
132.2
(32.6)
(73.0)
832.4
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Company has not been separately presented
in these financial statements.
Included within own shares are ordinary shares of the Company held by the Group in an employee benefit trust. The principal purpose of
this trust is to hold shares in the Company for subsequent transfer to certain senior employees and executive directors relating to options
granted and awards made in respect of market purchase shares under the 2004 LTIP, the 2014 LTIP and the Deferred Annual Share Bonus
Scheme. Details of such plans are set out in Note 16 to the consolidated financial statements and the Directors’ remuneration report. The
assets, liabilities and expenditure of the trust have been included in the consolidated financial statements. Finance costs and administration
charges are included in the income statement on an accruals basis. At 31 December 2014 the trust held 6,527,329 (2013: 6,895,539) shares,
upon which dividends have been waived, with an aggregate nominal value of £2.1m (2013: £2.2m) and market value of £115.1m (2013: £100.0m).
10 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS
Profit for the year
Dividends
Issue of share capital
Employee trust shares
Share based payments
Net increase/(decrease) in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
2014
£m
132.2
(105.6)
26.6
7.7
(26.7)
12.7
20.3
812.1
832.4
2013
£m
1.1
(91.8)
(90.7)
9.6
(50.1)
1.3
(129.9)
942.0
812.1
The Company had no other recognised gains or losses in the year ended 31 December 2014 or the year ended 31 December 2013.
11 CONTINGENT LIABILITIES
Borrowings by subsidiary undertakings totalling £929.7m (2013: £874.3m) which are included in the Group’s borrowings have been
guaranteed by the Company.
12 DIRECTORS’ REMUNERATION
The remuneration of the directors of the Company is disclosed in Note 21 to the consolidated financial statements and the Directors’
remuneration report.
13 EMPLOYEE NUMBERS AND COSTS
The average number of persons employed by the Company (including directors) during the year was 42 (2013: 41).
The aggregate employee costs relating to these persons were:
Wages and salaries
Social security costs
Share based payments
Pension costs
2014
£m
7.6
2.8
1.6
1.0
13.0
2013
£m
7.5
1.6
1.3
1.0
11.4
14 RELATED PARTY DISCLOSURES
The Company has identified the directors of the Company, the UK pension scheme and its key management as related parties for the purpose
of FRS 8 ‘Related Party Disclosures’. Details of the relevant relationships with these related parties are disclosed in the Directors’
remuneration report, Note 20 and Note 21 to the consolidated financial statements respectively.
BUNZL PLC ANNUAL REPORT 2014 119
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and
the Group and parent company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare Group and parent
company financial statements for each financial year. Under that law
the directors are required to prepare the Group financial statements
in accordance with IFRS as adopted by the EU and applicable law and
have elected to prepare the parent company financial statements in
accordance with UK GAAP and applicable law.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company and
of their profit or loss for that period.
In preparing both the Group and parent company financial
statements, the directors are required to:
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors’ report,
Directors’ remuneration report and Corporate governance
statement that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Annual Report and financial statements comply with the
Disclosure and Transparency Rules of the United Kingdom’s Financial
Conduct Authority in respect of the requirement to produce an annual
financial report.
We confirm on behalf of the Board that to the best of our knowledge:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been
prepared in accordance with IFRS as adopted by the EU;
• the Group and parent company financial statements have been
prepared in accordance with the applicable set of accounting
standards and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole; and
• for the parent company financial statements, state whether
applicable UK GAAP has been followed, subject to any material
departures disclosed and explained in the parent company
financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure
that its financial statements comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the IAS
Regulation. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
• the Annual Report and financial statements include a fair review of
the development and performance of the business and the position
of the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks
and uncertainties that they face.
On behalf of the Board
Michael Roney
Chief Executive
23 February 2015
Brian May
Finance Director
120 BUNZL PLC ANNUAL REPORT 2014
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC
REPORT ON THE FINANCIAL STATEMENTS
Our opinion
In our opinion:
• Bunzl plc’s Group and Company financial statements (the ‘financial statements’) give a true and fair view of the state of the Group’s and
of the Company’s affairs as at 31 December 2014 and of the Group’s profit and cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’)
as adopted by the European Union;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (‘UK GAAP’); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
What we have audited
The financial statements, which have been prepared by Bunzl plc, comprise:
• the Consolidated and Company balance sheets as at 31 December 2014;
• the Consolidated income statement and Consolidated statement of comprehensive income for the year then ended;
• the Consolidated statement of changes in equity for the year then ended;
• the Consolidated cash flow statement for the year then ended; and
• the Notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the Notes to the financial statements.
These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs
as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Company financial
statements is applicable law and UK GAAP.
Our audit approach
Overview
Materiality
• Overall Group materiality: £15 million which represents 5% of profit before taxation
Audit scope
• We perform audit work in 21 different countries in North America, Continental Europe, UK & Ireland and Rest of
the World, representing 72 components
Areas of focus
• Impairment of goodwill and other intangible assets
• Corporate tax exposures
• Rebate accounting
• Defined benefit pension liabilities
• Business combinations
BUNZL PLC ANNUAL REPORT 2014 121
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular,
we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of
management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented
a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are
identified as ‘areas of focus’ in the table below. We have also set out how we tailored our audit to address these specific areas in order
to provide an opinion on the financial statements as a whole and any comments we make on the results of our procedures should be read
in this context. This is not a complete list of all risks identified by our audit.
Area of focus
How our audit addressed the area of focus
Impairment of goodwill and other intangible assets
Refer to page 50 (Audit Committee report), page 83 (accounting policies) and page 92 (Note 9).
The Group has material goodwill balances and customer
relationship intangible assets spread across multiple geographies.
We focused on each significant cash generating unit (‘CGU’)
(the most significant being North America, France Hygiene and
UK Hospitality) as well as the smaller goodwill and intangibles
balances relating to the CGUs with the lowest level of headroom.
In assessing whether the carrying amount of these assets has
been impaired, management considers forecast cash flows of
the individual CGUs which are identified on a market and
geographical basis.
Management’s impairment assessment involves significant
estimation, principally relating to short and long term revenue
growth, future profitability and discount rates. The number
of acquisitions and the magnitude of the aggregated related
goodwill and intangible assets, together with the subjectivity
of the principal assumptions, required a significant amount of
audit effort, particularly as some of those assumptions are
dependent on economic factors and trading conditions specific
to overseas territories.
As described in Note 9 to the financial statements, management
concluded that, based on their own sensitivity calculations, no
reasonable change in assumptions would lead to an impairment
of goodwill or other intangible assets.
In our testing of management’s annual goodwill and other
intangible assets impairment calculations, we used our specialist
valuation knowledge to assist our evaluation of the appropriateness
of the models and the key assumptions used by management.
We evaluated the reasonableness of the directors’ forecast by
comparing the assumptions made to internal and external data.
In particular:
• we compared short term revenue growth rates to the latest three
year strategic plans and found them to be consistent;
• we confirmed that long term growth rates were not inconsistent
with economic forecasts;
• we found the achievability of future margins to be plausible based
on past and current performance; and
• we challenged the discount rate used to determine the present
value by assessing the cost of capital for the Company and
comparable organisations.
Furthermore, we obtained evidence to confirm adequate historical
accuracy in management’s forecasting process. Having ascertained
the extent of change in key assumptions that either individually
or collectively would be required for goodwill and other intangible
assets to be materially impaired, we considered the likelihood
of such a movement in those key assumptions to be low.
Corporate tax exposures
Refer to page 50 (Audit Committee report), page 82 (accounting policies) and pages 89 and 90 (Note 6).
The Group operates in a number of international territories with
complex taxation rules and regulations. The interpretation of these
complex regulations and the unknown future outcome of pending
judgements by the tax authorities results in the need to provide
against a number of uncertain tax positions.
We focused on this area because of the risk surrounding the level
of estimation and judgement that is necessary in determining the
provisions required.
We discussed with management the known uncertain tax positions
both at Group and local levels.
We used our specialist tax knowledge and experience to assist us
in challenging the appropriateness of management’s judgements in
relation to uncertain tax positions. These procedures assisted in our
corroboration of management’s position on the amount of significant
tax exposures and the provision and disclosures made in the
financial statements.
In assessing the adequacy of the tax provisions, we also considered
factors such as possible penalties and interest. Furthermore, we
confirmed that the calculations were in line with the Group’s policy and
that the methodology and principles had been applied consistently.
122 BUNZL PLC ANNUAL REPORT 2014
Area of focus
How our audit addressed the area of focus
Rebate accounting
Refer to page 50 (Audit Committee report) and page 82 (accounting policies).
We focused on this area as rebate income from suppliers is
material to the consolidated financial statements.
Given the degree of estimation involved in accounting for volume
based rebates, including the level of judgement involved in
forecasting the volume of products expected to be purchased,
we focused our audit procedures on the accuracy, valuation,
completeness and cut-off of these transactions.
We evaluated the processes in place for recognition of supplier
rebates by the Group and found these to be consistently applied.
We agreed the nature of rebate arrangements to contracts or
other supporting agreements and agreed the rates indicated
in the agreements with those used in the calculations. We also
reperformed rebate calculations. No exceptions were noted
from this testing.
For rebates that depend on the volumes purchased in a given period,
we compared the volume included in the rebate calculation to
the volume of products recorded in the underlying records in
management’s forecasts. This did not identify any rebate amounts
which were misstated.
Where possible, we also agreed the post year end settlement
of year end receivable amounts included in the opening and closing
Consolidated balance sheets to bank receipts.
Defined benefit pension liabilities
Refer to page 50 (Audit Committee report), page 84 (accounting policies) and pages 103 to 106 (Note 20).
The Group has significant defined benefit pension schemes in the
US and UK with a net pension deficit of £70.3 million which is
material in the context of the Consolidated balance sheet.
Management estimation is required in relation to the measurement
of pension scheme liabilities and management employs independent
actuarial experts to assist it in determining appropriate
assumptions such as inflation levels, discount rates, salary
increases and mortality rates.
Movements in these assumptions can have a material impact on the
determination of the liability.
We used our own specialist actuarial knowledge to satisfy
ourselves that the assumptions used in calculating the US and UK
pension scheme liabilities are appropriate, including confirming
that salary increases and mortality rate assumptions were
consistent with relevant national and industry benchmarks.
We verified that the discount and inflation rates used in the
valuation of the pension liabilities were consistent with our
internally developed benchmarks and, where available, with
other companies’ reporting as at 31 December 2014. In each case
we considered the assumptions made by management to be
reasonable in light of the available evidence.
Business combinations
Refer to page 50 (Audit Committee report), page 81 (accounting policies) and pages 108 to 111 (Note 24).
Given the acquisitive nature of the Group, accounting for business
combinations is an area of focus due to the judgements involved.
Business combinations can involve significant judgements in
relation to the assets and liabilities that are recognised, particularly
the allocation of purchase consideration to goodwill and separately
identified intangible assets. Any misstatement made in the
identification and/or valuation of acquired intangibles gives
rise to an equal, compensating misstatement in goodwill.
Management relies on external experts to value significant
intangibles acquired in business combinations. Where management
has relied on such experts, we assessed their competency and
tested the results of their work and found no issues.
We used our own specialist valuation knowledge to challenge the
methodology and key assumptions used in determining the value
of the customer relationship assets for the more significant
acquisitions. We concluded that the cash flows applied within the
valuation models and the key assumptions applied to the cash flows,
such as the discount and growth rates, were appropriate.
BUNZL PLC ANNUAL REPORT 2014 123
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as
a whole, taking into account the geographic structure of the Group, the accounting processes and controls and the sectors in which the
Group operates.
The Group is organised geographically into four business areas, being North America, Continental Europe, UK & Ireland and Rest of
the World.
We identified one significant component, being North America. In addition to this, we have identified eight components across Continental
Europe, UK & Ireland and Rest of the World for which a full scope audit of their financial information was required. In order to satisfy the
request of the Audit Committee and management, we performed full scope audits on a further 63 components. Our audit procedures covered
over 95% of total Group revenue, profit before taxation and total assets.
The audit undertaken for Group reporting purposes at the key reporting components of the Group were performed to respective statutory
materiality levels of the individual components. These local statutory materiality levels were set individually for each component and agreed
with the Group audit team and ranged up to £12.8 million.
Where work was performed by component auditors, detailed instructions were issued by us and we ensured that our involvement in this
work was at such a level that we could conclude that sufficient appropriate audit evidence had been obtained as a basis for our opinion on the
Group financial statements as a whole. The Group audit team visited North America, UK, France and Brazil. Telephone discussions were also
held with component auditors at these locations and with the majority of the components which the Group audit team did not visit in person.
Further, specific audit procedures over central functions and areas of significant judgement, including taxation, pensions, acquisitions and
impairment of goodwill and intangible assets, were performed by the Group audit team centrally.
Materiality
The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and
to evaluate the effect of misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
£15 million
How we determined it
5% of profit before taxation
Rationale for benchmark applied
Given that the Group’s businesses are profit orientated, we believe that profit before taxation
provides us with a consistent year-on-year basis for determining materiality
We agreed with the Audit Committee that we would report to them any misstatements identified during our audit above £750,000 as well
as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page 33, in relation to going concern. We have nothing
to report having performed our review.
As noted in the directors’ statement, the directors have concluded that it is appropriate to prepare the financial statements using the
going concern basis of accounting. The going concern basis presumes that the Group and Company have adequate resources to remain in
operation, and that the directors intend them to do so, for at least one year from the date the financial statements were signed. As part of
our audit we have concluded that the directors’ use of the going concern basis is appropriate.
However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s and Company’s
ability to continue as a going concern.
124 BUNZL PLC ANNUAL REPORT 2014
OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
• Information in the Annual Report is:
− materially inconsistent with the information in the audited financial statements; or
− apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group and Company acquired in the course of performing our audit;
or
− is otherwise misleading.
• the statement given by the directors, in accordance with provision C.1.1 of the UK
Corporate Governance Code (the ‘Code’), that they consider the Annual Report taken as
a whole to be fair, balanced and understandable and provides the information necessary
for members to assess the Group’s performance, business model and strategy is
materially inconsistent with our knowledge of the Group acquired in the course of
performing our audit.
We have no exceptions to report arising from
this responsibility.
We have no exceptions to report arising from
this responsibility.
• the section of the Annual Report, as required by provision C.3.8 of the Code, describing
the work of the Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
We have no exceptions to report arising from
this responsibility.
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Directors’ remuneration report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from this responsibility.
Corporate governance statement
Under the Listing Rules we are required to review the part of the Corporate governance report relating to the Company’s compliance with
nine provisions of the Code. We have nothing to report having performed our review.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Our responsibilities and those of the directors
As explained more fully in the Statement of directors’ responsibilities set out on page 120, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
BUNZL PLC ANNUAL REPORT 2014 125
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and
adequately disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements
and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable
basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a
combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with,
the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 February 2015
126 BUNZL PLC ANNUAL REPORT 2014
FIVE YEAR REVIEW
Revenue
Operating profit
Finance income
Finance cost
Disposal of business
Profit before income tax
Income tax
Profit for the year attributable to the Company’s equity holders
2014
£m
6,156.5
341.8
4.0
(46.0)
–
299.8
(89.1)
210.7
2013
£m
6,097.7
332.1
2.6
(44.8)
–
289.9
(83.1)
206.8
2012*
£m
5,359.2
293.8
3.6
(37.6)
4.0
263.8
(72.5)
191.3
2011*
£m
5,109.5
279.3
3.5
(37.0)
(56.0)
189.8
(68.8)
121.0
2010*
£m
4,829.6
255.7
3.5
(37.9)
–
221.3
(65.1)
156.2
Basic earnings per share
64.5p
63.5p
58.7p
37.3p
48.2p
Non-GAAP measures†
Adjusted operating profit
Adjusted profit before income tax
Adjusted profit for the year
Adjusted earnings per share
*Restated on adoption of IAS 19 (revised 2011) ‘Employee Benefits’.
†See Note 2w on page 85 for further details of the non-GAAP measures.
429.8
387.8
281.6
86.2p
414.4
372.2
268.2
82.4p
352.4
318.4
230.2
70.6p
335.7
302.2
219.9
67.6p
306.7
272.3
193.3
59.7p
BUNZL PLC ANNUAL REPORT 2014 127
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
Annual General Meeting
Results for the half year to 30 June 2015
Results for the year to 31 December 2015
Annual Report circulated
2015
15 April
24 August
2016
February
March
Dividend payments are normally made on these dates or the following
working day:
Ordinary shares (final)
Ordinary shares (interim)
1 July
2 January
ANALYSIS OF ORDINARY SHAREHOLDERS
At 31 December 2014 the Company had 5,281 (2013: 5,397)
shareholders who held 334.7 million (2013: 333.5 million) ordinary
shares between them, analysed as follows:
Size of holding
0 – 10,000
10,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,001 and over
Number of
shareholders
% of issued
share capital
4,673
347
168
41
52
5,281
2
4
11
8
75
100
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 (0) 870 889 3257
Fax +44 (0) 870 703 6101
Email webcorres@computershare.co.uk
Website www.computershare.com
INVESTOR CENTRE
Shareholders can manage their shareholding online at
www.investorcentre.co.uk. The Investor Centre is our registrar’s
easy to use website, available 24 hours a day, 7 days a week, where
the following services are available:
• change of address;
• view share balance information;
• join the dividend reinvestment plan; and
• view dividend payment and tax information.
In order to register for the Investor Centre, shareholders will need
their shareholder reference number which can be found on either
their share certificate or dividend tax voucher.
DIVIDEND PAYMENT BY BACS
Shareholders can have their dividends paid directly into their bank
or building society account using the Bankers’ Automated Clearing
Service (‘BACS’). This means that dividends will be in the account on
the same day the dividend payment is made. Shareholders will receive
their tax vouchers by post. To use this method of payment please contact
our registrar on +44 (0) 870 889 3257 or visit the Investor Centre
website. Please note that this option will not override any existing
dividend scheme mandate, which would need to be revoked in writing.
DIVIDEND REINVESTMENT PLAN
The Company operates a dividend reinvestment plan which allows
shareholders to use the whole of their cash dividend to buy additional
shares in the Company, thereby increasing their shareholding.
128 BUNZL PLC ANNUAL REPORT 2014
Shareholders can apply to join the plan online in the Investor Centre
or can contact the Company’s registrar to request the terms and
conditions of the plan and a printed mandate form.
AMERICAN DEPOSITARY RECEIPTS
The Company has a sponsored Level 1 American Depositary Receipt
(ADR) programme that trades on the over-the-counter (OTC) market
in the US. Citibank N.A. acts as the Depositary Bank.
Telephone Citibank +1 781 575 4555
Email citibank@shareholders-online.com
Website www.citi.com/dr
GLOBAL PAYMENTS SERVICE
Shareholders may if they wish have their dividend payments paid
directly into their bank account in certain foreign currencies. Please
contact the Company’s registrar on +44 (0) 870 889 3257 to request
further information about the currencies for which this service
is available.
SHARE DEALING
Bunzl plc shares can be traded through most banks and
stockbrokers. The Company’s registrar also offers an internet
and telephone dealing service. Further details can be found at
www.computershare.com/dealing/uk or by telephoning
+44 (0) 870 703 0084.
SHAREGIFT
Sometimes shareholders have only a small holding of shares which
may be uneconomical to sell. Shareholders who wish to donate these
shares to charity can do so through ShareGift, an independent charity
share donation scheme (registered charity no. 1052686). Further
information about ShareGift may be obtained from ShareGift on
+44 (0) 20 7930 3737 or at www.sharegift.org.
SHAREHOLDER SECURITY
Shareholders are advised to be cautious about any unsolicited
financial advice, offers to buy shares at a discount or offers of
free company reports. More detailed information about this can
be found at www.fca.org.uk in the Consumers section. Details of
any share dealing facilities that the Company endorses will be
included in Company mailings.
AUDITORS
PricewaterhouseCoopers LLP
STOCKBROKERS
J.P. Morgan Cazenove
Citigroup
COMPANY SECRETARY
Paul Hussey
REGISTERED OFFICE
York House
45 Seymour Street
London W1H 7JT
Telephone +44 (0) 20 7725 5000
Fax +44 (0) 20 7725 5001
Website www.bunzl.com
Registered in England no. 358948
FORWARD-LOOKING STATEMENTS
The Annual Report 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.
Printed on Amadeus 50 Silk which is produced using
50% recycled post-consumer waste and 50% wood fibre
from fully sustainable forests with FSC® certification.
All pulps used are Elemental Chlorine Free (ECF). Printed
in the UK by Pureprint using their
environmental printing technology and vegetable inks were
used throughout. Pureprint is a Carbon Neutral® company.
Both the manufacturing mill and the printer are registered
to the Environmental Management System ISO14001 and are
Forest Stewardship Council® (FSC) chain-of-custody certified.
® and
®
Designed and produced by
York House
45 Seymour Street
London W1H 7JT
www.bunzl.com