Developing
globally,
delivering
locally
Bunzl plc
Annual Report 2016
Contents
Strategic report
01 Financial highlights
02 Group at a glance
04 Chairman’s statement
06 Q&A with Frank van Zanten
08 Business model and strategy
16 Key performance indicators
18 Chief Executive’s review
32 Financial review
35 Principal risks and
uncertainties
38 Corporate responsibility
Directors’ report
48 Board of directors
50 Corporate governance report
56 Audit Committee report
60 Directors’ remuneration report
88 Other statutory information
Financial statements
92 Consolidated income
93
statement
Consolidated statement of
comprehensive income
94 Consolidated balance sheet
Consolidated statement
95
of changes in equity
Consolidated cash flow
statement
96
97 Notes
132 Company balance sheet
133 Company statement
of changes in equity
134 Notes to the Company
financial statements
139 Statement of directors’
responsibilities
140 Independent auditors’ report
to the members of Bunzl plc
146 Shareholder information
152 Five year review
Bunzl plc is a focused and successful
international distribution and outsourcing
group. We support businesses all over
the world with a variety of products that
are essential for our customers in the
successful operation of their businesses.
Through our strategy we have built leading positions in a number of business sectors in
the Americas, Europe and Australasia. Our strategy is based on three key areas of focus:
Operating model
improvements
Read more on page 14
Acquisition growth
Read more on page 12
Organic growth
Read more on page 11
The Annual Report can be
downloaded online. To find out
more visit www.bunzl.com
Strategic report | Financial highlights
Financial highlights
Cash
conversion†
99%
(2015: 97%)
Adjusted earnings
per share*
106.1p
(2015: 91.0p)
+6%
Growth at constant exchange rates
(Actual exchange rates +17%)
Dividend
per share
42.0p
(2015: 38.0p)
+11%
Revenue
Adjusted operating profit*
£7,429.1m
(2015: £6,489.7m)
£525.0m
(2015: £455.0m)
Adjusted profit before
income tax*
£478.2m
(2015: £411.2m)
+4%
+5%
+6%
Growth at constant exchange rates
(Actual exchange rates +14%)
Growth at constant exchange rates
(Actual exchange rates +15%)
Growth at constant exchange rates
(Actual exchange rates +16%)
Operating profit
Profit before tax
Basic earnings per share
£409.7m
(2015: £366.5m)
£362.9m
(2015: £322.7m)
80.7p
(2015: 71.0p)
Actual exchange rates +12%
Actual exchange rates +12%
Actual exchange rates +14%
* Before customer relationships amortisation, acquisition related costs and the associated tax, where relevant (see Note 2w on page 102).
† See the Key performance indicator on page 17.
Growth at constant exchange rates is calculated by comparing the 2016 reults to the results for 2015 retranslated at the average exchange rates used for 2016.
01
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
Strategic report | Group at a glance
Group at a glance
We provide a one-stop-shop
distribution and outsourcing
service across 30 countries,
supplying a broad range
of internationally sourced
non-food products to
a variety of market
sectors.
Where we operate
North America
Revenue increased 3% at constant
exchange rates.
Adjusted operating profit* up 4%
at constant exchange rates.
Operating margin* unchanged at 6.6%
at constant exchange rates.
Return on operating capital up from
57.5%◊ to 57.8%.
Revenue
£4,362.1m
% of 2016 revenue
59%
Adjusted operating profit*
£289.6m
* Before customer relationships amortisation and
acquisition related costs.
◊ Restated to reflect the internal transfer of a business
from Continental Europe to North America.
Read more about North America
on page 22
Market sectors
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 public
sector customers.
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.
30%
26%
12%
11%
of 2016 revenue
of 2016 revenue
of 2016 revenue
of 2016 revenue
02
Continental Europe
UK & Ireland
Rest of the World
Revenue up 10% at constant
exchange rates.
Adjusted operating profit* up 13%
at constant exchange rates.
Improvement in operating margin* from
9.1% to 9.3% at constant exchange rates.
Return on operating capital up
from 55.9%◊ to 58.8%.
Revenue decreased 2% at
constant exchange rates.
Adjusted operating profit* down
2% at constant exchange rates.
Operating margin* unchanged
at 7.7%.
Return on operating capital
up from 99.8% to 104.9%.
Revenue up 11% at constant
exchange rates.
Adjusted operating profit* up
4% at constant exchange rates.
Decrease in operating margin* from
8.0% to 7.5% at constant exchange rates.
Return on operating capital
down from 31.3% to 30.2%.
Revenue
£1,355.1m
% of 2016 revenue
18%
Revenue
£1,087.8m
% of 2016 revenue
15%
Revenue
£624.1m
% of 2016 revenue
8%
Adjusted operating profit*
Adjusted operating profit*
Adjusted operating profit*
£126.6m
£83.7m
£46.6m
Read more about Continental Europe
on page 24
Read more about UK & Ireland
on page 26
Read more about Rest of the World
on page 28
Other
A variety of product
ranges to other end
user markets.
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.
Healthcare
Disposable healthcare
consumables, including
gloves, swabs, gowns,
bandages and other
healthcare related
equipment and
cleaning & hygiene
products to hospitals,
care homes and other
facilities serving the
healthcare sector.
10%
7%
4%
of 2016 revenue
of 2016 revenue
of 2016 revenue
Market environment
Growth drivers
• Increasing trend to outsourcing.
• Global legislative trends for health &
safety and the environment.
• Underlying growth in key sectors including:
− Foodservice: away from home;
− Cleaning & hygiene: away from home;
− Safety: increased legislation; and
− Healthcare: demographics.
Competitive advantage
• No one does what we do, on our scale,
across our international markets.
• Decentralised operational structure
with experienced and knowledgeable
management.
• Global sourcing capabilities.
• Strong financial discipline.
• Expertise in making successful
acquisitions.
Customers
• Strong national, regional and local
customer base.
• Working with national and international
leading companies.
• Aligned with customer growth.
• Focus on customer service.
03
Bunzl plc Annual Report 2016 Results
I am pleased to report another good set of
results against the background of mixed
macroeconomic and market conditions
across the countries in which we operate.
Overall currency translation movements
due to the weakening of sterling had
a significant positive impact on the
reported Group growth rates at actual
exchange rates.
Group revenue increased 14% to £7,429.1
million (2015: £6,489.7 million) and adjusted
operating profit before customer
relationships amortisation and acquisition
related costs was up 15% to £525.0 million
(2015: £455.0 million). Adjusted earnings
per share were 106.1p (2015: 91.0p), an
increase of 17%.
At constant exchange rates, revenue
increased by 4% and adjusted operating
profit rose by 5%. The Group operating
margin improved from 7.0% to 7.1% with
adjusted earnings per share up 6% at
constant exchange rates.
Strategic report | Chairman’s statement
Chairman’s
statement
By continuing
to focus on our
strengths and
consolidate the
markets in which
we compete, we
have achieved
another year of
growth in earnings
and dividends.
Philip Rogerson
Chairman
Return on average operating capital
increased to 55.9% from 55.5% in 2015,
driven by an improvement in the operating
capital in the underlying business, partly
offset by an adverse impact from exchange
rate movements, a slightly lower underlying
operating margin and the impact of the
lower return on operating capital from
acquisitions. Return on invested capital of
16.7% was down from 17.1% in 2015
principally due to the effect of acquisitions
and limited organic growth.
Dividend
The Board is recommending a final dividend
of 29.0p. This brings the total dividend for
the year to 42.0p, up 11% compared to 2015.
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 our operations has delivered
another successful year of growth for
the Group.
We look to achieve organic growth by
applying our resources and expertise to
enable our customers to reduce or
eliminate the hidden costs of sourcing and
distributing a broad range of goods not for
resale. By outsourcing these activities to
Bunzl they are able to focus on their core
business and run their operations more
cost-effectively 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.
Revenue £bn
Adjusted earnings per share* p
07–12 restated on adoption of IAS 19 (revised 2011)
£7.4bn
7.4
106.1p
106.1
7.4
6.5
6.1
6.2
5.4
5.1
4.8
4.6
4.2
3.6
70.6
67.6
59.7
55.4
51.8
44.4
106.1
91.0
86.2
82.4
04
0.0
07
08
09
10
11
12
13
14
15
16
0.0
07
08
09
10
11
12
13
14
15
16
* Before customer relationships amortisation, acquisition related costs and associated tax, where relevant.
Bunzl plc Annual Report 2016 Acquisition activity continued throughout
2016. Including Saebe Compagniet and
Prorisk and GM Equipement, which we
agreed to acquire in November 2016 and
completed in January 2017, we made 14
acquisitions with a total committed spend of
£184 million, thereby adding annualised
revenue of £201 million. These acquisitions
have helped to strengthen our position in
many of the markets that we serve. In
addition, the acquisition of Packaging Film
Sales in the US was announced and
completed at the beginning of 2017 and we
are today announcing the purchase of LSH
in Singapore. We now have operations in
30 countries.
Investment
Investment in the business to support our
growth strategy and enhance our asset base
is an ongoing process. We have continued to
improve our facilities and open new ones,
both as a result of acquisitions and by
consolidating our warehouse footprint in
order to make it more efficient. Systems are
critical to our ability to serve our customers
in the most effective way. We continuously
upgrade our IT systems as we integrate new
businesses into the Group’s operations and
increase the functionality of our existing
systems. By doing so we are able to
enhance our customer offering and retain a
competitive advantage, thereby maintaining
our leading position in the marketplace.
Corporate responsibility
We continue to focus on sustainable
operating processes throughout our
businesses while at the same time, through
our one-stop-shop offering to our
customers, also actively contribute to the
sustainable footprint of our customers’
businesses by consolidating their product
deliveries. We work closely with our
suppliers with a view to ensuring that they
also adopt corporate responsibility (‘CR’)
policies similar to our own, while the quality
assurance/quality control team in Shanghai
undertakes audits of our key Asian
suppliers to assist them in meeting our
stringent standards. In addition, we
continually look to add to our full range of
environmentally friendly products. Integrity
is at the heart of Bunzl’s standards and we
ensure that all relevant employees
undertake CR training and that our
whistleblowing programme is
communicated throughout the Group.
Employees
Bunzl’s decentralised business model
drives local empowerment and fast decision
making, thereby allowing us to demonstrate
repeatedly our understanding of our
customers’ needs and deliver great service.
Throughout our operations around the
world, it is the enthusiasm with which our
employees undertake their responsibilities,
their commitment to improve our
performance and their willingness to go
the extra mile that allows us continually to
delight our customers. I would like to thank
them all for their achievements this year
which have contributed greatly to the
Group’s continued success.
Board
After more than a decade in the role,
Michael Roney retired as Chief Executive
and stood down from the Board at the
conclusion of the Annual General Meeting in
April 2016. He was succeeded by Frank van
Zanten who for the previous 10 years was
Managing Director of the Continental
Europe business area. The management
transition has gone well with Frank’s
appointment providing continuity for
the business as well as its customers
and employees.
Following his appointment as Chief
Executive of Brammer plc, Meinie Oldersma
resigned as a non-executive director in
August 2016.
David Sleath, who has served as a non-
executive director since September 2007,
will be retiring after the Company’s Annual
General Meeting in April 2017. During his
time he has also served as Chairman of the
Audit Committee and Senior Independent
Director. His independent advice and
significant contribution to our success have
been greatly appreciated and he leaves the
Board with our thanks and best wishes.
Today we are announcing the appointment
of Lloyd Pitchford as non-executive director
with effect from 1 March 2017. Lloyd is
currently Chief Financial Officer of Experian
plc and has extensive international business
experience which will be of great value to
Bunzl as we continue to expand and develop.
Upon David Sleath’s retirement at the
Annual General Meeting, Lloyd will assume
the role of Chairman of the Audit Committee
and Vanda Murray will become the Senior
Independent Director.
Philip Rogerson
Chairman
27 February 2017
Read our Corporate governance
report on page 50
Adjusted operating profit* £m
Share price range p
£525m
525
4171
525
High 2,436p
Low 1,735p
1,820
2,436
1,950
455
430
414
352
336
307
296
281
243
1,450
1,167
1,014
852
1,671
1,735
1,367
742
757
675
884
777
627
542
482
616
676
0
07
08
09
10
11
12
13
14
15
16
0
07
08
09
10
11
12
13
14
15
16
05
Bunzl plc Annual Report 2016 Strategic report | Q&A with Frank van Zanten
Q&A
with Frank van Zanten
the Company’s new Chief Executive
who was appointed in April 2016 after
a period of 10 years as the Managing
Director of Continental Europe.
Frank van Zanten
Chief Executive
Q Who is Frank van Zanten?
I am 50 years old and I was born and
raised in the Netherlands. I have spent
almost 20 years with the Bunzl Group
in a variety of different roles.
After completing my Master’s degree in
business, I took the opportunity to go into
our family business, Hopa Disposables,
assuming the role of Managing Director
in 1991. In 1994, after an approach by Bunzl,
we decided it was time to sell the business
and Hopa became the first Bunzl business
in Continental Europe. Following the
acquisition I had the opportunity to work
in Denmark, spend time in our German
business and I also worked in the UK for
two years.
06
Bunzl plc Annual Report 2016 In 2001, after seven years with Bunzl,
I became the Chief Executive of a listed
distribution company in the Netherlands.
Bunzl approached me again in 2005 and
I subsequently rejoined the Group as the
Managing Director of the Continental
Europe business area based in Amsterdam.
At that time we had operations in only four
countries but by 2015 had expanded to
14 countries, having doubled the size of
the business to more than €1.5 billion in
revenue and increased the operating profit
almost five times to €144 million.
After 10 years managing Continental Europe
I became Chief Executive of Bunzl plc in
April 2016. It has been an incredible journey.
I believe it is a great story for all the people
in the Bunzl Group that if you work hard and
you want to develop anything is possible.”
Q When you first took over as
Chief Executive what were your
initial observations?
Having worked within the Group for a long
time, it was not all new to me but I have
spent a lot of time travelling around the
world to visit many of our businesses.
I strongly believe that Bunzl has an excellent
business model with an experienced
management team that is successfully
executing a proven strategy.”
Q Do you anticipate continuing the
acquisition strategy that has
contributed to the strong growth
of the Group?
I am incredibly committed to the acquisition
strategy. I compare our acquisition spend
to capex in a manufacturing business;
purchasing businesses and integrating
them into our existing operations is part
of our DNA. We often buy family owned
businesses that require a trigger to sell,
and therefore the timing of transactions
is difficult to predict, but our strong balance
sheet and consistently high cash conversion
means we have the firepower to act quickly
when the opportunities arise.”
Q Will the Group continue to grow
organically as well as by acquisition?
Q What do you think is Bunzl’s
greatest asset?
Yes, growing the Group organically
continues to be a key part of our strategy.
By partnering with market leading
customers, we grow as the markets in
which we operate grow. However, we also
aim to increase our share of those markets
by selling more products to our existing
customers, what we call ‘filling the gap’,
as well as by expanding our product ranges
and winning new customers.”
I have to say that without any doubt it is our
people. Across the Group in all areas of the
business we have incredibly dedicated, loyal
and hardworking employees. Some of them
have been with us for a long time and some
are new to the Group but their continued
commitment to improving our business
on a daily basis and servicing the needs of
our customers is what makes Bunzl the
fantastic business that it is.”
Q Do you have any other specific
areas you want to focus on?
Q In your opinion what makes
Bunzl more than just a
distribution business?
I have two areas I have spoken about before
that I am particularly passionate about,
namely our investment in IT and digital
projects and the sharing of best practice
across the Group. In the last couple of
years, we have rolled out state-of-the-art
digital platforms across Continental Europe
and UK & Ireland which have enhanced our
customers’ experience when interacting
with our businesses and we plan to make
similar investments elsewhere in the near
future. Intensifying the sharing of best
practice across our businesses globally
is also a key area of focus for me. We have
successfully established a global forum
across our fast growing safety business,
bringing together the world leading industry
knowledge of our management which
includes many former business owners.
I want to expand this type of collaboration
to other businesses within the Group as the
benefits to those involved can be significant.”
Our business model offers so much
more than just a set of wheels. We not
only partner with many leading global
branded suppliers but through our Far East
sourcing operations we are able to provide
our extensive own brand product offering.
Our field sales teams work with our
customers across all of our sectors to
identify specific products to suit their
needs and we offer varying delivery
solutions such as direct to store, cross-
dock and warehouse replenishment.
With our global sourcing and procurement
capabilities, our international warehousing
and distribution infrastructure and our
range of delivery options, we are able
to provide a comprehensive and complete
one-stop-shop solution for all of our
customers’ non-food consumables
requirements. By providing this
consolidated offering we are able to
simplify and improve the efficiency
of their own supply chains.”
Read the full Chief Executive’s review
on page 18
Our strong balance sheet and
consistently high cash conversion
means we have the firepower to act
quickly when the opportunities arise.
07
Bunzl plc Annual Report 2016 Strategic report | Business model and strategy
Business model and strategy
For many years we have followed a
well-established and successful business
model and pursued a consistent and proven
strategy in order to create value for our
stakeholders. 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.
Foodservice
Grocery
Cleaning & hygiene
afety
S
Retail
Healthcare
Our business model
Strength and resilience through
our scale, balance and diversity
We have a geographically diversified
business portfolio operating across 30
countries, serving six core fragmented
market sectors, many of which are
growing and resilient to challenging
economic conditions. This allows us to
withstand shifts and changes in demand.
A one-stop-shop for non-food consumables
We source
We source and procure
branded, own brand
and unbranded products
globally, working with
both multinational and
local suppliers, to give
our customers 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 an
efficient one-stop-shop
solution, thereby
allowing them to focus
on their core businesses
more effectively.
We deliver
Our delivery options
include direct store delivery,
cross-dock and warehouse
replenishment programmes
on a local, regional, national
and international basis
to get products to our
customers when and
where they are needed.
08
Bunzl plc Annual Report 2016 Our sources of
competitive advantage
International scale
Relationships with both multinational
and local suppliers and our extensive
distribution networks mean we can deliver
to customers on a local, regional, national
and international basis, giving them
complete flexibility.
Operational focus
With a decentralised operational structure,
our enthusiastic, experienced and
knowledgeable management, including
many former business owners, are able
to focus on our customers’ needs while
retaining full responsibility for the financial
performance of their businesses.
Strong financial discipline
Over many years we have delivered
consistently good results with high returns
on capital and cash conversion.
Global sourcing
Our global sourcing capabilities allow us
to provide a very broad range of products,
including an extensive number of own
brand items.
Acquisition track record
We have a strong track record of successfully
integrating acquisitions, helping us to extend
our geographic footprint while at the same
time enabling our acquired businesses to
continue to feel ‘local’.
Our strategy
1 Organic growth
We are constantly looking to grow Bunzl
organically, both by expanding and
developing our business with existing
customers and by gaining new business
with additional customers.
2 Acquisition growth
We seek out 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.
3 Operating model
improvements
We continually strive to improve the
quality of our operations and to make
our businesses more efficient and
environmentally friendly. We do this by
investing in new IT systems, digital
projects and warehouse facilities as
well as implementing and sharing best
practice operational procedures.
Read more about our KPIs
on pages 16 and 17
Read more about our strategy
on pages 11 to 14
Creating value for stakeholders
Customer benefits
Employee 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.
We provide our employees with career
development opportunities and meet
their training needs while providing
opportunities for advancement within
the business.
Shareholder returns
Environmental awareness
We seek to deliver good returns
for our shareholders over time
with sustained improvement in profits
and earnings which drive long term
growth in Bunzl’s share price and
year-on-year increases in dividends.
Our continued focus on operational
excellence allows us to reduce both
our and our customers’ environmental
impact by reducing our warehouse
footprint, introducing more sustainable
products and business practices and
providing a one-stop-shop consolidated
product offering.
09
Bunzl plc Annual Report 2016 Strategic report | Business model and strategy
depth of
knowledge
... breadth
of product
10
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
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,
we endeavour to increase our level of
business with that customer. This can be
achieved by expanding our offering to parts
of their operations where we might not have
previously been a recognised supplier or by
increasing the type and variety of products
that are available, 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.
11
We build strong relationships with each
of our customers to understand their
needs and identify where we can support
them, while continually looking for new
ways to help make their businesses run
more smoothly.
Larry Baker
North America
Strategic report | Business model and strategy
Acquisition
growth
Expanding and developing the Group
through acquiring businesses is also a
key component of our growth strategy.
Historically, approximately three
quarters of our year-on-year growth
has been achieved through an ongoing
programme of focused and targeted
acquisitions in both new and existing
market sectors and geographies.
Since 2004 we have completed
more than 130 acquisitions
with a total committed spend
of £2.5 billion and have expanded
the Group’s operations from
12 to 30 countries.
existing
markets
12
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
...new
targets
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
− new geographies; or
− new market sectors.
• Bolt-on
− existing geographies; or
− existing market sectors.
Growth in existing countries
Unlike many industries that 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
We are a truly international business with
operations in 30 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. These include
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.
13
Key acquisition parameters
In considering potential acquisition
opportunities, we only target those
businesses that 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;
• that operate in markets with scope for
further consolidation and synergies;
• whose products represent a small
percentage of total customer spend;
• that have opportunities for own label
products; and
• with attractive financial returns.
Strategic report | Business model and strategy
Operating model
improvements
We are continually looking to refine and develop our
processes and procedures to improve our operations
and make our businesses 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 improving our profitability.
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.
IT systems
Systems are an important part of 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 improve
customer service.
Digital capabilities
The implementation of a variety of digital
projects throughout the Group, such as
web-based ordering portals, has increased
the efficiency of our operations while at
the same time provided an enhanced
experience for our customers when
interacting with our businesses.
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.
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.
Warehouse lighting
Recent improvements in lighting technology
have meant that we are able to make
significant savings in electricity costs by
installing energy efficient and
environmentally friendly lighting systems.
Global purchasing
With the annual cost of the goods we
sell exceeding £5.6 billion, our global scale
provides substantial purchasing synergies
with our international suppliers that we
are able to share with our customers in
the form of more competitive selling prices.
Through careful planning and by being flexible and
working together efficiently as a team, we ensure
that our customers get their orders where and
when they need them.
Nick Howe
UK & Ireland
14
Bunzl plc Annual Report 2016 ordering
online
...delivering
on time
15
Bunzl plc Annual Report 2016 Strategic report | Key performance indicators
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 %
Increase in revenue for the year
excluding the impact of currency
translation, acquisitions during the
first 12 months of ownership and
disposal of business.
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.
2.7
2.6
2.7
2.0
327
295
277
327
211
184
Operating model
improvements
Operating margin %
Ratio of adjusted operating profit∆
to revenue. Excluding the impact of
acquisitions during the first 12 months
of ownership, the 2016 operating
margin was 6.9% compared to 7.0%
in 2015 (restated at constant
exchange rates).
7.1
6.6
6.8
7.0
7.0
7.1
0.4
0.0
12
13
14
15
0.3
16
0
12
13
14
15
16
0.0
12
13
14
15
16
Reconciliation of revenue
growth between 2015 and
2016 £m
Annualised revenue from
acquisitions £m
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 (see Note 24 on
page 129).
Return on average
operating capital %
Ratio of adjusted operating profit to
the average of the month end operating
capital employed (being property,
plant and equipment and software,
inventories and trade and other
receivables less trade and
other payables).
641
7,131
3.9%
0.3%
7,429
6,490
15
Currency
translation
15#
Acquisitions
Organic
16
16
518
518
57.9
56.5
56.9
57.7
55.5
55.9
324
281
223
201
0
12
13
14
15
16
0.0
12
13
14
15
16
Bunzl plc Annual Report 2016 £184m
acquisition spend
Read more about our acquisition
strategy on pages 12 and 13
Financial
Adjusted earnings per share p
Adjusted profit for the year (being the profit
for the year before customer relationships
amortisation, acquisition related costs and
disposal of business and the associated tax)
divided by the weighted average ordinary shares
in issue (see Note 7 on page 108).
Non-financial
Scope 1 carbon emissions
Tonnes of CO2 per £m revenue
Measured in accordance with the Greenhouse
Gas Protocol applying Defra conversion factors.
106.1
0.0
106.1
86.2
82.4
91.0
70.6*
15.8
15.8
15.5◊
15.7◊
14.7◊
12.6†
12
13
14
15
16
12 months to 30 September
0.0
12
13
14
15
16
Cash conversion %
Operating cash flow, being cash generated
from operations before acquisition related costs
less net capital expenditure, as a percentage
of adjusted operating profit (see Consolidated
cash flow statement on page 96).
Scope 2 carbon emissions
Tonnes of CO2 per £m revenue
Measured in accordance with the Greenhouse
Gas Protocol applying Defra conversion factors.
102
102
93
95
97
99
5.4
4.6
5.3◊
5.2◊
5.4◊
4.5†
0
12
13
14
15
16
12 months to 30 September
0.0
12
13
14
15
16
Return on invested capital %
Ratio of adjusted operating profit to the average
of the month end invested capital (being equity
after adding back net debt, defined benefit
pension schemes, cumulative customer relationships
amortisation, acquisition related costs and
amounts written off goodwill, net of the
associated tax).
Fuel usage
Litres per £000 revenue
Diesel, petrol and LPG used in the Group’s
own vehicles.
17.9
17.9
17.9
17.6
17.1
16.7
5.6
5.6
5.1◊
5.0◊
4.8◊
4.1†
0.0
12
13
14
15
16
12 months to 30 September
0.0
12
13
14
15
16
17
∆ Before customer
relationships
amortisation and
acquisition related
costs.
# At 2016 exchange rates.
* 2012 has been restated
on adoption of IAS 19
(revised 2011)
‘Employee Benefits’.
† Included in the
external auditors’
limited assurance scope
referred to on page 46.
◊ The data for 2013,
2014 and 2015 was also
assured as detailed in
the Annual Reports
from those years.
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
Strategic report | Chief Executive’s review
Chief Executive’s review
Bunzl’s continued
success is based
on our extensive
knowledge and
experience of the
markets in which we
operate and a deep
understanding of
our customers’
requirements.
Operating performance
With more than 85% of the Group’s revenue
generated outside the UK, the weakening
of sterling against most currencies has had
a significant positive translation impact on
the Group’s reported results, increasing
revenue, profits and earnings by
approximately 10%. As in previous years,
the operations, including the relevant
growth rates and changes in operating
margins, are therefore 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 2015 at the average rates used for 2016.
Unless otherwise stated, all references
in this review to operating profit are to
adjusted operating profit (being operating
profit before customer relationships
amortisation and acquisition related costs).
Revenue increased 4% (14% at actual
exchange rates) to £7,429.1 million,
principally due to the effect of recent
acquisitions together with some organic
growth. Although the level of organic
growth at 0.3% was subdued for most of
the year by the impact of some previously
announced customer losses and price
declines on plastic resin-based products, it
started to improve during the fourth quarter
to approximately 1.5% as a result of recent
business wins and the abatement of the
Frank van Zanten
Chief Executive
Highlights
North America
Improved organic growth as year
progressed from additional business
won and abatement of price declines
on plastic products
Continental Europe
Strong revenue and profit growth with
operating margin up 20bp to 9.3%
UK & Ireland
Operating margin maintained at 7.7%
despite previously announced account
loss and subdued market conditions
Rest of the World
Adjusted operating profit up 4%† as a
result of acquisitions although margins
remained under pressure due to
market conditions
18
† At constant exchange rates.
had revenue of £31 million in 2015, was
acquired at the end of March and represents
our second step in Turkey, extending our
operations there into the foodservice and
healthcare sectors. It is engaged in the
sale of a variety of packaging and other
foodservice supplies and disposable gloves
to wholesalers, retailers and hospitals
throughout Turkey and also exports to a
number of countries.
At the end of May we completed three
further acquisitions. Inkozell and Mo Ha Ge
are both engaged in the sale of healthcare
related consumables, mainly incontinence
products, to a variety of home end users
and care homes throughout Germany. The
aggregate revenue of the businesses in 2015
was £16 million. In the UK we purchased
Classic Bag which develops and distributes
bespoke retail packaging for non-food
retailers in the UK, Hong Kong and
elsewhere in Europe. It complements our
existing retail supplies business in the UK,
enhances our customer base and extends
our presence in this market in Hong Kong.
Revenue in 2015 was £7 million. Polaris
Chemicals distributes cleaning & hygiene
supplies to both redistributors and end
users, including government and education
establishments, retirement homes and
As a responsible business, Bunzl actively
promotes sustainability and we continually
challenge ourselves to reduce the
environmental footprint of our operations,
introduce more sustainable practices to the
businesses we acquire and improve the
safety of all our sites. We remain committed
to reducing our impact on the environment
and supporting the communities within
which we operate. Once again a rigorous
assessment of our supply chain with regard
to social issues has been undertaken and
in our Corporate responsibility report we
seek to show the benefits of our collective
endeavours on the lives of our people,
suppliers and customers. During the year
we undertook a detailed employee survey
and were delighted that 82% of our
employees took part and 93% of
respondents ‘enjoy the work they do’.
Finally, our focus on collaboration and the
sharing of best practice continues to bring
opportunities for our colleagues to work
together, contributing greatly to Bunzl’s
continued success.
Acquisitions
Acquisitions are a key component of the
Group’s growth strategy. Our committed
spend in 2016 was £184 million from a
total of 14 transactions, including Saebe
Compagniet and Prorisk and GM
Equipement which we agreed to acquire
in November 2016 and completed in
January 2017.
At the beginning of February we purchased
Earthwise Bag, a distributor of reusable
bags to supermarkets and other retailers in
the US, which has expanded our offering of
environmentally friendly products. Revenue
in 2015 was £12 million. Bursa Pazari, which
impact of such price declines. Operating
profit was £525.0 million, an increase of
5% (15% at actual exchange rates). The
percentage growth in operating profit was
greater than that of revenue due to the
impact of higher margin acquisitions,
resulting in an improvement in the Group
operating margin by 10 basis points at both
constant and actual exchange rates to 7.1%.
In North America revenue rose 3% (15%
at actual exchange rates) principally due
to the impact of acquisitions completed in
both 2015 and 2016, while operating profit
increased 4% (16% at actual exchange rates)
with the operating margin unchanged at
both constant and actual exchange rates at
6.6%. Revenue in Continental Europe rose
10% (24% at actual exchange rates) as a
result of organic revenue growth and the
impact of acquisitions, with operating profit
up 13% (27% at actual exchange rates) and
the operating margin up 20 basis points at
both constant and actual exchange rates to
9.3%. In UK & Ireland revenue was down 2%
(down 1% at actual exchange rates) with a
decline in organic revenue principally due to
a previously announced account loss in our
food retail business at the beginning of 2016.
Operating profit also reduced 2% (down 1%
at actual exchange rates) with the operating
margin stable at both constant and actual
exchange rates at 7.7%. In Rest of the World
revenue increased 11% (21% at actual
exchange rates) with operating profit up 4%
(11% at actual exchange rates) due to the
impact of acquisitions completed in 2015,
particularly in Latin America. Margins came
under pressure due to the challenging
macroeconomic conditions and some
adverse foreign exchange transaction
impact of weaker local currencies in the
relevant markets in both Latin America
and Australasia, with the business area
operating margin down 50 basis points
(70 basis points at actual exchange rates)
to 7.5%.
Basic earnings per share were 4% higher
(14% at actual exchange rates) at 80.7p.
Adjusted earnings per share, which
excludes the effect of customer
relationships amortisation and acquisition
related costs, were 106.1p, an increase of
6% (17% at actual exchange rates).
The operating cash flow, which is before
acquisition related costs, continued to be
strong with cash conversion (the ratio of
operating cash flow to adjusted operating
profit) at 99%. The ratio of net debt to
EBITDA calculated at average exchange
rates decreased from 2.1 times as at the end
of 2015 to 2.0 times, which is at the lower
end of our target range of 2.0 to 2.5 times.
19
Bunzl plc Annual Report 2016 Strategic report | Chief Executive’s review
Chief Executive’s review continued
cleaning companies, throughout the
Brussels and Walloon regions of Belgium.
The acquisition has brought additional scale
to our cleaning & hygiene supplies business
in Belgium. Revenue in 2015 was £3 million.
The purchase in July of Plus II and Apex,
which had revenues in 2015 of £16 million
and £6 million respectively, has further
expanded our cleaning & hygiene supplies
business in Canada which has grown
significantly in recent years through
acquisition. At the end of August we
acquired Blyth, a Prague based distributor
of a broad range of personal protection
equipment to a variety of end user
customers throughout the Czech Republic
and Slovakia. Revenue in 2015 was
£5 million.
In September we purchased three further
businesses. Kingsbury Packaging, which is
located in Northern Ireland and had revenue
of £5 million in 2015, supplies food
packaging related products to convenience
stores and food retailers in Ireland. Silwell
has provided additional scale to our
business in Hungary by extending our
operations there in the foodservice sector.
Revenue in 2015 was £6 million. Tri-Star
Packaging is also engaged in the
distribution of food packaging and
foodservice products, as well as some
cleaning & hygiene consumables, to end
user customers including ‘food-to-go’
retailers, contract caterers and food
processors throughout the UK. Revenue
in 2015 was £28 million.
At the end of December we acquired
Woodway, a leading supplier of packaging
products and solutions to a variety of end
user customers in the UK. It specialises in
supporting the e-commerce activities of
retailers and had revenue in the year ended
June 2016 of £31 million.
In November we entered into agreements to
acquire Saebe Compagniet in Denmark and
Prorisk and GM Equipement in France, both
of which were completed in January 2017.
Saebe Compagniet is a distributor of
cleaning & hygiene related products to a
variety of end user customers, particularly
in the hotel, restaurant and catering
sectors, in Denmark. Revenue in the year
ended April 2016 was £13 million. Prorisk
and GM Equipement, which together had
aggregate revenue in 2015 of £6 million, are
principally engaged in the sale of a variety of
personal protection equipment and first aid
related products to both end users and
distributors throughout France.
Since the year end we have acquired two
further businesses. In early January 2017
we purchased the business of Packaging
Film Sales which distributes food packaging
products, including flexible barrier films
and speciality bags and pouches, to food
processors in the US. Revenue in 2015 was
£5 million. Finally, today we are announcing
the acquisition of LSH, a distributor of safety
products, primarily to end users, based in
Singapore which was completed at the end
of January 2017. This represents our first
step into Singapore and should provide a
base from which to develop our operations
in Asia. Revenue in 2016 was £5 million.
Prospects
Against the backdrop of mixed
macroeconomic and market conditions,
the combination of our strong competitive
position, diversified and resilient businesses
and ability to consolidate our fragmented
markets further is expected to lead to
continued growth. If exchange rates remain
at their current levels, the significant
weakening of sterling last year will have
a further positive translation effect on the
reported results in 2017, particularly in the
first half.
In North America, the pick up in organic
revenue growth towards the end of 2016 is
expected to continue due to some additional
business won, albeit at lower margins, and
the abatement of the impact of price
declines on plastic resin-based products.
In Continental Europe we expect to see a
good performance due to the benefit of
acquisitions and organic growth. Despite
ongoing uncertainty in some of our markets,
UK & Ireland should make progress due to
the impact of acquisitions and the benefit of
a recent account win, although we continue
to focus on mitigating the adverse foreign
exchange transaction impact from the
weakening of sterling. With many of the
economies in Rest of the World showing
less volatility and the major local currencies
having strengthened, we expect to see a
more stable trading performance from our
businesses there.
The pipeline of potential acquisitions
remains promising. We are in discussions
with various targets and we expect to
complete further transactions during 2017.
The Board believes that the prospects of the
Group are positive due to its strong market
position and ability to grow the business
both organically and through acquisitions.
Frank van Zanten
Chief Executive
27 February 2017
20
Bunzl plc Annual Report 2016 Management
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
Julie Welch
Director of Group Human Resources
Andrew Tedbury
Managing Director UK & Ireland
Paul Hussey
General Counsel & Company Secretary
Paul Budge
Managing Director Continental Europe
Jonathan Taylor
Managing Director Latin America
Andrew Mooney
Director of Corporate Development
Kim Hetherington
Managing Director Australasia
Everyone at Bunzl makes a key contribution to the
successful growth and development of the business
through the application of their diverse skills and
experiences and their dedication and commitment
to see the Group progress.
Frank van Zanten
Chief Executive
21
Bunzl plc Annual Report 2016 Strategic report | Chief Executive’s review
North America
Highlights
2016
£m
2015◊
£m
Growth at
constant
exchange
Revenue
4,362.1
3,784.2
Adjusted operating profit*
Operating margin*
289.6
6.6%
249.0
6.6%
3%
4%
* Before customer relationships amortisation and acquisition related costs
(see Note 2w on page 102).
◊ Restated to reflect the internal transfer of a business from Continental Europe
(see Note 3 on page 104).
Revenue increase from acquisitions and
improved organic growth
Growth in grocery from contract wins and expansion
of business with existing customers
Redistribution growth from category
management programmes
Safety impacted by downturn in oil and gas sector
Strong growth in business serving food processor,
convenience stores and agricultural sectors
Further expansion of national distribution
platform in Canada
Our customers rely
on our sourcing
expertise, the
depth and breadth
of our product
offering and the
comprehensive
service we provide
from our extensive
distribution facilities.
Patrick Larmon
President and CEO
North America
In North America, revenue increased by 3%
to £4,362.1 million due to the impact of the
acquisitions completed in 2015 and 2016 as
well as organic growth of 1%, the level of
which improved relative to that achieved in
2015. The recent acquisitions have expanded
our footprint in several of our market
sectors while adding further products and
services to our portfolio. Although we
continued to face challenges in growing
sales organically due to deflationary
pressures on product prices and slow
growth rates in several customer sectors,
we saw a pick up during the fourth quarter
of the year due to some additional business
won and the abatement of the impact of
price declines on plastic resin-based
products towards the end of the year.
Operating profit increased 4% to £289.6
million with the operating margin remaining
unchanged at 6.6%.
Despite the deflationary pressures on
product prices that persisted for most of the
year, our largest business serving the
grocery sector grew as a result of securing
new contract wins and expanding business
with existing customers. We have activated
our ‘pick-and-pack’ services at several
large customers to provide many new items
and offer a wider range of products with the
convenience of single source delivery.
Additionally, the acquisition of Earthwise
Bag, acquired in February 2016, has
strengthened our offering in eco-friendly
products through the supply of reusable
bags that can be custom-branded for
promotional purposes. Our expanded
product offering combined with our flexible
store delivery programmes allow us to
22
deliver unmatched service and improved
asset utilisation for our customers. For our
largest customer we have also agreed to
take on the distribution of a range of
additional items which are new to the
business area and which we expect to offer
to other customers operating in both the
grocery and retail sectors.
Overall, our business serving the retail
sector remained stable with the adverse
impact of some lost accounts being offset by
new business secured during the year. We
have expanded our available products as
well as enhanced our service capabilities by
consolidating operations to provide faster
deliveries. Our network of warehouses
and fleet of trucks provide an attractive
business model for large retailers with
expansive footprints requiring distribution
to multiple locations. We have continued
to promote our material consolidation
services, primarily used by our largest
retail customer, to retailers with similar
operations. Our materials management
capabilities help retailers reduce costs and
open or remodel stores faster so that they
can begin generating revenue sooner.
In our business serving the redistribution
sector, we have experienced growth
through the implementation of category
management programmes at new and
already established foodservice distribution
customers. These engagements often begin
using innovative, proprietary digital tools to
illustrate to both prospective and existing
customers the substantial revenue
generating opportunities that a complete
redistribution programme has to offer.
Bunzl plc Annual Report 2016 North America is Bunzl’s largest and
longest-established business area, having
started in 1981 with the acquisition of Jersey
Paper Company in the US. The revenue of
the business area that year was £20 million.
Over the last 35 years the operations have
grown substantially throughout the US
while at the same time have expanded into
Canada, Mexico and Puerto Rico to become
the market-leading business that it is today
with revenue of £4.4 billion.
Locations
168
Employees
5,478
Market sectors
We are expanding our sales of janitorial and
sanitation (‘jan-san’) products in this sector
and others through our central warehouse
initiative. In support of this initiative, we
opened a warehouse in the north east
US for the stocking and distribution of
jan-san products in the region and we
have continued to enhance our central
warehouse infrastructure and jan-san
inventory in strategic US locations.
We have also continued to drive sales
through innovative products such as our
proprietary oneSAFE single-use glove
dispensing system.
Our business serving the safety sector
experienced a difficult year with lower
revenue and operating profit due to a
downturn in the oil and gas industry as well
as some weakness in the welding segment.
Despite these factors, we have made gains
in other areas, such as the automotive and
industrial markets. We have taken steps to
reduce operating costs while seeking new
ways to expand our business. We have also
continued to invest in the development of
our own brand of personal protection
equipment. These products contribute
higher margins while at the same time allow
us to offer added value to our customers
when compared to branded alternatives.
In our business serving the food processor
sector, although customer consolidation has
continued, we have expanded our existing
customer relationships and gained new
business by offering a total plant operating
supplies programme. This one-stop-shop
solution encompasses jan-san and safety
products as well as our own label products
including vacuum pouches, shrink wrap
bags and bin liners. Our national accounts
sales team is continually looking to drive
sales by identifying and pursuing customers
who understand the benefit of a single-
source solution for their plant operations.
We have also seen growth in our business
that supplies the agricultural sector.
The business is achieving greater levels
of profitability after migrating all of our
companies serving this sector onto a
unified IT platform that includes a
warehouse management system which
has enhanced operational efficiencies
across the business.
Our business serving the convenience
store sector has grown strongly despite
competition from non-traditional suppliers
as well as some customer consolidation. We
continue to execute our pull-through selling
strategy by partnering with our primary
wholesale customers to help them increase
sales with convenience store retailers
and we have expanded this business with
the addition of other items carried by
convenience stores. Our ability to manage
our customers’ inventory enables them to
have the right products at the right time so
that they can reduce their working capital
and warehouse space needs. We have also
improved our transportation efficiencies
and inventory management capabilities in
this sector.
Our business in Canada continues to
operate successfully with all of the recent
acquisitions continuing to perform well. In
the second half of the year we acquired two
further businesses, Apex in Toronto and
Plus II in Montreal, which have allowed
us to expand our jan-san products and
services in the region as well as our
e-commerce capabilities for our Canadian
customers. We continue to leverage our
national distribution platform and
restructure our business as needed to
enhance our operations serving all of our
market sectors in Canada.
Finally, all of our businesses throughout
North America are benefiting from a
continuous improvement initiative which
is focused on enhancing our operational
capabilities. This includes a warehouse
optimisation programme to ensure we have
the most efficient infrastructure to support
our customers as well as a routing system
that maximises our truck fleet utilisation.
23
Bunzl plc Annual Report 2016 Strategic report | Chief Executive’s review
Continental Europe
Highlights
2016
£m
2015◊
£m
Growth at
constant
exchange
Revenue
Adjusted operating profit*
Operating margin*
1,355.1
1,088.6
126.6
9.3%
99.5
9.1%
10%
13%
* Before customer relationships amortisation and acquisition related costs
(see Note 2w on page 102).
◊ Restated to reflect the internal transfer of a business to North America
(see Note 3 on page 104).
Significant increase in revenue and profit, principally
driven by acquisitions with operating margin* up 20bp
Return to growth in cleaning & hygiene in France
Performance in the Netherlands mixed
Strong growth in Germany and expansion in healthcare
through acquisition
Increased sales and profit in Denmark
Strong performance in Spain and central Europe with
increased levels of profitability
In the Netherlands, sales grew modestly
with mixed performances across the
sectors that we serve. The results were
particularly impacted by De Ridder which
delivered a weaker performance in 2016,
having benefitted in the prior year from
unusually high sales of products to
government agencies.
In Belgium, sales continued to increase in
the cleaning & hygiene sector as a result of
additional business with a number of larger
customers although this growth was partly
offset by lower sales in the grocery and food
processor sectors. Gross margins were
stable but operating profit was impacted
by higher temporary costs linked to the
implementation of a new ERP system in
one of the hygiene businesses.
In Germany, sales again grew well with both
national and regional accounts and gross
margins improved. Some cost reductions
and efficiency gains following the 2015
implementation of a new ERP system also
helped lead to a significant increase in
operating profit. In May 2016 we acquired
Inkozell and Mo Ha Ge, both active in the
distribution of incontinence products to
‘at home’ end users and care homes. The
businesses are integrating well with our
other German operations.
In Switzerland, sales declined as a
contraction in the horeca sector, linked to
lower levels of tourism due to the continued
strength of the Swiss franc, was not fully
offset by gains in the retail and industry
sectors. Sales to the medical sector were
broadly flat. Competition from lower cost
neighbouring countries in the Eurozone also
put further pressure on margins resulting
in operating profit being below that of the
previous year.
Meier Verpackungen, which we acquired in
September 2015 as our first business in
Austria, grew well with an increase in sales
of food and meat packaging products more
than offsetting lower fruit and vegetable
packaging sales which were disrupted by a
poor local harvest due to extreme weather
conditions in the spring.
In Denmark, revenue increased strongly,
in particular due to higher sales to the
horeca sector, food processors and
redistributors as well as higher demand
for personal protection equipment. Sales
to customers serving the retail sector
improved marginally while sales to
customers in the public sector were flat
following the loss of one major account.
As a result of the overall revenue growth,
the operating profit also increased.
The acquisition of Saebe Compagniet
was completed in early January 2017
and has further strengthened our
cleaning & hygiene operations.
Continental Europe once again developed
strongly with revenue rising by 10% to
£1,355.1 million and operating profit up 13%
to £126.6 million. Organic revenue growth of
2% improved on the level seen in 2015 with
the results also boosted by the full year
impact of the eight acquisitions made in
2015 and the part year contribution of the
five acquisitions completed in 2016. While
gross margins reduced slightly, ongoing
management of the cost base enabled the
business area to maintain its underlying
profitability and, with the benefit of higher
margin acquisitions, the business area
operating margin rose by 20 basis points at
constant exchange rates to 9.3%.
In France, sales at our cleaning & hygiene
business returned to growth following
investment in our e-commerce and
telesales capabilities. Additional cost
reductions offset margin pressures and
operating profit again increased in the
year. However, our personal protection
equipment business recorded lower sales
which could only partly be offset by lower
costs. Ligne T, the specialist safety business
acquired in May 2015, traded ahead of
expectations and the acquisition of Prorisk
and GM Equipement, which was completed
at the end of January 2017, has further
increased our scale in the French safety
market and broadened our product range.
Comatec, which was acquired in December
2015 and specialises in the distribution of
high-end, innovative, single-use tableware
to the hotel, restaurant and catering
(‘horeca’) sector, also traded well ahead of
expectations with growth both in the local
French and export markets.
24
Bunzl plc Annual Report 2016 Bunzl acquired its first business in Continental
Europe with the purchase of Hopa Disposables in the
Netherlands in 1994. This was followed by acquisitions
in Germany, Denmark and France in 1997, 2000 and
2004 respectively. By 2010 the business had expanded
through acquisition into a further eight countries and
today operates in 14 countries across the continent.
Market sectors
Locations
152
Employees
4,029
In Turkey, sales at our personal protection
equipment business, Istanbul Ticaret which
was acquired at the end of May 2015, grew
strongly despite the uncertain environment
in the country following the failed coup
attempt in July. The weaker Turkish lira
has, however, put pressure on margins.
At the end of March 2016 we acquired
Bursa Pazari, a distributor of packaging
and other foodservice supplies and
disposable gloves, which has subsequently
traded ahead of expectations.
We continue to roll out our common
e-commerce platform across the business
area. After launching this at our first
company in late 2015, a further five
businesses went live on the system during
2016. This will be further rolled out in 2017,
helping to drive both sales growth and cost
efficiencies going forward.
Our broad portfolio
of operations across
a variety of market
sectors and countries
means we are
a balanced and
resilient business
that has delivered
consistently good
results over time.
Paul Budge
Managing Director
Continental Europe
In Spain, sales grew well in both the
cleaning & hygiene and safety sectors due
to a combination of customer wins and
product range extension. The cleaning &
hygiene business relocated to a new
warehouse in Madrid to provide a platform
for further growth and efficiency gains.
Quirumed, the healthcare products
business acquired in January 2015, saw
lower sales but improved profitability due
to cost reduction measures. Cemelim and
Faru, both acquired in the last quarter of
2015, have integrated well with Cemelim
now fully merged into our cleaning &
hygiene business. Overall profitability
in Spain increased significantly.
In Israel, sales have grown rapidly in the
horeca sector and also increased in the
bakery sector despite disruption caused
by a warehouse relocation following a fire.
Margins improved in both areas and careful
cost control led to a substantial rise in
operating profit.
In central Europe, revenue rose strongly
in all of our local businesses from new
customer wins as well as increased levels
of activity with existing customers and
underlying profits rose accordingly. In
August we completed the acquisition of
Blyth, a specialist distributor of personal
protection equipment based in the Czech
Republic, and in September we bought
Silwell, which is based in Hungary and
sells disposable foodservice items to
the horeca sector. Both businesses are
integrating well with our existing
operations in those countries.
25
Bunzl plc Annual Report 2016 Strategic report | Chief Executive’s review
UK & Ireland
Highlights
Revenue
Adjusted operating profit*
Operating margin*
2016
£m
2015
£m
1,087.8
1,102.4
83.7
7.7%
84.9
7.7%
Growth at
constant
exchange
(2)%
(2)%
* Before customer relationships amortisation and acquisition related costs
(see Note 2w on page 102).
Margin maintained despite lower revenue
Improved profitability in safety in sluggish markets
and good performance in cleaning & hygiene
Food retail restructured following previously announced
account loss; non-food retail performing well
Hospitality impacted by lower investment by customers
but should improve with recent contract win
Solid growth in healthcare
Excellent performance in Ireland across all sectors
By outsourcing
the purchasing,
consolidation
and distribution of
everyday essential
items, our customers
are able to focus on
their core businesses,
saving them time
and money.
Andrew Tedbury
Managing Director
UK & Ireland
In UK & Ireland revenue decreased by 2%
to £1,087.8 million and operating profit was
also 2% lower at £83.7 million. The
previously announced loss of an account in
food retail at the beginning of 2016
combined with subdued market conditions
in the UK resulted in a weaker performance
compared to 2015 with organic revenue
declining by 3%. Although a significant
amount of our products sold are essential
everyday items, some uncertainty, which
was seen in the run up to the EU
referendum in June, continued across
certain of our markets in the second half of
2016, most notably in relation to investment
in the hospitality and construction sectors.
We completed four acquisitions during
the year which, due to the timing of their
completion, will have a greater impact on
the results in 2017.
Despite our safety business successfully
winning new business with a number of
major companies, it continues to operate
in sluggish markets. This is particularly
so in the construction sector where the
lack of major government investment in
infrastructure has delayed projects and in
the oil & gas sector where production has
been curtailed, in both cases resulting in
reduced demand for protective clothing and
equipment. The business undertook a
restructuring at the end of 2015 to reduce
its cost base further and has continued to
develop its own label product offering
which has resulted in increased levels of
profitability. We have also continued to
invest in both people and technology to help
drive operational efficiencies. Our cleaning
& hygiene business has continued to
perform well in a competitive marketplace
and has similarly invested in additional
technology, most notably in vehicle
telematics and e-commerce enhancements,
to improve our efficiency and enhance our
levels of customer service.
The food retail business has been
successfully restructured following the
account loss at the start of 2016 and has
recently won new business with a clearly
defined value proposition supported by an
improved suite of customer centric
technology. The acquisition of Classic Bag
in May complements our existing non-food
retail business which has performed well
during the year, growing with both existing
and new customers, completing a re-brand
and delivering innovative new packaging
solutions to the high street retail sector. Our
recent acquisition of Woodway in December
has further strengthened our offering in
high quality packaging products. It provides
bespoke value-added services through a
specialist technical services team that gives
customers a complete solution for their
distribution packaging needs, particularly
relating to their e-commerce activities.
Finally, our marketing services business
has continued to develop its online
marketing tools for customers alongside
the fulfilment of point-of-sale products and
has created capacity for further growth by
opening an additional distribution centre.
26
Bunzl plc Annual Report 2016 The acquisition of Automatic Catering Supplies in 1993
marked the beginning of the Group’s expansion into
Europe. Bunzl subsequently entered the cleaning &
hygiene sector in 1996, the retail and grocery sectors
in 1999 and the healthcare and safety sectors in
2000. Since then the UK & Ireland business area has
continued to develop significantly with annual revenue
now in excess of £1 billion.
Market sectors
Locations
99
Employees
3,641
Our business in Ireland experienced
excellent growth throughout the year and
profitability improved as we continued to
put a greater focus on margin improving
initiatives. All sectors benefited, from
catering, hospitality and retail through to
cleaning & hygiene and safety. We are
investing in a new purpose built warehouse
in Northern Ireland to support future
growth. Finally, the acquisition in
September of Kingsbury Packaging has
further expanded our product offering and
extended our customer base in the
foodservice and food retail sectors.
It is difficult to give a firm view as to the
probable impact of the 2016 referendum
result in the UK as the terms of leaving
the European Union are not yet known.
However, with more than 85% of our
business based outside the UK, we do not
currently expect the impact on the Group’s
overall operations to be significant.
The catering and hospitality sector has
continued to be both competitive and
challenging with many customers cutting
back on future investments, particularly
in kitchen design and heavy catering
equipment. However, our proposition
remains strong and we have managed to
win a long term contract with a major
contract caterer across a range of non-food
areas, adding expertise and value to the
customer offering. We have invested heavily
in digital technology with both new web and
app developments giving our customers
sophisticated tools to help them run their
businesses better. We continue to grow our
exclusive brand product offering, creating
new ranges that offer both quality and value
and the addition of Tri-Star Packaging in
September has further expanded our reach
with ‘food-to-go’ retailers, contract
caterers and food processors.
Although the UK healthcare market
continues to be under pressure from
ongoing government imposed spending
constraints, our healthcare business has
continued to grow in both the public and
private acute sectors. Our business that is
focused on own brand products has been
challenged by both rapid commoditisation
and the significant weakening of sterling in
the wake of the EU referendum vote but has
continued to develop new value-adding
products and has also increased sales
overseas. The care home supplies business
continues to grow against a backdrop of an
ageing UK population needing more care.
27
Bunzl plc Annual Report 2016 Strategic report | Chief Executive’s review
Rest of the World
Highlights
Revenue
Adjusted operating profit*
Operating margin*
Growth at
constant
exchange
11%
4%
2016
£m
2015
£m
624.1
514.5
46.6
7.5%
42.1
8.2%
* Before customer relationships amortisation and acquisition related costs
(see Note 2w on page 102).
Margins remained under pressure due to
macroeconomic conditions and currency weakness
Significant benefit from 2015 acquisitions,
particularly in Latin America
Latin America
• Underlying profit maintained in Brazil as market
conditions show signs of stability
• Elsewhere overall business trading in line with
our expectations
Australasia
• Market conditions remain challenging
In Rest of the World revenue increased 11%
to £624.1 million and operating profit was up
4%. With no organic revenue growth, the
results benefitted from the impact of
acquisitions made in 2015, particularly in
Latin America. Margins remained under
pressure due to the challenging
macroeconomic conditions and the impact
of currency movements which affected
those businesses that import large volumes
of products. As a result, the business area
operating margin reduced by 50 basis points
at constant exchange rates to 7.5%.
In Brazil, the economic and political
volatility has continued although the market
has begun to show some signs of greater
stability following the challenges faced
during the Presidential impeachment
process. Despite some of the sectors we
serve experiencing ongoing market
weakness, our diversified business portfolio
enabled us to grow our underlying revenue
and maintain operating profit. In our safety
business, due to the continued impact of our
customers postponing investments and
higher levels of unemployment, sales and
margins grew only slightly. Operating
margins were impacted by the cost of
restructuring measures undertaken during
the year to reposition the business for the
anticipated upturn. The challenging market
conditions also affected Casa do EPI,
acquired in November 2015, which
performed below our expectations due to
soft demand in Minas Gerais, particularly in
the mining sector. Further steps were taken
to integrate fully Casa do EPI with our
Prot Cap business which is expected to
generate future synergies and strengthen
our end user personal protection
equipment offering.
The cleaning & hygiene sector in Brazil
continued to be adversely affected by the
difficult market conditions. Large account
losses by several key contract cleaning
customers reduced sales volumes while
intense competition also impacted margins.
To combat these declines, operating costs
were reduced and we moved our São Paulo
headquarters to a more efficient and lower
cost location. A new online B2B platform
was also developed and launched,
the results of which have so far been
very encouraging.
In contrast, our healthcare businesses in
Brazil saw strong sales growth, particularly
with imported products. The highly
successful integration of Labor and
Lamedid, which consolidated three
warehouses into one, led to cost synergies
with minimal business interruption and
operating profits grew significantly. Dental
Sorria, acquired in December 2015, has
settled in well and towards the end of the
year moved into new premises which will
improve service levels and support further
growth. We continue to see the growing
healthcare sector in Brazil as one of the
most attractive markets in which to invest.
In the rest of Latin America, the picture is
more positive with our overall business
trading in line with our expectations. In
Chile, Vicsa grew sales and significantly
improved its gross margins through product
28
We source products
from all over the
world, liaising closely
with our suppliers so
that we are able to
offer a full range of
items which satisfy
our customers’
demands.
Jonathan Taylor
Managing Director
Latin America
Sharing best practice
in the way we do
business increases
our efficiency, from
achieving purchasing
synergies to operating
our warehouses
in the most cost-
effective way.
Kim Hetherington
Managing Director
Australasia
Bunzl plc Annual Report 2016 The current operations of the Group in
Rest of the World started in 1983 with the
acquisition of United Suppliers based in
Sydney, followed by the purchase of a number
of other businesses throughout Australia
and New Zealand over the next 30 years.
The Group’s first move into Latin America
was in 2008 with the acquisition of Prot Cap
in São Paulo since when the business has
expanded both within Brazil and into five
other countries in the region.
Locations
99
Employees
3,082
Market sectors
mix management. Tecno Boga, on the other
hand, suffered from lower demand for its
premium footwear products in the mining
industry which impacted both sales and
margins. New product lines were launched
to reverse this trend and operating costs
were reduced. DPS, our catering
disposables business, traded in line with
expectations but achieved higher operating
margins due to strong purchasing initiatives.
In Colombia, our business grew sales
well. Solmaq, acquired in June 2015,
performed in line with our expectations
and relocated its offices and warehouse
to more suitable locations.
In Mexico, our safety business grew sales
and operating profit through successful
margin management initiatives combined
with good cost control. The outcome of the
US Presidential election resulted in a sharp
devaluation in the Mexican peso towards the
end of the year but the business was able to
mitigate much of this impact with selling
price adjustments. However, in the short
term we expect more volatility and
uncertainty in the Mexican market but our
business is well prepared to react to these
changing conditions.
In Australasia, the market conditions also
remained challenging throughout the year.
There were, however, some positive signs in
the resources sector towards the end of the
year with commodity prices improving.
While our business in Australasia has a
significant exposure to this sector, our
business strategy continues to focus on
developing a sustainable position in more
resilient market sectors to enable our
operations to remain strong throughout all
economic cycles.
Our largest business, Outsourcing Services,
has been impacted by the market downturn
and currency related margin pressure.
However, the business is focused on the
more resilient healthcare, cleaning,
catering and retail sectors and is well
placed to take advantage of changes to
government funding for community
healthcare. We are also continuing to work
with new and existing customers to develop
supply solutions. Part of this will come from
the work we have underway with our new
digital trading platform to create an efficient
and easy to access online mobile customer
portal. In addition, we migrated two of our
recently acquired businesses onto the main
ERP system and also consolidated the
Newcastle warehouse operation into the
larger and more efficient Enfield operation
in Sydney. We will shortly relocate the
Melbourne head office and distribution
centre into a larger and more efficient
facility in Dandenong and will also
consolidate our two healthcare businesses
in Victoria.
Our food processor business also faced a
number of challenges throughout 2016. This
was due mainly to a shortage of livestock as
a result of severe drought conditions in
some regions causing plant closures and
reduced operating schedules which
impacted our results in these areas. This
sector should recover as the herds are
replenished. The ongoing business strategy
has been to continue to diversify our
presence across the wider food processor
sector and, as such, we continue to make
good progress with these endeavours. The
business has had a number of major
customer wins across Australia and New
Zealand and we should see the benefit of
this diversification through the coming year.
Our industrial and safety supplies business
has again been the most impacted by the
resources market downturn in Australia,
particularly in the regions that support this
sector. We have been working hard to widen
our operations into sectors outside mining
and have made solid progress developing
new business opportunities in the
construction, energy and government
sectors. We have also continued to reduce
costs by consolidating facilities and
reorganising the business to fit the current
market environment. By doing so we have
been able to maintain our market presence
by retaining our regional footprint to ensure
that we are able to capitalise quickly as the
market starts to improve. An upgrade of our
ERP system in the industrial and safety
businesses has been successfully
completed. This forms part of our ongoing
technology investment and will enable us
to streamline our operational platform
and processes to help drive productivity
and enhance our competitive position.
We will continue to evaluate opportunities
across our national footprint and, where
applicable, consolidate facilities and
realign the business to the prevailing
market conditions.
29
Bunzl plc Annual Report 2016 Strategic report | Chief Executive’s review
providing
opportunities
...developing
skills
30
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
One of the main
objectives of selling
our family business
to Bunzl was to give
us access to their
extensive knowledge,
experience and
resources in order to
grow and develop our
operations further.
Ecem Aykol
Continental Europe
Valuing our people
Our decentralised organisation structure
provides the framework for how we do
business. Local autonomy, within a clearly
defined Group strategy, underpins everything
we do such that, despite our size, we retain the
culture of a dynamic, local business for both
our employees and customers with our teams
incentivised to provide a high quality service
and produce sustainable returns.
Providing development
and training opportunities
We endeavour to ensure that everyone takes
personal responsibility for themselves to
grow within their roles. Where appropriate
to do so, we foster internal appointments
and promotions and support personal
development through formal training
programmes, as well as help to provide
learning on the job.
Encouraging feedback
and communication
A combination of regular employee
engagement surveys, company social media
sites and intranet and video technologies
allows us to receive feedback from our
workforce and to collaborate effectively
across the world.
31
The acquisition of businesses is a key part of our strategy to grow and develop and we are proud of our track record of retaining former owners and other key staff of the companies we acquire. We value highly their local knowledge and expertise which is essential to ensure that the successful ongoing customer relationships are maintained. Strategic report | Financial review
Financial review
Group performance
With more than 85% of the Group’s revenue
generated outside the UK, the weakening
of sterling against most currencies has
had a significant positive translation
impact on the Group’s reported results
increasing revenue, profits and earnings
by approximately 10%.
Revenue increased to £7,429.1 million
(2015: £6,489.7 million), up 4% at constant
exchange rates and 14% at actual exchange
rates, reflecting the benefit of acquisitions
and some growth in the underlying
businesses. Adjusted operating profit
(being operating profit before customer
relationships amortisation and acquisition
related costs) increased to £525.0 million
(2015: £455.0 million), an increase of 5% at
constant exchange rates and 15% at actual
exchange rates. At both constant and actual
exchange rates, the adjusted operating
profit margin increased from 7.0% to 7.1%
due to the impact of higher margin
acquisitions. Customer relationships
amortisation and acquisition related costs
increased £26.8 million to £115.3 million
due to a £14.5 million increase in customer
relationships amortisation and a £12.3
million increase in acquisition related costs.
The net interest expense of £46.8 million
was £3.0 million higher than in 2015 at
actual exchange rates but down £0.8 million
at constant exchange rates principally due
to a reduction in the net interest expense
associated with the Group’s pension
schemes. Adjusted profit before income tax
(being profit before income tax, customer
relationships amortisation and acquisition
related costs) was £478.2 million (2015:
£411.2 million), up 6% at constant exchange
rates and up 16% at actual exchange rates,
principally due to the growth in adjusted
operating profit.
Tax
The tax rate on adjusted profit for the year
was 26.9% (2015: 27.5%). The reduction in
the rate compared with recent years is
principally due to one-off benefits in 2016
which are not expected to be repeated
in 2017. In addition, enacted changes in tax
legislation will increase the taxable base
which will increase the tax rate in the
coming year. It is therefore expected that
the tax rate on adjusted profit for 2017 will
be between 1.5 and 2.0 percentage points
higher than in 2016. This estimate does not
seek to anticipate the impact of other
potential changes for which legislation has
not been published. As noted in the
Highlights
Revenue and adjusted
operating profit*
Good increases in revenue and
adjusted operating profit* at
constant exchange rates
Revenue
£7,429.1m +4%
(2015: £6,489.7m)
Adjusted operating profit*
£525m +5%
(2015: £455.0m)
Profit for the year
Up 4% at constant exchange rates
£265.9m +4%
(2015: £232.7m)
Cash conversion
Continued strong cash conversion
with operating cash flow† to
adjusted operating profit*
99%
(2015: 97%)
Earnings
Adjusted earnings per share* up 6%
at constant exchange rates
106.1p +6%
(2015: 91.0p)
Dividend
Long track record of dividend growth
continues with an increase of 11%
42.0p +11%
(2015: 38.0p)
* Before customer relationships amortisation,
acquisition related costs and associated tax,
where relevant, (see Note 2w on page 102).
† Before acquisition related costs.
Brian May
Finance
Director
Our long term track
record of strong
cash generation
has enabled us to
pay a growing
dividend over the
past 24 years and
to support our
growth strategy by
making acquisitions
and reinvesting in
the underlying
business.
32
Bunzl plc Annual Report 2016 Principal risks and uncertainties section
on page 37 the Group is monitoring the
development of proposals for tax reforms in
the US. The reported tax rate on statutory
profit before tax was 26.7% (2015: 27.9%).
Profit for the year
Profit after tax of £265.9 million was up
£33.2 million, primarily due to a £43.2
million increase in operating profit offset
by a £3.0 million increase in the net interest
expense and a £7.0 million increase in the
tax charge.
Before approving any dividends, the Board
considers the level of borrowings of the
Group by reference to the ratio of net debt
to operating profit before depreciation,
amortisation and acquisition related costs
(‘EBITDA’), the ability of the Group to
continue to generate cash and the amount
required to invest in the business, in
particular into future acquisitions. The
Company’s long term track record of strong
cash generation, coupled with the Group’s
substantial borrowing facilities, provides
the Company with the financial flexibility to
enable dividends to be funded.
Earnings
The weighted average number of shares
increased to 329.4 million from 327.6 million
in 2015 due to employee share option
exercises, partly offset by shares being
purchased from the market for the Group’s
employee benefit trust. Earnings per share
were 80.7p, up 4% on 2015 at constant
exchange rates and 14% at actual exchange
rates. After adjusting for customer
relationships amortisation, acquisition
related costs and the associated tax,
adjusted earnings per share were 106.1p, an
increase on 2015 of 6% at constant exchange
rates and 17% at actual exchange rates.
The risks and constraints to maintaining
a growing dividend are principally those
linked to the Group’s trading performance
and liquidity, as described in the Principal
risks and uncertainties section on pages
35 to 37. The Group has substantial
distributable reserves within Bunzl plc
and there is a robust process of
distributing profits generated by subsidiary
undertakings up through the Group to Bunzl
plc. At 31 December 2016 Bunzl plc had
sufficient distributable reserves to cover
more than three years of dividends at the
cost of the 2016 dividends, which is expected
to be approximately £139 million.
Customer relationships 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 items are removed in
calculating the adjusted earnings per share
on which management assesses the
performance of the Group. For further
details of this and other non-GAAP
measures see Note 2w to the consolidated
financial statements on page 102.
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)*
2016
13.00
29.00
42.00
2015 Growth
11%
11.75
10%
26.25
11%
38.00
2.5
2.4
* Based on adjusted earnings per share.
The Company’s practice has been to pay
a progressive dividend with the aim
of delivering year-on-year increases in
dividends, growing at approximately the
same rate as the growth in adjusted
earnings per share. The 2016 dividend is 11%
higher than the 2015 dividend, compared to
the adjusted earnings per share which have
grown by 6% at constant exchange rates and
17% at actual exchange rates. Bunzl has
sustained a growing dividend to
shareholders over the past 24 years.
Acquisitions
We completed 12 acquisitions and agreed to
acquire two further businesses during the
year ended 31 December 2016. The
estimated annualised revenue and adjusted
operating profit of the businesses acquired
were £182.3 million and £21.5 million
respectively. Including the two businesses
agreed to be acquired during 2016 but which
completed in January 2017, the estimated
annualised revenue was £201.1 million.
A summary of the effect of acquisitions is
as follows:
Fair value of net assets acquired
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to
the retention of former owners
Net cash acquired
Transaction costs and expenses
Total committed spend in respect
of acquisitions completed in the
current year
Spend on acquisitions committed
as at 31 December 2016
Total committed spend in respect
of acquisitions agreed in the
current year
£m
86.4
51.0
137.4
124.4
13.0
137.4
18.2
(1.0)
6.8
161.4
22.8
184.2
The net cash outflow in the year in respect
of acquisitions comprised:
Cash consideration
Net cash 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
124.4
(1.0)
36.2
159.6
17.0
176.6
* Cash flow on acquisition related costs relates to £5.9
million of transaction costs paid and £11.1 million of
payments relating to the retention of former owners.
Cash flow
Cash generated from operations before
acquisition related costs was £546.7 million,
an £81.7 million increase from 2015,
primarily due to a £70.0 million increase in
adjusted operating profit. The Group’s free
cash flow of £355.5 million was up £45.3
million from 2015, primarily due to the £81.7
million increase in cash generated from
operations, partly offset by a £30.7 million
increase in the cash outflow relating to tax.
After payment of dividends of £125.4 million
in respect of 2015 (2015: £116.1 million in
respect of 2014), an acquisition cash outflow
of £176.6 million (2015: £371.2 million) and a
£37.5 million outflow on employee share
schemes (2015: £29.5 million), the net cash
inflow was £16.0 million (2015: £206.6
million outflow). The summary cash flow
for the year was as follows:
Cash generated from operations*
Net capital expenditure
Operating cash flow*
Cash conversion†
Net interest
Tax
Free cash flow
Dividends
Acquisitions
Employee share schemes
Net cash inflow
* Before acquisition related costs.
£m
546.7
(24.8)
521.9
99%
(43.2)
(123.2)
355.5
(125.4)
(176.6)
(37.5)
16.0
† Before customer relationships amortisation and
acquisition related costs.
Cash conversion (being the ratio of operating
cash flow* to adjusted operating profit†) has
been added as a Key Performance Indicator
(‘KPI’) (see page 17), replacing the Free cash
flow KPI. Cash conversion is a measure
used by management to monitor the
ongoing cash generation of our operating
businesses and it is also reported monthly
to the Board of Directors.
33
Bunzl plc Annual Report 2016
Strategic report | Financial review
Financial review continued
Balance sheet
Return on average operating capital
increased to 55.9% from 55.5% in 2015,
driven by an improvement in the operating
capital in the underlying business, partly
offset by an adverse impact from exchange
rate movements, a slightly lower underlying
operating margin and the impact of the
lower return on operating capital from
acquisitions. Return on invested capital of
16.7% was down from 17.1% in 2015
principally due to the effect of acquisitions
and limited organic growth.
Intangible assets increased by £301.5
million to £1,947.6 million due to an increase
from exchange of £249.9 million, intangible
assets arising on acquisitions in the year of
£131.3 million and software additions of
£7.3 million, partly offset by an amortisation
charge of £87.0 million. The Group’s net
pension deficit of £84.1 million at
31 December 2016 was £44.1 million higher
than at 31 December 2015, largely due to an
actuarial loss of £42.4 million. The actuarial
loss arose largely as a result of the impact
of an £81.7 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 £39.3 million higher
than expected.
Net debt to EBITDA calculated at average
exchange rates was 2.0 times (2015: 2.1
times). The movements in shareholders’
equity and net debt during the year were
as follows:
Shareholders’ equity
At 1 January 2016
Profit for the year
Dividends
Currency (net of tax)
Actuarial loss on pension schemes
(net of tax)
Share based payments (net of tax)
Employee share options
At 31 December 2016
Net debt
At 1 January 2016
Net cash inflow
Currency
At 31 December 2016
£m
1,016.3
265.9
(125.4)
207.7
(34.1)
15.8
(33.7)
1,312.5
£m
(1,107.2)
16.0
(137.4)
(1,228.6)
Net debt to EBITDA (times)
2.0
34
Exchange rates
Average
US$
Euro
Canadian$
Brazilian real
Australian$
Closing
US$
Euro
Canadian$
Brazilian real
Australian$
2016
1.36
1.22
1.80
4.74
1.82
2016
1.24
1.17
1.66
4.01
1.71
2015
1.53
1.38
1.95
5.10
2.03
2015
1.47
1.36
2.05
5.90
2.03
Group tax strategy
The Group’s tax strategy is to comply with
tax laws in all of the countries in which it
operates and to balance its responsibilities
for controlling the tax costs with its
responsibilities to pay tax where it does
business. Therefore management of taxes
is carried out within defined parameters.
The Group’s tax strategy has been approved
by the Board and tax risks are regularly
reviewed by the Audit Committee.
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 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. 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 and credit risks. Treasury
policies have been approved by the Board
and cover the nature of the exposure to be
hedged, the types of financial instruments
that may be employed and the criteria for
investing and borrowing cash. The Group
uses derivatives to manage its foreign
currency and interest rate risks arising
from underlying business activities. No
transactions of a speculative nature are
undertaken. The treasury department is
subject to periodic independent review by
the internal audit department. Underlying
policy assumptions and activities are
periodically reviewed by the executive
directors and the Board. Controls over
exposure changes and transaction
authenticity are in place.
The Group continually monitors net debt and
forecast cash flows to ensure that sufficient
facilities are in place to meet the Group’s
requirements in the short, medium and
long term and, in order to do so, arranges
borrowings from a variety of sources.
Additionally, compliance with the Group’s
biannual debt covenants is monitored on
a monthly basis and formally tested at
30 June and 31 December. The principal
covenant limits are net debt, calculated at
average exchange rates, to EBITDA of no
more than 3.5 times and interest cover of
no less than 3.0 times. Sensitivity analyses
using various scenarios are applied to
forecasts to assess their impact on
covenants and net debt. During 2016 all
covenants were complied with and based
on current forecasts it is expected that
such covenants will continue to be complied
with for the foreseeable future.
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. At 31 December 2016 the nominal
total of US private placement notes
outstanding was £1,251.1 million (2015:
£1,001.9 million) with maturities ranging
from 2017 to 2028. The Group’s committed
bank facilities mature between 2017 and
2022. At 31 December 2016 the available
committed bank facilities totalled £954.2
million (2015: £969.0 million) of which
£101.3 million (2015: £154.9 million) was
drawn down.
Further details of the Group’s capital
management, policies and controls relating
to external borrowings and the
management of liquidity, interest rate,
foreign currency and credit risks are set out
in Note 13 on pages 113 to 118.
Brian May
Finance Director
27 February 2017
Bunzl plc Annual Report 2016 Strategic report | Principal risks and uncertainties
Principal risks and uncertainties
Bunzl has an extensive
risk management
framework designed
to identify and assess
the likelihood of risks
arising, and the
consequences of
them doing so, and
subsequently manage
the actions necessary
in order 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
successfully delivering the Group’s strategic
objectives. The ‘Risk management and
internal control’ section of the Corporate
governance report on page 54 includes
further information on the specific
procedures designed to identify, manage
and mitigate risks which could have a
material impact on the Group’s business,
financial condition or results of operations
and for monitoring the Company’s risk
management and internal control systems.
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 its 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 Audit Committee also reviews
the process for the management of risk
and the assurance procedures over controls
designed to manage key risks. Accordingly,
the directors confirm that they have carried
out a robust assessment of the principal
risks facing the Group, including those that
would threaten its business model, future
performance, solvency or liquidity.
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 2015 Annual
Report remain those of most concern to
the business at the end of 2016.
Although the principal risks affecting the
Group are unchanged from the previous
year, the Board is continuing to monitor
the potential risks associated with the
June 2016 referendum vote for the UK
to leave the European Union. The position
is presently unclear and it is too early to
understand properly the impact that the
UK leaving the European Union will have
on the Group’s operations. However these
risks are most likely to relate to the impact
of foreign exchange volatility, an economic
slowdown in the UK and the imposition of
trade tariffs. Of these risks, the first two
have already been identified as principal
risks for the Group, further details of which
are set out below under ‘Foreign exchange’
and ‘Economic environment’. The risk
relating to trade tariffs is considered to be
a Group risk but is not currently thought
to be a principal risk.
In accordance with the provisions of the
Corporate Governance Code, the directors
have taken account of the Group’s principal
risks in assessing the prospects of the
Company when considering whether
there is a reasonable expectation that the
Company will be able to continue operations
and meet its liabilities as they fall due
over the period of their assessment.
The principal risks and uncertainties faced
by the Group and the steps taken to
mitigate such risks and uncertainties are
summarised below. The risks identified
do not comprise all of the risks that the
Group may face and accordingly this
summary is not intended to be exhaustive
and is not presented in order of potential
probability or impact.
35
Bunzl plc Annual Report 2016 Strategic report | Principal risks and uncertainties
Market risks
Risk
Description
Competitive
pressures
Product
price
changes
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.
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.
Economic
environment
The Group’s business is partially dependent on general economic
conditions in the US, the UK, the Eurozone and other important
markets. A significant deterioration in these conditions could
have an adverse effect on the Group’s business and results
of operations.
Financial risks
Risk
Description
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 also 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.
36
Mitigating factors
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, in a
consolidated one-stop-shop offering. 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.
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.
Mitigating factors
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.
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 composition minimises the impact of movements in
foreign exchange rates on the ratio of net debt to EBITDA.
Bunzl plc Annual Report 2016 Financial risks continued
Risk
Description
Taxation
In an increasingly complex corporate tax environment, it is
possible that changes in tax law, including those that might arise
from the OECD’s current Base Erosion and Profit Shifting project,
may lead to higher tax rates for many international businesses,
thereby adversely affecting the Group’s future cash flows.
Following the change in administration in the US, there is also an
increased likelihood that future tax reform there could affect the
Group’s results, either positively or negatively.
Operational risks
Risk
Description
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 arising on 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.
Mitigating factors
Oversight of the Group’s tax strategy is within the remit of the
Board. The Group seeks to plan and manage its tax affairs
efficiently but also responsibly with a view to ensuring that it
complies fully with the relevant legal obligations in the countries
in which the Group operates while endeavouring to manage its tax
affairs to protect value for the Company’s shareholders in line with
the Board’s broader fiduciary duties.
The Group manages and controls these risks through an internal
tax department made up of experienced tax professionals who
exercise judgement and seek appropriate advice from specialist
professional firms. At the same time the Group monitors
international developments in tax law and practice, adapting its
approach where necessary to do so. Tax risks are assessed by the
Audit Committee and are also incorporated within the Group risk
assessment reviewed by the Board as part of the formal
governance process relating to risk management.
Mitigating factors
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 together with
appropriate insurance cover. 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 reduces the risks associated with
defective products.
Note 13 to the consolidated financial statements includes information relating to the Group’s risk management policies so far as they relate
to financial instruments.
37
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
Strategic report | Corporate responsibility
improving
safety
...responsible
sourcing
38
Corporate responsibility
Objective performance
measures and
structured monitoring
of environmental,
health & safety and
other relevant metrics
continues to be a focus
in order to maintain
high levels of corporate
responsibility within
our business.
Whether in the warehouse or on the
road, our commitment to safety is
paramount. We are all trained to use
safe working practices and to make
sure we look after both ourselves
and our colleagues.
Ngoun Ngoeong
North America
Highlights
Biennial employee survey completed
with increased response rate
Reduction targets for accident
incidence and severity rates exceeded
Analysis of social risk in worldwide
supply chain completed and supplier
management enhanced
Enhanced reported Scope 3 carbon
emissions
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
receive their products when and where they
are needed.
Sourcing
We source everyday essential non-food
items for a number of market sectors
including foodservice, grocery, cleaning &
hygiene, retail, safety 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
their environmental impact and, as a result,
their effect on 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.
Our broad range of products are therefore
never far from where they need to be,
allowing us to meet 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.
39
Bunzl plc Annual Report 2016 Strategic report | Corporate responsibility
Corporate responsibility continued
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 again been recognised by its FTSE4Good
listing and CDP (formerly Carbon Disclosure
Project) 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 our
warehouses and on our vehicles and
ensuring that everyone takes personal
responsibility for this;
• environment/climate change: 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;
449
Asian supplier CR audits
31%
Reduction in accident
severity rate
40
• suppliers: responsible sourcing,
working as partners with our suppliers
to encourage high levels of CR and
ethical trading initiatives; and
• community: providing support by
encouraging employee fundraising,
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.
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 2016. 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
resources (‘HR’) policies and procedures.
16 (2015: 17) calls/letters were received
through our confidential whistleblowing
process, ‘Speak Up’, none of which related
to any issues of material concern.
All directors, managers, sales
representatives and purchasing staff
are required to undertake all of the CR
e-learning modules which have been
developed and enhanced since their original
launch. There are now a total of 11 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
refreshed the posters which are displayed
in all our locations to advertise ‘Speak Up’.
Bunzl plc Annual Report 2016 What we plan to
do in 2017
Continue to monitor
turnover and take action
where necessary.
Focus on career
development and
succession plans.
Detailed actions plans
to be devised to address
any significant issues
raised.
Reduce the Group
accident incidence rate
by 5% from 2016.
Reduce the Group
accident severity rate
by 5% from 2016.
Key performance
indicators
Performance
What we said we
would do in 2016
What we did
2014
2015
2016
Employees
Engaging with our employees with clear communications and the provision of training and development opportunities
Employee turnover:
Voluntary
(Data for 2014 and
2015 has been
amended to reflect
a modified method
of calculation).
Gender diversity:
Women at senior
management level
Employee
engagement index
score
10.0% 10.3% 11.7% Monitor turnover
and take action
where necessary.
10% 11% 10% Extend the training
network further and
encourage wider
participation.
74%
–
76% Prepare to
undertake the
employee
engagement survey
either at the end of
2016 or during the
first half of 2017.
We are seeing an increase in voluntary employee turnover
in all our business areas. The movement in the levels of
voluntary employee turnover tends to reflect changing
economic conditions in the countries in which we operate
rather than any intrinsic reasons related to the Group.
Our key employee and management populations
remain stable.
We continued to promote a women’s development and
training network across the Group.
We completed a further employee survey in 2016 covering
all businesses within the Group. The response rate was
82%, an increase of 10% against the previous survey in
2014 and the engagement score was 76%, an increase
of 2%. Details of the outcome of the survey have been
distributed to the business area heads and the HR
community for discussion with management in the
individual businesses.
Health & safety
Improving safety in our warehouses and on our vehicles
Reduction in
accident incidence
rate (% change
year-on-year)
-19% -7% -7% Reduce the Group
accident incidence
rate by 5% from
2015.
Reduction in
accident severity
rate (% change
year-on-year)
-3% -16% -31% Reduce the Group
accident severity
rate by 5% from
2015.
Establish
programmes in each
business area to
identify behaviours
that promote safety
as a value.
The accident incidence rate reduced by 7% and the
accident severity rate reduced by 31%. The accident
incidence rate improved in UK & Ireland, Continental
Europe and Latin America. In North America the
significant improvement made in the previous year was
partially offset by the performance of some recently
acquired businesses. The accident severity rate decreased
in North America, Continental Europe and UK & Ireland,
where our focus on behavioural safety and assisted
return to work programmes appears to be improving our
performance. Although Latin America saw an increase in
severity rate, their performance compares favourably with
other business areas. Australasia’s incidence and severity
rates have both increased. While their incidence rate is
only slightly above the Group average, their severity rate
was adversely affected by two manual handling accidents
accounting for 68% of their days lost.
We continue to enhance and extend our Safety
Observations Programmes. North America launched
a Fleet Safety Call – Drive for World Class and branch
celebrations are held on sites with a history of zero
accidents. In UK & Ireland ‘Fleet Elite’ drivers are
recognised based on a history of good safe driving scores.
41
Bunzl plc Annual Report 2016 Strategic report | Corporate responsibility
Corporate responsibility continued
Key performance
indicators
Performance
What we said we
would do in 2016
What we did
2014
2015
2016
Environment/climate change
Reducing our impact on the environment by reducing carbon emissions
What we plan to
do in 2017
Carbon emissions:
Scope 1 (Tonnes of
CO2e per £m
revenue)
15.7
14.7
12.6 Reduce emissions
by 29% against 2010
baseline data
(reduce 3% from
2015).
The 2016 figure represents a 38% reduction in emissions
versus our 2010 baseline data (decrease of 15% from
2015). Our emissions are represented as an index against
revenue and in 2016 the reduction in the index was
affected by the weakening of sterling against the major
currencies in the last quarter of the CR reporting year.
We estimate that this exchange rate effect increased
the reduction by c.4%.
Reduce emissions by 1%
against 2016.
(This reduction target
excludes any foreign
exchange translation
effect on revenue
numbers)
Carbon emissions:
Scope 2 (Tonnes of
CO2e/£m revenue)
5.2
5.4
4.5
Reduce emissions
by 13% against 2010
baseline data
(reduce 2% from
2015).
Total Scope 1 & 2
emissions (Tonnes
of CO2e/£m
revenue)
20.9
20.1
17.1
Reduce emissions
by 25% against 2010
baseline data.
Fuel for transportation remains our highest source of
CO2e emissions contributing c.85% of Scope 1 and 62% of
combined Scope 1 and 2 emissions. Despite an increasing
number of vehicles, consumption by our commercial fleet
decreased by more than 2%. Much of this was due to
the decision by our business in Australasia to transfer to
third party carriers in order to gain additional efficiencies
and flexibility but also included increased fuel efficiencies.
The 2016 figure represents a 26% reduction in emissions
versus our 2010 baseline data (decrease of 16% from 2015).
Our emissions are represented as an index against revenue
and in 2016 the reduction in the index was affected by
the weakening of sterling against the major currencies in
the last quarter of the CR reporting year. We estimate that
the exchange rate effect increased the reduction by c.4%.
Increases resulting from acquisitions have been more than
offset by the continued implementation of low energy lighting.
In particular, projects within UK & Ireland reduced overall
business area consumption by 11%.
The 2016 figure represents a 35% reduction in emissions
versus our 2010 baseline data (decrease of 15% from 2015).
Our emissions are represented as an index against revenue
and in 2016 the reduction in the index was affected by the
weakening of sterling against the major currencies in the last
quarter of the CR reporting year. We estimate that the
exchange rate effect increased the reduction by c.4%.
Reduce emissions by 2%
against 2016.
(This reduction target
excludes any foreign
exchange translation
effect on revenue
numbers)
Reduce emissions by 1%
against 2016.
(This reduction target
excludes any foreign
exchange translation
effect on revenue
numbers)
Suppliers
Responsible sourcing, working as partners with our suppliers to encourage high levels of CR and ethical trading initiatives
Asian supplier CR
audits and
assessments
covering
environmental and
social standards
(Number of audits/
assessments
carried out)
323
382
449
Undertake a
supplier risk
assessment in
relation to enforced
labour/slavery.
Our global sourcing audit team continued to refine its
CR audit programme to categorise suppliers appropriately
in relation to their standards and practices. The Risk
Management Committee worked with consultants to
complete a risk assessment of social risks in our global
supply chain including forced labour/slavery.
Launch a training
programme covering
social risks in our global
supply chain.
Refine supplier CR
risk profiling.
Community
Providing support to our local communities through employee fundraising, matched funding and donations of stock and cash
to charitable organisations
Charity donations
(£000s)
572
631
712
Continue to support
relevant charities.
Bunzl supported a variety of projects for charities supporting
healthcare and the environment. For example, we continued
to fund a mobile first aid vehicle for St John Ambulance and
contributed towards the Defence and National Rehabilitation
Centre in Loughborough and the Buglife Urban Buzz project
at the Queen Elizabeth Hospital in Birmingham.
Continue to support
relevant charities.
42
Bunzl plc Annual Report 2016 Employees
Bunzl currently operates in 30 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 2016 are set out in the
charts on the right.
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 applicable local
laws. The majority of countries in which
Bunzl operates have their own laws banning
child and forced 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
with a view to ensuring 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, and do not
use any forced labour.
Total workforce
Gender split at 31 December 2016
Male (10,775)
Female (5,802)
35%
65%
Senior management
Gender split at 31 December 2016
Male (376)
Female (40)
10%
90%
Board composition
6 male, 2 female
Average number of employees
By business area
North America (5,478)
Continental Europe (4,029)
UK & Ireland (3,641)
Rest of the World (3,082)
19%
22%
34%
25%
Health & safety
Health and safety remains a priority for
Bunzl and it is our aim that no employee or
other person should be injured as a result of
our operations. Regretfully in the 2016
reporting period there was one fatality
(2015: two) when a motorcyclist died
following a collision with a Bunzl car driver.
We continue to invest in premises and
equipment to improve the safety of our
employees and others. Although we aim to
minimise the risks which occur, particularly
relating to the operation of our warehouses
and vehicles, incidents involving manual
handling, slipping and tripping and impact
with equipment/objects remain the highest
causes of accidents and days lost. Together
these three hazards represent 90% of
incidents and 92% of days lost. All our
businesses are required to comply with
Group policies issued through the Risk
Management Committee which reviews
Group safety performance on a quarterly
basis. Implementation of Group policies is
audited by a team of safety professionals
and safety standards are also reviewed as
part of our internal audit process. The Head
of Internal Audit has joined the Risk
Management Committee to integrate CR
further into our broader risk management
processes.
Following a successful pilot project, the use
of telematics has been extended across
France Hygiene’s commercial fleet which
is our largest fleet in Continental Europe.
The majority of commercial vehicles now
have on-board telematics that enable
us to improve safety. UK & Ireland have
completed 37% of the project to fit
commercial vehicles with multiple cameras,
side proximity sensors and audible left turn
and reversing warnings to improve road
safety both for our drivers and other road
users, as well as reduce vehicle damage.
They have also introduced a Safe Urban
Driving course comprising practical cycling
and a classroom based session designed to
provide our commercial drivers with
first-hand experience of being a vulnerable
road user.
Our safety awareness programmes are
management led within the business areas.
France Hygiene, which had the highest
incidence and severity rate in the Group,
held a meeting of logistics directors and
managers to brainstorm ways to improve
safety and strengthen the focus on their
43
Bunzl plc Annual Report 2016 Strategic report | Corporate responsibility
Corporate responsibility continued
Environment/climate change
We seek to minimise the contribution of
Bunzl’s operations to climate change and to
prevent other harmful effects of Bunzl’s
operations on the environment. Operational
efficiency forms part of our long-
established and successful strategy to
develop the business and the reduction of
energy consumption is an integral part of
operational efficiency. Our facilities
worldwide operate to Group standards and
we promote environmental awareness
throughout the business. Our policy of
leasing premises provides flexibility in the
configuration of our footprint to optimise the
efficiency of our distribution. Bunzl had no
significant environmental incidents in 2016.
Direct water usage is not a significant
environmental impact for our business as it
is principally confined to staff hygiene and
workplace cleaning purposes. As we do not
manufacture any of the goods we sell, water
discharges, apart from internal sanitation,
are limited to rainwater run-off from the
yards of Group locations where the water is
treated by interceptors in accordance with
local legislation.
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 businesses to adopt our
reporting guidelines, in which case the
revenue from the businesses is not included
when calculating the indexed emissions. We
integrate our environmental reporting with
our financial reporting through the annual
budget review. Businesses provide
commentary on their environmental
performance and set targets for the
following year. Environmental data is
reviewed and agreed by the relevant
Finance Directors.
All acquisitions made prior to the 2016
reporting year are now providing
environmental data. Revenue relating
to more recent acquisitions which are
not yet reporting emissions is excluded.
The reported data covers around 99% of
the Group by revenue.
The requirements of the EU Energy
Efficiency Directive have been implemented
in all relevant businesses across
Continental Europe and UK & Ireland.
A number of locations in UK & Ireland,
Australasia and Continental Europe have
renewed their ISO 14001 accreditation.
Currently, measured by revenue,
approximately 26% of the Group’s
operations are ISO 14001 accredited.
Accreditation is based on processes and
practices which are implemented Group-
wide through our EHS management
programme, although some parts of the
business have not elected to become
formally certified. In Continental Europe,
France Securite has become MASE certified
to reflect the requirements of its customer
base. This certification encompasses
continuous improvement in EHS
performance and is externally assessed.
Waste
Tonnes per £m revenue
Incinerated waste
General waste
Recovered/recycled
waste
0.2
0.8
2.0
0.2
0.8
1.8
0.2
0.8
1.7
0.1
0.7
1.3
0.1
0.9
1.1
12 13 14 15 16
Scope 3 carbon emissions
Tonnes of CO2 per £m revenue
Waste
Electricity transmission
Business travel
Third party carriers
0.2
1.6
13.0
0.4
0.2
1.3
11.5
0.3
0.2
1.2
11.7
0.4
Carbon emissions from waste
have been restated for 2014 and
2015 to reflect more accurate
conversion rates.
14 15 16
Incidence rate
Average number of
incidents per month per
100,000 employees
143
142
115
107
99†
12 13
14
15
16
Severity rate
Average number of days
lost per month per
100,000 employees
0
4
6
,
3
6
8
6
,
3
6
9
5
,
3
1
2
0
,
3
†
0
8
0
,
2
12 13 14 15 16
† Included in the external auditors’ limited assurance
scope referred to on page 46. 2015 and 2014 data was
also assured as detailed in the 2015 and 2014 Annual
Reports respectively.
high risk groups of workers. Initiatives
identified at the meeting are being
implemented across the business. The root
cause of many incidents is shown to be a
failure to implement established safe
working practices. Our Safety Observation
Programme, providing ongoing feedback to
our employees on both good and poor safety
performance, continues to be extended
across the business. In North America a
number of sites are evaluating pre-shift
stretching programmes as a way to reduce
manual handling injuries. Investment in
additional Environment, Health & Safety
(‘EHS’) management resource has occurred
in North America and Continental Europe.
During the year we have implemented our
upgraded web-based EHS reporting system
in order to provide improved analysis and
management reports. The system includes
an improved audit system which enables
progress on corrective actions to be tracked
by the EHS managers.
Details of our performance from 2012 to
2016 are provided in the bar charts above.
The accident data provided covers more
than 99% of the Group by revenue as it
excludes the most recent acquisitions
whose employee numbers are not included
when calculating the index.
44
Bunzl plc Annual Report 2016 Greenhouse gas emissions data for the 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
2015
92,645
33,843
126,488
2016†
89,186
32,201
121,387
26.3
20.1
17.1
† Included in the external auditors’ limited assurance scope referred to on page 46. The data for 2015 was also
In addition, as energy contracts are
renewed, businesses are moving to low
carbon energy where this makes
commercial sense and is supported by the
local infrastructure.
Scope 3: We are continuing to refine the
data for our Scope 3 emissions. Our
reporting comprises emissions from third
party carriers, business flights, waste and
electricity transmission losses. The
majority of the businesses which have been
acquired since 2010 do not have their own
fleet and in addition all our businesses,
irrespective of whether they have their own
fleet, will distribute a proportion of goods
by third party carriers where it is more
efficient and cost-effective to do so. The
bar graph opposite shows that third party
carriers produce the largest part of our
reported Scope 3 emissions. Bunzl is an
international company with an active global
acquisition programme and business flights
are essential for the effective management
and growth of our business. We increasingly
use alternative means of communication
such as video and telephone conferencing
and flights are justified by business needs
and subject to authorisation by senior
management. Reduction and segregation of
waste continues to be an area of focus and
the data provided covers approximately 95%
of the Group by revenue, although accurate
waste measurement remains challenging.
Despite including this in our Scope 3
calculation, we have for transparency
continued to provide waste data separately
as well.
assured as detailed in the 2015 Annual Report.
Scope 1: Fuel for transportation remains
our highest source of CO2e emissions
contributing c. 85% of Scope 1 and 62% of
combined Scope 1 and 2 emissions. Of those
emissions relating to transportation, more
than 75% are generated by our fleet of
commercial vehicles. Fuel represents a
significant cost to the business and we are
focused on maximising the efficiency of our
fleet through regular replacement and
maintenance of vehicles, route optimisation,
the use of vehicle telematics and driver
training programmes. In North America,
where we have our largest commercial
fleet, the combination of these measures
provided a 4% improvement in fuel
efficiency during the year. At Group level
diesel consumed by our commercial fleet
decreased by more than 2%. Increases in
Continental Europe and Latin America
resulting from acquisitions have been offset
by decreases in North America, UK &
Ireland and Australasia. In Australasia the
need for greater flexibility of transport
methods and efficiency in distribution has
resulted in the decision to transfer
distribution to third party carriers. This is
an ongoing process. We seek to minimise
the number of miles that our vehicles travel
empty on the road by backhauling, typically
using empty vehicles to collect stock from
suppliers. Consumption of gas during the
year fell by 11% primarily as a result of the
relatively mild winter.
Scope 2: Electricity consumption has
decreased by 1% despite an increase in
warehouse space due to acquisitions and
organic growth of the business. Lighting is
our highest category of electricity
consumption and we continue to review the
return on investment on low energy lighting
at all our sites worldwide as the technology
progresses and improves the efficiency of
such lighting. We also fit voltage optimisers
where this is beneficial. During the year
there have been 13 projects to upgrade
lighting providing annualised savings of
approximately 2.1 million kWh of electricity.
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. 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 periodically write to those suppliers
that provide us with 50% of our products
by value to ensure that our CR aspirations
are compatible.
To assist the business areas, we have our
own quality assurance/quality control
department based in Shanghai which
performs 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 capabilities, 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 2016
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.
45
Bunzl plc Annual Report 2016 Strategic report | Corporate responsibility
Corporate responsibility continued
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, illegal discrimination, wages
not meeting local minimum requirements
and not providing adequate days of rest.
Since 2015, in order to enhance the
processes further, any suppliers that are
being monitored and assessed due to
identification of a serious breach are now
reported to and reviewed by the Board. In
2016 we completed a quantitative analysis
of material social risks in our worldwide
supply chain. Suppliers were ranked against
Human and Labour rights identified by
internationally agreed standards and
credible data taking account of geography
and product. This is an ongoing project
but we are satisfied that those suppliers
assessed as high risk and who are currently
supplying Bunzl are covered by our audit
programme.
We work with our suppliers with the aim of
ensuing the products we supply are
manufactured from sustainably sourced
raw materials. We also continue to refine
our processes to ensure that imported
paper and wood based products are
manufactured from legally sourced timber.
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 testing over
a number of 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 one site in UK &
Ireland and multiple sites across North
America and Continental Europe to check
that data had been appropriately measured,
included, collated and reported.
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.
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
fundraising activities championed by our
employees locally. This is supplemented by
donations made at Group level to charities
predominantly in the fields of healthcare
and the environment to support projects
often in the 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 £712,000 to
charitable causes during 2016 (2015:
£631,000). This does not include in-kind
donations or employee fundraising.
We continue to support our employees in
their charitable fundraising, for example
a triathlon challenge raising money for
childrens’ medical research, as well as
supporting projects for healthcare and
environmental charities, such as sponsoring
Buglife who improve parks and green
spaces within big cities to create natural
habitats for invertebrate insects which play
a big part in our ecosystem.
For more information on all of Bunzl’s
CR policies and activities please visit the
Responsibility section of our website,
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 (Revised):
‘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 17
and the data on pages 44 and 45, 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 also available in the
Responsibility section of our website,
www.bunzl.com.
46
Bunzl plc Annual Report 2016 Risks
The Principal risks and uncertainties section on pages 35 to 37 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.
CR risks
Risk
CR compliance
failures
Description
Mitigating factors
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
Suppliers’
non-compliance
with good CR
practices
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.
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. Regular training in all areas of CR
takes place using our suite of e-training modules.
The Group seeks to secure key staff with appropriate
incentive packages, development opportunities and career
progression. Voluntary staff turnover and sickness absence
is measured on a monthly basis and employee age profiles
are reviewed annually. This 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 key suppliers
throughout Asia. The top 50% of suppliers by value of Bunzl
spend 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.
Sustainability has been at
the heart of our business for
many years. Segregation of
waste is embedded in our
everyday working practices,
while we work hand-in-hand
with our customers on
packaging reduction ideas.
47
Bunzl plc Annual Report 2016 Directors’ report | Board of directors
Board of directors
Good governance overseen by a strong
independent Board is essential to the long term
sustainability and success of the Group.
1 Philip Rogerson # (Age 72)
Chairman
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 Group 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 Frank van Zanten # (Age 50)
Chief Executive
Executive director since February 2016
and Chief Executive and member of the
Nomination Committee from April 2016.
He joined Bunzl in 1994 when Bunzl
acquired his family owned business in the
Netherlands and he subsequently assumed
responsibility for a number of businesses
in other countries. In 2002 he became
Chief Executive Officer of PontMeyer NV,
a listed company in the Netherlands, before
re-joining Bunzl in 2005 as the Managing
Director of the Continental Europe business
area. He is a non-executive director of
Grafton Group plc.
3 Patrick Larmon (Age 64)
Executive director
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. He is
a non-executive director of Huttig Building
Products, Inc. and Bodycote plc.
48
4 Brian May (Age 52)
Finance Director
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.
5 David Sleath *†#• (Age 55)
Non-executive director
Non-executive director since 2007, Senior
Independent Director and Chairman of the
Audit Committee. 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.
He will retire from the Board following the
Annual General Meeting on 19 April 2017.
6 Eugenia Ulasewicz *†#• (Age 63)
Non-executive director
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.
7 Jean-Charles Pauze *†#• (Age 69)
Non-executive director
Non-executive director since 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 currently
a member of the Supervisory Board of
IMCD N.V.
8 Vanda Murray OBE *†#• (Age 56)
Non-executive director
Non-executive director since 2015, Chair
of the Remuneration Committee and will
become Senior Independent Director upon
the retirement of David Sleath on 19 April
2017. 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 Chairman of Fenner PLC and a non-
executive director of Exova Group plc.
9 Lloyd Pitchford *†#• (Age 45)
(not pictured)
Non-executive director
Appointed as a non-executive director with
effect from 1 March 2017 and will become
Chairman of the Audit Committee upon the
retirement of David Sleath on 19 April 2017.
Having previously held a number of senior
finance positions with BG Group plc, latterly
as Group Financial Controller, he
subsequently joined Intertek Group plc
where he was Chief Financial Officer from
2010 to 2014. He is currently Chief Financial
Officer of Experian plc.
* Member of the Audit Committee
† Member of the Remuneration Committee
# Member of the Nomination Committee
• Independent director
Bunzl plc Annual Report 2016 3
6
1
4
7
2
5
8
Our Board has continued to focus on overseeing
the implementation of a consistent and proven
strategy which has successfully built the
business and created shareholder value.
Philip Rogerson
Chairman
49
Bunzl plc Annual Report 2016 Directors’ report | Corporate governance report
Corporate governance report
Chairman’s introduction
Good governance is absolutely key to the
effective management of the Company and
its long term sustainability and continued
success. The Board is therefore committed
to maintaining the highest standards of
corporate governance and, as Chairman, it
is my role to ensure that we continue to do
so. Although we are a decentralised Group
which gives management autonomy to take
decisions relating to our operations locally,
our governance framework allows the
Board to lead the Company in the right
direction as we develop and pursue our
future strategy, while ensuring that the tone
of the Group’s culture and values is set from
the top and that the standards established
by the Board are maintained throughout
the Group.
One of the key aspects of good governance
by any Board is to plan for future
management succession. As I reported last
year, following an extensive search and
selection process, we appointed Frank van
Zanten to succeed Michael Roney as Chief
Executive following Mike’s decision to retire
from the Board in April 2016 after more
than 10 years in the role. Frank, who was
formerly an owner of a business we
acquired in 1994 and the Managing Director
of our Continental Europe business area
from 2005 until earlier last year, has
extensive knowledge and experience of our
business gained over many years. This,
together with his successful track record of
implementing our strategy for developing
and expanding the Group both organically
and by acquisition, meant that he was ideally
placed to take on the role.
The latest edition of the UK Corporate
Governance Code (the ‘Code’), which is
published by the Financial Reporting
Council and a copy of which is available at
www.frc.org.uk, 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. The report
that follows provides an overview of the
work undertaken by the Board and its
Committees in fulfilling our governance
responsibilities and describes how the
principles of the Code have been applied
by the Company during the year ended
31 December 2016. An updated version of
the Code was published in April 2016 and
will apply to the Company for the year
ending 31 December 2017. The Company
50
has already taken account of the small
number of changes required and will report
formally in accordance with the revised
edition of the Code in the 2017 Annual
Report. However all references to the
Code in this report relate to the 2014 edition
of the Code.
Philip Rogerson
Chairman
27 February 2017
Compliance statement
It is the Board’s view that for the year ended
31 December 2016 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
Financial Conduct Authority and to report if
it does not reflect such compliance. No such
report has been made.
Board composition
As at 31 December 2016, the Board was
made up of eight members comprising a
Chairman, a Chief Executive, two other
executive directors and four non-executive
directors. Frank van Zanten was appointed
to the Board on 1 February 2016 in
anticipation of Michael Roney’s retirement
on 20 April 2016 and Meinie Oldersma
resigned from the Board on 22 August
2016. As announced today, an additional
non-executive director, Lloyd Pitchford,
will join the Board on 1 March 2017 and
David Sleath, who has been a non-executive
director since September 2007, will retire
from the Board following the Company’s
Annual General Meeting on 19 April 2017.
Brief biographical details of the directors
are given on page 48. 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 David Sleath 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 in
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;
Bunzl plc Annual Report 2016 − 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.
Following David Sleath’s retirement, Vanda
Murray will become the Senior Independent
Director. A key role of the Senior
Independent Director is to be 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. The Senior
Independent Director 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.
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.
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 2016 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,
cybersecurity risks and controls, supplier
audits carried out 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 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.
Directors are required to give notice of any
potential situational and/or transactional
conflicts which are then considered by the
Board and, if deemed 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
currently 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. Following David
Sleath’s retirement, Lloyd Pitchford, who,
as mentioned above, is joining the Board as
a non-executive director on 1 March 2017,
will become the Chairman of the Audit
Committee. He is the Chief Financial Officer
of Experian plc and, as such, also has recent
and relevant financial experience. 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
2016 are set out in the Audit Committee
report on pages 56 to 59. Members’
attendance at the Committee meetings
held during the year is set out in the table
on page 52. 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
51
Bunzl plc Annual Report 2016 Directors’ report | Corporate governance report
Corporate governance report continued
Remuneration Committee
The Remuneration Committee comprises
all of the independent non-executive
directors and is currently chaired by Vanda
Murray. 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 Julie Welch, 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 60 to 87.
Members’ attendance at the Committee
meetings held during the year is set out in
the table below. The terms of reference of
the Committee, which were reviewed by the
Board 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 independent 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;
52
• 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 both in relation to the appointment
of Frank van Zanten on 1 February 2016 to
succeed Michael Roney as Chief Executive
with effect from 20 April 2016 and the
appointment of Lloyd Pitchford as a
non-executive director with effect from
1 March 2017. Details of the process
followed in relation to Frank van Zanten’s
appointment are set out in the Corporate
governance report included in the 2015
Annual Report and further information
relating to the appointment of Lloyd
Pitchford is set out below.
Activities
The Committee met on three occasions
during 2016. Members’ attendance at those
meetings is set out in the table below.
One of the Committee’s main
responsibilities during the year related to
the process of identifying and selecting a
new non-executive director. Having taken
account of the challenges and opportunities
facing the Company currently and in the
future and after identifying the background,
skills, knowledge and experience that will
be required of non-executive directors in
the future, the Committee prepared and
agreed a detailed specification for the
role and appointed an external search
consultancy, The Zygos Partnership, to
assist them in the recruitment process.
The Zygos Partnership does not provide any
other services to, or have any connection
with, the Company. In particular the
Committee was 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 the 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. The Committee carried out
Board and committee attendance
The following table shows the attendance in 2016 of directors at Board meetings and at
meetings of the Board Committees of which they were members:
Number of meetings
Philip Rogerson
Michael Roney*
Frank van Zanten†
Patrick Larmon
Brian May
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma◊
Vanda Murray
Notes:
Board
7
7
3
6
7
7
7
7
6
4
7
Audit
Committee
4
Remuneration
Committee
4
4
4
3
2
4
4
4
3
2
4
Nomination
Committee
3
3
1
2
3
3
2
1
3
* Michael Roney retired as a director on 20 April 2016 having attended all of the Board and relevant Committee
meetings held between 1 January 2016 and that date.
† Frank van Zanten was appointed as a director on 1 February 2016 and attended all of the Board and relevant
Committee meetings held between that date and the end of the year.
◊ Meinie Oldersma resigned as a director on 22 August 2016 having attended all of the Board and Committee
meetings held between 1 January 2016 and that date.
Bunzl plc Annual Report 2016 an extensive search and selection process,
overseen by a sub-committee of the
Committee, and a number of candidates
were considered. All members of the
Committee had the opportunity to meet the
shortlisted candidates following which the
recommendation was made to the Board in
February 2017, which was subsequently
unanimously approved, that Lloyd Pitchford
be appointed as a non-executive director
with effect from 1 March 2017. The Board
also accepted the Committee’s
recommendation that he be appointed to
each of the three Board Committees and
that he should assume the role of Chairman
of the Audit Committee upon David Sleath’s
retirement in April 2017.
During the year 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 2016 Annual General Meeting. In
particular the Committee reviewed the
performance of David Sleath, who was
appointed to the Board in September 2007.
The Committee believed that he continued
to be effective and to demonstrate strong
independence in character and judgement
in the manner in which he was discharging
his responsibilities as a director.
Consequently the Committee was satisfied
that, despite his length of tenure, he
remained independent. As mentioned
above, David Sleath is due to retire following
the conclusion of the Annual General
Meeting to be held on 19 April 2017 and
accordingly he will not be subject to
re-election at the meeting.
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 eight Board
members 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 43.
The terms of reference of the Committee,
which were reviewed and amended by
the Board in 2016, are set out on the
Company’s website.
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 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 first 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 an annual performance evaluation
and accordingly external evaluations have
been completed each year since 2012. 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 2016, the Board once again identified
a number of key priorities in order to improve
the Board’s performance, including:
• continuing to keep the key strategic
issues facing the Group under review both
as part of the Board’s annual strategy
meeting and at other times of the year
as appropriate;
• providing ongoing support to the new
Chief Executive 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; and
• the successful recruitment and
subsequent appointment of an additional
non-executive director and overseeing the
induction and integration of such director.
As a result of the overall performance
evaluation process carried out in 2016,
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 139 and the auditors’ report
on pages 140 to 145 includes a statement by
the external auditors about their reporting
responsibilities. As set out on page 97, 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:
• comprehensive reviews undertaken at
different levels in the Group in order to
ensure the accuracy, consistency and
overall balance of the Annual Report; and
• procedures to verify the factual accuracy
of the Annual Report.
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
position and performance, business model
and strategy.
53
Bunzl plc Annual Report 2016 Directors’ report | Corporate governance report
Corporate governance report continued
Risk management and
internal control
The directors acknowledge that they have
overall responsibility for identifying,
evaluating, managing and mitigating the
principal risks faced by the Group and for
monitoring the Group’s risk management
and internal control systems. However, such
systems are 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 the principal risks faced by the
Group and for determining the nature and
extent of the principal 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 2016 and up to the date of
approval of these financial statements and
that the Group’s risk management and
internal control systems have been
monitored during the year.
A summary of the principal control
structures and processes in place across
the Group is set out below and 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 pages 50 and 51.
The Board has delegated to an Executive
Committee, consisting of the Chief
Executive, Finance Director and other
functional managers, the initial
responsibility for identifying, evaluating,
managing and mitigating the risks facing
the Group and for deciding how these are
best 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
whistleblowing 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;
• continual investment in IT systems
to ensure the production of timely
and accurate management information
relating to the operation of the
Group’s businesses; and
• 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.
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 principal 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 56 to 59;
• regular meetings are held with insurance
and risk advisers to assess the risks
throughout the Group;
• 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 Company’s
risk management and internal control
systems in operation during 2016.
The external auditors are engaged to
express an opinion on the financial
statements. The audit includes a 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.
54
Bunzl plc Annual Report 2016 Assessment of the prospects of the
Company and its viability statement
In accordance with provision C.2.2 of the
Code, the directors set out below how they
have assessed the prospects of the
Company, over what period the prospects
have been assessed and the Company’s
formal viability statement.
The context for and period over
which the prospects of the Company
have been assessed
To consider the prospects of the Company
and determine an appropriate time frame
for the purpose of making a statement on
the Company’s longer term viability, the
directors have taken into account various
factors including the nature of the
Company’s business, its business model
and strategy and the existing planning
periods. In particular:
• Bunzl has a geographically balanced and
diversified business portfolio operating in
30 countries;
• the Company operates across six core,
fragmented market sectors, many of
which are growing and resilient to
challenging economic conditions; and
• the business model and strategy
minimise the volatility of the Company’s
results, enabling Bunzl to deliver
consistently good results with high
returns on capital and cash conversion.
With regard to the time frame specifically,
the directors considered the above factors
as well as the Group’s strategic planning
process. Comprehensive budgets are
prepared annually by the business areas
and approved by the Board. Strategic plans
covering a period of two years beyond the
forecast for the current year are also
prepared annually and reviewed by the
Board. While the directors have no reason
to believe the Company will not be viable
over a longer period, given the inherent
uncertainty involved, the period over which
the directors consider it possible to form a
reasonable expectation as to the Group’s
longer term viability is the three year period
to 31 December 2019.
How the prospects of the Company
and its longer term viability have
been assessed
In making a viability statement, the
directors are required to consider the
Company’s ability to meet its liabilities in
full as they fall due, taking into account the
Company’s current position and principal
risks. The Company has significant financial
resources including committed and
uncommitted banking facilities and US
private placement notes, further details of
which are set out in Note 13 to the
consolidated financial statements.
As a result, the directors believe that the
Company is well placed to manage its
business risks successfully.
The resilience of the Group to a range of
possible scenarios, in particular the impact
on key financial ratios and its ongoing
compliance with financial covenants, was
factored into the directors’ considerations
through stress testing current financial
projections. These included the following:
• an adverse but plausible deterioration in
revenue and operating profit combined
with the adverse impact of a number of
acquisitions underperforming and a
significant increase in working capital;
• the impact that the materialisation of the
market, operational and tax related
principal risks may have on the
Company’s longer term viability, in
particular on its financial liquidity and
debt covenants risk, both with and without
mitigating actions; and
• a reverse stress test scenario which
identified what would need to happen to
cause the Company to fail, which for this
purpose is taken to mean an unavoidable
breach of financial covenants. The
conditions required to create this situation
were so severe that it was considered to
be implausible.
In all scenarios it has been assumed, based
on past experience and all current
indicators, that the Company will be able to
refinance its banking facilities and US
private placement notes as and when they
mature. The directors consider that the
stress testing based assessment of the
Company’s prospects, building on the
results of the robust assessment of the
principal risks to the business and the
financial implications of them materialising,
confirms the resilience of the Group to
severe but plausible scenarios and provides
a reasonable basis on which to conclude on
its longer term viability.
Confirmation of longer term viability
Taking into account the Company’s current
position and principal risks and the
assessment performed of the prospects of
the Company, the directors have a
reasonable expectation that the Company
will be able to continue in operation and
meet its liabilities as they fall due over the
three year period to 31 December 2019.
Relations with shareholders
As required by the relevant law and
regulations, 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,
during the year, the Company has published,
on a voluntary basis, two quarterly trading
statements and two other trading
statements prior to entering its close
periods at the end of June and the end of
December 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.
On behalf of the Board
Paul Hussey
Secretary
27 February 2017
55
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
Directors’ report | Audit Committee report
Audit Committee report
framework of listed companies and acts
independently of management to ensure
that the interests of our shareholders are
properly protected through the Committee’s
oversight of the Company’s financial
management and its reporting processes
and procedures. There are a number of key
aspects to this including the use of
appropriate accounting policies and
practices, supported by the implementation
of a robust assurance framework in which
the risk management and internal control
systems, the internal and external audit
functions and the regular internal reporting
of the Company’s performance against
budgets, forecasts and prior year results
are all very important. In particular this year
the Committee has considered the impact of
the EU Audit Directive and Regulation that
came into effect on 17 June 2016 which has
resulted in changes to the audit regime for
EU public interest entities such as the
Company. The new legislation introduces
mandatory rotation of auditors and tighter
restrictions on the provision of non-audit
services, as well as setting out
requirements in relation to the
responsibilities and composition of
audit committees.
The significant accounting matters
considered by the Committee in relation
to the 2016 financial statements were the
accounting for business combinations, the
carrying value of goodwill and customer
relationships intangible assets, defined
benefit pension schemes, taxation and
supplier rebates. These are discussed in
detail in the report that follows and the
Committee is satisfied that these matters
have been properly recorded in the
Company’s books and records and
accounted for appropriately.
As a Committee we will continue to keep
our activities under review and focused on
the audit, assurance and risk processes
within the business. By doing so we will
ensure that we are able to maintain high
standards of financial governance in line
with the regulatory framework as well as
market practice for audit committees
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
David Sleath
Chairman of
the Audit
Committee
Statement from David
Sleath, Chairman of the
Audit Committee
On behalf of the Board, I am pleased to
present our Audit Committee report for
2016, the purpose of which is to give
shareholders an overview of the role of
the Committee and to report on the work
it has carried out during 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 2014 edition of the Code which applied to
the financial year ended 31 December 2016.
As in previous years, the Committee’s
primary focus has been centred on the
integrity of the Company’s financial
reporting together with the related internal
controls. The Committee has a clearly
defined role in the corporate governance
The Committee has a key role to play in
overseeing the interests of shareholders
by focusing on the integrity of our financial
reporting and ensuring that the Company
maintains clearly defined and established
risk management and internal control
processes and procedures.
56
Bunzl plc Annual Report 2016
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;
• making recommendations to the
Board in relation to the appointment,
re-appointment and removal of the
external auditors;
• reviewing the appropriateness of the
Company’s relationship with the external
auditors, including monitoring the
auditors’ independence and objectivity;
• agreeing the scope of, and the terms of
engagement and fees for, the statutory
audit;
• initiating and supervising a competitive
tender process for the external audit as
may be required from time to time; and
• developing and implementing a policy on
the engagement of the external auditors
to supply non-audit services.
The Committee is 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, which
were reviewed by both the Committee and
the Board in 2016, 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.
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 four occasions during
the year and members’ attendance at those
meetings is set out in the table on page 52.
The Committee’s activities in 2016 included:
• making recommendations to the Board
concerning the re-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;
• receiving and considering a report from
the Chartered Institute of Internal
Auditors relating to an external
assessment of the internal audit function;
• 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 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 and amending the policy for the
provision of non-audit services by the
external auditors;
• reviewing the principal tax risks
applicable to the Company and the steps
taken to manage such risks; and
• reviewing and updating the Company’s
internal audit charter in accordance with
international internal auditing standards.
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.
During the year the Financial Reporting
Council’s Corporate Reporting Review Team
(‘CRRT’) carried out a review of the Annual
Report for the year ended 31 December
2015. The response by the Company to the
request for information was discussed with
me in my capacity as Chairman of the Audit
Committee prior to responding to the CRRT.
Details of both the enquiries raised by the
CRRT and the Company’s response thereto
were also considered by the Committee.
The CRRT have closed their enquiries with
no requirements to restate any disclosures.
However, undertakings were given
to enhance certain disclosures in the
future in response to the CRRT review.
The Committee is satisfied that the
enhancements proposed to, and agreed
with, the CRRT have been appropriately
incorporated in the 2016 Annual Report.
Financial statements and significant
accounting matters
During the year and prior to the publication
of the Group’s results for 2016, the
Committee reviewed the 2016 half yearly
financial report and related news release,
the 2016 Annual Report (including the
financial statements), the 2016 annual
results news release and the reports from
the external auditors on the outcomes of
their half year review and the audit relating
to 2016.
57
Bunzl plc Annual Report 2016
Directors’ report | Audit Committee report
Audit Committee report continued
As part of its work, the Committee
considered the following significant
accounting matters 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 acquisitions completed
in 2016. 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 customer relationships
intangible assets
Goodwill is allocated to cash generating
units (‘CGUs’) and is tested annually for
impairment. During the year the Committee
reviewed an assessment prepared by
management of the composition of the
Group’s CGUs, which were last formally
reviewed in 2010. Having done so, the
Committee was satisfied with the proposed
revisions to the CGUs as they reflected
adjustments required from the addition
of approximately 100 businesses and
consequential changes to management
oversight and responsibility. The Committee
critically reviewed and discussed
management’s report on the impairment
testing of the carrying value of goodwill and
customer relationships intangible assets
of each of the existing and revised CGUs
(including the sensitivity of the outcome of
impairment testing to the use of different
discount rates) and considered the external
auditors’ testing thereof. After due
consideration, 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 customer
relationships intangible assets based
on either CGU allocation. Details of the
key assumptions and judgements used
are set out in Note 9 to the consolidated
financial statements.
58
Defined benefit pension schemes
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
experts. Details of the key assumptions
used are set out in Note 20 to the
consolidated 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 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 and proposed disclosures
related to tax made by management.
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
the arrangements which are based on the
volume of products purchased may, for a
limited number of arrangements, 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 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. This report
showed that substantially all of the supplier
rebates were unconditional and non-
judgemental. The Committee discussed the
findings of the external auditors in this area
and, having done so, concluded that it was
satisfied with the accounting for the Group’s
supplier rebates for the year including the
value of rebate income recognised.
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 Company has a detailed
policy relating to the provision of non-audit
services by the external auditors which is
overseen by the Committee. As mentioned
in my introduction, following the
implementation of the EU Audit Directive
and Regulation with effect from 17 June
2016 the rules relating to non-audit services
have been changed. The new rules
introduce a statutory cap on the level of
non-audit fees which may be billed by the
external auditors and include a ‘blacklist’
of prohibited services that the external
auditors are not allowed to provide. As a
result, as part of the 2016 review of both
its terms of reference and the Company’s
policy for the provision of non-audit services
by the external auditors, the Committee
approved appropriate amendments to
ensure that such terms of reference and
policy are fully compliant with the new
regulations. Under the revised policy the
only non-audit services that have been
pre-approved by the Committee are those
which are not prohibited or otherwise
restricted and which are considered to be
trivial due to the value of the services.
Apart from such pre-approved services,
a permitted service requires specific
authorisation from the Committee or myself
as the Committee Chairman. It is the
Company’s policy to assess the non-audit
services to be performed by the Company’s
auditors on a case-by-case basis to ensure
adherence to the prevailing ethical
standards and regulations. In the main,
other firms are used by the Company to
provide non-audit services. However, if the
provision of a service by the Company’s
auditors is not prohibited and adequate
safeguards are in place, it is sometimes
appropriate for this additional work to be
carried out by the Company’s auditors.
Details of the fees paid to the external
auditors in 2016 in respect of the audit and
for non-audit services are set out in Note 4
to the consolidated financial statements.
Bunzl plc Annual Report 2016
The ratio of the fees relating to non-audit
services to audit services in 2016 was 17%.
During 2016 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 2015. 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 24 different
aspects of the audit process grouped under
four separate headings: the robustness of
the audit process; the quality of delivery;
the quality of people and service; and the
quality of reporting. 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. Having done
so, the Committee confirmed that it
was satisfied with the effectiveness of the
external audit process. The Committee
will carry out a similar effectiveness
review in 2017 in relation to the audit
of the financial statements for the year
ended 31 December 2016.
Auditors’ re-appointment
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.
As previously reported, following a detailed
tender process, PricewaterhouseCoopers
LLP (‘PwC’) were first appointed as the
Company’s external auditors in 2014 to
replace KPMG Audit Plc who, together with
their predecessor firms, had been the
external auditors since 1986.
As a consequence of its satisfaction with the
results of its review of the external auditors’
activities during the year, the Committee
has again recommended to the Board that a
resolution proposing the re-appointment of
PwC as external auditors for the year
ending 31 December 2017 be put to
shareholders at the forthcoming
Annual General Meeting.
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 monitored 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.
Internal audit
The Company has an internal audit
department which comprises nine 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. Overall
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. In order to benchmark the
internal audit department against best
practice, during 2016 the quality and
effectiveness of the function was also
externally assessed by the Chartered
Institute of Internal Auditors. Following
both of these assessments, the Committee
concluded that the internal audit function
continued to be effective, efficient and
appropriately resourced.
David Sleath
Chairman of the Audit Committee
27 February 2017
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Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report
Statement from Vanda
Murray, Chairman of the
Remuneration Committee
I am pleased to present the Directors’
remuneration report for the year ended
31 December 2016.
Role of the Remuneration
Committee
The Committee proposes the directors’
remuneration policy for shareholder
approval. It also governs the implementation
of the policy ensuring that the remuneration
for our executive directors and senior
management supports the sustainable
performance of the business and that it is
aligned with shareholders’ interests. The
Committee considers both market practice
and stakeholders’ views when setting the
Group’s performance-related incentives to
ensure that they are based on challenging
and robust performance targets which are
aligned to the Group’s strategic goals and
which drive profitable growth, while
complying with UK corporate governance
good practice.
Performance and remuneration
for 2016
Michael Roney retired as Chief Executive
in April 2016 after a long and successful
tenure of more than 10 years, during
which time the Group achieved strong
and sustainable performance. Michael’s
successor as Chief Executive is Frank van
Zanten, an internal appointment made
after an extensive internal and external
search process.
The business strategy has remained constant
during 2016 with the Group continuing to grow
both organically and by acquisition while
continuously improving the quality of our
operating model.
The key performance metrics for the annual
bonus are the Group’s adjusted earnings per
share and return on average operating
capital and for Patrick Larmon there are
two additional measures related to the
operating profit and return on average
operating capital of the business area
for which he has responsibility (North
America). Performance against these
metrics has resulted in an annual bonus for
Frank van Zanten of 65% of the maximum
opportunity, which equates to 75% of his
annual salary for 2016, initially as a director
from 1 February until 19 April 2016 and then
as Chief Executive from 20 April to the end
of the financial year.
Vanda Murray
Chairman of the
Remuneration
Committee
Our remuneration policy is
a key element in enabling
us to continue to drive our
high performance culture
which focuses on building
shareholder value.
This report has been prepared on
behalf of, and has been approved
by, the Board. It complies with the
Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013
(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.
The report is presented in
three main sections: an annual
statement from the Chairman
of the Committee; the directors’
remuneration policy to be approved
by shareholders at the 2017
Annual General Meeting (‘AGM’);
and the annual report on
remuneration for 2016.
In accordance with the Regulations,
at the 2017 AGM we will be
asking shareholders to vote on two
separate remuneration resolutions
as follows:
• the binding triennial vote on the
directors’ remuneration policy
which describes the Company’s
forward looking directors’
remuneration policy which will,
subject to shareholder approval,
become formally effective as at
the date of the 2017 AGM (and is
set out on pages 62 to 74); and
• an advisory vote on the annual
report on remuneration as set
out on pages 74 to 87 which
provides details of
the remuneration earned
by directors for performance
in the year ended
31 December 2016.
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Bunzl plc Annual Report 2016
The annual bonuses for Brian May and
Patrick Larmon are 77% and 66% of their
annual salaries respectively. In line with the
remuneration policy, 50% of the annual
bonuses will be delivered in shares, subject
to a three year deferral. In addition, 100% of
the executive share options and 82% of the
performance shares vested under the
Company’s Long Term Incentive Plan
(‘LTIP’) for the performance periods that
ended in 2016.
Review of remuneration policy and
shareholder consultation
As we approach our 2017 AGM and the
triennial binding vote on our directors’
remuneration policy, we have undertaken a
thorough review of the policy and have
consulted on the proposed changes with our
largest shareholders and with proxy voting
advisers. The existing policy was strongly
supported by shareholders when voted on in
2014 and the key elements of that policy
remain at the core of our proposed
remuneration policy.
Over recent years, the Group has grown and
expanded internationally through a series of
acquisitions, extending our geographic
footprint across 30 countries. Our
remuneration framework is a crucial
element in enabling us to compete for key
talent internationally and in continuing to
drive our high performance culture which
focuses on building shareholder value.
The current remuneration policy has not
been changed in the last three years and
the annual bonus opportunity has remained
unchanged for eight years. In light of the
Group’s expansion and its development
over many years, the Committee has
reviewed whether the current remuneration
arrangements remain appropriate. Having
completed this review, we are proposing
some amendments to the policy to bring
it in line with current best practice and to
drive performance for the Company’s next
stage of development.
Remuneration arrangements for
the 2017 financial year and beyond
Executive directors’ base salaries have
been increased by 2%, effective 1 January
2017, below that of the workforce average of
2.8%. Frank van Zanten’s base salary was
set at £800,000 on his appointment as Chief
Executive compared to £922,000 for his
predecessor. Similarly, his pension
contribution of 25% of base salary is lower
than the 30% paid to Michael Roney.
The proposed directors’ remuneration
policy sets the annual bonus maximum level
at the FTSE 100 market median of 180% of
base salary. However, for the 2017 financial
year, the Chief Executive’s maximum annual
bonus opportunity will be set at 150% of
base salary, 30 percentage points below the
FTSE 100 median and the proposed policy
maximum (currently set at 115% of base
salary). For the other executive directors,
the 2017 maximum annual bonus will be
limited to 125% of base salary, currently
115% for Brian May and 110% for Patrick
Larmon also significantly below the relevant
FTSE 100 market median. The on-target
bonus for the Chief Executive for 2017 will
be 75% of base salary, currently 70%, and
70% for the other executive directors, which
is unchanged. The threshold and target
bonus as a percentage of the maximum
will reduce as these will remain fixed as
a percentage of salary.
Annual bonus awards will continue to be
based on growth in adjusted earnings per
share and return on average operating
capital. These metrics remain key to the
business strategy and the target levels are
stretching without encouraging
inappropriate levels of risk. Threshold,
target and stretch performance levels will
be disclosed in the remuneration report for
the relevant year.
Despite the absolute maximum levels of
LTIP awards permitted under the policy
falling below the FTSE 100 median, we
are not proposing to increase these.
We are proposing to set the normal award
limits for the performance share element
of the LTIP at 150% of base salary and leave
the limits for share option awards under
the LTIP unchanged. The resulting LTIP
award limits are materially lower than
the FTSE 100 median.
We will continue to set robust and
challenging performance conditions for
the LTIP awards. These awards are subject
to earnings per share growth targets and,
in addition, in the case of the performance
shares, a relative total shareholder return
condition. We propose to use the capacity
in the LTIP policy conservatively, with the
award levels for 2017 held at 2016 levels.
For LTIP awards made after the 2017 AGM
and subsequently, a post-vesting holding
period will be introduced for executive
directors. This holding period will continue
if they leave employment during the holding
period. The remuneration policy will also
increase the Chief Executive’s shareholding
requirement to 250% of base salary in
line with the FTSE 100 median. Excluding
the value of his transitional international
relocation package, following these
proposed changes the 2017 total on-
target remuneration for Frank van Zanten
will remain below that of the previous
Chief Executive.
Conclusions
As a result of these policy changes there
will be a greater emphasis on performance
related remuneration for all of the executive
directors. I very much hope that you will
support the remuneration resolutions at
the AGM. This balanced and prudent set
of proposals is intended to ensure that
we continue to drive and reward
performance and maintain alignment
with shareholders’ interests.
Vanda Murray OBE
Chairman of the Remuneration Committee
27 February 2017
Directors’ remuneration policy –
summary of proposed changes at a glance
• Recognising the feedback received from
shareholders in 2016, going forward the
Committee will apply time proration to
performance shares in the event that an
executive director retires.
• Increased Chief Executive’s
• Notice periods for new executive director
service contracts equalised to 12 months
from both the Company and employee
(previously six months from employee
and 12 months from employer).
• Malus and clawback provisions
shareholding requirement to 250% of
base salary (currently 200%).
• Introduction of a two year post-vesting
holding requirement on LTIP awards
from the 2017 AGM onwards.
• The annual bonus maximum level set
at 180% of base salary with the 2017
maximum capped at 150% of base
salary for Frank van Zanten (currently
115%) and 125% for other executive
directors (currently 115% and 110%
of base salary for Brian May and
Patrick Larmon).
• Annual bonus performance
targets disclosures enhanced.
• Pension contributions or cash
allowances for new executive director
appointments capped at 25% of base
salary (currently 30%).
strengthened for both the annual
bonus, including the cash element, and
the LTIP.
• The existing variable pay structure
maintained but with an increased focus
on above target performance.
The absolute maximum LTIP awards
permitted under the current policy are
not increasing, despite being below the
market median, and actual LTIP award
levels for 2017 will remain at the same
level as 2016, significantly below the
policy maximum.
The total remuneration for Frank
van Zanten with these changes will
remain below that of his predecessor
(excluding the value of the transitional
relocation package).
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Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Directors’
remuneration policy
We continue to pursue our well defined
strategy of developing the business through
profitable organic growth, consolidating our
position in the markets in which we compete
through focused acquisitions in both
existing and new geographies and
continuously improving our operating
model. 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 total shareholder
return (‘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.
Overview
Our directors’ remuneration policy has been
reviewed during the year and is submitted
for approval in the required triennial vote at
the 2017 AGM. The overall approach to
remuneration adopted by the Company has
been in place for many years and the key
elements of this policy are very little
changed from those approved by
shareholders in 2014.
Our current directors’ remuneration policy,
which is effective subject to our new policy
being approved by shareholders at our 2017
AGM, is set out in our 2014 and 2015 Annual
Reports and is also available on our website
at www.bunzl.com.
The proposed policy set out below is
submitted to be approved by shareholders
at our 2017 AGM and will formally take effect
from the date of the AGM with the exception
of the annual bonus where the policy will
apply for the full financial year in 2017.
The proposed policy is designed to meet the
following objectives:
• to support the next phase of the Group’s
growth and development;
• to bring the policy in line with current best
practice principles;
• to provide flexibility to take better account
of market remuneration levels;
• to ensure remuneration reflects the
performance of the Group in the relevant
year and the longer term; and
• to align pay with the strategic objectives
of the Company and the interests of our
shareholders.
In setting the remuneration policy for the
executive directors, the Committee also
takes into consideration a number of
different factors:
• the Committee applies the principles set
out in the UK Corporate Governance Code
and also takes into account best practice
guidance issued by the major UK
institutional investor bodies, the Financial
Conduct Authority (including the
provisions of any applicable remuneration
codes) and other relevant organisations;
• the Committee has overall responsibility
for the remuneration policies and
structures for employees of the Group as
a whole and it reviews remuneration
policy on a Group wide basis. When the
Committee determines and reviews the
remuneration policy for the executive
directors it considers and compares it
against the pay, policy and employment
conditions of the rest of the Group to
ensure that there is alignment between
the two; and
• the Committee considers the external
market in which the Group operates and
uses comparator remuneration data from
time to time to inform its decisions.
However, the Committee recognises that
such data should be used as a guide only
(recognising that data can be volatile and
may not be directly relevant) and that
there is often a need to phase-in changes
over a period of time.
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Bunzl plc Annual Report 2016
The Committee’s overall policy, having had due regard to the factors above, continues to be for a substantial proportion of total
remuneration to be based on variable pay. This is achieved by setting base pay and benefits up to mid-market levels, with annual bonus and
long term incentive opportunities linked to the achievement of demanding performance targets which will be disclosed. In this way the
Committee facilitates alignment between the interests of shareholders and the total remuneration paid to the executive directors.
The table below summarises how the proposed policy compares with the current policy:
Summary of key features of current policy
Summary of key features of proposed policy
Pension
Defined contribution to pension or cash allowance
of equivalent value. Only base salary is pensionable.
Maximum of 30% of base salary.
Annual bonus
opportunity
Maximum 115% of base salary for Chief Executive
and Finance Director and 110% for Patrick Larmon.
Target bonus 70% of base salary (61% of maximum
for Chief Executive and Finance Director and 64% of
maximum for Patrick Larmon).
Clawback provisions apply for misstatement for
deferred bonus.
Pension contributions or cash allowance for new joiners
will be capped at 25% of base salary.
Policy maximum of 180% of base salary.
For 2017, maximum of 150% of base salary for Chief
Executive and 125% of base salary for Finance Director
and Patrick Larmon.
Target bonus 75% of base salary (reduces to 50% of 2017
maximum) for the Chief Executive and remains at 70% of
base salary for the Finance Director and Patrick Larmon
(which is 56% of maximum).
Clawback to be strengthened and a malus provision
to be added for both the cash bonus and the deferred
shares element.
Long Term
Incentive Plan
(‘LTIP’)
The policy states that the normal award limits will be up
to 200% of base salary (share options) and 112.5% of base
salary (performance shares).
The normal award limits can be up to 200% of base
salary (share options) and 150% of base salary
(performance shares).
No post-vesting holding period.
Clawback provisions apply for misstatement and error.
However, award levels in 2017 will be no higher than
in 2016.
Two year post-vesting holding period (net of sales
to settle tax) to apply to awards made of share
options and performance shares after the 2017 AGM
and subsequently.
Time proration of performance shares on retirement.
Clawback to be strengthened and a malus provision
to be added.
Shareholding
requirement
Executive directors are required to build up a
shareholding of 200% of base salary.
To be increased to 250% for the Chief Executive and
remain at 200% for the other executive directors.
Service
Contracts
Executive directors are normally employed on contracts
that provide for 12 months’ notice from the Company and
six months’ notice from the executive.
Contracts for new executive directors will provide for an
equal notice period from the Company and the executive
of a maximum of 12 months’ notice.
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Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Engagement with shareholders
The Committee engages with, and seeks the
views of, its major investors and investor
representative bodies on any significant
changes to the Company’s remuneration
policy. The Committee also engages from
time to time with shareholders when
considering important questions about the
implementation of the policy. Views
expressed by shareholders are considered
by the Committee as part of any review of
remuneration policy or sooner if
appropriate.
Remuneration policy for
executive directors
The following table summarises each
element of the proposed remuneration
policy for the executive directors, explaining
how each element operates and links to the
corporate strategy. The policy will be
formally effective following shareholder
approval at the 2017 AGM with the annual
bonus policy applying for the full financial
year. If approved, this policy supersedes
that approved by shareholders in 2014.
Salary
Purpose
Operation
• 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
• 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
• 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 2016 and 2017 are on pages 75 and 83
respectively
Performance
metrics
• while there are no performance conditions attached to the payment of base salary, 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
• incentivise the attainment of annual corporate targets
• retain high performing employees
• align with shareholders’ interests
• annual award based on financial targets set by the Committee at the beginning of the year
• 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 Deferred Annual Share Bonus Scheme (‘DASBS’)
• malus and clawback provisions apply under DASBS to allow the recoupment of bonus for three years from
the end of the relevant performance year in the event of material misstatement of performance, a significant
failure of risk control or serious misconduct. Malus and clawback also apply to the cash element of the
bonus award
• non-pensionable
Annual bonus
Purpose
Operation
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Bunzl plc Annual Report 2016
Annual bonus continued
Maximum
potential value
Performance
metrics
• the annual bonus policy maximum is 180% of base salary
• the annual target bonus opportunity is capped at 50% of the maximum, where the maximum exceeds 140%
of base salary
• for the 2017 performance year for Frank van Zanten the maximum annual bonus will be limited to 150% of
base salary with the on-target award at 50% of the maximum, equating to an on-target bonus of 75% of
base salary
• for the 2017 performance year for Brian May and Patrick Larmon the maximum annual bonus will be limited
to 125% of base salary with the on-target bonus remaining at the current 70% of base salary
• the current threshold levels of bonus for Frank van Zanten and Brian May are 49% of base salary and 31% of
base salary for Patrick Larmon. As the maximum bonus percentage increases, these threshold levels will
remain fixed as a percentage of base salary and thereby reduce as a percentage of the maximum
• any further increase during the policy period, within the policy maximum, will be subject to Company
performance
• metrics will be set each year by the Committee aligned to the Company’s key strategic objectives
For the 2017 performance year, the principal metrics are as follows:
• 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 the Company’s Key
Performance Indicators (‘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 the management of capital
employed 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, tax, customer relationships
amortisation and acquisition related costs (‘PBITA’) and RAOC of the business area for which he has direct
responsibility (North America) and both are measured on a constant exchange rate basis. The additional
measures relating to PBITA and RAOC 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 team 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
Long term incentives
Purpose
Operation
• incentivise growth in longer term eps and TSR
• align with shareholders’ interests
• recruit and retain senior employees
• 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
• a malus and clawback facility is in operation under which part or the full amount of a vested award may be
recovered, by a 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, for a period of three years
from the relevant performance year, 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 performance or there has been a significant
failure of risk control or serious misconduct
• two year post-vesting holding requirement for shares that vest, net of sales to settle tax or other withholding
due on vesting or exercise of awards
• all awards are subject to the discretions contained in the relevant plan rules
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Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Long term incentives continued
Maximum
potential value
Executive share options
• maximum annual award of 250% of base salary
• normal annual grant levels for executive directors are expected to be between 167% and 200% of base
salary and the Committee would not normally grant above 200% of salary to incumbent executive directors
without further consultation with shareholders
Performance shares
• maximum annual award of 150% of base salary
• normal annual grant levels for executive directors are expected to be between 94% and 150% of base salary
• for the 2017 grants, awards will not exceed 112.5% of base salary
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 for the previously approved 2004 LTIP (which expired in 2014) are shown on page 66 of the
2014 Annual Report. The targets set for the 2014 LTIP are shown on page 79.
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 for the previously approved 2004 LTIP (which expired in 2014) are shown on page 66 of the
2014 Annual Report. The targets set for the 2014 LTIP are shown on page 80.
Performance
metrics
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Bunzl plc Annual Report 2016
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 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 into 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
• 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 £500 per month)
• 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)
• service conditions apply
• provision of competitive retirement benefits
• retain executive directors
• 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
Performance
metrics
Retirement benefits
Purpose
Operation
Maximum
potential value
• company pension contributions to defined contribution retirement arrangements or cash allowances
are capped at 25% of base salary for new executive directors and 30% of base salary under
legacy arrangements
• 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 2017 £154,200 per annum)
Performance
metrics
• Not applicable
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 accommodation, 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
67
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Shareholding requirement
Purpose
Operation
• strengthen the alignment between the interests of the executive directors and those of shareholders
• executives will normally be expected to retain shares, net of sales to settle tax, 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
Maximum potential
value
• The Chief Executive’s shareholding requirement is 250% of base salary. The requirement for other executive
directors is 200% of base salary. This does not include any holdings of deferred shares or vested but
unexercised share options or performance shares
Performance
metrics
Note
• Not applicable
A description of how the Company will operate the policy in 2017 is detailed within the remuneration policy summary as set out on pages 64 to 68.
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 the Company’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 PBITA and RAOC which are relevant as these are two of the KPIs of the business area he
is responsible for managing.
• RAOC is another of the Company’s KPIs. The RAOC modifier ensures continued focus on management of capital employed 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 employed 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.
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 29 people)
are granted both executive share option and performance share awards. Approximately 414 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 may be 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 and the
function and seniority of the relevant role.
68
Bunzl plc Annual Report 2016
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 2017 the majority of employees across the Group have received salary increases in the range of 2.2%–3.4%, dependent on geographical
location with the principal exception being those employees based in Brazil, 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 Committee considers the general basic salary increase within the geographical regions for the broader employee population when
determining the annual salary increases for the executive directors and is cognisant of the Group’s overall employment arrangements
when reviewing and implementing the executive directors’ remuneration policy. Although the Committee did not consult with employees
with regard to the remuneration policy of the executive directors, the Company does monitor employees’ views through a regular
employee survey.
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, any variable pay awards for new executive director appointments will not exceed the maximum
limits set out in the policy table above. However, in addition, for an external appointment the Committee may consider offering additional
cash and/or share based elements to replace deferred awards forfeited by the individual on leaving their existing employment 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 would take account of the nature, time horizons and performance requirements attaching to the
awards forfeited. 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
Frank van Zanten’s service contract provides for an equal notice period from the Company and the executive of a maximum 12 months’
notice and any contracts for newly appointed executive directors will provide for equal notice in the future. The other executive directors
are employed on contracts that provide for 12 months’ notice from the Company and six months’ notice from the executive. For Brian May
there is no predetermined compensation for termination of his contract. 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.
Frank van Zanten
Brian May
Patrick Larmon
Date of service contract
13 January 2016
9 December 2005
1 January 2005
69
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
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:
Component
of pay
Base salary,
pension and
benefits
Voluntary resignation
or termination for
cause
Paid for the proportion of
the notice period worked
and any untaken holidays
pro-rated to the leaving date
Death, ill health, disability (excluding redundancy) Departure on
agreed terms
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
Annual bonus
cash
Cessation of employment
during a bonus year will
normally result in no cash
bonus being paid
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
Annual bonus
deferred shares
Unvested deferred shares
will lapse
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
Executive share
options
Unvested executive share
options will lapse
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
Performance
shares
Unvested performance
shares 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 to which the unvested options may be
exercised 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 but may be
subject to time proration. However in the case of the death
of an executive, the Committee will determine the extent to
which the unvested performance shares may be exercised
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.
However in the
case of retirement
of an executive
director unvested
performance
shares will
normally be
subject to time
proration
based on the
proportion of
the performance
period that
has expired
Options under
Sharesave
Other
Notes
As per HMRC regulations
As per HMRC regulations
None
Disbursements such as legal costs and outplacement fees
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 after 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.
70
Bunzl plc Annual Report 2016
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);
• 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.
71
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
2017 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 for 2017, in line with the new remuneration policy, is illustrated in the bar charts below.
Frank van Zanten
Below threshold performance
(Total £1,431,321)
Target performance
(Total £2,747,121)
Stretch performance
(Total £4,062,921)
Brian May
Below threshold performance
(Total £739,991)
Target performance
(Total £1,556,297)
Stretch performance
(Total £2,291,513)
Patrick Larmon
Below threshold performance
(Total £919,972)
Target performance
(Total £2,236,595)
Stretch performance
(Total £3,422,427)
86%
14%
45%
30%
5%
7%
30%
75%
36%
12%
24%
22%
26%
35%
25%
28%
24%
8%
30%
38%
98%
2%
40%
1%
27%
26%
1%
32%
32%
41%
Salary and benefits
Pension
Bonus (Cash/DASBS)
LTIP
Notes
a) Salary represents annual salary for 2017. Benefits such as a car or car allowance and private medical insurance have been included based on 2016 figures. In the case of Frank
van Zanten, benefits also include the transitional international relocation package including accommodation, which are gross amounts before taxes, referred to on page 75.
Patrick Larmon’s salary is paid in US dollars and has been translated at the 2016 year end closing exchange rate of £1: US$1.24.
b) Pension represents the cost of pension accrued in 2016 in the Defined Benefit Section of the Bunzl Pension Plan for Brian May, the value of the annual pension allowance for
Frank van Zanten and Brian May and the total of the Company’s 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 79.
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. for 2017 an on-target bonus of 75% of base salary for Frank van Zanten and 70% of base salary for
Brian May and Patrick Larmon comprised of half cash and half 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 for 2017, the maximum annual bonus will be limited to 150% of base salary for Frank van Zanten
and 125% of base salary for Brian May and Patrick Larmon comprised of half cash and half 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.
Legacy arrangements
The directors’ remuneration policy first approved by shareholders at the 2014 AGM gave authority 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.
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Bunzl plc Annual Report 2016
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
David Sleath*
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma**
Vanda Murray
Lloyd Pitchford
Date of
appointment
1 January 2010
1 September 2007
1 April 2011
1 January 2013
1 April 2013
1 February 2015
1 March 2017
Date of last
re-appointment
at AGM
20 April 2016
20 April 2016
20 April 2016
20 April 2016
20 April 2016
20 April 2016
n/a
Length of
service as at
2017 AGM
7 years 3 months
9 years 7 months
6 years
4 years 3 months
n/a
2 years 2 months
1 month
* David Sleath will retire from the Board at the conclusion of the 2017 AGM to be held on 19 April 2017 and Lloyd Pitchford will be appointed to the Board as a non-executive
director with effect from 1 March 2017 and will assume the role of Chairman of the Audit Committee upon David Sleath’s retirement. At the same time Vanda Murray will
assume the role of Senior Independent Director.
**Meinie Oldersma retired from the Board on 22 August 2016.
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
Operation
Maximum potential
value
Performance
metrics
• 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
• 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 2016
• 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
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. The Committee has consulted with major shareholders and proxy voting groups with regard to the proposed changes to the
remuneration policy to be submitted for approval at the 2017 AGM.
73
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Annual report on remuneration for 2016
Committee remit and membership
The following independent non-executive directors were members of the Committee during 2016:
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma*
Vanda Murray
*Meinie Oldersma retired from the Board on 22 August 2016.
Date of appointment
to the Committee
5 December 2007
20 April 2011
1 January 2013
1 April 2013
1 February 2015
Meetings eligible
to attend
4
4
4
2
4
Meetings
attendance
4
4
3
2
4
The Secretary to the Committee is Julie Welch, Director of Group Human Resources. No director plays any part in determining his or her
remuneration. During the year ended 31 December 2016, 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 Aon Hewitt. PwC provided external survey data on directors’ remuneration and benefit levels. Aon Hewitt
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 LTIP had been satisfied and in addition advised the Committee on the changes to the remuneration
policy. The fees payable to each adviser, based on hourly rates, were: £12,700 (PwC) and £34,170 (Aon Hewitt) respectively for such work
undertaken in 2016. In addition to the work undertaken on behalf of the Committee, PwC, who are the Company’s external auditors, also
provided a limited amount of non-audit services to the Company as set out in Note 4 to the consolidated financial statements. Looking
forward, any other non-audit services required by the Company will, in the main, be provided by other firms to ensure the independence
of PwC’s work as auditors.
Statement of voting at the 2016 AGM for the remuneration report and at the 2014 AGM for the remuneration policy
The remuneration report and remuneration policy received the following shareholder votes in 2016 and in 2014 respectively, being the
years that they were last voted on by shareholders:
Remuneration report (2016 AGM)
Remuneration policy (2014 AGM)
Notes
Votes
cast
273,654,330
264,349,297
Votes
For
201,947,243
258,510,901
% of shares
voted
73.80
97.79
Votes
Against
71,707,087
5,838,396
% of shares
voted
26.20
2.21
Votes
Withheld
296,109
600,455
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.
c) Following the voting outcome at the 2016 AGM, the Committee has considered the views of shareholders that were raised in relation to the remuneration report for the year
ended 31 December 2015 and addressed the question of treatment of long term incentive awards for executive directors who retire in its policy review and consultation with
shareholders this year. The new remuneration policy introduces time proration of performance shares on retirement.
74
Bunzl plc Annual Report 2016
Single total figure of remuneration 2016 (audited information)
Executive directors
Michael Roney
Frank van Zanten
Brian May
Patrick Larmon
Total
Salary
£000
2015
922.0
–
515.0
677.1
2,236.0 2,114.1
2016
274.6
652.0
530.0
779.4
2016
5.1
369.5
17.0
27.7
419.3
Non-executive directors
Philip Rogerson
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma
Vanda Murray
Total
Bonus
£000
2015
Taxable
LTIP
benefits
£000
£000
2016
2015
2015
680.4 1,862.9 2,042.2
16.7
692.9
–
–
–
977.1
1,061.9
380.1
16.7
369.0 1,124.1
18.9
1,187.9
52.3 1,409.2 1,429.5 4,657.0 4,292.0
2016
–
490.8
406.0
512.4
Pension
£000
2015
2016
276.6 2,226.3
– 2,363.5
Total
£000
2015
3,937.9
–
184.3 2,112.5 2,158.0
14.3 2,459.7 2,267.2
475.2 9,162.0 8,363.1
2016
83.7
158.3
182.4
16.1
440.5
Board
fees
£000
2015
325.0
66.0
66.0
66.0
66.0
60.5
649.5
Committee
Chair/SID
fees £000
2015
–
26.3
–
–
–
10.6
36.9
2016
–
32.0
–
–
–
16.0
48.0
Total
£000
2015
325.0
92.3
66.0
66.0
66.0
71.1
686.4
2016
340.0
99.5
67.5
67.5
43.8
83.5
701.8
2016
340.0
67.5
67.5
67.5
43.8
67.5
653.8
Notes
a) Michael Roney retired as Chief Executive on 20 April 2016 and left the employment of the Company on 30 April 2016; an amount of £52,357 was paid to him in respect of his
employment for the period from 20 April until 30 April 2016.
b) Frank van Zanten was appointed to the Board on 1 February 2016 and became Chief Executive upon Michael Roney’s retirement on 20 April 2016 at a salary of £800,000 per annum.
c) 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 2015 deferred bonus were awarded in 2016 as shown in the table on page 84 and the shares relating to the 2016 deferred bonus will be awarded in 2017.
d) 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, Frank van Zanten’s
benefits include a transitional international relocation package from Amsterdam to London following his appointment as Chief Executive in April 2016 which are grossed up for
taxes. This includes assistance with accommodation, removal costs and school fees. In addition Patrick Larmon’s club fees are paid by the Company.
e) The long term incentives are in the form of awards under the 2004 LTIP which were granted in April and October 2013 and February 2014 and under the 2014 LTIP granted in
August 2014. Long term incentive figures exclude any gain from the purchase of shares by Patrick Larmon through the ESPP described on page 67.
f) The figures shown in relation to 2015 for the LTIP have been restated from those figures shown in the 2015 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 28 February 2016 and 30 August 2016 at the closing mid-market share price of 1,935p and 2,413p respectively.
g) 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$1.36 in respect of 2016
and £1: US$1.53 in respect of 2015.
h) The value of the LTIP award for Frank van Zanten for 2016 relates to vesting of awards that were granted prior to becoming Chief Executive.
i) £977,005 of the LTIP amount shown in 2016 for Michael Roney relates to exercises of LTIP awards which vested during 2016 after the termination of his employment
as an executive director.
j) As Meinie Oldersma resigned from the Board on 22 August 2016, the 2016 fees of £43,800 have been paid until this date. No payments were or are to be made to former directors in
respect of loss of office and no payments were made to former directors during the year other than as expressed in Note a) and i) above. In addition to the remuneration paid to
directors in 2015 shown above, Peter Johnson, who retired as a non-executive director during the year, received remuneration of £28,400 in respect of the period 1 January 2015 to
15 April 2015, the date of his retirement.
Executive directors’ annual salary (audited information)
Executive directors’ salaries were reviewed with effect from 1 January 2016 in accordance with normal policy and were increased taking
into account the average salary increases for employees across the Group.
Michael Roney
Frank van Zanten
Brian May
Patrick Larmon
Salary
from
1 January
2016
£922,000
£800,000
£530,000
US$1,060,000
Salary
from
1 January
2015
£922,000
–
£515,000
US$1,036,000
Notes
a) Michael Roney’s base salary was £922,000 and was paid until his termination date of 30 April 2016.
b) Frank van Zanten’s base salary was £800,000 from 20 April 2016 upon his appointment as Chief Executive.
Executive directors’ salaries were also reviewed with effect from 1 January 2017 and the increases awarded are shown on page 83.
Increase
in salary
2015 to
2016
0%
–
2.9%
2.3%
75
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Executive directors’ external appointments
Michael Roney served as a non-executive director of Brown-Forman Corporation throughout 2016 and from 1 January 2016 until the
termination of his employment with the Company on 30 April 2016 retained fees of US$73,216. Frank van Zanten served as a non-executive
director of Grafton Group plc throughout 2016 and during the year retained fees of €70,000. Brian May served as a non-executive director of
United Utilities Group PLC throughout 2016 and during the year retained fees of £78,066. Patrick Larmon served as a non-executive director of
Bodycote plc from 13 September 2016 and during the remainder of the year retained fees of £16,039. In addition, he has also served as a
non-executive director of Huttig Building Products, Inc. throughout 2016 and retained fees of US$109,664 which included US$57,644 worth of
deferred shares which vested in 2016.
Non-executive directors’ fees (audited information)
The Chairman’s fee is reviewed every two years with the most recent review having taken place with effect from 1 January 2016. The fees
for the non-executive directors were reviewed with effect from 1 January 2016 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 2016
£340,000
£67,500
£16,000
£16,000
£16,000
Fees paid
in 2015
£325,000
£66,000
£16,000
£15,000
£15,000
Increase in fees
2015 to 2016
4.6%
2.3%
0%
6.7%
6.7%
The non-executive directors’ fees were reviewed with effect from 1 January 2017 and the increases awarded are shown on page 83.
Performance against annual bonus targets (audited information)
The annual bonus plan and DASBS currently operate as set out in the policy section on pages 61 and 62 of the 2015 Annual Report. For Frank
van Zanten, the bonus opportunity for 2016 was split between performance in terms of PBITA and RAOC based on the Continental Europe
(’CE’) business area from 1 February 2016 to 19 April 2016 and the performance of the Group from 20 April 2016 on his appointment to Chief
Executive. His bonus opportunity as Chief Executive was based on 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. All of Brian May’s and 25% of Patrick Larmon’s bonus potential
in 2016 related to 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. For Patrick Larmon, a further 75% of his bonus potential related to the PBITA performance of North America
(‘NA’) which was modified by the achievement of NA’s RAOC relative to the target set and measured on a constant exchange rate basis. The
results for 2016 against the targets set were as follows:
Group performance
Frank van Zanten
On-target
bonus opportunity
as % salary
70%
Threshold
eps
89.7p
Target
eps
94.2p
Stretch
eps
103.6p
Brian May
70%
89.7p
94.2p
103.6p
Patrick Larmon
17.5%
89.7p
94.2p
103.6p
Primary
% actual constant
exchange rate eps
relative to target
101.1% of target
performance
101.1% of target
performance
101.1% of target
performance
2016 bonus as %
of salary before
modifier applied
74.8%
Performance against targets
Modifier
RAOC for the
Group relative
to target (55.5%)
1.023
2016 bonus
award as %
of salary
76.6%
74.8%
19.1%
1.023
1.023
(‘CE’)
performance
Frank van Zanten
On-target
bonus opportunity
as % of salary
60%
Target CE
PBITA
€150.6m
% PBITA of
CE businesses
relative to target
102.6%
Bonus as %
of salary before
modifier applied
66.5%
% RAOC for the
CE businesses
relative to target
1.005
(‘NA’)
performance
Target NA
PBITA (constant
exchange rate
US$)
Patrick Larmon
52.5%
US$398.3m
Notes
% PBITA of
NA businesses
relative
to target
98.9% of target
performance
Bonus as %
of salary before
modifier applied
% RAOC for the
NA businesses
relative
to budget
44.7%
1.034
46.2%
a) For the Group performance table above the annual on-target bonus opportunity for Frank van Zanten 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 70% of salary with a threshold award of 31% of salary and a maximum award of 110% of salary.
76
76.6%
19.5%
66.8%
Bunzl plc Annual Report 2016
Threshold performance was 95% of target and the maximum bonus award would have been paid out at 110% of the target for Group performance and 107.5% of target for
NA performance.
b) The bonuses derived from the primary measures shown above are increased, decreased or remain unchanged according to the actual performance against the relevant
RAOC modifier. The modifier is unlikely to change the bonus determined by the primary measure by more than 5% up or down.
c) Frank van Zanten’s bonus award is shown for both Group and CE performance.
d) In accordance with his departure terms, no bonus payment was made to Michael Roney for the 2016 financial year (see page 82).
e) At target exchange rates the adjusted eps for 2016 was 95.2p.
Accordingly the total payments under the annual bonus plans were:
Michael Roney
Frank van Zanten
Brian May
Patrick Larmon
2016
%
–
75.3
76.6
65.7
Total bonus payment (cash and deferred shares) as a % of salary
2012
%
77.0
–
77.0
85.9
2013
%
104.2
–
104.2
85.3
2015
%
73.8
–
73.8
54.5
2014
%
98.0
–
98.0
69.7
The monetary values of the bonus payments for 2016 and 2015 are included in the table on page 75.
LTIP grants/awards with performance periods ending in 2016 (audited information)
Executive share option awards – LTIP Part A
Executive share option awards, granted three years previously, are due to vest on 27 February 2017 and 29 August 2017. The Committee
assessed the relevant performance of the Company against the performance conditions:
LTIP Part A – 27 February 2014 awards
Performance
measure
Eps growth relative
to RPI (over three
year period to
31 December 2016)
Vesting
schedule
100% vesting
for target
performance
LTIP Part A – 29 August 2014 awards
Performance
measure
Eps growth
(over three year
period to
31 December 2016)
Vesting
schedule
25% vesting for target
performance, 100%
vesting for maximum
performance
Michael Roney
Frank van Zanten
Brian May
Patrick Larmon
Note
RPI growth
(Dec 2013
to Dec 2016)
Target growth
(3% p.a. above
RPI growth)
Actual eps
growth
% vesting
(max 100%)
5.4%
14.7%
28.8%
100%
Threshold target
(5% p.a.)
Maximum target
(8% p.a.)
Actual eps
growth
% vesting
(max 100%)
15.8%
26.0%
28.8%
100%
Date of
grant
27 February 2014
29 August 2014
27 February 2014
29 August 2014
27 February 2014
29 August 2014
27 February 2014
29 August 2014
Number of
shares granted
43,000
54,600
16,200
18,800
22,500
29,000
25,500
35,500
Vesting
outcome
100%
100%
100%
100%
100%
100%
100%
100%
Estimated value of
award vesting
£245,100
£270,270
£92,340
£93,060
£128,250
£143,550
£145,350
£175,725
Included in the single total figure of remuneration table on page 75 is the estimated value of these awards based on the difference between the exercise price and the average of
the Company’s closing mid-market share price for the three month period ended 31 December 2016 (2,136p).
77
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Performance shares – LTIP Part B
Awards of performance shares were made to the executive directors on 5 April 2013 and 7 October 2013 with the three year TSR
performance periods being completed during the financial year on 31 March 2016 and 30 September 2016 respectively. The Committee
subsequently assessed the performance of the Company against the relevant performance conditions:
LTIP Part B – 5 April 2013 and 7 October 2013 awards
Performance
measure
Eps growth
relative to RPI (over
three year period to
31 December 2015)
Performance
measure
TSR relative to
comparator group
of bespoke
peer companies
Vesting
schedule
25% vesting
for threshold
performance,
100% vesting
for maximum
performance
Performance
Period
1 April 2013 to
31 March 2016
1 October 2013 to
30 September 2016
Michael Roney
Frank van Zanten
Brian May
Patrick Larmon
Note
RPI growth
(Dec 2012
to Dec 2015)
Threshold target
(4% p.a. above
RPI growth)
Maximum target
(10% p.a. above
RPI growth)
Actual eps
growth
% vesting
(max 50%)
5.6%
18.1%
38.7%
28.9%
32.2%
Vesting
schedule
25% vesting
for threshold
performance,
100% vesting
for maximum
performance
Date of
grant
5 April 2013
7 October 2013
5 April 2013
7 October 2013
5 April 2013
7 October 2013
5 April 2013
7 October 2013
Threshold target
(median)
Maximum target
(upper quartile)
12.3%
22nd out of 43
53.075%
11th out of 43
Actual TSR
61.7%
5th out of 43
15.9%
19th out of 38
48.8%
10th out of 38
81.0%
4th out of 38
Number of
shares granted
38,500
37,000
15,000
13,500
20,000
19,500
23,000
22,000
Vesting
outcome – eps
32.2%
32.2%
32.2%
32.2%
Vesting
outcome – TSR
50%
50%
50%
50%
50%
50%
50%
50%
% vesting
(max 50%)
50.0%
50.0%
Value of
award vesting
£640,774
£706,735
£249,652
£257,863
£332,870
£372,469
£382,800
£420,221
Included in the single total figure of remuneration table on page 75 is the value of these vested awards at the closing mid-market share price on the dates of vesting, 5 April 2016
and 7 October 2016, which were 2,025p and 2,324p respectively.
Total pension entitlements (audited information)
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 2016
£83,748
£158,295
£113,910
£16,120
Pension
value in
the year
from DB
scheme
–
–
£68,515
–
Total
pension
2016
£83,748
£158,295
£182,425
£16,120
Michael Roney
Frank van Zanten
Brian May
Patrick Larmon
Notes
a) Michael Roney received a pension allowance of 30% of basic salary and retired as Chief Executive on 20 April 2016 and left the employment of the Company on 30 April 2016.
b) As Chief Executive Frank van Zanten receives a pension allowance of 25% of base salary. Prior to this his pension allowance was 20% of basic salary.
c) Brian May, who joined the Group in the UK prior to the closure of the defined benefit (’DB’) sections of the Bunzl Pension Plan (‘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. The pensionable salary cap is notionally £150,600 for
tax year 2016/17 and £149,400 for tax year 2015/16. The employee contribution rate is currently 10% of pensionable salary.
d) 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.
e) 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 (‘DC’) 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 2016 of £7,352 (2015: £6,536).
78
Bunzl plc Annual Report 2016
f) 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. No further SERA payments were made in 2016 (2015 : US$45,007).
g) Patrick Larmon also participates in the Bunzl USA, LLC Deferred Savings (401k) Plan. The Company makes matching contributions to this Plan. During 2016 contributions for
Patrick Larmon amounted to £8,768 (2015: £7,794).
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. Executive share
options were granted in March and September 2016 and performance share awards were granted in April and October 2016 under the 2014
LTIP in accordance with the policy and performance conditions as approved at the 2014 AGM.
LTIP interests awarded during the financial year (audited information)
Plan
2014 LTIP Part A
2014 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
Basis of award
Date of grant
77.5% of salary
03.03.16
50% of salary
11.04.16
02.09.16
124.5% of salary
11.10.16 68.09% of salary
95% of salary
03.03.16
52.5% of salary
11.04.16
95% of salary
02.09.16
52.5% of salary
11.10.16
95% of salary
03.03.16
52.5% of salary
11.04.16
95% of salary
02.09.16
52.5% of salary
11.10.16
Face value
£000
313.8
212.7
996.0
544.7
503.5
278.2
503.5
278.2
716.0
394.5
757.1
449.6
% vesting at
threshold
performance
100%
25%
100%
25%
100%
25%
100%
25%
100%
25%
100%
25%
Number
of shares
16,135
10,369
42,636
23,428
25,887
13,566
21,553
11,967
36,810
19,235
32,411
19,338
Performance
period end date
31.12.18
31.03.19
31.12.18
30.09.19
31.12.18
31.03.19
31.12.18
30.09.19
31.12.18
31.03.19
31.12.18
30.09.19
Frank van Zanten
Brian May
Patrick Larmon
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 2014 LTIP Part A
on 3 March 2016 and on 2 September 2016 at a value of 1,945p and 2,336p per share respectively. Performance shares were awarded under the 2014 LTIP Part B on 11 April 2016
and on 11 October 2016 at a value of 2,051p and 2,325p per share respectively.
Performance conditions for 2016 awards
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 2016 were as detailed below.
Executive share option awards – 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%
79
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
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 2016 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 67. Newly issued shares are
currently used to satisfy the exercise of options under the Sharesave Scheme and the International and Irish Sharesave Plans. 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 2016
2.2%
1.2%
Statement of directors’ shareholding and share interests (audited information)
As at 31 December 2016, all executive directors and their connected persons have a shareholding as follows:
Frank van Zanten
Brian May
Patrick Larmon
Note
Actual share ownership as a percentage
of salary at 31 December 2016
at the closing mid-market price
(2,109p)
185%
419%
345%
Under the terms of the Company remuneration policy Frank van Zanten has a period of up to three years to build up his shareholding requirement of not less than 200%
of his base salary (which is proposed to increase to 250% under the new remuneration policy to be proposed at the 2017 AGM). In his previous role, he was not required to meet
a shareholding requirement.
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Bunzl plc Annual Report 2016
Interests in shares and share options
The interests of the directors, and their connected persons, in the Company’s ordinary shares and share options to
31 December 2016 were:
Unvested
and subject
to holding
period
(DASBS)
25,732
38,650
38,542
–
–
–
–
–
–
Shares
Unvested
and subject to
performance
conditions
(LTIP Part B)
79,034
88,221
117,807
–
–
–
–
–
–
Owned
outright
57,261
105,240
127,623
10,000
4,000
4,000
2,500
2,500
3,000
Options (LTIP Part A and Sharesave)
Total
interests held
Unvested
and subject to
performance
conditions
126,467
153,441
201,160
–
–
–
–
–
–
Unvested
subject to
continued
employment
1,642
2,173
–
–
–
–
–
–
–
Vested
but not
exercised
18,000
24,500
130,000
–
–
–
–
–
–
308,136
412,225
615,132
10,000
4,000
4,000
2,500
2,500
3,000
Frank van Zanten
Brian May
Patrick Larmon
Philip Rogerson
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Meinie Oldersma*
Vanda Murray
* As Meinie Oldersma resigned from the Board on 22 August 2016, the above represents his holding at that date.
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 an eight year period. The Company’s
TSR performance against the FTSE 350 Support
Services Sector over an eight year period commencing
on 1 January 2009 is shown to the right.
460
400
340
280
220
160
100
Bunzl
FTSE 350 Support Services
2009
2010
2011
2012
2013
2014
2015
2016
Source: Thomson Reuters Datastream
Chief Executive’s pay in last eight years (audited information)
The table below summarises the Chief Executive’s single total figure of remuneration, annual bonus and long term incentive pay out as a
percentage of maximum opportunity for 2016 and the previous seven years.
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
2009
2010
2011
2012
2013
2014
2015
2016
1,943.2
2,314.2
3,394.1
3,502.9
4,387.6
4,766.8
3,937.9 3,718.3
45%
71%
99%
67%
91%
85%
64%
45%
100%
100%
100%
100%
100%
100%
100% 100%
(performance shares)
84%
65%
29%
45%
62%
89%
69%
82%
Notes
a) The data for 2016 includes the amounts relating to Michael Roney from 1 January 2016 to 19 April 2016 and also includes the LTIP awards made to him that vested in the
period from 20 April to 31 December 2016. There was no bonus award for Michael Roney in relation to 2016.
b) The data for 2016 also includes the amounts relating to Frank van Zanten from 20 April to 31 December 2016 including the bonus award for that period and the
international relocation package with accommodation benefit support, but excludes the LTIP awards made to him in his previous role that vested during the period
from 20 April to 31 December 2016.
c) All years prior to 2016 relate to Michael Roney.
d) No LTIP awards that have been granted to Frank van Zanten since he became Chief Executive on 20 April 2016 have vested during 2016.
e) The single total figure of remuneration in relation to 2015 has been restated from the figure shown in the 2015 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 f) to the table of the single total figure of remuneration 2016 on page 75.
81
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
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 2016 and leavers and joiners in either year have been removed from the data to prevent distortion.
Salary
Benefits
Bonus
Notes
Chief Executive
Percentage
change
(2016 vs 2015)
-13%
1%
-10%
UK and US
management
population
Percentage
change
(2016 vs 2015)
2%
3%
22%
a) Salary percentage change based on Michael Roney’s salary of £922,000 for 2015 and Frank van Zanten’s salary of £800,000 on appointment to Chief Executive on 20 April 2016.
b) Benefits are annualised and exclude the 2016 international relocation package benefit for Frank van Zanten of £353,191.
c) Bonus amount is lower for the newly appointed Chief Executive, Frank van Zanten, compared to the former Chief Executive, Michael Roney.
d) US and UK management population includes any promotional increases that occurred during either year.
e) Bonus relates to the performance targets of the companies for which the relevant individual’s work.
Relative importance of spend on pay
The table below shows a comparison between the overall expenditure on pay and dividends paid to shareholders for 2016 and 2015
(as stated in Note 21 and Note 17 to the consolidated financial statements on pages 127 and 122 respectively).
£ million unless otherwise stated
Overall expenditure on pay
Dividend paid in the year
Notes
2016
647.3
125.4
2015
558.1
116.1
Percentage
change
16.0%
8.0%
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.
c) The percentage change in overall expenditure on pay includes the impact of changes in exchange rates from 2015 to 2016, the background to which is referred to in the
Chief Executive’s review on page 18 and in the Financial review on page 32.
Departure terms of Michael Roney (Chief Executive until 20 April 2016)
Michael Roney retired from the Board on 20 April 2016 and left the Group on 30 April 2016. His departure terms, as determined by the
Committee within the terms of the Company’s remuneration policy approved at the 2014 AGM, were set out in the 2015 Annual Report and
were as follows:
• salary (which was not increased on 1 January 2016), benefits and pension allowance were paid as usual until 30 April 2016
(the ‘Leaving Date’);
• no payment in lieu of notice was made;
• no annual cash bonus or DASBS award was made for the 2016 financial year;
• any deferred shares outstanding at the Leaving Date, which were awarded under the DASBS in relation to the 2014 and 2015 financial
years, will vest in full on 1 March 2017;
• no grants or awards under the LTIP were made in 2016; and
• any grants and awards outstanding at the Leaving Date, which were made under the LTIP Part A and B in 2013, 2014 and 2015, will vest at
the normal vesting date subject to satisfaction of the existing performance conditions and provided that prior to the relevant vesting date
Michael Roney has not worked in any capacity for a competitor organisation. Recovery provisions continue to apply.
82
Bunzl plc Annual Report 2016 2017 Remuneration (audited information)
The current remuneration policy was implemented with effect from the 2014 AGM and continues to apply until the 2017 AGM when the new
policy is submitted to shareholders for approval.
Salary
The salary increases for the executive directors for 2017, which are in line with increases that have been implemented for other employees
in the Group as discussed on page 69, are as follows:
Frank van Zanten
Brian May
Patrick Larmon
Notes
Salary from
1 January
2017
£816,000
£540,600
Salary from
1 January
2016
£800,000
£530,000
US$1,081,200 US$1,060,000
Increase in
salary
2016 to 2017
2.0%
2.0%
2.0%
a) As reported on page 75 Frank van Zanten’s salary was £800,000 from his appointment as Chief Executive on 20 April 2016.
b) The average sterling : dollar exchange rate for 2016 was £1: $1.36.
2017 bonus targets
The structure for Frank van Zanten’s, Brian May’s and 25% of Patrick Larmon’s annual bonus for 2017 is described on pages 64 and 65.
The threshold for bonus payments on growth in constant exchange rate eps has been set at the actual result achieved in 2016 on a constant
exchange rate basis. For Patrick Larmon the other 75% of his bonus will relate to the attainment of PBITA performance of NA relative to
budget which will be modified, positively or negatively, by the achievement of NA’s RAOC 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 are not disclosed while
still commercially sensitive, but are disclosed the following year.
Performance measures for long term incentives to be awarded in 2017
Grants of executive share options and performance shares awarded to executive directors and senior executives in 2017 will be subject to
the same performance conditions as those executive share options and performance share awards granted in 2016 as detailed on pages
79 and 80.
Chairman’s and non-executive directors’ fees for 2017 (audited information)
The Chairman’s fee is reviewed every two years with the most recent review having taken place with effect from 1 January 2016. The
non-executive directors’ fees are reviewed annually and were most recently reviewed with effect from 1 January 2017. The current fee
structure for the Chairman and 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
2017
£340,000
£68,850
£17,000
£17,000
£17,000
Fees paid
in 2016
£340,000
£67,500
£16,000
£16,000
£16,000
Increase
in fees
2016 to 2017
–
2.0%
6.25%
6.25%
6.25%
83
Bunzl plc Annual Report 2016 Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
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 2016
The outstanding awards granted to each director of the Company and any director with an interest in the Company during 2016 under the
DASBS are set out in the table below. Further information relating to the deferred bonus is provided on page 64.
Shares
held at
1 January
2016
9,566
7,976
–
25,575
28,815
23,130
–
14,165
15,898
12,921
–
21,045
16,003
12,061
–
Shares
awarded
during
2016
–
–
8,190
–
–
–
17,600
–
–
–
9,831
–
–
–
10,478
Total
number
of award
shares at
31 December
2016
9,566
7,976
8,190
–
28,815
23,130
17,600
–
15,898
12,921
9,831
–
16,003
12,061
10,478
Shares
vested
during
2016
–
–
–
25,575
–
–
–
14,165
–
–
–
21,045
–
–
–
Normal
vesting
date
01.03.17
01.03.18
01.03.19
01.03.16
01.03.17
01.03.17
01.03.17
01.03.16
01.03.17
01.03.18
01.03.19
01.03.16
01.03.17
01.03.18
01.03.19
Share
price
at grant
p
1,573
1,896
1,933
1,272
1,573
1,896
1,933
1,272
1,573
1,896
1,933
1,272
1,573
1,896
1,933
Market
price
at vesting
p
–
–
–
1,969
–
–
–
1,969
–
–
–
1,969
–
–
–
Monetary
value of
vested
award
£000
–
–
–
504
–
–
–
279
–
–
–
414
–
–
–
Frank van Zanten
Michael Roney
Brian May
Patrick Larmon
Notes
The deferred element of the 2016 annual bonus plan as shown on page 75 is not included in the table above as the appropriate number of shares have not yet been awarded. No
shares lapsed during the year. Frank van Zanten did not receive a share award under the DASBS in 2013 which would have vested on 1 March 2016.
84
Bunzl plc Annual Report 2016 LTIP
The tables below show the number of executive share options and performance shares held by the executive directors under the LTIP
during 2016.
Executive share options – LTIP Part A
Frank van Zanten
Total
Michael Roney
Total
Brian May
Total
Patrick Larmon
Total
Notes
a) Executive share options were exercised during 2016 by:
Options at
1 January
2016
20,000
18,000
16,200
18,800
15,300
17,396
–
–
105,696
53,000
47,500
43,000
54,600
48,100
54,653
300,853
27,500
24,500
22,500
29,000
25,500
29,001
–
–
158,001
41,500
36,000
34,000
31,500
28,500
25,500
35,500
33,300
37,639
–
–
303,439
Grant
date
28.02.13
30.08.13
27.02.14
29.08.14
26.02.15
27.08.15
03.03.16
02.09.16
28.02.13
30.08.13
27.02.14
29.08.14
26.02.15
27.08.15
28.02.13
30.08.13
27.02.14
29.08.14
26.02.15
27.08.15
03.03.16
02.09.16
02.09.11
01.03.12
31.08.12
28.02.13
30.08.13
27.02.14
29.08.14
26.02.15
27.08.15
03.03.16
02.09.16
Exercise
price
p
1,240
1,375
1,566
1,641
1,920
1,687
1,945
2,336
1,240
1,375
1,566
1,641
1,920
1,687
1,240
1,375
1,566
1,641
1,920
1,687
1,945
2,336
813
962
1,116
1,240
1,375
1,566
1,641
1,920
1,687
1,945
2,336
Options
exercisable
between
28.02.16–27.02.23
30.08.16–29.08.23
27.02.17-26.02.24
29.08.17-28.08.24
26.02.18-25.02.25
27.08.18-26.08.25
03.03.19-02.03.26
02.02.19-01.02.26
28.02.16–27.02.23
30.08.16–28.02.17
27.02.17-26.08.17
29.08.17-28.08.18
26.02.18-25.02.19
27.08.18-26.08.19
28.02.16–27.02.23
30.08.16–29.08.23
27.02.17-26.02.24
29.08.17-28.08.24
26.02.18-25.02.25
27.08.18-26.08.25
03.03.19-02.03.26
02.02.19-01.02.26
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
26.02.18-25.02.25
27.08.18-26.08.25
03.03.19-02.03.26
02.02.19-01.02.26
Options at
31 December
2016
–
18,000
16,200
18,800
15,300
17,396
16,135
42,636
144,467
–
–
43,000
54,600
48,100
54,653
200,353
–
24,500
22,500
29,000
25,500
29,001
25,887
21,553
177,941
–
36,000
34,000
31,500
28,500
25,500
35,500
33,300
37,639
36,810
32,411
331,160
(i) Frank van Zanten on 15 March 2016 in respect of 20,000 ordinary shares at an exercise price of 1,240p, at a market price of 1,985p, resulting in a gain of £149,000;
(ii) Michael Roney on 11 March 2016 in respect of 53,000 ordinary shares at an exercise price of 1,240p, at a market price of 1,978p, resulting in a gain of £391,140. In addition
Michael Roney exercised share options on 5 September 2016 in respect of 47,500 ordinary shares at an exercise price of 1,375p, at a market price of 2,380p, resulting in a
gain of £477,375;
(iii) Brian May on 29 June 2016 in respect of 27,500 ordinary shares at an exercise price of 1,240p, at a market price of 2,201p, resulting in a total gain of £264,275; and
(iv) Patrick Larmon on 23 March 2016 in respect of 41,500 ordinary shares at an exercise price of 812.5p, at a market price of 1,985p, resulting in a gain of £486,590.
b) The mid-market price of an ordinary share on 31 December 2016 was 2,109p and the range during 2016 was 1,735p to 2,436p.
c) The performance conditions have been satisfied in relation to options granted 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 since then have been granted
under the 2014 LTIP Part A.
85
Bunzl plc Annual Report 2016
Directors’ report | Directors’ remuneration report
Directors’ remuneration report continued
Performance shares – LTIP Part B
Awards
(shares)
held at
1 January
2016
15,000
13,500
12,150
12,300
10,200
10,587
–
–
73,737
38,500
37,000
31,500
31,600
28,200
28,749
195,549
20,000
19,500
16,500
16,500
14,700
14,988
–
–
102,188
23,000
22,000
18,500
20,900
20,000
19,834
–
–
124,234
Conditional
shares
awarded
during
2016
–
–
–
–
–
–
10,369
23,428
33,797
–
–
–
–
–
–
–
–
–
–
–
–
–
13,566
11,967
25,533
–
–
–
–
–
–
19,235
19,338
38,573
Market price
per share
at award
p
1,277
1,325
1,606
1,597
1,840
1,804
2,025
2,325
1,277
1,325
1,606
1,597
1,840
1,804
1,277
1,325
1,606
1,597
1,840
1,804
2,025
2,325
1,277
1,325
1,606
1,597
1,840
1,804
2,025
2,325
Award
date
05.04.13
07.10.13
04.04.14
06.10.14
02.04.15
05.10.15
11.04.16
11.10.16
05.04.13
07.10.13
04.04.14
06.10.14
02.04.15
05.10.15
05.04.13
07.10.13
04.04.14
06.10.14
02.04.15
05.10.15
11.04.16
11.10.16
05.04.13
07.10.13
04.04.14
06.10.14
02.04.15
05.10.15
11.04.16
11.10.16
Lapsed
awards
(shares)
during
2016
2,672
2,405
–
–
–
–
–
–
5,077
6,857
6,590
–
–
–
–
13,447
3,562
3,473
–
–
–
–
–
–
7,035
4,097
3,919
–
–
–
–
–
–
8,016
Exercised
awards
(shares)
during
2016
12,328
11,095
–
–
–
–
–
–
23,423
31,643
30,410
–
–
–
–
62,053
16,438
16,027
–
–
–
–
–
–
32,465
18,903
18,081
–
–
–
–
–
–
36,984
Market
price
per share
at exercise
p
2,010
2,339
–
–
–
–
–
–
Value at
exercise
£000
248
260
–
–
–
–
–
–
2,010
2,342
–
–
–
–
2,019
2,345
–
–
–
–
–
–
2,010
2,342
–
–
–
–
–
–
636
712
–
–
–
–
332
376
–
–
–
–
–
–
380
423
–
–
–
–
–
–
Awards
(shares)
held at 31
December
2016
–
–
12,150
12,300
10,200
10,587
10,369
23,428
79,034
–
–
31,500
31,600
28,200
28,749
120,049
–
–
16,500
16,500
14,700
14,988
13,566
11,967
88,221
–
–
18,500
20,900
20,000
19,834
19,235
19,338
117,807
Frank van Zanten
Total
Michael Roney
Total
Brian May
Total
Patrick Larmon
Total
Notes
a) The closing mid-market price of the Company’s ordinary shares as at the vesting dates on 5 April 2016 and 7 October 2016 were 2,025p and 2,324p respectively.
b) Performance share awards granted in April 2014 and earlier have been granted under the 2004 LTIP Part B. Performance share awards granted since then have been granted
under the 2014 LTIP Part B.
86
Bunzl plc Annual Report 2016 All employees share scheme
Sharesave Schemes
The table below shows the number of share options granted to the executive directors under the Sharesave Schemes. Details of the
Sharesave Schemes are set out on page 67.
Frank van Zanten
Michael Roney
Brian May
Vanda Murray OBE
Chairman of the Remuneration Committee
27 February 2017
Options at
1 January
2016
678
–
1,948
585
1,197
976
Grant
date
01.04.15
29.03.16
27.03.12
20.03.15
21.03.14
20.03.15
Exercise
price
p
1,536
1,556
770
1,536
1,253
1,536
Options
exercisable
between
01.05.18-31.10.18
01.05.21-31.10.21
30.04.16-31.10.16
30.04.16-31.10.16
01.05.19-31.10.19
01.05.20-31.10.20
Options at
31 December
2016
678
964
–
–
1,197
976
87
Bunzl plc Annual Report 2016 Bunzl plc Annual Report 2016
Directors’ report | Other statutory information
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 19 April
2017 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 13.00p was paid on
3 January 2017 in respect of 2016 and the
directors recommend a final dividend of
29.0p, making a total for the year of 42.0p
per share (2015: 38.0p). Dividend details are
given in Note 17 to the consolidated financial
statements. Subject to approval by the
shareholders at the Annual General Meeting
on 20 April 2016, the final dividend will be
paid on 3 July 2017 to those shareholders
on the register at the close of business on
26 May 2017.
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.
Substantial shareholdings
As at 31 December 2016 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.
As at 27 February 2017 no further
notifications have been received since the
year end.
Shareholder
Massachusetts Financial Services Company
Cascade Investment L.L.C.
Invesco Limited
BlackRock, Inc.
APG Asset Management N.V.
88
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.
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.
Date of
notification
27.12.16
15.10.15
26.08.14
12.12.16
24.06.15
Number of
shares
33,540,043
23,503,182
16,645,696
16,370,044
10,265,263
% of issued
share capital
9.99
7.02
4.97
4.87
3.06
Power to issue and allot shares
The directors are generally and
unconditionally authorised under the
authorities granted at the 2016 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 £35.92
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
£5.39 million, without regard to the
pre-emption provisions of the Companies
Act 2006. No such shares were issued or
allotted under these authorities in 2016,
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, any persons closely associated with
them, are subject to the Company’s
Dealing Code.
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 2016
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 2016 Annual General Meeting,
shareholders gave the Company authority
to purchase a maximum of 33,520,000
ordinary shares. During the year ended
31 December 2016 the Company did not
purchase any of its own shares pursuant to
this authority or the authority granted at the
2015 Annual General Meeting and no shares
have been purchased between 31 December
2016 and 27 February 2017. The Company is
therefore currently authorised to buy back
33,520,000 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 all the directors who
served throughout the year are set out on
page 48. Lloyd Pitchford has been appointed
to the Board with effect from 1 March 2017.
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 David Sleath who retires from the
Board 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 2016. 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 60 to 87.
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 2016
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.
89
Bunzl plc Annual Report 2016
Directors’ report | Other statutory information
Other statutory information continued
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 2016 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 to
the consolidated financial statements on
page 120, there are no disclosures required
to be made under UK Listing Rule 9.8.4.
Strategic report and
Directors’ report
Pages 1 to 47 inclusive consist of the
Strategic report and pages 48 to 90 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 a strategic report and a 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
27 February 2017.
On behalf of the Board
External auditors
Each of the directors at the date of approval
of this report confirms that:
Paul Hussey
Secretary
27 February 2017
• 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.
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.
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 38 to 47.
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.
90
Financial
statements
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated cash flow statement
In this section
92 Consolidated income statement
93
94 Consolidated balance sheet
95
96
97 Notes
132 Company balance sheet
133 Company statement of changes in equity
134 Notes to the Company financial statements
139 Statement of directors’ responsibilities
140 Independent auditors’ report to the members of Bunzl plc
146 Shareholder information
152 Five year review
91
Bunzl plc Annual Report 2016 Financial statements
Consolidated income statement
for the year ended 31 December 2016
Revenue
Operating profit
Finance income
Finance expense
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:
Customer relationships amortisation
Acquisition related costs
Adjusted operating profit
Finance income
Finance expense
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
2016
£m
7,429.1
409.7
7.1
(53.9)
362.9
(97.0)
265.9
2015
£m
6,489.7
366.5
4.8
(48.6)
322.7
(90.0)
232.7
80.7p
79.7p
71.0p
70.2p
409.7
366.5
81.3
34.0
525.0
7.1
(53.9)
478.2
(128.6)
349.6
66.8
21.7
455.0
4.8
(48.6)
411.2
(113.1)
298.1
106.1p
91.0p
†See Note 2w on page 102 for further details of the non-GAAP measures.
The Accounting policies and other Notes on pages 97 to 131 form part of these consolidated financial statements.
92
Bunzl plc Annual Report 2016 Consolidated statement of comprehensive income
for the year ended 31 December 2016
Profit for the year
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit 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 on foreign operations
Loss taken to equity as a result of 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 income/(expense) for the year
Total comprehensive income attributable to the Company’s equity holders
Notes
20
6
6
2016
£m
265.9
(42.4)
8.3
(34.1)
267.0
(59.7)
2.6
(1.5)
(0.7)
207.7
173.6
439.5
2015
£m
232.7
27.0
(6.7)
20.3
(77.8)
(13.5)
9.6
(10.6)
(0.4)
(92.7)
(72.4)
160.3
93
Bunzl plc Annual Report 2016 Financial statements
Consolidated balance sheet
at 31 December 2016
Assets
Property, plant and equipment
Intangible assets
Defined benefit pension assets
Derivative financial assets
Deferred tax assets
Total non-current assets
Inventories
Income tax receivable
Trade and other receivables
Derivative financial assets
Cash at bank and in hand
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
Defined benefit pension liabilities
Other payables
Provisions
Derivative financial liabilities
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
2016
£m
2015*
£m
2014*
£m
8
9
20
15
10
11
23
16
23
20
14
15
23
23
12
14
123.3
1,947.6
–
14.9
2.3
2,088.1
960.9
5.7
1,157.5
12.5
282.4
2,419.0
4,507.1
107.9
167.5
27.7
21.1
988.3
1,312.5
1,283.6
84.1
30.5
31.0
1.7
124.9
1,555.8
155.7
86.0
82.9
1,297.8
8.1
8.3
1,638.8
3,194.6
4,507.1
112.6
1,646.1
5.4
16.5
–
1,780.6
794.2
0.7
947.5
17.2
281.8
2,041.4
3,822.0
107.7
163.9
(179.1)
20.2
903.6
1,016.3
1,058.8
45.4
20.8
25.3
–
112.8
1,263.1
231.1
120.8
74.8
1,096.4
10.0
9.5
1,542.6
2,805.7
3,822.0
107.7
1,490.3
–
16.3
3.9
1,618.2
705.3
0.7
869.8
12.6
298.6
1,887.0
3,505.2
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
244.3
35.8
64.6
1,018.4
8.5
10.7
1,382.3
2,521.3
3,505.2
Approved by the Board of Directors of Bunzl plc (Company registration number 358948) on 27 February 2017 and signed on its behalf by
Frank van Zanten, Chief Executive and Brian May, Finance Director.
* Revised to reflect a change in the presentation of Cash at bank and in hand and Bank overdrafts and a reclassification of software assets
from Property, plant and equipment to Intangible assets (see Note 1(i)).
94
Bunzl plc Annual Report 2016 Consolidated statement of changes in equity
for the year ended 31 December 2016
At 1 January 2016
Profit for the year
Actuarial loss on defined benefit
pension schemes
Foreign currency translation differences
on foreign operations
Loss taken to equity as a result of effective
net investment hedges
Gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve
to income statement
Income tax (charge)/credit on other
comprehensive income
Total comprehensive income
2015 interim dividend
2015 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2016
At 1 January 2015
Profit for the year
Actuarial gain on defined benefit
pension schemes
Foreign currency translation differences
on foreign operations
Loss taken to equity as a result of effective
net investment hedges
Gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve
to income statement
Income tax (charge)/credit on other
comprehensive income
Total comprehensive (expense)/income
2014 interim dividend
2014 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2015
Share
capital
£m
107.7
Share
premium
£m
Translation
reserve
£m
Merger
£m
Other reserves
Cash flow
hedge
£m
Capital
redemption
£m
163.9
(179.1)
2.5
16.1
1.6
Retained earnings
Own
shares
£m
(118.9)
Earnings
£m
1,022.5
265.9
Total
equity
£m
1,016.3
265.9
(42.4)
(42.4)
267.0
(59.7)
(0.5)
206.8
0.2
3.6
2.6
(1.5)
(0.2)
0.9
(37.5)
24.0
107.9
167.5
27.7
2.5
16.1
2.5
(132.4)
8.3
231.8
(38.6)
(86.8)
(24.0)
15.8
1,120.7
Share
capital
£m
107.6
Share
premium
£m
Translation
reserve
£m
Merger
£m
Other reserves
Cash flow
hedge
£m
Capital
redemption
£m
160.3
(87.2)
2.5
16.1
2.4
Retained earnings
Own
shares
£m
(115.1)
Earnings
£m
897.3
232.7
267.0
(59.7)
2.6
(1.5)
7.6
439.5
(38.6)
(86.8)
3.8
(37.5)
–
15.8
1,312.5
Total
equity
£m
983.9
232.7
(77.8)
(13.5)
(0.6)
(91.9)
0.1
3.6
9.6
(10.6)
0.2
(0.8)
(30.2)
26.4
107.7
163.9
(179.1)
2.5
16.1
1.6
(118.9)
27.0
27.0
(6.7)
253.0
(36.0)
(80.1)
(26.4)
14.7
1,022.5
(77.8)
(13.5)
9.6
(10.6)
(7.1)
160.3
(36.0)
(80.1)
3.7
(30.2)
–
14.7
1,016.3
95
Bunzl plc Annual Report 2016 Financial statements
Consolidated cash flow statement
for the year ended 31 December 2016
Cash flow from operating activities
Profit before income tax
Adjusted for:
net finance expense
customer relationships amortisation
acquisition related costs
Adjusted operating profit
Adjustments:
non-cash items
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 and software
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 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)/inflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of year
Increase in cash and cash equivalents
Currency translation
Cash and cash equivalents at end of year
Non-GAAP measures†
Cash generated from operations before acquisition related costs
Purchase of property, plant and equipment and software
Sale of property, plant and equipment
Operating cash flow
Cash conversion % (operating cash flow to adjusted operating profit)
† See Note 2w on page 102 for further details of the non-GAAP measures.
96
Notes
5
9
3
26
26
24
8,9
24
17
23
2016
£m
362.9
46.8
81.3
34.0
525.0
28.0
(6.3)
546.7
(17.0)
(123.2)
406.5
5.9
(25.4)
0.6
(159.6)
(178.5)
(49.1)
(125.4)
206.1
(210.5)
22.9
3.8
26.4
(67.7)
(193.5)
34.5
50.7
34.5
41.5
126.7
2015
£m
322.7
43.8
66.8
21.7
455.0
19.8
(9.8)
465.0
(42.7)
(92.5)
329.8
2.8
(24.8)
2.4
(328.5)
(348.1)
(42.7)
(116.1)
256.4
(73.8)
27.5
3.7
23.1
(56.3)
21.8
3.5
54.3
3.5
(7.1)
50.7
546.7
(25.4)
0.6
521.9
465.0
(24.8)
2.4
442.6
99%
97%
Bunzl plc Annual Report 2016 Notes
1 Basis of preparation
Bunzl plc (the ‘Company’) is a public limited company listed on the London Stock Exchange incorporated and domiciled in the
United Kingdom.
(i) Basis of accounting
The consolidated financial statements for the year ended 31 December 2016 have been approved by the directors. They are prepared
in accordance with (i) EU endorsed International Financial Reporting Standards (‘IFRS’) and interpretations of the IFRS Interpretations
Committee (‘IFRS IC’) and those parts of the Companies Act 2006 as applicable to companies using IFRS and (ii) IFRS as issued by the
International Accounting Standards Board (‘IASB’). They are prepared under the historical cost convention with the exception of certain
items which are measured at fair value as described in the accounting policies below. The directors consider that it is appropriate to adopt
the going concern basis of accounting in preparing the financial statements.
In March 2016 an agenda decision of the IFRS IC was issued which provided clarity over the situations where cash pooling arrangements
meet the requirements of IFRS to present cash and overdrafts on a net basis. As a result, the 31 December 2015 comparative figures for
Cash at bank and in hand and Bank overdrafts have been increased by £202.6m (31 December 2014: £216.2m). These balances were
previously presented on a net basis in the Consolidated balance sheet and relevant Notes (see Note 13 and Note 23).
In prior years software related assets were included as a part of property, plant and equipment in the Consolidated balance sheet. As the
Group continues to upgrade its IT systems and invest in new e-commerce platforms, separate disclosure of the net book value of these
assets is considered to enhance existing disclosures and increase transparency. The Group has therefore changed the presentation of
software assets to show them as a separate component of intangible assets, increasing intangible assets and reducing property, plant
and equipment by £14.1m at 31 December 2015 (31 December 2014: £11.5m) (see Note 9).
(ii) New accounting standards and interpretations
There are no new standards issued by the IASB that are applicable to the Group for the year ended 31 December 2016. The Group has
adopted all relevant amendments to existing standards and interpretations issued by the IASB that are effective from 1 January 2016 with
no material impact on its consolidated results or financial position.
The Group is currently assessing the potential impact of new and revised standards and interpretations issued by the IASB that will
be effective from 1 January 2017 and beyond, none of which have been adopted early. A summary of the Group’s current considerations
with respect to three of the new accounting standards is included below.
IFRS 15 ‘Revenue from Contracts with Customers’ will be effective in the consolidated financial statements for the year ending
31 December 2018, with comparatives restated from a transition date of 1 January 2017. Revenue is currently recognised in the income
statement at the point in time at which the significant risks and rewards of ownership of the goods are transferred. IFRS 15 requires
companies to apportion revenue from customer contracts to separate performance obligations and recognise revenue as these
performance obligations are satisfied. The Group has reviewed its arrangements with customers and concluded that for substantially
all of its customer contracts the performance obligation is the delivery of goods and it is therefore appropriate to recognise revenue
at a single point of time, on delivery of goods, which is consistent with current accounting policies. Accordingly, based on the Group’s
assessment, which is ongoing, the application of IFRS 15 is not anticipated to have a material impact on the timing of revenue recognition
and consequently is not anticipated to have a material impact on the Group’s operating profit or financial position.
IFRS 9 ‘Financial Instruments’ will be effective in the consolidated financial statements for the year ending 31 December 2018 with a
transition date of 1 January 2017. The Group has reviewed the differences between IFRS 9 and the current accounting policies which
comply with International Accounting Standards (‘IAS’) 39 ‘Financial Instruments: Recognition and Measurement’. Based on this analysis
the Group does not anticipate that there will be any material impact on its consolidated results or financial position.
IFRS 16 ‘Leases’ will be effective in the consolidated financial statements for the year ending 31 December 2019, which the Group intends
to adopt retrospectively with comparatives restated from a transition date of 1 January 2018. To prepare for the transition to this new
accounting standard, data has been collated on all of the Group’s leases which are principally for warehouses and vehicles. Based on the
Group’s assessment, which is ongoing, the application of IFRS 16 will have a material impact on the consolidated financial statements.
The new standard will require that the Group's leased assets are recorded within property, plant and equipment as 'right of use assets'
with a corresponding lease liability which is based on the discounted value of the cash payments required under each lease. The existing
operating lease expenses, currently recorded in operating costs, will be replaced with a depreciation charge, which will be lower than
the current operating lease expense, and a separate financing expense, which will be recorded in finance expense. There will be no net
cash flow impact arising from the new standard and the Group does not currently intend to alter its approach as to whether assets should
be leased or bought going forward. Current banking covenants are unaffected.
Apart from these three standards the Group does not anticipate that any other new or revised standards and interpretations issued by the
IASB that will be effective from 1 January 2017 and beyond will have a material impact on its consolidated results or financial position.
97
Bunzl plc Annual Report 2016 Financial statements
Notes continued
2 Accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the consolidated
financial statements.
a Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group is either 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. A list of all of Bunzl plc’s
subsidiary undertakings is included in the Related undertakings note in the Shareholder information section on pages 146 to 148 and is
subject to audit. The results of all of the subsidiary undertakings are included in full in these consolidated financial statements.
(ii) Business combinations
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.
When less than 100% of a subsidiary is acquired, the Group measures the present ownership component of the non-controlling
interest at fair value at the acquisition date which means that goodwill includes a portion attributable to the non-controlling interest.
When an acquisition of less than 100% of a subsidiary also includes an option to purchase the remaining share of the subsidiary,
the anticipated acquisition method is applied, where judged appropriate to do so, meaning that no non-controlling interest is recognised.
A liability is carried on the balance sheet equal to the fair value of the option and this is revised to fair value at each reporting date with
differences being recorded in acquisition related costs in the income statement.
(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 other comprehensive income.
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 balances, are recognised directly in
other comprehensive income and accumulated in the translation reserve. Differences that have arisen since 1 January 2004, the date
of transition to IFRS, are presented in this separate component of equity.
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 not recognised if there is significant uncertainty regarding recovery of the consideration due.
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.
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.
98
Bunzl plc Annual Report 2016 2 Accounting policies continued
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. Substantially all supplier rebate income is unconditional and non-judgemental. 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 a number of equity settled share based payment 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 which 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 to the
extent that it relates to items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or recoverable on the taxable income or loss for the year using tax rates enacted or substantively
enacted at the balance sheet date and any adjustments in respect of prior years. Current tax payable is recognised when it is probable that
the Group will be required to settle the obligation. The Group’s policy for accounting for current tax payable or receivable where it is
uncertain is described in more detail in the Critical accounting judgements, estimates and assumptions, section d – Taxation.
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 and where the Company controls the timing of the reversal. A deferred
tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the temporary
difference can be utilised.
i Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses. The carrying values
of property, plant and equipment are periodically reviewed for impairment when events or changes in circumstances indicate that the
carrying values may not be recoverable. Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items.
j Depreciation
Depreciation is charged to profit or loss on a straight line basis to write off cost less estimated residual value over the assets’ estimated
remaining useful lives. The estimated useful lives are as follows:
Buildings
Plant and machinery
Fixtures, fittings and equipment
Freehold land
50 years (or depreciated over life of lease if shorter than 50 years)
3 to 12 years
3 to 12 years
Not depreciated
Assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
99
Bunzl plc Annual Report 2016 Financial statements
Notes continued
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 chose to apply IFRS 3 ‘Business Combinations’ from 1 January 2004 and elected not to restate previous
business combinations. For acquisitions made before 1 January 2004, goodwill represents the amount previously recorded under UK
Generally Accepted Accounting Practice (‘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) Customer relationships
Customer relationships intangible assets acquired in a business combination are recognised on acquisition and recorded at fair value.
Subsequent to initial recognition, customer relationships intangible assets 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
of 10 to 19 years.
(iii) Software
Software is stated at historical cost less accumulated amortisation and any impairment losses. The carrying value of software is
periodically reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable.
Amortisation is charged to the income statement on a straight line basis over the estimated useful economic lives of three to seven 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 of disposal 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 is based on the first-in first-out principle and
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.
Provision is made for obsolete, slow moving or defective items where appropriate.
n Trade and other receivables
Trade and other receivables are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition these assets are measured at amortised 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 initially measured at fair value including any directly attributable transaction costs. Subsequent to initial
recognition these liabilities are measured at amortised cost.
100
Bunzl plc Annual Report 2016 2 Accounting policies continued
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 ‘Fair Value Measurement’ 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 is designated and qualifies as a hedge of a forecast transaction, 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, as reported in the cash flow statement, comprises cash at bank and in hand and bank overdrafts. Cash at bank
and in hand includes cash balances and short term deposits with maturities of three months or less from the date the deposit is made.
r Net debt
Net debt is defined as interest bearing loans and borrowings adjusted for the fair value of interest rate swaps on fixed interest rate
borrowings and other derivatives managing the interest rate and currency profile less cash and cash equivalents.
s Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event that
can be reliably measured and 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 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 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.
101
Bunzl plc Annual Report 2016 Financial statements
Notes continued
2 Accounting policies continued
u Retirement benefits
(i) Defined contribution pension schemes
A defined contribution pension scheme is a post-employment benefit scheme under which the Company pays fixed contributions into a
separate fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay
all employee benefits relating to employee service in the current and prior periods. Obligations for contributions to defined contribution
pension schemes are recognised as an expense in the income statement in the periods during which services are rendered by employees.
(ii) Defined benefit pension schemes
A defined benefit pension scheme is a post-employment benefit plan other than a defined contribution pension scheme. Defined benefit
pension schemes are recognised on the balance sheet as a defined benefit pension asset or a defined benefit pension liability based on
the difference between the fair value of pension scheme assets and the present value of pension scheme liabilities.
The present value of pension scheme liabilities are calculated by a qualified actuary using the projected unit method by estimating the
amount of future benefit that employees have earned in return for their service in the current and prior periods, discounted using the rate
applicable to AA rated corporate bonds that have a similar maturity and currency to the pension scheme liabilities. The fair value of any
pension scheme assets (at bid price) are deducted from the present value of pension scheme liabilities to determine the net deficit or
surplus of each scheme. Remeasurements arising from defined benefit pension schemes comprise actuarial gains and losses of pension
scheme liabilities and the actual return on pension scheme assets excluding amounts already included in net interest. The net actuarial
gain or loss for the year is recorded in full in the statement of comprehensive income.
Current service cost, past service cost or gain 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 pension liability or asset is calculated by applying the discount rate used to measure the defined benefit pension scheme deficit or
surplus at the beginning of the year to the net defined benefit pension liability or asset at the beginning of the year. Net interest is recorded
within finance expense in the income statement.
When the valuation of a defined benefit pension scheme results in a surplus, the recognised defined benefit pension asset is limited to the
present value of benefits available in the form of any future refunds from the pension scheme or reductions in future contributions and
takes into account the adverse effect of any minimum funding requirements.
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 alternative 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 alternative performance measures used within the consolidated financial statements
and the location of the reconciliations to equivalent IFRS measures are:
• adjusted operating profit and adjusted profit before income tax (as reconciled on the consolidated income statement on page 92);
• adjusted profit for the year (as reconciled on the consolidated income statement on page 92); and
• adjusted earnings per share and adjusted diluted earnings per share (as reconciled in Note 7).
These measures exclude the charge for customer relationships amortisation, acquisition related costs and any associated tax, where
relevant. 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. Customer relationships amortisation,
acquisition related costs and any associated tax are not items which are taken into account by management when assessing the results
of the business as they do not relate to the underlying operating performance and distort comparability between businesses and between
reporting periods. Accordingly, these items are removed in calculating the profitability measures by which management assess the
performance of the Group.
Other non-GAAP measures, including the Group’s key performance indicators which are set out and defined on pages 16 and 17, are used
to monitor the performance of the Group and a number of these are based on, or derived from, the non-GAAP measures noted above.
All non-GAAP measures have been calculated consistently with the methods applied in the consolidated financial statements for the year
ended 31 December 2015. Growth rates at constant exchange rates are calculated by retranslating the results for the year ended
31 December 2015 at the average rates for the year ended 31 December 2016 so that they can be compared without the distorting impact
of changes caused by foreign exchange translation.
102
Bunzl plc Annual Report 2016 2 Accounting policies continued
Critical accounting judgements, estimates and assumptions
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the choice and
application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from those derived from the application of such judgements, estimates and assumptions, in particular those which involve
anticipating future events. Accordingly, the judgements, estimates and assumptions are reviewed on an ongoing basis, with the impact
of any revisions considered necessary being recognised prospectively thereafter.
The key assumptions and sources of estimation uncertainty at the balance sheet date that have most risk of causing material adjustment to
the carrying values of assets and liabilities in the consolidated financial statements for the year ended 31 December 2016 are noted below
and explained more fully in the referenced Notes. The directors believe that the judgements, estimates and assumptions applied in the
preparation of these consolidated financial statements are appropriate. Where relevant and practicable, sensitivity analyses are disclosed
in the relevant Notes to demonstrate the impact of changes in estimates or assumptions used.
a Accounting for business combinations
Part of the Company’s strategy is to grow through acquisitions. Acquisitions are accounted for using the acquisition method as described
in the business combinations accounting policy, Note 2 a(ii), and the goodwill accounting policy, Note 2 k(i). This includes the determination
of fair values for assets and liabilities acquired, including the separate identification of intangible assets, which use assumptions and
estimates and are therefore subjective. The Group has developed a process to meet the requirements of IFRS 3, including the separate
identification of customer relationships intangible assets based on estimated future performance and customer attrition rates. External
valuation specialists are used where appropriate. The process applied is described in Note 24.
b Recoverability of goodwill and customer relationships intangible assets
As noted above, part of the Company’s strategy is to grow through acquisitions which has led to material goodwill and customer
relationships intangible assets being recognised on the balance sheet. Goodwill is tested annually to determine if there is any indication
of impairment. The allocation of goodwill to cash generating units (‘CGUs’) is a judgement made by management. Assumptions are then
used to determine the recoverable amount of each CGU, principally based on the present value of estimated future cash flows. Actual
performance may differ from management’s expectations. The judgements made and assumptions used in performing impairment
testing are described in Note 9. The useful economic lives of customer relationships intangible assets are also reviewed at least annually,
with any revisions to the original estimated useful economic lives accounted for prospectively.
c Defined benefit pension schemes
The measurement of the present value of defined benefit pension scheme liabilities involves the use of various actuarial assumptions,
the selection of which is judgemental. The Group uses independent actuarial experts to assist with the estimation of the discount rates,
inflation rates and longevity assumptions used for the measurement of defined benefit pension scheme liabilities but the actual liabilities
could be materially different. The main risks to which the Group is exposed in relation to the valuation of the defined benefit pension
schemes are described in Note 20. The judgement made in relation to the application of IFRS IC Interpretation 14 ('IFRIC 14') ‘The Limit
on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’, is also described in Note 20.
d Taxation
The Group operates in many countries and is therefore subject to tax laws in a number of different tax jurisdictions. The amount of tax
payable or receivable on profits or losses for any period is subject to the agreement of the tax authority in each respective jurisdiction
and the tax liability or asset position is open to review for several years after the relevant accounting period ends. In determining the
provisions for income taxes, management is required to make judgements and estimates based on interpretations of tax statute and
case law, which it does after taking account of professional advice and prior experience.
Uncertainties in respect of enquiries and additional tax assessments raised by tax authorities are measured using management’s
single best estimate of the likely outcome, which includes interest and penalties where relevant. The amounts ultimately payable or
receivable may differ from the amounts of any provisions recognised in the consolidated financial statements as a result of the estimates
and assumptions used. While the majority of the tax payable balance relates to uncertain tax provisions, management does not consider
there to exist a significant risk of material adjustment within the next financial year because the tax provisions cover a range of matters
across multiple tax jurisdictions with a variety of timescales before such matters are expected to be concluded.
103
Bunzl plc Annual Report 2016 Financial statements
Notes continued
3 Segment analysis
Year ended 31 December 2016
Revenue
Adjusted operating profit/(loss)
Customer relationships amortisation
Acquisition related costs
Operating profit/(loss)
Finance income
Finance expense
Profit before income tax
Adjusted profit before income tax
Income tax
Profit for the year
Purchase of property, plant and equipment
and software
Depreciation and software amortisation
Year ended 31 December 2015
Revenue
Adjusted operating profit/(loss)
Customer relationships amortisation
Acquisition related costs
Operating profit/(loss)
Finance income
Finance expense
Profit before income tax
Adjusted profit before income tax
Income tax
Profit for the year
North
America
£m
4,362.1
289.6
(23.1)
(11.7)
254.8
Continental
Europe
£m
1,355.1
126.6
(34.9)
(12.5)
79.2
UK &
Ireland
£m
1,087.8
83.7
(8.3)
(1.8)
73.6
Rest of the
World
£m
624.1
46.6
(15.0)
(8.0)
23.6
Corporate
£m
(21.5)
–
–
(21.5)
Total
£m
7,429.1
525.0
(81.3)
(34.0)
409.7
7.1
(53.9)
362.9
478.2
(97.0)
265.9
7.4
9.8
8.0
9.4
North
America*
Continental
Europe*
£m
3,784.2
249.0
(18.9)
(9.5)
220.6
£m
1,088.6
99.5
(27.3)
(5.3)
66.9
5.4
4.5
UK &
Ireland
£m
1,102.4
84.9
(8.0)
(0.8)
76.1
3.8
3.4
0.8
0.3
25.4
27.4
Rest of the
World
£m
514.5
42.1
(12.6)
(6.1)
23.4
Corporate
£m
(20.5)
–
–
(20.5)
Total
£m
6,489.7
455.0
(66.8)
(21.7)
366.5
4.8
(48.6)
322.7
411.2
(90.0)
232.7
Purchase of property, plant and equipment
and software
Depreciation and software amortisation
9.1
8.7
6.6
8.1
4.3
4.3
4.1
2.9
0.7
0.1
24.8
24.1
* The segment analysis for the year ended 31 December 2015 previously included, within Continental Europe, the results of a business
based in Europe that also had operations in the US. That part of the business is now managed and reported as part of the North America
operating segment. Accordingly, the Group has restated the operating segment information for the year ended 31 December 2015 to
include the business within the North America segment. For the year ended 31 December 2015 additional revenue of £32.4m and adjusted
operating profit of £5.0m are now being reported in North America with a corresponding reduction in revenue and adjusted operating
profit in Continental Europe. Customer relationships amortisation, purchase of property plant and equipment and software and
depreciation and software amortisation have also been restated.
Acquisition related costs for the year ended 31 December 2016 comprise transaction costs and expenses of £6.8m (2015: £7.9m), deferred
consideration payments of £29.6m (2015: £24.3m) relating to the retention of former owners of businesses acquired and a credit of £2.4m
(2015: £10.5m credit) from adjustments to previously estimated earn outs.
The Group results are reported as four business areas based on geographic regions, which are reviewed regularly by the Company’s
chief operating decision maker, the Board of Directors. The principal results reviewed for each business area are revenue and adjusted
operating profit.
Reportable segments are determined based on quantitative thresholds in accordance with IFRS 8 ‘Operating Segments’. The three business
areas of North America, Continental Europe and UK & Ireland are operating segments that meet the quantitative thresholds for reportable
segments and are therefore disclosed separately above. The Rest of the World business area contains Latin America and Australasia
which individually do not meet the quantitative thresholds for separate disclosure as reportable segments. Rest of the World is therefore
an ‘other’ segment that is disclosed above as a reportable segment as this information is considered to be useful to users of the financial
statements and it also helps to reconcile the results of the reportable segments to the Group’s consolidated and business area results.
104
Bunzl plc Annual Report 2016 3 Segment analysis continued
Information related to each reportable segment is set out above. 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, safety, retail and healthcare market sectors but results are not monitored on this basis.
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.
There are no customers who account for more than 10% of Group revenue. Customer dependencies are regularly monitored.
Revenue generated in the parent company’s country of domicile, the UK, for the year ended 31 December 2016 was £1,003.7m
(2015: £1,031.4m).
As noted above, the businesses within each operating segment operate in a number of different countries and sell products across a
range of market sectors. The table below provides a breakdown of revenue by market sector. The other category covers a wide range of
market sectors, none of which is sufficiently material to warrant separate disclosure.
Revenue by market sector
Foodservice
Grocery
Cleaning & hygiene
Safety
Retail
Healthcare
Other
2016
£m
2,221.9
1,906.9
923.2
831.7
756.7
531.8
256.9
7,429.1
2015†
£m
1,894.1
1,727.7
799.3
710.5
694.5
449.4
214.2
6,489.7
† The revenue by market sector for the year ended 31 December 2015 has been restated to reflect the definitions as set out in the Strategic
report on pages 2 and 3, which have been refined compared to the prior year.
The table below reconciles segment assets and liabilities to the Group’s total assets and total liabilities. Unallocated assets and liabilities
include corporate assets and liabilities, tax assets and liabilities, cash at bank and in hand, interest bearing loans and borrowings,
derivative assets and liabilities and defined benefit pension assets and liabilities. Non-current assets (other than defined benefit pension
assets, derivative financial assets and deferred tax assets) in the parent company’s country of domicile, the UK, at 31 December 2016 were
£352.7m (2015: £313.3m).
At 31 December 2016
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
At 31 December 2015
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
North
America
£m
1,736.9
Continental
Europe
£m
1,143.3
UK &
Ireland
£m
721.8
Rest of
the World
£m
579.8
Unallocated
£m
1,736.9
1,143.3
721.8
579.8
578.0
322.5
308.3
578.0
322.5
308.3
North
America*
Continental
Europe*
£m
1,419.9
1,419.9
478.6
478.6
£m
939.3
939.3
260.1
260.1
UK &
Ireland
£m
653.7
653.7
288.5
288.5
117.4
117.4
Rest of
the World
£m
479.4
479.4
93.3
93.3
325.3
325.3
1,868.4
1,868.4
Unallocated
£m
329.7
329.7
1,685.2
1,685.2
Total
£m
4,181.8
325.3
4,507.1
1,326.2
1,868.4
3,194.6
Total
£m
3,492.3
329.7
3,822.0
1,120.5
1,685.2
2,805.7
* As explained above, the Group has restated the operating segment information for the year ended 31 December 2015 to include an
additional business within the North America segment which was previously included within the Continental Europe business segment.
As a result, for the year ended 31 December 2015 additional segment assets of £33.0m and segment liabilities of £3.0m are now being
reported in North America with a corresponding reduction in segment assets and segment liabilities in Continental Europe.
105
Bunzl plc Annual Report 2016 Financial statements
Notes continued
4 Analysis of operating income and expenses
Cost of goods sold
Employee costs (Note 21)
Depreciation of property, plant and equipment (Note 8)
Amortisation of intangible assets (Note 9)
Acquisition related costs
Loss/(gain) on disposal of property, plant and equipment
Rentals payable under operating leases and subleases
Lease and sublease income
Other operating expenses
Net operating expenses
2016
£m
5,620.1
713.2
21.7
87.0
34.0
0.2
115.0
(0.4)
428.6
7,019.4
* Revised to reflect a reclassification of software assets from property, plant and equipment to intangible assets (see Note 1(i)).
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
other tax advisory services
all other services
Total auditors’ remuneration
UK
£m
0.3
0.4
0.1
–
0.1
0.9
Overseas
£m
–
1.7
–
0.2
–
1.9
2016
Total
£m
0.3
2.1
0.1
0.2
0.1
2.8
UK
£m
0.3
0.4
0.1
–
0.1
0.9
Overseas
£m
–
1.5
–
0.2
–
1.7
2015*
£m
4,927.2
613.0
21.0
69.9
21.7
(1.6)
97.2
(0.5)
375.3
6,123.2
2015
Total
£m
0.3
1.9
0.1
0.2
0.1
2.6
Audit related assurance services comprise the review of the half yearly financial report for the six months ended 30 June. Other tax
advisory services and all other services comprise other non-audit work which was permissible in accordance with the Company’s policy
and the prevailing regulations concerning the provision of non-audit services by the Company’s external auditor. It is the Company’s policy
to assess the non-audit services to be performed by the Company’s auditors on a case-by-case basis to ensure adherence to the prevailing
ethical standards and regulations. In the main other firms are used by the Company to provide non-audit services. However, if the provision
of a service by the Company’s auditors is not prohibited and adequate safeguards are in place, it is sometimes appropriate for this
additional work to be carried out by the Company’s auditors.
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 56 to 59.
5 Finance income/(expense)
Interest on cash and cash equivalents
Interest income from foreign exchange contracts
Net interest income on defined benefit pension schemes in surplus
Other finance income
Finance income
Interest on loans and overdrafts
Interest expense from foreign exchange contracts
Net interest expense on defined benefit pension schemes in deficit
Fair value gain/(loss) on US private placement notes in a hedge relationship
Fair value (loss)/gain on interest rate swaps in a hedge relationship
Foreign exchange gain on intercompany funding
Foreign exchange loss on external debt not in a hedge relationship
Other finance expense
Finance expense
Net finance expense
2016
£m
3.0
3.0
0.4
0.7
7.1
(49.7)
(1.1)
(1.9)
2.9
(3.1)
117.8
(118.3)
(0.5)
(53.9)
46.8
2015
£m
1.9
1.9
–
1.0
4.8
(43.3)
(1.7)
(2.4)
(2.9)
2.9
2.0
(3.0)
(0.2)
(48.6)
43.8
The foreign exchange gain or loss on intercompany funding arises as a result of the retranslation of foreign currency intercompany loans.
The gain or loss on intercompany funding is substantially matched by the foreign exchange loss or gain on external debt not in a hedge
relationship which minimises the foreign currency exposure in the income statement.
106
Bunzl plc Annual Report 2016 6 Income tax
Current tax on profit
current year
adjustments in respect of prior years
Deferred tax on profit
current year
adjustments in respect of prior years
Income tax on profit
2016
£m
124.0
(9.4)
114.6
(17.8)
0.2
(17.6)
97.0
2015
£m
116.2
(7.5)
108.7
(18.1)
(0.6)
(18.7)
90.0
In assessing the underlying performance of the Group, management uses adjusted profit which excludes customer relationships
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 (also referred to as the underlying tax rate) which is shown in the table below. The Group’s expectations for the tax rate
on adjusted profit in 2017 is included in the Financial Review on pages 32 and 33.
Income tax on profit
Tax associated with customer relationships amortisation and acquisition related costs
Tax on adjusted profit
Profit before income tax
Customer relationships 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 defined benefit pension schemes
Foreign currency translation differences on foreign operations
Loss taken to equity as a result of effective net
investment hedges
Gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve to income statement
Other comprehensive income/(expense)
Dividends
Issue of share capital
Employee trust shares
Share based payments
Other comprehensive income/(expense) and equity
Gross
2016
£m
(42.4)
267.0
(59.7)
2.6
(1.5)
166.0
(125.4)
3.8
(37.5)
10.2
17.1
Tax credit/
(charge)
2016
£m
8.3
–
(0.5)
(0.5)
0.3
7.6
–
–
–
5.6
13.2
Net
2016
£m
(34.1)
267.0
(60.2)
2.1
(1.2)
173.6
(125.4)
3.8
(37.5)
15.8
30.3
Gross
2015
£m
27.0
(77.8)
(13.5)
9.6
(10.6)
(65.3)
(116.1)
3.7
(30.2)
9.1
(198.8)
2016
£m
97.0
31.6
128.6
362.9
115.3
478.2
26.7%
26.9%
Tax credit/
(charge)
2015
£m
(6.7)
–
(0.6)
(1.9)
2.1
(7.1)
–
–
–
5.6
(1.5)
2015
£m
90.0
23.1
113.1
322.7
88.5
411.2
27.9%
27.5%
Net
2015
£m
20.3
(77.8)
(14.1)
7.7
(8.5)
(72.4)
(116.1)
3.7
(30.2)
14.7
(200.3)
107
Bunzl plc Annual Report 2016 Financial statements
Notes continued
6 Income tax continued
Factors affecting the tax charge for the year
The Group operates in many countries and is subject to different rates of income tax in those countries. The expected tax rate is calculated
as a weighted average of the tax rates in the tax jurisdictions in which the Group operates, most of which are higher than the UK statutory
rate of 20.0% (2015: 20.25%). 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 (2016: 30.9%; 2015: 31.1%)
Effects of:
non-deductible expenditure
impact of intercompany finance
recognition of previously unrecognised tax assets
prior year adjustments
other
Income tax on profit
Deferred tax in the income statement
Accelerated capital allowances
Defined benefit pension schemes
Goodwill and customer relationships
Share based payments
Provisions
Other
Deferred tax on profit
7 Earnings per share
Profit for the year
Adjusted for:
customer relationships amortisation
acquisition related costs
tax credit on adjusting items
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
108
2016
£m
362.9
112.0
10.9
(12.7)
(3.8)
(9.1)
(0.3)
97.0
2016
£m
0.2
(0.5)
(19.3)
–
0.9
1.1
(17.6)
2016
£m
265.9
81.3
34.0
(31.6)
349.6
2016
329.4
4.3
333.7
80.7p
25.4p
106.1p
79.7p
25.1p
104.8p
2015
£m
322.7
100.4
9.0
(10.8)
(0.2)
(8.1)
(0.3)
90.0
2015
£m
0.1
(0.8)
(15.5)
(0.2)
(0.9)
(1.4)
(18.7)
2015
£m
232.7
66.8
21.7
(23.1)
298.1
2015
327.6
4.1
331.7
71.0p
20.0p
91.0p
70.2p
19.7p
89.9p
Bunzl plc Annual Report 2016
8 Property, plant and equipment
2016
Cost
Beginning of year
Acquisitions†
Additions
Disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Net book value at 31 December 2016
2015
Cost
Beginning of year
Acquisitions
Additions
Disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Net book value at 31 December 2015
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
132.7
0.9
9.5
(13.5)
16.0
145.6
87.1
10.8
(13.0)
8.1
93.0
83.4
0.9
7.4
(5.5)
11.0
97.2
65.7
7.5
(5.3)
6.2
74.1
80.7
(2.4)
1.2
(0.4)
13.2
92.3
31.4
3.4
(0.3)
10.2
44.7
47.6
Total
£m
296.8
(0.6)
18.1
(19.4)
40.2
335.1
184.2
21.7
(18.6)
24.5
211.8
52.6
23.1
123.3
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment*
£m
78.8
2.2
0.9
(1.1)
(0.1)
80.7
29.4
2.1
(0.3)
0.2
31.4
49.3
121.6
3.2
11.9
(5.6)
1.6
132.7
78.8
12.0
(4.9)
1.2
87.1
45.6
79.2
2.6
6.5
(3.1)
(1.8)
83.4
63.7
6.9
(3.9)
(1.0)
65.7
17.7
Total*
£m
279.6
8.0
19.3
(9.8)
(0.3)
296.8
171.9
21.0
(9.1)
0.4
184.2
112.6
Commitments for capital expenditure not provided for at 31 December 2016 were £1.0m (2015: £0.5m).
† The acquired cost of land and buildings in 2016 includes a negative adjustment of £2.4m during the measurement period related to fair
value adjustments on leasehold improvements on businesses acquired in 2015.
* Revised to reflect a reclassification of software assets from property, plant and equipment to intangible assets (see Note 1(i) for an
explanation and Note 9 for the reclassified amounts).
109
Bunzl plc Annual Report 2016 Financial statements
Notes continued
9 Intangible assets
2016
Cost
Beginning of year
Acquisitions
Additions
Disposals
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Goodwill
£m
Customer
relationships
£m
Software*
£m
Total*
£m
999.3
51.0
–
141.2
1,191.5
1,069.2
80.2
–
157.0
1,306.4
436.5
81.3
–
50.9
568.7
48.1
0.1
7.3
(5.4)
7.2
57.3
34.0
5.7
(5.4)
4.6
38.9
2,116.6
131.3
7.3
(5.4)
305.4
2,555.2
470.5
87.0
(5.4)
55.5
607.6
Net book value at 31 December 2016
1,191.5
737.7
18.4
1,947.6
2015
Cost
Beginning of year
Acquisitions
Additions
Disposals
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Goodwill
£m
Customer
relationships
£m
Software*
£m
Total*
£m
922.3
109.0
–
(32.0)
999.3
938.9
172.2
–
(41.9)
1,069.2
382.4
66.8
–
(12.7)
436.5
43.0
0.7
5.5
(0.3)
(0.8)
48.1
31.5
3.1
(0.2)
(0.4)
34.0
1,904.2
281.9
5.5
(0.3)
(74.7)
2,116.6
413.9
69.9
(0.2)
(13.1)
470.5
Net book value at 31 December 2015
999.3
632.7
14.1
1,646.1
Both goodwill and customer relationships have been acquired as part of business combinations. Further details of acquisitions made in the
year are set out in Note 24 together with details of acquisitions committed to be acquired in 2016 which were completed in 2017.
* As explained in Note 1(i), the Group has changed the presentation of software assets to show them as a separate component of intangible
assets, increasing intangible assets and reducing property, plant and equipment by £14.1m at 31 December 2015 and by £11.5m at
31 December 2014.
110
Bunzl plc Annual Report 2016 9 Intangible assets continued
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 of disposal. 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 consisting of detailed cash flow forecasts for the first two years and CGU specific growth assumptions for years three, four
and five. For periods after this five year period, the methodology applies a long term growth rate specific to the CGU 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 profit margins and the discount rates 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 discount rates used are determined
with assistance provided by external valuation specialists.
The Group has acquired approximately 100 businesses and entered into six new countries since the beginning of 2010 which is when the
composition of the Group’s CGUs was last updated. To reflect more appropriately the way that the Group is now structured, including
recent changes to management oversight and responsibility, the allocation of goodwill to CGUs for impairment testing purposes was
updated for the 2016 impairment testing exercise. Impairment testing was also performed in 2016 based on the existing CGUs to ensure
that no potential impairments were avoided as a result of the change to the composition of the CGUs. Based on impairment testing using
both the existing and updated CGUs, no impairments were identified to the carrying value of goodwill within the Group.
At 31 December 2016 North America, Rest of Continental Europe and France carried a significant amount of goodwill in comparison with
the total value of the Group’s goodwill. At 31 December 2016 the carrying value of goodwill in respect of North America was £365.7m
(2015: £300.7m), Rest of Continental Europe was £156.9m (2015: £117.5m) and France was £133.9m (2015: £118.6m). At 31 December 2016
the aggregate amount of goodwill attributable to the Group’s CGUs, excluding North America, Rest of Continental Europe and France, was
£535.0m (2015: £462.5m), none of which is individually significant. The comparatives in this paragraph have been restated to reflect the
updated CGUs.
For North America, Rest of Continental Europe and France, the weighted average long term growth rate used in 2016 was 2.5%–3.5%
(2015: 2.5%–3.5%) reflecting anticipated revenue and profit growth. A pre-tax discount rate in the range of 7% – 8% (2015: 8%) has been
applied to the value in use calculations 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 CGUs with long term growth rates ranging from 2.5%–7.0%
(2015: 2.5%–6.9%) and discount rates ranging from 7%–15% (2015: 8%–19%).
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.
111
Bunzl plc Annual Report 2016 Financial statements
Notes continued
10 Inventories
Goods for resale
2016
£m
960.9
2015
£m
794.2
£5.8m was written off from inventories during the year (2015: £5.2m) due to obsolescence or damage. The provision for slow moving,
obsolete or defective inventories at 31 December 2016 was £68.3m (2015: £61.4m).
2016
£m
938.0
64.1
155.4
1,157.5
Gross
2015
£m
606.8
114.8
33.2
16.3
771.1
2016
£m
19.0
2.4
1.8
(5.1)
2.7
20.8
2016
£m
911.8
23.4
157.5
205.1
1,297.8
2015
£m
752.1
61.7
133.7
947.5
Provision
2015
£m
0.9
0.3
1.5
16.3
19.0
2015
£m
18.4
2.1
1.9
(2.5)
(0.9)
19.0
2015
£m
735.4
21.8
161.2
178.0
1,096.4
11 Trade and other receivables
Trade receivables
Prepayments
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
2016
£m
771.7
134.6
36.0
16.5
958.8
Provision
2016
£m
2.2
1.1
1.0
16.5
20.8
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
12 Trade and other payables – current
Trade payables
Other tax and social security contributions
Other payables
Accruals and deferred income
112
Bunzl plc Annual Report 2016 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 defined on page 16 and 17 respectively) as well as the level of total shareholders’ equity and the amount of dividends paid to ordinary
shareholders. For the year ended 31 December 2016, the return on average operating capital employed was 55.9% (2015: 55.5%), the return
on invested capital was 16.7% (2015: 17.1%), the level of total shareholders’ equity at 31 December 2016 was £1,312.5m (2015: £1,016.3m)
and the amount of dividends paid in the year ended 31 December 2016 was £125.4m (2015: £116.1m).
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 2p.
The Group tests the effectiveness of hedges on a prospective and retrospective basis to ensure compliance with IAS 39.
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 and formally tested at 30 June and 31 December. The principal covenant limits are net debt,
calculated at average exchange rates, to operating profit before depreciation, 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 2016 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 comprising multi-currency credit facilities from the Group’s banks and US private
placement notes denominated in US dollars, sterling and euros. An issue of fixed interest US private placements of €133m and £97m,
agreed in 2015, was drawn down in March 2016. At 31 December 2016 the nominal total of US private placement notes outstanding was
£1,251.1m (2015: £1,001.9m) with maturities ranging from 2017 to 2028. During the year the Group also refinanced or agreed new banking
facilities totalling £107.7m. The Group’s committed bank facilities mature between 2017 and 2022. At 31 December 2016 the available
committed bank facilities totalled £954.2m (2015: £969.0m) of which £101.3m (2015: £154.9m) was drawn down.
113
Bunzl plc Annual Report 2016 Financial statements
Notes continued
13 Risk management and financial instruments continued
The committed facilities maturity profile at 31 December 2016 is set out in the chart below.
Committed facilities maturity profile by year
£m
140
101
40
18
103
82
17
179
69
19
128
89
20
238
83
21
65
118
156
133
173
127
141
22
23
24
25
26
27
40
28
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
Bank facilities – undrawn
Bank facilities – drawn
US dollar, sterling and euro
US private placement notes
2016
£m
102.7
139.9
610.3
852.9
2015
£m
60.0
191.0
563.1
814.1
In addition the Group maintains overdraft and uncommitted facilities to provide short term flexibility. At 31 December 2016 there were no
loans secured by fixed charges on property (2015: none).
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 2016 fixed rate debt of £867.5m (2015: £679.4m), being fixed rate US private placement notes
denominated in US dollars, sterling and euros, was stated at amortised cost with maturities ranging from 2017 to 2025.
At 31 December 2016 floating rate debt was comprised of £101.3m (2015: £160.0m) floating rate bank loans and £396.8m (2015: £339.5m) of
fixed rate US private placement notes with maturities ranging from 2025 to 2028 which have been swapped to floating rates using interest
rate swaps. 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 or six months.
The interest rate risk on the floating rate debt is managed using interest rate options. Borrowings with a notional principal of £101.3m were
capped at 31 December 2016 (capped at 31 December 2015: £154.9m). 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 affected 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:
Impact on profit before tax
–1%
£m
(0.1)
–
+1%
£m
0.7
0.4
Impact on equity
–1%
£m
(0.1)
–
+1%
£m
0.7
0.4
2016
2015
114
Bunzl plc Annual Report 2016 13 Risk management and financial instruments continued
Contractual maturity profile
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:
2016
Financial assets:
Cash at bank and in hand
Loans and receivables
Trade receivables and other receivables
Derivative financial instruments
Interest rate swaps
Interest rate caps
Foreign exchange contracts for
net investment hedging
Foreign exchange contracts for
intercompany hedging
Foreign exchange contracts for
cash flow hedging
Financial liabilities:
Financial liabilities at amortised cost
Bank loans
US private placement notes
Bank overdrafts
Finance lease creditors
Trade and other payables
Non-current payables
Financial liabilities at fair value
US private placement notes
Derivative financial instruments
Interest rate swaps
Foreign exchange contracts for net
investment hedging
Foreign exchange contracts for
intercompany hedging
Foreign exchange contracts for
cash flow hedging
Fair value
£m
Carrying
amount
£m
Total
contractual
cash flows
£m
Within one
year
£m
282.4
282.4
282.4
282.4
1,093.4
1,093.4
1,093.4
1,093.4
14.7
0.1
7.6
1.6
14.7
0.1
7.6
1.6
41.3
–
7.4
1.6
5.1
–
7.4
1.6
3.4
1,403.2
3.4
1,403.2
3.4
1,429.5
3.3
1,393.2
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
–
–
4.7
–
–
–
0.1
4.8
–
–
13.0
–
–
–
–
13.0
–
–
18.5
–
–
–
–
18.5
(104.9)
(906.2)
(155.7)
(0.4)
(1,297.8)
(30.5)
(104.9)
(867.5)
(155.7)
(0.4)
(1,297.8)
(30.5)
(106.2)
(1,020.5)
(155.7)
(0.4)
(1,297.8)
(30.5)
(4.4)
(114.7)
(155.7)
(0.2)
(1,297.8)
–
(101.8)
(68.4)
–
(0.1)
–
(30.5)
–
(301.6)
–
(0.1)
–
–
–
(535.8)
–
–
–
–
(398.5)
(396.8)
(543.3)
(15.6)
(15.6)
(46.8)
(465.3)
(1.7)
(3.3)
(4.4)
(1.7)
(3.3)
(4.4)
23.7
(3.3)
(4.4)
2.1
(3.3)
(4.4)
2.1
–
–
6.3
13.2
–
–
–
–
(0.4)
(2,903.8)
(0.4)
(2,863.4)
(0.4)
(3,138.8)
(0.4)
(1,594.4)
–
(214.3)
–
(342.2)
–
(987.9)
115
Bunzl plc Annual Report 2016 Financial statements
Notes continued
13 Risk management and financial instruments continued
2015
Financial assets:
Cash at bank and in hand
Loans and receivables
Trade receivables and other receivables
Derivative financial instruments
Interest rate swaps
Foreign exchange contracts for
net investment hedging
Foreign exchange contracts for
intercompany hedging
Foreign exchange contracts for
cash flow hedging
Financial liabilities:
Financial liabilities at amortised cost
Bank loans
US private placement notes
Bank overdrafts
Finance lease creditors
Trade and other payables
Non-current payables
Financial liabilities at fair value
US private placement notes
Derivative financial instruments
Foreign exchange contracts for net
investment hedging
Foreign exchange contracts for
intercompany hedging
Foreign exchange contracts for
cash flow hedging
Fair value*
£m
Carrying*
amount
£m
Total
contractual
cash flows
£m
Within one
year
£m
281.8
885.8
17.1
9.1
5.1
281.8
885.8
17.1
9.1
5.1
281.8
885.8
77.5
9.1
5.1
281.8
885.8
8.3
9.1
5.1
2.4
1,201.3
2.4
1,201.3
2.4
1,261.7
2.4
1,192.5
(160.5)
(701.5)
(231.1)
(0.7)
(1,096.4)
(20.8)
(160.0 )
(679.4)
(231.1)
(0.7)
(1,096.4)
(20.8)
(166.0)
(800.9)
(231.1)
(0.7)
(1,096.4)
(20.8)
(6.7)
(144.0)
(231.1)
(0.3)
(1,096.4)
–
(333.8)
(339.5)
(471.6)
(13.2)
(5.6)
(4.0)
(5.6)
(4.0)
(5.6)
(4.0)
(5.6)
(4.0)
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
–
–
7.5
–
–
–
7.5
(2.0)
(95.6)
–
(0.2)
–
(20.8)
(13.2)
–
–
–
–
–
–
20.8
40.9
–
–
–
20.8
(157.3)
(218.7)
–
(0.2)
–
–
–
–
–
40.9
–
(342.6)
–
–
–
–
(39.5)
(405.7)
–
–
–
–
(0.4)
(2,554.8)
(0.4)
(2,537.9)
(0.4)
(2,797.5)
(0.4)
(1,501.7)
–
(131.8)
–
(415.7)
–
(748.3)
All financial assets and liabilities stated as being measured at fair value in the tables above (including all derivative financial instruments)
have carrying amounts where the fair value 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 financial assets and liabilities stated at fair value have been determined by discounting expected future cash flows, translated
at the appropriate balance sheet date exchange rates and adjusted for counterparty or own credit risk as applicable.
For financial assets and financial liabilities not measured at fair value, including trade receivables, other receivables, trade and other
payables and non-current payables, their carrying amount is a reasonable approximation of fair value due to their short term nature.
However, within other payables there is £7.1m (2015: £3.8m) related to earn outs on businesses acquired which are recorded at fair value.
This is a level three fair value which is initially measured based on the expected future profitability of the businesses acquired at the
acquisition date and subsequently reassessed at each reporting date based on the most recent data available on the expected profitability
of the businesses acquired.
* Cash at bank and in hand and bank overdrafts have been revised to reflect a change in presentation (see Note 1(i)). Other receivables
have been added to the table as they represent a financial asset previously excluded from this analysis as they were previously combined
with prepayments in Note 11.
116
Bunzl plc Annual Report 2016 13 Risk management and financial instruments continued
Offsetting of financial assets and liabilities
The following table sets out the Group’s derivative 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. Note 1(i) and Note 23 include further information relating to a revision to the presentation of cash at bank and in hand and bank
overdrafts which are no longer presented on a net basis in the Consolidated balance sheet.
2016
Derivative assets
Derivative liabilities
2015
Derivative assets
Derivative liabilities
Gross amounts of
recognised financial
assets and liabilities
£m
28.6
(11.0)
Amounts offset in
the balance sheet
£m
(1.2)
1.2
Net amounts
recognised in the
balance sheet
£m
27.4
(9.8)
Amounts not
offset in the
balance sheet
£m
–
–
Net amounts
£m
27.4
(9.8)
36.3
(12.6)
(2.6)
2.6
33.7
(10.0)
–
–
33.7
(10.0)
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
2016
1.36
1.22
2015
1.53
1.38
2016
1.24
1.17
2015
1.47
1.36
For the year ended 31 December 2016, a movement of one cent in the US dollar and euro average exchange rates would have changed
profit before income tax by £1.4m and £0.4m respectively (2015: £1.1m and £0.3m) and adjusted profit before income tax by £1.5m and
£0.7m respectively (2015: £1.2m and £0.5m).
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 2016, all foreign exchange cash flow
hedges were effective with a gain of £3.0m recognised in equity (2015: gain of £2.0m) which will affect the income statement during 2017.
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 and foreign currency debt. This currency composition minimises the impact of movements in foreign exchange rates on the ratio
of net debt to EBITDA.
The currency profile of the Group’s net debt at 31 December is set out in the table below:
US dollar
Sterling
Euro
Other
2016
£m
538.4
414.4
221.6
54.2
1,228.6
2015
£m
563.5
302.3
190.9
50.5
1,107.2
117
Bunzl plc Annual Report 2016
Financial statements
Notes continued
13 Risk management and financial instruments continued
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 at the year end 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.
2016
2015
Impact on profit before tax
–10%
£m
(0.9)
(0.9)
+10%
£m
0.8
0.7
Impact on equity
–10%
£m
142.1
106.4
+10%
£m
(116.3)
(87.1)
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 at bank and in hand, 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
at bank and in hand (see Note 23), derivative financial instruments (see page 115) and trade receivables and other receivables (see Note 11)
is their respective carrying amounts.
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. 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.
14 Provisions
Current
Non-current
Beginning of year
Charge
Acquisitions
Utilised or released
Currency translation
End of year
Properties
2016
£m
16.9
0.5
1.8
(1.2)
0.5
18.5
Claims
2016
£m
17.9
1.2
2.0
(4.3)
4.0
20.8
Total
2016
£m
34.8
1.7
3.8
(5.5)
4.5
39.3
Properties
2015
£m
14.2
2.2
2.4
(1.9)
–
16.9
2016
£m
8.3
31.0
39.3
Claims
2015
£m
17.4
0.5
7.0
(4.7)
(2.3)
17.9
2015
£m
9.5
25.3
34.8
Total
2015
£m
31.6
2.7
9.4
(6.6)
(2.3)
34.8
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, which typically extend from
one to 10 years, up to the earliest possible termination date.
The Group has provisions for expected legal, environmental and other claims based on management’s best estimate of the liability at the
balance sheet date. 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 actual outcome of any such proceedings, either individually or in the aggregate, will be materially
different to the amounts provided.
118
Bunzl plc Annual Report 2016 15 Deferred tax
Accelerated capital allowances
Defined benefit pension schemes
Goodwill and customer relationships
Share based payments
Provisions
Inventories
Other
Deferred tax asset/(liability)
Set-off of tax
Net deferred tax asset/(liability)
Asset
£m
1.1
25.3
0.4
12.5
9.6
5.4
12.8
67.1
(64.8)
2.3
Liability
£m
(11.3)
–
(164.8)
–
(0.1)
(7.9)
(5.6)
(189.7)
64.8
(124.9)
2016
Net
£m
(10.2)
25.3
(164.4)
12.5
9.5
(2.5)
7.2
(122.6)
–
(122.6)
Asset
£m
1.5
16.7
–
13.9
11.6
10.5
9.6
63.8
(63.8)
–
Liability
£m
(12.2)
(1.0)
(141.1)
–
(1.3)
(16.7)
(4.3)
(176.6)
63.8
(112.8)
2015
Net
£m
(10.7)
15.7
(141.1)
13.9
10.3
(6.2)
5.3
(112.8)
–
(112.8)
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
£3.5m (2015: £3.3m) 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 £13.1m (2015: £9.1m).
No deferred tax has been recognised in respect of unutilised capital losses of £96.2m (2015: £96.2m) as it is not considered probable that
there will be suitable future taxable profits against which they can be utilised.
The movement in 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
2016
£m
112.8
14.6
(17.6)
(6.8)
1.7
17.9
122.6
2015
£m
112.1
9.5
(18.7)
9.0
5.1
(4.2)
112.8
119
Bunzl plc Annual Report 2016 Financial statements
Notes continued
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
Issued – option exercises
End of year
2016
£m
107.9
2015
£m
107.7
2016
335,190,830
416,261
335,607,091
2015
334,706,876
483,954
335,190,830
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. Further details of the share plans as they relate to the directors of the Company are set out in the Directors’
remuneration report.
Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan
The Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan operate on a similar basis with options granted to
participating employees who have completed at least three months of continuous service at a discount of up to 20% of the market price
prevailing shortly before the invitation to apply for the option. Depending on the scheme, options are normally exercisable either three or
five years after they have been granted with employees saving up to £500 (2015: £500) per month (or the equivalent value in other
currencies for the International Sharesave Plan) or €500 (2015: €500) per month for the Irish Sharesave Plan.
The Sharesave Scheme (2011), which replaced the Sharesave Scheme (2001), was 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. All options outstanding under the Sharesave Scheme (2001) were exercised during 2016. The International Sharesave
Plan and Irish Sharesave Plan, which is approved by the Irish Revenue Commissioners, were introduced following the approval of the
Sharesave Scheme (2001) and were extended following the approval of the Sharesave Scheme (2011).
Long Term Incentive Plan 2004 (‘2004 LTIP’) and 2014 (‘2014 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 2014 LTIP was approved by shareholders at the
2014 Annual General Meeting and replaced the 2004 LTIP. Both the 2004 LTIP and the 2014 LTIP, the operation of which is overseen by the
Remuneration Committee of the Board, are divided into two parts.
Part A of the LTIPs relates to the grant of market priced executive share options. In normal circumstances options granted are only
exercisable if the relevant performance condition has been satisfied. The performance conditions are based on the Company’s adjusted
earnings per share growth exceeding UK RPI inflation over three financial years by a specified margin (for the 2004 LTIP) or meeting
certain specified targets (for the 2014 LTIP).
Part B of the 2004 and 2014 LTIPs relate to the grant of 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 will
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 (for the 2004 LTIP) or meeting certain specified targets (for the 2014 LTIP).
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 2004 LTIP, the 2014 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 expenses and administration charges are included in the income statement
on an accruals basis. At 31 December 2016 the trust held 6,280,158 (2015: 6,307,153) shares, upon which dividends have been waived,
with an aggregate nominal value of £2.0m (2015: £2.0m) and market value of £132.4m (2015: £118.9m).
120
Bunzl plc Annual Report 2016 16 Share capital and share based payments continued
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 (£)
2016
03.03.16–11.10.16
19.53–23.97
nil–23.36
2,878,326
3–5
16–19
3–10
3.0–6.4
0.2–1.1
1.6–2.0
1.79–9.38
2015
26.02.15–05.10.15
17.13–19.00
nil–19.20
3,523,358
3–5
16–19
3–10
3.0–6.1
0.6–1.5
1.9–2.1
1.76–6.02
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 £21.30
(2015: £18.64). The total charge for the year relating to share based payments was £10.2m (2015: £9.1m). After tax the total charge was
£7.3m (2015: £6.9m).
Details of share options and awards which have been granted and exercised, those which have lapsed during 2016 and those outstanding
and available to exercise at 31 December 2016, 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,
and the 2004 LTIP Part A and Part B and 2014 LTIP Part A and Part B are set out in the following table:
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
Options
outstanding
at 01.01.16
Grants/awards
2016
Exercises
2016
Lapses*
2016
Options
outstanding
at 31.12.16
Price (£)
–
15.56
15.56
15.56
Number
–
246,326
99,767
16,019
–
–
Number
28,425
754,539
282,725
32,694
6,361,544
761,733
Price (£)
Number
5.80
27,362
7.70-15.56
185,045
9.92-15.56
70,292
9.92
8,240
5.85-15.66
– 2,478,687
443,034
nil
–
50,609 16.38-16.87
4,562,317 2,169,597 19.45-23.36
–
nil
346,617
13,592,495 2,878,326
–
3,263,269
808,518
Price (£)
Number
Number
1,063
–
–
71,515
744,305
7.70-15.56
19,633
292,567 12.53-15.56
4,944
35,529 12.53-15.56
23,000
5.64-15.97
3,859,857
89,659
229,040
nil
6,540,976 16.38-23.36
140,329
nil
1,053,952
101,183
451,326 12,756,226
Options
available
to exercise
31.12.16
Number
–
12,265
–
–
3,631,857
33,165
135,702
–
3,812,989
* Share option lapses relate to those which have either been forfeited or have expired during the year.
For the options outstanding at 31 December 2016, the weighted average fair value and the weighted average remaining contractual lives
(being the time period from 31 December 2016 until the lapse date of each share option) are set out below:
Sharesave Scheme (2001) and (2011)
International Sharesave Plan
Irish Sharesave Plan
2004 LTIP and 2014 LTIP Part A
2004 LTIP and 2014 LTIP Part B
Weighted average
fair value of options
granted (£)
3.57
3.74
3.70
2.48
13.03
Weighted average
remaining contractual
life (years)
2.24
1.93
2.07
6.26
4.32
The outstanding share options and performance share awards are exercis able at various dates up to September 2026.
121
Bunzl plc Annual Report 2016
Financial statements
Notes continued
17 Dividends
2014 interim
2014 final
2015 interim
2015 final
Total
Total dividends per share for the year to which they relate are:
Interim
Final
Total
2016
£m
38.6
86.8
125.4
2015
£m
36.0
80.1
116.1
2016
13.00p
29.00p
42.00p
Per share
2015
11.75p
26.25p
38.00p
The 2016 interim dividend of 13.0p per share was paid on 3 January 2017 and comprised £42.8m of cash. The 2016 final dividend of 29.0p
per share will be paid on 3 July 2017 to shareholders on the register at the close of business on 26 May 2017. The 2016 final dividend will
comprise approximately £96m of cash.
18 Contingent liabilities
Bank guarantees
2016
£m
1.4
2015
£m
0.6
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
Frank van Zanten
Patrick Larmon
Brian May
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
2016
10,000
57,261
127,623
105,240
4,000
4,000
2,500
3,000
313,624
2015
10,000
124,546
105,240
4,000
4,000
2,500
3,000
253,286
Frank van Zanten was appointed as director of the Company on 1 February 2016. Details of the directors’ options and awards over ordinary
shares 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 2016 Patrick Larmon has acquired interests in 620 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 3 January 2017 and he has also acquired
an interest in 316 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 2016 and
27 February 2017.
122
Bunzl plc Annual Report 2016 20 Retirement benefits
The Group operates a number of defined benefit and defined contribution retirement benefit schemes in the US, the UK and elsewhere
in Europe (including France, the Netherlands and the Republic of Ireland). 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. Contributions to all schemes are determined in line with
actuarial advice and local conditions and practices. Scheme assets for the purpose of IAS 19 ‘Employee Benefits’ are stated at their
bid value.
Characteristics of defined benefit pension schemes
UK
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 valuation of the UK defined benefit pension scheme has been updated
to 31 December 2016 by the Group’s actuaries.
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.
The trustees, in agreement with the Company, have hedging in place to reduce the impact of inflation and interest rate movements on
the funding of the plan.
The last full triennial valuation on the UK defined benefit pension scheme was carried out by a qualified actuary as at 5 April 2015 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 2016 to 30 June 2022.
US
The principal US defined benefit pension 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 valuation of the US defined benefit pension scheme
has been updated to 31 December 2016 by the Group’s actuaries.
The US scheme is a qualified pension scheme and is subject to standard regulations under the Employee Retirement Income Security Act
1974, 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 assets of the scheme are held in trust by an independent custodian. 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.
Annual actuarial valuations are performed on the US defined benefit scheme. The last annual review was carried out by a qualified actuary
as at 1 January 2016 and showed that there was a required annual contribution of $5.2m. In 2017, the Group plans to contribute $8.0m for
the 2016 plan year to cover prudently this required contribution and anticipate future funding needs. In 2016, the Group also paid a
contribution of $8.0m for the 2015 plan year. The annual review as at 1 January 2017 is ongoing.
123
Bunzl plc Annual Report 2016 Financial statements
Notes continued
20 Retirement benefits continued
Risks
The main risks to which the Group is exposed in relation to the defined benefit pension 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 the interest rate and also the 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 mentioned above could lead to a material change to the deficit or surplus of the pension schemes. Given the long term time
horizon of the schemes’ cash flows, the assumptions used can lead to volatility in the scheme valuations from year to year. The Company
and the trustees seek to mitigate actively the risks associated with the schemes.
A higher defined 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 the income statement
Defined contribution pension schemes
Defined benefit pension schemes
current service cost (net of contributions by employees)
gain on settlement (net of cash payments to unfunded pension schemes)
Total included in employee costs
Amounts included in finance (income)/expense
Net interest income on defined benefit pension schemes in surplus
Net interest expense on defined benefit pension schemes in deficit
Total charge to the income statement
Amounts recognised in the statement of comprehensive income
Actual return less expected return on pension scheme assets
Experience gain on pension scheme liabilities
Impact of changes in financial assumptions relating to the present value of pension scheme liabilities
Impact of changes in demographic assumptions relating to the present value of pension scheme liabilities
Actuarial (loss)/gain on defined benefit pension schemes
2016
£m
18.8
6.1
(0.1)
24.8
(0.4)
1.9
26.3
2016
£m
39.3
4.6
(91.8)
5.5
(42.4)
The cumulative amount of net actuarial losses arising since 1 January 2004 recognised in the statement of comprehensive income at
31 December 2016 was £129.5m (2015: £87.1m).
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 were:
UK
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)
2016
22.4
24.1
21.9
2015
£m
13.7
6.4
–
20.1
–
2.4
22.5
2015
£m
(6.3)
6.6
24.2
2.5
27.0
2015
22.6
24.3
22.3
124
Bunzl plc Annual Report 2016
20 Retirement benefits continued
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation rate
2016
2015
3.7%
3.1%
2.7%
2.3%
3.5%
3.0%
3.9%
2.1%
UK
2014
3.8%
3.0%
3.7%
2.1%
2016
2015
3.0%
–
4.1%
2.3%
3.0%
–
4.3%
2.5%
US
2014
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 decrease/(increase) that would arise on the overall net pension deficit as at 31 December 2016 as a result of reasonably possible
changes to key assumptions was:
UK
US
Impact of change
in longevity
–1 year
£m
11.1
3.6
+1 year
£m
(10.7)
(3.4)
Impact of change
in inflation rate
Impact of change
in discount rate
+0.25%
£m
(10.6)
0.1
–0.25%
£m
9.3
(0.1)
+0.25%
£m
16.9
4.3
–0.25%
£m
(18.2)
(4.5)
The market value of pension scheme assets and the present value of retirement benefit obligations at 31 December were:
Equities
Bonds
Other
Total market value of pension scheme assets
Present value of funded obligations
Present value of unfunded obligations
Present value of funded and unfunded obligations
Defined benefit pension schemes in deficit
Deferred tax
Total (deficit) after tax
Equities
Bonds
Other
Total market value of pension scheme assets
Present value of funded obligations
Present value of unfunded obligations
Present value of funded and unfunded obligations
Defined benefit pension schemes in surplus*
Defined benefit pension schemes in deficit
Deferred tax
Total net surplus/(deficit) after tax
UK
2016
£m
99.5
222.4
0.4
322.3
(347.6)
–
(347.6)
(25.3)
4.3
(21.0)
UK
2015
£m
94.7
181.7
0.3
276.7
(271.3)
–
(271.3)
5.4
–
(1.0)
4.4
US
2016
£m
59.9
40.6
11.1
111.6
(142.1)
(14.9)
(157.0)
(45.4)
17.5
(27.9)
US
2015
£m
45.7
32.5
9.4
87.6
(111.2)
(12.4)
(123.6)
–
(36.0)
14.0
(22.0)
Other
2016
£m
5.6
4.7
7.9
18.2
(22.5)
(9.1)
(31.6)
(13.4)
3.5
(9.9)
Other
2015
£m
5.7
5.9
1.3
12.9
(17.1)
(5.2)
(22.3)
–
(9.4)
2.7
(6.7)
Total
2016
£m
165.0
267.7
19.4
452.1
(512.2)
(24.0)
(536.2)
(84.1)
25.3
(58.8)
Total
2015
£m
146.1
220.1
11.0
377.2
(399.6)
(17.6)
(417.2)
5.4
(45.4)
15.7
(24.3)
Of the pension scheme assets, £436.6m (2015: £366.6m) are valued based on a quoted market price.
* In accordance with IFRIC 14, any surplus on the UK scheme is recognised as a defined benefit asset because the Group considers that it
has an unconditional right to a refund of any surplus from the UK scheme.
125
Bunzl plc Annual Report 2016 Financial statements
Notes continued
20 Retirement benefits continued
Movement in net deficit
Beginning of year
Acquisitions
Current service cost
Gain on settlement
Contributions
Net interest expense
Actuarial (loss)/gain
Currency translation
End of year
Changes in the present value of defined benefit pension liabilities
Beginning of year
Acquisitions
Current service cost
Liabilities extinguished on settlement
Interest expense
Contributions by employees
Actuarial loss/(gain)
Benefits paid
Currency translation
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Acquisitions
Interest income
Assets distributed on settlement
Actuarial gain/(loss)
Contributions by employer
Contributions by employees
Benefits paid
Currency translation
End of year
The actual return on pension scheme assets was £54.4m (2015: £7.4m).
2016
£m
(40.0)
(1.0)
(6.1)
0.4
14.9
(1.5)
(42.4)
(8.4)
(84.1)
2016
£m
417.2
2.1
6.1
(1.0)
16.6
0.8
81.7
(15.0)
27.7
536.2
2016
£m
377.2
1.1
15.1
(0.6)
39.3
14.9
0.8
(15.0)
19.3
452.1
2015
£m
(70.3)
–
(6.4)
–
13.8
(2.4)
27.0
(1.7)
(40.0)
2015
£m
435.8
–
6.4
–
16.1
0.7
(33.3)
(14.6)
6.1
417.2
2015
£m
365.5
–
13.7
–
(6.3)
13.8
0.7
(14.6)
4.4
377.2
The Group expects to pay approximately £15.7m in contributions to the defined benefit pension schemes in the year ending 31 December
2017 (expected as of 2015 in the year ending 31 December 2016: £14.1m) including £7.3m for the UK (expected as of 2015 in the year ending
31 December 2016: £7.0m).
The weighted average duration of the defined benefit pension scheme liabilities at 31 December 2016 was approximately 20.2 years
(2015: 18.5 years) for the UK and 12.0 years (2015: 12.5 years) for the US.
The total defined benefit pension scheme liabilities are divided between active members (£200.1m (2015: £144.6m)), deferred members
(£161.3m (2015: £126.6m)) and pensioners (£174.8m (2015: £146.0m)).
126
Bunzl plc Annual Report 2016 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
Other pension costs
Share based payments
2016
5,478
4,029
3,641
3,082
16,230
55
16,285
2016
£m
612.3
65.9
24.8
10.2
713.2
2015
5,097
3,762
3,636
2,549
15,044
54
15,098
2015
£m
528.9
54.9
20.1
9.1
613.0
In addition to the above, acquisition related costs for the year ended 31 December 2016 include deferred consideration payments of £29.6m
(2015: £24.3m) relating to the retention of former owners of businesses acquired.
Key management remuneration
Salaries and short term employee benefits
Share based payments
Retirement benefits
2016
£m
5.9
1.3
0.8
8.0
2015
£m
5.7
1.5
0.9
8.1
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
2016
£m
0.7
2.7
1.4
4.8
2015
£m
0.7
2.5
1.4
4.6
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 £1.3m (2015: £4.4m). The aggregate
market value of performance share awards exercised by directors under long term incentive schemes during the year was £2.7m
(2015: £2.5m). The aggregate market value of share awards exercised by directors under the DASBS was £1.2m (2015: £2.1m).
127
Bunzl plc Annual Report 2016 Financial statements
Notes continued
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
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
Derivatives managing the interest rate risk and currency profile
Net debt
Land &
buildings
2016
£m
84.7
219.3
70.5
374.5
Other
2016
£m
29.4
56.5
3.7
89.6
2016
£m
282.4
(155.7)
126.7
(86.0)
(1,283.6)
14.3
(1,228.6)
Land &
buildings
2015
£m
70.4
168.2
58.9
297.5
2015*
£m
281.8
(231.1)
50.7
(120.8)
(1,058.8)
21.7
(1,107.2)
Other
2015
£m
25.3
46.9
3.2
75.4
2014*
£m
298.6
(244.3)
54.3
(35.8)
(913.3)
17.4
(877.4)
* The 31 December 2015 comparative figures for cash at bank and in hand and bank overdrafts have been increased by £202.6m and by
£216.2m as at 31 December 2014 as explained in Note 1(i). These amounts, being the overdraft included in the Group’s cash pool at the
end of 2015 and 2014 respectively, were previously netted against cash at bank and in hand in the Consolidated balance sheet.
Notwithstanding the change in presentation, the cash pool continues to operate as previously, enabling the Group to access cash in its
subsidiaries to pay down the Group’s borrowings. The Group continues to have the legal right to set-off balances within the cash pool and
the change in presentation has no impact on the Group’s net debt or its compliance with banking covenants. The cash at bank and in hand
and bank overdrafts figures net of the amounts in the cash pool are disclosed below for reference:
Cash at bank and in hand net of amounts in the cash pool
Bank overdrafts net of amounts in the cash pool
Cash and cash equivalents
Movement in net debt
Beginning of year
Net cash inflow/(outflow)
Realised gains on foreign exchange contracts
Currency translation
End of year
2016
£m
139.6
(12.9)
126.7
2015
£m
79.2
(28.5)
50.7
2016
£m
(1,107.2)
16.0
22.9
(160.3)
(1,228.6)
2014
£m
82.4
(28.1)
54.3
2015
£m
(877.4)
(206.6)
27.5
(50.7)
(1,107.2)
128
Bunzl plc Annual Report 2016 24 Acquisitions
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 2016 the allocation period for all acquisitions completed since 1 January 2016 remained open
and accordingly the fair values presented are provisional.
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. There were no material measurement period adjustments recorded
during the year ended 31 December 2016 related to acquisitions completed in the year ended 31 December 2015.
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.
For each of the businesses acquired during the year, the name of the business, the market sector served, its location and date of
acquisition, as well as the estimated annualised revenue it would have contributed to the Group for the year if such acquisitions had been
made at the beginning of the year, are separately disclosed. The remaining disclosures required by IFRS 3 are provided separately for those
individual acquisitions that are considered to be material and in aggregate for individually immaterial acquisitions. An acquisition would
generally be considered individually material if the impact on the Group’s revenue or profit measures (on an annualised basis) or the
relevant amounts on the balance sheet is greater than 5%. Management also applies judgement in considering whether there are any
material qualitative differences from other acquisitions made.
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are included in the table below. In addition to the
acquisitions completed during the year, the Company also entered into agreements during the year to acquire two further businesses,
these being Saebe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions
are also included below.
Business
Earthwise Bag
Bursa Pazari
Inkozell and Mo Ha Ge
Classic Bag
Polaris Chemicals
Plus II
Apex
Blyth
Kingsbury Packaging
Silwell
Tri-Star Packaging
Woodway
Completed acquisitions
Saebe Compagniet
Prorisk and GM Equipement
Committed acquisitions
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Foodservice
Safety
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
Denmark
France
Acquisition date
2016
9 February
30 March
31 May
31 May
31 May
25 July
26 July
31 August
14 September
30 September
30 September
30 December
2 January 2017
31 January 2017
Annualised
revenue
£m
13.2
32.3
19.3
7.4
2.9
17.8
6.6
5.7
5.4
7.9
27.8
36.0
182.3
12.4
6.4
201.1
129
Bunzl plc Annual Report 2016
Financial statements
Notes continued
24 Acquisitions continued
A summary of the effect of acquisitions completed in 2016 and 2015 is shown below:
Customer relationships
Property, plant and equipment and software
Inventories
Trade and other receivables
Trade and other payables
Net cash/(overdrafts)
Provisions
Defined benefit pension liabilities
Income tax payable and deferred tax liabilities
Fair value of net assets acquired
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to retention of former owners
Net (cash)/overdraft acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions completed in the current year
Spend on acquisitions committed but not completed as at 31 December 2016
Spend on acquisition committed as at 31 December 2014 but completed in January 2015
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 (cash)/overdraft acquired
Deferred consideration in respect of prior year acquisitions
Net cash outflow in respect of acquisitions
Transaction costs and expenses
Payments relating to retention of former owners
Total cash outflow in respect of acquisitions
2016
£m
80.2
(0.5)
16.5
44.1
(32.3)
1.0
(3.8)
(1.0)
(17.8)
86.4
51.0
137.4
124.4
13.0
137.4
18.2
(1.0)
6.8
161.4
22.8
–
184.2
2016
£m
124.4
(1.0)
36.2
159.6
5.9
11.1
176.6
2015
£m
172.2
8.7
73.6
57.2
(40.7)
(0.6)
(9.4)
–
(17.3)
243.7
109.0
352.7
311.5
41.2
352.7
36.2
0.6
7.9
397.4
–
(70.2)
327.2
2015
£m
311.5
0.6
16.4
328.5
8.5
34.2
371.2
Acquisitions completed in the year ended 31 December 2016 contributed £85.7m (2015: £217.1m) to the Group’s revenue and £11.2m
(2015: £26.9m) to the Group’s adjusted operating profit for the year ended 31 December 2016.
The estimated contributions from acquisitions completed during the year to the results of the Group for the year ended 31 December if such
acquisitions had been made at the beginning of the year, are as follows:
Revenue
Adjusted operating profit
2016
£m
182.3
21.5
2015
£m
389.5
49.1
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 2016 if such acquisitions had been made at the beginning of the year is £201.1m (2015: £324.1m,
excluding Tillman).
130
Bunzl plc Annual Report 2016 24 Acquisitions continued
2015
Summary details of the businesses acquired during the year ended 31 December 2015 are included in the table below.
Business acquired
Tillman
Quirumed
Jan-Mar
Janssen Packaging
Prescott
Emballages Maska
Istanbul Ticaret
Ligne T
GF
Solmaq
Cordova Safety Products
Steiner Industries
Bidvest Hospitality Supplies
Delta Hospitality
Meier Verpackungen
Planet Clean
ICB
Cemelim
Casa do EPI
DPS
Faru
Comatec
Dental Sorria
Completed acquisitions
Tillman (committed on 30 December 2014)
Committed acquisitions
Sector
Safety
Healthcare
Cleaning & hygiene
Retail
Cleaning & hygiene
Cleaning & hygiene
Safety
Safety
Retail
Safety
Safety
Safety
Foodservice
Foodservice
Foodservice
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Safety
Hospitality
Healthcare
Country
USA
Spain
Canada
Netherlands
Canada
Canada
Turkey
France
Canada
Colombia
USA
USA
Australia
Australia
Austria
Canada
New Zealand
Spain
Brazil
Chile
Spain
France
Brazil
Acquisition date
2015
2 January
30 January
30 January
10 March
31 March
31 March
29 May
29 May
1 June
30 June
30 June
1 July
1 July
17 July
1 September
16 September
30 October
2 November
3 November
30 November
30 November
1 December
18 December
Annualised
revenue
£m
65.4
14.6
6.1
6.5
8.6
15.9
24.4
4.4
41.8
13.6
54.9
12.0
4.7
5.2
29.0
13.4
2.3
2.5
16.0
25.4
3.3
13.8
5.7
389.5
(65.4)
324.1
25 Related party disclosures
The Group has identified the directors of the Company, their close family members, the Group defined benefit 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 Cash flow from operating activities
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
cash flow statement.
Non-cash items
Depreciation and software amortisation
Share based payments
Provisions
Retirement benefit obligations
Other
Working capital movement
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
2016
£m
27.4
10.2
(3.0)
(9.0)
2.4
28.0
2016
£m
(18.0)
(39.6)
51.3
(6.3)
2015
£m
24.1
9.1
(3.9)
(7.4)
(2.1)
19.8
2015
£m
(16.1)
(23.7)
30.0
(9.8)
131
Bunzl plc Annual Report 2016 Financial statements
Company balance sheet
at 31 December 2016
Fixed assets
Tangible assets
Intangible assets
Investments
Current assets
Defined benefit pension asset: amounts falling due after more than one year
Deferred tax asset
Debtors: amounts falling due after more than one year
Debtors: amounts falling due within one year
Cash at bank and in hand
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Non-current liabilities
Provisions
Defined benefit pension liability
Net assets
Capital and reserves
Share capital
Share premium
Other reserves
Capital redemption reserve
Profit and loss account†
Total shareholders’ funds
Notes
3
3
4
9
5
6
6
7
8
9
10
11
11
2016
£m
0.4
1.3
681.1
682.8
–
5.9
1,500.0
237.6
0.1
1,743.6
(94.9)
1,648.7
2,331.5
(1.7)
(25.3)
2,304.5
107.9
167.5
5.6
16.1
2,007.4
2,304.5
2015*
£m
0.4
0.7
673.1
674.2
5.4
1.0
–
218.4
0.1
224.9
(94.6)
130.3
804.5
(1.7)
–
802.8
107.7
163.9
5.6
16.1
509.5
802.8
Approved by the Board of Directors of Bunzl plc (Company registration number 358948) on 27 February 2017 and signed on its behalf by
Frank van Zanten, Chief Executive and Brian May, Finance Director.
The Accounting policies and other Notes on pages 134 to 138 form part of these financial statements.
† Profit and loss account includes a net profit after tax of £176.2m (2015: £97.1m). As permitted by section 408(3) of the Companies Act 2006,
the profit and loss account of the Company has not been separately presented in these financial statements.
* Revised to reflect a reclassification of software assets from tangible assets to intangible assets. (see Note 2).
132
Bunzl plc Annual Report 2016 Company statement of changes in equity
at 31 December 2016
At 1 January 2016
Profit for the year
Other comprehensive income
Dividends from subsidiaries
currently unrealised
Contributions to pension scheme
by participating subsidiaries
Actuarial loss on defined benefit
pension scheme
Income tax charge on other
comprehensive income
Total comprehensive income
2015 interim dividend
2015 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2016
At 1 January 2015
Profit for the year
Other comprehensive income
Contributions to pension scheme
by participating subsidiaries
Actuarial gain on defined benefit
pension scheme
Income tax charge on other
comprehensive income
Total comprehensive income
2014 interim dividend
2014 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2015
Share
capital
£m
107.7
Share
premium
£m
163.9
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Own
shares
£m
(118.9)
Profit and loss account
Retained
earnings
£m
628.4
176.2
Total
shareholders’
funds
£m
802.8
176.2
1,500.0
1,500.0
4.6
4.6
(36.2)
(36.2)
6.3
1,650.9
(38.6)
(86.8)
(24.0)
9.9
2,139.8
6.3
1,650.9
(38.6)
(86.8)
3.8
(37.5)
–
9.9
2,304.5
0.2
3.6
(37.5)
24.0
107.9
167.5
5.6
16.1
(132.4)
Share
capital
£m
107.6
Share
premium
£m
160.3
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Own
shares
£m
(115.1)
Profit and loss account
Retained
earnings
£m
645.7
97.1
Total
shareholders’
funds
£m
820.2
97.1
0.1
3.6
(30.2)
26.4
107.7
163.9
5.6
16.1
(118.9)
4.6
18.5
(4.4)
115.8
(36.0)
(80.1)
(26.4)
9.4
628.4
4.6
18.5
(4.4)
115.8
(36.0)
(80.1)
3.7
(30.2)
–
9.4
802.8
133
Bunzl plc Annual Report 2016 Financial statements
Notes to the Company financial statements
1 Basis of preparation
Bunzl plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. These financial statements present information
about the Company as an individual undertaking and not about its Group. The financial statements of the Company have been prepared
on a going concern basis and under the historical cost convention with the exception of certain items which are measured at fair value as
described in the accounting policies below.
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’)
and the Companies Act 2006 as applicable to companies using FRS 101. There are no new standards, amendments or interpretations that
are applicable to the Company for the year ended 31 December 2016. In preparing these financial statements the Company has applied the
exemptions available under FRS 101 in respect of:
• a cash flow statement and related notes;
• comparative period reconciliations for share capital and tangible fixed assets;
• disclosures relating to transactions with wholly owned subsidiaries and capital management;
• the effects of new but not yet effective IFRSs; and
• disclosures relating to the compensation of key management personnel.
As the consolidated financial statements of the Company include the equivalent disclosures, the Company has also applied the exemptions
available under FRS 101 in respect of:
• certain disclosures required by IFRS 2 ‘Share Based Payments’ in respect of Group settled share based payments; and
• certain disclosures required by IFRS 13 ‘Fair Value Measurement’ and disclosures required by IFRS 7 ‘Financial Instruments’.
2 Accounting policies
The accounting policies of the Company have, unless otherwise stated, been applied consistently to all periods presented in these financial
statements. The Company has changed the presentation of software assets to show them separately as intangible assets, reducing
tangible assets by £0.7m at 31 December 2015. This is consistent with the reclassification for the Group explained in Note 1(i) to the
consolidated financial statements. In most cases the accounting policies for the Company are fully aligned with the equivalent accounting
policy for the Group as stated on pages 98 to 102 in Note 2 to the consolidated financial statements. The accounting policies of the Company
which are aligned with those of the Group are the policies for tangible assets, intangible assets, income tax, provisions, retirement
benefits, investment in own shares, dividends and leases. The accounting policies that are specific to the Company are set out below.
a Investment in subsidiary undertakings
Investments in subsidiary undertakings are held at cost less any provision for impairment. The subsidiary undertakings which the Company
held at 31 December 2016 are disclosed in the Related undertakings note in the Shareholder information section on pages 146 to 148.
b Share based payments
The Company operates a number of equity settled share based payment compensation plans. Details of these plans are outlined in Note 16
to the consolidated financial statements 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 which is spread over the expected vesting
period with a corresponding credit to equity.
Where the Company grants options over its own shares to the employees of its subsidiaries and it has not recharged the cost to the
relevant subsidiaries, it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent
to the equity settled share based payment charge recognised in its consolidated financial statements, with the corresponding credit being
recognised directly in equity.
c Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its 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.
d Defined benefit pension schemes
The Company is the sponsoring company of the UK defined benefit pension scheme. As there is no contractual agreement or stated Group
policy for charging the net defined benefit cost of the scheme to participating subsidiaries, the net defined benefit pension cost or benefit
is recognised fully by the Company. The contributions paid by the participating subsidiaries other than the Company are credited to profit or
loss of the Company where the amounts relate to service and are independent of the number of years of service or to other comprehensive
income if not linked to service.
134
Bunzl plc Annual Report 2016 2 Accounting policies continued
Critical accounting judgements, estimates and assumptions
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the choice and
application of the Company’s accounting policies and the reported amounts of assets, liabilities and profit or loss. Actual results may differ
from those derived from the application of such judgements, estimates and assumptions, in particular those which involve anticipating
future events. Accordingly, the judgements, estimates and assumptions are reviewed on an ongoing basis, with the impact of any revisions
considered necessary being recognised prospectively thereafter.
The key assumptions and sources of estimation uncertainty at the balance sheet date that have most risk of causing material adjustment
to the carrying values of assets and liabilities in the financial statements for the year ended 31 December 2016 are the carrying value of
investments, as explained below, and the measurement of the defined benefit pension scheme liability which is explained in Note 2 to the
consolidated financial statements. The directors believe that the judgements, estimates and assumptions applied in the preparation of
these financial statements are appropriate. Where relevant and practicable, sensitivity analysis is disclosed in the relevant Notes to the
consolidated financial statements to demonstrate the impact of changes in estimates or assumptions used.
Recoverability of investments
The carrying amounts of the Company’s non-financial assets, in particular the investments in subsidiary undertakings, 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 are the greater of their fair value less the costs of disposal and their 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 exceeds its estimated recoverable amount with impairment losses being recognised
in profit or loss.
3 Tangible and intangible assets
Cost
Beginning of year
Additions
End of year
Accumulated depreciation
Beginning of year
Charge in year
End of year
Net book value at 31 December 2016
Net book value at 31 December 2015
Short
leasehold
improvement
£m
Fixtures,
fittings and
equipment
£m
0.1
–
0.1
0.1
–
0.1
–
–
1.4
0.1
1.5
1.0
0.1
1.1
0.4
0.4
* Revised to reflect a reclassification of software assets from tangible assets to intangible assets (see Note 2).
4 Investments
Investments in subsidiary undertakings
Cost
Beginning of year
Additions
End of year
Impairment provisions
Beginning and end of year
Net book value at 31 December
Total
tangible
assets*
£m
1.5
0.1
1.6
1.1
0.1
1.2
0.4
0.4
Total
intangible
assets*
£m
0.8
0.7
1.5
0.1
0.1
0.2
1.3
0.7
2016
£m
676.4
8.0
684.4
2015
£m
669.0
7.4
676.4
3.3
3.3
681.1
673.1
135
Bunzl plc Annual Report 2016 Financial statements
Notes to the Company financial statements continued
5 Deferred tax asset
Recognised deferred tax assets net of deferred tax liabilities are attributable to the following:
1 January 2015
Recognised in profit or loss
Recognised in other comprehensive income or directly in equity
31 December 2015/1 January 2016
Recognised in profit or loss
Reclassification to current tax
Recognised in other comprehensive income or directly in equity
31 December 2016
Defined benefit
pension scheme
£m
3.4
–
(4.4)
(1.0)
0.2
(1.2)
6.3
4.3
Share based
payments
£m
1.5
–
0.3
1.8
–
–
(0.3)
1.5
Other
£m
0.1
0.1
–
0.2
(0.1)
–
–
0.1
Net deferred
tax asset
£m
5.0
0.1
(4.1)
1.0
0.1
(1.2)
6.0
5.9
Deferred tax is calculated in full on temporary differences under the liability method. Following the enactment of legislation in the UK,
the corporation tax rate will be reduced from 20% to 19% with effect from 1 April 2017 and from 19% to 17% from 1 April 2020. Accordingly,
the UK tax rate used for measuring deferred tax reflects the rate expected to be applied when the temporary differences reverse. It is
probable that the deferred tax assets recognised will be realised. The recovery of the net deferred tax asset will be over more than one
year. No deferred tax asset has been recognised in respect of unutilised capital losses of £70.6m (2015: £70.6m).
6 Debtors
Debtors: amounts falling due within one year
Amounts owed by Group undertakings
Prepayments and other debtors
Group relief receivable
Debtors: amounts falling due after more than one year
Amounts owed by Group undertakings
2016
£m
236.8
0.8
–
237.6
2015
£m
215.2
1.9
1.3
218.4
1,500.0
–
The carrying amount of the amounts owed by Group undertakings falling due after more than one year is a reasonable approximation of its
fair value. These amounts have a fixed repayment date and are interest bearing at an interest rate which is reset periodically based on the
Bank of England base rate.
7 Creditors: amounts falling due within one year
Trade creditors
Amounts owed to Group undertakings
Other tax and social security contributions
Accruals and deferred income
8 Provisions
Beginning of year
Utilised or released
End of year
2016
£m
1.4
81.9
0.7
10.9
94.9
2016
£m
1.7
–
1.7
2015
£m
0.9
81.9
1.2
10.6
94.6
2015
£m
1.7
–
1.7
The provisions relate to properties, where amounts are held against liabilities for repairs and dilapidations and other claims.
136
Bunzl plc Annual Report 2016 9 Retirement benefits
The Company operates a number of retirement benefit schemes in the UK, including both a defined benefit and defined contribution
schemes. A description of the characteristics and risks to which the Company is exposed in relation to the UK defined benefit pension
scheme together with the principal assumptions used and sensitivity to changes in assumptions are detailed in Note 20 to the consolidated
financial statements. The amounts included in the Company financial statements related to the defined benefit pension scheme at
31 December were:
Amounts included in profit for the year
Current service cost (net of contributions by employees)
Net interest (income)/expense
Contributions paid by participating subsidiaries linked to service
Total charge to profit for the year
Amounts recognised in other comprehensive income
Actual return less expected return on pension scheme assets
Experience gain on pension scheme liabilities
Impact of changes in assumptions relating to the present value of pension scheme liabilities
Actuarial (loss)/gain on defined benefit pension scheme
Contributions paid by participating subsidiaries not linked to service
Total (charge)/credit to other comprehensive income
Movement in defined benefit pension scheme (deficit)/surplus
Beginning of year
Current service cost
Contributions
Net interest income/(expense)
Actuarial (loss)/gain
End of year
Changes in the present value of defined benefit pension scheme liabilities
Beginning of year
Current service cost
Interest expense
Contributions by employees
Actuarial loss/(gain)
Benefits paid
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Interest income
Actuarial gain/(loss)
Contributions by the Company
Contributions by participating subsidiaries
Contributions by employees
Benefits paid
End of year
2016
£m
2.1
(0.4)
(1.5)
0.2
2016
£m
35.5
5.6
(77.3)
(36.2)
4.6
(31.6)
2016
£m
5.4
(2.1)
7.2
0.4
(36.2)
(25.3)
2016
£m
271.3
2.1
10.4
0.7
71.7
(8.6)
347.6
2016
£m
276.7
10.8
35.5
1.2
6.0
0.7
(8.6)
322.3
The actual return on pension scheme assets was £46.3m (2015: £6.2m). The market value of scheme assets and the present value
of retirement benefit obligations at 31 December are detailed in Note 20 to the consolidated financial statements.
The total defined benefit pension liability is divided between active members (£89.6m (2015: £62.4m)), deferred members (£137.9m
(2015: £105.4m)) and pensioners (£120.1m (2015: £103.5m)).
2015
£m
2.5
0.5
(1.3)
1.7
2015
£m
(3.8)
6.3
16.0
18.5
4.6
23.1
2015
£m
(17.1)
(2.5)
7.0
(0.5)
18.5
5.4
2015
£m
288.1
2.5
10.5
0.6
(22.3)
(8.1)
271.3
2015
£m
271.0
10.0
(3.8)
1.1
5.9
0.6
(8.1)
276.7
137
Bunzl plc Annual Report 2016 Financial statements
Notes to the Company financial statements continued
10 Share capital
Issued and fully paid ordinary shares of 321⁄7p each
Number of ordinary shares in issue and fully paid
Beginning of year
Issued – option exercises
End of year
2016
£m
107.9
2015
£m
107.7
2016
335,190,830
416,261
335,607,091
2015
334,706,876
483,954
335,190,830
11 Reserves
Included in the profit and loss account within retained earnings is £1,500.0m relating to dividends which were declared from the Company’s
subsidiary undertakings during the year ended 31 December 2016 but which were not settled in cash and are therefore unrealised. Until
these outstanding balances are settled in cash the relevant amounts outstanding are not distributable as dividends to the Company’s
shareholders. Excluding these amounts the Company has substantial distributable reserves as explained further in the Financial review
on page 33.
The own shares reserve includes ordinary shares of the Company held by the Company in an employee benefit trust. The assets, liabilities
and expenditure of the trust are included in the Company financial statements. Details of the trust and investment in own shares reserve are
set out in Note 16 to the consolidated financial statements.
The dividends paid and declared in the current and prior period are detailed in Note 17 to the consolidated financial statements.
The capital redemption reserve as presented in the statement of changes in equity records the aggregate nominal value of treasury shares
that have been cancelled.
12 Contingent liabilities and commitments
Contingent liabilities
Borrowings by subsidiary undertakings totalling £1,352.4m (2015: £1,173.8m) which are included in the Group’s borrowings have been
guaranteed by the Company.
Commitments
Non-cancellable operating lease rentals of £3.9m (2015: £4.6m) are payable in relation to a lease with a duration of longer than five years.
13 Employees’ and directors’ remuneration
The average number of persons employed by the Company during the year (including directors) was 46 (2015: 44) and the aggregate
employee costs relating to these persons were:
Wages and salaries
Social security costs
Share based payments
Pension costs
2016
£m
7.8
2.1
1.5
1.0
12.4
2015
£m
7.4
2.5
1.7
1.1
12.7
Conditional awards of executive share options and performance shares are granted to executive directors and other senior employees
of the Company. Employees of the Company can also participate in the Company’s Sharesave Scheme. Further information on the
Company’s share plans is disclosed in Note 16 to the consolidated financial statements.
14 Related party disclosures
The Company has identified the directors of the Company, their close family members, the UK pension scheme 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 and Note 20 and Note 21 to the consolidated financial statements respectively.
138
Bunzl plc Annual Report 2016 Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report,
which includes the Directors’ remuneration report and the financial
statements, in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have prepared
the Group financial statements in accordance with IFRS as
adopted by the European Union and the parent company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (UK accounting standards and applicable law).
In preparing the Group financial statements, the directors have also
elected to comply with IFRS issued by the IASB. 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 Company and the Group and of the profit or loss of the
Company and Group for that period. In preparing these financial
statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether IFRS as adopted by the European Union, IFRS
issued by the IASB and applicable UK accounting standards
have been followed, subject to any material departures disclosed
and explained in the Group and parent company financial
statements respectively; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable
them to ensure that the financial statements and the Directors’
remuneration report comply with the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The directors consider 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.
Each of the directors, whose names and functions are set out
on page 48 of the Annual Report, confirm that to the best
of their knowledge:
• 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
• the Annual Report includes 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
Frank van Zanten
Chief Executive
27 February 2017
Brian May
Finance Director
139
Bunzl plc Annual Report 2016 Financial statements
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 2016 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; 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.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note 1 to the consolidated financial statements, the Group, in addition to applying IFRSs as adopted by the European Union,
has also applied IFRSs as issued by the International Accounting Standards Board ('IASB').
In our opinion, the Group financial statements comply with IFRSs as issued by the IASB.
What we have audited
The financial statements, included within the Bunzl plc Annual Report (‘the Annual Report’), comprise:
• the Consolidated and Company balance sheets as at 31 December 2016;
• the Consolidated income statement and Consolidated statement of comprehensive income for the year then ended;
• the Consolidated and Company 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 United Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice),
including FRS 101 ‘Reduced Disclosure Framework’.
Our audit approach
Overview
Materiality
• Overall Group materiality: £16m which represents approximately 5% of profit before taxation
Audit scope
• We performed audits of the financial information of 77 components spread across 25 different countries across
North America, Continental Europe, UK & Ireland and Rest of the World
• Specific audit procedures over central functions and areas of significant judgement, including the impairment of
goodwill and customer relationships intangible assets, business combinations, defined benefit pension schemes
and taxation were performed by the Group audit team centrally
Areas of focus
• Impairment of goodwill and customer relationships intangible assets
• Business combinations
• Defined benefit pension schemes
• Corporate tax exposures
• Supplier rebate accounting – purchase volume based rebates
140
Bunzl plc Annual Report 2016 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 and the risk of fraud in revenue recognition, 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 customer relationships intangible assets
Refer to page 58 (Audit Committee report), page 100 (Accounting policies) and pages 110 and 111 (Note 9).
The Group has material goodwill balances of £1,191.5m
(2015: £999.3m) and customer relationships intangible assets of
£737.7m (2015: £632.7m) spread across multiple geographies and
relating to multiple cash generating units ('CGUs').
In our testing of management’s annual goodwill and customer
relationships intangible assets impairment calculations, we used
valuation experts to assist our evaluation of the key assumptions
used by management.
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 sector or
geographical basis.
We focused on the CGUs with the highest goodwill and
customer relationships intangible assets (the most material
being North America, Rest of Continental Europe and France)
as well as the CGUs where there were smaller goodwill and
customer relationships intangible asset balances but lower
levels of headroom.
Management’s impairment assessment involves significant
estimation, principally relating to short and long term revenue
growth, future profitability and discount rates. Due to the
acquisitive nature of the Group and the magnitude of the
aggregated related goodwill and customer relationships
intangible assets, together with the subjectivity of the principal
assumptions, a significant amount of audit effort was required,
particularly as some of these assumptions are dependent
on economic factors and trading conditions specific to
overseas territories.
We evaluated the reasonableness of the directors’ cash flow
forecasts by comparing the assumptions made to internal and
external data.
In particular:
• we compared short term revenue growth rates to the latest
strategic plans and found them to be consistent;
• we determined that long term growth rates are generally
consistent when compared to third party nominal GDP rates;
• we found the achievability of future margins to be plausible based
on past and current performance and consistent with budgets;
• we challenged the discount rate used to determine the
present value by assessing the cost of capital for the Company
and comparable organisations and considered them to be
reasonable; and
• we evaluated the reduction in the number of CGUs and reviewed
the results of management's 'gateway' test, being the impairment
review performed under the previous CGU definitions and noted
no indicators of impairment.
Furthermore, we obtained evidence to assess adequate historical
accuracy in management’s forecasting process.
As described in Note 9 to the consolidated 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.
Having ascertained the extent of changes in key assumptions either
individually or collectively that would be required for goodwill and
other intangible assets to be materially impaired, we considered
such a change in those key assumptions to be unlikely.
141
Bunzl plc Annual Report 2016 Financial statements
Independent auditors’ report to the members of Bunzl plc continued
Area of focus
How our audit addressed the area of focus
Business combinations
Refer to page 58 (Audit Committee report), page 98 (Accounting policies) and pages 129 to 131 (Note 24).
Given that the Group continues to make significant investment
in acquisitions, accounting for business combinations is an area
of focus due to the level of judgement involved.
Business combinations can involve judgements in relation to the
value of assets and liabilities that are recognised on acquisition,
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 valuation specialists to value
significant intangibles acquired in business combinations. Where
management has relied on such specialists, we assessed their
independence and competency and tested the results of their
work and found no material issues.
We used our own valuation experts to challenge the methodology
and key assumptions used in determining the value of the customer
relationships assets for the more significant acquisitions. We
determined that the cash flows applied within the valuation models
and the key assumptions such as the discount rates, growth rates,
customer attrition and period for amortisation, were appropriate.
Defined benefit pension schemes
Refer to page 58 (Audit Committee report), page 102 (Accounting policies) and pages 123 to 126 (Note 20).
The Group has defined benefits pension schemes (with material
schemes in the US and the UK) with a net deficit of £84.1m at the
current year end (2015: £40.0m), which is material in the context
of the Consolidated balance sheet.
Management estimation is required in relation to the
measurement of pension scheme obligations, 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 and, therefore, the extent of any
surplus or deficit.
We used our own actuarial experts 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 determined that
the discount and inflation rates used in the valuation of the
pension scheme liabilities were consistent with our internally
developed benchmarks and, where available, with those disclosed
in the published financial statements of other companies as at
31 December 2016. In each case we considered the assumptions
made by management to be reasonable in light of the available
evidence.
Corporate tax exposures
Refer to page 58 (Audit Committee report), page 99 (Accounting policies) and pages 107 and 108 (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 result 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, together with the importance of achieving
adequate and clear disclosure related to judgemental tax matters.
We discussed with management their assessment of uncertain
tax positions and used our taxation specialists to assist us in
challenging the appropriateness of management’s judgements
in relation to these positions. These procedures assisted in our
corroboration of management’s position on the amount of
significant tax exposures and the provisions 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
determined that the calculations were in line with the accounting
standards and that the methodology and principles had been
applied consistently.
We consider the current level of tax provision to be reasonable.
Supplier rebate accounting – purchase volume based rebates
Refer to page 58 (Audit Committee report) and page 99 (Accounting policies).
We focused on this area as purchase volume based rebate income
from suppliers is material to the consolidated financial statements.
Given a degree of estimation is involved in accounting for purchase
volume based supplier rebates, we focused our audit procedures
on the accuracy, occurrence and cut-off of these transactions
and the valuation of amounts held on the balance sheet.
We evaluated the processes in place across the Group for the
recognition of purchase volume based supplier rebates and found
these to be consistently applied. We agreed the nature of a sample
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 a sample of rebate
calculations and assessed management’s estimates of purchases.
No material exceptions were noted from this testing.
Where appropriate, 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, with no material
exceptions noted.
142
Bunzl plc Annual Report 2016 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 industry 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 financially significant component, being North America, where a full scope audit has been performed. In addition to this,
we identified four 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 72 components. The components where we performed audit procedures covered over 95% of Group revenue, profit before taxation
and total assets.
Component audits were performed to respective statutory materiality levels of the individual components and, for component teams with
no statutory requirements, a materiality was allocated by the Group team. These local materiality levels were set individually for each
component and ranged up to £15.0m.
Where work was performed by component auditors, detailed instructions were issued by the Group audit team, who visited North America,
UK, France and Australia. Telephone discussions were also held with component auditors at these locations and with the majority of the
components that the Group audit team did not visit in person. In addition, specific audit procedures over central functions and areas of
significant judgement, including taxation, pensions, acquisitions and the impairment of goodwill and intangible assets, were performed
by the Group audit team centrally.
Materiality
The scope of our audit was 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 on the individual financial statement line items and disclosures and in evaluating 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
£16 million (2015: £15m)
How we determined it
Approximately 5% of profit before taxation
Rationale for benchmark applied
Given that the Group’s businesses are profit orientated and the directors use profit measures
to assess the performance of the business, 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 misstatements identified during our audit above £800,000 (2015: £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 97 in relation to going concern. We have nothing
to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the
directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements.
We have nothing material to add or to draw attention to.
As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going concern basis in preparing the
financial statements. 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 and Company’s ability to continue as a going concern.
143
Bunzl plc Annual Report 2016 Financial statements
Independent auditors’ report to the members of Bunzl plc continued
Other required reporting
Consistency of other information and compliance with applicable requirements
Companies Act 2006 opinion
In our opinion, based on the work undertaken in the course of the audit:
• 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; and
• the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are
required to report if we have identified any material misstatements in the Strategic report and the Directors' report. We have nothing
to report in this respect.
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:
We have no exceptions to report.
− 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
− otherwise misleading.
• the statement given by the directors on page 53, 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 and Company’s position and performance,
business model and strategy, is materially inconsistent with our knowledge of the
Group and Company acquired in the course of performing our audit.
We have no exceptions to report.
• the section of the Annual Report on page 57, 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.
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:
• the directors’ confirmation on page 35 of the Annual Report, in accordance with
provision C.2.1 of the Code, that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity.
• the disclosures in the Annual Report that describe those risks and explain how they
are being managed or mitigated.
• the directors’ explanation on page 55 of the Annual Report, in accordance with
provision C.2.2 of the Code, as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We have nothing material to add or to draw
attention to.
We have nothing material to add or to draw
attention to.
We have nothing material to add or to draw
attention to.
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of the principal
risks facing the Group and the directors’ statement in relation to the longer term viability of the Group. Our review was substantially less
in scope than an audit and only consisted of making enquiries and considering the directors’ process supporting their statements; checking
that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with
the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.
144
Bunzl plc Annual Report 2016 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 10 further 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 139, 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.
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. With respect to the Strategic report and Directors' report, we consider
whether those reports include the disclosures required by applicable legal requirements.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
27 February 2017
145
Bunzl plc Annual Report 2016 Financial statements
Shareholder information
Related undertakings
In accordance with Section 409 of the Companies Act 2006 a full list of Bunzl plc’s subsidiary undertakings and other shares held by the
Company as at 31 December 2016 is disclosed below. The registered office address of each entity or, in the case of unincorporated entities,
the principal place of business, is disclosed on pages 149 and 150. Unless otherwise stated the subsidiary undertakings listed are wholly
owned and held indirectly by Bunzl plc with ordinary shares issued (or the equivalent of ordinary shares in the relevant country of
incorporation). In some of the jurisdictions in which the Group operates share classes are not defined and in these instances, for the
purposes of this disclosure, the shares issued have been classified as ordinary shares. Bunzl plc does not have any joint venture
companies or associated undertakings. No subsidiary undertakings have been excluded from the consolidation.
Subsidiary
undertakings
Argentina
Vicsa Steelpro S.A.
Australia
ACN 082 933 579 Pty Ltd(iii)
Atlas Health Care Pty Limted
Bunzl Australasia Holdings Pty Limited(iii)
Bunzl Australasia Limited
Bunzl Brands & Operations Pty Limited
Bunzl Catering Supplies Limited
Bunzl Food Processor Supplies Pty Limited
Bunzl Outsourcing Services Limited
Network Packaging Pty Limited
Protect-A-Clean-Pty-Ltd
Robertsons Lifting & Rigging Pty Limited
Sanicare Australia Pty Limited
Star Wholesale Distribution Pty Limited
Worksense Workwear and Safety Pty Limited
Austria
Bunzl Holdings Austria GmbH
Meier Verpackungen GmbH
Belgium
Etablissements Glorieux SA
King Belgium NV
L.A.R.G.O. SPRL
Polaris Chemicals SPRL
Total Safety Supply Belgium BVBA
Varia-Pack NV
Brazil
B2B Web Distribuicao De Produtos Ltda
Bunzl Armazenagem, Logistica e Prestação De Serviços
Administrativos Ltda.
Bunzl Higiene E Limpeza Ltda
Casa Do EPI Ltda.
Dental Sorria Ltda.
DVS Equipamentos de Proteção Individual Ltda
Labor Import Comercial Importadora Exportadora Ltda
Prot Cap Artigos Para Protecao Industrial Ltda
Canada
Atlas Environmental Facilities, Ltd.
Bunzl Canada, Inc.
Emballages Maska Inc.(iii)
Jan-Mar Sales Limited(iii)
Pennystone Inc.(ii)
Plus II Sanitation Supplies Inc.
Translogic Fulfillment Systems Corporation
Wesclean Equipment & Cleaning Supplies Limited(ii)
Chile
B2B Web Distribuicao de Produtos Chile SpA
Bunzl Chile Holdings SpA
DPS Chile Comercial Limitada
146
Registered office
address*
Subsidiary
undertakings
Tecno Boga Comercial Limitada
Vicsa Safety Comercial Limitada
China
Bunzl Trading (Shanghai) Limited
Keenpac (Shenzhen) Trading Company Limited
Colombia
Importadores Exportadores Solmaq
Vicsa Steelpro Colombia S.A.S.
Czech Republic
Blyth s.r.o.
Bunzl CS s.r.o.
Denmark
Bunzl Distribution Danmark A/S
Bunzl Holding Danmark A/S
Bunzl Properties Danmark A/S
Clean Care A/S
MultiLine A/S
France
Bunzl Holdings France SAS
Comatec SAS
France Securite SAS
Groupe Pierre Le Goff – Ile De France – ODI SAS
Groupe Pierre Le Goff – Ile de France – Allodics SAS
Groupe Pierre Le Goff – Ile de France – Adage SAS
Groupe Pierre Le Goff Bourgogne Franche-Comte SAS
Groupe Pierre Le Goff Grand Ouest SAS
Groupe Pierre Le Goff Mediterranee SAS
Groupe Pierre Le Goff Nord-Est SAS
Groupe Pierre Le Goff Normandie SAS
Groupe Pierre Le Goff Rhone-Alpes Centre SAS
Groupe Pierre Le Goff Sud-Ouest SAS
Hygiadis SAS
Karpie SCI
Keenpac France SAS
Ligne T SAS
OPM France SAS
PLG Finances SAS
SCI des Saules SCI
Societe Civile Immobiliere Sainte Claire Deville SC
Germany
Baumer Betriebshygiene Vertriebsgesellschaft mbH(iii)
Bunzl Holding GmbH(iii)
Bunzl Verpackungen GmbH
Inkozell Zellstoff-Vertrieb GmbH
Logmed GmbH
Majestic GmbH
Mo Ha Ge Mommsen Handelsgesellschaft mbH
MoHaGe Holdings GmbH
PKA Klöcker GmbH(iii)
Protemo GmbH
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Bunzl plc Annual Report 2016 Related undertakings continued
Subsidiary
undertakings
Hong Kong
Bunzl Asia Limited(iii)
Earthwise Bag Company (Hong Kong) Limited
Keenpac Asia Limited
Hungary
Bunzl Magyarország Kft.
Propack Kereskedelmi Korlatolt Felelossegu Tarsasag
Silwell Kereskedelmi Korlátolt Felelösségü Társaság
Tecep Management Kereskedelmi Es Szolgaltato KFT.(iii)
Ireland
Bunzl Finance Ireland Unlimited Company(ii)
Bunzl Ireland Limited
Cambrex Unlimited Company
DG Distributors and Vendors Limited
Irish Merchants Unlimited Company
Romneya Limited
Thomas McLaughlin (Ireland) Limited
Tishu MFG Limited
Yorse Ireland Unlimited Company
Israel
M.S. Global Limited
Meichaley Zahav Packages Ltd
Silco (Utensils) A.S. Limited(iii)
Italy
Keenpac Italia S.R.L.
Mexico
Bunzl De Mexico SA de CV(ii)
Bunzl Servicios, SA. De CV
Cool Pak AG Packaging, S. de R. L. de C.V.
Cool Pak Exports S. de R.L. de C.V.(iv)
CP AG Servicios, S. de R.L. de C.V.
Earthwise Bag Company De Mexico, S. DE. R.L. DE C.V.(ii)
Espomega S. de R.L. de C.V.(iii)
Proepta, S.A. DE C.V.(iii)
Steelpro S.A de C.V.(iii)
Netherlands
Allshoes Benelux BV
Bunzl Outsourcing Services B.V.
Bunzl Verpakkingen Arnhem B.V.
Bunzl Verpakkingen B.V.
Bunzl Verpakkingsgroep B.V.
Conpax Belfort B.V.
De Ridder BV
King Benelux Holding BV
King Nederland BV
Majestic Products B.V.
Worldpack Trading B.V.
New Zealand
Bunzl Food Processor Supplies (NZ) Limited
Bunzl Outsourcing Services NZ Limited
Corded Strap (NZ) Limited
ICB Cleaning Supplies Limited
Nelson Packaging Supplies Limited
Peru
Vicsa Safety Peru S.A.C.
Puerto Rico
Melissa Sales Corp.
Registered office
address*
Subsidiary
undertakings
Registered office
address*
Romania
Bunzl Distributie SRL
Slovakia
Eurobal, spol. s.r.o.
Spain
Bunzl Distribution Spain, S.A.U.
Faru, S.L.U.
Guantes Juba, S.A.U.
Juba Personal Protective Equipment, S.L.U.
Lovilia Spain, S.L.U.
Marca Proteccion Laboral, S.L.U.
Marvel Proteccion Laboral, S.L.U.
Portchartain Inversiones, S.L.U.
Quirumed, S.L.U.
Switzerland
Distrimondo AG
Keenpac (Switzerland) SA
MMH Holding AG
Uehlinger AG
Weita AG
Weita Holding AG
WGS AG
Turkey
Bursa Pazari İnşaat Sanayi Ve Ticaret Anonim Şirketi (80%)
Istanbul Ticaret Hirdavat Sanayi A.Ş.
Istanbul Ticaret İş Güvenliği ve Endüstriyel Ürünler A.Ş.
Kullanatmarket Elektronik Pazarlama Ticaret Anonim
Şirketi
United Kingdom
365 Healthcare Limited
A. & E. Russell Limited
Advanced Medical Products (Clacton) Limited
Aptfine Limited
Atollbyte Limited(i)
Birchfolder Limited
Bradlees Limited
Bunzl American Holdings (No.1) Limited
Bunzl American Holdings (No.2) Limited
Bunzl American Holdings (No.3) Limited
Bunzl American Holdings (No. 4)
Bunzl Australia Forex LLP
Bunzl Australian Holdings Limited
Bunzl Finance Public Limited Company(i)
Bunzl Group Services Limited(i)
Bunzl Overseas Holdings Limited
Bunzl Overseas Holdings (No.2) Limited(i)
Bunzl Overseas Holdings (No.3) Limited
Bunzl Overseas Holdings (No.4) Limited
Bunzl Pension Trustees Limited(i)
Bunzl Plastics Limited(i)
Bunzl Properties Limited(i)
Bunzl Retail & Healthcare Supplies Limited
Bunzl Retail Supplies Holdings Limited
Bunzl UK Limited
Buwier Limited
Care Shop Limited
Central Catering Supplies Limited
Classic Bag Company Holdings Limited
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109
109
109
147
Bunzl plc Annual Report 2016 Financial statements
Shareholder information continued
Related undertakings continued
Subsidiary
undertakings
Continental Chef Supplies Limited
Dialene Limited
Greenham Trading Limited(i)
GrowModule 365 Limited
Guardsman Limited
Henares Limited(i)
Howper 800 Limited(iii)
Indigo Concept Packaging Limited
Irish Merchants (Northern Ireland) Limited
Keenpac Limited
Kingsbury Packaging (Limavady) Ltd
Lee Brothers Bilston Limited
Lockhart Catering Equipment Limited
London Bio Packaging Limited
Michael Davies and Associates Limited
Portabottle Limited
Portabrands Limited
P.O.S. Direct Limited
Rafferty Hospitality Products Limited
Selectuser Limited(ii)
Southern Syringe Services Limited
SPH 3102 Limited
The Classic Printed Bag Company Limited
The Porta Group Limited
Thomas McLaughlin
Thompson Christmas Company Limited
Thompson Medd Limited
Tri-Star Packaging Supplies Limited
Universal Hospital Supplies Limited
Walsh and Jenkins Holdings Limited
Walsh and Jenkins Limited
Wavelength Handling & Distribution Services Limited
Woodway Packaging Limited
Woodway UK Limited
Woodway UK South Limited(iii)
WOW Catering Supplies Limited
Wycombe Marsh Paper Mills Limited(i)
Yorse No. 1 Limited
Yorse No. 2 Limited
Yorse No. 3 Limited(i)
Registered office
address*
109
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109
109
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109
110
109
111
109
109
109
109
109
109
109
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106
109
109
109
109
109
109
109
109
109
109
109
109
United States
Arch Logistics, LLC
Bunzl Corporate Holdings, Inc.
Bunzl Distribution California, LLC
Bunzl Distribution Leasing, Inc.
Bunzl Distribution Midatlantic, LLC
Bunzl Distribution Midcentral, Inc.
Bunzl Distribution Northeast, LLC
Bunzl Distribution Oklahoma, Inc.
Bunzl Distribution Southeast, LLC
Bunzl Distribution Southwest, L.P.
Bunzl Distribution USA, LLC
Bunzl Finance L.L.C.(ii)
Bunzl Holdings Inc.
Bunzl International Services, Inc.
Bunzl Mexican Holdings II, LLC
Bunzl Mexican Holdings, LLC
Bunzl Midatlantic, LLC
148
115
115
123
122
124
115
115
112
115
118
123
115
123
123
115
115
115
Subsidiary
undertakings
Bunzl Minneapolis, LLC
Bunzl North American Holdings, Inc.
Bunzl Northeast, LLC
Bunzl Processor Distribution, LLC
Bunzl Retail, LLC
Bunzl Southwest Holdings, LLC
Bunzl US Holdings LLC
Bunzl USA Holdings LLC
Bunzl USA LLC
Bunzl Utah, LLC
Bunzl Western Holdings, Inc.
Cool-Pak, LLC
Destiny Packaging, LLC
Earthwise Bag Company, Inc.
Foodhandler Inc.
Green Source, LLC
Hi-Valu, LLC
International Sourcing Company Inc.(iii)
John Tillman Company
Keenpac, LLC
Keepsafe, LLC
Masteragents LLC
Papercraft Southwest, LLC
Prime Source, LLC
R3 Safety, LLC
R3, LLC
SAS Safety Corporation
Schwarz Paper Company, LLC
Steiner Industries, Inc.
TSN East, LLC
TSN West, LLC
U.S. Glove Co., Inc.
Uruguay
Steelpro Safety S.A.
Other
shareholdings
Viner-Pack Gyarto Kereskedelmi Es Szolgaltato
Korlatolt Felelossegu Tarsasag (20%)
Registered office
address*
122
123
115
115
115
120
115
120
123
119
115
123
123
127
113
115
115
117
123
115
114
121
123
115
115
116
123
123
121
115
115
125
128
Registered office
address*
65
* For the list of registered office addresses and principal places of
business, refer to the following section headed ‘List of registered
office addresses’ which forms part of these financial statements.
Classifications key
(i) Directly owned by Bunzl plc
(ii) Holding of ordinary and preference shares
(iii) Holding of more than one class of ordinary share
(iv) Holding of preference shares
Bunzl plc Annual Report 2016 List of registered office addresses
Address
Maipú 1300, piso 13, Ciudad de Buenos Aires, Argentina
34-48 Cosgrove Road, Enfield NSW 2136, Australia
37 Rocco Drive, Scoresby, Victoria 3176, Australia
55 Sarah Andrews Close, Erskine Park NSW 2759, Australia
Level 2, 700 Springvale Road, Mulgrave VIC 3170, Australia
Diepoldsauer Straße 37, 6845 Hohenems, Austria
1300 Wavre, Avenue Sabin 23, 1300 Wavre, Belgium
149A Chaussee de Coutrai, 7740 Pecq, Belgium
Avenue Sabin 23, 1300 Wavre, Avenue Sabin 23, Belgium
Aarschotsesteenweg 114 3012 Leuven (Wilsele), Belgium
Oudenaardsesteenweg 19 9000 Ghent, Belgium
Rue du Cerf 190 1332 Genval, Belgium
Rua Avelino Hilario Muniz, 699, Contagem, Minas Gerais, Brazil
Rua Crepusculo, No 58, Belo Horizonte, Minas Gerais, Brazil
Rua São Domingos da Prata, 200, Bairro Vila Barros, CEP 07193-
160, Guarulhos, São Paulo, Brazil
City of Osasco, State of São Paulo, at Rua Padre Damaso, No. 165 &
173, Centro, 06016-010, Brazil
Avenida Doutor Mauro Lindemberg Monteiro 140, Osasco, São
Paulo, CEP 06278-010, Brazil
Avenida Ermano Marchetti, 580 Agua Branca, City of São Paulo,
São Paulo, CEP 05038-000, Brazil
Estrada Velha de Guarulhos – São Miguel, 5135, Box 311 – Jardim
Arapongas, Guarulhos, São Paulo, CEP 07210-250, Brazil
7450 Pion Avenue, Saint-Hyacinthe QC J2R 1R9, Canada
77 King Street West, Suite 400, Toronto ON M5K 0A1, Canada
Dentons Canada LLP, 2900, 10180 – 101 Street, Edmonton AB
T5J 3V5, Canada
SNR Dentons LLP, 77 King Street West, Suite 400, Toronto ON
M5K 0A1, Canada
Stewart McKelvey, Suite 900, Purdy’s Wharf Tower One, 1959 Upper
Water Street, Halifax, NS B3J 2X2, Canada
3900-1 Place Ville-Marie, Montréal Québec H3B 4M7, Canada
Avenida Boulevard, Aeropuerto Norte #9649, Pudahuel, Santiago,
Chile
Antiguo Camino a Coquimbo S/N Lote 1-3/ 1-9, Colina, Sanitago,
Chile
Av. Presidente Eduardo Frei Montalva 5151, Conchalí, 8550678
Santiago, Chile
Floor 9, Xinpeng Plaza, No. 200, Lane 91, E'shan Road, Pudong
New Area, Shanghai, China, 200127
Room 912, Central Business Tower, 88 Fuhua 1st Road, Futian,
Shenzhen, China
Carrera 30 No. 15-30, Bogota D.C., Colombia
Funza, (Cundinamarca), Colombia
Dolnokrčská 2029/54a, Krč, Praha 4, 140 00, Czech Republic
Prague 10 – Uhřiněves, Přátelstvi 1011, 10400, Czech Republic
Greve Main 30, 2670 Greve, Denmark
Indkildevej 2 c, DK-9210, Aalborg SØ, Denmark
Kirkebjergvej 17, 4180 Sorø, Denmark
556 Chemin du Mas de Cheylon, CAP Delta 30941, Nimes, France
168 avenue Charles de Gaulle, 9220 Neuilly-sur-Seine, Paris,
France
Rue Charles Remi Arwoult, 21700 Nuite Saint Georges, France
Rue Nungesser et Coli d2A Nantes Atlantique, 44860 Saint-Aignan
de Grand Lieu, France
ZI Val de Seine, 17 avenue Nobel, 92390 Villeneuve la Garenne,
France
Zone d'activite Sud Saint Jean, 57130 Jouy aux Arches, France
2 Rue Paul Vaillant Couturier, 76120 Le Grand Quevilly, France
20 rue VEGA, 44470 Carquefou, France
Quai Louis Aulagne, 69 190 Saint Fons, France
29 avenue des Morillons, ZA des Doucettes, 95140 Garges les
Gonesses, France
Key
1
2
3
4
5
6
7
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9
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12
13
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18
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32
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36
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38
39
40
41
42
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45
46
47
Address
Boulevard Francois-Xavier Faffeur, Zone Industrielle Lanollier,
Key
11000, Carcassonne, France
440 route de Rosporden, 29000 Quimper, France
5 avenue Gutenberg, ZA Pariwest, 78310 Maurepas, France
Parc d'activite Des Lacs, 22 rue Saint Exupery, 33 290 Blanquefort,
France
50 Avenue d'Allemagne, Rond Point de L'Europe, ZA Albasud, 82000
Montauban, France
585, Rue Alain Colas, 29200, Brest, France
Bahnhofstrasse 72, 27404 Zeven, Germany
Elbestraße 1-3, 45768 Marl, Germany
Friedrichstrasse 2, 40699 Erkrath, Germany
Malteserstrasse 139-143, 12277, Berlin, Germany
Maysweg 11, 47918 Tönisvorst, Germany
Room 1303, 13th Floor, Nan Fung Tower, 173 Des Voeux Road
Central, Hong Kong
Unit 3-4 18F Tower 6, China Hong Kong City, Tsim Sha Tsui,
Kowloon, Hong Kong
11th Floor, One Pacific Place, 88 Queensway, Hong Kong
H-1097 Budapest, Gyáli út 37/A, Hungary
Vendel Park, Erdőalja út 3., 2051 Biatorbágy, Hungary
2310 Szigetszentmiklos, Kantor ut 10, Hungary
2336 Dunavarsány, 071/33 hrsz, Hungary
Arthur Cox Building, Earlsfort Terrace, Dublin 2, Ireland
Emek Ha'Ela 250, Modi'in, P.O.B 553, LOD 7110601, Israel
4 Kinneret Street, POB 1139, Airport City, Ben Gurion Airport,
7019802, Israel
Via Pellicceria n. 10, 50123, Florence, Italy
Felipe Eugenio Marrón Montané, Avenida Pablo Neruda No. 2839,
Colonia Providencia. C.P. 44630, Guadalajara, Jalisco, Mexico
Galileo # 11, Colonia Polanco V Secc., Delagación Miguel Hidalgo,
11560, Ciudad de México, Mexico
Pablo A. Gonzalez Garza Pte., 820, Chepevera, Monterrey, Nuevo
Leon, 64030, Mexico
Pablo Neruda #2839, Colonia Providencia, 44639 Guadalajara,
Jalisco, Mexico
Ave. Bonifacio Salinas 203, Col Central de Carga, CP67129, CD
Guadalupe, Nuevo Leon, Mexico
Arzipe Valdes & Marco, Ave. Batallón de San Patricio #111, Piso 28,
Despacho 2801, Colonia Valle Oriente, San Pedro Garza Garcia,
Nuevo León, C.P. 66269, Mexico
Bosques de Ciruelos No. 180, PP 101 Bosques de las Lomas,
Delagacion Miguel Hidalgo, D.F. 11700, Mexico
Carretera Miguel Alemán KM21 Edificio 4C Prologis Park, Apodaca,
N.L., México C.P. 66627
Curieweg 19, 3208, K J Spijkenisse, Netherlands
Delta 2, 6825 MR Arnhem, Netherlands
Esp 125, 5633 AA, Eindhoven, Netherlands
Oosterwerf 4, 1911 JB, Uitgeest, Netherlands
Rondebeltweg 82, 1329 BG Almere, Netherlands
Stephensonstraat 5, 4004JA Tiel, Netherlands
Barnsteenstraat 1-A, Alkmaar, Netherlands
686 Rosebank Road, Avondale, Auckland, 1026, New Zealand
97 Sawyers Arm Road, Christchurch, 8052, New Zealand
Av. Santa Rosa 350. Ate., Lima, Peru
Corporate Creations Puerto Rico Inc., Urbanizacion Country Club,
GS-31 Calle 206, Carolina PR 00982, Carolina County,
Puerto Rico
Comuna Dragomiresti Vale, Sat Dragomiresti Deal, DE 287/1,
Judetul Ilfov, Bucharest West Logistics Park, Cladirea C, Unitatea
C01, Romania
Na pantoch 18, 831 06 Bratislava, Slovakia
Parque Empresarial Las Mercedes, Edefficio 5, 3 Planta, Avenida
de Aragon 330, Madrid 28022, Spain
48
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89
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149
Bunzl plc Annual Report 2016 Financial statements
Shareholder information continued
List of registered office addresses continued
Address
Key
Santo Domingo De La Calzada, La Rioja, 26250, Carretera De
Logrono, Spain
Calle Filats, 8 Polg. Industrial Prologis Park, Sant Boi de Llobregat,
Barcelona, Spain
Calle Moroder No3, Moncada, Valencia, Spain
Cartagena, Murcia, poligono industrial Cabezo Beaza, Avenida
Bruselas, 30353, esquina calle Amsterdam, parcela R 100, Spain
Cartagena, Murcia, poligono industrial Cabezo Beaza, Avenida
Luxemburgo, calle Artes y Oficios, nave B-3, Spain
Edificio Plaza, Nave 5, Ali-4 Plataforma Logistica de Zaragoza,
50197, Zaragoza, Spain
Güterstrasse, 4313 Möhlin, Switzerland
Nordring 2, 4147 Aesch, Switzerland
Oberebenestrasse 53, CH-5620 Bremgarten, Switzerland
c/o ALR Fiduciaire Rummel SA, ch. Valmont 224, 1260, NYON,
Switzerland
c/o Weita AG, Nordring 2, 4147 Aesch, Switzerland
Akçaburgaz Mahallesi, 3137. Sokak, No.19 Esenyert, Istanbul,
Turkey
Tersane Cad. No:115 Karaköy, Istanbul, Turkey
Yukarıdudullu Mah., Nato Yolu Cad., Metanet Sok. No:2, 34775
Ümraniye, Istanbul, Turkey
103 High Street, Waltham Cross, Hertfordshire, EN8 7AN,
United Kingdom
25-27 Mallard Close, Earls Beaton, Northampton, NN6 0JF,
United Kingdom
c/o Lindsays, 1 Royal Bank Place, Buchanan Street, Glasgow,
G1 3AA, United Kingdom
York House, 45 Seymour Street, London, W1H 7JT, United Kingdom
72 Cathedral Road, Armagh, BT61 8AG, Northern Ireland,
United Kingdom
Arthur Cox, Victoria House, Gloucester Street, Belfast, Northern
Ireland, BT1 4LS, United Kingdom
406 South Boulder #400, Tulsa OK 74103, United States
Corporate Creations Network Inc., 15 North Mill Street, Nyeck New
York, NY 10960, United States
Corporate Creations Network Inc., 119 East Court Street,
Cincinnati, OH 45202, United States
Corporate Creations Network Inc., 12747 Olive Boulevard, Suite
300, St. Louis, MO 63141, St. Louis County, United States
Corporate Creations Network Inc., 1922 Ingersoll Avenue, Des
Moines, IA 50309 IL, United States
Corporate Creations Network Inc., 205 Powell Place, Brentwood TN
37027, United States
Corporate Creations Network Inc., 2425 W Loop South #200,
Houston TX, United States
Corporate Creations Network Inc., 2825 East Cottonwood Parkway
#500, Salt Lake City UT 84121, United States
Corporate Creations Network Inc., 3411 Silverside Road, Rodney
Building #104, Wilmington DE 19810, United States
Corporate Creations Network Inc., 350 S. Northwest Highway #300,
Park Ridge IL 60068, United States
Corporate Creations Network Inc., 5200 Willson Road #150, Edina
MN 55424, United States
Corporate Creations Network Inc., 6802 Paragon Place #410,
Richmond, VA 23230, Henrico, United States
Corporate Creations Network, Inc., 1001 State Street #1400, Erie
PA 16501, United States
Corporate Creations Network, Inc., West 505 Riverside Avenue
#500, Spokane WA 99201, United States
One City Place Drive, Suite 200, Saint Louis MO63141, United States
Corporate Creations Network Inc., 1430 Truxtun Avenue, 5th Floor,
Bakersfield CA 93301, United States
César Cortinas 2037, Montevideo, Uruguay
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150
Financial calendar
Annual General Meeting
Results for the half year to 30 June 2017
Results for the year to 31 December 2017
Annual Report circulated
2017
19 April
29 August
2018
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 2016 the Company had 4,587* (2015: 5,225)
registered shareholders who held 335.6 million (2015: 335.2 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
3,964
380
151
42
50
4,587
1
4
10
9
76
100
* The decrease in the number of registered shareholders during
2016 was principally due to a wealth manager consolidating the
beneficial holdings of its clients and operating a reduced number
of pooled accounts rather than a large number of individual
segregated accounts.
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 (0) 370 889 3257
Fax +44 (0) 370 703 6101
Email webqueries@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:
• elect for electronic communications;
• 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 confirmations.
Bunzl plc Annual Report 2016 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.
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. To use this method
of payment please contact our registrar on +44 (0) 370 889 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. Shareholders who have elected to
have their dividends paid by BACS and who have registered a valid
email address with the registrar will be able to access their dividend
confirmations electronically at www.investorcentre.co.uk. If no such
email address has been registered, shareholders will receive their
dividend confirmations by post.
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. 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 with ticker BZLFY. 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) 370 889 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) 370 703 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.
151
Bunzl plc Annual Report 2016 Five year review
Revenue
Operating profit
Finance income
Finance expense
Disposal of business
Profit before income tax
Income tax
Profit for the year attributable to the Company’s equity holders
2016
£m
7,429.1
409.7
7.1
(53.9)
–
362.9
(97.0)
265.9
2015
£m
6,489.7
366.5
4.8
(48.6)
–
322.7
(90.0)
232.7
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
2012*
£m
5,359.2
293.8
3.6
(37.6)
4.0
263.8
(72.5)
191.3
Basic earnings per share
80.7p
71.0p
64.5p
63.5p
58.7p
Non-GAAP measures†
Adjusted operating profit
Adjusted profit before income tax
Adjusted profit for the year
Adjusted earnings per share
525.0
478.2
349.6
106.1p
455.0
411.2
298.1
91.0p
429.8
387.8
281.6
86.2p
414.4
372.2
268.2
82.4p
352.4
318.4
230.2
70.6p
* Restated on adoption of IAS 19 (revised 2011) ‘Employee Benefits’.
† See Note 2w on page 102 for further details of the non-GAAP measures.
152
Bunzl plc Annual Report 2016 Printed by Park Communications on
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