STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
If you are looking at this on a tablet,
the search, print and go to page functions
will not work.
WELCOME TO THE BUNZL PLC
ANNUAL REPORT 2017
Use the interactive PDF control panel
along the top of each page to help you
find information and navigate around
this document easily.
Go to home
page
Search
Print
Previous
view
Go to page
Go to
contents
Navigate within
the report
Links
Dynamic links within the text are
indicated when the user rolls over
hyperlinks and the mouse cursor
changes to a pointed hand.
Full screen mode
This PDF is set up to view in full
screen mode. To turn this off, press
esc and the full toolbar is revealed.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DELIVERING
BUSINESS
SOLUTIONS
Bunzl plc
Annual Report 2017
STRATEGIC REPORT
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DELIVERING
BUSINESS SOLUTIONS
GLOBALLY
Bunzl plc is a focused and successful international
distribution and outsourcing group. We support
businesses all over the world with a variety of products
and solutions 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 market sectors in the Americas,
Europe, Australasia and Asia.
The Annual Report can
be downloaded online.
To find out more visit
www.bunzl.com
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
Our long term track record of strong cash generation has enabled
us to pay a growing dividend over the past 25 years and to support
our growth strategy by making acquisitions and reinvesting
in the underlying business.
Adjusted earnings per share*
Cash conversion†
119.4p
+7%
(2016: 106.1p)
Growth at constant exchange rates
(Actual exchange rates +13%)
97%
(2016: 99%)
Dividend per share
46.0p
+10%
(2016: 42.0p)
Revenue
Adjusted operating profit*
Adjusted profit before income tax*
£8,580.9m
+10%
(2016: £7,429.1m)
Growth at constant exchange rates
(Actual exchange rates +16%)
£589.3m
+6%
(2016: £525.0m)
Growth at constant exchange rates
(Actual exchange rates +12%)
£542.6m
+7%
(2016: £478.2m)
Growth at constant exchange rates
(Actual exchange rates +13%)
Operating profit
Profit before income tax
Basic earnings per share
£456.0m
(2016: £409.7m)
£409.3m
(2016: £362.9m)
94.2p
(2016: 80.7p)
Actual exchange rates +11%
Actual exchange rates +13%
Actual exchange rates +17%
* Before customer relationships amortisation, acquisition related items and, where relevant, the associated tax (see Note 2w on page 110).
† See the key performance indicator on page 23.
Growth at constant exchange rates is calculated by comparing the 2017 results to the results for 2016 retranslated at the average exchange rates used for 2017.
CONTENTS
Strategic report
01 Financial highlights
02 Group at a glance
04 Chairman’s statement
06 Chief Executive’s review
09 Q&A with the Chief Executive
10 Investment case
11 Market environment
12 Our business model
14 Our strategy
22 Key performance indicators
24 Financial review
29 Our management team
30 Operating review
38 Our people
42 Corporate responsibility
51 Principal risks and
uncertainties
Directors’ report
56 Board of directors
58 Corporate governance report
65 Nomination Committee report
67 Audit Committee report
71 Directors’ remuneration report
96 Other statutory information
Financial statements
100 Consolidated income
statement
101 Consolidated statement of
comprehensive income
102 Consolidated balance sheet
103 Consolidated statement
of changes in equity
104 Consolidated cash flow
statement
105 Notes
141 Company balance sheet
142 Company statement
of changes in equity
143 Notes to the Company
financial statements
148 Statement of directors’
responsibilities
149 Independent auditors’ report
to the members of Bunzl plc
155 Shareholder information
161 Five year review
1
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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
CONTINENTAL EUROPE
Revenue
£1,610.4m
% of 2017 revenue
19%
Adjusted operating profit*
£151.1m
NORTH AMERICA
Revenue
£5,061.1m
% of 2017 revenue
59%
Adjusted operating profit*
£318.3m
Revenue increased 10% at constant exchange rates.
Revenue up 12% at constant exchange rates.
Adjusted operating profit* up 4% at constant exchange rates.
Adjusted operating profit* up 13% at constant exchange rates.
Decrease in operating margin* from 6.6% to 6.3%.
Improvement in operating margin* from 9.3% to 9.4%.
Return on operating capital down from 57.8% to 53.6%.
Return on operating capital down from 58.8% to 57.5%.
Read more about North America on page 30
Read more about Continental Europe on page 32
UK & IRELAND
Revenue
£1,190.8m
% of 2017 revenue
14%
Adjusted operating profit*
£88.5m
REST OF THE WORLD
Revenue
£718.6m
% of 2017 revenue
8%
Adjusted operating profit*
£53.9m
Revenue increased 9% at constant exchange rates.
Revenue up 5% at constant exchange rates.
Adjusted operating profit* up 5% at constant exchange rates.
Adjusted operating profit* up 5% at constant exchange rates.
Operating margin* down from 7.7% to 7.4%.
Operating margin* unchanged at 7.5%.
Return on operating capital down from 104.9% to 90.0%.
Return on operating capital up from 30.2% to 32.4%.
Read more about UK & Ireland on page 34
Read more about Rest of the World on page 36
* Before customer relationships amortisation and acquisition related items.
2
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
MARKETS
SERVED
% OF 2017 REVENUE
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.
29%
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.
27%
SAFETY
A complete range of personal
protection equipment, including
gloves, boots, hard hats, ear
and eye protection and other
workwear, to industrial and
construction markets.
12%
HEALTHCARE
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.
7%
CLEANING & HYGIENE
Cleaning and hygiene materials,
including chemicals and hygiene paper,
to cleaning and facilities management
companies and industrial and public
sector customers.
12%
OTHER
A variety of product ranges
to other end user markets.
3%
RETAIL
Goods not for resale, including packaging
and other store supplies and a full range
of cleaning and hygiene products, to
retail chains, boutiques, office supply
companies, department stores, home
improvement chains and related
e-commerce sales channels.
10%
3
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CHAIRMAN’S STATEMENT
Bunzl’s success is based on the strength and resilience of our business model,
the execution of a consistent strategy, understanding our customers’ requirements
and our ability to deliver products and solutions when and where they are needed.
Executing our
consistent and proven
strategy has resulted in
another successful year
with continued growth
in earnings and dividends
through a combination
of organic and
acquisition growth.
Philip Rogerson
Chairman
Revenue £bn
£8.6bn
5.4
5.1
4.6
4.8
4.2
8.6
7.4
6.1
6.2
6.5
Adjusted earnings per share* p
08–12 restated on adoption of IAS 19 (revised 2011)
119.4p
67.6
70.6
55.4
51.8
59.7
119.4
106.1
86.2
82.4
91.0
08
09
10
11
12
13
14
15
16
17
08
09
10
11
12
13
14
15
16
17
Results
Against the background of variable
macroeconomic and market conditions
across the countries and sectors in which we
operate, I am pleased to report that Bunzl
produced another good set of results in 2017.
Overall currency translation movements due
to the weakening of sterling during 2016 had
a significant positive impact on the reported
Group growth rates at actual exchange rates,
although the impact for the year as a whole
was somewhat less than that seen during the
first half of the year.
Group revenue increased 16% to
£8,580.9 million (2016: £7,429.1 million)
and adjusted operating profit before
customer relationships amortisation
and acquisition related items was up
12% to £589.3 million (2016: £525.0 million).
Adjusted earnings per share were 119.4p
(2016: 106.1p), an increase of 13%.
At constant exchange rates, revenue
increased by 10% and adjusted operating
profit rose by 6% with the Group operating
margin declining from 7.1% to 6.9%.
Adjusted earnings per share were up 7%.
Return on average operating capital
decreased from 55.9% in 2016 to 53.1%
due to a lower operating margin and
higher operating capital in the underlying
business and the impact of a lower return
on operating capital from acquisitions.
Return on invested capital of 16.0% was
down from 16.7% in 2016 principally due
to the effect of acquisitions.
Dividend
The Board is recommending a final
dividend of 32.0p. This brings the total
dividend for the year to 46.0p, up 10%
compared to 2016. Shareholders will again
have the opportunity to participate in our
dividend reinvestment plan.
Strategy
We have continued to pursue our
consistent and proven strategy of developing
the business through organic growth,
consolidating our markets through focused
acquisitions and continuously improving the
quality of our operations and making our
businesses more efficient. Once again this
has delivered another successful year of
growth for the Group.
We seek to achieve organic growth by
applying our resources and expertise to offer
an efficient and cost effective one-stop-shop
solution to enable our customers to reduce
or eliminate the hidden costs of sourcing and
distributing a broad range of goods that are
essential to the successful operation of their
businesses but which they do not themselves
resell. 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. We are continually
looking to enhance our service offering by
providing a variety of value-added, innovative
and customised solutions, thereby building
long term relationships with our customers.
4
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Adjusted operating profit* £m
£589m
589
525
455
430
414
352
336
296
307
281
08
09
10
11
12
13
14
15
16
17
The level of organic revenue growth in 2017
was substantially higher than the previous
year, principally due to additional business
won in North America towards the end
of 2016.
Acquisition activity accelerated in 2017 with
the Group agreeing to make 15 acquisitions
during the year with a total committed spend
of £616 million, thereby adding annualised
revenue of £621 million. This was a record
level of acquisition spend for Bunzl,
significantly exceeding the previous high of
£327 million achieved in 2015. The
businesses purchased have helped to
strengthen our position in many of the
markets that we serve in both new and
existing geographies. In addition, the
acquisition of Revco in the US was announced
and completed at the beginning of 2018. In
early February 2018 we also completed the
sale of OPM, a non-core business that was
principally involved in the sale of SodaStream
products to retailers in France.
Investment
Over time we have steadily invested in
the business to support our growth strategy
and to expand and enhance our asset base.
During the year we continued to improve
our existing facilities and opened new ones,
both as a result of acquisitions and by
consolidating our warehouse footprint in
order to make it more efficient. Our ability
to serve our customers in the most effective
way is critical to our success. In striving to
do so, we continuously upgrade our IT
systems and digital platforms as we
integrate new businesses into the Group’s
operations and increase the functionality of
our existing systems and platforms, thereby
enabling us to enhance our customer
offering and retain a competitive advantage.
Share price range p
High
2,465p
Low
2,016p
2,465
2,436
1,950
1,820
1,450
1,167
884
676
1,367
1,014
852
2,016
1,671
1,735
11
12
13
14
15
16
17
757
542
08
675
482
09
777
616
10
Corporate responsibility
We have continued to make improvements in
our corporate responsibility (’CR’) approach
by focusing on the environmental
sustainability of our operations as well as
our role in assisting both our customers and
suppliers to improve the sustainability of
their own businesses. This year saw the
expansion of the remit of the quality
assurance/quality control team in Shanghai
not only to undertake audits of our key Asian
suppliers to assist them in meeting our
stringent standards but also to work with
suppliers in countries such as Mexico, Brazil,
Romania and Turkey to strengthen further
their already robust practices. We believe
that building relationships, capacity and trust
with suppliers is critical. To this end, we
organised a conference during the year for
our Asian suppliers to showcase examples
of good practice, build CR awareness and
provide a helping hand in how to identify
and remedy CR issues. We also adopted
a specific supplier code of conduct during
the year which is in the process of being
rolled out across our supplier base.
As part of our policy to provide our
customers with high quality and good
value products, companies within the
Group help their customers to achieve
their sustainability goals by developing and
offering environmentally friendly products
and innovative solutions.
People
We recognise that the people best placed to
make a decision in relation to our day-to-day
operations are those who understand the
local circumstances and our customers.
Bunzl is therefore rightly proud of its
decentralised organisation structure which
allows each of our business areas to decide
5
Bunzl plc Annual Report 2017
*
Before customer relationships amortisation,
acquisition related items and, where relevant,
the associated tax.
where they focus their efforts. At the same
time, functional knowledge and expertise is
shared across businesses to the benefit of
all. I have been delighted once again by the
contribution and commitment of all our
employees. Whenever I visit our operations
around the world I am reminded of the
enthusiasm with which our people undertake
their responsibilities and their individual
accountability to improving performance
which is key to the ongoing growth and
success of Bunzl. On behalf of the Board,
I would very much like to thank all our
hardworking and loyal employees.
Board
David Sleath, who had served as a non-
executive director since 2007, retired after
the Company’s Annual General Meeting in
April 2017. During his time with us, he also
served as Chairman of the Audit Committee
and Senior Independent Director. His sound
advice and significant contribution to our
success are greatly appreciated. Lloyd
Pitchford, who is currently Chief Financial
Officer of Experian plc, was appointed as
a non-executive director with effect from
1 March 2017 and assumed the role of
Chairman of the Audit Committee upon
David’s retirement when Vanda Murray
also became the Senior Independent
Director. Stephan Nanninga, a Dutch
national who has had extensive international
experience across a range of businesses
operating in the distribution and service
sectors, joined the Board as a non-executive
director on 1 May 2017.
Philip Rogerson
Chairman
26 February 2018
Read our Corporate governance report
on page 42
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CHIEF EXECUTIVE’S REVIEW
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.
HIGHLIGHTS
Acquisitions
Record level of committed acquisition
spend of £616 million adds 15 businesses
to the Group.
North America
Improved organic revenue growth from
significant additional grocery business,
albeit at lower margins.
Continental Europe
Strong increases in revenue and
operating profit with operating margin
up 10 basis points to 9.4%.
UK & Ireland
Return to organic revenue growth with
operating margin down 30 basis points
principally due to higher import prices
from weaker sterling.
Rest of the World
Good growth in revenue and operating
profit with margins stable.
To find out more see pages 30 to 37
Our deep understanding and extensive
knowledge of the fragmented markets in which
we operate and our ability to offer total solutions
that provide quantifiable benefits to our customers
have once again contributed to our success.
Frank van Zanten
Chief Executive
Operating performance
With 87% of the Group’s revenue generated
outside the UK, the weakening of sterling
against most currencies in 2016 had a
significant positive translation impact on
the Group’s reported results in 2017,
increasing revenue, profits and earnings
by approximately 6%. 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 2016 at the average rates used for 2017.
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 items) while operating
margin refers to adjusted operating profit
as a percentage of revenue.
Revenue increased 10% (16% at actual
exchange rates) to £8,580.9 million due to
the positive impact of acquisitions together
with an improved level of organic growth.
Consistent with the trends seen during
the fourth quarter of 2016, organic revenue
continued to increase in 2017 and was up
4.3% compared to the prior year, mainly as a
result of the additional business won in North
America towards the end of 2016. Operating
profit was £589.3 million, an increase of 6%
(12% at actual exchange rates). The
percentage growth in operating profit was
lower than that of revenue principally due to
the impact of the business won in North
America being at an operating margin below
the Group average, resulting in a decline in
6
Bunzl plc Annual Report 2017
the Group operating margin by 20 basis
points at both constant and actual exchange
rates to 6.9%.
In North America, revenue rose 10%
(16% at actual exchange rates) due to the
impact of higher organic growth together
with the effect of acquisitions, while
operating profit increased 4% (10% at actual
exchange rates) as the operating margin
declined 30 basis points at both constant
and actual exchange rates to 6.3% due to the
impact of the lower margin business won.
Revenue in Continental Europe rose 12%
(19% at actual exchange rates) as a result
of the impact of acquisitions and an improved
level of organic revenue growth, with
operating profit up 13% (19% at actual
exchange rates) and the operating margin
up 10 basis points to 9.4% at both constant
and actual exchange rates. In UK & Ireland,
revenue was up 9% at both constant and
actual exchange rates due to the impact of
acquisitions and a return to organic growth
and operating profit increased 5% (6% at
actual exchange rates) with the operating
margin decreasing by 30 basis points at both
constant and actual exchange rates to 7.4%.
In Rest of the World, revenue increased 5%
(15% at actual exchange rates) as a result of
both acquisitions and organic growth with
operating profit up 5% (16% at actual
exchange rates) and the operating margin
unchanged at 7.5% at both constant and
actual exchange rates.
Adjusted profit before income tax (being
profit before income tax, customer
relationships amortisation and acquisition
related items) was £542.6 million, up 7%
(13% at actual exchange rates) due to the
growth in adjusted operating profit and a
lower net interest charge. Profit before
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
87%
of the Group’s revenue
was generated outside
the UK
income tax was £409.3 million, an increase
of 7% (13% at actual exchange rates). Basic
earnings per share were 11% higher (17%
at actual exchange rates) at 94.2p. Adjusted
earnings per share, which exclude the
effect of customer relationships
amortisation, acquisition related items and
the associated tax, were 119.4p, an increase
of 7% (13% at actual exchange rates).
The operating cash flow, which is before
acquisition related items, continued to be
strong with cash conversion (the ratio of
operating cash flow to adjusted operating
profit) at 97%. The ratio of net debt to EBITDA
calculated at average exchange rates
increased from 2.0 times at the end of 2016
to 2.3 times, reflecting the higher level of
acquisition spend during the year.
Whether they have been with us for a long
time or are new to the Group, our dedicated,
hardworking and loyal employees drive
continuous improvement in everything they
do. We in turn are committed to developing
our people to enhance our capability and
capacity across all our locations. Our
success has been built on continued
development and innovation to meet the
changing needs of our customers and I
strongly believe that everyone at Bunzl
makes a key contribution to the successful
growth of the business through their diverse
skills and experiences.
Acquisitions
Acquisition activity, which is a key component
of Bunzl’s growth strategy, picked up
significantly in 2017. During the year we
agreed to purchase 15 businesses for a total
committed acquisition spend of £616 million.
These included two larger transactions,
being DDS in the US and a group of
businesses in France consisting of Hedis,
Comptoir de Bretagne and Générale
Collectivités (Groupe Hedis). The annual
acquisition spend in 2017 was a record
level for the Group.
In January 2017, in addition to completing the
purchase of Sæbe Compagniet and Prorisk
and GM Equipement, which we agreed to
acquire in November 2016, we acquired two
further businesses. Early in the month 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 2016 was
£4 million. At the end of January we acquired
LSH, a distributor of safety products,
primarily to end users, which represents our
first step into Singapore. Revenue in 2016
was £5 million.
At the end of March we completed two
acquisitions, ML Kishigo and Neri. ML
Kishigo, which is engaged in the sale of high
visibility clothing and other safety-related
workwear to distributors throughout the
US, provides customised solutions for its
customers and brings additional expertise
and an extended product portfolio to our
existing safety business in the US. Revenue
in 2016 was £26 million. Neri supplies
a broad range of personal protection
equipment, including gloves, footwear and
workwear, to both distributors and end users
throughout Italy and takes us into the
important safety market there for the first
time. Revenue in 2016 was £41 million.
7
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CHIEF EXECUTIVE’S REVIEW CONTINUED
We completed four transactions during May.
DDS is a distributor of goods not for resale
and value-added services to retailers and
other general distribution customers,
principally throughout North America. The
business supplies a wide range of packaging,
consumables and operating store supplies
through a variety of distribution and
outsourcing programmes and has expanded
and extended our operations, particularly in
relation to the retail sector. Revenue in 2016
was £242 million. Tecnopacking is engaged in
the distribution of industrial and disposable
packaging products to end users operating in
a variety of different sectors throughout
Spain as well as in Portugal. Revenue in 2016
was £33 million. This acquisition has further
extended our operations in Spain which have
grown significantly in recent years with total
annualised revenue now approaching €200
million. We also acquired two separate
businesses in Canada at the end of May.
AMFAS and Western Safety are distributors
of commercial and industrial first aid and
safety supplies, including a full range of
personal protection equipment, to end user
customers throughout Western Canada. The
businesses, which together had aggregated
annualised revenue of £10 million in 2016,
also provide safety-related services
including training programmes and other
workplace safety solutions.
Pixel Inspiration, a marketing services
business in the UK which specialises in the
digital signage sector, was purchased at the
end of June. Revenue in 2016 was £7 million.
At the beginning of August we acquired
HSESF and its associated companies in
China. Based in Shanghai with operations
in four other provinces in eastern China,
the businesses are principally engaged in
the sale of a variety of personal protection
equipment to local distributors and end
users but also export to customers overseas.
The aggregate revenue of the businesses
acquired was £24 million in 2016.
During October we entered into an
agreement to purchase Talge, which is
principally engaged in the sale of a variety
of foodservice related products, mainly
to redistributors in the southeast region
of Brazil. Revenue in 2016 was £20 million.
Completion of the acquisition took place
in January 2018 following clearance of
the transaction by the Brazilian competition
authority. At the end of October we
purchased Interpath, which is principally
engaged in the distribution of a variety of
laboratory and healthcare related
consumable products to the pathology,
medical research and life science end user
markets in Australia. Revenue in the year
ended June 2017 was £13 million.
We acquired a group of businesses in France
at the end of November. Groupe Hedis, which
trades through a number of subsidiaries,
is engaged in the sale and distribution of
cleaning & hygiene related products to a
variety of end user customers, principally
in the public, healthcare, foodservice and
cleaning sectors, as well as to some
redistributors. Two other businesses,
Comptoir de Bretagne and Générale
Collectivités, distribute light catering
equipment and tableware to a similarly
diverse customer base in France. In 2016
the aggregate revenue of the businesses
acquired was £136 million, of which £115
million related to Hedis and £21 million
related to Comptoir de Bretagne and
Générale Collectivités.
We completed the purchase of Lightning
Packaging in the UK in November.
The business is principally engaged in
the distribution of industrial packaging
products to a variety of end user customers
throughout the UK. Revenue in the year
ended March 2017 was £14 million.
In December we also entered into an
agreement to acquire the business of
Aggora which designs, supplies, installs
and maintains commercial catering
equipment for end user customers in the UK.
The acquisition was completed in early
January 2018. Revenue in the year ended
March 2017 was £27 million.
Since the year end we have acquired one
further business. In early January 2018
we purchased Revco which designs and
develops workplace safety and personal
protection equipment for supply to
redistributors in the US. Revenue in 2017
was £29 million.
Disposal
In February 2018 we sold OPM, a distributor
of SodaStream products in France, which
was a non-core business that was no longer
considered to be a strategic fit within the
Group. Revenue in 2017 was £50 million.
Prospects
The combination of our strong competitive
position, diversified and resilient businesses
and ability to consolidate our fragmented
markets further, should lead to continued
growth and our expectations for 2018 at
constant exchange rates remain unchanged.
If exchange rates stay at their current levels,
the recent weakening of the US dollar will
have an adverse translation effect on the
reported results in 2018.
At constant exchange rates, each of our
business areas is expected to grow. In North
America, we expect revenue to increase as
last year’s strong organic growth continues
during the first quarter of this year before
returning to more normal levels thereafter
as the substantial additional grocery
business is fully absorbed, together with
the effect of acquisitions. We will continue
to focus on mitigating the impact of higher
operating costs, caused in particular by the
additional business won as well as some
inflationary pressures, through productivity
improvements and other initiatives. In
Continental Europe we expect to see a strong
performance due to continued organic
growth and the purchase of Groupe Hedis
in France and other acquisitions, partly offset
by the disposal of OPM in February 2018.
Despite ongoing uncertainty in some of our
markets, UK & Ireland should develop well
as a result of improved organic growth from
recent account wins and the impact of
acquisitions. In Rest of the World, overall we
expect to see progress due to both organic
and acquisition growth.
As announced in January, we expect that
the recent changes to tax legislation in the
US will reduce the Group’s effective tax rate
for 2018 to approximately 24% from 27.5%
in 2017.
The pipeline of potential acquisitions remains
promising. Discussions are ongoing with a
number of targets and we expect to complete
further transactions as the year progresses.
The Board believes that the prospects of the
Group are positive due to its strong market
position and well established and successful
strategy to grow the business both
organically and by acquisition.
Frank van Zanten
Chief Executive
26 February 2018
8
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Q
&A
with the
Chief Executive
Frank van Zanten
discusses how the business
performed in 2017 and
reflects on how he sees
the Group now after his
first full year as the
Group’s Chief Executive.
Q How would you summarise 2017
for Bunzl?
2017 has been another good year for Bunzl
with a 7% increase in adjusted earnings per
share which has allowed us to continue our
long term track record of dividend growth
for the 25th consecutive year. Growth by
acquisition is an important part of our
strategy and 2017 has been a record year for
acquisition spend with the Company agreeing
to acquire 15 businesses with a total
committed spend of £616 million.
Q What is the reasoning behind this
record acquisition spend?
We often buy family owned businesses
that require a trigger to sell such as
succession issues. The timing of when that
trigger will occur is difficult to predict, which
means we sometimes have to wait patiently
for many years until the business in question
becomes available to purchase. 2017 has just
been a year where several of our targets
chose to sell and we have also bought two
larger businesses being DDS in the US and
Groupe Hedis in France.
Q What has been your personal
highlight of 2017?
One of the things I am passionate about is the
power of collaboration and the importance
of sharing best practice, so my personal
highlight of 2017 would have to be our global
management conference that we held in
May. This involved 165 of our most senior
executives in the Group who came together
over a period of three days. We based the
conference around five key themes with
cross company teams collaborating in
advance in preparation for the conference.
When we came together the output and
discussions were incredible.
Q In your opinion what makes
Bunzl unique?
Bunzl provides a one-stop-shop for
essential products that represent a low
proportion of our customers’ spend
delivered in one consolidated delivery,
on-time and in-full. We have a market-
leading position, operating on a global scale
across 30 countries and six market sectors.
We have a very decentralised management
structure with a strong entrepreneurial
culture and all of this together is what I
believe makes us unique in the markets in
which we compete.
Q What are the most important
aspects of the service that Bunzl
offers to its customers?
All aspects of the service we offer are
important to our customers, but if I had to
highlight one or two it would be our ability
to provide on-time and in-full deliveries of
a broad range of products and the expert
knowledge of our field sales people.
9
Bunzl plc Annual Report 2017
We are selling products that are essential
to our customers’ operations. Many of our
customers want to spend as little time as
possible thinking about these goods not for
resale and therefore look to the expert
knowledge of our staff to ensure they have
the right products and solutions for their
needs. Given the essential nature of the
products we sell, on-time in-full deliveries
of customers’ entire orders are critical to the
smooth running of their businesses – without
the meat trays, the butcher counter of a
grocery store closes and without personal
protection equipment the construction site
cannot operate safely.
Q Having completed a full year
in the role as Chief Executive,
have any of your initial
observations changed?
The Group has continued to grow and develop
during 2017 and I am very pleased to see this.
My initial observations which I talked about
last year are unchanged. Bunzl is a great
business with incredibly committed and
hardworking employees, many of whom I
have now had the pleasure to meet in person.
I will continue to execute our consistent and
proven compounding strategy and believe we
are well positioned for further development
in the future.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INVESTMENT CASE
A consistent and proven compounding strategy with
a long term track record of delivering sustainable growth.
A diversified, balanced
and resilient business…
Presence in 30 countries.
Revenue from resilient sectors
75%
Six customer focused
market sectors.
Fragmented markets.
Long term relationships with
customers and suppliers.
Profitable organic growth.
ROIC*
RAOC*
53.1%
16.0%
Acquisitions since 2004
151
Average cash conversion since 2004*
97%
25 year record of
dividend growth
with a consistent and
proven compounding
strategy…
and significant
opportunities for
future growth…
due to disciplined
financial management…
resulting in a long
term track record
of good returns for
our shareholders.
* See ’Key performance indicators’ on pages 22 and 23.
Continuous operating model
improvements.
Disciplined approach to
self-funded acquisitions.
Significant opportunities to
grow in existing countries.
Scope for further geographic
expansion.
Potential for expansion into
new sectors.
Consistently strong cash
conversion.
Efficient capital allocation.
Strong balance sheet.
Sustained increases in
revenue, adjusted operating
profit and adjusted earnings
per share.
Creation of shareholder value
through long term dividend
and share price growth.
10
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
MARKET ENVIRONMENT
No one else does what we do, on our scale,
across our international markets.
GROWTH DRIVERS
Increasing trend to outsourcing,
particularly in the grocery and retail sectors.
Global health & safety legislative and
compliance trends in the safety sector.
Underlying growth of ‘away from home’ demand
in the foodservice and cleaning & hygiene sectors.
Changing demographics and ageing population
increasing demand in the healthcare sector.
CUSTOMERS
Strong national and regional
customer base.
Partnering with national and
international leading companies.
Aligned with customer growth.
Focus on customer service providing
innovative products and solutions.
On-time and in-full deliveries.
COMPETITIVE
ADVANTAGE
Decentralised operational structure with
experienced and knowledgeable management.
Global sourcing capabilities.
Extensive distribution networks.
Ability to invest in IT systems
and digital capabilities.
Expertise in making and
integrating acquisitions.
SUPPLIERS/
PRODUCTS
Strong relationships with
branded manufacturers.
Low cost own brand
alternative products.
Market-leading quasi-manufacturer
of own brand products.
Global sourcing function
with QA/QC services.
11
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR BUSINESS MODEL
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.
OUR RESOURCES
Our people
Despite our global scale, our
decentralised organisation structure
enables us to retain the culture of a
dynamic local business, thereby
creating an entrepreneurial
environment in which our employees
can operate.
Our product range
Our broad and extensive product
range, including our own brand
offering, enables us to provide our
customers with comprehensive
solutions to their needs.
Our service capabilities
Using a combination of our own
fleet supported by third party
providers, we are able to ensure
our customers receive their orders
whatever their requirements,
including timed delivery slots,
specific ‘beyond the back door’
delivery locations or ‘cross-docked’
deliveries from our truck directly to
our customer’s delivery vehicle on a
just-in-time basis.
Our knowhow
Our deep and detailed knowledge of
the comprehensive and innovative
product and service solutions that
we are able to provide to our
customers in order to meet their
specific needs has been gained over
many years of experience.
WE ARE A ONE-STOP-SHOP FOR
NON-FOOD CONSUMABLES
WE
SOURCE
WE
CONSOLIDATE
WE
DELIVER
We source and procure
branded, own brand
and unbranded products
globally, working with
suppliers to give our
customers access to
the best and most suitable
products and solutions
to meet their needs, taking
account of any sustainability
requirements.
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.
Our delivery options
include direct site 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.
ACROSS THESE SECTORS
Foodservice
Grocery
Safety
Cleaning
& hygiene
Retail
Healthcare
Other
OUR SOURCES OF COMPETITIVE ADVANTAGE
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.
Global sourcing
Our global sourcing capabilities allow us
to provide a very broad range of products,
including an extensive range of own
brand and environmentally friendly,
sustainable items.
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.
12
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
WE ARE A ONE-STOP-SHOP FOR
NON-FOOD CONSUMABLES
CREATING VALUE FOR STAKEHOLDERS
SHAREHOLDERS
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.
CUSTOMERS
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.
ENVIRONMENT
Our continued focus on operational
excellence allows us to reduce both our own
and our customers’ environmental impact by
introducing more sustainable products
and business practices and providing
our customers with a single
consolidated on-time and
in-full delivery of
multiple products.
EMPLOYEES
We support equality and diversity
throughout the organisation and
have policies and procedures which
are designed to allow our employees
to meet their training needs,
maximise their potential and
provide career opportunities
for progression within
the business.
COMMUNITIES
We support charitable projects in
the local communities where our
businesses are based through
monetary and in-kind product
donations and sponsorship for
fundraising activities carried out
by our employees.
SUPPLIERS
We partner with a variety of
international, national and local
suppliers, on both an exclusive and
non-exclusive basis, in order to
provide our customers with
the broadest possible range
of products across each of
our market sectors.
OUR SOURCES OF COMPETITIVE ADVANTAGE
Digital capabilities
Our e-commerce platforms increase the
efficiency of our operations while enhancing
the experience for our customers. These
include options such as budgetary controls,
closed specific product lists and branded
portals for our customers.
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’.
13
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
STRATEGY OVERVIEW
We are continuing to pursue our strategy
in order to create value for our stakeholders by
focusing on our strengths and consolidating the
markets in which we compete. Through the
consistent execution of our long-established and
successful strategy, we have built leading positions
in a number of market sectors in the Americas,
Europe, Australasia and Asia.
Deepening our commitment to our customers
and markets, extending our business to new
geographies, investing in systems and
infrastructure and expanding and
coordinating our procurement and
international sourcing remain important
elements of our strategy.
14
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR STRATEGY
The Company’s strategy is based on three key areas of focus:
Read more
P18
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.
Read more
P16
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.
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
capabilities, warehouse facilities
and routing systems as well as
implementing and sharing best
practice operational procedures.
Read more
P20
15
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Organic revenue growth
4.3%
OUR STRATEGY
CONTINUED
BUILDING
RELATIONSHIPS
WITH OUR
CUSTOMERS
ORGANIC GROWTH
Growing Bunzl organically, either by expanding and developing
our business with existing customers or by gaining additional
business with new customers, is an integral part of
our strategy to enhance shareholder value.
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 we supply
to them, whether branded or own brand.
We do this either by extending the range
of products within a particular category
or adding new categories of products to
those already supplied, often by optimising
cross-selling opportunities across other
Bunzl businesses.
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 current and future
needs over a sustained period of time and
through a broad and effective product
and service offering.
Winning 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
effectively than their current suppliers.
16
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
We build strong
relationships with our
customers to gain a deep
understanding of their needs
and to identify where
we can support them.
USING OUR
DETAILED
KNOWLEDGE
AND EXPERTISE
17
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR STRATEGY
CONTINUED
New markets entered in 2017
4
Our strong balance
sheet and consistently high
cash conversion means we
have the ongoing firepower
to act quickly when the
opportunities arise.
18
Bunzl plc Annual Report 2017
A RECORD
LEVEL OF
ANNUAL
ACQUISITION
SPEND
ITALY
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CONSOLIDATING
OUR FRAGMENTED
MARKETS
INTERNATIONALLY
CHINA
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.
BRAZIL
Key acquisition parameters
In considering potential acquisition
opportunities, we only target those
businesses which meet the specific
parameters that fit our business model and
growth strategy. These include businesses:
• that sell business to business (’B2B’);
• with a consolidated not for resale
product offering;
• in resilient and growing markets;
• with a fragmented customer base;
• 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.
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. During 2017 we entered the
safety sector in Italy through the anchor
acquisition of Neri and expanded our
operations into the foodservice sector in
Brazil through the agreement to acquire
Talge which was completed in early 2018.
Growth in new countries
We are truly international, having grown
from a business with operations in 12
countries in 2003 to one with a presence in
30 countries today, having entered Singapore
and China during 2017 following the anchor
acquisitions of LSH and HSESF respectively.
However, there are a number of potentially
attractive countries where we do not yet
operate. 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.
19
Bunzl plc Annual Report 2017
SINGAPORE
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR STRATEGY
CONTINUED
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.
Through careful planning
and by being flexible, we
ensure that our customers
get their orders delivered to
their desired location
on-time and in-full.
Number of locations
581
20
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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.
Global purchasing
With the annual cost of the goods
we sell exceeding £6.4 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.
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 state-of-the-art
e-commerce solutions, has
increased the efficiency of our
operations while at the same time
provided an enhanced experience
for our customers when interacting
with our businesses.
CONTINUING
TO REFINE AND
DEVELOP OUR
PROCESSES
Environment
We are able to make savings in our
operating costs through the
implementation of a number of
environmentally friendly initiatives
such as the installation of energy
efficient lighting systems in our
warehouses and reductions in
the amount of packaging waste
generated by the business.
CONSTANTLY
IMPROVING
THE WAY WE
DO BUSINESS
21
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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 and
acquisitions during the first 12 months
of ownership.
Organic revenue growth in 2017 of
4.3% was at the highest level since
2006 principally due to additional
business won in North America.
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.
2017 was a record year for acquisition
spend with committed spend of
£616 million on 15 businesses,
including two larger acquisitions
in the US and France.
Reconciliation of revenue growth
between 2016 and 2017 £m
4.3
Revenue up 16% (10%
at constant exchange
rates) from organic
growth of 4.3% and
the impact of
acquisitions made
in 2016 and 2017.
2.7
2.0
0.4
0.3
13
14
15
16
17
397
7,826
335
420
8,581
7,429
16
Currency
translation
16#
Organic
Acquisitions
17
616
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 138).
The 15 acquisitions in 2017 will add
annualised revenue of £621 million.
295
327
211
184
621
324
281
223
201
13
14
15
16
17
13
14
15
16
17
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 2017 operating margin was
6.8% compared to 7.1% in 2016 (restated at
constant exchange rates).
Adjusted operating profit margin
down 20bp to 6.9% principally due
to the impact of the additional
business won in North America.
6.8
7.0
7.0
7.1
6.9
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).
RAOC down to 53.1% due to lower operating
margin and higher operating capital in the
underlying business, both partly due to the
additional business won in North America,
and also the mix effect of the lower return
on operating capital from acquisitions,
partly offset by a small favourable impact
from exchange movements.
56.9
57.7
55.5
55.9
53.1
13
14
15
16
17
13
14
15
16
17
22
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
∆ Before customer
relationships amortisation
and acquisition related items.
# At 2017 average exchange rates.
† Included in the external
auditors’ limited assurance
scope referred to on page 48.
◊ The data for 2013, 2014, 2015
and 2016 was also assured
as detailed in the Annual
Reports from those years.
FINANCIAL
Adjusted earnings per share p
Adjusted profit for the year (being the profit
for the year before customer relationships
amortisation, acquisition related items and
the associated tax) divided by the weighted
average number of ordinary shares in issue
(see Note 7 on page 116).
At constant exchange rates, adjusted eps
up 7% driven by a 6% increase in adjusted
operating profit and a decrease in the net
interest charge, partly offset by the impact
of a higher effective tax rate.
Cash conversion %
Operating cash flow, being cash generated
from operations before acquisition related
items less net capital expenditure, as a
percentage of adjusted operating profit∆
(see Consolidated cash flow statement
on page 104).
Another strong year of cash generation
with cash conversion of 97% in 2017
and an average of 97% since 2004.
NON-FINANCIAL
Scope 1 carbon emissions
Tonnes of CO2e per £m revenue
Measured in accordance with the
Greenhouse Gas Protocol applying
2017 Defra conversion factors.
Scope 1 carbon emissions down
10% (1% at constant exchange
rates) primarily due to fuel
efficiency improvements.
119.4
106.1
82.4
86.2
91.0
15.5◊ 15.7◊
14.7◊
12.6◊
11.3†
13
14
15
16
17
12 months to 30 September
13
14
15
16
17
Scope 2 carbon emissions
Tonnes of CO2e per £m revenue
Measured in accordance with the
Greenhouse Gas Protocol applying 2017
Defra UK conversion factors and 2017 IEA
factors for overseas electricity.
Scope 2 carbon emissions down 18%
(10% at constant exchange rates) from
the continued implementation of low
energy lighting and also impacted by
the application of updated emission
factors for electricity.
5.3◊
5.2◊
5.4◊
4.5◊
3.7†
102
95
97
99
97
13
14
15
16
17
12 months to 30 September
13
14
15
16
17
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 scheme
liabilities, cumulative customer
relationships amortisation, acquisition
related items and amounts written off
goodwill, net of the associated tax).
ROIC down to 16.0% due to the mix
effect of acquisitions and lower
returns in the underlying business,
partly offset by a small favourable
impact from exchange movements.
17.9
17.6
17.1
16.7
16.0
Fuel usage
Litres per £000 revenue
Diesel, petrol and LPG used in the Group’s
own vehicles.
Fuel usage down 11% (2% at constant
exchange rates) driven by continued fuel
efficiency improvements and an increase
in the proportion of business distributed
via third party carriers as opposed to our
own fleets.
5.1◊
5.0◊
4.8◊
4.1◊
3.7†
13
14
15
16
17
12 months to 30 September
13
14
15
16
17
23
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL REVIEW
Our long term record of strong profit
growth coupled with high cash conversion has
enabled us to pay dividends which have grown
every year for the past 25 years and to support
our growth strategy by making acquisitions and
reinvesting in the underlying business.
Brian May
Finance Director
HIGHLIGHTS
Revenue
Up 10% at constant exchange rates
Adjusted operating profit*
Up 6% at constant exchange rates
Adjusted earnings per share*
Up 7% at constant exchange rates
£8,580.9m +10%
(2016: £7,429.1m)
£589.3m +6%
(2016: £525.0m)
119.4p +7%
(2016: 106.1p)
Profit for the year
Up 11% at constant exchange rates
Cash conversion
Continued strong cash conversion with operating
cash flow† to adjusted operating profit*
Dividend
Long track record of dividend growth
continues with an increase of 10%
£310.5m +11%
(2016: £265.9m)
97%
(2016: 99%)
46.0p +10%
(2016: 42.0p)
Financial results
Revenue
Adjusted operating profit*
Adjusted profit before income tax*
Adjusted earnings per share*
Dividend for the year
Statutory results
Operating profit
Profit before income tax
Basic earnings per share
Balance sheet and Cash flow
Return on average operating capital %
Return on invested capital %
Cash conversion %
Growth as
reported
Growth at
constant
exchange
16%
12%
13%
13%
10%
11%
13%
17%
10%
6%
7%
7%
6%
7%
11%
2017
£m
8,580.9
589.3
542.6
119.4p
46.0p
456.0
409.3
94.2p
53.1%
16.0%
97%
2016
£m
7,429.1
525.0
478.2
106.1p
42.0p
409.7
362.9
80.7p
55.9%
16.7%
99%
* Before customer relationships amortisation, acquisition related items and, where relevant, the associated tax (see Note 2w on page 110).
† Before acquisition related items.
24
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL REVIEW CONTINUED
Currency translation
Currency translation had a significant positive impact on the Group’s
reported results, increasing revenue, profits and earnings
by approximately 6%. The favourable exchange rate impact was
principally due to the weakening of sterling against the major
currencies of the Group midway through 2016, leading to a 12%
positive impact in the first half of 2017 and a broadly neutral impact
in the second half of 2017.
Average exchange rates
US$
Euro
Canadian$
Brazilian real
Australian$
Closing exchange rates
US$
Euro
Canadian$
Brazilian real
Australian$
2017
1.29
1.14
1.67
4.11
1.68
2017
1.35
1.13
1.69
4.49
1.73
2016
1.36
1.22
1.80
4.74
1.82
2016
1.24
1.17
1.66
4.01
1.71
Revenue
Revenue increased to £8,580.9 million (2016: £7,429.1 million), up 10%
at constant exchange rates (up 16% at actual exchange rates),
reflecting the benefit of acquisitions and organic growth of 4.3%.
Movement in Revenue (£m)
Movement in revenue (£m)
Reconciliation of adjusted operating profit to operating profit (£m)
700
600
500
400
300
589.3
(96.6)
(12.1)
3.9
(28.5)
456.0
2017
Adjusted
operating
profit
Customer
relationships
amortisation
Transaction
costs and
expenses
Deferred
consideration
relating to the
retention
of former
owners
Adjustments
to previously
estimated
earn outs
2017
Operating
profit
Customer relationships amortisation and acquisition related items
are items which are not taken into account by management when
assessing the results of the business as they are considered by
management to form part of the total spend on acquisitions or
are non-cash items resulting from acquisitions and therefore
do not relate to the underlying operating performance and
distort comparability between businesses and reporting periods.
Accordingly, these items are removed in calculating the profitability
measures by which management assesses the performance of the
Group. Further details on this and on other alternative performance
measures are set out in Note 2w to the consolidated financial
statements on page 110.
9,000
8,500
8,000
7,500
7,000
420.1
8,580.9
334.5
Interest
The net interest expense of £46.7 million was £0.1 million lower than
in 2016 at actual exchange rates and down £1.8 million at constant
exchange rates, mainly due to a lower effective interest rate on the
Group’s borrowings.
397.2
7,826.3
7,429.1
2016
Revenue
Currency
translation
2016
at constant
exchange
rates
Organic
growth
Acquisitions
2017
Revenue
Operating profit
Adjusted operating profit (being operating profit before customer
relationships amortisation and acquisition related items) increased
to £589.3 million (2016: £525.0 million), an increase of 6% at constant
exchange rates and 12% at actual exchange rates.
At both constant and actual exchange rates, the adjusted operating
profit margin decreased from 7.1% to 6.9%, primarily due to the
impact of lower margin business won in North America.
Movement in adjusted operating profit (£m)
600
500
400
300
28.6
553.6
525.0
35.7
589.3
2016
Adjusted
operating
profit
Currency
translation
2016
at constant
exchange
rates
Growth in
the year
2017
Adjusted
operating
profit
Profit before income tax
Adjusted profit before income tax (being profit before income tax,
customer relationships amortisation and acquisition related items)
was £542.6 million (2016: £478.2 million), up 7% at constant exchange
rates (up 13% at actual exchange rates), due to the growth in adjusted
operating profit and the decrease in net interest expense.
Movement in Adjusted profit before tax (£m)
Movement in adjusted profit before income tax (£m)
600
500
400
300
26.9
505.1
478.2
35.7
1.8
542.6
2016
Adjusted
profit before
income tax
Currency
translation
2016
at constant
exchange
rates
Growth in
adjusted
operating
profit
Decrease in
net interest
2017
Adjusted
profit before
income tax
Profit before income tax increased by £46.4 million to £409.3 million,
up 13% at actual exchange rates, due to an increase of £64.4 million
in adjusted profit before income tax, partly offset by an increase
of £15.3 million in customer relationships amortisation and a
£2.7 million increase in acquisition related items due to acquisitions
in 2016 and 2017.
25
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL REVIEW CONTINUED
Taxation
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. In accordance with UK legislation, the strategy
relating to UK taxation is published on the Bunzl plc website within
the Corporate governance section.
The effective tax rate (being the tax rate on adjusted profit) for the year
was 27.5% (2016: 26.9%) and the reported tax rate on the statutory profit
was 24.1% (2016: 26.7%). The effective tax rate has increased on the
prior year principally due to changes in tax legislation that have
increased the profits which are subject to tax. The reported tax rate is
significantly lower than in 2016 due to the reduction in a net deferred tax
liability in the US following the enactment of the Tax Cuts and Jobs Act.
Other than the tax impact of this reduction on intangible assets, which
is not taken into account by management when assessing the results of
the business, this new legislation had no material effect on the results
for 2017. However, due to the reduced rate of US federal tax that applies
from 1 January 2018, the Group expects that the tax rate on adjusted
profit will decrease to approximately 24% in 2018.
As explained in the Principal risks and uncertainties section on pages
51 to 55, the Group identifies tax as a principal risk, and notes that
the future tax rate could be affected by changes in tax law and
the resolution of uncertainties relating to prior year tax liabilities.
This would include the conclusion of legal arguments between the
European Commission and the UK government over whether part
of the UK’s tax regime is contrary to European Union State Aid
provisions.
Earnings per share
Profit after tax of £310.5 million was up £44.6 million at actual
exchange rates, due to a £46.4 million increase in profit before
tax partly offset by a £1.8 million increase in the tax charge.
The weighted average number of shares increased from 329.4 million
in 2016 to 329.5 million due to employee share option exercises,
partly offset by shares being purchased from the market for the
Group’s employee benefit trust. Basic earnings per share were 94.2p,
up 11% at constant exchange rates and 17% at actual exchange rates.
After adjusting for customer relationships amortisation, acquisition
related items and the associated tax, adjusted profit after tax
increased by £43.8 million from £349.6 million in 2016 to £393.4
million in 2017 and adjusted earnings per share (‘adjusted eps’)
were 119.4p, an increase on 2016 of 7% at constant exchange rates
and 13% at actual exchange rates.
Movement in Adjusted EPS (p)
Movement in adjusted eps (p)
7.9
7.9
0.4
(1.0)
119.4
6.0
112.1
106.1
130
120
110
100
90
Dividends
An analysis of dividends per share for the years to which they relate is
shown below:
Interim dividend (p)
Final dividend (p)
Total dividend (p)
Dividend cover (times)*
* Based on adjusted earnings per share.
2017
14.0
32.0
46.0
2.6
2016
13.0
29.0
42.0
2.5
Growth
8%
10%
10%
The Company’s practice has been to pay a progressive dividend,
delivering year-on-year increases with the dividend growing at
approximately the same rate as the growth in adjusted earnings per
share. The 2017 dividend is 10% higher than the 2016 dividend, which
compares with the adjusted earnings per share growth of 7%
at constant exchange rates and 13% at actual exchange rates.
Before approving any dividends, the Board considers the level of
borrowings of the Group by reference to the ratio of net debt to
EBITDA (being earnings before interest, tax, depreciation, customer
relationships and software amortisation and acquisition related
items), 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 fund a growing
dividend. After the further growth in 2017, Bunzl has sustained
a growing dividend to shareholders over the past 25 years.
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 51 to 55. 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 2017 Bunzl plc had sufficient distributable
reserves to cover more than four years of dividends at the cost of the
2017 dividends, which is expected to be approximately £152 million.
Acquisitions
The Group completed 15 acquisitions and agreed to acquire two
further businesses during the year ended 31 December 2017. The
estimated annualised revenue and adjusted operating profit of the
acquisitions completed during the year were £587.7 million and
£57.0 million respectively. Excluding the two acquisitions that had
been agreed at 31 December 2016 but completed during 2017, and
including the two acquisitions that were agreed during 2017 but not
completed by 31 December 2017, the estimated annualised revenue
of the acquisitions was £620.9 million.
The acquisitions completed during the year include the acquisition
of Groupe Hedis, which is considered to be individually significant due
to its impact on intangible assets, adding £131.7 million to customer
relationships and £119.0 million to goodwill. The committed spend
on this acquisition was £237.3 million. For further details of this
acquisition see Note 24 on page 139.
2016
Adjusted
eps
Currency
translation
2016 at
constant
exchange
rates
Increase in
adjusted
operating
profit
Decrease
in interest
Increase in
effective
tax rate
2017
Adjusted
eps
26
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL REVIEW CONTINUED
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
Cash acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions
completed in the current year
Spend on acquisitions committed but not completed at the
year end
Spend on acquisitions committed at prior year end but
completed in the current year
Total committed spend in respect of acquisitions agreed
in the current year
The Group’s free cash flow of £412.1 million was up £56.6 million
from 2016, primarily due to the increase in operating cash flow of
£47.8 million in addition to a £10.1 million decrease in the cash
outflow relating to tax. The Group’s free cash flow was primarily
used to finance dividend payments of £138.2 million in respect of
2016 (2016: £125.4 million in respect of 2015) and an acquisition
cash outflow of £588.5 million (2016: £176.6 million).
Cash conversion (being the ratio of operating cash flow to adjusted
operating profit) was 97% (2016: 99%). The Group has had a
consistently high level of cash conversion over many years and cash
conversion has averaged 97% since 2004. Further details of cash
conversion are set out in the Key performance indicators section
on page 23.
Net debt
Net debt increased by £295.0 million during the year to £1,523.6
million (2016: £1,228.6 million), principally due to the net cash outflow
of £334.0 million.
Movement in Net Debt (£m)
Movement in net debt (£m)
£m
383.8
217.8
601.6
594.2
7.4
601.6
23.3
(29.1)
12.1
607.9
32.6
(24.4)
616.1
2,000
334.0
The net cash outflow in the year in respect of acquisitions comprised:
1,500
(39.0)
1,523.6
Cash consideration
Cash acquired
Deferred consideration in respect of prior year
acquisitions
Net cash outflow in respect of acquisitions
Acquisition related items*
Total cash outflow in respect of acquisitions
£m
594.2
(29.1)
9.5
574.6
13.9
588.5
1,000
500
0
1,228.6
Net debt
at 1 January
2017
Net cash
outflow
Currency
translation
Net debt
at 31 December
2017
*
Acquisition related items comprise £9.2 million of transaction costs and expenses
paid and £4.7 million from payments relating to the retention of former owners.
Disposal
At 31 December 2017, the Group had received a binding offer for the
purchase of OPM in France, the acceptance of which was subject to
completion of a consultation process with the relevant works council.
The disposal was subsequently completed on 2 February 2018.
Accordingly, the assets and liabilities of the business have been
separately recorded on the Group balance sheet as assets and
liabilities held for sale. Revenue in 2017 of the business disposed
of was £50.3 million, and the net assets held for disposal at
31 December 2017 were £12.4 million.
Cash flow
A summary of the cash flow for the year is shown below:
2016
£m
546.7
(24.8)
521.9
(43.2)
(123.2)
355.5
(125.4)
(176.6)
(37.5)
16.0
Cash generated from operations†
Net capital expenditure
Operating cash flow†
Net interest
Tax
Free cash flow
Dividends
Acquisitions◊
Employee share schemes
Net cash (outflow)/inflow
2017
£m
602.6
(32.9)
569.7
(44.5)
(113.1)
412.1
(138.2)
(588.5)
(19.4)
(334.0)
Movement
£m
55.9
(8.1)
47.8
(1.3)
10.1
56.6
(12.8)
(411.9)
18.1
(350.0)
† Before acquisition related items.
◊ Including acquisition related items.
Net debt to EBITDA calculated at average exchange rates and in
accordance with our external banking covenants was 2.3 times
(2016: 2.0 times).
Balance sheet
Summary balance sheet at 31 December 2017:
Intangible assets
Tangible assets
Working capital
Other net liabilities
Pensions deficit
Net debt
Equity
2017
£m
2,351.7
125.2
871.9
(325.6)
2016
£m
1,947.6
123.3
819.0
(264.7)
3,023.2 2,625.2
(84.1)
(1,523.6) (1,228.6)
1,312.5
1,448.6
(51.0)
Return on average operating capital %
Return on invested capital %
53.1% 55.9%
16.0% 16.7%
Return on average operating capital decreased to 53.1% from 55.9%
in 2016, driven by a lower operating margin and a higher average
operating capital in the underlying business, both partly due to the
additional business won in North America at lower than average
margins, and also due to the impact of the lower return on operating
capital from acquisitions, partly offset by a small favourable impact
from exchange rate movements. Return on invested capital of 16.0%
was down from 16.7% in 2016 due to lower returns on recent
acquisitions and in the underlying business, partly offset by a small
favourable impact from exchange rate movements.
27
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL REVIEW CONTINUED
Intangible assets increased by £404.1 million to £2,351.7 million
due to intangible assets arising on acquisitions in the year of
£556.6 million and software additions of £7.5 million, partly offset by
an amortisation charge of £104.0 million, a decrease from exchange
of £51.9 million and a transfer to assets held for sale of £4.1 million.
Working capital increased by £52.9 million to £871.9 million primarily
from acquisitions and a small underlying increase, partly offset by a
decrease from exchange rate movements and a transfer to assets
held for sale.
The Group’s net pension deficit of £51.0 million at 31 December 2017
was £33.1 million lower than at 31 December 2016, largely due to an
actuarial gain of £27.0 million. The actuarial gain arose as a result
of the actual return on scheme assets being £31.5 million higher
than expected, partly offset by an increase in the present value of
scheme liabilities from changes in assumptions, principally lower
discount rates.
Shareholders’ equity increased by £136.1 million during the year
to £1,448.6 million.
Movement in Shareholders’ Equity (£m)
Movement in shareholders’ equity (£m)
1,700
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
1,312.5
2016
Share-
holders’
equity
310.5
(138.2)
(49.4)
17.4
12.6
(16.8)
1,448.6
Profit for
the year
Dividends
Currency
(net of tax)
Actuarial
gain on
pension
schemes
(net of tax)
Share
based
payments
(net of tax)
Employee
share
options
(net of tax)
2017
Share-
holders’
equity
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 borrowings have a range of
maturities, are competitively priced and meet the demands of the
business over time. Following the publication of the Group’s BBB+
credit rating from Standard & Poor’s (stable outlook), Bunzl
Finance plc successfully issued a £300 million senior unsecured
bond to further diversify the funding sources of the Group.
The senior bond has been listed on the London Stock Exchange.
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, 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 2017 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 funding available comprising
multi-currency credit facilities from the Group’s banks, US
private placement notes and the senior bond issued during 2017.
At 31 December 2017 the nominal value of US private placement
notes outstanding was £1,107.6 million (2016: £1,251.1 million)
with maturities ranging from 2018 to 2028. The £300 million
senior bond matures in 2025 and the Group’s committed bank
facilities mature between 2018 and 2022. At 31 December 2017
the available committed bank facilities totalled £1,056.9 million
(2016: £954.2million) of which £224.6 million (2016: £101.3 million)
was drawn down, providing-headroom of £832.3 million
(2016: £852.9 million).
Committed facilities maturity profile by year (£m)
600
500
400
300
200
100
0
310
67
115
300
156
122
167
116
130
22
23
24
25
26
27
37
28
195
177
25
81
20
30
80
21
50
103
37
18
100
66
19
Bank facilities – undrawn
Senior unsecured bond
Bank facilities – drawn
US private placement notes
Further details of the Group’s capital management and treasury
policies and controls are set out in Note 13 on pages 121 to 127.
Brian May
Finance Director
26 February 2018
28
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR MANAGEMENT TEAM
Managers from across the Group meet regularly to review
performance, discuss trends affecting our businesses and seek
further opportunities for growth and competitive advantage.
Patrick Larmon
President and CEO
North America
Andrew Tedbury
Managing Director
UK & Ireland
Julie Welch
Director of Group
Human Resources
Paul Hussey
General Counsel
and Company
Secretary
Brian May
Finance Director
Paul Budge
Managing Director
Continental Europe
Andrew Mooney
Director of Corporate
Development
Jonathan Taylor
Managing Director
Latin America
Kim Hetherington
Managing Director
Australasia
29
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OPERATING REVIEW
NORTH AMERICA
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 36 years the operations have grown substantially
throughout the US while at the same time have expanded into Canada and Mexico to become
the market-leading business that it is today with revenue of £5.1 billion.
HIGHLIGHTS
Revenue
£5,061.1m 10%†
(2016: £4,362.1m)
Adjusted operating profit*
£318.3m 4%†
(2016: £289.6m)
Operating margin*
6.3%
(2016: 6.6%)
Revenue growth driven by strong organic
growth and impact of acquisitions
Substantial revenue growth in grocery
although margins lower
Significant expansion in retail supplies
through acquisition of DDS
Redistribution growth from category
management programmes
Growth in safety from improving market
conditions, boosted by acquisition of
ML Kishigo
Good progress in Canada
Market sectors
Employees
Locations
6,071
191
† At constant exchange rates.
*
Before customer relationships amortisation
and acquisition related items (see Note 2w on
page 110).
management partner, we help our
redistribution customers to manage their
own supply chain from their suppliers to their
end users. We analyse how their businesses
handle disposables using on-site surveys
and proprietary digital tools. The resulting
data helps them optimise the flow of high
volume, low value products that are costly
for them to handle, resulting in lower
inventory, reduced operating costs and
better cash flow. Additionally, our
experienced national sales team helps
our customers market specific products
to specific customers using the expanded
e-commerce and digital tool capabilities
that we have available. Our increased focus
on jan-san products is also driving new
organic growth in this sector and across
our other businesses. We have continued
to expand our central warehouse system for
jan-san items by opening two new locations
to improve national availability across the
US and take advantage of our scale. Together
with our ongoing investment in marketing
tools and the development of new product
items, our jan-san initiative has contributed
to our growth with foodservice distributor
customers by allowing them to offer a wider
range of products to their own customers.
Against the backdrop of improving market
conditions in the oil & gas sector, our safety
business saw improvements in sales and
operating profit boosted by the purchase of
ML Kishigo at the end of March. The
acquisition has provided access to a broad,
strong own label branded range of new and
innovative high visibility clothing and other
safety-related workwear. These items
complement our existing range of safety
products and are now available to all of our
customers in this sector. Our other safety
businesses have also continued to invest
in the development of their own brands
of personal protection equipment. These
products contribute higher margins while
at the same time allow us to offer our
customers a value alternative to
manufacturer branded products.
In North America, revenue increased by
10% to £5,061.1 million, primarily due to a
substantial increase in business with an
existing grocery customer which helped
drive organic sales growth to more than 5%,
as well as the impact of recent acquisitions.
The rate of organic growth was higher than
in the recent past although the additional
business won is at an operating margin
below the average margin for the North
America business area. Operating profit
therefore increased by 4% to £318.3 million,
with the operating margin declining to 6.3%.
Our business serving the grocery sector
benefited from several new accounts
although the additional business won,
combined with a competitive marketplace,
has led to lower margins. We are continually
working to increase our efficiencies, thereby
contributing to a lower cost to serve.
The additional business with an existing
customer referred to above has increased
our capacity to handle pick and pack items
which will allow us to expand our service
to other customers and provide many new
items and a wider range of products. This,
combined with our flexible store delivery
programmes, allow our customers to source
large volume, low value not for resale items
in an effective and efficient manner.
Our retail supplies business has benefited
from the acquisition of DDS in May which
has significantly increased the size of our
operations in this sector. DDS’s experience
with speciality multi-channel retailers
allows us to offer more products across
our customer base and provide additional
merchandising and delivery capabilities.
By combining their expertise in this
sector with our extensive distribution
network and scale, we can deliver a more
comprehensive market-leading service to
all types of retailers.
Our redistribution business serving the
foodservice and janitorial and sanitation
(’jan-san’) sectors has grown this year due
to the success of our category management
programme for our larger national and
regional customers. As their category
30
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
As a focused and service-oriented
organisation we have continued to demonstrate
the strength and depth of our customer proposition
and show our ability to develop further across
the various markets we serve.
Patrick Larmon
President and CEO, North America
Finally, our business in Canada has
continued to make good progress,
particularly in the safety, industrial
packaging and grocery sectors. We were
successful in winning and implementing
new business for a large grocery customer
during the year. We also realised a number
of operational synergies through facility
consolidations, particularly in western
Canada and the results were further boosted
through the impact of recent acquisitions.
These include the purchase of AMFAS and
Western Safety during the first half of 2017.
In addition to distributing commercial and
industrial first aid and safety supplies,
including a full range of personal protection
equipment, they also provide safety-related
services including training programmes
and other workplace safety solutions.
Although our business serving the food
processor sector has experienced
margin pressures due to the continuing
consolidation of several large customers,
we have again delivered strong sales and
operating profit growth. We moved the
operations from our largest facility servicing
this sector into a new, modern warehouse
that will drive more efficiency and provide
opportunities to grow further. This facility
now includes state-of-the-art automation
to facilitate the handling of small, individual
items. Our national accounts strategy
continues to deliver new ways to expand
our offering to our larger customers using
additional digital and marketing tools that
we have developed. Our total plant operating
supplies programme offers a one-stop-shop
solution encompassing 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.
Our business that supplies the agricultural
sector was negatively impacted by adverse
weather conditions in California that resulted
in reduced fruit and vegetable yields at
harvest. Despite this, we have continued to
invest in the business and have generated
new business opportunities, particularly in
Mexico. Having integrated our agriculture
businesses onto one IT platform, we are now
in the process of changing our warehouse
footprint to be closer to our customers and
improve efficiencies. Not only will this reduce
our costs, but it will also allow us to enhance
the service levels that we are able to provide.
In the convenience store sector, our business
continues to generate greater revenue and
operating profit by using a pull-through
selling strategy with our primary wholesale
customers to help them increase sales with
convenience store retailers. Additionally, our
ability to manage our customers’ inventory
enables them to have the right products at
the right time with excellent fill rates and
just-in-time deliveries so that they can
reduce their working capital and warehouse
space needs.
31
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OPERATING REVIEW CONTINUED
CONTINENTAL EUROPE
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 15 countries across the continent.
In the Netherlands, revenue was up
significantly due to new customer wins in the
healthcare and retail sectors in particular,
although these gains were at lower margins.
This sales growth was boosted by the
continued expansion of our outsourcing
programme for hospitals. Sales also
increased with customers in the horeca,
grocery, safety and e-fulfilment sectors,
although declined in the cleaning and
government sectors. Overall operating profit
in the Netherlands grew well.
In Belgium, sales continued to increase in the
cleaning & hygiene sector but our business
serving the retail sector saw a decline in
sales as its main customers sought cost
reductions in the face of competition from
lower cost retail chains. While gross margins
improved, operating profit was impacted
negatively by some one-off costs associated
with an ERP implementation and warehouse
relocation in the cleaning & hygiene sector.
Polaris Chemicals, acquired in May 2016, has
performed ahead of expectations.
In Germany, sales declined in all sectors
other than the hotel sector. Although costs
were lower, the sales reduction led to lower
operating profit. Inkozell and Mo Ha Ge, both
acquired in May 2016 and principally engaged
in the distribution of incontinence products to
’at-home’ end users and care homes, have
integrated well into the Group.
HIGHLIGHTS
Revenue
£1,610.4m 12%†
(2016: £1,355.1m)
Adjusted operating profit*
£151.1m 13%†
(2016: £126.6m)
Operating margin*
9.4%
(2016: 9.3%)
Strong increases in revenue and profit
with improved operating margin
Significant acquisition of Groupe Hedis
further strengthens position in France
Good revenue and profit growth in the
Netherlands from new customer wins,
particularly in healthcare and retail
Significant growth in Spain from organic
growth and acquisition of Tecnopacking
Expansion into safety in Italy through
purchase of Neri
Strong performance in Turkey and Israel
with increased levels of profitability
Market sectors
Employees
Locations
4,414
188
† At constant exchange rates.
*
Before customer relationships amortisation
and acquisition related items (see Note 2w on
page 110).
Continental Europe has enjoyed another
year of strong growth with revenue rising
by 12% to £1,610.4 million and operating
profit up 13% to £151.1 million. As a result,
the operating margin improved to 9.4%.
Organic revenue growth of 4% was higher
than that achieved in 2016 and we also
benefited from the full year impact of the five
acquisitions made in 2016 and the part year
contribution of the five acquisitions
completed in 2017.
In France, sales in our cleaning & hygiene
business declined as an underlying
improvement in growth with regional
customers, particularly in the hotel,
restaurant and catering (’horeca’) and food
sectors, was not sufficient to offset fully the
impact of the loss of two larger accounts.
Cost increases were minimal but the lower
sales resulted in a decrease in operating
profit. Our safety business recorded strong
sales growth after winning some new
business, although this was at lower
margins. Prorisk and GM Equipement,
acquired at the end of January 2017, have
been fully integrated into our main
warehouse and onto our ERP system.
Comatec, our foodservice business which
specialises in the distribution of high-end,
innovative, single-use tableware to the
horeca sector, enjoyed strong sales growth
after investing in additional resources to
ensure its continued success. In a major
development, we completed the acquisition
of Groupe Hedis in November which has
expanded our cleaning & hygiene activities
and extended our business in France into the
catering equipment sector. Integration is
underway and our teams are working hard
on delivering the expected synergy benefits.
In February 2018 we sold OPM, a distributor
of SodaStream products in France, which
was a non-core business that was no
longer considered to be a strategic fit within
the Group.
32
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
By listening to their needs, we have formed
strong partnerships with our customers,
using the expertise of our commercial teams
to provide them with reliable and value-added
outsourcing solutions and distribution services.
Paul Budge
Managing Director, Continental Europe
Our business in Switzerland has seen a
return to revenue growth, despite continued
pressure in the tourism industry due to the
strong Swiss franc, as a result of good
performances in the medical, retail and
industrial sectors. Margins remained under
pressure from lower cost suppliers in
neighbouring countries but costs have been
reduced. Operating profit was slightly lower
than last year.
In Austria, Meier Verpackungen has enjoyed
good sales growth in the fruit and vegetable
and dairy sectors which, together with
improved margins, resulted in higher
operating profit.
In Denmark, revenue decreased due to the
loss of a major public sector customer in
the latter part of 2016, despite increased
sales in the horeca, redistribution, food
processing and safety sectors. Costs were
reduced as a consequence of the customer
loss but this could not prevent a decline in
operating profit. The acquisition of Sæbe
Compagniet was completed in early January
2017 and has further strengthened our
foodservice operations.
In Spain, sales grew strongly in the cleaning
& hygiene sector, as a major contract win
was rolled out, and the safety sector, due
to a combination of customer wins and
an extension of the product range. Our
healthcare business saw substantial growth
from new product launches and enhanced
marketing efforts. Overall, margins
improved and operating profit was
significantly higher. The results also
benefited from the acquisition in May of
Tecnopacking, which is principally engaged
in the distribution of industrial, foodservice
and retail packaging products to a broad
range of customers.
In Italy, Neri was acquired at the end of
March 2017 and has extended our safety
operations into a new country. The business
has traded in line with our expectations.
In Turkey, revenue at our personal protection
equipment business grew strongly due to
both volume increases and price rises which
had to be implemented following the
devaluation of the Turkish lira. Sales also
increased significantly at Bursa Pazari,
the distributor of packaging and other
foodservice supplies and disposable gloves
acquired in March 2016, due to gains in the
public sector and price rises. As a result of
this revenue growth, operating profit in both
businesses increased substantially.
In Israel, sales increased significantly in our
businesses serving the horeca and bakery
sectors due to customer wins. Margins
improved and operating profit was up
considerably compared to the prior year.
In central Europe, revenue declined slightly
as gains in the cleaning & hygiene sector in
Hungary and strong growth in Romania and
the Czech Republic were offset by lower
sales to retailers and the agriculture sector
in Hungary. Blyth, a specialist distributor of
personal protection equipment which is
based in the Czech Republic and was
acquired in August 2016, and Silwell, which
is based in Hungary and sells disposable
foodservice items to the horeca sector and
was acquired in September 2016, are both
trading ahead of expectations.
We have continued to roll out our common
e-commerce platform across the business
area and a further four businesses went
live on the system during 2017. This will be
further rolled out in 2018, thereby helping
to drive both sales growth and operating
cost efficiencies going forward.
33
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OPERATING REVIEW CONTINUED
UK & IRELAND
The acquisition of Automatic Catering Supplies in the UK 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.
HIGHLIGHTS
Revenue
£1,190.8m 9%†
(2016: £1,087.8m)
Adjusted operating profit*
£88.5m 5%†
(2016: £83.7m)
Operating margin*
7.4%
(2016: 7.7%)
Strong revenue growth with operating
margin impacted by higher import prices
from weaker sterling
Trading in safety impacted by sluggish
markets; good performance in cleaning
& hygiene
Growth in food retail; non-food retail
strengthened by acquisition of Woodway
and Lightning Packaging
Growth in hospitality from contract
wins and expansion of business with
existing customers
Healthcare held back by difficult
market conditions
Good growth in Ireland across all sectors
Market sectors
Employees
Locations
3,937
100
† At constant exchange rates.
*
Before customer relationships amortisation
and acquisition related items (see Note 2w on
page 110).
In UK & Ireland, revenue increased by
9% to £1,190.8 million, while operating profit
was up 5% to £88.5 million. Although the
organic sales growth of 1.5% for the year
recovered from the decline seen in 2016, and
the results were boosted by the impact of
recent acquisitions, the UK market continues
to be challenging due to political and
economic uncertainty which has had an
adverse impact on profitability. The operating
margin was only down 30 basis points to 7.4%
as we took active steps to mitigate the
adverse consequences of the significant
foreign exchange transaction impact from
the weakening of sterling in 2016 which led to
higher prices of imported products.
Both sales and operating profit in our safety
business were down as investment in major
construction and infrastructure projects
slowed. As a result, we undertook steps
to improve our operating efficiencies further,
consolidating some of our warehouses and
investing further in our digital channels. New
customer wins within our cleaning & hygiene
supplies business have, however, given rise
to some good growth as we look to provide
our customers with valuable data driven
insights to help them operate their own
businesses more efficiently and effectively in
their respective marketplaces.
The food retail market in the UK continues to
remain a very challenging environment
which has impacted our business. Against
this background, we have nevertheless
successfully managed to grow with many of
our customers by providing extra product
ranges and services. In addition, we have
secured two further notable customer wins
during the year, including one customer that
moved to another supplier two years ago but
has recently returned to us, having
recognised the importance of our ’best-in-
class’ value and service proposition that we
are able to provide in contrast to many of our
competitors. On the high street, we continue
to encounter both opportunities and
challenges in our retail packaging
businesses as the market moves from a
traditional ’bricks and mortar’ operating
model to an increasing online offering. We
are continuing to invest in product design and
service innovation to offer our customers
clear differentiation in their marketplaces.
The acquisition of Woodway in December
2016 has further expanded our offering
in high quality packaging products with a
particular focus on e-commerce packaging
solutions and the purchase of Lightning
Packaging in November 2017 has also
strengthened our position in this market.
Our point-of-sale fulfilment business
continues to add new customers by providing
both merchandising insight and added value
services. The purchase of Pixel Inspiration
at the end of June 2017 has also expanded
this business into the provision of
digital solutions.
The catering and hospitality market has been
adversely impacted by inflation in food costs
and the increase in the national living wage
which together have put further pressure on
our customers’ operating margins, thereby
causing them to look for cost savings in our
product categories. The trading environment
has also been more challenging due to the
continuing uncertainty of the 2016
referendum vote for the UK to leave the
European Union which has held back some
investment decisions. Despite these difficult
circumstances, we have managed to expand
our business due to the roll-out of a major
customer win, while enlarging our operating
footprint and further improving our own
brand offering and providing greater value to
all our customers. Our online ordering app
has also been extensively improved to
accommodate more customer functionality
going forward. Our catering equipment
business has also continued to grow with
some new customer wins in the restaurant
sector, expanded product ranges and an
improved online presence.
The UK government is continuing to focus on
reducing costs within the NHS. As a result,
we have seen margins come under pressure
during the year which have been further
34
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
As a reliable supplier of critical, everyday
essential items, our customers rely on our
sourcing expertise and the depth and breadth
of our product offering and service solutions that we
provide from our extensive network of distribution facilities.
Andrew Tedbury
Managing Director, UK & Ireland
exacerbated by the adverse foreign exchange
transaction impact on the price of globally
sourced products following the devaluation
of sterling. Our healthcare businesses have
however managed to grow sales by focusing
on value-added products, both within the
NHS and in the private sector, as well as
by increasing export sales. Our nursing
and care homes supplies business has also
seen further growth with new customer
wins and a more widely available online
product portfolio.
Our overall business in Ireland has
developed well throughout the year with
strong increases in both revenue and
operating profit. We are continuing to invest
in our operations with the opening of our new
purpose-built facility in Armagh for our
catering and hospitality business which has
generated further operational efficiencies
with the capacity for additional growth. The
winning in the final quarter of the year of a
new large customer, to whom we will provide
a full range of catering disposables, light and
heavy catering equipment and kitchen design
services, completed a good year for the
business. A number of large public sector
customer wins in our cleaning and safety
business have been rolled out successfully
during the year. Kingsbury Packaging, which
was acquired in September 2016, has been
fully integrated and has compensated for the
loss of some redistribution business in our
operations serving the retail sector. In
addition, further improvements to our digital
capabilities have in turn enhanced our
customer offering and improved both the
range and services available across our
customer base.
35
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OPERATING REVIEW CONTINUED
REST OF THE WORLD
The current operations in Rest of the World started in 1983 with the acquisition of United
Suppliers based in Sydney, followed by the purchase of numerous businesses throughout
Australia and New Zealand in subsequent years. Bunzl made its first move into Latin
America 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, and has grown
further into Asia with the acquisitions in Singapore and China in 2017.
HIGHLIGHTS
Revenue
£718.6m 5%†
(2016: £624.1m)
Adjusted operating profit*
£53.9m 5%†
(2016: £46.6m)
Operating margin*
7.5%
(2016: 7.5%)
Latin America
– Overall good performance, including
improvement in Brazil
– Entry into foodservice sector in Brazil
with acquisition of Talge
Australasia
– Continued improvement in trading
conditions
– Acquisition of Interpath has enhanced
healthcare presence
Asia
– Expansion in Asia through acquisitions
in Singapore and China
Market sectors
Employees
Locations
3,112
102
† At constant exchange rates.
*
Before customer relationships amortisation
and acquisition related items (see Note 2w on
page 110).
In Rest of the World, revenue increased 5%
to £718.6 million with operating profit up 5%
to £53.9 million and the operating margin
unchanged at 7.5%. Trading conditions have
improved somewhat compared to the recent
past and the economic environments in
the countries in which we operate have
stabilised, but market conditions remain
variable across the business area. Of the
total increase in revenue, 2% was due to the
organic growth of the underlying business,
with acquisitions accounting for the balance.
Vicsa saw lower sales and operating profit,
although further improved gross margins
with a better product mix. Our other safety
business, Tecno Boga, experienced lower
sales with operating profit flat as reduced
demand for its premium footwear lines was
offset by the introduction of a number of new
brands and product lines. Trading conditions
were more favourable in the foodservice
sector, with increased sales and operating
profit at our business DPS, despite the loss
of a larger account.
Brazil saw a return to modest economic
growth during the year despite continued
political uncertainty. We recorded organic
sales growth in all our sectors for the first
time in several years which, together with
improved gross margins, helped operating
profit to increase. Sales through our
e-commerce platforms were also up in all
businesses and we believe we are well
positioned to benefit from Brazil’s expected
continued economic growth. Despite the
challenging industrial environment, our
safety business showed good increases in
sales and operating profit driven by a strong
performance in the redistribution channel
and improvements in gross margins.
Despite an increase in sales, our cleaning &
hygiene business saw operating profit
decline. In the healthcare sector in Brazil,
sales continued to grow, albeit at a lower rate
than in previous years due to unexpected
delays in the arrival of several key imported
product lines. Operating profit was impacted,
however, as gross margins came under
some pressure.
We entered the foodservice sector in Brazil
in January 2018 with the acquisition of Talge,
which is based in Santa Catarina. The
business imports and distributes a broad
portfolio of private label products mainly to
foodservice distributors in the southeast
region of Brazil and provides us with an
anchor in this important new sector.
In the rest of Latin America, we experienced
mixed results against a backdrop of lower
economic growth rates in most countries
in which we operate. In Chile, where we
experienced the continued impact of a
subdued mining sector, our safety business
In Colombia, economic conditions
deteriorated during the year with softening
demand in the construction, industrial
and public sectors, such that sales and
underlying operating profit fell in our safety
business, Solmaq. Restructuring and
operational improvement measures were
implemented during the year, leading to a
much improved performance in the fourth
quarter and a business which is well
positioned for a future upturn in demand.
Sales in Vicsa Colombia were down but good
margin management led to strong operating
profit growth despite the weakness in the
local economy.
In our Vicsa operations in Argentina and Peru,
sales and operating profit grew significantly
due to favourable trading conditions.
In Mexico, our safety business achieved sales
growth despite the market’s current
uncertainty regarding the country’s
commercial relationship with the US.
However, unfavourable currency movements
have put prices and gross margins under
pressure, such that operating profit fell
despite good cost control. Our business is
continuing to develop its e-commerce
platform and is well positioned for when
market conditions improve.
In Australasia, sales and operating profit
increased as trading conditions continued
to improve, with GDP growth being driven
by increased capital spending from
government investment in infrastructure.
Although the Australian dollar stabilised
during the year, some raw material and
product shortages have increased the cost
of imported goods which will present some
challenges going forward.
36
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Our global network of businesses enables
us to collaborate and share expert knowledge
and best practices, from achieving purchasing
synergies to operating our warehouses in
the most cost-effective way, thereby creating
value and efficiencies for our customers.
Jonathan Taylor
Managing Director, Latin America
We have grown through the development of
long term relationships with our customers
and by identifying and successfully
executing future opportunities to expand
our business with them.
Kim Hetherington
Managing Director, Australasia
business is capitalising on the increased
government funding into infrastructure and
has been successful in winning major new
contracts in the construction and energy
sectors and with the federal government.
We have also been able to realise some key
benefits from our recent ERP upgrade
including improved reporting capabilities
across the business. A reduction in costs
through the consolidation of facilities and
a reorganisation of the business to fit the
current market environment has enabled
us to streamline our operational platform
and processes and will allow us to continue
to drive productivity and enhance our
competitive position.
In October, we acquired Interpath which is
based in Melbourne and is a leading national
distributor of laboratory and healthcare
related consumables to the pathology,
medical research and life science markets
in Australia. This expands our reach in the
healthcare sector and progresses our
strategy to develop our portfolio within
growing and resilient market sectors.
We made our first acquisition in Asia in
January 2017 with the purchase of LSH in
Singapore which was followed by the
addition of HSESF in China in August. Both
businesses are principally engaged in the
supply of personal protection equipment
and are being integrated into the Group.
Our largest business, Bunzl Outsourcing
Services, continued to develop within the
healthcare, contract cleaning, catering and
retail sectors with sales and operating profit
both increasing. Healthcare, which is our
largest sector, continues to grow, driven by
the ageing population. Recent changes to
government funding has increased demand
by creating new growth opportunities in
the community services sector. We are well
positioned to capitalise on these opportunities
and the requirements for specialist medical
consumables and clinical support are met
through our national distribution footprint.
We have also invested in a new e-commerce
platform which is in the process of being
rolled out across the business. This will
further enhance our existing trading platform
which has automated the majority of our
current orders.
Our food processor business continues
to make progress with our strategy to
diversify our presence across the wider
food processor sector resulting in higher
sales and operating profit. We have been
successful in winning additional large food
processor customer contracts across
Australia and New Zealand. This is building
momentum as we roll these out across both
regions. The business has also developed an
improved retail food packaging offering and
we are already capitalising on several of
these new, innovative product ranges.
While our safety business continues to have
a strong presence in the resources sector,
we made the strategic decision to develop
our expertise in other areas to reduce an
overreliance in one sector. As such, the
37
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
VALUING OUR PEOPLE
We deliver creative, effective solutions for
our customers through the unique skills and
perspectives of our employees. The long term
relationships formed by our employees with all
our stakeholders shapes the reputation of Bunzl
and drives our positive ’can-do’ ethos.
Our commitment as a responsible employer
is to support and equip employees to work
collaboratively and with local autonomy,
within the framework of our Group strategy.
38
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR PEOPLE
Our aim is to foster a culture that is inclusive,
diverse and focused on continuous
improvement. We encourage and reward
high performance, creating a sustainable
work environment where all are able to
realise their individual potential. Each year
we welcome new employees, many of whom
join through acquisitions, and this provides
new ideas and challenges to continue the
development of Bunzl internationally.
A diverse and successful team
Bunzl currently operates in 30 countries
worldwide. As a service provider, our
business relies heavily on the skills and
experience of our employees. We pride
ourselves on the fact that we run our
businesses locally and managers are
empowered accordingly. 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
acquisitions continue 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.
An engaging place to work
We are committed to informing and
supporting our employees to grow within
their roles. In our 2016 employee survey, our
employee engagement score was 76%, an
increase of 2% on the survey two years
previously. During 2017, each senior business
leader worked in partnership with the human
resources (‘HR’) function to build business-
level action plans. One area highlighted for
improvement was communications and we
therefore refreshed our global employee
newsletter, the Source, into a magazine
format and plan to launch a digital app
version shortly. The information shared
helps our employees understand how we
are performing as a company and also
includes stories from around the Group on
new business deals and recent acquisitions,
community projects, innovative products
being brought to market and a popular
’Day in the Life’ of a colleague from one of
our businesses. We use a range of other
channels to communicate with our
employees using collaboration platforms,
apps and video briefing technologies as well
as regular staff meetings and briefings, all
of which allows us continually to receive
real-time feedback from our workforce.
During the year we also brought together
165 leaders at a global conference with the
theme of collaboration. Presentations from
senior managers in the business covered
best practice on topics such as digital
opportunities, sales effectiveness,
accelerating organic growth, acquisitions
and how best to differentiate ourselves from
our competition. We remain proud of the fact
that, despite our scale, our decentralised
business model encourages local
accountability.
Employee Consultation and
Information Forum (‘ECIF’) – UK
& Ireland and Continental Europe
A group of elected representatives meet
annually as part of the ECIF. In 2017, 10
representatives from the UK & Ireland
and Continental Europe business areas
met at Bunzl Cleaning and Hygiene’s
offices in Langley, UK with the business
area Managing Directors, the Group
Finance Director and the Director of
Group HR to share information on issues
that are important to our employees
in these businesses.
The most recent financial results of the
Group were shared and discussed as well
as the achievements and plans from a
regional perspective. In addition, the
representatives were updated on the
developments in corporate responsibility
(‘CR’) and the highlights from the global
management conference were shared.
The representatives raised the common
questions that their colleagues wanted
to be discussed and gained input from all
the people present at the meeting. It was
considered a successful meeting providing
another opportunity to build engagement
with, and two way communications
between, the Group’s senior management
and the wider workforce.
Total workforce
Gender split at 31 December 2017
Senior management
Gender split at 31 December 2017
Average number of employees
By business area
36%
64%
11%
18%
22%
35%
Male 11,619
Female 6,535
Male 400
Female 50
89%
25%
North America 6,071
Continental Europe 4,414
UK & Ireland 3,937
Rest of the World 3,112
39
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR PEOPLE CONTINUED
Rewarding for performance
In return for their commitment and hard
work, we make sure that we treat our
employees fairly and pay them properly for
the work that they do. All our UK employees
over the age of 18 who have completed their
probation period are paid the National Living
Wage or above and those on probation
receive at least the minimum wage. Locally
our sites are empowered to run a variety of
recognition and incentive schemes ranging
from employee of the month through to
programmes based on performance and
living the Bunzl values. We have good
employee benefits. During 2017 a flexible
benefit holiday purchase scheme was
introduced in the UK & Ireland and in the
US we offer a wellness programme that
incentivises and rewards employees for
getting annual medical screenings and for
being physically active.
Employee development
and retention
As part of our commitment to developing
our people, we have continued to invest
in training programmes for customer facing
and operational roles through to senior
management. Participants on the Bunzl
Management Programme, which is aimed
at employees leading a team for the first
time, delivered projects introducing new
ideas for the business, using learnings from
the programme. We encourage employees
to take charge of their development and
career growth and look to appoint from
within the organisation wherever we can.
Online learning platforms and succession
tools were also introduced in some regions
this year. It is our people who continue to
deliver the Group’s strategy for the individual
businesses and we have strong people talent
pipelines and recruitment processes that
ensure we employ and retain the best talent.
Equality and diversity
Our business culture is underpinned by our
CR framework which sets out the legal,
ethical, social and environmental standards
of behaviour we expect from our employees.
All of Bunzl’s policies seek to respect
human rights’ standards defined by both
internationally agreed principles and our own
cultural standards. We monitor the age of
our workforce across the world to ensure
compliance with these standards and identify
any potential succession issues. This year we
have focused on activities to increase the
number of women in senior leadership roles.
These include working with strategic training
providers and internal mentors to coach
women in middle management roles to reach
their potential and we are committed to
ensuring that more women come up through
the organisation. We introduced an equality
and diversity policy in October, setting out
our specific commitments to ensure our
employment policies, practices and
procedures focus on maximising the
potential of each individual. We believe this is
best achieved by developing our employees’
talents, while recognising their different
cultures, perspectives and experiences.
Total workforce age profile
at 31 December 2017
18%
17%
25%
40%
Under 30 3,145
30-39 4,560
40-54 7,162
Over 55 3,287
We are committed to monitoring and
understanding any gender pay gap and as a
business we value diversity and support the
UK government’s commitment to address
the UK’s overall gender pay gap. From 2018
we will publish our UK gender pay gap data
in line with the guidelines. At Bunzl we are
confident that men and women are paid
equally for doing equivalent jobs across
our businesses. Our analysis of roles held
by men and women shows that we have an
under-representation of women in the senior
leadership team and an over-representation
of men at more junior levels across the
business. We believe that by becoming more
diverse, through the adoption of a number of
key initiatives across the business as outlined
above, we will attract and retain the best
talent, engage our workforce and grow
our business.
Helping the local community –
North America
Following the hurricanes in the US in
September, colleagues pulled together
to support those whose lives were
devastated by the impact of the high
winds and torrential rains and flooding.
We were able to deliver food, drinks and
cleaning supplies to support the victims.
The magnitude of these storms was
unprecedented and our people performed
in an outstanding manner to help meet
the immediate needs of those most
badly affected.
40
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OUR PEOPLE CONTINUED
Key performance indicators
Performance
2015
2016
2017
What we said we
would do in 2017
What we did
Employees
Engaging with our employees with clear communications and the provision of training and development opportunities
Employee turnover:
Voluntary
10.3% 11.7% 13.0% Continue to monitor
turnover and take
action where
necessary.
From our monitoring we are seeing an increase in voluntary
employee turnover in our business. The movement in the levels
of voluntary employee turnover tends to reflect the economic
conditions in the countries in which we operate and low
unemployment levels, particularly in North America, rather
than any intrinsic reasons related to the Group. Our key
employee and management populations remain stable.
Gender diversity:
Women at senior
management level
11% 10% 11% Focus on career
development and
succession plans.
We continued to promote women’s development and training
across the Group and use case studies to highlight female
role models.
Employee engagement
index score
–
76%
–
Detailed action plans
to be devised to
address any
significant issues
raised.
The results of the employee survey have been absorbed and,
as appropriate, working parties or local forums and listening
groups set up to address the significant issues raised. The
employee survey is run every two years and therefore data
is available for 2016 only.
What we plan
to do in 2018
Continue to monitor
turnover and take
action where
necessary.
Extend the training
further and
encourage wider
participation.
Undertake an
employee survey
during 2018.
Supporting community projects
and employee fundraising
We believe that ensuring community support
makes a meaningful difference to our
colleagues. We provide resources and
opportunities for Bunzl people to be good
citizens and to get involved in local
community projects and to contribute to
social impact causes. These fundraising
activities championed by our employees
locally are supplemented by donations made
at Group level.
St John Ambulance – UK & Ireland
Bunzl has built a long term relationship with
UK national charity St John Ambulance
(‘SJA’). Having previously supported a
number of first aid initiatives, in 2015 Bunzl
funded a purpose-built mobile first aid
vehicle – the first in the charity’s fleet. Based
in south west England, the vehicle is used by
volunteer first aiders at major public and
sporting events and also provides a night
service in city centres and can offer
emergency support for disaster situations.
The vehicle provides a mobile triage clinic
and can treat ‘walking wounded’ on site.
In 2017 Bunzl Healthcare funded a second
vehicle which will provide support for the
London area. Bunzl are also funding 100 first
aid classes provided by SJA in primary and
secondary schools, aiming to create a new
generation of lifesavers.
Health and wellness
Bunzl encourages wellbeing and supports
good physical and mental health of our
workforce and an engaging workplace.
We aim to support our employees to be the
best they can be. This includes giving them
opportunities to maintain and enhance their
health so they can maximise their fitness
and, at the same time, improve their capacity
to work safely and effectively. This benefits
both the individual and our business. We
support various programmes including one
on ergonomics in the workplace to protect
our employees from work-related hazards to
their health, including prevention of work-
related illness and occupational diseases.
41
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
31%
Reduction in accident
severity rate
BEING A
RESPONSIBLE
BUSINESS
We focus on maintaining high levels of
corporate responsibility within our business.
To this end we actively work with our
suppliers to increase sustainability within
our supply chain and provide products and
solutions to our customers that are sourced
and delivered efficiently, safely and
sustainably. As a responsible employer
we provide our employees with a safe
working environment and promote a
positive and supportive culture.
503
Asian supplier
CR audits
42
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY
Business context
We are a focused and successful
international distribution and
outsourcing group with operations across
the Americas, Europe, Australasia and
Asia. 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.
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.
Sourcing
We source everyday essential non-food items
for a number of market sectors including
foodservice, grocery, cleaning & hygiene,
safety, retail and healthcare. We are able to
offer a full range of items which satisfy our
customers’ demands, including offering
alternative products which have a lower
environmental impact. Our quality
assurance/quality control department based
in Shanghai monitors and works with our
key direct suppliers in Asia and elsewhere
to ensure that appropriate corporate
responsibility (’CR’) standards are in place.
Consolidation
We have an extensive operations’ footprint
across 30 countries. 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.
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.
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;
• supply chain: responsible sourcing,
working as partners with our suppliers to
encourage high levels of CR and ethical
trading initiatives;
• 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, promoting the reduction of
waste and providing innovative products
and services to meet our customers’
needs, for example environmentally
friendly packaging;
43
Bunzl plc Annual Report 2017
• community: providing support by
encouraging employee fundraising and
donating to charitable projects and good
causes that benefit the communities we
work in; and
• customers: offering a full product range
and delivering these products to our
customers efficiently, thereby enabling
our customers to benefit from a lower
environmental impact of doing business.
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
2017. 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 HR policies and
procedures. In the reporting year 13 (2016: 16)
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. We have recently developed
a training module on combatting modern
slavery and are currently in the process
of rolling this out.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
Supply chain
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. We work with our suppliers with the
aim of ensuring 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. 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.
Auditing
To assist the business areas, we have our
own quality assurance/quality control
department based in Shanghai which
performs regular audits of our direct
suppliers in Asia to ensure that they meet
international standards, as well as tests 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. We expect our suppliers to meet or
exceed local legislative requirements and
applicable international requirements for
workers’ welfare and conditions of
employment, such as those set by the
International Labour Organization (ILO) and
the Ethical Trading Initiative (ETI). During
2017 the team in Shanghai has continued to
grow and refine its CR audit programme
further 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 of time which is
deemed appropriate for the circumstances.
If a serious breach is identified following
assessment, an action plan is documented
and the supplier is expected to commit to
addressing all the areas where discrepancies
have been identified. The process of
improvement via this method is principally
reliant on the commitment of the supplier’s
management team/owner/agent to ensure
that all areas are addressed. If we have
reason to believe that the supplier is not
making sufficient or committed progress,
this could lead to a suspension in the
relationship until such time that we are
confident that all areas are being
satisfactorily addressed. Bunzl companies
reserve the right to cease a relationship with
a supplier if it is found that unacceptable
practices are being employed at any sites
used for producing or sourcing Bunzl
products. Such practices include use of
child, forced or bonded labour, illegal
discrimination, wages not meeting local
minimum requirements and not providing
adequate days of rest and any other breach
of local or applicable international
requirements for workers’ welfare and
conditions of employment. Suppliers that
are being monitored and assessed due to
identification of a serious breach are
periodically 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 analysis confirmed that
our central CR audit process covers the
geographies with high levels of social risks,
which are predominantly countries in Asia.
However during 2017 we started to expand
our CR audits into geographies with medium
levels of social risk by carrying out audits
outside of Asia, namely in Mexico, Brazil,
Romania and Turkey. We will expand this
process further in 2018.
Capacity building and training
We work with our suppliers to help them
prevent CR issues arising and to address
them if they are found. In 2017 we continued
to expand our approach from audit and
monitoring to collaborative solutions. We
believe that building relationships, capacity
and trust with suppliers is critical when it
comes to preventing and identifying
incidences of modern slavery. We also
organised a supplier conference in Shanghai
to showcase examples of good practice and
build awareness of social compliance issues.
This helped to develop local expertise and
build the business case for suppliers to
achieve better productivity, quality and
worker retention. The training included
increasing awareness of modern slavery
issues and other social risks and how to
identify and remedy them if found and
enabled the sharing of good practice and
learning with other suppliers. The
conference was attended by 30 suppliers.
Training
We will shortly be launching a CR training
module which specifically covers social
risks, including modern slavery. This
training module is mandatory for all of
our senior management as well as senior
sales representatives and procurement
employees. The training will help our
employees to understand and recognise
social risk issues that might occur in our
supply chain and to inform them of the
appropriate actions that should be taken
if such issues are found.
Supplier training conference – Group
A supplier conference was held in Shanghai in 2017. The key objectives of the event were to
increase suppliers’ awareness of modern slavery issues and other social risks and to enable
sharing of good practices about how to remedy those risks if found. The event was very
successful and well received by the 30 suppliers that attended.
“Attending the supplier training conference in Shanghai provided a unique
opportunity to speak with Bunzl and other suppliers about social risk issues in
an atmosphere of openness. Bunzl’s commitment to this training programme
demonstrates its willingness to develop stronger supplier partnerships. As a
supplier to Bunzl, we feel privileged to be part of this.”
Lu Yue-Zhong – EBIC, Asian supplier to Bunzl
44
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
Incidence rate
Average number of
incidents per month per
100,000 employees
23%
Reduction in
incidents
Severity rate
Average number of
days lost per month per
100,000 employees
31%
142
115
107
99
76†
13 14 15 16 17
6
8
6
,
3
6
9
5
,
3
1
2
0
,
3
0
8
0
,
2
†
8
2
4
,
1
Reduction in days lost
13 14 15 16 17
† Included in the external auditors limited assurance
scope referred to on page 48. 2016, 2015 and 2014
data was also assured as detailed in the respective
Annual Reports.
12 months to 30 September.
Communications
We continue to ensure that our CR policies,
including our requirements relating to social
risks, are communicated and enforced
adequately in our supply chain through
communication with our suppliers. In the
past we have written to our top suppliers by
value. In 2017 we refined this approach and
started the process of writing to all suppliers
in countries with medium or high social risks
and to our main suppliers in other countries
with relatively low direct social risks. For this
purpose, we have developed a Supplier Code
of Conduct that defines the principles and
standards that Bunzl expects suppliers of
goods and services to adhere to.
Employees/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 ILO, 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 and
identify any potential succession issues.
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. More details about our employees can be
found in the Our people section of this Annual
Report on page 38.
The UK Modern Slavery Act 2015 requires
certain businesses to produce an annual
statement that sets out the steps these
businesses have taken during the financial
year to ensure that slavery and human
trafficking are not taking place in their
operations and supply chains. This
requirement affects Bunzl plc and a number
of operating companies in the UK. The
current Bunzl slavery and human trafficking
statement has been approved by the Bunzl
plc board and is available on our website,
www.bunzl.com.
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. In the 2017 reporting period
there were no fatalities (2016: one).
Our incidence and severity rates have
improved by 23% and 31% respectively.
This improvement was particularly driven by
strong performances in North America and
Australia where the number of accidents
decreased by 33% and 60% respectively.
This has been underpinned by our safety
observation programme which provides
ongoing feedback to our employees on both
good and poor safety performance. During
2018, it will continue to be extended across
the business. In North America, warehouse
managers and supervisors perform one
safety observation per day. The results are
reviewed monthly in a safety committee
meeting. All sites in the US have introduced
pre-shift stretching programmes as a way
to reduce manual handling injuries. The
roll-out will continue into Canada in 2018.
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, falling, slipping and tripping and
impact with equipment/objects remain the
highest causes of accidents and days lost.
Together these hazards represent 93% of
incidents and 95% of days lost. All our
businesses are required to comply with
Group policies issued through the Corporate
Responsibility and Sustainability Committee
which reviews the Group’s 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.
Stretch It Out Campaign –
North America
Two years ago, Bunzl North America began
a programme called Stretch It Out (‘SIO’),
focusing on pre-shift stretching in order
to address ergonomic related sprains and
strains. SIO has not only helped to reduce the
leading cause of injuries within our operations,
but has also led to increased employee
engagement and participation. The SIO
programme centres around employees’
involvement with their teams.
“I really enjoy leading the SIO
programme in Bunzl Anaheim.
SIO has helped our team focus
more on safe behaviours, both
inside and outside of work.”
William Lemus,
Warehouse employee
and Safety team
member at
Bunzl Anaheim
45
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
Our primary method for distributing the
goods that we sell is the use of delivery
vehicles. Consequently, geographical regions
have placed considerable emphasis on
training programmes for drivers. Each of
these programmes has their own specific
focus but all of them are aimed at reducing
accidents and injuries on the road. In 2016,
telematics equipment was installed
throughout France Hygiene's commercial
fleet, which is our largest fleet in Continental
Europe. In 2017, France Hygiene further
focused on the implementation of safe driving
programmes by training, coaching and
engaging drivers, helping them to
demonstrate best-in-class safe driving
behaviours. UK & Ireland now has all
commercial vehicles fitted 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.
Our safety awareness programmes are
management led within the business areas.
France Hygiene, which has the highest
incidence and severity rate in the Group,
developed a programme to improve safety
and strengthen the focus on their high risk
groups of workers. Various initiatives were
implemented across the business. Additional
training programmes covering the specific
risks that these groups of workers can be
exposed to during their work helped
employees to apply safe working methods
to mitigate these risks.
The root cause of many incidents is found to
be a failure to implement established safe
working practices. France Sécurité started a
safety observation programme in 2017. The
programme included training for supervisors
on how to perform behaviour observations
and coaching on effective feedback
conversations with employees.
During the year we improved our web-based
Environmental, Health & Safety (‘EHS’)
reporting system by enhancing the reporting
functionalities. The system includes an
audit system which enables progress on
corrective actions to be tracked by our
EHS managers.
Details of our performance from 2013 to 2017
are provided in the bar charts on page 45.
The accident data provided covers more than
99% of the Group by revenue.
Waste
Tonnes per £m revenue
Incinerated waste
General waste
Recovered/recycled waste
12 months to 30 September.
0.1
0.7
1.3
0.2
0.8
1.8
0.2
0.8
1.7
0.2
0.8
2.0
0.2
0.7
1.8
Scope 3 carbon emissions
Waste
Electricity transmission
Business travel
Third party carriers
12 months to 30 September.
Carbon emissions from waste
have been restated for 2014 and
2015 to reflect more accurate
conversion rates.
13 14 15 16 17
0.2
0.4
1.6
13.0
0.2
0.3
1.2
11.7
0.2
0.4
1.3
11.5
0.1
0.3
1.1
9.6
14
15
16
17
approximately 24% of the Group’s operations
are certified to ISO 14001. Certification 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 Sécurité is
MASE (Manuel d’Amélioration Sécurité
des Entreprises) certified to reflect the
requirements of its customer base.
This certification encompasses continuous
improvement in EHS performance and
is externally assessed.
Carbon emissions
Scope 1: Fuel for transportation remains
our highest source of CO2e emissions
contributing c. 83% of Scope 1 and c. 63% 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 2.5% improvement in fuel efficiency during
the year. This has resulted in an annualised
saving of approximately 400,000 litres of
diesel fuel. At Group level, diesel consumed
by our commercial fleet increased by 2.5%
mainly due to sales growth. In Australasia,
the need for greater flexibility of transport
methods and efficiency in distribution has
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 2017.
Direct water usage is not a significant
environmental impact for our business as it
is principally confined to staff hygiene and
workplace cleaning purposes. Our estimated
water usage is 140,000 m3 of water. 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. All
acquisitions made prior to the 2017 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.
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.
The requirements of the EU Energy
Efficiency Directive have been implemented
in all relevant businesses across Continental
Europe and UK & Ireland. In addition, a
number of locations in UK & Ireland,
Australasia and Continental Europe have
renewed their ISO 14001 certification.
Currently, measured by revenue,
46
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
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
Base year 2010
95,249
28,757
124,006
26.3
Tonnes of CO2e
2016
89,186
32,201
121,387
17.1
2017†
92,687
30,451
123,138
15.0
† Included in the external auditors’ limited assurance scope referred to on page 48. The data for 2016 was also
assured as detailed in the 2016 Annual Report.
resulted in the decision to transfer a major
part of our distribution to third party
carriers. This transfer started in 2016 and
was completed in 2017. 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. In France, the use of telematics
has contributed to a 5% decrease in fuel
usage by our commercial vehicles (66,000
litres of diesel).
Consumption of gas during the year
increased by nearly 11% primarily due to
colder weather conditions in North America,
and increased presence in colder
geographical areas (e.g. Canada) leading
to higher building heating requirements.
Scope 2: Electricity consumption has
increased by 1.0% as a result of an increase
in warehouse space due to acquisitions and
organic growth of the business. Per £ of
revenue, our electricity consumption has
decreased by 4% at constant exchange rates.
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 17 projects, predominantly
in North America and UK & Ireland, to
upgrade lighting, providing annualised
savings of approximately 3 million kWh
of electricity. These savings represent
approximately 4% of our electricity
consumption. Other locations are being
looked at for potential LED lighting projects
to determine the available incentives and
anticipated payback. 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. In the UK &
Ireland we have moved to a central
electricity supply contract with low carbon
electricity. This contract covers all business
units in this business area except a few
recent acquisitions that are still on
existing contracts.
Scope 3: We are continuing to refine the data
collection for our Scope 3 carbon 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 on
page 46 shows that third party carriers
produce the largest proportion 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 are subject to authorisation by senior
management. Reduction and segregation of
waste continues to be an area of focus and
the data provided covers approximately 94%
of the Group by revenue, although accurate
waste measurement remains challenging.
Despite including this in our Scope 3
emissions calculation, we have for
transparency continued to provide waste
data separately as well.
Community
Although Bunzl’s operations are
international, our strength lies 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 £742,000 to charitable causes
during 2017 (2016: £712,000). This does not
47
Bunzl plc Annual Report 2017
include in-kind donations or employee
fundraising. We continue to support our
employees in their charitable fundraising, for
example a charity run in Switzerland to raise
money for Alzheimer's research, as well as
supporting projects for healthcare and
environmental charities, such as providing
funding to the British Red Cross Solidarity
Fund which was launched to support people
who had been injured, bereaved or
traumatised by terrorist attacks in the UK.
For more information on all of Bunzl’s CR
policies and activities please visit the
Responsibility section of our website,
www.bunzl.com.
Customers
As part of our policy to provide our
customers with high quality products and
good value for money, businesses within
the Group are constantly developing and
sourcing new products. Our aim is not only
to satisfy changing customer requirements
but also to give ourselves a competitive
advantage in the marketplace. From colour
coded ‘free from’ labels for the hospitality
sector to the use of innovative fabrics to give
greater protection to workers against
challenging weather conditions or where
there is a risk of contamination from viruses,
bacteria and fungi, Bunzl works with its
customers in the development of new,
redesigned or substantially
improved products.
A number of Bunzl businesses adopt
partnerships and source innovative products
to help their customers be responsible users
of disposable packaging and reduce their
waste footprints. To increase our offering
of environmentally friendly products
which can minimise waste, North America
expanded its offering through the acquisition
of Earthwise Bag Company. The business
specialises in the supply of reusable
eco-friendly bags including multi-use totes,
insulated bags, wine totes and produce bags
to supermarkets and other retailers.
Bunzl Catering Supplies (‘BCS’) is a founding
member of the Simply Cups Scheme, the
UK’s only dedicated collection and recycling
solution for paper cups. The team at BCS has
hosted a series of launch days for a number
of customers, engaging with consumers and
working hard to change perceptions around
paper cup recycling. BCS has continued to
work closely alongside the Simply Cups team
and, together with environmental charity
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
Square Mile Challenge in the City
of London – UK and Ireland
BCS joined with key supply chain partners to
launch a paper cup recycling initiative called
the Square Mile Challenge at London’s
Liverpool Street station. The initiative was
organised in partnership with Simply Cups,
of which BCS is a founding member, and
aimed to recruit businesses and consumers
to work together to recover and recycle half
a million paper cups within one month.
It was a huge success and the work has
continued since then.
“While no one has the solution to this
problem, collectively we can use the
Square Mile Challenge as a catalyst
for new thinking.”
Joanna Gilroy, Head of Sustainability,
Bunzl Catering & Hospitality Division and
Corporate Responsibility Manager, Bunzl plc
Hubbub and a number of supplier partners
and retailers, joined forces to launch a high
profile coffee cup recycling challenge in the
City of London – the Square Mile Challenge.
This was hugely successful and almost all
businesses that participated in the event
decided to continue with the cup collection
scheme afterwards.
Bunzl’s one-stop-shop service saves delivery
miles. Bunzl sources and consolidates a
broad range of products to offer our
customers an efficient consolidated product
offering, thereby minimising the number of
deliveries and fleet miles required.
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
non-financial KPIs on page 23 and the data on
pages 45 and 47, in each case that has been
highlighted with the symbol ’†’. They have
provided an unqualified opinion in relation to
the relevant KPIs and data and their full
assurance opinion is available in the
Responsibility section of our Group website,
www.bunzl.com.
A limited assurance engagement is
substantially less in scope than a reasonable
assurance engagement in relation to both the
risk assessment procedures, including an
understanding of internal control, and the
procedures performed in response to the
assessed risks. In order to reach their
opinion, PwC performed a range of
procedures including making enquiries of
relevant Bunzl management, and evaluating
the design of the key structures, systems,
processes and controls for managing,
recording and reporting the selected
information. This included analysing and
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, 15 sites in North America and seven
sites in 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.
48
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
CR Risks
Corporate responsibility risks are considered to be part of the Group’s risk management process, as set out on pages 51 to 55, but none are
considered to represent principal risks to the Group. 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.
Principal CR risk facing
the Group
Description of risk and how it might affect the
Group’s prospects
How the risk is managed
or mitigated
CR compliance
failures
Lack of adherence to the Group’s CR policies could result in a
variety of issues including those relating to inappropriate
business practices, accidents at work and increased levies
due to levels of waste or carbon emissions.
Loss of key
employees
The Group is not capital intensive but the business is based
on strong customer and supplier relationships which are
built up locally. Stability of key relationship roles amongst the
Group’s employees is therefore important.
Loss of operating
facilities/
unavailability
of staff
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. 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 often 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 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
Shanghai audits key direct suppliers throughout Asia and
oversees audits carried out by third parties elsewhere. All
key suppliers and suppliers in countries with increased social
risk are made aware of the Group’s CR aspirations. We have
developed a Supplier Code of Conduct that defines the
principles and standards that Bunzl expect suppliers of
goods and services to adhere to.
These risks are seen to be counterbalanced 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.
Key performance indicators
Performance
2015
2016
2017
What we said we
would do in 2017
What we did
Health & safety
Improving safety in our warehouses and on our vehicles
Reduction in
accident incidence
rate (% change
year-on-year)
Reduction in
accident severity
rate (% change
year-on-year)
-7%
-7%
-16%
-31%
-23% Reduce the Group
accident incidence
rate by 5% from
2016.
-31% Reduce the Group
accident severity
rate by 5% from
2016.
The accident incidence rate reduced by 23% and the accident
severity rate reduced by 31%. The accident incidence rate
improved in all business areas. The accident severity rate
decreased in all business areas except UK & Ireland where
we saw a small increase.
The improvements were achieved by focusing on the
implementation of our internal safe working standards that
address the key hazards of our operations and improved
safety observation programmes.
Businesses that operate their own commercial vehicles have
placed considerable emphasis on training programmes for
drivers, aimed at reducing accidents and injuries on the road.
We continued to enhance and extend our training and
awareness programmes that aim to address the behavioural
factors which cause injuries.
What we plan
to do in 2018
Reduce the Group
accident incidence
rate by 5% from
2017.
Reduce the Group
accident severity
rate by 5% from
2017.
49
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE RESPONSIBILITY CONTINUED
Key performance indicators continued
Performance
2015
2016
2017
What we said we
would do in 2017
What we did
Environment/climate change
Reducing our impact on the environment by reducing carbon emissions
Carbon emissions:
Scope 1 (Tonnes of
CO2e/£m revenue)
14.7
12.6
11.3
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)
5.4
4.5
3.7
20.1
17.1
15.0
Total Scope 1 & 2
emissions (Tonnes
of CO2e/£m
revenue)
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.)
The 2017 figure represents a 10% reduction in Scope 1
emissions versus 2016, including the effect of foreign
exchange translation. At constant exchange rates the
reduction in emissions is 1%.
Fuel for transportation contributes c. 83% of Scope 1
emissions. Reduction of these emissions is primarily driven by
fuel efficiency improvements (including regular replacement
of vehicles, use of vehicle telematics and driver training
programmes). In North America, where we have our largest
commercial fleet we have improved our fuel efficiency by 2.5%
during the year. At a Group level, diesel consumed by our
commercial fleet per £m revenue decreased by 2.5% excluding
foreign exchange translation effect.
Scope 1 emissions are also impacted by weather conditions
(influencing the fuel needed for heating of buildings). As a
result of the relatively cold winter in North America and
increased presence in colder geographical areas our Group
natural gas usage increased by nearly 11%.
The 2017 figure represents an 18% reduction in Scope 2
emissions versus 2016, including the effect of foreign
exchange translation. At constant exchange rates the
reduction in emissions is 10%.
The Scope 2 emissions are calculated with location based
emission factors that are updated annually. The impact of the
update of the conversion factors in 2017 on the Scope 2 index is a
reduction of 4% versus 2016. Our Scope 2 emissions do not take
into account low carbon electricity purchases (representing
approximately 15% of electricity purchased).
The remaining improvement in the Scope 2 index has been driven
by the continued implementation of low energy lighting.
The 2017 figure represents a 12% reduction in total Scope 1 and 2
emissions versus 2016, including the effect of foreign exchange
translation. At constant exchange rates the reduction in emissions
is 4%.
What we plan
to do in 2018
Reduce emissions
by 1% against 2017.
(This reduction
target excludes any
foreign exchange
translation effect
on revenue
numbers.)
Reduce emissions
by 2% against 2017.
(This reduction
target excludes any
foreign exchange
translation effect
on revenue
numbers.)
Reduce emissions
by 1% against 2017.
(This reduction
target excludes any
foreign exchange
translation effect on
revenue numbers.)
Our Scope 1 and 2 emissions are represented as an index against £m revenue. The foreign exchange translation effect in the 2017 reporting year, caused by the movement in
the exchange rates of sterling against other currencies during the 2017 reporting year compared to the 2016 reporting year, was to increase the reported reduction in
emissions by approximately 9%.
Suppliers
Responsible sourcing, working as partners with our suppliers to encourage high levels of CR and ethical trading initiatives
Supplier CR audits
and assessments
covering
environmental and
social standards
(Number of audits/
assessments
carried out)
382
449
503
Launch a training
programme
covering social risks
in our global supply
chain.
We have developed and will shortly be launching a CR training
module which specifically covers social risks, including
modern slavery. This training is mandatory for all of our
senior management as well as sales representatives and
procurement employees.
Refine supplier CR
risk profiling.
The CR audit programme was expanded into geographies
outside Asia with medium levels of social risk.
Further expansion
of our CR audit
programme into
geographies with
medium levels of
social risk.
Community
Providing support to our local communities through employee fundraising, matched funding and donations of stock and cash to charitable organisations
Charity donations
(£000s)
631
712
742
Continue to support
relevant charities.
Bunzl supported a variety of projects for healthcare and
environment related charities. For example, we have
expanded our work with St John Ambulance.
Continue to support
relevant charities.
50
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES
Bunzl operates in six core market sectors across 30 countries
which exposes it to many risks and uncertainties. The Group sees
the management of risk, both positive and negative, as critical
to achieving its strategic objectives.
Risk management process
To deliver the Group’s strategic objectives successfully, and provide value for shareholders, customers and other stakeholders, it is critical
that Bunzl maintains an effective process for the management of risk. The Company has a risk management policy which ensures a consistent
process is followed by every business and business area as well as the Executive Committee and ultimately the Board, firstly to assess and
then subsequently to manage both current and emerging risks. These interrelated aspects of the Group’s risk management policy are
explained below*. Additional detail is also provided on the key risk management activities undertaken during 2017.
RISK ASSESSMENT
Risk identification
Inherent risk assessment
• Every business, business area,
• The inherent impact and
the Executive Committee and the
Board identify and document risks
in a consistent way within the
categories of strategic, operational
and financial risks.
• This includes current risks as well as
emerging risks which also need to be
carefully monitored.
probability of risks are evaluated
before considering the effect of any
mitigating activities:
– impact is assessed based on
a defined range of business
continuity, health & safety and
the environment, regulatory,
reputational and financial criteria;
and
– probability is assessed as remote,
unlikely, possible or probable.
Risk response and residual
risk assessment
• The relevant mitigating activities and
controls are evaluated for each risk.
• The residual risk is assessed assuming that
the mitigating actions and internal controls
operate as intended in an effective way.
• If necessary to bring the residual risk within
Bunzl’s risk appetite, enhancements to risk
mitigation activities and controls are
considered until the residual risk is reduced
to an acceptable level.
RISK MANAGEMENT
The Board
Executive Committee
• Establishes the nature and extent of risk the Group is willing to
accept (its ’risk appetite’) in pursuit of Bunzl’s strategic objectives.
• Performs a robust assessment of the Group’s risks through
a biannual review of the Group’s risk register, including those
risks considered to be significant by management and the
Executive Committee.
• Continuously monitors and oversees the Group’s risk management
and internal controls processes and procedures.
• Holds regular meetings with business area management to discuss
strategic, operational and financial issues and ensures policies and
procedures are in place to identify and manage the principal risks
affecting each of the Group’s businesses.
• Considers the evolving risk landscape including reviewing the
results of the risk assessment process and assessing the
sufficiency of risk mitigation activities for current risks and the
threats and opportunities from emerging risks.
The Audit Committee
Business area and business management
• Reviews the process for the management of risk, including the risk
• The Group’s decentralised management structure allows
assessment and risk response, and its effectiveness.
• Directs and oversees internal audit’s activities and reviews the
results of assurance over controls and risk mitigation activities.
• In addition during 2017 the Audit Committee considered the results
of an external assessment of the effectiveness of Bunzl’s risk
management process and procedures and discussed the
recommended changes to the risk management process.
for the establishment of clear ownership of risk identification and
management at the business level within the framework of the
Bunzl risk management policy.
• Businesses, with the support of business area management,
implement and monitor the effectiveness of controls, policies
and procedures designed to manage risk.
*
The ’Risk management and internal control’ section of the Corporate governance report on pages 63 and 64 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.
51
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal risks and uncertainties
The principal risks and uncertainties faced by
the Group, being those which are material to
the development, performance, position or
future prospects of the Group, and the steps
taken to mitigate such risks, are
summarised below.
The Group operates in six core market sectors
across 30 countries which exposes it to many
risks and uncertainties, not all of which are
necessarily within the Company’s control.
Therefore, 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. The risks are not presented in
order of probability or impact.
During the year an analysis of the
interconnectivity of the principal and
non-principal risks as identified through
the Group’s risk assessment process
was performed. This review looked at
the relationships, connections and
interdependencies between risks,
recognising that risks do not always occur
in isolation. Although this exercise did not
result in identifying any additional principal
risks, the review contributed to the Group’s
assessment of the adequacy of risk
management and mitigating activities.
To improve clarity, the presentation of the
Group’s principal risks and uncertainties has
been refreshed when compared to the 2016
Annual Report. In particular:
• the categories of risk have been
reclassified to align them more closely
with the Company’s strategy;
• the titles of some of the risks have been
amended to reflect more accurately the
detailed descriptions of the relevant risks;
– the risk headed Economic environment
was considered to be too generic,
especially as components of that risk
are included in the Competitive
pressures, Product cost deflation and
inflation and Financial risks set out
below;
− the risk headed Business continuity has
been refocused on the specific Cyber
security element of this risk; and
• the Laws and regulations risk was
reconsidered and it was determined that
while exposure to potential legal and
regulatory claims is always a risk, it did not
represent a principal risk to the Group.
Overall, save as mentioned above in relation
to Laws and regulations, the nature and type
of the principal risks and uncertainties
affecting the Group are considered to be
unchanged from the previous year. The
likelihood and impact of each of the principal
risks crystallising is also considered to be
materially unchanged as compared to the
prior year.
The Board is continuing to monitor the
potential risks associated with the UK
leaving the European Union (’Brexit’).
As exit negotiations are ongoing, the final
outcome remains unclear and it is too early
to understand fully the impact that Brexit
will have on the Group’s operations. The
risks arising from Brexit will most likely
be limited to foreign exchange volatility, a
reduction in economic activity in the UK and
the imposition of trade tariffs. The Group
does not consider that its principal risks and
uncertainties have changed as a result of
these Brexit related risks.
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.
Principal risks facing the Group
Description of risk and how it might affect the
Group’s prospects
How the risk is managed or mitigated
Risks to the Group’s organic growth
1. Competitive pressures
Revenue and profits are reduced
as the Group loses a customer or
lowers prices due to competitive
pressure
2. Product cost deflation
Revenue and profits are reduced
due to the Group’s need to pass on
cost price reductions
• The Group operates in highly competitive markets and
faces price competition from international, national,
regional and local companies in the countries and
markets in which it operates.
• Unforeseen changes in the competitive landscape
could also occur such as an existing competitor or new
market entrant introducing disruptive technologies or
changes in routes to market.
• Customers, especially large or growing customers,
could exert pressure on the Group’s selling prices,
thereby reducing its margins, could switch to a
competitor or could ultimately choose to deal directly
with suppliers.
• Any of these competitive pressures could lead to a loss
of market share, and a reduction in the Group’s
revenue and profits.
• A reduction in the cost of products bought by the Group,
due to suppliers passing on lower commodity prices
(such as plastic or paper) and/or foreign currency
fluctuations, coupled with actions of competitors, may
require the Group to pass on such cost reductions to
customers, especially those on indexed or cost-plus
pricing arrangements, resulting in a reduction in the
Group’s revenue and profits.
• Operating profit margins may also be lower due to the
above factors if operating costs are not reduced
commensurate with the reduction in product costs.
• The Group’s geographic and market sector
diversification allow it to withstand shifts in demand,
while this global scale across many markets also
enables the Group to provide the broadest possible
range of customer specific solutions to suit their
exacting needs.
• The Group maintains high service levels and close
contact with its customers to ensure that their needs
are being met satisfactorily. This includes continuing to
invest in e-commerce and digital platforms to further
enhance its service offering to customers.
• The Group maintains 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 at competitive prices.
• The Group uses its considerable experience in sourcing
and selling products to manage prices during periods
of deflation in order to minimise the impact on profits.
• Focus on the Group’s own brand products, together
with the reinforcement of the Group’s service and
product offering to customers, helps to minimise the
impact of price deflation.
• The Group continually looks at ways to improve
productivity and implement other efficiency
measures to manage and, where possible,
reduce its operating costs.
52
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal risks facing the Group
Description of risk and how it might affect the
Group’s prospects
How the risk is managed or mitigated
3. Product cost inflation
Profits are reduced from the
Group’s inability to pass on
product cost increases
• Significant or unexpected cost increases by suppliers,
due to the pass through of higher commodity prices
(such as plastic or paper) and/or foreign currency
fluctuations, could adversely impact profits if the
Group is unable to pass on such product cost increases
to customers.
Risks to the Group’s acquisition growth
4. Unavailability of
acquisitions
Profit growth is reduced from the
Group’s inability to acquire new
companies
• Acquisitions are a key component of the Group’s growth
strategy and one of the key sources of the Group’s
competitive advantage, having made more than 150
acquisitions since 2004.
• Insufficient acquisition opportunities, through a lack
of availability of suitable companies to acquire or an
unwillingness of business owners to sell their
companies to Bunzl, could adversely impact future
profit growth.
• The Group sources its products from a number of
different suppliers so that it is not dependent on any
one source of supply for any particular product and can
purchase products at the most competitive prices.
• The majority of the Group’s transactions are
carried out in the functional currency of the Group’s
operations, but for foreign currency transactions some
forward purchasing of foreign currencies is used to
reduce the impact of short term currency volatility.
• If necessary, the Group will, where possible, pass on
price increases from its suppliers to its customers.
• The Group maintains a large acquisition pipeline which
continues to grow with targets identified by managers
of our current businesses, research undertaken by the
Group’s dedicated and experienced in-house corporate
development team and leads received from banking
and corporate finance contacts.
• The Group has a strong track record of successfully
making acquisitions. At the same time the Group
maintains a decentralised management structure
which facilitates a strong entrepreneurial culture and
encourages former owners to remain within the Group
after acquisition, which in turn encourages other
companies to consider selling to Bunzl.
5. Unsuccessful acquisition
Profits are reduced, including
by an impairment charge, due
to an unsuccessful acquisition
or acquisition integration
• Inadequate pre-acquisition due diligence related to a
• The Group has established processes and procedures
target company and its market, or an economic decline
shortly after an acquisition, could lead to the Group
paying more for a company than its fair value.
for detailed pre-acquisition due diligence related
to acquisition targets and the post-acquisition
integration thereof.
• Furthermore, the loss of key people or customers,
exaggerated by inadequate post-acquisition
integration of the business, could in turn result in
underperformance of the acquired company compared
to pre-acquisition expectations which could lead to
lower profits as well as a need to record an impairment
loss against any associated intangible assets.
• 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 endeavours to maximise the performance of
its acquisitions 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.
• Concurrent with the Group’s IT investments, the Group
is continuing to improve information security policies
and controls to improve its ability to monitor, prevent,
detect and respond to cyber threats.
• Cyber security awareness campaigns across all
regions have been or will be deployed to enhance the
knowledge of Bunzl personnel including their
resilience to phishing attacks.
• IT disaster recovery and incident management plans,
which would be implemented in the event of any such
failure, are in place and periodically tested.
• A Group CIO and Group Head of Information Security
has been recruited to coordinate activity in this area.
Risks to the Group’s operations
6. Cyber security
Bunzl’s ability to operate and
service its customers’ needs
are impacted by a cyber-attack
• The frequency, sophistication and impact of cyber-
attacks on businesses are rising at the same time
as Bunzl is increasing its digital footprint through
acquisition and investment in e -commerce platforms
and efficiency enhancing IT systems.
• Weak cyber defences, both now and in the future,
through a failure to keep up with increasing cyber risks
and insufficient IT disaster recovery planning and
testing, could increase the likelihood and severity of
a cyber-attack leading to business disruption,
reputational damage and loss of customers.
53
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal risks facing the Group
Description of risk and how it might affect the
Group’s prospects
How the risk is managed or mitigated
Financial risks
7. Availability of funding
Insufficient liquidity leading
to insolvency
8. Currency translation
Significant change in foreign
exchange rates leading to a
reduction in reported results and/
or a breach of banking covenants
• Insufficient liquidity in financial markets could lead to
banks and institutions being unwilling to lend to the
Group, resulting in the Group being unable to obtain
necessary funds when required to repay maturing
borrowings, thereby reducing the cash available to
meet its trading obligations, make acquisitions and
pay dividends.
• The majority of the Group’s revenue and profits are
earned in currencies other than sterling, the Group’s
functional currency.
• As a result, a significant strengthening of sterling
against the US dollar and the euro in particular could
have a material translation impact on the Group’s
reported results and/or lead to a breach of net debt to
EBITDA banking covenants.
9. Taxation
Increase in Group tax rate and/or
cash tax
• Changes to tax law have recently been enacted in
several countries, in particular in the US, and overall
these are expected to lead to a decrease in the Group’s
effective tax rate.
• However, the future tax expense and cash tax
obligations could be affected by the resolution of
uncertain prior year issues and by further changes in
tax law.
• For instance, changes could result from the legal
arguments between the European Commission and the
UK government over whether part of the UK’s tax
regime is contrary to European Union State Aid
provisions.
• The resolution of prior year issues or legislative
• 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.
• The Group does not hedge the impact of exchange rate
movements arising on translation of earnings into
sterling at average exchange rates. The Board believes
that the benefits of its geographical spread outweigh
the risks. Results are reported at constant exchange
rates so that investors can observe the underlying
performance of the Group excluding the translation
impact on the Group’s reported results.
• The Group’s borrowings are denominated in US
dollars, sterling and euros in similar proportions to the
relative profit contribution of each of these currencies
to the Group’s EBITDA. This minimises the risk that
movements in foreign exchange rates will have a
material impact on the ratio of net debt to EBITDA, and
therefore minimises the risk of a breach of banking
covenants caused by foreign currency fluctuations.
• Oversight of the Group’s tax strategy is within the remit
of the Board and tax risks are assessed by the Audit
Committee.
• 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.
changes could cause a higher tax expense and higher
cash tax payments, thereby adversely affecting the
Group’s future cash flows.
• At the same time the Group monitors international
developments in tax law and practice, adapting its
approach where necessary to do so.
54
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
resilient and in particular it remained in
compliance with the relevant financial
covenants. The conditions required to create
the reverse stress test scenario, the third
stress test, were so severe that it was
considered to be implausible.
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
In accordance with the provisions of the
Corporate Governance Code, the directors
have taken account of the Group’s current
position and principal risks and uncertainties
referred to above in assessing the prospects
of the Company and they 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 2020.
Assessment of the prospects of the
Company and its viability statement
In accordance with provision C.2.2 of the
Corporate Governance 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 2020.
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 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, US private placement notes and
a senior unsecured bond, 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 stress tests included
the following:
• the impact of the crystallisation of the
principal risks to the Group’s organic
growth and a significant increase in
working capital;
• the impact of the crystallisation of the
principal risks to the Groups’s organic
and acquisition growth and significant
increases in both working capital and the
effective tax rate, 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.
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, US private placement
notes and senior unsecured bond as and
when they mature. In the first two stress
tests it was found that the Group was
55
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
BOARD OF DIRECTORS
The Board has continued to focus on creating shareholder value by successfully
developing the business through a combination of organic growth and further
consolidating the fragmented markets in which Bunzl competes.
Philip Rogerson
Chairman
Frank van Zanten
Chief Executive
Patrick Larmon
Executive director
Brian May
Finance Director
Vanda Murray
Non-executive director
Lloyd Pitchford
Non-executive director
Eugenia Ulasewicz
Non-executive director
Jean-Charles Pauze
Non-executive director
Stephan Nanninga
Non-executive director
56
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Effective leadership
through a strong,
independent Board is essential
to the long term sustainability
and success of the Group.”
Philip Rogerson
Chairman
Brian May (Age 53)
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.
Vanda Murray OBE *†#• (Age 57)
Non-executive director
Non-executive director since 2015, Senior
Independent Director and Chair of the
Remuneration Committee. 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 Redrow plc.
Lloyd Pitchford *†#• (Age 46)
Non-executive director
Non-executive director since March 2017
and Chairman of the Audit Committee.
Having previously held a number of senior
finance positions with BG Group plc,
including five years 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.
Philip Rogerson # (Age 73)
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 been
both a non-executive director and Chairman
of a number of companies and is currently
Chairman of De La Rue plc and a non-
executive director of Blancco Technology
Group plc.
Frank van Zanten # (Age 51)
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.
Patrick Larmon (Age 65)
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.
Eugenia Ulasewicz *†#• (Age 64)
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, Vince Holding Corp. and
Hudson Ltd.
Jean-Charles Pauze *†#• (Age 70)
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.
Stephan Nanninga *†#• (Age 60)
Non-executive director
Appointed as a non-executive director
with effect from 1 May 2017. After holding
a number of positions with Sonepar and
Royal Dutch Shell, he subsequently became
Managing Director, Distribution Europe of
CRH plc in 1999. He then joined SHV Holdings
NV in 2007, where he was initially responsible
for the Makro and Dyas businesses, before
becoming Chief Executive in 2014, a position
he held until 2016. He is an executive director
of Dutch Star Companies ONE N.V.
* Member of the Audit Committee
† Member of the Remuneration Committee
# Member of the Nomination Committee
• Independent director
57
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE REPORT
Good governance is key to the successful
delivery of our strategy to grow the Group with
the Board continuing to provide independent
scrutiny and challenge, while maintaining its
focus on creating shareholder value.
Philip Rogerson
Chairman
INTRODUCTION FROM
PHILIP ROGERSON
Chairman of the Board
At Bunzl we believe that establishing and
maintaining the highest standards of
corporate governance is vitally important to
the long term success and sustainability of
the business. The Board recognises that
good governance is about more than just
compliance with rules and regulations;
it is about culture, behaviours and how
we do business and the Board is therefore
committed to ensuring that the Group’s
values and high standards are set from the
top and embedded throughout the Group.
Integrity and accountability are at the heart
of everything that we do and I believe that
this, together with our robust governance
framework, allows the Board to lead the
Company in the right direction as we develop
and pursue our future strategy, while
ensuring that good governance principles
and practices are adhered to.
As detailed on page 62, an externally
facilitated evaluation of the Board and its
Committees was once again undertaken
during 2017 and I am pleased to report that
as a result of the evaluation, the Board
concluded that both it and its Committees
continue to operate effectively. The Board
continues to work closely with the executive
management team and offers support and
robust challenge as appropriate.
Last year we revised our remuneration policy
to drive performance for the Company’s next
stage of development and to bring it in line
with current best practice. We consulted
extensively with our largest shareholders
and their representative bodies and this
resulted in our revised remuneration policy
being approved by an overwhelming majority
at the Annual General Meeting (‘AGM’) held in
April 2017. Details of the new policy are set
out in the Remuneration report on pages 71
to 95.
The Company is subject to the Financial
Reporting Council’s (’FRC’) UK Corporate
Governance Code (the ’Code’), which was
last updated in April 2016. The Code 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 reports that follow provide an overview
of the work undertaken by the Board and
its Committees in fulfilling our governance
responsibilities and describe how the
principles and provisions of the Code have
been applied by the Company during the
year ended 31 December 2017. A copy of
the 2016 version of the Code is available
at www.frc.org.uk.
Philip Rogerson
Chairman
26 February 2018
Compliance statement
It is the Board’s view that, for the year ended
31 December 2017, the Company has been
fully compliant with all of the relevant
principles and provisions set out in the 2016
version of the Code. 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
Financial Conduct Authority’s Listing Rules
and to report if it does not reflect such
compliance. No such report has been made.
Board composition
As at 31 December 2017, the Board was
made up of nine members comprising a
Chairman, a Chief Executive, two other
executive directors and five non-executive
directors. David Sleath, our former Senior
Independent Director, retired from the Board
following the conclusion of the Company’s
AGM on 19 April 2017 having served as a
non-executive director from September
2007. Vanda Murray, an independent
non-executive director and Chair of the
Remuneration Committee, assumed the role
of Senior Independent Director upon David
Sleath’s retirement. Lloyd Pitchford was
appointed to the Board on 1 March 2017 and
Stephan Nanninga joined the Board on 1 May
2017. Brief biographical details of the
directors are given on page 57. 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 will be subject to re-election
at the forthcoming AGM.
58
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE REPORT CONTINUED
GOVERNANCE STRUCTURE
The Board has ultimate responsibility for the overall leadership of the Group. 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. Further details of the matters reserved for the Board can be found below.
The Board has established three 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. Further information relating to the Board Committees is set out below and in the Committee reports which follow this
Governance report.
BOARD
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
AUDIT
COMMITTEE
Chairman
Lloyd Pitchford
Members
Vanda Murray
Eugenia Ulasewicz
Jean-Charles Pauze
Stephan Nanninga
Chairman
Vanda Murray
Members
Eugenia Ulasewicz
Jean-Charles Pauze
Lloyd Pitchford
Stephan Nanninga
Key responsibilities
Reviews and monitors the integrity of the
Company’s financial reports, risk processes
and internal controls and the effectiveness of
the internal audit function and external
auditors.
Key responsibilities
Sets the remuneration policy for the
Chairman and executive directors and
monitors the policies and practices applied
to senior management remuneration.
Chairman
Philip Rogerson
Members
Frank van Zanten
Vanda Murray
Eugenia Ulasewicz
Jean-Charles Pauze
Lloyd Pitchford
Stephan Nanninga
Key responsibilities
Reviews the structure, size and composition
of the Board with regard to diversity and
to ensuring a balance of skills, knowledge
and experience.
For more information see pages 67 to 70
For more information see pages 71 to 95
For more information see pages 65 and 66
MATTERS RESERVED FOR THE BOARD
The table below summarises some of the matters which are required to be brought to the Board for decision:
SHAREHOLDERS
Matters requiring
shareholder approval.
Circulars and significant
shareholder communications.
£
CAPITAL ALLOCATION
AND STRUCTURE
POLICIES AND
STATEMENTS
Significant capital expenditure/disposals.
Significant business acquisitions/
Material Group policies and statements
and major changes thereto, for example:
disposals.
Material changes to the Group’s
capital structure.
Major property leases.
Material increases in borrowing
and loan facilities.
– Tax strategy;
– Treasury policy;
– Modern slavery statement;
– Equality and diversity policy; and
– Risk appetite.
PEOPLE AND
LEADERSHIP
STRATEGY AND
MANAGEMENT
FINANCIAL REPORTING,
RISK AND CONTROLS
Appointment/removal of directors and
The Group’s strategic aims
Financial results and announcements
Company secretary.
Non-executive directors’ remuneration.
Board Committee constitution and
terms of reference.
and objectives.
Annual budget and strategic plan.
relating thereto.
Final and interim dividends.
Auditor appointment/removal.
Risk management and internal controls.
59
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD ROLES AND RESPONSIBILITIES
The following table summarises the role and responsibilities of the different members of the Board:
Role
Chairman
Responsibilities
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.
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 Chairman is also viewed by investors as the ultimate steward of the business and the
guardian of the interests of all the shareholders.
Chief Executive
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 Chief Executive:
• manages the executive directors and the Group’s management and day-to-day activities;
• prepares and presents to the Board the strategy for growth in shareholder value;
• sets the operating plans and budgets required to deliver the agreed strategy;
• ensures that the Group has in place appropriate risk management and control
mechanisms; and
• communicates with the Company’s shareholders and analysts on a day-to-day basis
as necessary.
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.
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.
Other executive directors
The Finance Director supports the Chief Executive and is responsible for managing the Group’s funding strategy,
financial reporting, risk management and internal controls, investor relations programme and the leadership of the
finance function. The President and CEO, North America has a specific responsibility for managing the North America
business area which represents 59% of the Group’s total revenue.
Senior Independent
Director
Independent non-
executive directors
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
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.
Executive and non-executive directors
Board gender
Non-executive director tenure
3
2
2
2
6
7
Executive
Non-executive (includes Chairman)
Male
Female
2
0 – 3 years
3 – 6 years
6+ years
60
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Board activity in 2017
The Board meets formally at least seven
times a year and normally at least two of
these meetings 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. 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, the Finance Director and
the heads of the business areas together with
the Director of Corporate Development.
During 2017, 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,
tax risks, cyber security risks and controls,
supplier audits carried out and health and
safety performance metrics.
The Board also reviewed and formally
approved the Group’s equality and diversity
policy, further details of which are set out in
the Our people section of this Annual Report
on pages 38 to 41.
The Board calendar is planned to ensure that
the directors discuss a wide range of topics
throughout the year and the Board has
formally adopted a schedule of matters
which are required to be referred to it for
decision. A non-exhaustive list of such
matters can be found on page 59.
Meetings
The Board met on seven occasions during
2017. Directors’ attendance at those
meetings is set out below:
Meetings attended
Philip Rogerson
Frank van Zanten
Patrick Larmon
Brian May
David Sleath1
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Lloyd Pitchford2
Stephan Nanninga3
Notes:
7
7
7
7
3
7
6
7
5
4
1 David Sleath retired as a director on 19 April 2017
having attended all of the Board meetings held
between 1 January 2017 and that date.
2 Lloyd Pitchford was appointed as a director on
1 March 2017 and attended all of the Board meetings
held between that date and the end of the year.
3 Stephan Nanninga was appointed as a director on
1 May 2017 and attended all of the Board meetings
held between that date and the end of the year.
Board in action – Board and
strategy meetings in Atlanta, US
The June 2017 Board and Committee
meetings and the annual strategy
meeting were held in Atlanta, US
and the directors used the opportunity
to enhance further their
understanding of the Group’s
operations in North America by
visiting the Bunzl Atlanta site.
The Bunzl Atlanta site is part of the Group’s
North American business area. During
their visit, the directors were taken on a
comprehensive site tour and were given
presentations by regional and divisional
managers. The presentations gave an
overview of the different businesses in the
southeast region, including the Bunzl Atlanta
site, and covered topics such as key financial
metrics and information related to
employees, customers, suppliers and the
markets served. The directors were also
informed of the challenges and opportunities
faced by the businesses during 2017 and
the efforts and initiatives undertaken to
overcome these challenges. The Board
believes that site visits play an important
role in directors’ development by giving
them better insight into the Group’s
businesses and the environments in which
they operate as well as providing an
opportunity to meet local management.
Governance in action – acquisition process
Expanding the Group through acquisition is an important part of Bunzl’s strategy to grow and develop. Our markets are very fragmented
which results in numerous opportunities to expand through purchasing businesses in both existing and new markets and countries.
The Board plays a critical role in ensuring that a robust and rigorous process is followed in respect of the more material acquisitions
and those involving the entry into new countries or market sectors to ensure that the proposals are carefully considered and challenged
before being taken forward. This process is summarised below and details of the acquisitions made by the Group during 2017 can be
found on pages 138 to 140.
1
2
3
4
Presentation made to the
Board by management
regarding the relevant potential
acquisition, due to its material
size or because it represents
the Group’s first step into a new
country or market sector.
The Board considers the
acquisition proposal, including
the financial performance of
the target company, the
projected synergies, the
regulatory, political and
competitor landscapes, the
Company’s existing operations
and market presence in the
relevant country, employee
matters and any potential risks
and management’s proposals
for mitigating these.
The Board agrees whether to
proceed with the proposed
acquisition and sets any
relevant parameters
concerning the transaction,
including in relation to the
purchase price and any specific
due diligence requirements.
The Board undertakes a
post-acquisition review
approximately two years after
completion of the transaction
to evaluate whether all desired
objectives and benefits have
been realised, measured
against the relevant investment
case at the time the acquisition
was approved.
61
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE REPORT CONTINUED
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, the Board
identifies a number of key priorities in
order to improve the Board’s performance.
Key priorities identified in 2016
1. 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.
2. Providing ongoing support to the new Chief
Executive as appropriate.
3. 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.
4. The successful recruitment and subsequent
appointment of an additional non-executive
director and overseeing the induction and
integration of such director.
Key priorities identified in 2017
1. 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.
2. Developing a greater understanding of
the relevant digital and technological
developments affecting the Group’s
businesses.
3. Focusing on the operational initiatives
required in order to maintain or improve
the Group’s operating margins.
4. 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.
The Board is satisfied that the
priorities identified following the
evaluation carried out in 2016
have been adequately addressed
during 2017.
As a result of the performance
evaluation process carried out in
2017, the Board concluded that
both it and its Committees are
operating effectively.
62
Bunzl plc Annual Report 2017
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.
Induction, training and 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 plc’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.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE REPORT CONTINUED
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.
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 148 and the auditors’ report on
pages 149 to 154 includes a statement by the
external auditors about their reporting
responsibilities. As set out on page 105,
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.
The Board considered whether the 2017
Annual Report, taken as a whole, was fair,
balanced and understandable and provided
sufficient information to enable the reader
to assess the Group’s position and
performance, business model and strategy.
In carrying out its review, the Board
considered 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
also took account of the preparation and
verification processes that had been
undertaken, including the review that had
been carried out by one of the Company’s
senior executives who had not been involved
in the Annual Report’s preparation.
As a result of its deliberations the
Board concluded that, taken as a whole,
the 2017 Annual Report is fair, balanced
and understandable.
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 (its
’risk appetite’). The directors confirm that
such procedures have been in place for the
year ended 31 December 2017 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.
Further information about the Group’s
approach to risk management and the
principal risks and uncertainties facing
the Group can be found on pages 51 to 54.
A summary of the principal control
processes and procedures in place to
manage such risks is set out below.
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
63
Bunzl plc Annual Report 2017
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;
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
CORPORATE GOVERNANCE REPORT CONTINUED
• 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 67 to 70;
• regular meetings are held with insurance
and risk advisers to assess the risks
throughout the Group;
• a management committee, known as the
Corporate Responsibility and Sustainability
Committee, which oversees issues relating
principally to environment, health & safety
and business continuity planning matters,
sets relevant policies and practices and
monitors their implementation;
• health & safety 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 2017.
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.
Assessment of the prospects of the
Company and its viability statement
In accordance with provision C.2.2 of the
Code, details of how the directors have
assessed the prospects of the Company, over
what period the prospects have been
assessed and the Company’s formal viability
statement are included in the Strategic
report on page 55.
On behalf of the Board
Paul Hussey
Secretary
26 February 2018
Relations with shareholders
As required by the relevant laws 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 AGM is sent to shareholders
at least 20 working days before the
meeting. All shareholders are encouraged
to participate in the AGM, 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 AGM each of the resolutions
put to the meeting will be taken on a poll
rather than on a show of hands as the
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 AGM.
During the year, the Company
hosted a Capital Markets event
which was attended by more
than 70 representatives from
shareholders and analysts.
Presentations were given by the
heads of the Company’s
businesses in North America,
Continental Europe, UK &
Ireland and Latin America on a
diverse range of topics relating
to the Company’s strategy and
service offering and included a
number of testimonials from
customers about the Company’s
value proposition. A webcast of
the event and copies of the
presentations made are
available on the Company’s
website, www.bunzl.com.
64
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
NOMINATION COMMITTEE REPORT
The Committee is committed to ensuring
that the skills, knowledge and expertise at
Board level meet the changing demands
of the business and take account of the existing
and future challenges and opportunities
facing the Company.
Philip Rogerson
Chairman and Chairman of the Nomination Committee
Meetings
The Committee met on four occasions
during 2017. Members’ attendance at
those meetings is set out below:
Philip Rogerson
Frank van Zanten
David Sleath1
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Lloyd Pitchford2
Stephan Nanninga3
Meetings attended
4
4
3
4
4
4
1
1
1
2
3
David Sleath retired as a director on 19 April
2017 having attended all of the Committee
meetings held between 1 January 2017 and
that date.
Lloyd Pitchford was appointed as a director on
1 March 2017 and became Audit Committee
Chairman on 19 April 2017. He attended all of
the Committee meetings held between 1 March
2017 and the end of the year.
Stephan Nanninga was appointed as a director
on 1 May 2017 and attended all of the
Committee meetings held between that date
and the end of the year.
PRINCIPAL RESPONSIBILITIES
OF THE COMMITTEE
Composition
• Reviewing the structure, size and
composition of the Board with regard
to maintaining a balance of skills,
experience, knowledge and diversity.
Succession
• Considering succession planning,
taking into account the challenges and
opportunities facing the Company and
the skills and expertise required by
the Board in the future.
• Reviewing annually a succession
planning presentation in relation to
the Company’s key management.
Appointments
• Identifying and nominating appropriate
individuals to fill Board vacancies as
they arise.
• Approving the appointment of any
senior executive who is to report
directly to the Chief Executive.
• Making recommendations to the
Board as to the continuation in office
and/or re-appointment of directors.
Evaluation
• Considering the commitment required
of non-executive directors and
reviewing their performance.
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 UK Corporate
Governance Code, the majority of the
members are independent non-executive
directors. The Secretary to the Committee
is the 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 meets as
necessary throughout the year to discharge
its responsibilities. The Committee’s
terms of reference, which were reviewed
by both the Committee and the Board in
2017, are available on the Company’s website,
www.bunzl.com.
Activities
One of the Committee’s main responsibilities
during the year related to the process of
identifying and selecting two new non-
executive directors. 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
detailed specifications for the roles and
appointed external search consultancies,
65
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
NOMINATION COMMITTEE REPORT CONTINUED
The Zygos Partnership and Korn Ferry, to
assist them in the recruitment processes.
The consultancies used do not provide any
other services to, or have any connection
with, the Company.
The Committee agreed that the search
criteria for candidates should include, in
particular, successful senior business
executives with extensive international
management experience across a range of
businesses operating in the distribution or
service sectors and, in the case of the
successor to David Sleath, someone who
had recent and relevant financial experience
as the appointee was expected to become
Chair of the Audit Committee. It was
important that the chosen candidates were
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 directors
could provide wise counsel and independence
of mind and to challenge management
constructively by offering impartial,
independent and objective advice.
The Committee carried out 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 recommendations
were made to the Board, which were
subsequently unanimously approved,
that Lloyd Pitchford be appointed as a
non-executive director with effect from
1 March 2017 and that Stephan Nanninga be
appointed as a non-executive director with
effect from 1 May 2017. The Board also
accepted the Committee’s recommendation
that they both be appointed to each of the
three Board Committees and that Lloyd
Pitchford should assume the role of
Chairman of the Audit Committee upon
David Sleath’s retirement in April 2017.
Succession planning
The Committee recognises that having the
right directors and senior management is
crucial for the Group’s success and a key task
of the Committee is to ensure that there is
a robust and rigorous succession planning
process, over both the medium to long term,
to ensure that there is the right mix of skills
and experience as the Company evolves.
During the year the Chief Executive
presented his annual management
succession plan to the Committee for its
consideration. In addition, the Committee
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 performance
evaluation process which was carried out
when considering and recommending the
nomination of directors for re-election at the
2017 AGM.
Diversity policy
Within our business, the Board is committed
to greater diversity, in its broadest sense,
whether in terms of ideas, skills, knowledge,
experience, education, ethnicity, gender, or
any other relevant measure.
When considering Board appointments,
one of our objectives is to maintain a
diverse Board. While we will continue to
follow a policy of ensuring that the best
people are appointed for the relevant roles,
based on merit by assessing candidates
against objective criteria, we recognise the
benefits of greater diversity and will take
account of this when considering any
particular appointment. However, our
primary responsibility when making new
appointments is to ensure the strength
of the Board’s composition. The overriding
aim is to select and recommend the best
candidate for the position, having regard to
all of the different stakeholders that Bunzl
has as a global organisation, while ensuring
that the Board members are able to provide
a range of perspectives, insights and
challenge required to support effective
decision making.
Looking beyond the Board to the Group’s
wider workforce, Bunzl is committed to
treating people fairly and equally and by
accepting and embracing their diversity, and
ensuring there is an inclusive and positive
working environment for all employees. For a
number of years in the annual succession
planning reviews there has been a particular
focus on diversity within the business areas
and one of the key objectives is to ensure
there are no barriers preventing talented
people from succeeding. There is also a
range of initiatives within the Group to help
provide learning and development
opportunities for female executives and to
ensure unbiased career progression
opportunities. The Board has formally
approved an equality and diversity policy,
which applies to the wider workforce of the
Group, further details of which are included
in the Our people section on page 40.
Monitoring and reporting
The Nomination Committee is responsible for
regularly reviewing the structure, size and
composition of the Board, including the skills,
knowledge, experience and diversity
of the directors. It is also responsible for
identifying and nominating appropriate
individuals to fill Board vacancies as they
arise. The Committee will report annually,
in the Company’s Annual Report, on the
process followed in relation to any Board
appointments made during the relevant
period. The Board is responsible for keeping
its diversity policy under review and making
changes thereto when appropriate to do so.
Philip Rogerson
Chairman
26 February 2018
Further information about the Company’s
workforce diversity is set out on pages 38
to 41
66
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT
During 2017, the Committee
focused on the integrity of the Group’s
financial reporting and financial control,
while ensuring that an appropriate level
of challenge was applied to the Group’s risk
management and compliance processes.
Lloyd Pitchford
Chairman of the Audit Committee
PRINCIPAL RESPONSIBILITIES
OF THE COMMITTEE
Reporting
• Monitoring and reviewing the integrity
of the Group’s financial results and the
significant judgements contained
therein.
Risk management and
internal control
• Reviewing:
– the Group’s risk management
processes, procedures and
controls;
– the effectiveness of the Company’s
internal financial controls; and
− the Group’s whistleblowing
arrangements.
Internal audit
• Overseeing the Company’s internal
audit activities.
• Monitoring and reviewing the
effectiveness of the internal audit
function.
External audit
• Making recommendations to the
Board in relation to the appointment/
re-appointment/removal of the
external auditors.
• Reviewing the Company’s relationship
with the external auditors and
monitoring their independence and
objectivity.
• Agreeing the scope, terms of
engagement and fees for the statutory
audit.
• Initiating and supervising a
competitive tender process for the
external audit as required from time
to time.
• Developing and implementing a policy
on the engagement of the external
auditors to supply non-audit services.
Meetings
The Committee met on four occasions
during 2017. Members’ attendance at
those meetings is set out below:
Lloyd Pitchford1
David Sleath2
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Stephan Nanninga3
Meetings attended
3
1
4
4
4
3
1
2
3
Lloyd Pitchford was appointed as a director on
1 March 2017 and became Audit Committee
Chairman on 19 April 2017. He attended all of
the Committee meetings held between 1 March
2017 and the end of the year.
David Sleath retired as a director on 19 April
2017 having attended all of the Committee
meetings held between 1 January 2017 and
that date.
Stephan Nanninga was appointed as a director
on 1 May 2017 and attended all of the
Committee meetings held between that date
and the end of the year.
INTRODUCTION FROM
LLOYD PITCHFORD
Chairman of the Audit Committee
I am pleased to present the Audit
Committee’s report for the year ended
31 December 2017. This is my first report as
Committee Chairman, having succeeded
David Sleath who retired from the Board in
April 2017. I also wish to welcome Stephan
Nanninga, who joined the Board as a
non-executive director on 1 May 2017,
as a member of the Committee.
The purpose of this report is to give
shareholders an overview of the role of the
Committee, to provide a meaningful insight
into our activities during the past year and
to demonstrate how the Committee has
discharged its responsibilities effectively.
This report reflects the requirements placed
on committees by the UK Corporate
Governance Code (the ‘Code’) and applicable
67
Bunzl plc Annual Report 2017
guidance, laws and regulations. The Code
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 2016 edition of
the Code which applied to the financial year
ended 31 December 2017. In carrying out its
duties, the Committee also operated in
accordance with the recommendations
set out in the FRC’s Guidance on Audit
Committees, which was published
in April 2016.
The principal responsibilities of the
Committee include monitoring and reviewing
the integrity of the Company’s financial
reporting, together with the related internal
controls, and ensuring that the assumptions
and judgements made by management
in preparing the financial results are
challenged as appropriate. The significant
accounting matters considered by the
Committee in relation to the 2017 financial
statements were the accounting for business
combinations, the carrying value of goodwill
and customer relationships intangible
assets, defined benefit pension schemes and
taxation. 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.
The Committee will continue to review its
activities in the light of regulatory and best
practice developments to ensure that we are
able to maintain high standards of financial
governance going forward.
The information on the following pages sets
out in detail the activities of the Committee
during the year. I hope that you will find this
report useful in understanding the work that
we have undertaken.
Lloyd Pitchford
Chairman of the Audit Committee
26 February 2018
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT CONTINUED
Composition
The Committee members are all of the
independent non-executive directors who
were appointed to the Committee by the
Board following recommendations by the
Nomination Committee. While the other
directors, being the Chairman of the
Company and the executive 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 the Company Secretary.
The Committee members bring an
appropriate balance of financial and
commercial experience in multinational
organisations, combined with a good
understanding of the Company’s business
and are therefore considered by the Board
to be collectively competent in the sector in
which the Company operates. As the serving
Chief Financial Officer of Experian plc, I am
considered by the Board to have recent and
relevant financial experience. I consider
independent thinking to be crucial in
assessing the work of management and the
assurance provided by the internal and
external audit functions and believe that
each of the Committee members brings an
appropriate mind-set to their role.
Role
Audit committees have a clearly defined role in
the corporate governance framework of listed
companies. We, as the Audit Committee, act
independently of management to ensure that
the interests of our stakeholders are properly
protected through the Committee’s oversight,
review and challenge 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 and 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.
The Committee ensures that the Company has
effective governance over the Group’s financial
reporting, including the adequacy of related
disclosures, the performance of both the
internal and external audit functions and
the management of the Group’s systems
of internal control and business risk
management and related compliance
activities. The Committee’s terms of reference,
which were reviewed by both the Committee
and the Board in 2017, are 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. I also liaise with the
Finance Director as necessary to ensure
robust oversight and challenge in relation
to financial control and risk management.
The Committee’s performance and
effectiveness is reviewed annually by both
the Committee and as part of the Board
performance evaluation. I also meet with
each Committee member independently
to ensure that their individual views about
the operation of the Committee are taken
into account.
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 meetings. In addition,
separate discussions are held during
Committee meetings between the
Committee and the Head of Internal Audit
and the external auditors without
management present. In 2017, David Sleath
attended the AGM and going forward I will
attend to respond to any shareholder
questions that might be raised on the
Committee’s activities. The Committee’s
activities in 2017 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, where appropriate,
challenging 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;
• reviewing the effectiveness of the risk
management process;
• receiving and considering a report from a
professional services firm relating to their
assessment of the Company’s risk
management processes and procedures;
68
Bunzl plc Annual Report 2017
• 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 coming year;
• considering the extent to which the
recommendations previously made by the
Chartered Institute of Internal Auditors
(’IIA’) in 2016 regarding the effectiveness
of the internal audit function had been
addressed;
• 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 the effectiveness of the
Company’s internal financial controls and
the assurance procedures relating to risk
management systems;
• reviewing the Company’s annual controls
self-assessment process and making
recommendations in relation to the
improvement thereof;
• 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 policy for the provision of
non-audit services by the external
auditors;
• reviewing and approving the level and
nature of non-audit work which the
external auditors performed during the
year, including the fees paid for such work;
• reviewing the principal tax risks applicable
to the Company and the steps taken to
manage such risks; and
• reviewing the Company’s internal audit
charter.
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.
An area of particular focus during the year
included the Company’s risk management
processes and procedures, which had been
reviewed by a professional services firm
against industry peers and best practice.
The Committee considered the results of
the review, which concluded that there is a
good understanding of the risk management
process within the Group, with established
routines for risk reporting at both the
business area and Group levels, and a
commitment to risk management within the
Company’s management and the Board.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT CONTINUED
While the findings in the report were positive,
the Committee has continued to oversee the
enhancement of the Company’s approach to
risk management. This has been achieved by
monitoring the implementation of their
suggested improvements, all of which have
been satisfactorily implemented, and which
included the development of a risk
management policy, the identification and
assessment of emerging risks and an
analysis of risk interconnectivity, together
with oversight of a formalised risk appetite
statement that was approved by the Board
in January 2018.
The Committee also considered the
preparations being made by management for
the future implementation of new accounting
standards IFRS 9 (Financial Instruments),
IFRS 15 (Revenue from Contracts with
Customers) and IFRS 16 (Leases) and the
potential impact on the Group.
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
in the future we are able to maintain high
standards of financial governance in line with
the regulatory framework as well as market
practice for audit committees.
Financial statements and significant
accounting matters
During the year and prior to the publication of
the Group’s results for 2017, the Committee
reviewed the 2017 half yearly financial report
and related news release, the 2017 Annual
Report (including the financial statements),
the 2017 annual results news release and the
reports from the external auditors on the
outcomes of their half year review and their
audit relating to 2017.
As part of its work, the Committee
considered the following significant
accounting matters in relation to the
Company’s financial statements and
challenged the judgements being made
in relation thereto.
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
2017. 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. Details of the Company’s
approach to accounting for acquisitions are
set out in Note 24 to the consolidated
financial statements.
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
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 CGUs (including the sensitivity of
the outcome of impairment testing to the use
of different assumptions) and considered the
external auditors’ testing thereof. After due
challenge and debate, the Committee
concluded that it was satisfied with the
assumptions and judgements applied in
relation to such testing and agreed that
there was no impairment to goodwill or
customer relationships intangible assets.
Details of the key assumptions and
judgements used are set out in Note 9 to the
consolidated financial statements.
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
decrease 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. Having done so, the
Committee was satisfied with the key
judgements and proposed disclosures
related to tax made by management.
69
Bunzl plc Annual Report 2017
The Committee is satisfied that each of the
above mentioned significant accounting
matters have been properly recorded in the
Company’s books and records and accounted
for appropriately, including relevant
disclosure in the Annual Report.
In previous years, in addition to those
matters referred to above, supplier rebates
have also been considered to be a significant
accounting matter which have accordingly
been reviewed by the Committee. However,
having reviewed the matter again in 2017,
the Committee is satisfied that substantially
all of the Group’s supplier rebate income
is unconditional and non-judgemental.
As a result, supplier rebates are no
longer considered by the Committee to
be a significant accounting matter.
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,
in addition to considering the results of the
external assessment referred to above, 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
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT CONTINUED
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. These reports 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.
External auditors’ independence
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 reported last
year, this policy was updated in 2016
following the implementation of the EU Audit
Directive and Regulation which changed the
rules relating to the provision of non-audit
services by the external auditors. 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
Auditors’ effectiveness reviews
During 2017 the Committee undertook reviews of the effectiveness of both the Company’s
external audit process for the 2016 financial statements and the Company’s internal audit
function. Each of the reviews followed a broadly similar process, as summarised below:
Detailed
questionnaires
of different
aspects of
external audit
process/internal
audit function.
Questionnaires
completed by:
• directors; and
• senior managers
at Group and
business
area levels.
Results of
questionnaires
considered and
discussed by the
Committee.
Action plan and
implementation
timeframes
agreed.
Internal audit function
The questionnaire covered a total of 35 different
aspects of the internal audit function including:
purpose, authority and responsibility;
independence and objectivity; quality
assurance processes; adequacy of resources;
auditors’ skills and capabilities; and the
quality of reporting.
The Committee also considered the extent to
which the recommendations from the IIA’s
assessment of the effectiveness of the internal
audit function in 2016 had been addressed.
External audit process
The questionnaire covered a total of 24 different
aspects of the external 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.
Following these assessments,
the Committee concluded
that it was satisfied with the
effectiveness of the external audit
process relating to the 2016
financial statements and that the
internal audit function continued
to be effective, efficient and
appropriately resourced.
The Committee will carry out
similar effectiveness reviews in
2018 in respect of the audit of the
2017 financial statements and the
internal audit function.
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 2017 in respect of
the audit and for non-audit services are set
out in Note 4 to the consolidated financial
statements. The ratio of the fees relating to
non-audit services to audit services in 2017
was 9%.
External 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. While
the Company has no current retendering
plans, in accordance with The Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee
Responsibilities) Order 2014 (’CMA Order’)
the Company will be required to put the
external audit contract out to tender by 2024.
In addition, PwC will be required to rotate the
audit partner responsible for the Company’s
audit, who is currently Paul Cragg, every five
years. Accordingly, the Company confirms
that it has complied with the provisions of the
CMA Order for the 2017 financial year.
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 2018 be put to shareholders at
the forthcoming AGM.
70
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT
The remuneration policy and practices are
aligned with the long term performance of
our business and have been a crucial element
in retaining and attracting key talent and in driving
behaviours to build a culture where reward is
clearly linked to sustainable performance.
Vanda Murray OBE
Chairman of the Remuneration Committee
PRINCIPAL RESPONSIBILITIES
OF THE COMMITTEE
Remuneration
• Setting and reviewing directors’
remuneration and benefits including
base salary, bonus, long term
incentive plans and retirement
benefits.
• Ensuring that all remuneration paid to
the directors is in accordance with the
Company’s previously approved
remuneration policy.
• Ensuring all contractual terms on
termination, and any payments made,
are fair to the individual and the
Company.
• Monitoring the policies and practices
applied in respect of the remuneration
of senior executives directly below
Board level and making
recommendations as appropriate.
Long term incentive plans
• Overseeing the Company’s long term
incentive plans for all employees.
Governance and compliance
• Ensuring that provisions relating to
disclosure of remuneration as set out
in the relevant legislation, the UK
Listing Rules and the Corporate
Governance Code are fulfilled.
Composition
The Committee comprises all of the
independent non-executive directors of the
Company. 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.
Meetings
The Committee met on four occasions
during 2017. Members’ attendance at
those meetings is set out below:
Vanda Murray
David Sleath1
Eugenia Ulasewicz
Jean-Charles Pauze
Lloyd Pitchford2
Stephan Nanninga3
Meetings attended
4
1
4
4
3
3
1
2
3
David Sleath retired as a director on 19 April
2017 having attended all of the Committee
meetings held between 1 January 2017 and
that date.
Lloyd Pitchford was appointed as a director on
1 March 2017 and attended all of the Committee
meetings held between that date and the end
of the year.
Stephan Nanninga was appointed as a director
on 1 May 2017 and attended all of the
Committee meetings held between that date
and the end of the year.
Role
The primary role of the Committee is to
determine the framework or broad policy for
the remuneration of the Chairman and the
executive directors of the Board. The
Committee’s terms of reference, which were
reviewed by both the Committee and the
Board in 2017, are available on the
Company’s website, www.bunzl.com.
Activities
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 the Company’s shareholders’
interests. The Committee considers market
practice and shareholders’ views when
setting the Group’s performance-related
incentives and ensures compliance with
UK corporate governance good practice.
71
Bunzl plc Annual Report 2017
INTRODUCTION FROM
VANDA MURRAY
Chairman of the Remuneration Committee
I am pleased to present the Directors’
remuneration report for the period ended
31 December 2017 which has been prepared
by the Remuneration Committee and
approved by the Board.
Remuneration policy and
shareholder engagement
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 delivering shareholder value.
The Committee believes that the
remuneration policy has contributed to our
success by creating a culture where reward
is aligned to sustainable performance.
At last year's AGM, following consultation
with our largest shareholders and their
representative bodies on the proposed
remuneration structure, we received
overwhelming support for the remuneration
policy, which was approved with a 92% vote
in favour, and 98% support for our
remuneration report. I would like to thank
our investors for their constructive input
and voting support. We have continued to
consult with shareholders in 2017 as part
of our ongoing commitment to open
dialogue to ensure our policy takes into
account institutional investors best
practice expectations.
The changes made to the remuneration
policy in 2017 were designed to drive
performance for the Company’s next stage
of development and to bring the policy in line
with current best practice.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
The policy changes in summary:
• policy maximum for annual bonus of 180%
of base salary (the 2017 FTSE 100 market
median) but reduction in the target and
threshold bonus (as a percentage of the
maximum);
• improved disclosure in the remuneration
report for the relevant year to include
threshold, target and stretch performance
metrics;
• maintained bonus deferral of 50%
of award into shares for three years;
• strengthened malus and clawback
provisions including for the cash element
of bonus;
• shareholding requirement increased
to 250% for the Chief Executive and
maintained at 200% for other
executive directors;
• reduction in pension contribution or cash
allowance for new executive directors
(capped at 25% of base salary);
• time proration for performance shares
in the event of an executive director
retirement; and
• introduction of a two year post-vesting
holding requirement for LTIP awards from
the 2017 AGM onwards.
As the AGM and the approval of the directors’
remuneration policy occurred part way
through 2017, no subsequent changes were
made to the executive directors’ bonus
performance measures for 2017. They have
now been reviewed and are being changed
for 2018.
The annual bonus opportunity in the policy
had remained unchanged for eight years.
However, we adopted a prudent, phased
approach limiting the increase in bonus to
150% of base salary for the Chief Executive
for 2017, 30 percentage points lower than the
maximum policy amount. As referred to
above, we increased the shareholding
requirement for our Chief Executive to 250%
of base salary and strengthened the malus
and clawback provisions for the annual
bonus plan and the Company’s Long Term
Incentive Plan (’LTIP’).
We recognise that investors are keen to
understand the degree of stretch in our
annual bonus plan. Being mindful of the
competitive sensitivity of such disclosure, we
have disclosed the performance ranges that
apply to our annual bonus plan on a
retrospective basis since 2016. We will
continue to do so going forward.
The changes we have made to the policy are
working well and support the Company’s
focus on building and strengthening its
strategic position for the long term. Looking
forward, the Committee will continue to drive
and reward performance and maintain
alignment with shareholders’ interests.
Performance and reward for 2017
The business strategy has remained
constant during 2017 with the Group
continuing to grow both organically and
by acquisition, extending our geographic
footprint across 30 countries while
continuously improving the quality of our
operating model.
This year Group revenue is up 10% and
adjusted operating profit is up 6% at
constant exchange rates against the
background of variable macroeconomic
and market conditions.
Annual bonus
In setting our incentive targets, we have
regard to the performance potential of the
different parts of the business and of the
whole Group. The on-target performance
level for the bonus is set at, or close to, the
budgeted level of performance. The
Committee sets a range around the target
both to incentivise delivery of a stretching
performance and to allow for limited
underperformance.
Following the 2017 AGM, the Committee,
in determining the implementation of the
approved policy for 2017, decided to retain
the existing overall structure for the annual
bonus with the key performance metrics
being the Group’s adjusted earnings per
share (’eps’) and return on average operating
capital (’RAOC’) and, for Patrick Larmon, 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). We carefully
reviewed the financial performance targets
for the annual bonus plan and after due
consideration the Committee decided to
increase the on-target eps bonus award level
for the executive directors to slightly above
the 2017 budgeted level. In doing so, we
ensured that the performance targets
became more challenging as the quantum in
bonus levels increased, balanced against the
fact that we were already part way through
the year. Performance against these metrics
has resulted in an annual bonus for Frank
van Zanten of 73% of the maximum
opportunity, which equates to 109% of his
annual salary for 2017.
The annual bonuses for Brian May and
Patrick Larmon are 95% and 84% 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.
LTIP grants
The remuneration policy allows annual
grants under the LTIP up to 200% of base
salary for share options and 150% for
performance shares. However, for 2017 we
took a prudent approach and award levels
were maintained at the same levels as 2016,
with share options at up to 200% of base
salary and performance shares being held
at 112.5% of base salary.
LTIP vesting
The Committee assessed the performance
for 2015-2017 based on the metrics set for
the LTIP options and performance shares.
The strong eps growth was reflected in
100% of executive share options vesting
during 2017. In addition, 82% and 56% of
performance shares vested for performance
periods that ended in March and September
2017 respectively.
Remuneration arrangements for
the 2018 financial year
Base salary
Executive directors’ base salaries have
been increased by between 2.0% and 2.5%
effective from 1 January 2018 which is in line
with that of the US and UK workforce
average respectively.
Annual bonus
The directors’ remuneration policy sets the
annual bonus maximum level around the
FTSE 100 market median. For the 2018
financial year, the Chief Executive’s
maximum annual bonus opportunity will be
180% of base salary. For the other executive
directors, the maximum annual bonus will be
150% of base salary. The on-target bonus is
50% of the maximum, namely 90% of base
salary for the Chief Executive and 75% of
base salary for the other executive directors.
The annual bonus has previously measured
performance with a one-dimensional focus
against a single financial measure of eps
growth, subject to a RAOC percentage
modifier (with only a minor impact on the
bonus). Following recent shareholder
consultation the Committee has concluded
that it is an appropriate time to introduce a
balanced scorecard of performance
measures for the 2018 bonus award to
provide greater alignment to the strategic
KPIs and a more rounded view on
72
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
• 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’s Listing Rules and
takes into account the accompanying
Directors’ Remuneration Reporting
Guidance and the relevant policies of
shareholder representative bodies.
• The directors’ remuneration policy
was approved by shareholders in a
binding vote at the 2017 AGM on
19 April 2017 and is not being
submitted to a shareholder vote at the
2018 AGM.
In accordance with the Regulations,
at the 2018 AGM we will be asking
shareholders to vote on an advisory vote
on the annual report on remuneration as
set out on pages 84 to 95 which provides
details of the remuneration earned by
directors for performance in the year
ended 31 December 2017.
performance. To this end, for 2018 the
bonus award will be based on eps, RAOC,
operating cash flow and personal
performance linked to certain specified
strategic non-financial goals. These metrics
are all key to the future business strategy.
The performance measures for the balanced
scorecard and their respective weightings
are summarised in the table below:
2017
Eps growth*
Weighting 2018
100% Eps growth*
RAOC%*
Operating
cash flow £m*
Strategic
non-financial
goals
100%
Weighting
50%
15%
15%
20%
100%
Subject to an eps
underpin – eps to be
at least at the threshold
level for any bonus to
be paid
Subject to a
RAOC modifier
* Calculated at constant exchange rates
Threshold, target and stretch levels for all
financial measures will be disclosed in the
relevant year’s remuneration report. The
specific performance levels are not disclosed
while still commercially sensitive.
When setting the target levels, the
Committee conducts an analysis of
the challenges and growth opportunities
across the Group and sets targets that are
stretching without encouraging inappropriate
levels of risk. The range itself varies each
year taking into account the risks and
opportunities facing the business and
the principle that target setting year
by year results in stretching ambition
while ensuring that the scale of reward
on offer is proportionate and always linked
to performance. For 2018 the level of
outperformance required for a maximum
bonus on the eps element will be increased
further to 112% of target, while maintaining
the existing asymmetric range by setting
the threshold at 93% of target. To ensure
that strong financial performance
underpins bonus payouts, the Committee
has introduced an eps underpin. If eps
performance falls below the threshold
level, no bonus will be payable.
LTIP
The normal annual award limits for share
options can be up to 200% of base salary and
150% of base salary for the performance
share element of the LTIP although award
levels for 2018 will once again be held at the
same levels as 2016 and 2017, with share
options at up to 200% of base salary and
performance shares being held at 112.5% of
base salary. The resulting LTIP award levels
for 2018 are materially lower than the FTSE
100 mid market levels and below the
maximum levels permitted by the
remuneration policy.
We will continue to set robust and
challenging performance conditions for the
LTIP awards. These awards are subject to
eps growth targets and, in addition, in the
case of the performance shares, a relative
total shareholder return (‘TSR’) condition.
LTIP awards are subject to a post-vesting
holding period which was introduced last
year for the executive directors. The
holding period continues to apply to any
awards retained where an executive
director leaves employment.
We will continue to review the LTIP
periodically. The opportunity, measures
and targets may be considered in the future
within the parameters permitted in the
remuneration policy.
Conclusions
2017 was a successful year, supported by the
Company’s remuneration policy, and the
level of payout for the annual bonus and
vesting of the LTIP awards reflects this. In
the following pages you will find details of:
• our current directors’ remuneration
policy (as approved in April 2017); and
• the annual report on remuneration
for 2017.
I hope that you will find this report to be
clear and helpful in understanding our
remuneration policy and practices.
Vanda Murray OBE
Chairman of the Remuneration Committee
26 February 2018
73
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 the relevant year’s remuneration report.
In this way the Committee facilitates
alignment between the interests of
shareholders and the total remuneration
paid to the executive directors.
DIRECTORS’
REMUNERATION POLICY
We continue to pursue our well defined
strategy of developing the business through
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 adjusted earnings per share (‘eps’) 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.
In the application of the remuneration policy,
the metrics and targets for the annual bonus
plan remained the same for 2017 with eps
growth and return on average operating
capital (‘RAOC’) performance measures. For
the 2018 financial year and going forward, in
addition to eps and RAOC, we have added
operating cash flow and personal objectives
as performance measures. The weighting is
50% eps growth, 15% RAOC, 15% operating
cash flow and 20% strategic personal
objectives (non-financial metrics). The eps
metric has an underpin attached which must
be achieved before any of the other metrics
can lead to any bonus being paid.
The directors’ remuneration policy was
approved by shareholders at the 2017 AGM
and is not subject to a vote at the 2018 AGM.
Objectives of the policy
The current directors’ remuneration policy,
effective from the date of the 2017 AGM,
with the exception of the annual bonus where
the policy applied for the full financial year
in 2017, has been 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;
• to ensure that the targets set each year
result in stretching ambitions and that the
scale of the reward is proportionate; and
• to align pay with the strategic objectives
of the Company and the interests of its
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.
74
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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 remuneration
policy for the executive directors, explaining how each element
operates and links to the corporate strategy.
Salary
Purpose
• recognise knowledge, skills and experience as well as reflect the scope and size of the role
• reward individual performance without encouraging undue risk
• promote the importance of environmental, social and governance issues
Operation
• paid in 12 equal monthly instalments during the year
• reviewed annually, normally in December (with any changes usually effective from January)
• taking into consideration individual and Group performance, salary increases across the Group are benchmarked for
appropriate salary levels using a comparator group of similarly sized companies with a large international presence
• pensionable
Maximum potential value
• 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 2017 and 2018 are set out on pages 85 and 92
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
Annual bonus
Purpose
• incentivise the attainment of annual corporate targets
• retain high performing employees
• align with shareholders’ interests
Operation
• annual award based on financial targets set by the Committee at the beginning of the year
• 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
Maximum potential value
• the annual bonus policy maximum is 180% of base salary
• non-pensionable
• the annual target bonus opportunity is capped at 50% of the maximum, where the maximum exceeds 140% of base
salary
• for the 2018 performance year for Frank van Zanten the maximum annual bonus will be 180% of base salary with the
on-target award at 50% of the maximum, equating to an on-target bonus of 90% of base salary
• for the 2018 performance year for Brian May and Patrick Larmon the maximum annual bonus will be 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
• the current threshold levels of bonus are 49% of base salary for Frank van Zanten and Brian May and 31% of base
salary for Patrick Larmon
75
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual bonus continued
Performance metrics
• metrics will be set each year by the Committee aligned to the Company’s key strategic objectives
For the 2018 performance year, the principal metrics are as follows:
• growth at constant exchange rates in the Company’s eps against a relevant target
• the Company’s RAOC performance
• the Company’s operating cash flow, being cash generated from operations before acquisition related items less net
capital expenditure
• personal objectives linked to certain specified strategic goals
• the use of eps, RAOC and operating cash flow measures are seen as appropriate as they are, or form part of, three of
the Company’s financial Key Performance Indicators (’KPIs’). The use of eps growth aligns the executive directors’
interests with those of the shareholders, RAOC ensures the continued focus on the management of capital employed
together with profitability and cash flow ensures the focus on cash generation
• 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 items (’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
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
For the 2018 performance year, the weighting of these metrics will be as follows:
• eps – 50%
• RAOC – 15%
• operating cash flow – 15%, and
• strategic non-financial goals – 20%
There will be an eps underpin, such that if eps is below threshold there is no bonus payout.
Long term incentives
Purpose
• incentivise growth in longer term eps and TSR
• align with shareholders’ interests
• recruit and retain senior employees
Operation
• discretionary biannual grants of executive share option awards and performance share awards which vest subject to
performance conditions measured over three years and subject to continuous Company service
• 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
76
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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 2018 grants, awards will not exceed 112.5% of base salary
Performance metrics
Performance and service conditions must be met over a three year performance period
Executive share options
• eps performance measure relates to the absolute growth in the Company’s eps against the targets set for the
performance period
• the vesting is scaled as follows:
– no vesting for performance below the threshold target
– 25% of an award will vest for achieving the threshold target
– 100% of an award will vest for achieving or exceeding the maximum target
– for performance between these targets, the level of vesting will vary on a straight line sliding scale
• the Committee annually reviews the performance conditions outlined above and, in line with the rules of the 2014
LTIP, reserves the right to set different targets for forthcoming annual grants provided it is deemed that the relevant
performance conditions remain appropriately challenging in the prevailing economic environment
• the targets set 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 87.
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 88.
77
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
All employee share plans
Purpose
Operation
• 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
• 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
Maximum potential value
• in the UK, the Sharesave Scheme is linked to a contract for monthly savings within the HMRC limits over a period of
either three or five years (currently £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)
Performance metrics
• service conditions apply
Retirement benefits
Purpose
Operation
• 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
• 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% per annum on salary up to the
notional pensionable salary cap (from 6 April 2018 £160,800 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
78
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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
• not applicable
Performance measures and targets
The key measures used by the Committee for incentivising the executive directors are a subset of the Company’s KPIs. For 2017, eps modified
by RAOC was used for the annual bonus and eps and relative TSR for the 2014 LTIP. Other metrics based on the Company’s KPIs may be used
in the future where it is considered that they provide clear alignment with the evolving strategy of the Group.
• 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 year.
• 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 a 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.
As outlined on pages 72 and 73 earlier in this report, in addition to the measures referred to above, the Committee is introducing a balanced
scorecard of performance measures which will include both operating cash flow and non-financial personal objective measures for the
annual bonus plan for the executive directors in 2018 in addition to the existing eps and RAOC measures. This is intended to provide greater
alignment to the strategic KPIs and a more rounded assessment of performance. For 2018, the bonus award will be based on the growth in
eps, RAOC, operating cash flow and personal performance linked to certain strategic goals.
• Operating cash flow is a measure that forms part of the Company’s cash conversion KPI. The use of operating cash flow ensures the focus
on cash generation enabling the Group to pay dividends and to support the growth strategy by making acquisitions and reinvesting in the
underlying business.
• Personal objectives reward individual contribution to the success of the Company linked to certain specified strategic goals.
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, with payment made after the year end following
the Committee’s assessment of performance relative to the targets.
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 30 people) are
granted both executive share option and performance share awards. Approximately 450 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, the US and the 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.
79
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 options and performance share awards.
In 2018 the majority of employees across the Group have received average salary increases ranging from 2.0%–3.25%, 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 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 regular employee surveys.
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
80
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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
Voluntary resignation or termination for cause
Death, ill health, disability (excluding redundancy)
Departure on agreed terms
Base salary,
pension and
benefits
Paid for the proportion of the notice period
worked and any untaken holidays pro-rated
to the leaving date
Annual bonus cash
Cessation of employment during a bonus year
will normally result in no cash bonus being paid
Annual bonus
deferred shares
Unvested deferred shares will lapse
Executive share
options
Unvested executive share options will lapse
Performance
shares
Unvested performance shares will lapse
Paid up to the date of death or leaving, including
any untaken holidays pro-rated to such date. In
the case of ill health, a payment in lieu of notice
may be made and, according to the
circumstances, may be subject to mitigation. In
such circumstances some benefits such as
company car or medical insurance may be
retained until the end of the notice period
Cessation of employment during a bonus year or
after the year end but prior to the normal bonus
payment date will result in cash and deferred
bonus being paid and pro-rated for the relevant
portion of the financial year worked and
performance achieved
In the case of the death of an executive, all
deferred shares will be transferred to the estate
as soon as possible after death. In all other cases,
subject to the discretion of the Committee,
unvested deferred shares will be transferred to
the individual on a date determined by the
Committee
Tax advantaged options will vest in full on the
cessation of employment and be exercisable for
the following 12 months after which any
unexercised options will lapse
Subject to the discretion of the Committee,
unvested non-tax advantaged share options will
normally be retained by the individual for the
remainder of the vesting period and remain
subject to the relevant performance conditions.
However in the case of the death of an executive,
the Committee will determine the extent 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
Note
As per HMRC regulations
As per HMRC regulations
None
Disbursements such as legal costs and
outplacement fees
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.
81
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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.
2018 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 2018, in line with the remuneration policy, is illustrated in the bar charts below.
Frank van Zanten
Below threshold performance
(Total £1,429,769)
Target performance
(Total £2,903,924)
Stretch performance
(Total £4,378,079)
Brian May
Below threshold performance
(Total £766,151)
Target performance
(Total £1,630,391)
Stretch performance
(Total £2,494,631)
Patrick Larmon
Below threshold performance
(Total £872,987)
Target performance
(Total £2,147,333)
Stretch performance
(Total £3,421,680)
86%
14%
42%
7%
26%
25%
28%
5%
34%
33%
75%
35%
12%
25%
23%
8%
33%
98%
40%
25%
1%
28%
1%
36%
25%
28%
36%
31%
38%
2%
Salary and benefits
Pension
Bonus (Cash/DASBS)
LTIP
Notes
a) Salary represents annual salary for 2018. Benefits such as a car or car allowance and private medical insurance have been included based on 2017 figures. In the case of
Frank van Zanten, benefits also include the international relocation package including accommodation, which are gross amounts before taxes, referred to on page 85.
Patrick Larmon’s salary is paid in US dollars and has been translated at the 2017 year end closing exchange rate of £1: US$1.35.
b) Pension represents the cost of pension accrued in 2017 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 for Patrick Larmon through the Defined Contribution Senior Executive Retirement Agreement (’SERA’), further details of which are shown on
page 88.
c) Below threshold performance comprises salary, benefits and pension only with no bonus awarded and no LTIP awards vested.
82
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
d) Target performance comprises annual bonus awarded at target level (i.e. for 2018 an on-target bonus of 90% of base salary for Frank van Zanten and 75% 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 2018, the maximum annual bonus will be 180% of base salary for Frank van Zanten and
150% 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 and deliver 30% of their face value in
gain to the executives.
Legacy arrangements
The directors’ remuneration policy approved by shareholders at the 2017 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.
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
Vanda Murray
Lloyd Pitchford
Stephan Nanninga**
Date of
appointment
1 January 2010
1 September 2007
1 April 2011
1 January 2013
1 February 2015
1 March 2017
1 May 2017
Date of last
re-appointment
at AGM
19 April 2017
n/a
19 April 2017
19 April 2017
19 April 2017
19 April 2017
n/a
Length of
service as at
2018 AGM
8 years 3 months
n/a
7 years
5 years 3 months
3 years 2 months
1 year 1 month
11 months
*
David Sleath retired from the Board at the conclusion of the 2017 AGM held on 19 April 2017 and Lloyd Pitchford was appointed to the Board as a non-executive director with
effect from 1 March 2017 and assumed the role of Chairman of the Audit Committee upon David Sleath’s retirement. At the same time Vanda Murray assumed the role of
Senior Independent Director.
** Stephan Nanninga was appointed to the Board as a non-executive director with effect from 1 May 2017.
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
• 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 latest
review being with effect from January 2018
• 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
Maximum potential value
• determined within the overall aggregate annual limit of £1,000,000 authorised by shareholders with reference to the
Company’s Articles of Association
Performance metrics
• not eligible to participate in any performance related elements of remuneration
83
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 consulted with major shareholders and proxy voting groups on the remuneration policy that was approved at the 2017
AGM and the performance measures for the annual bonus plan for executive directors in 2018.
ANNUAL REPORT ON REMUNERATION FOR 2017
Committee remit and membership
The following independent non-executive directors were members of the Committee during 2017:
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Notes
Date of appointment to
the Committee
5 December 2007
20 April 2011
1 January 2013
1 February 2015
1 March 2017
1 May 2017
Meetings eligible
to attend
1
4
4
4
3
3
Meetings
attendance
1
4
4
4
3
3
a) David Sleath retired from the Board on 19 April 2017.
b) Lloyd Pitchford was appointed as a non-executive director of the Company and as a member of the Committee with effect from 1 March 2017.
c) Stephan Nanninga was appointed as a non-executive director of the Company and as a member of the Committee with effect from 1 May 2017.
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 2017, 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 interests of 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 their responsibilities, the Committee seeks external remuneration advice as necessary. During the year the Committee
received advice from Willis Towers Watson (’WTW’) and Aon Hewitt. WTW 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: £15,288 (WTW) and £31,203 (Aon Hewitt) respectively for
such work undertaken in 2017.
Statement of voting at the 2017 AGM for the remuneration report and the remuneration policy
The remuneration report and remuneration policy received the following shareholder votes in 2017, being the years that they were last voted
on by shareholders:
Remuneration report (2017 AGM)
Remuneration policy (2017 AGM)
Notes
Votes
cast
268,619,208
259,865,084
Votes
For
262,640,824
239,494,126
% of shares
voted
97.77
92.16
Votes
Against
5,978,384
20,370,958
% of shares
voted
2.23
7.84
Votes
Withheld
2,461,315
11,215,438
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.
84
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
Single total figure of remuneration 2017 (audited information)
Executive directors
Salary
£’000
2016
652.0
530.0
779.4
1,961.4
2017
816.0
540.6
838.1
2,194.7
2017
389.4
17.1
38.9
445.4
Frank van Zanten
Brian May
Patrick Larmon
Total
Notes
Taxable
benefits
£’000
2016
369.5
17.0
27.7
LTIP
Bonus
£’000
£’000
2016
2016
2017
738.2
490.8
517.5
739.1 1,044.3
406.0
897.3 1,204.1
512.4
414.2 2,109.8 1,409.2 2,153.9 2,986.6
2017
891.1
513.0
705.7
2017
204.0
195.0
17.2
416.2
Pension
£’000
2016
Total
£’000
2016
2017
158.3 2,818.0 2,408.8
2,179.7
182.4 2,004.8
16.1 2,497.2 2,539.7
7,128.2
356.8 7,320.0
a) Frank van Zanten was appointed to the Board on 1 February 2016 and became Chief Executive on 20 April 2016.
b) 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 2016 deferred bonus were awarded in 2017 as shown in the table on page 93 and the shares relating to the 2017 deferred bonus will be awarded in 2018.
c) 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 an international relocation package from Amsterdam to London following his appointment as Chief Executive in April 2016, together with any associated tax
liability relating to such package. This includes assistance with accommodation, removal costs and school fees. In addition Patrick Larmon’s club fees are paid by the Company.
d) The long term incentives are in the form of awards under the 2004 LTIP which were granted in April 2014 and under the 2014 LTIP granted in October 2014 and February and
August 2015. Long term incentive figures exclude any gain from the purchase of shares by Patrick Larmon through the ESPP described on page 78.
e) The remuneration for Patrick Larmon is determined and paid in US dollars and has been translated at the average exchange rates for the year of £1: US$1:29 in respect of
2017 and £1: US$1:36 in respect of 2016.
f) The value of the LTIP award for Frank van Zanten for 2016 relates to vesting of awards that were granted prior to him becoming Chief Executive.
g) The figures shown in relation to 2016 for the LTIP have been restated from those figures shown in the 2016 Annual Report to reflect the difference between the relevant
grant price and the value of the LTIP share option awards on the actual date of vesting on 27 February 2017 and 29 August 2017 at the closing mid-market share price
of 2,245p and 2,283p respectively.
Non-executive directors
Philip Rogerson – Chairman
David Sleath
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Total
Notes
Board
fees
£’000
2016
340.0
67.5
67.5
67.5
67.5
–
–
610.0
2017
340.0
20.7
68.9
68.9
68.9
57.4
45.9
670.7
Committee
Chair/SID
fees
£’000
2016
–
32.0
–
–
16.0
–
–
48.0
2017
–
10.2
–
–
28.8
11.8
–
50.8
2017
340.0
30.9
68.9
68.9
97.7
69.2
45.9
721.5
Total
£’000
2016
340.0
99.5
67.5
67.5
83.5
–
–
658.0
a) As David Sleath retired from the Board on 19 April 2017, the 2017 fees of £30,855 have been paid until this date.
b) Vanda Murray became Senior Independent Director on 19 April 2017.
c) Lloyd Pitchford and Stephan Nanninga joined the Board on 1 March 2017 and 1 May 2017 respectively.
d) In addition to the remuneration paid to the directors in 2016 shown above, Meinie Oldersma, who resigned as a non-executive director on 22 August 2016, received
remuneration of £43,800 in respect of the period 1 January 2016 to 22 August 2016.
e) In addition to payment of the fees shown in the table above, the Company also incurs the travel and subsistence expenses of the Chairman and the non-executive directors
relating to their attendance at Board and Committee meetings, together with any associated tax liability relating to such expenses.
No payments were or are to be made to former directors in respect of loss of office. No other payments were made to former directors during the year, with the exception of the
amounts paid to Michael Roney in respect of the exercise of executive share options, performance share awards and deferred annual share bonus awards granted prior to his
retirement as referred to in the Directors’ remuneration report for 2016.
Executive directors’ annual salary (audited information)
Executive directors’ salaries were reviewed with effect from 1 January 2017 in accordance with normal policy and were increased taking into
account the average salary increases for employees across the Group.
Frank van Zanten
Brian May
Patrick Larmon
Note
Salary
from
1 January
2017
£816,000
£540,600
US$1,081,200
Salary
from
1 January
2016
£800,000
£530,000
US$1,060,000
Increase
in salary
2016 to
2017
2.0%
2.0%
2.0%
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 2018 and the increases awarded are shown on page 92.
85
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
Executive directors’ external appointments
Frank van Zanten served as a non-executive director of Grafton Group plc in 2017 and during the year retained fees of €70,000. Brian May
served as a non-executive director of United Utilities Group PLC in 2017 and during the year retained fees of £79,867. Patrick Larmon
served as a non-executive director of Bodycote plc in 2017 and retained fees of £54,372. In addition, he served as a non-executive
director of Huttig Building Products, Inc. in 2017 and retained fees of US$146,025 which included US$77,025 worth of deferred shares
which vested in 2017.
Non-executive directors’ fees (audited information)
The Chairman’s fee is reviewed every two years and, as a result, no review took place during 2017. The fees for the non-executive directors
were reviewed with effect from 1 January 2017 in accordance with the normal fees’ policy.
Chairman’s fee
Non-executive director fee
Supplements:
Senior Independent Director
Audit Committee Chairman
Remuneration Committee Chairman
With effect from
January 2017
£340,000
£68,850
£17,000
£17,000
£17,000
Fees paid
in 2016
£340,000
£67,500
£16,000
£16,000
£16,000
Increase in fees
2016 to 2017
–
2.0%
6.25%
6.25%
6.25%
The Chairman’s and the non-executive directors’ fees were reviewed with effect from 1 January 2018 and the increases awarded are shown on
page 93.
Performance against annual bonus targets (audited information)
The annual bonus plan and DASBS currently operate as set out in the policy section on pages 75 and 76. All of Frank van Zanten’s and Brian
May’s and 25% of Patrick Larmon’s bonus potential in 2017 related to growth in the Company’s constant exchange rate eps relative to budget
which was modified by the achievement of the Group’s RAOC relative to budget. For Patrick Larmon, a further 75% of his bonus potential
related to the PBITA performance of North America (’NA’) which was modified by the achievement of NA’s RAOC relative to the target set and
measured on a constant exchange rate basis. The results for 2017 against the targets set were as follows:
Group performance
On-target
bonus opportunity
as % salary
Threshold
eps
Target
eps
Stretch
eps
Frank van Zanten
75%
114.4
116.8
127.8
Brian May
70%
114.4
116.8
127.8
Patrick Larmon
17.5%
114.4
116.8
127.8
NA
performance
On-target
bonus opportunity
as % of salary
Target NA
PBITA
(constant
exchange
rate US$)
Patrick Larmon
52.5%
US$402.4m
Notes
% actual constant
exchange rate eps
relative to target
104.5% of target
performance
104.5% of target
performance
104.5% of target
performance
% PBITA of
NA businesses
relative to target
102% of target
performance
Primary
2017 bonus as % of
salary before
modifier applied
Performance against targets
Modifier
RAOC for the
Group relative
to target (53.4%)
2017 bonus
award as %
of salary
110.5
96.0
24.0
0.989
0.989
0.989
109.2
94.9
23.7
Bonus as %
of salary before
modifier applied
RAOC for the
NA businesses
relative to target
2017 bonus
award as %
of salary
63.7
0.949
60.5
a) For the Group performance table above the annual on-target bonus opportunity for Frank van Zanten is 75% of salary with a threshold award of 49% of salary and a
maximum award of 150%. For Brian May and Patrick Larmon the annual on-target bonus opportunity is 70% of salary with a threshold award of 49% of salary for Brian May
and 31% of salary for Patrick Larmon and a maximum award of 125 % of salary for both Brian May and Patrick Larmon.
For Group performance, threshold performance was 97.9% of target and the maximum bonus award would have been paid out at 109.4% of target. For NA performance,
threshold performance was 95% of target and the maximum bonus award would have been paid out at 107.5% of target.
b) The bonuses derived from the primary measures shown above are increased, decreased or remain unchanged according to the RAOC modifier, being the actual RAOC
achieved relative to target RAOC. The RAOC modifier is unlikely to change the bonus determined by the primary measure by more than 5% up or down.
c) At target exchange rates the adjusted eps for 2017 was 122.0p.
86
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
Accordingly the total payments under the annual bonus plans were:
Frank van Zanten
Brian May
Patrick Larmon
2017
%
109.2
94.9
84.2
Total bonus payment (cash and deferred shares) as a % of salary
2013
%
–
104.2
85.3
2015
%
–
73.8
54.5
2016
%
75.3
76.6
65.7
2014
%
–
98.0
69.7
The monetary values of the bonus payments for 2017 and 2016 are included in the table on page 85.
LTIP grants/awards with performance periods ending in 2017 (audited information)
Executive share option awards – LTIP Part A
Executive share option awards, granted three years previously, are due to vest on 26 February 2018 and 27 August 2018. The Committee
assessed the performance of the Company against the relevant performance condition:
LTIP Part A – 26 February 2015 and 27 August 2015 awards
Performance
Measure
Threshold target
(5% p.a.)
Maximum target
(8% p.a.)
Actual eps
growth
% vesting
(max 100%)
Vesting
schedule
25% vesting for
target performance,
100% vesting for
maximum
performance
Eps growth
(over three year period
to 31 December 2017)
Frank van Zanten
Brian May
Patrick Larmon
Note
15.8%
26.0%
38.5%
100%
Date of
grant
26 February 2015
27 August 2015
26 February 2015
27 August 2015
26 February 2015
27 August 2015
Number of
shares granted
15,300
17,396
25,500
29,001
33,300
37,639
Vesting
outcome
100%
100%
100%
100%
100%
100%
Estimated
value of
award vesting
£40,086
£86,110
£66,810
£143,555
£87,246
£186,313
Included in the single total remuneration table on page 85 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 2017 (2,182p).
Performance shares – LTIP Part B
Awards of performance shares were made to the executive directors on 4 April 2014 under the 2004 LTIP and 6 October 2014 under the 2014
LTIP and vested during 2017. The Committee assessed the performance of the Company against the relevant performance conditions:
LTIP Part B – 4 April 2014 award
Performance
Measure
Eps growth relative
to RPI (over
three year period to
31 December 2016)
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 2014 to
31 March 2017
RPI growth
(Dec 2013
to Dec 2016)
Threshold target
(4% p.a. above
RPI growth)
Maximum target
(10% p.a. above
RPI growth)
Actual eps
growth
% vesting
(max 50%)
5.4%
17.9%
38.5%
28.8%
32.3%
Vesting
schedule
25% vesting
for threshold
performance,
100% vesting
for maximum
performance
Threshold target
(median)
Maximum target
(upper quartile)
Actual TSR
% vesting
(max 50%)
35.1%
19.5th out of 38
55.5%
10th out of 38
55.5%
10th out of 38
50.0%
87
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
LTIP Part B – 6 October 2014
Vesting
schedule
25% vesting
for target
performance,
100% vesting for
maximum
performance
Performance
period
1 October 2014 to
30 September 2017
Performance
measure
EPS growth (over
three year period to
31 December 2016)
Performance
Measure
TSR relative
to comparator
group
of bespoke
peer companies
Frank van Zanten
Brian May
Patrick Larmon
Note
Threshold target
(6% p.a.
compounded)
Maximum target
(12% p.a.
compounded)
Actual eps
growth
% vesting
(max 50%)
19.1%
40.5%
28.8%
29.4%
Vesting
schedule
25% vesting
for threshold
performance,
100% vesting
for maximum
performance
Date of
grant
4 April 2014
6 October 2014
4 April 2014
6 October 2014
4 April 2014
6 October 2014
Threshold target
(median)
Maximum target
(upper quartile)
Actual TSR
% vesting
(max 50%)
30.7%
16.5th out of 32
86.7%
8.5th out of 32
48.2%
13.5th out of 32
26.4%
Number of
shares granted
12,150
12,300
16,500
16,500
18,500
20,900
Vesting
outcome – eps
32.3%
29.4%
32.3%
29.4%
32.3%
29.4%
Vesting
outcome – TSR
50.0%
26.4%
50.0%
26.4%
50.0%
26.4%
Value of
award vesting
£232,877
£158,398
£316,255
£212,498
£354,590
£269,136
Included in the single total figure of remuneration on page 85 is the value of these vested awards at the closing mid-market share price on the dates of vesting, 4 April 2017 and
6 October 2017, which were 2,329p and 2,308p 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 2017
£204,000
£116,190
£17,171
Pension
value in
the year
from DB
scheme
–
£78,838
–
Total
pension
2017
£204,000
£195,028
£17,171
Frank van Zanten
Brian May
Patrick Larmon
Notes
a) As Chief Executive Frank van Zanten receives a pension allowance of 25% of base salary.
b) 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
£154,200 for tax year 2017/18 and £150,600 for tax year 2016/17. The employee contribution rate is currently 10% of pensionable salary.
c) In addition to benefits from the BPP, Brian May receives a pension allowance of 30% of base salary above the pensionable salary cap which permits him to make provision,
of his own choice, in respect of that part of his salary which exceeds the cap.
d) Patrick Larmon originally joined the US Plan, subject to IRS limits, which accrued at a rate of 1.67% per annum up to 50% of the five year average pensionable salary less the
primary social security benefit, with a normal retirement age of 65 years. Pensionable salary in the US Plan is capped at US$140,000. On closure of the US Plan, Patrick
Larmon chose to freeze his benefit and no further benefits have accrued. Patrick Larmon is currently a member of a defined contribution (’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 2017 of £7,752 (2016: £7,352).
e) In addition, Patrick Larmon receives a supplementary pension through a defined benefit Senior Executive Retirement Agreement (’SERA’). Patrick Larmon’s SERA, which
became fully accrued in 2012, provides for a lifetime pension of US$100,000 per annum, payable upon retirement. No further SERA payments were made in 2017 and 2016.
f) Patrick Larmon also participates in the Bunzl USA, LLC Deferred Savings (401k) Plan. The Company makes matching contributions to this Plan. During 2017 contributions for
Patrick Larmon amounted to £9,419 (2016: £8,768).
88
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 2017 and performance share awards were granted in April and October 2017 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
Date of grant
02/03/2017
10/04/2017
01/09/2017
09/10/2017
02/03/2017
10/04/2017
01/09/2017
09/10/2017
02/03/2017
10/04/2017
01/09/2017
09/10/2017
Basis of award
100% of salary
56.25% of salary
100% of salary
56.25% of salary
95% of salary
52.5% of salary
95% of salary
52.5% of salary
95% of salary
52.5% of salary
95% of salary
52.5% of salary
Face value
£000
816.0
459.0
816.0
459.0
513.6
283.8
513.6
283.8
834.0
458.1
797.2
434.7
% vesting at
threshold
performance
100%
25%
100%
25%
100%
25%
100%
25%
100%
25%
100%
25%
Number
of shares
34,946
19,565
35,324
19,887
21,994
12,097
22,232
12,297
35,716
19,525
34,509
18,834
Performance
period end date
31.12.19
31.03.20
31.12.19
30.09.20
31.12.19
31.03.20
31.12.19
30.09.20
31.12.19
31.03.20
31.12.19
30.09.20
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 2 March 2017 and on 1 September 2017 at a value of 2,335p and 2,310p per share respectively. Performance shares were awarded under the 2014 LTIP Part B on 10 April 2017
and on 9 October 2017 at a value of 2,346p and 2,308p per share respectively.
Performance conditions for 2017 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 2017 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%
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%
89
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 2017 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 78. 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 2017
2.1%
1.2%
Statement of directors’ shareholding and share interests (audited information)
As at 31 December 2017, 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 2017 at the closing mid-market price
(2,072p)
207%
403%
324%
Under the terms of the Company’s remuneration policy applicable on his appointment as Chief Executive, 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. This requirement has increased to 250% under the new remuneration policy approved at the 2017 AGM.
In his previous role, he was not required to meet a shareholding requirement.
90
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 2017 were:
Unvested
and subject
to holding
period
(DASBS)
27,670
31,753
34,954
–
–
–
–
–
–
–
Owned
outright
81,478
105,240
130,896
10,000
4,000
4,000
2,500
3,000
4,000
–
Shares
Unvested
and subject to
performance
conditions
(LTIP Part B)
94,036
79,615
116,766
–
–
–
–
–
–
–
Options (LTIP Part A and Sharesave)
Total
interests held
Unvested
and subject to
performance
conditions
161,737
146,167
210,385
–
–
–
–
–
–
–
Unvested
subject to
continued
employment
1,642
2,173
–
–
–
–
–
–
–
–
Vested
but not
exercised
18,800
76,000
155,000
–
–
–
–
–
–
–
385,363
440,948
648,001
10,000
4,000
4,000
2,500
3,000
4,000
–
Frank van Zanten
Brian May
Patrick Larmon
Philip Rogerson
David Sleath*
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
* As David Sleath retired from the Board on 19 April 2017, the above reflects 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 a nine year
period. The Company’s TSR performance
against the FTSE 350 Support Services
Sector over a nine year period commencing
on 1 January 2009 is shown to the right.
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
500
450
400
350
300
250
200
150
100
Bunzl
FTSE 350 Support Services
Source: Thomson Reuters Datastream
2009
2010
2011
2012
2013
2014
2015
2016
2017
This graph shows the value, by 31 December 2017, of £100 invested in the ordinary shares of Bunzl plc on
1 January 2009, compared with the value of £100 invested in the FTSE 350 Support Services on the same date.
The other points plotted are the values at intervening financial year ends.
Chief Executive’s pay in last nine 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 2017 and the previous eight years.
Single total figure
of remuneration £000
Annual variable element
award rates against
maximum opportunity
Long term incentive vesting
rates against maximum
opportunity
Notes
2009
2010
2011
2012
2013
2014
2015
2016
2017
1,943.2
2,314.2
3,394.1
3,502.9 4,387.6 4,766.8
3,937.9 3,845.3 2,818.0
45%
71%
99%
67%
91%
85%
64%
45%
73%
LTIP Part A (options)
LTIP Part B
(performance shares)
100%
100%
100%
100% 100%
100%
100% 100%
100%
84%
65%
29%
45%
62%
89%
69%
82%
69%
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 were granted to Frank van Zanten since he became Chief Executive on 20 April 2016 vested during 2016.
e) The single total figure of remuneration in relation to 2016 has been restated from the figure shown in the 2016 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 2017 on page 85.
91
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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 2017 and leavers and joiners in either year have been removed from the data to prevent distortion.
Salary
Benefits
Bonus
Notes
Chief Executive
Percentage
change
(2017 vs 2016)
2%
1%
45%
UK and US
management
population
Percentage
change
(2017 vs 2016)
7%
9%
-14%
a) The 2016 bonus for the Chief Executive is based on the annualised bonus for Frank van Zanten in his role as Chief Executive.
b) Benefits are annualised and exclude the international relocation package benefit for Frank van Zanten of £372,245.
c) US and UK management population includes any promotional increases that occurred during either year.
d) 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 2017 and 2016 (as stated
in Note 21 and Note 17 to the consolidated financial statements on pages 136 and 131 respectively).
£ million unless otherwise stated
Overall expenditure on pay
Dividend paid in the year
Notes
2017
725.8
138.2
2016
647.3
125.4
Percentage
change
12.1%
10.2%
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 2016 to 2017, the background to which is referred to in the
Chief Executive’s review on page 6 and in the Financial review on page 25.
2018 Remuneration (audited information)
The current remuneration policy was implemented with effect from the 2017 AGM and continues to apply for 2018.
Salary
The salary increases for the executive directors for 2018, which are in line with increases that have been implemented for other employees in
the Group as discussed on page 80, are as follows:
Frank van Zanten
Brian May
Patrick Larmon
Note
The average sterling: dollar exchange rate for 2017 was £1: $1.29.
Salary from
1 January
2018
£836,400
£554,000
Salary from
1 January
2017
£816,000
£540,600
US$1,102,800 US$1,081,200
Increase in
salary
2017 to 2018
2.5%
2.5%
2.0%
92
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
2018 bonus targets
The structure for Frank van Zanten’s, Brian May’s and 25% of Patrick Larmon’s annual bonus for 2018 is described on pages 75 and 76.
For 2018, a balanced scorecard of performance measures is being introduced, based on eps, RAOC, operating cash flow and specified
strategic goals and with an eps underpin. If eps performance falls below the threshold level there will be no bonus paid. The Committee
has also introduced increased stretch into the eps metric. The level of outperformance required for a maximum bonus has been increased
to 112% of target. At the same time, the threshold is only 7% below target maintaining an asymmetric range. For Patrick Larmon the other
75% of his bonus will relate to the attainment of PBITA performance of North America relative to budget which will be modified, positively
or negatively, by the achievement of North America’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 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 2018
Grants of executive share options and performance shares awarded to executive directors and senior executives in 2018 will be subject
to the same performance conditions as those executive share options and performance share awards granted in 2017 as detailed on
pages 89 and 90.
Chairman’s and non-executive directors’ fees for 2018 (audited information)
The Chairman’s and the non-executive directors’ fees were reviewed with effect from 1 January 2018. The Chairman's fee is reviewed
every two years with the previous review in January 2016. The non-executive directors’ fees are reviewed annually. 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
2018
£357,000
£70,400
£18,000
£18,000
£18,000
Fees paid
in 2017
£340,000
£68,850
£17,000
£17,000
£17,000
Increase
in fees
2017 to 2018
5.0%
2.25%
5.88%
5.88%
5.88%
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 2017
The outstanding awards granted to each director of the Company and any director with an interest in the Company during 2017 under
the DASBS are set out in the table below. Further information relating to the deferred bonus is provided on page 75.
Shares
held at
1 January
2017
9,566
7,976
8,190
15,898
12,921
9,831
16,003
12,061
10,478
Shares
awarded
during
2017
11,504
9,001
12,415
Shares
vested
during
2017
9,566
15,898
16,003
Total
number
of award
shares at
31 December
2017
–
7,976
8,190
11,504
–
12,921
9,831
9,001
–
12,061
10,478
12,415
Normal
vesting
date
01.03.17
01.03.18
01.03.19
01.03.20
01.03.17
01.03.18
01.03.19
01.03.20
01.03.17
01.03.18
01.03.19
01.03.20
Share
price
at grant
p
1,573
1,896
1,933
2,255
1,573
1,896
1,933
2,255
1,573
1,896
1,933
2,255
Market
price
at vesting
p
2,335
Monetary
value of
vested
award
£000
223
2,335
371
2,335
374
Frank van Zanten
Brian May
Patrick Larmon
Note
The deferred element of the 2017 annual bonus plan as shown on page 85 is not included in the table above as the appropriate number of shares have not yet been awarded.
No shares lapsed during the year.
93
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
LTIP
The tables below show the number of executive share options and performance shares held by the executive directors under the LTIP during
2017.
Executive share options – LTIP Part A
Frank van Zanten
Total
Brian May
Total
Patrick Larmon
Total
Notes
a) Executive share options were exercised during 2017 by:
Options at
1 January
2017
18,000
16,200
18,800
15,300
17,396
16,135
42,636
–
–
144,467
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
Grant
date
30.08.13
27.02.14
29.08.14
26.02.15
27.08.15
03.03.16
02.09.16
02.03.17
01.09.17
30.08.13
27.02.14
29.08.14
26.02.15
27.08.15
03.03.16
02.09.16
02.03.17
01.09.17
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
02.03.17
01.09.17
Exercise
price
p
1,375
1,566
1,641
1,920
1,687
1,945
2,336
2,335
2,310
1,375
1,566
1,641
1,920
1,687
1,945
2,336
2,335
2,310
962
1,116
1,240
1,375
1,566
1,641
1,920
1,687
1,945
2,336
2,335
2,310
Options
exercisable
between
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
02.09.19–01.09.26
02.03.20–01.03.27
01.09.20–31.08.27
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
02.09.19–01.09.26
02.03.20–01.03.27
01.09.20–31.08.27
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
02.09.19–01.09.26
02.03.20–01.03.27
01.09.20–31.08.27
Options at
31 December
2017
–
–
18,800
15,300
17,396
16,135
42,636
34,946
35,324
180,537
24,500
22,500
29,000
25,500
29,001
25,887
21,553
21,994
22,232
222,167
–
34,000
31,500
28,500
25,500
35,500
33,300
37,639
36,810
32,411
35,716
34,509
365,385
(i)
Frank van Zanten on 3 March 2017 in respect of 18,000 ordinary shares at an exercise price of 1,375p, at a market price of 2,307p, resulting in a gain of £167,760 and 16,200
ordinary shares at an exercise price of 1,566p, at a market price of 2,307p, resulting in a gain of £120,042; and
(ii) Patrick Larmon on 2 May 2017 in respect of 36,000 ordinary shares at an exercise price of 962p, at a market price of 2,400.5p resulting in a gain of £517,860.
b) The mid-market price of a share on 31 December 2017 was 2,072p and the range during 2017 was 2,016p to 2,465p.
c) 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.
d) The performance conditions have been satisfied in relation to options granted under the 2004 LTIP Part A.
94
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT CONTINUED
Frank van Zanten
Total
Brian May
Performance shares – LTIP Part B
Awards
(shares)
held at
01-Jan
2017
12,150
12,300
10,200
10,587
10,369
23,428
–
–
79,034
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
Total
Patrick Larmon
Total
Conditional
shares
awarded
during
2017
–
–
–
–
–
–
19,565
19,887
39,452
–
–
–
–
–
–
12,097
12,297
24,394
–
–
–
–
–
–
19,525
18,834
38,359
Market price
per share
at award
p
1,606
1,597
1,840
1,804
2,051
2,325
2,346
2,308
1,606
1,597
1,840
1,804
2,051
2,325
2,346
2,308
1,606
1,597
1,840
1,804
2,051
2,325
2,346
2,308
Award
date
04.04.14
06.10.14
02.04.15
05.10.15
11.04.16
11.10.16
10.04.17
09.10.17
04.04.14
06.10.14
02.04.15
05.10.15
11.04.16
11.10.16
10.04.17
09.10.17
04.04.14
06.10.14
02.04.15
05.10.15
11.04.16
11.10.16
10.04.17
09.10.17
Lapsed
awards
(shares)
during
2017
2,157
5,436
–
–
–
–
–
–
7,593
2,929
7,292
–
–
–
–
–
–
10,221
3,284
9,236
–
–
–
–
–
–
12,520
Exercised
awards
(shares)
during
2017
9,993
–
–
–
–
–
–
–
9,993
13,571
9,208
–
–
–
–
–
–
22,779
15,216
11,664
–
–
–
–
–
–
26,880
Market
price
per share
at exercise
p
2,335
–
–
–
–
–
–
–
2,335
2,303
–
–
–
–
–
–
2,335
2,301
–
–
–
–
–
–
Value at
exercise
£000
233
–
–
–
–
–
–
–
317
212
–
–
–
–
–
–
355
268
–
–
–
–
–
–
Awards
(shares)
held at 31
December
2017
–
6,864
10,200
10,587
10,369
23,428
19,565
19,887
100,900
–
–
14,700
14,988
13,566
11,967
12,097
12,297
79,615
–
–
20,000
19,834
19,235
19,338
19,525
18,834
116,766
All employees share scheme
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 78.
Sharesave Schemes
Frank van Zanten
Brian May
Vanda Murray OBE
Chairman of the Remuneration Committee
26 February 2018
Options at
1 January
2017
678
964
1,197
976
Grant
date
01.04.15
29.03.16
21.03.14
20.03.15
Exercise
Price
p
1,536
1,556
1,253
1,536
Options
exercisable
between
01.05.18-31.10.18
01.05.21-31.10.21
01.05.19-31.10.19
01.05.20-31.10.20
Options at
31 December
2017
678
964
1,197
976
95
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OTHER STATUTORY INFORMATION
Power to issue and allot shares
The directors are generally and
unconditionally authorised under the
authorities granted at the 2017 AGM to allot
shares in the Company up to approximately
one third of the Company’s issued share
capital or two thirds in respect of a rights
issue. The directors were also given the
power to allot ordinary shares for cash
up to a limit representing approximately
10% of the Company’s issued share capital
as at 13 March 2017, without regard to the
pre-emption provisions of the Companies
Act 2006 (however, more than 5% can only
be used in connection with an acquisition or
specified capital investment).
No such shares were issued or allotted
under these authorities in 2017, 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 AGM and the
directors again propose to seek equivalent
authorities at such AGM.
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 Share
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 share; and
• in favour of not more than four transferees.
Annual General Meeting
The Notice convening the Company’s Annual
General Meeting (’AGM’), to be held at The
Park Suite, The Dorchester, Park Lane,
London W1K 1QA on Wednesday 18 April
2018 at 11.00 am., is set out in a separate
letter from the Chairman to shareholders.
vested. 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.
Dividends
An interim dividend of 14.0p was paid on
2 January 2018 in respect of 2017 and the
directors recommend a final dividend of
32.0p, making a total for the year of 46.0p
per share (2016: 42.0p). Dividend details are
given in Note 17 to the consolidated financial
statements. Subject to shareholder approval
at the 2018 AGM, the final dividend will
be paid on 2 July 2018 to those shareholders
on the register at the close of business
on 25 May 2018.
Share capital
The Company has a single class of share
capital which is divided into ordinary shares
of 321⁄7p each which rank pari passu in
respect of participation and voting rights.
The shares are in registered form, are fully
paid up and are quoted on the London Stock
Exchange. In addition, the Company operates
a Level 1 American Depositary Receipt
programme with Citibank N.A. under
which the Company’s shares are traded on
the over-the-counter (OTC) market in the
form of American Depositary Receipts.
Details of changes to the issued share capital
during the year are set out in Note 16 to the
consolidated financial statements.
Bunzl Group General Employee
Benefit Trust
The trustee of the Bunzl Group General
Employee Benefit Trust (’the EBT’) holds
shares in respect of employee share options
and awards that have not been exercised or
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.
Substantial shareholdings
As at 31 December 2017, the Company had been notified of the following significant
interests in the issued share capital of the Company, in accordance with rule 5 of the
Financial Conduct Authority’s Disclosure Guidance and Transparency Rules.
Shareholder
Massachusetts Financial Services Company
GIC Private Limited
FMR LLC
BlackRock, Inc.
APG Asset Management N.V.
Date of
notification
13.12.17
18.12.17
05.10.17
06.03.17
24.06.15
Number of
shares
33,644,264
18,096,160
17,494,199
17,257,793
10,265,263
% of issued
share capital
10.02
5.39
5.20
5.14
3.06
On 13 February 2018, the Company received a further notification that Massachusetts
Financial Services Company had reduced its shareholding to 32,329,330 shares
(9.62% of the Company’s issued share capital). No other notifications have been
received between 31 December 2017 and 26 February 2018.
96
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OTHER STATUTORY INFORMATION CONTINUED
Registration of a transfer of an uncertificated
share may be refused in the circumstances
set out in the uncertificated securities rules,
and where, in the case of a transfer to joint
holders, the number of joint holders to whom
the uncertificated share is to be transferred
exceeds four.
In addition, no instrument of transfer for
certificated shares shall be registered if the
transferor has been served with a restriction
notice (as defined in the Company’s Articles
of Association (the ’Articles’)) after failure to
provide the Company with information
concerning certain interests in the
Company’s shares required to be provided
under the Companies Act 2006, unless the
transfer is shown to the Board to be pursuant
to an arm’s length sale. The Board has the
power to procure that uncertificated shares
are converted into certificated shares and
kept in certificated form for as long as the
Board requires.
The Company is not aware of any agreements
between shareholders that may result in any
restriction of the transfer of shares or voting
rights.
Restrictions on voting rights
A member shall not be entitled to vote,
unless the Board otherwise decides, at any
general meeting or class meeting in respect
of any shares held by them if any call or other
sums payable remain unpaid. Currently, all
issued shares are fully paid. In addition, no
member shall be entitled to vote if he has
been served with a restriction notice after
failing 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 2017 AGM, shareholders gave the
Company authority to purchase up to a
maximum amount equivalent to
approximately 10% of its issued share
capital. During the year ended 31 December
2017, the Company did not purchase any of its
own shares pursuant to this authority or the
authority granted at the 2016 AGM and no
shares have been purchased between
31 December 2017 and 26 February 2018.
As a result, directors again propose to seek
the equivalent authority at the 2018 AGM.
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 AGM
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 AGM 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 AGM of
the Company.
In addition to any power to remove a director
from office conferred by company law, the
Company may also by special resolution
remove a director from office before the
expiration of his or her period of office under
the Articles.
The office of a director shall also be vacated
pursuant to the Articles if the director:
• resigns by giving notice to the Company
or is asked to resign by all of the other
directors who are not less than three in
number; or
• is or has been suffering from mental or
physical ill health and the Board resolves
that his or her office be vacated; or
• is absent without permission from Board
meetings for six consecutive months and
the Board resolves that his or her office be
vacated; or
• becomes bankrupt or compounds with his
or her creditors generally; or
• is prohibited by law from being a director;
or
• ceases to be a director by virtue of any
provisions of company law or is removed
from office pursuant to the Articles.
Biographical details of the directors are set
out on page 57. Lloyd Pitchford and Stephan
Nanninga were appointed to the Board with
effect from 1 March 2017 and 1 May 2017
respectively but all of the other directors
served throughout the year. Notwithstanding
the retirement by rotation provisions in the
Articles, each of the directors will retire and
offer themselves for re-election at the
forthcoming AGM in accordance with the UK
Corporate Governance Code.
97
Bunzl plc Annual Report 2017
Directors’ interests in the Company’s
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 2017. 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 71 to 95.
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 2017
and remain in force as at the date of this
report under which the Company has agreed
to indemnify the directors and the Company
Secretary, in addition to other senior
executives who are directors of subsidiaries
of the Company, to the extent permitted by
law and the Articles in respect of all losses
arising out of, or in connection with, the
execution of their powers, duties and
responsibilities as a director or officer
of the Company or any of its subsidiaries.
Amendment of articles
Any amendments to the Articles may be
made in accordance with the provisions of
the Companies Act 2006 by way of special
resolution of the Company’s shareholders.
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 42 to 50.
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
OTHER STATUTORY INFORMATION CONTINUED
Strategic report and
Directors’ report
Pages 1 to 55 inclusive consist of the
Strategic report and pages 56 to 98
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.
The Company has chosen, in accordance with
Section 414C(11) of the Companies Act 2006,
to include certain matters in its Strategic
report that would otherwise be required to
be disclosed in this Directors’ report. These
matters are refered to above and are
explained in more detail in the Strategic
report on pages 1 to 55.
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
26 February 2018.
On behalf of the Board
Paul Hussey
Secretary
26 February 2018
Political donations
During 2017, no contributions were made for
political purposes.
Use of financial instruments
Information on the use of financial
instruments can be found in the Financial
review on pages 24 to 28 and in the Notes to
the financial statements on pages 105 to 140.
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 129, there are
no disclosures required to be made under UK
Listing Rule 9.8.4.
External auditors
Each of the directors in office at the date of
approval of this report confirms that:
• so far as the director is aware, there is no
relevant audit information of which the
Group and 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 Group and 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 AGM for the re-appointment of
PricewaterhouseCoopers LLP as auditors of
the Company, at a rate of remuneration to be
determined by the directors.
Future developments within
the Group
An indication of likely future developments in
the Group’s business can be found in the
Strategic report on pages 1 to 55.
Greenhouse gas emissions
Information relating to greenhouse gas
emissions has been set out in the Corporate
responsibility report on pages 42 to 50.
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 the 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.
Further information relating to the Group’s
employees can be found in the Our people
section of this Annual Report on pages
38 to 41.
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 repayable 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 and the senior
unsecured bond (which is listed on the
London Stock Exchange), all of which have
been entered into by Bunzl Finance plc and
the Company and are also guaranteed by
the Company.
98
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FINANCIAL
STATEMENTS
CONTENTS
Consolidated income statement 100
Consolidated statement of comprehensive income 101
Consolidated balance sheet 102
Consolidated statement of changes in equity 103
Consolidated cash flow statement 104
Notes 105
Company balance sheet 141
Company statement of changes in equity 142
Notes to the Company financial statements 143
Statement of directors’ responsibilities 148
Independent auditors’ report to the members of Bunzl plc 149
Shareholder information 155
Five year review 161
99
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
100
Financial statements
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2017
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
Alternative performance measures†
Operating profit
Adjusted for:
Customer relationships amortisation
Acquisition related items
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
2017
£m
8,580.9
456.0
10.6
(57.3)
409.3
(98.8)
310.5
2016
£m
7,429.1
409.7
7.1
(53.9)
362.9
(97.0)
265.9
94.2p
93.5p
80.7p
79.7p
456.0
409.7
96.6
36.7
589.3
10.6
(57.3)
542.6
(149.2)
393.4
81.3
34.0
525.0
7.1
(53.9)
478.2
(128.6)
349.6
119.4p
106.1p
† See Note 2w on page 110 for further details of the alternative performance measures.
The Accounting policies and other Notes on pages 105 to 140 form part of these consolidated financial statements.
Bunzl plc Annual Report 2017
100
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
101
Financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) 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
Gain/(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 (expense)/income for the year
Total comprehensive income attributable to the Company’s equity holders
Notes
20
6
6
2017
£m
310.5
27.0
(9.6)
17.4
(53.3)
7.2
2.4
(7.0)
1.3
(49.4)
(32.0)
278.5
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
Bunzl plc Annual Report 2017
101
Bunzl plc Annual Report 2017
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
102
Financial statements
CONSOLIDATED BALANCE SHEET
at 31 December 2017
Notes
2017
£m
2016
£m
STRATEGIC REPORT
Assets
Property, plant and equipment
Intangible assets
Derivative financial assets
Deferred tax assets
Total non-current assets
Inventories
Trade and other receivables
Income tax receivable
Derivative financial assets
Cash at bank and in hand
Assets classified as held for sale
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
Income tax payable
Provisions
Derivative financial liabilities
Deferred tax liabilities
Total non-current liabilities
Bank overdrafts
Interest bearing loans and borrowings
Trade and other payables
Income tax payable
Provisions
Derivative financial liabilities
Liabilities classified as held for sale
Total current liabilities
Total liabilities
Total equity and liabilities
8
9
15
10
11
23
26
16
23
20
14
15
23
23
12
14
26
125.2
2,351.7
10.0
3.4
2,490.3
1,064.9
1,258.4
4.4
10.3
333.6
27.7
2,699.3
5,189.6
108.0
171.4
(17.9)
17.3
1,169.8
1,448.6
1,499.2
51.0
30.7
3.0
39.0
0.9
158.0
1,781.8
221.3
145.1
1,468.4
90.5
6.2
12.4
15.3
1,959.2
3,741.0
5,189.6
123.3
1,947.6
14.9
2.3
2,088.1
960.9
1,157.5
5.7
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
1,297.8
82.9
8.3
8.1
–
1,638.8
3,194.6
4,507.1
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 26 February 2018 and signed on its behalf by
Frank van Zanten, Chief Executive and Brian May, Finance Director.
Bunzl plc Annual Report 2017
102
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
103
Financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
At 1 January 2017
Profit for the year
Actuarial gain on defined benefit
pension schemes
Foreign currency translation differences
on foreign operations
Gain 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 credit/(charge) on other
comprehensive income
Total comprehensive income
2016 interim dividend
2016 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2017
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
Share
capital
£m
107.9
Share
premium
£m
167.5
Translation
reserve
£m
27.7
Capital
redemption
£m
16.1
Other reserves
Cash flow
hedge
£m
2.5
Merger
£m
2.5
Retained earnings
Own
shares
£m
(132.4)
Earnings
£m
Total
equity
£m
1,120.7 1,312.5
310.5
310.5
(53.3)
7.2
0.5
(45.6)
0.1
3.9
2.4
(7.0)
0.8
(3.8)
(20.8)
30.3
108.0
171.4
(17.9)
2.5
16.1
(1.3)
(122.9)
27.0
27.0
(53.3)
7.2
2.4
(7.0)
(9.6)
327.9
(42.8)
(95.4)
(8.3)
278.5
(42.8)
(95.4)
4.0
(20.8)
–
12.6
1,292.7 1,448.6
(30.3)
12.6
Share
capital
£m
107.7
Share
premium
£m
163.9
Translation
reserve
£m
(179.1)
Capital
redemption
£m
16.1
Other reserves
Cash flow
hedge
£m
1.6
Merger
£m
2.5
Retained earnings
Own
shares
£m
(118.9)
Earnings
£m
Total
equity
£m
1,022.5 1,016.3
265.9
265.9
(42.4)
(42.4)
267.0
(59.7)
2.6
(1.5)
8.3
231.8
(38.6)
(86.8)
7.6
439.5
(38.6)
(86.8)
3.8
(37.5)
–
15.8
1,120.7 1,312.5
(24.0)
15.8
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)
Bunzl plc Annual Report 2017
103
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
104
Financial statements
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2017
Cash flow from operating activities
Profit before income tax
Adjusted for:
net finance expense
customer relationships amortisation
acquisition related items
Adjusted operating profit
Adjustments:
non-cash items
working capital movement
Cash generated from operations before acquisition related items
Cash outflow from acquisition related items
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 (losses)/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 inflow/(outflow) from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
(Decrease)/increase in cash and cash equivalents
Currency translation
Cash and cash equivalents at end of year
Alternative performance measures†
Cash generated from operations before acquisition related items
Purchase of property, plant and equipment and software
Sale of property, plant and equipment
Operating cash flow
Notes
5
9
3
25
25
24
8,9
24
17
23
2017
£m
409.3
46.7
96.6
36.7
589.3
28.9
(15.6)
602.6
(13.9)
(113.1)
475.6
2.3
(33.8)
0.9
(574.6)
(605.2)
(46.8)
(138.2)
418.7
(87.3)
(10.2)
4.0
24.7
(48.1)
116.8
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)
(12.8)
34.5
126.7
(12.8)
(1.6)
112.3
602.6
(33.8)
0.9
569.7
50.7
34.5
41.5
126.7
546.7
(25.4)
0.6
521.9
Cash conversion % (operating cash flow to adjusted operating profit)
97%
99%
† See Note 2w on page 110 for further details of the alternative performance measures.
Bunzl plc Annual Report 2017
104
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
105
Financial statements
NOTES
1 Basis of preparation
Bunzl plc (the ‘Company’) is a public company, which is limited by shares and is listed on the London Stock Exchange. The Company is
incorporated and domiciled in the United Kingdom and is registered in England and Wales.
(i) Basis of accounting
The consolidated financial statements for the year ended 31 December 2017 have been approved by the Board of directors of Bunzl plc. 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.
(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 2017. The Group has adopted
all relevant amendments to existing standards and interpretations issued by the IASB that are effective from 1 January 2017 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 2018 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’ is effective in the consolidated financial statements for the year ending 31 December 2018.
IFRS 15 requires companies to apportion revenue from customer contracts to separate performance obligations and recognise revenue as
these performance obligations are satisfied. The vast majority of the Group’s revenue is generated from the delivery of goods to customers
representing a single performance obligation which is satisfied upon delivery of the relevant goods. During the year the Group carried out a
detailed assessment of its other revenue streams and assessed the revenue recognition policies for these goods and services against the
requirements of IFRS 15. The Group’s other revenue generating activities represent circa 1% of total revenue. The majority of this revenue
relates to design and fit-out services for foodservice customers and fulfilment services where the Group does not take title to inventory.
Having assessed these and other services performed, the Group has determined that the recognition of revenue under IFRS 15 does not differ
materially from current accounting practice. Accordingly, based on the Group’s assessment, the application of IFRS 15 is not anticipated to have
a material impact on the timing of revenue recognition and is not anticipated to have a material impact on the Group’s operating profit or
financial position. Therefore the adoption of IFRS 15 is not expected to lead to a restatement of the 2017 consolidated income statement in the
2018 Annual Report. The Group will adopt IFRS 15 on 1 January 2018 using the retrospective approach.
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 IAS 39
‘Financial Instruments: Recognition and Measurement’ and has determined that the only notable change affecting the Group is that IFRS 9
provides a new expected credit loss impairment model for financial assets. During the year the Group carried out an assessment of the impact
of adopting the expected credit loss impairment model for financial assets particularly on the provision for trade receivables and has determined
that it will not have a material impact on the overall level of provisioning. Based on the Group’s overall assessment, the application of IFRS 9 is
not anticipated to have a material impact on the Group’s consolidated results or financial position. Therefore the adoption of IFRS 9 on 1 January
2018 is not expected to lead to a restatement of the 2017 results in the 2018 Annual Report.
IFRS 16 ‘Leases’ will be effective in the consolidated financial statements for the year ending 31 December 2019. The Group will adopt IFRS 16
on 1 January 2019 and intends to use the modified retrospective approach to transition utilising the practical expedients outlined in the standard.
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, offices 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. Whilst the actual impact
will not be known until IFRS 16 is adopted on 1 January 2019, using projections based on leases in place at 31 December 2017 and assuming
an adoption date of 1 January 2017, it is currently estimated that adoption of IFRS 16 would increase the carrying value of property, plant and
equipment at 31 December 2017 by between £350 million and £400 million, with liabilities increasing by between £450 million and £500 million.
The existing operating lease expense, currently recorded in operating costs, will be replaced by a depreciation charge, which will be lower than
the current operating lease expense, and a separate financing expense, which will be recorded in interest expense. It is currently estimated that
there will be a small positive impact on profit before tax but there will be no net cash flow impact arising from the new standard. Net debt to
EBITDA (being earnings before interest, tax, depreciation, customer relationships and software amortisation and acquisition related items)
calculated at average exchange rates will increase by approximately 0.2 times but current banking covenants will be unaffected. The Group
does not currently intend to alter its approach as to whether assets should be leased or bought going forward.
Apart from these three standards, the Group does not anticipate that any other new or revised standards and interpretations currently issued
by the IASB that will be effective from 1 January 2018 and beyond will have a material impact on its consolidated results or financial position.
Bunzl plc Annual Report 2017
105
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
106
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 155 to 157 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
items 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 principally engaged in the delivery of goods to customers. Revenue from the sale of goods 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.
Bunzl plc Annual Report 2017
106
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
107
Financial statements
Financial statements
NOTES CONTINUED
2 Accounting policies continued
24 Acquisitions continued
e Supplier rebates
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
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
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
sale of the inventories to which it relates and is calculated by reference to the expected consideration receivable from each rebate arrangement.
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
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.
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Annualised
revenue
f Share based payments
£m
Business
The Group operates a number of equity settled share based payment compensation plans. Details of these plans are outlined in Note 16 and the
13.2
Earthwise Bag
Directors’ remuneration report. The total expected expense is based on the fair value of options and other share based incentives on the grant
32.3
Bursa Pazari
date, calculated using a valuation model, and is spread over the expected vesting period with a corresponding credit to equity.
19.3
Inkozell and Mo Ha Ge
7.4
Classic Bag
g Leases
2.9
Polaris Chemicals
Operating lease rentals and any incentives receivable are recognised in the income statement on a straight line basis over the term of the
17.8
Plus II
relevant lease. Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased assets are classified as
6.6
Apex
finance leases. Where land and buildings are held under leases, the accounting treatment of the land is considered separately from that of the
5.7
Blyth
buildings due to the indefinite life of land.
Kingsbury Packaging
5.4
Silwell
7.9
h Income tax
Tri-Star Packaging
27.8
Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except to the extent
Woodway
36.0
that it relates to items recognised directly in equity or other comprehensive income.
182.3
Acquisitions completed in 2016
12.4
Sæbe Compagniet
Current tax is the expected tax payable or recoverable on the taxable income or loss for the year using tax rates enacted or substantively
Prorisk and GM Equipement
6.4
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
201.1
Acquisitions agreed in 2016
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, part d – Taxation.
25 Cash flow from operating activities
Deferred tax is provided using the balance sheet liability method providing for temporary differences arising between tax bases and carrying
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
amounts in the consolidated financial statements. Deferred tax is measured at the tax rates that are expected to be applied to temporary
cash flow statement.
differences when they reverse, based on the laws that have been enacted or substantively enacted at the balance sheet date.
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
Foodservice
Safety
Denmark
France
2016
Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of assets
Non-cash items
£m
and liabilities that affect neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent that they will
27.4
Depreciation and software amortisation
probably not reverse in the foreseeable future and where the Company controls the timing of the reversal. A deferred tax asset is recognised
10.2
Share based payments
only to the extent that it is probable that future taxable profit will be available against which the temporary difference can be utilised.
(3.0)
Provisions
(9.0)
Retirement benefit obligations
i Property, plant and equipment
Other
2.4
Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses. The carrying values of
28.0
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.
Working capital movement
Increase in inventories
j Depreciation
Increase in trade and other receivables
Depreciation is charged to profit or loss on a straight line basis to write off cost less estimated residual value over the assets’ estimated
Increase in trade and other payables
remaining useful lives. The estimated useful lives are as follows:
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
2017
£m
(94.3)
(62.8)
141.5
(15.6)
2016
£m
(18.0)
(39.6)
51.3
(6.3)
Buildings
26 Items classified as held for sale
Plant and machinery
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
Fixtures, fittings and equipment
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
Freehold land
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
Assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
50 years (or depreciated over life of lease if shorter than 50 years)
3 to 12 years
3 to 12 years
Not depreciated
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
107
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
108
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 transaction costs and expenses) 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 which range from
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 which range from 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.
Bunzl plc Annual Report 2017
108
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
109
Financial statements
Financial statements
NOTES CONTINUED
2 Accounting policies continued
24 Acquisitions continued
p Financial instruments
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
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
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Other
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
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.
Annualised
revenue
(i) Fair value hedge
Sector
£m
Business
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
Grocery
13.2
Earthwise Bag
the derivative are recognised immediately in the income statement. The carrying value of the hedged item is adjusted by the change in fair value
Foodservice
32.3
Bursa Pazari
that is attributable to the risk being hedged with changes recognised in the income statement.
Healthcare
19.3
Inkozell and Mo Ha Ge
Retail
7.4
Classic Bag
(ii) Cash flow hedge
Cleaning & hygiene
2.9
Polaris Chemicals
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
Cleaning & hygiene
17.8
Plus II
in equity. The gain or loss relating to any ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity
6.6
Cleaning & hygiene
Apex
are recycled to the income statement in the period when the hedged item affects profit or loss.
5.7
Safety
Blyth
Foodservice
Kingsbury Packaging
5.4
(iii) Hedge of a net investment in foreign operations
Foodservice
Silwell
7.9
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in foreign operations
Foodservice
Tri-Star Packaging
27.8
are recognised directly in equity to the extent the hedge is effective. To the extent that the hedge is ineffective such differences are recognised
Retail
Woodway
36.0
in the income statement.
182.3
Acquisitions completed in 2016
q Cash and cash equivalents
12.4
Sæbe Compagniet
Prorisk and GM Equipement
6.4
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
201.1
Acquisitions agreed in 2016
in hand includes cash balances and short term deposits with maturities of three months or less from the date the deposit is made.
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
Foodservice
Safety
Denmark
France
r Net debt
25 Cash flow from operating activities
Net debt is defined as interest bearing loans and borrowings adjusted for the fair value of interest rate swaps on fixed interest rate borrowings
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
and other derivatives managing the interest rate and currency profile less cash and cash equivalents.
cash flow statement.
s Provisions
2017
Non-cash items
£m
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
Depreciation and software amortisation
31.3
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,
Share based payments
11.8
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
Provisions
(7.5)
Retirement benefit obligations
(8.3)
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.
Other
1.6
28.9
2016
£m
27.4
10.2
(3.0)
(9.0)
2.4
28.0
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
Working capital movement
shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold or
Increase in inventories
reissued, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is recognised in
Increase in trade and other receivables
retained earnings.
Increase in trade and other payables
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.
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
u Retirement benefits
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
(i) Defined contribution pension schemes
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
A defined contribution pension scheme is a post-employment benefit scheme under which the Company pays fixed contributions into a separate
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
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
27 Related party disclosures
recognised as an expense in the income statement in the periods during which services are rendered by employees.
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
(ii) Defined benefit pension schemes
parties are disclosed in the Directors’ remuneration report, Note 20 and Note 21 respectively. All transactions with subsidiaries are eliminated
A defined benefit pension scheme is a post-employment benefit plan other than a defined contribution pension scheme. Defined benefit pension
on consolidation.
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.
2017
£m
(94.3)
(62.8)
141.5
(15.6)
2016
£m
(18.0)
(39.6)
51.3
(6.3)
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
109
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
110
Financial statements
NOTES CONTINUED
2 Accounting policies continued
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 on 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 Alternative performance 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 (and are therefore known as ‘alternative performance
measures’) and may not be directly comparable with other companies’ alternative performance 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, adjusted profit before income tax and adjusted profit for the year (as reconciled on the face of the consolidated
income statement);
effective tax rate, being tax on adjusted profit as a percentage of adjusted profit before income tax (as shown in Note 6);
adjusted earnings per share and adjusted diluted earnings per share (as reconciled in Note 7);
cash conversion % (operating cash flow, as reconciled on the face of the consolidated cash flow statement, to adjusted operating profit);
return on average operating capital % (the ratio of adjusted operating profit to the average of the month end operating capital employed (being
property, plant and equipment, software, inventories and trade and other receivables less trade and other payables)); and
return on invested capital % (the ratio of adjusted operating profit to the average of the month end invested capital (being equity after adding
back net debt, defined benefit pension scheme liabilities, cumulative customer relationships amortisation, acquisition related items and
amounts written off goodwill, net of the associated tax)).
These measures exclude the charge for customer relationships amortisation, acquisition related items and any associated tax, where relevant.
Acquisition related items comprise deferred consideration charges relating to the retention of former owners of businesses acquired,
transaction costs and expenses and adjustments to previously estimated earn outs. Customer relationships amortisation, acquisition related
items and any associated tax are items which are not taken into account by management when assessing the results of the business as they are
considered by management to form part of the total spend on acquisitions or are non-cash items resulting from acquisitions and therefore 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 alternative performance measures, including the Group’s key performance indicators which are set out and defined on pages 22 and 23,
are used to monitor the performance of the Group and a number of these are based on, or derived from, the alternative performance measures
noted above. All alternative performance measures have been calculated consistently with the methods applied in the consolidated financial
statements for the year ended 31 December 2016. Growth rates at constant exchange rates are calculated by retranslating the results for the
year ended 31 December 2016 at the average rates for the year ended 31 December 2017 so that they can be compared without the distorting
impact of changes caused by foreign exchange translation.
Bunzl plc Annual Report 2017
110
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
111
Financial statements
Financial statements
NOTES CONTINUED
2 Accounting policies continued
24 Acquisitions continued
2016
Critical accounting judgements, estimates and assumptions
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
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
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
derived from the application of such judgements, estimates and assumptions, in particular those which involve anticipating future events.
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
Accordingly, the judgements, estimates and assumptions are reviewed on an ongoing basis, with the impact of any revisions considered
necessary being recognised prospectively thereafter.
Denmark
France
Foodservice
Safety
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
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Annualised
revenue
The key assumptions and sources of estimation uncertainty at the balance sheet date that have most risk of causing material adjustment to
£m
Business
the carrying values of assets and liabilities in the consolidated financial statements for the year ended 31 December 2017 are noted below and
13.2
Earthwise Bag
explained more fully in the referenced Notes. The directors believe that the judgements, estimates and assumptions applied in the preparation
32.3
Bursa Pazari
of these consolidated financial statements are appropriate. Where relevant and practicable, sensitivity analyses are disclosed in the relevant
19.3
Inkozell and Mo Ha Ge
Notes to demonstrate the impact of changes in estimates or assumptions used.
7.4
Classic Bag
2.9
Polaris Chemicals
a Accounting for business combinations
17.8
Plus II
Part of the Company’s strategy is to grow through acquisitions. Acquisitions are accounted for using the acquisition method as described in the
6.6
Apex
business combinations accounting policy, Note 2 a(ii), and the goodwill accounting policy, Note 2 k(i). This includes the determination of fair
5.7
Blyth
values for assets and liabilities acquired, including the separate identification of intangible assets, which use assumptions and estimates and are
Kingsbury Packaging
5.4
therefore subjective. The Group has developed a process to meet the requirements of IFRS 3, including the separate identification of customer
Silwell
7.9
relationships intangible assets based on estimated future performance and customer attrition rates. External valuation specialists are used
Tri-Star Packaging
27.8
where appropriate. The process applied is described in Note 24.
Woodway
36.0
182.3
Acquisitions completed in 2016
b Recoverability of goodwill and customer relationships intangible assets
12.4
Sæbe Compagniet
As noted above, part of the Company’s strategy is to grow through acquisitions which has led to material goodwill and customer relationships
Prorisk and GM Equipement
6.4
intangible assets being recognised on the balance sheet. Goodwill is tested annually to determine if there is any indication of impairment. The
201.1
Acquisitions agreed in 2016
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
25 Cash flow from operating activities
useful economic lives of customer relationships intangible assets are also reviewed at least annually, with any revisions to the original
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
estimated useful economic lives accounted for prospectively.
cash flow statement.
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
Non-cash items
selection of which is judgemental. The Group uses independent actuarial experts to assist with the estimation of the discount rates, inflation
Depreciation and software amortisation
rates and longevity assumptions used for the measurement of defined benefit pension scheme liabilities but the actual liabilities could be
Share based payments
materially different. The main risks to which the Group is exposed in relation to the valuation of the defined benefit pension schemes are
Provisions
described in Note 20.
Retirement benefit obligations
Other
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
2016
or asset position is open to review for several years after the relevant accounting period ends. In determining the provisions for income taxes,
Working capital movement
£m
management is required to make judgements and estimates based on interpretations of tax statute and case law, which it does after taking
(18.0)
Increase in inventories
account of professional advice and prior experience.
(39.6)
Increase in trade and other receivables
51.3
Increase in trade and other payables
Uncertainties in respect of enquiries and additional tax assessments raised by tax authorities are measured using management’s single best
(6.3)
estimate of the likely outcome. 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
26 Items classified as held for sale
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
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
expected to be concluded.
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
2016
£m
27.4
10.2
(3.0)
(9.0)
2.4
28.0
2017
£m
(94.3)
(62.8)
141.5
(15.6)
2 January 2017
31 January 2017
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
111
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
112
Financial statements
NOTES CONTINUED
North
America
£m
5,061.1
318.3
(28.1)
(15.6)
274.6
Continental
Europe
£m
1,610.4
151.1
(41.0)
(12.7)
97.4
UK &
Ireland
£m
1,190.8
88.5
(10.5)
(4.2)
73.8
Rest of the
World
£m
718.6
53.9
(17.0)
(4.2)
32.7
Corporate
£m
(22.5)
(22.5)
11.0
9.1
1.6
1.6
North
America
£m
4,362.1
289.6
(23.1)
(11.7)
254.8
6.0
7.5
3.1
3.4
Continental
Europe
£m
1,355.1
126.6
(34.9)
(12.5)
79.2
5.6
4.0
0.9
1.0
UK &
Ireland
£m
1,087.8
83.7
(8.3)
(1.8)
73.6
3.6
3.2
1.8
1.2
Rest of the
World
£m
624.1
46.6
(15.0)
(8.0)
23.6
0.1
0.1
0.1
0.2
Corporate
£m
(21.5)
(21.5)
3 Segment analysis
Year ended 31 December 2017
Revenue
Adjusted operating profit/(loss)
Customer relationships amortisation
Acquisition related items
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
Depreciation of property, plant and equipment
Purchase of software
Software amortisation
Year ended 31 December 2016
Revenue
Adjusted operating profit/(loss)
Customer relationships amortisation
Acquisition related items
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
Depreciation of property, plant and equipment
Purchase of software
Software amortisation
6.8
8.2
0.6
1.6
5.5
6.8
2.5
2.6
3.7
3.7
1.7
0.8
2.0
2.8
1.8
0.6
Acquisition related items
Deferred consideration payments relating to the retention of former owners of businesses acquired
Transaction costs and expenses
Adjustments to previously estimated earn outs
0.1
0.2
0.7
0.1
2017
£m
28.5
12.1
(3.9)
36.7
Total
£m
8,580.9
589.3
(96.6)
(36.7)
456.0
10.6
(57.3)
409.3
542.6
(98.8)
310.5
26.3
23.9
7.5
7.4
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
18.1
21.7
7.3
5.7
2016
£m
29.6
6.8
(2.4)
34.0
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 business in Latin America , Australasia
and Asia 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.
Bunzl plc Annual Report 2017
112
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
113
Financial statements
Financial statements
NOTES CONTINUED
3 Segment analysis continued
24 Acquisitions continued
Information related to each reportable segment is set out above. The revenue presented relates to external customers. Sales between the
2016
business areas are not material. Each of the business areas supplies a range of products to customers operating primarily in the foodservice,
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
grocery, safety, cleaning & hygiene, retail and healthcare market sectors but results are not monitored on this basis. The performance of the
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
four business areas is assessed by reference to adjusted operating profit and this measure also represents the segment results for the
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
purposes of reporting in accordance with IFRS 8. Debt and associated interest is managed at a Group level and therefore has not been allocated
shown below:
across the business areas.
Annualised
In the year ended 31 December 2017 the Group had one customer with revenue of £876.7m across North America, UK & Ireland and Rest of the
revenue
Acquisition date
World, representing 10% of total Group revenue (2016: no customers accounted for 10% or more of the Group’s revenue).
£m
2016
Business
13.2
9 February
Earthwise Bag
Revenue generated in the parent company’s country of domicile, the UK, for the year ended 31 December 2017 was £1,103.1m (2016:£1,003.7m).
30 March
32.3
Bursa Pazari
19.3
31 May
Inkozell and Mo Ha Ge
As noted above, the businesses within each operating segment operate in a number of different countries and sell products across a range of
31 May
7.4
Classic Bag
market sectors. The table below provides a breakdown of revenue by market sector. The other category covers a wide range of market sectors,
2.9
31 May
Polaris Chemicals
none of which is sufficiently material to warrant separate disclosure.
25 July
Plus II
17.8
6.6
26 July
Apex
2016
31 August
5.7
Blyth
Revenue by market sector
£m
14 September
Kingsbury Packaging
5.4
2,221.9
Foodservice
30 September
Silwell
7.9
1,906.9
Grocery
30 September
Tri-Star Packaging
27.8
831.7
Safety
30 December
Woodway
36.0
923.2
Cleaning & hygiene
182.3
Acquisitions completed in 2016
756.7
Retail
12.4
Sæbe Compagniet
531.8
Healthcare
Prorisk and GM Equipement
6.4
Other
256.9
201.1
Acquisitions agreed in 2016
7,429.1
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
2017
£m
2,470.8
2,323.0
1,011.8
996.5
897.0
599.0
282.8
8,580.9
2 January 2017
31 January 2017
Foodservice
Safety
Denmark
France
The Group’s financial results have not historically been subject to significant seasonal trends.
25 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
The table below reconciles segment assets and liabilities to the Group’s total assets and total liabilities. Unallocated assets and liabilities include
cash flow statement.
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 derivative financial assets and deferred tax assets) in
2016
the parent company’s country of domicile, the UK, at 31 December 2017 were £361.1m (2016: £352.7m).
Non-cash items
£m
27.4
Depreciation and software amortisation
10.2
Share based payments
Total
(3.0)
Provisions
At 31 December 2017
£m
(9.0)
Retirement benefit obligations
Segment assets
4,820.0
Other
2.4
Unallocated assets
369.6
28.0
Total assets
5,189.6
2017
£m
31.3
11.8
Unallocated
(7.5)
£m
(8.3)
1.6
369.6
28.9
369.6
Continental
Europe
£m
1,580.6
Rest of the
World
£m
600.1
North
America
£m
1,885.7
UK &
Ireland
£m
753.6
1,885.7
1,580.6
600.1
753.6
329.3
651.7
124.8
409.8
124.8
329.3
409.8
651.7
Segment liabilities
Working capital movement
Unallocated liabilities
Increase in inventories
Total liabilities
Increase in trade and other receivables
Increase in trade and other payables
1,515.6
2016
£m
2,225.4
(18.0)
3,741.0
(39.6)
51.3
(6.3)
Total
At 31 December 2016
£m
4,181.8
Segment assets
26 Items classified as held for sale
Unallocated assets
325.3
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
Total assets
4,507.1
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
Segment liabilities
322.5
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
Unallocated liabilities
Total liabilities
27 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. All transactions with subsidiaries are eliminated
on consolidation.
2017
£m
2,225.4
(94.3)
2,225.4
(62.8)
141.5
(15.6)
Unallocated
£m
Continental
Europe
£m
1,143.3
Rest of the
World
£m
579.8
North
America
£m
1,736.9
1,326.2
1,868.4
3,194.6
UK &
Ireland
£m
721.8
1,868.4
1,868.4
325.3
325.3
1,143.3
1,736.9
721.8
579.8
322.5
578.0
578.0
308.3
308.3
117.4
117.4
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
113
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
114
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 items
Loss on disposal of property, plant and equipment
Rentals payable under operating leases and subleases
Lease and sublease income
Other operating expenses
Net operating expenses
Auditors’ remuneration
Audit of these financial statements
Amounts receivable by the Company’s auditors and their
associates in respect of:
audit of financial statements of subsidiaries of the Company
audit related assurance services
tax advisory services
all other services
Total auditors’ remuneration
UK
£m
0.4
0.4
0.1
–
0.1
1.0
Overseas
£m
–
2.3
–
0.1
–
2.4
2017
Total
£m
0.4
2.7
0.1
0.1
0.1
3.4
UK
£m
0.3
0.4
0.1
–
0.1
0.9
2017
£m
6,490.6
800.4
23.9
104.0
36.7
0.5
138.0
–
530.8
8,124.9
Overseas
£m
–
1.7
–
0.2
–
1.9
2016
£m
5,620.1
713.2
21.7
87.0
34.0
0.2
115.0
(0.4)
428.6
7,019.4
2016
Total
£m
0.3
2.1
0.1
0.2
0.1
2.8
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 auditors. 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 67 to 70.
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 on US private placement notes in a hedge relationship
Fair value loss on interest rate swaps in a hedge relationship
Foreign exchange (loss)/gain on intercompany funding
Foreign exchange gain/ (loss) on external debt not in a hedge relationship
Other finance expense
Finance expense
Net finance expense
2017
£m
4.1
5.2
–
1.3
10.6
(50.9)
(1.6)
(2.3)
2.3
(2.9)
(46.0)
44.7
(0.6)
(57.3)
(46.7)
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)
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.
Bunzl plc Annual Report 2017
114
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
115
Financial statements
Financial statements
NOTES CONTINUED
24 Acquisitions continued
6 Income tax
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
Current tax on profit
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
current year
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
adjustments in respect of prior years
shown below:
2017
£m
2016
£m
124.0
(9.4)
114.6
134.8
(8.0)
126.8
Deferred tax on profit
current year
Business
adjustments in respect of prior years
Earthwise Bag
Bursa Pazari
Income tax on profit
Inkozell and Mo Ha Ge
Classic Bag
In assessing the underlying performance of the Group, management uses adjusted profit which excludes customer relationships amortisation
Polaris Chemicals
and acquisition related items. Similarly the tax effect of these items is excluded in monitoring the effective tax rate (being the tax rate on
Plus II
adjusted profit before income tax) which is shown in the table below. The Group’s expectations for the effective tax rate in 2018 are included
in the Financial Review on pages 24 to 28.
Apex
Blyth
Kingsbury Packaging
Silwell
Income tax on profit
Tri-Star Packaging
Tax associated with customer relationships amortisation and acquisition related items
Woodway
Tax on adjusted profit
Acquisitions completed in 2016
Sæbe Compagniet
Profit before income tax
Prorisk and GM Equipement
Customer relationships amortisation and acquisition related items
Acquisitions agreed in 2016
Adjusted profit before income tax
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
Annualised
(17.8)
revenue
£m
0.2
13.2
(17.6)
32.3
97.0
19.3
7.4
2.9
17.8
6.6
5.7
2016
5.4
£m
7.9
97.0
27.8
31.6
36.0
128.6
182.3
12.4
362.9
6.4
115.3
201.1
478.2
2 January 2017
31 January 2017
2017
£m
98.8
50.4
149.2
Foodservice
Safety
(28.5)
0.5
(28.0)
98.8
Denmark
France
409.3
133.3
542.6
25 Cash flow from operating activities
Reported tax rate
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
Effective tax rate
cash flow statement.
24.1%
27.5%
26.7%
26.9%
The reported tax rate for 2017 is significantly lower than in 2016 due to the reduction in a net deferred tax liability in the US following the
enactment of the Tax Cuts and Jobs Act.
Non-cash items
Depreciation and software amortisation
Share based payments
Provisions
Tax on other comprehensive income and equity
Retirement benefit obligations
Actuarial gain/(loss) on defined benefit pension schemes
Other
Foreign currency translation differences on foreign
Tax (charge)/
credit
2017
£m
(9.6)
Gross
2017
£m
27.0
Gross
2016
£m
(42.4)
Net
2017
£m
17.4
operations
(53.3)
–
(53.3)
267.0
2017
£m
31.3
Tax credit/
11.8
(charge)
(7.5)
2016
(8.3)
£m
8.3
1.6
28.9
–
2016
£m
27.4
10.2
Net
(3.0)
2016
(9.0)
£m
(34.1)
2.4
28.0
267.0
Gain/(loss) taken to equity as a result of effective net
2016
Working capital movement
(60.2)
investment hedges
7.2
£m
Gain recognised in cash flow hedge reserve
2.1
2.4
(18.0)
Increase in inventories
(1.2)
Movement from cash flow hedge reserve to income statement
(7.0)
(39.6)
Increase in trade and other receivables
51.3
Increase in trade and other payables
173.6
Other comprehensive (expense)/income
(23.7)
(125.4)
Dividends
(138.2)
(6.3)
Issue of share capital
3.8
4.0
(37.5)
Employee trust shares
(20.8)
26 Items classified as held for sale
Share based payments
15.8
11.8
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
30.3
Other comprehensive (expense)/income and equity
(166.9)
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
7.7
2.0
(5.8)
(32.0)
(138.2)
4.0
(20.8)
12.6
(174.4)
2017
(0.5)
£m
(0.5)
(94.3)
0.3
(62.8)
7.6
141.5
–
(15.6)
–
–
5.6
13.2
(59.7)
2.6
(1.5)
166.0
(125.4)
3.8
(37.5)
10.2
17.1
0.5
(0.4)
1.2
(8.3)
–
–
–
0.8
(7.5)
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
115
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
116
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 for
the period of 19.25% (2016: 20.00%). The adjustments to the tax charge at the weighted average rate to determine the income tax on profit are
as follows:
2017
£m
409.3
2016
£m
362.9
120.6
112.0
8.5
(3.7)
(20.1)
0.2
(7.5)
0.8
98.8
2017
£m
(2.0)
4.4
(30.9)
0.9
(2.9)
2.5
(28.0)
2017
£m
310.5
96.6
36.7
(50.4)
393.4
2017
329.5
2.6
332.1
10.9
(12.7)
–
(3.8)
(9.1)
(0.3)
97.0
2016
£m
0.2
(0.5)
(19.3)
1.4
(0.5)
1.1
(17.6)
2016
£m
265.9
81.3
34.0
(31.6)
349.6
2016
329.4
4.3
333.7
94.2p
25.2p
119.4p
93.5p
25.0p
118.5p
80.7p
25.4p
106.1p
79.7p
25.1p
104.8p
Profit before income tax
Tax charge at weighted average rate (2017: 29.5%; 2016: 30.9%)
Effects of:
non-deductible expenditure
impact of intercompany finance
change in tax rates
temporary differences not previously recognised
prior year adjustments
other
Income tax on profit
Deferred tax in the income statement
Property, plant and equipment
Defined benefit pension schemes
Goodwill and customer relationships
Provisions
Inventories
Other
Deferred tax on profit
7 Earnings per share
Profit for the year
Adjusted for:
customer relationships amortisation
acquisition related items
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
Bunzl plc Annual Report 2017
116
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
117
Financial statements
Financial statements
NOTES CONTINUED
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
24 Acquisitions continued
8 Property, plant and equipment
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
2017
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
Cost
shown below:
Beginning of year
Acquisitions
Additions
Disposals
Business
Transfer to assets held for sale
Earthwise Bag
Currency translation
Bursa Pazari
End of year
Inkozell and Mo Ha Ge
Classic Bag
Accumulated depreciation
Polaris Chemicals
Beginning of year
Plus II
Charge in year
Apex
Disposals
Blyth
Transfer to assets held for sale
Kingsbury Packaging
Currency translation
Silwell
End of year
Tri-Star Packaging
Woodway
Net book value at 31 December 2017
Acquisitions completed in 2016
Sæbe Compagniet
Prorisk and GM Equipement
Acquisitions agreed in 2016
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
145.6
2.5
12.4
Acquisition date
(5.2)
2016
(0.5)
9 February
(6.3)
30 March
148.5
31 May
31 May
31 May
93.0
25 July
11.6
26 July
(4.8)
31 August
(0.4)
14 September
(1.7)
30 September
97.7
30 September
30 December
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
97.2
2.3
9.8
(2.9)
(0.3)
(2.2)
103.9
92.3
–
4.1
(3.1)
–
–
93.3
2 January 2017
31 January 2017
44.7
3.6
(2.5)
–
(0.5)
45.3
74.1
8.7
(2.5)
(0.2)
(2.6)
77.5
Foodservice
Safety
Denmark
France
48.0
26.4
50.8
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
Total
£m
335.1
4.8
Annualised
26.3
revenue
(11.2)
£m
(0.8)
13.2
(8.5)
32.3
345.7
19.3
7.4
2.9
211.8
17.8
23.9
6.6
(9.8)
5.7
(0.6)
5.4
(4.8)
7.9
220.5
27.8
36.0
125.2
182.3
12.4
6.4
201.1
Total
£m
2016
25 Cash flow from operating activities
Cost
Beginning of year
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
Acquisitions†
cash flow statement.
Additions
Disposals
Non-cash items
Currency translation
Depreciation and software amortisation
End of year
Share based payments
Provisions
Accumulated depreciation
Retirement benefit obligations
Beginning of year
Other
Charge in year
Disposals
Currency translation
End of year
Working capital movement
Increase in inventories
Net book value at 31 December 2016
Increase in trade and other receivables
Increase in trade and other payables
Commitments for capital expenditure not provided for at 31 December 2017 were £0.7m (2016: £1.0m).
132.7
0.9
9.5
(13.5)
16.0
145.6
80.7
(2.4)
1.2
(0.4)
13.2
92.3
87.1
10.8
(13.0)
8.1
93.0
31.4
3.4
(0.3)
10.2
44.7
83.4
0.9
7.4
(5.5)
2017
£m
11.0
31.3
97.2
11.8
(7.5)
(8.3)
65.7
1.6
7.5
28.9
(5.3)
6.2
2017
74.1
£m
(94.3)
23.1
(62.8)
141.5
(15.6)
47.6
52.6
296.8
(0.6)
18.1
(19.4)
2016
£m
40.2
27.4
335.1
10.2
(3.0)
(9.0)
184.2
2.4
21.7
28.0
(18.6)
24.5
2016
211.8
£m
(18.0)
123.3
(39.6)
51.3
(6.3)
adjustments on leasehold improvements on businesses acquired in 2015.
† The acquired cost of land and buildings in 2016 includes a negative adjustment of £2.4m during the measurement period related to fair value
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
117
Bunzl plc Annual Report 2017
STRATEGIC REPORT
9 Intangible assets
2017
Cost
Beginning of year
Acquisitions
Additions
Disposals
Transfer to assets held for sale
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
118
Financial statements
NOTES CONTINUED
Goodwill
£m
1,191.5
217.8
–
(4.1)
(27.2)
1,378.0
Customer
relationships
£m
Software
£m
Total
£m
1,306.4
338.3
–
–
(30.9)
1,613.8
568.7
96.6
–
(6.1)
659.2
57.3
0.5
7.5
(0.7)
–
(0.1)
64.5
38.9
7.4
(0.7)
(0.2)
45.4
2,555.2
556.6
7.5
(0.7)
(4.1)
(58.2)
3,056.3
607.6
104.0
(0.7)
(6.3)
704.6
Net book value at 31 December 2017
1,378.0
954.6
19.1
2,351.7
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
999.3
51.0
–
141.2
1,191.5
Customer
relationships
£m
Software
£m
Total
£m
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
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 2017 which were completed in 2018.
Bunzl plc Annual Report 2017
118
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
119
Financial statements
Financial statements
NOTES CONTINUED
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
9 Intangible assets continued
24 Acquisitions continued
Impairment tests
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
The carrying amount of goodwill is allocated across cash generating units (‘CGUs’) and is tested annually for impairment.
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
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
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
activities across different geographies. The identification of CGUs reflects the way in which the business is managed on a geographical basis.
shown below:
Given the similar nature of the activities of each CGU, a consistent methodology is applied across the Group in assessing CGU recoverable
Annualised
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
revenue
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
£m
Business
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
13.2
Earthwise Bag
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
32.3
Bursa Pazari
period, the methodology applies a long term growth rate specific to the CGU to derive a terminal value. Cash flow expectations exclude any
19.3
Inkozell and Mo Ha Ge
future cash flows that may arise from restructuring or other enhancements to the cash generating activities of the CGU and reflect
7.4
Classic Bag
management’s expectations of the range of economic conditions that may exist over the projection period.
2.9
Polaris Chemicals
17.8
Plus II
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
6.6
Apex
consideration past experience and the current economic environment with regard to customer attrition rates and additions to the customer
5.7
Blyth
base, the ability to introduce price increases and new products and experience in controlling the underlying cost base. This information is used
Kingsbury Packaging
5.4
to determine a long term growth rate which is consistent with the geographic segments in which the Group operates and management’s
Silwell
7.9
assessment of future operating performance and market share movements. The discount rates used are determined with assistance provided
Tri-Star Packaging
27.8
by external valuation specialists.
Woodway
36.0
182.3
Acquisitions completed in 2016
At 31 December 2017 North America, France and Rest of Continental Europe carried a significant amount of goodwill in comparison with
12.4
Sæbe Compagniet
the total value of the Group’s goodwill. At 31 December 2017 the carrying value of goodwill in respect of North America was £388.6m (2016:
Prorisk and GM Equipement
6.4
£365.7m), France was £257.3m (2016: £133.9m) and Rest of Continental Europe was £186.5m (2016: £156.9m). At 31 December 2017 the
201.1
Acquisitions agreed in 2016
aggregate amount of goodwill attributable to the Group’s CGUs, excluding North America, France and Rest of Continental Europe, was £545.6m
(2016: £535.0m), none of which is individually significant.
25 Cash flow from operating activities
For North America, France and Rest of Continental Europe, the weighted average long term growth rate used in 2017 was 2.5%–3.5% (2016:
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
2.5%–3.5%) reflecting anticipated revenue and profit growth. A pre-tax discount rate in the range of 7%–10% (2016: 7%–8%) has been applied
cash flow statement.
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
2016
conditions arising in individual CGUs with long term growth rates ranging from 2.5%–6.5% (2016: 2.5%–7.0%) and discount rates ranging from
Non-cash items
£m
7%–15% (2016: 7%–15%).
27.4
Depreciation and software amortisation
10.2
Share based payments
Sensitivity to changes in key assumptions
(3.0)
Provisions
Impairment testing is dependent on management’s estimates and judgements, particularly as they relate to the forecasting of future cash flows,
(9.0)
Retirement benefit obligations
expected long term growth rates and the discount rates selected. A key assumption on which value in use calculations are dependent relates to
Other
2.4
revenue growth including the impact of changes to the underlying customer base. This assumption is sensitive to customer attrition and the rate
28.0
at which new customer relationships are introduced and established.
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
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
2 January 2017
31 January 2017
Foodservice
Safety
Denmark
France
2016
Based on past experience and taking into account current market conditions, management has concluded that it is reasonable to assume that
Working capital movement
£m
there will be no material deterioration in the customer base over the projection period which will significantly impact future cash flows and that
(18.0)
Increase in inventories
no reasonably possible change in key assumptions would result in impairment in any of the Group’s CGUs. Should such a change occur, this
(39.6)
Increase in trade and other receivables
would represent a triggering event to indicate that an impairment review may be necessary. In accordance with IAS 36 ‘Impairment of Assets’,
51.3
Increase in trade and other payables
a full impairment review would then be undertaken on the relevant assets within the CGU. Any such changes are monitored through normal
(6.3)
monthly procedures.
2017
£m
(94.3)
(62.8)
141.5
(15.6)
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
119
Bunzl plc Annual Report 2017
STRATEGIC REPORT
10 Inventories
Goods for resale
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
120
Financial statements
NOTES CONTINUED
2017
£m
1,064.9
2016
£m
960.9
During the year £8.2m (2016: £5.8m) was written off from inventories due to obsolescence or damage. The provision for slow moving, obsolete
or defective inventories at 31 December 2017 was £79.8m (2016: £68.3m).
At 31 December 2017, in addition to the amounts shown above, there were £8.1m of inventories classified as held for sale.
11 Trade and other receivables
Trade receivables
Prepayments
Other receivables
2017
£m
1,029.6
73.9
154.9
1,258.4
2016
£m
938.0
64.1
155.4
1,157.5
At 31 December 2017, in addition to the amounts shown above, there were £15.3m of trade and other receivables classified as held for sale.
The ageing of trade receivables at 31 December was:
Current
0–30 days overdue
31–90 days overdue
Over 90 days overdue
Gross
2017
£m
824.1
166.3
46.1
18.3
1,054.8
Provision
2017
£m
4.7
0.7
1.5
18.3
25.2
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
Gross
2016
£m
771.7
134.6
36.0
16.5
958.8
2017
£m
20.8
6.1
2.9
(4.1)
(0.5)
25.2
Provision
2016
£m
2.2
1.1
1.0
16.5
20.8
2016
£m
19.0
2.4
1.8
(5.1)
2.7
20.8
2017
£m
1,032.1
24.2
185.6
226.5
1,468.4
2016
£m
911.8
23.4
157.5
205.1
1,297.8
At 31 December 2017, in addition to the amounts shown above, there were £15.0m of trade payables classified as held for sale.
Bunzl plc Annual Report 2017
120
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
121
Financial statements
Financial statements
NOTES CONTINUED
24 Acquisitions continued
13 Risk management and financial instruments
Capital management
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
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
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
defined on page 22 and 23 respectively) as well as the level of total shareholders’ equity and the amount of dividends paid to ordinary shareholders.
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
The principal covenant limits are net debt, calculated at average exchange rates, to earnings before interest, tax, depreciation, customer
Annualised
relationships and software amortisation and acquisition related items (‘EBITDA’) of no more than 3.5 times and interest cover of no less than 3.0
revenue
times. Sensitivity analyses using various scenarios are applied to forecasts to assess their impact on covenants and net debt. Additionally,
£m
Business
compliance with the Group’s biannual debt covenants is monitored on a monthly basis and formally tested at 30 June and 31 December. During
13.2
Earthwise Bag
2017 all covenants have been complied with and based on current forecasts it is expected that such covenants will continue to be complied with
32.3
Bursa Pazari
for the foreseeable future.
19.3
Inkozell and Mo Ha Ge
7.4
Classic Bag
The Group funds its operations through a mixture of shareholders’ equity and bank and capital market borrowings. All of the borrowings are
2.9
Polaris Chemicals
managed by a central treasury function and funds raised are lent onward to operating subsidiaries as required. The overall objective is to
17.8
Plus II
manage the funding to ensure the borrowings have a range of maturities, are competitively priced and 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.
6.6
Apex
5.7
Blyth
The Group’s businesses provide a high and consistent level of cash generation which helps fund future development and growth. The Group
Kingsbury Packaging
5.4
seeks to maintain an appropriate balance between the higher returns that might be possible with higher levels of borrowings and the
Silwell
7.9
advantages and security afforded by a sound capital position.
Tri-Star Packaging
27.8
Woodway
36.0
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
182.3
Acquisitions completed in 2016
capital requirements.
12.4
Sæbe Compagniet
Prorisk and GM Equipement
6.4
Treasury policies and controls
201.1
Acquisitions agreed in 2016
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
25 Cash flow from operating activities
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
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
to periodic independent review by the internal audit department. Underlying policy assumptions and activities are periodically reviewed by the
cash flow statement.
executive directors and the Board. Controls over exposure changes and transaction authenticity are in place.
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
Foodservice
Safety
Denmark
France
2016
Non-cash items
£m
Hedge accounting
27.4
Depreciation and software amortisation
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
10.2
Share based payments
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
(3.0)
Provisions
a foreign operation. The accounting treatment for hedges is set out in the financial instruments’ accounting policy in Note 2p. The Group tests
(9.0)
Retirement benefit obligations
the effectiveness of hedges on a prospective and retrospective basis to ensure compliance with IAS 39.
Other
2.4
28.0
Risk management
(a) Liquidity risk
2016
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
Working capital movement
£m
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
(18.0)
Increase in inventories
and, in order to do so, arranges borrowings from a variety of sources.
(39.6)
Increase in trade and other receivables
51.3
Increase in trade and other payables
The Group has substantial funding available comprising multi-currency credit facilities from the Group’s banks, US private placement notes
(6.3)
and a senior unsecured bond. The senior unsecured bond was issued during 2017 and is listed on the London Stock Exchange.
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
2017
£m
(94.3)
(62.8)
141.5
(15.6)
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
121
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
122
Financial statements
NOTES CONTINUED
13 Risk management and financial instruments continued
Loans, borrowings and net debt
Bank overdrafts
Bank loans
US private placement notes
Finance lease creditors
Borrowings due within one year
Bank and other loans
US private placement notes
Senior bond
Finance lease creditors
Borrowings due after one year
Derivatives managing the interest rate risk and currency profile of the debt
Gross debt
Cash at bank and in hand
Net debt
Further information on the movement in net debt is shown in Note 23.
2017
£m
(221.3)
(107.4)
(37.3)
(0.4)
(366.4)
(121.5)
(1,080.3)
(297.2)
(0.2)
(1,499.2)
8.4
(1,857.2)
333.6
(1,523.6)
2016
£m
(155.7)
(3.7)
(82.1)
(0.2)
(241.7)
(101.3)
(1,182.1)
–
(0.2)
(1,283.6)
14.3
(1,511.0)
282.4
(1,228.6)
The total committed funding at 31 December 2017 was £2,464.5m (2016: £2,205.3m). The committed funding maturity profile at 31 December
2017 is set out in the chart below.
Committed funding maturity profile by year
£m
177
25
81
20
195
30
80
21
50
103
37
18
100
66
19
310
67
115
22
300
167
25
156
23
122
24
116
26
130
27
37
28
The undrawn committed bank facilities available at 31 December were as follows:
Bank facilities – undrawn
Bank facilities – drawn
Senior bond
US private placement notes
Expiring within one year
Expiring after one year but within two years
Expiring after two years
2017
£m
50.0
100.0
682.3
832.3
2016
£m
102.7
139.9
610.3
852.9
In addition the Group maintains overdraft and uncommitted facilities to provide short term flexibility. At 31 December 2017 there were no loans
secured by fixed charges on property (2016: none).
Bunzl plc Annual Report 2017
122
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
123
Financial statements
Financial statements
NOTES CONTINUED
13 Risk management and financial instruments continued
24 Acquisitions continued
Contractual maturity profile
2016
The contractual maturity profile of the Group’s financial liabilities at 31 December is set out in the tables below. The amounts disclosed are the
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
contractual undiscounted cash flows and therefore include interest cash flows (forecast using LIBOR interest rates at 31 December in the case
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
of floating rate financial assets and liabilities). Derivative assets and liabilities have been included within the tables since they predominantly
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
relate to derivatives which are used to manage the interest cash flows on the Group’s debt. Bank loans have been drawn under committed
shown below:
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. Foreign currency cash flows have been translated using spot rates as at 31 December.
Business
Earthwise Bag
Bursa Pazari
Inkozell and Mo Ha Ge
Classic Bag
2017
Polaris Chemicals
Financial liabilities
Plus II
Bank overdrafts
Apex
Bank loans
Blyth
US private placement notes
Kingsbury Packaging
Senior bond
Silwell
Finance lease creditors
Tri-Star Packaging
Trade and other payables
Woodway
Acquisitions completed in 2016
Derivative financial instruments
Sæbe Compagniet
Net settled:
Prorisk and GM Equipement
Acquisitions agreed in 2016
Gross settled:
Foreign exchange inflows
Foreign exchange outflows
Interest rate swaps
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Within one
year
£m
Country
USA
Total
Turkey
contractual
Germany
cash flows
United Kingdom
£m
Belgium
Canada
(221.3)
Canada
(234.9)
Czech Republic
(1,355.3)
United Kingdom
(350.6)
Hungary
(0.6)
United Kingdom
(1,499.1)
United Kingdom
(3,661.8)
(221.3)
(109.2)
(78.1)
(3.4)
(0.4)
(1,468.4)
(1,880.8)
Foodservice
Safety
Denmark
France
32.2
4.0
After
two years
but within
five years
£m
Acquisition date
2016
After
9 February
one year
30 March
but within
31 May
two years
31 May
£m
31 May
25 July
–
26 July
(1.3)
31 August
(102.8)
14 September
(6.8)
30 September
(0.2)
30 September
(30.7)
30 December
(141.8)
Annualised
revenue
£m
Contractual cash (outflows)/inflows
13.2
After
32.3
more than
19.3
five years
7.4
£m
2.9
17.8
–
6.6
–
5.7
(805.8)
5.4
(320.2)
7.9
–
27.8
–
36.0
(1,126.0)
182.3
12.4
6.4
13.8
201.1
–
–
13.8
(1,112.2)
–
(124.4)
(368.6)
(20.2)
–
–
(513.2)
2 January 2017
31 January 2017
0.4
(0.4)
3.6
(138.2)
–
–
10.8
(502.4)
10.8
3.6
25 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
Total
cash flow statement.
2,019.4
(2,020.2)
31.4
(3,630.4)
2,019.0
(2,019.8)
3.2
(1,877.6)
Non-cash items
Depreciation and software amortisation
Share based payments
Provisions
2016
Retirement benefit obligations
Financial liabilities
Other
Bank overdrafts
Bank loans
US private placement notes
Finance lease creditors
Working capital movement
Trade and other payables
Increase in inventories
Increase in trade and other receivables
Derivative financial instruments
Increase in trade and other payables
Net settled:
Interest rate swaps
Total
contractual
cash flows
£m
(155.7)
(106.2)
(1,563.8)
(0.4)
(1,328.3)
(3,154.4)
Within one
year
£m
(155.7)
(4.4)
(130.3)
(0.2)
(1,297.8)
(1,588.4)
65.0
7.2
After
one year
but within
two years
£m
Contractual cash (outflows)/inflows
2016
£m
After
27.4
more than
10.2
five years
(3.0)
£m
(9.0)
2.4
–
28.0
–
(1,001.1)
–
2016
£m
–
(18.0)
(1,001.1)
(39.6)
51.3
(6.3)
31.7
2017
After
£m
two years
31.3
but within
11.8
five years
(7.5)
£m
(8.3)
1.6
–
28.9
–
(348.4)
(0.1)
2017
£m
–
(94.3)
(348.5)
(62.8)
141.5
(15.6)
19.3
–
(101.8)
(84.0)
(0.1)
(30.5)
(216.4)
6.8
Foreign exchange inflows
Foreign exchange outflows
Gross settled:
26 Items classified as held for sale
1,563.2
–
(1,557.9)
–
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
31.7
70.3
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
Total
(969.4)
(3,084.1)
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
1,561.7
(1,556.5)
12.4
(1,576.0)
1.2
(1.1)
6.9
(209.5)
0.3
(0.3)
19.3
(329.2)
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
123
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
124
Financial statements
NOTES CONTINUED
13 Risk management and financial instruments continued
(b) 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.
The table below shows the fixed/floating mix after interest rate swaps. Of the US private placement notes of £1,117.6m (2016: £1,246.2m), there
are US dollar denominated amounts totalling £353.3m (2016: £396.8m), with maturities ranging from 2025 to 2028, which have been swapped to
floating rates using interest rate swaps which reprice every three or six months. Bank loans are drawn for various periods of up to three months
at interest rates linked to LIBOR.
The interest rate risk on the floating rate debt is managed using interest rate options. Borrowings with a notional principal of £150.0m were
capped at 31 December 2017 (31 December 2016: £101.3m). 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.
Fixed vs floating interest rate table
Fixed rate debt
US private placement notes
Senior bond
Total fixed rate debt
Interest rate swaps (fixed leg)
Fixed rate liability
Floating rate debt
Bank overdraft
Bank loans
Total floating rate debt
Interest rate swaps (floating leg)
Floating rate liability
Derivatives managing the interest rate risk and currency profile of the debt
Finance lease creditors
Gross debt
2017
£m
2016
£m
(1,117.6)
(297.2)
(1,414.8)
353.3
(1,061.5)
(221.3)
(228.9)
(450.2)
(353.3)
(803.5)
(1,264.2)
–
(1,264.2)
384.7
(879.5)
(155.7)
(105.0)
(260.7)
(384.7)
(645.4)
8.4
(0.6)
(1,857.2)
14.3
(0.4)
(1,511.0)
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:
2017
2016
Impact on profit before tax
–1%
£m
(0.1)
(0.1)
+1%
£m
1.4
0.7
Impact on equity
–1%
£m
(0.1)
(0.1)
+1%
£m
1.4
0.7
(c) 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
2017
1.29
1.14
Average rate
2016
1.36
1.22
2017
1.35
1.13
Closing rate
2016
1.24
1.17
For the year ended 31 December 2017, a movement of one cent in the US dollar and euro average exchange rates would have changed profit
before income tax by £1.6m and £0.6m respectively (2016: £1.4m and £0.4m) and adjusted profit before income tax by £1.9m and £1.0m
respectively (2016: £1.5m and £0.7m).
Bunzl plc Annual Report 2017
124
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
125
Financial statements
Financial statements
NOTES CONTINUED
13 Risk management and financial instruments continued
24 Acquisitions continued
The majority of the Group’s transactions are carried out in the respective functional currencies of the Group’s operations and so transaction
2016
exposures are usually relatively limited. Where they do occur the Group’s policy is to hedge exposures of highly probable forecast transactions
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
for a period of up to 12 months using forward foreign exchange contracts and these are designated as cash flow hedges. However, the economic
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
impact of foreign exchange on the value of uncommitted future purchases and sales is not hedged. As a result, sudden and significant
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
movements in foreign exchange rates can impact profit margins where there is a delay in passing on to customers the resulting price increases.
shown below:
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
For the year ended 31 December 2017, all foreign exchange cash flow hedges were effective with a loss of £1.6m recognised in equity (2016: gain
Annualised
of £3.0m) which will affect the income statement during 2018.
revenue
£m
Business
The majority of the Group’s borrowings are effectively denominated in US dollars, sterling and euros, aligning them to the respective functional
13.2
Earthwise Bag
currencies of the component parts of the Group’s EBITDA. This currency profile is achieved using short term foreign exchange contracts
32.3
Bursa Pazari
and foreign currency debt. This currency composition minimises the impact of movements in foreign exchange rates on the ratio of net debt
19.3
Inkozell and Mo Ha Ge
to EBITDA.
7.4
Classic Bag
2.9
Polaris Chemicals
The currency profile of the Group’s net debt at 31 December is set out in the table below:
Plus II
17.8
6.6
Apex
2016
5.7
Blyth
£m
Kingsbury Packaging
5.4
538.4
US dollar
Silwell
7.9
414.4
Sterling
Tri-Star Packaging
27.8
221.6
Euro
Woodway
36.0
Other
54.2
182.3
Acquisitions completed in 2016
1,228.6
12.4
Sæbe Compagniet
Prorisk and GM Equipement
6.4
If a 10% strengthening or weakening of sterling had taken place on 31 December it would have increased/(decreased) profit before tax and
201.1
Acquisitions agreed in 2016
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
25 Cash flow from operating activities
the resulting movement in profit before tax is due solely to the translation effect on monetary items. This analysis assumes that all other
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
variables, and in particular interest rates, remain constant.
cash flow statement.
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
2017
£m
604.7
437.8
373.0
108.1
1,523.6
2 January 2017
31 January 2017
Foodservice
Safety
Denmark
France
Impact on equity
2016
–10%
Non-cash items
£m
£m
27.4
Depreciation and software amortisation
84.4
2017
10.2
Share based payments
142.1
2016
(3.0)
Provisions
(9.0)
Retirement benefit obligations
(d) Credit risk
Other
2.4
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
28.0
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.
Impact on profit before tax
–10%
£m
(0.9)
(0.9)
2017
+10%
£m
£m
31.3
(74.3)
11.8
(116.3)
(7.5)
(8.3)
1.6
28.9
+10%
£m
0.7
0.8
2016
Working capital movement
£m
The Group’s financial assets are cash at bank and in hand, derivative financial instruments and trade and other receivables which represent the
(18.0)
Increase in inventories
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,
(39.6)
Increase in trade and other receivables
derivative financial assets (see page 123) and trade and other receivables (see Note 11) is their respective carrying amounts.
51.3
Increase in trade and other payables
Dealings are restricted to those banks with the relevant combination of geographic presence and suitable credit rating. The Group continually
(6.3)
monitors the credit ratings of its counterparties and the credit exposure to each counterparty.
2017
£m
(94.3)
(62.8)
141.5
(15.6)
26 Items classified as held for sale
For trade and other receivables, the amounts represented in the balance sheet are net of allowances for doubtful receivables, estimated
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
by the Group’s management based on prior experience and their assessment of the current economic environment. Note 11 sets out an analysis
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
of trade and other receivables and the provision for doubtful debts in respect of trade receivables.
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
At the balance sheet date there were no significant concentrations of credit risk.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
125
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
126
Financial statements
NOTES CONTINUED
13 Risk management and financial instruments continued
Financial instruments
Financial assets and liabilities
Financial assets held at amortised cost
Cash at bank and in hand
Trade and other receivables
Financial assets held at fair value
Interest rate derivatives in fair value hedges
Foreign exchange derivatives in cash flow hedges
Foreign exchange derivatives in net investment hedges
Other foreign exchange and interest rate derivatives
Total financial assets
Financial liabilities held at amortised cost
Bank overdrafts
Bank loans
US private placement notes
Senior bond
Finance lease creditors
Trade and other payables
Financial liabilities held at fair value
US private placement notes
Interest rate derivatives in fair value hedges
Foreign exchange derivatives in cash flow hedges
Foreign exchange derivatives in net investment hedges
Other foreign exchange derivatives
Total financial liabilities
2017
£m
2016
£m
333.6
1,258.4
10.1
0.6
5.8
3.8
1,612.3
(221.3)
(228.9)
(754.5)
(297.2)
(0.6)
(1,499.1)
(363.1)
(0.9)
(2.3)
(7.3)
(2.8)
(3,378.0)
282.4
1,157.5
14.7
3.4
7.6
1.7
1,467.3
(155.7)
(105.0)
(867.4)
–
(0.4)
(1,328.3)
(396.8)
(1.7)
(0.4)
(3.3)
(4.4)
(2,863.4)
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.
At 31 December 2017 the fair values, based on unadjusted market data, of the US private placement notes, was £1,158.2m (2016: £1,304.7m)
and of the senior unsecured bond was £304.4m (2016: nil).
For other financial assets and financial liabilities not measured at fair value, including cash at bank and in hand, bank loans and overdrafts,
trade and other receivables and trade and other payables, their carrying amount is a reasonable approximation of fair value due to their short
term nature. Bank loans are priced based on floating interest rates and the credit spread has not changed since the inception of the loan.
However, within other payables there is £12.0m (2016: £7.1m) 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.
Bunzl plc Annual Report 2017
126
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
127
Financial statements
Financial statements
NOTES CONTINUED
Amounts not
offset in the
balance sheet
£m
–
–
Net amounts
recognised in the
balance sheet
£m
20.3
(13.3)
Gross amounts of
recognised financial
assets and liabilities
£m
20.5
(13.5)
13 Risk management and financial instruments continued
24 Acquisitions continued
Offsetting of financial assets and liabilities
2016
The following table sets out the Group’s derivative financial assets and liabilities that are subject to counterparty offsetting or master netting
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
agreements. The master netting agreements regulate settlement amounts in the event either party defaults on their obligations.
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
27.4
(9.8)
28.6
(11.0)
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
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Amounts offset in
the balance sheet
£m
(0.2)
Country
0.2
USA
Turkey
Germany
(1.2)
United Kingdom
1.2
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
2017
Derivative assets
Business
Derivative liabilities
Earthwise Bag
Bursa Pazari
2016
Inkozell and Mo Ha Ge
Derivative assets
Classic Bag
Derivative liabilities
Polaris Chemicals
Plus II
Apex
14 Provisions
Blyth
Kingsbury Packaging
Silwell
Current
Tri-Star Packaging
Non-current
Woodway
Acquisitions completed in 2016
Sæbe Compagniet
Prorisk and GM Equipement
Acquisitions agreed in 2016
Beginning of year
Charge
25 Cash flow from operating activities
Acquisitions
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
Utilised or released
cash flow statement.
Currency translation
End of year
Net amounts
Annualised
£m
revenue
20.3
£m
(13.3)
13.2
32.3
19.3
27.4
7.4
(9.8)
2.9
17.8
6.6
5.7
2016
5.4
£m
7.9
8.3
27.8
31.0
36.0
39.3
182.3
12.4
Total
2016
6.4
£m
201.1
34.8
1.7
3.8
(5.5)
4.5
39.3
2016
Non-cash items
£m
The properties provision includes provisions for vacant properties where amounts are held against liabilities for onerous lease commitments,
27.4
Depreciation and software amortisation
repairs and dilapidations. These provisions cover the relevant periods of the lease agreements, which typically extend from one to 10 years,
10.2
Share based payments
up to the earliest possible termination date.
(3.0)
Provisions
(9.0)
Retirement benefit obligations
Other provisions include expected legal and environmental claims, onerous contracts and other liabilities based on management’s best estimate
Other
2.4
of the liability at the balance sheet date, determined by reference to known factors and past experience of similar items. Management expects
28.0
these amounts to be settled within the next one to five years.
Other
2016
£m
17.9
1.2
2.0
(4.3)
4.0
20.8
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
Denmark
Other
2017
France
£m
20.8
0.9
9.9
(6.9)
(0.3)
24.4
Properties
2016
£m
16.9
0.5
1.8
(1.2)
0.5
18.5
Properties
2017
£m
18.5
1.4
4.7
(3.5)
(0.3)
20.8
Total
2017
£m
39.3
2.3
14.6
(10.4)
(0.6)
45.2
2 January 2017
31 January 2017
Foodservice
Safety
2017
£m
6.2
39.0
45.2
–
–
The Group is a defendant in a number of legal proceedings incidental to its operations. While any litigation has an element of uncertainty,
2016
Working capital movement
management does not expect that the actual outcome of any such proceedings, either individually or in the aggregate, will be materially different
£m
to the amounts provided.
(18.0)
Increase in inventories
(39.6)
Increase in trade and other receivables
51.3
Increase in trade and other payables
(6.3)
2017
£m
(94.3)
(62.8)
141.5
(15.6)
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
127
Bunzl plc Annual Report 2017
STRATEGIC REPORT
15 Deferred tax
Property, plant and equipment
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)
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
128
Financial statements
NOTES CONTINUED
Asset
£m
0.9
11.9
–
8.9
11.4
6.8
14.6
54.5
(51.1)
3.4
Liability
£m
(8.2)
–
(190.6)
–
(0.3)
(5.8)
(4.2)
(209.1)
51.1
(158.0)
2017
Net
£m
(7.3)
11.9
(190.6)
8.9
11.1
1.0
10.4
(154.6)
–
(154.6)
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)
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.
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 £12.7m
(2016: £13.1m).
No deferred tax has been recognised in respect of unutilised capital losses of £96.1m (2016: £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
2017
£m
122.6
55.6
(28.0)
12.3
(2.8)
(5.1)
154.6
2016
£m
112.8
14.6
(17.6)
(6.8)
1.7
17.9
122.6
Bunzl plc Annual Report 2017
128
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
129
Financial statements
Financial statements
NOTES CONTINUED
2017
2016
£m
107.9
2017
£m
108.0
24 Acquisitions continued
16 Share capital and share based payments
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
Issued and fully paid ordinary shares of 321⁄7p each
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
Number ordinary shares in issue and fully paid
2016
shown below:
335,607,091 335,190,830
Beginning of year
416,261
Issued – option exercises
Annualised
revenue
335,931,546 335,607,091
End of year
£m
Sector
Business
Country
13.2
Grocery
Earthwise Bag
USA
The Company operates a number of share plans for the benefit of employees of the Company and its subsidiaries. Further details of the share
32.3
Foodservice
Bursa Pazari
Turkey
plans as they relate to the directors of the Company are set out in the Directors’ remuneration report.
19.3
Germany
Healthcare
Inkozell and Mo Ha Ge
7.4
United Kingdom
Retail
Classic Bag
Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan
2.9
Belgium
Cleaning & hygiene
Polaris Chemicals
For many years, the Company has operated all employee savings-related share option schemes. The existing scheme in the UK, the Sharesave
17.8
Canada
Cleaning & hygiene
Plus II
Scheme (2011), was approved by shareholders at the 2011 Annual General Meeting. It is an HM Revenue & Customs (‘HMRC’) tax advantaged
6.6
Canada
Cleaning & hygiene
Apex
scheme and is open to all UK employees, including UK based executive directors.
5.7
Czech Republic
Safety
Blyth
United Kingdom
Foodservice
Kingsbury Packaging
5.4
The Irish Sharesave Plan, which is approved by the Irish Revenue Commissioners, and the International Sharesave Plan, were first introduced
Hungary
Foodservice
Silwell
7.9
in 2006 and have since been extended, most recently following the approval of the Sharesave Scheme (2011).
United Kingdom
Foodservice
Tri-Star Packaging
27.8
United Kingdom
Retail
Woodway
36.0
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
182.3
Acquisitions completed in 2016
before the invitation to apply for the options. Depending on the scheme, options are normally exercisable either three or five years after they
12.4
Sæbe Compagniet
have been granted with employees saving up to £500 (2016: £500) per month (or the equivalent value in other currencies under the International
Prorisk and GM Equipement
6.4
Sharesave Plan) or €500 (2016: €500) per month under the Irish Sharesave Plan.
201.1
Acquisitions agreed in 2016
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
Foodservice
Safety
Denmark
France
324,455
Long Term Incentive Plan 2004 (‘2004 LTIP’) and 2014 (‘2014 LTIP’)
25 Cash flow from operating activities
The 2004 LTIP was approved by shareholders at the 2004 Annual General Meeting and expired in May 2014. No further share options or
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
performance share awards have been granted under the 2004 LTIP since that date. The 2014 LTIP was approved by shareholders at the 2014
cash flow statement.
Annual General Meeting and replaced the 2004 LTIP. The operation of both LTIPs is overseen by the Remuneration Committee of the Board and
each is divided into two parts.
2016
Non-cash items
£m
Part A of the LTIPs relates to the grant of market priced executive share options. In normal circumstances options granted under Part A are only
27.4
Depreciation and software amortisation
exercisable if the relevant performance condition has been satisfied. The performance condition is based on the Company’s adjusted earnings
10.2
Share based payments
per share growth exceeding UK RPI inflation over three financial years by a specified margin (for the 2004 LTIP) or meeting certain specified
(3.0)
Provisions
targets (for the 2014 LTIP).
(9.0)
Retirement benefit obligations
Other
2.4
Part B of the LTIPs relate to the grant of performance share awards which are conditional rights to receive shares in the Company for nil
28.0
consideration. A performance share award will usually vest (i.e. become exercisable) on the third anniversary of its grant. The extent to which
a performance share award will vest is usually subject to the extent to which the applicable performance conditions have been satisfied, based
partly on the Company’s total shareholder return performance, relative to a comparator group of companies over a three year period, and partly
2016
Working capital movement
subject to the Company’s adjusted earnings per share growth exceeding UK RPI inflation over three years by a specified margin (for the 2004
£m
LTIP) or meeting certain specified targets (for the 2014 LTIP).
(18.0)
Increase in inventories
(39.6)
Increase in trade and other receivables
Investment in own shares
51.3
Increase in trade and other payables
(6.3)
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 in relation to options granted and awards made under
the LTIPs and the Deferred Annual Share Bonus Scheme (‘DASBS’) over market purchase shares. Details of these plans are set out above and
26 Items classified as held for sale
in the Directors’ remuneration report. The assets, liabilities and expenditure of the trust have been incorporated in the consolidated financial
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
statements. Finance expenses and administration charges are included in the income statement on an accruals basis. At 31 December 2017
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
the trust held 5,930,284 (2016: 6,280,158) shares, upon which dividends have been waived, with an aggregate nominal value of £1.9m (2016:
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
£2.0m) and market value of £122.9m (2016: £132.4m).
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
2017
£m
(94.3)
(62.8)
141.5
(15.6)
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
129
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
130
Financial statements
NOTES CONTINUED
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 (£)
2017
02.03.17–09.10.17
22.71–23.38
nil–23.35
3,121,549
3–5
17–18
3–10
3.0–6.5
0.1–0.9
1.8–2.1
1.84–11.07
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
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 £23.27
(2016: £21.30). The total charge for the year relating to share based payments was £11.8m (2016: £10.2m). After tax the total charge was
£9.5m (2016: £7.3m).
Details of share options and awards which have been granted and exercised, those which have lapsed during 2017 and those outstanding and
available to exercise at 31 December 2017, in each case in respect of all options and awards, whether over new issue or market purchase
shares, under the 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 (2011)
International Sharesave Plan
Irish Sharesave Plan
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
Exercises
Grants/awards
Options outstanding
Options
outstanding
01.01.17
Number
744,305
292,567
35,529
3,859,857
229,040
Options
available
to exercise
31.12.17
Number
11,887
782
–
– 2,550,743 5.64–15.97 2,550,743
– 1,309,114
175,314
18,943
–
643,262 16.38–23.36 120,253 8,204,493 16.38–23.36 1,503,334
6,540,976 2,427,032 22.86–23.35
47,664
84,608 1,270,302
nil
385,108
1,053,952
4,133,353
334,748 13,116,165
12,756,226 3,121,549
7.70–18.68
49,902 12.53–15.36
6,652 12.53–18.68
5.64–15.66
nil
Lapses*
2017
Price (£) Number
59,704
30,916
4,484
Number
Price (£)
749,074 9.92–18.68
281,777 15.36–18.68
40,833 15.36–18.68
Number
222,941
70,028
16,440
–
–
2017
Price (£)
18.68
18.68
18.68
84,150
2,426,862
Number
158,468
at 31.12.17
18,943
34,783
nil
nil
2017
nil
* Share option lapses relate to those which have either been forfeited or have expired during the year.
For the options outstanding at 31 December 2017, the weighted average fair value and the weighted average remaining contractual lives (being
the time period from 31 December 2017 until the lapse date of each share option) are set out below:
Sharesave Scheme 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 (£)
4.06
3.97
3.99
2.63
14.51
Weighted average
remaining contractual
life (years)
2.00
1.65
1.85
7.39
4.23
The outstanding share options and performance share awards are exercisable at various dates up to September 2027.
Bunzl plc Annual Report 2017
130
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
131
Financial statements
Financial statements
NOTES CONTINUED
24 Acquisitions continued
17 Dividends
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
2015 interim
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
2015 final
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
2016 interim
shown below:
2016 final
Total
42.8
95.4
138.2
2017
£m
2016
£m
38.6
86.8
2017
14.0p
32.0p
46.0p
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
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Business
Total dividends per share for the year to which they relate are:
Earthwise Bag
Bursa Pazari
Inkozell and Mo Ha Ge
Interim
Classic Bag
Final
Polaris Chemicals
Total
Plus II
Apex
The 2017 interim dividend of 14.0p per share was paid on 2 January 2018 and comprised £46.2m of cash. The 2017 final dividend of 32.0p per
Blyth
share will be paid on 2 July 2018 to shareholders on the register at the close of business on 25 May 2018. The 2017 final dividend will comprise
Kingsbury Packaging
approximately £106m of cash.
Silwell
Tri-Star Packaging
18 Contingent liabilities
Woodway
Acquisitions completed in 2016
Sæbe Compagniet
Bank guarantees
Prorisk and GM Equipement
Acquisitions agreed in 2016
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:
25 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.
Philip Rogerson
Frank van Zanten
Patrick Larmon
Non-cash items
Brian May
Depreciation and software amortisation
Eugenia Ulasewicz
Share based payments
Jean-Charles Pauze
Provisions
Vanda Murray
Retirement benefit obligations
Lloyd Pitchford
Other
Stephan Nanninga
2 January 2017
31 January 2017
Foodservice
Safety
Denmark
France
2017
£m
1.5
125.4
Annualised
revenue
£m
13.2
32.3
Per share
2016
19.3
13.0p
7.4
29.0p
2.9
42.0p
17.8
6.6
5.7
5.4
7.9
27.8
36.0
2016
182.3
£m
12.4
1.4
6.4
201.1
2017
10,000
81,478
2017
130,896
£m
105,240
31.3
4,000
11.8
2,500
(7.5)
3,000
(8.3)
4,000
1.6
–
28.9
341,114
2016
10,000
57,261
2016
127,623
£m
105,240
27.4
4,000
10.2
2,500
(3.0)
3,000
(9.0)
–
2.4
–
28.0
309,624
2016
2017
Lloyd Pitchford and Stephan Nanninga were appointed as directors of the Company on 1 March 2017 and 1 May 2017 respectively.
Working capital movement
£m
£m
(18.0)
Increase in inventories
(94.3)
Details of the directors’ options and awards over ordinary shares made under the 2004 LTIP, 2014 LTIP, Sharesave Scheme (2011) and DASBS
(39.6)
Increase in trade and other receivables
(62.8)
are set out in the Directors’ remuneration report. Since 31 December 2017 Patrick Larmon has acquired interests in 701 ordinary shares as a
51.3
Increase in trade and other payables
141.5
result of his election to participate in the dividend reinvestment plan in respect of the interim dividend which was paid on 2 January 2018 and
(6.3)
(15.6)
he has also acquired an interest in 309 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 2017 and
26 February 2018.
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
131
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
132
Financial statements
NOTES CONTINUED
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 2017 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 2017 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 2017 and showed that there was a required annual contribution of $5.2m. In 2018, the Group plans to contribute $8.0m for the 2017
plan year to cover prudently this required contribution and anticipate future funding needs. In 2017, the Group also paid a contribution of $8.0m
for the 2016 plan year. The annual review as at 1 January 2018 is ongoing.
Bunzl plc Annual Report 2017
132
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
133
Financial statements
Financial statements
NOTES CONTINUED
20 Retirement benefits continued
24 Acquisitions continued
Risks
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
The main risks to which the Group is exposed in relation to the defined benefit pension schemes are described below:
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
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
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
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.
In the UK, the trustee implements partial currency hedging on the overseas assets to mitigate currency risk.
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
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
Sector
are invested in liability matching assets to mitigate the interest rate and also the inflation risk.
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Annualised
revenue
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
£m
Business
13.2
Earthwise Bag
32.3
Bursa Pazari
Mortality risk — the assumptions adopted by the Group make allowance for future improvements in life expectancy. However, if life
19.3
Inkozell and Mo Ha Ge
expectancy improves at a faster rate than assumed, this would result in greater payments from the schemes and consequently increases in
7.4
Classic Bag
the schemes’ liabilities. The mortality assumptions are reviewed on a regular basis to minimise the risk of using an inappropriate assumption.
2.9
Polaris Chemicals
17.8
Plus II
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.
6.6
Apex
5.7
Blyth
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
Kingsbury Packaging
5.4
the schemes’ cash flows, the assumptions used can lead to volatility in the scheme valuations from year to year. The Company and the trustees
Silwell
7.9
seek to mitigate actively the risks associated with the schemes.
Tri-Star Packaging
27.8
Woodway
36.0
A higher defined benefit obligation could lead to additional funding requirements in future years. Any deficit measured on a funding valuation
182.3
Acquisitions completed in 2016
basis, which may differ from the actuarial valuation under IAS 19, will generally be financed over a period that ensures the contributions are
12.4
Sæbe Compagniet
appropriate to the Group and in line with the relevant regulations.
Prorisk and GM Equipement
6.4
201.1
Acquisitions agreed in 2016
Financial information
The amounts included in the consolidated financial statements at 31 December were:
25 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
Amounts included in the income statement
cash flow statement.
Defined contribution pension schemes
Defined benefit pension schemes
Non-cash items
current service cost (net of contributions by employees)
Depreciation and software amortisation
gain on settlement (net of cash payments to unfunded pension schemes)
Share based payments
Total included in employee costs
Provisions
Amounts included in finance (income)/expense
Retirement benefit obligations
Net interest income on defined benefit pension schemes in surplus
Other
Net interest expense on defined benefit pension schemes in deficit
Total charge to the income statement
2017
7.0
£m
31.3
–
11.8
27.5
(7.5)
(8.3)
–
1.6
2.3
28.9
29.8
2016
6.1
£m
27.4
(0.1)
10.2
24.8
(3.0)
(9.0)
(0.4)
2.4
1.9
28.0
26.3
2 January 2017
31 January 2017
Foodservice
Safety
Denmark
France
2017
£m
20.5
2016
£m
18.8
Working capital movement
Amounts recognised in the statement of comprehensive income
Increase in inventories
Actual return less expected return on pension scheme assets
Increase in trade and other receivables
Experience (loss)/gain on pension scheme liabilities
Increase in trade and other payables
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 gain/(loss) on defined benefit pension schemes
26 Items classified as held for sale
The cumulative amount of net actuarial losses arising since 1 January 2004 recognised in the statement of comprehensive income at
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
31 December 2017 was £102.5m (2016: £129.5m).
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 were:
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
2017
2017
£m
£m
(94.3)
31.5
(62.8)
(2.6)
141.5
(10.3)
(15.6)
8.4
27.0
2016
2016
£m
£m
(18.0)
39.3
(39.6)
4.6
51.3
(91.8)
(6.3)
5.5
(42.4)
UK
27 Related party disclosures
Longevity at age 65 for current pensioners (years)
The Group has identified the directors of the Company, their close family members, the Group defined benefit pension schemes and its key
Longevity at age 65 for future pensioners (years)
management as related parties for the purpose of IAS 24 ‘Related Party Disclosures’. Details of the relevant relationships with these related
US
parties are disclosed in the Directors’ remuneration report, Note 20 and Note 21 respectively. All transactions with subsidiaries are eliminated
Longevity at age 65 for current and future pensioners (years)
on consolidation.
2017
22.3
23.7
21.7
2016
22.4
24.1
21.9
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
133
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
134
Financial statements
NOTES CONTINUED
20 Retirement benefits continued
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation rate
2017
3.6%
3.1%
2.6%
2.2%
2016
3.7%
3.1%
2.7%
2.3%
UK
2015
3.5%
3.0%
3.9%
2.1%
2017
3.0%
–
3.6%
2.3%
2016
3.0%
–
4.1%
2.3%
US
2015
3.0%
–
4.3%
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 [increase)/decrease that would arise on the overall net pension deficit as at 31 December 2017 as a result of reasonably possible changes
to key assumptions was:
UK
US
Impact of change
in longevity
–1 year
£m
11.3
3.8
+1 year
£m
(11.4)
(3.7)
Impact of change
in inflation rate
–0.25%
£m
8.8
0.1
+0.25%
£m
(8.9)
(0.1)
Impact of change
in discount rate
–0.25%
£m
(17.3)
(4.4)
+0.25%
£m
16.2
4.2
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 deficit
Deferred tax
Total deficit after tax
UK
2017
£m
118.3
227.7
0.3
346.3
(347.4)
–
(347.4)
(1.1)
0.2
(0.9)
UK
2016
£m
99.5
222.4
0.4
322.3
(347.6)
–
(347.6)
(25.3)
4.3
(21.0)
US
2017
£m
53.1
46.8
14.4
114.3
(136.3)
(12.5)
(148.8)
(34.5)
7.2
(27.3)
US
2016
£m
59.9
40.6
11.1
111.6
(142.1)
(14.9)
(157.0)
(45.4)
17.5
(27.9)
Other
2017
£m
5.7
4.2
10.0
19.9
(23.0)
(12.3)
(35.3)
(15.4)
4.5
(10.9)
Other
2016
£m
5.6
4.7
7.9
18.2
(22.5)
(9.1)
(31.6)
(13.4)
3.5
(9.9)
Total
2017
£m
177.1
278.7
24.7
480.5
(506.7)
(24.8)
(531.5)
(51.0)
11.9
(39.1)
Total
2016
£m
165.0
267.7
19.4
452.1
(512.2)
(24.0)
(536.2)
(84.1)
25.3
(58.8)
Of the pension scheme assets, £464.1m (2016: £436.6m) are valued based on a quoted market price.
Bunzl plc Annual Report 2017
134
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
135
Financial statements
Financial statements
NOTES CONTINUED
20 Retirement benefits continued
24 Acquisitions continued
2016
Movement in net deficit
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
Beginning of year
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
Acquisitions
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
Current service cost
shown below:
Gain on settlement
Contributions
Net interest expense
Business
Actuarial gain/(loss)
Earthwise Bag
Transfer to liabilities classified as held for sale
Bursa Pazari
Currency translation
Inkozell and Mo Ha Ge
End of year
Classic Bag
Polaris Chemicals
Plus II
Changes in the present value of defined benefit pension scheme liabilities
Apex
Beginning of year
Blyth
Acquisitions
Kingsbury Packaging
Current service cost
Silwell
Liabilities extinguished on settlement
Tri-Star Packaging
Interest expense
Woodway
Contributions by employees
Acquisitions completed in 2016
Actuarial loss
Sæbe Compagniet
Benefits paid
Prorisk and GM Equipement
Transfer to liabilities classified as held for sale
Acquisitions agreed in 2016
Currency translation
End of year
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
2016
£m
(40.0)
(1.0)
(6.1)
0.4
14.9
Annualised
(1.5)
revenue
£m
(42.4)
13.2
–
32.3
(8.4)
19.3
(84.1)
7.4
2.9
2016
17.8
£m
6.6
417.2
5.7
2.1
5.4
6.1
7.9
(1.0)
27.8
16.6
36.0
0.8
182.3
81.7
12.4
(15.0)
6.4
–
201.1
27.7
536.2
2017
£m
536.2
3.1
7.0
–
15.6
0.8
4.5
(23.5)
(0.3)
(11.9)
531.5
2017
£m
(84.1)
(3.1)
(7.0)
–
15.3
(2.3)
27.0
0.3
2.9
(51.0)
2 January 2017
31 January 2017
Foodservice
Safety
Denmark
France
25 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
Changes in the fair value of defined benefit pension scheme assets
cash flow statement.
Beginning of year
Acquisitions
Interest income
Non-cash items
Assets distributed on settlement
Depreciation and software amortisation
Actuarial gain
Share based payments
Contributions by employer
Provisions
Contributions by employees
Retirement benefit obligations
Benefits paid
Other
Currency translation
End of year
2017
£m
452.1
–
2017
13.3
£m
–
31.3
31.5
11.8
15.3
(7.5)
0.8
(8.3)
(23.5)
1.6
(9.0)
28.9
480.5
2016
£m
377.2
1.1
2016
15.1
£m
(0.6)
27.4
39.3
10.2
14.9
(3.0)
0.8
(9.0)
(15.0)
2.4
19.3
28.0
452.1
The actual return on pension scheme assets was £44.8m (2016: £54.4m).
Working capital movement
Increase in inventories
The Group expects to pay approximately £15.5m in contributions to the defined benefit pension schemes in the year ending 31 December
Increase in trade and other receivables
2018 (expected as of 2016 in the year ending 31 December 2017: £15.7m) including £7.5m for the UK (expected as of 2016 in the year ending
Increase in trade and other payables
31 December 2017: £7.3m).
2017
£m
(94.3)
(62.8)
141.5
(15.6)
2016
£m
(18.0)
(39.6)
51.3
(6.3)
The weighted average duration of the defined benefit pension scheme liabilities at 31 December 2017 was approximately 19.3 years
26 Items classified as held for sale
(2016: 20.2 years) for the UK and 12.0 years (2016: 12.0 years) for the US.
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
The total defined benefit pension scheme liabilities are divided between active members (£196.4m (2016: £200.1m)), deferred members
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
(£156.4m (2016: £161.3m)) and pensioners (£178.6m (2016: £174.8m)).
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
135
Bunzl plc Annual Report 2017
STRATEGIC REPORT
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
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
136
Financial statements
NOTES CONTINUED
2017
6,071
4,414
3,937
3,112
17,534
61
17,595
2017
£m
686.5
74.6
27.5
11.8
800.4
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
In addition to the above, acquisition related items for the year ended 31 December 2017 include deferred consideration payments of £28.5m
(2016: £29.6m) relating to the retention of former owners of businesses acquired.
Key management remuneration
Salaries and short term employee benefits
Share based payments
Retirement benefits
2017
£m
6.7
2.0
0.9
9.6
2016
£m
5.9
1.3
0.8
8.0
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
2017
£m
0.7
2.6
2.1
5.4
2016
£m
0.7
2.7
1.4
4.8
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 £0.8m (2016: £1.3m). The aggregate market
value of performance share awards exercised by directors under long term incentive schemes during the year was £1.4m (2016: £2.7m). The
aggregate market value of share awards exercised by directors under the DASBS was £1.0m (2016: £1.2m).
Bunzl plc Annual Report 2017
136
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
137
Financial statements
Financial statements
NOTES CONTINUED
Land &
buildings
2017
£m
93.6
247.5
67.2
408.3
24 Acquisitions continued
22 Lease commitments
The Group leases certain property, plant and equipment under non-cancellable operating lease agreements. These leases have varying terms
2016
and renewal rights. At 31 December the total future minimum lease payments under non-cancellable operating leases for each of the following
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
periods were:
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
Other
2016
Annualised
£m
revenue
29.4
£m
56.5
13.2
3.7
32.3
89.6
19.3
7.4
2.9
17.8
2016
£m
6.6
282.4
5.7
(155.7)
5.4
126.7
7.9
(86.0)
27.8
(1,283.6)
36.0
14.3
182.3
(1,228.6)
12.4
6.4
201.1
Land &
buildings
2016
£m
84.7
219.3
70.5
374.5
Other
2017
£m
Acquisition date
31.9
2016
61.7
9 February
4.3
30 March
97.9
31 May
31 May
31 May
25 July
26 July
31 August
14 September
30 September
30 September
30 December
Denmark
France
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Within one year
Business
Between one and five years
Earthwise Bag
After five years
Bursa Pazari
Inkozell and Mo Ha Ge
Classic Bag
23 Cash and cash equivalents and net debt
Polaris Chemicals
Plus II
Apex
Cash at bank and in hand
Blyth
Bank overdrafts
Kingsbury Packaging
Cash and cash equivalents
Silwell
Interest bearing loans and borrowings – current liabilities
Tri-Star Packaging
Interest bearing loans and borrowings – non-current liabilities
Woodway
Derivatives managing the interest rate risk and currency profile of the debt
Acquisitions completed in 2016
Net debt
Sæbe Compagniet
Prorisk and GM Equipement
The cash at bank and in hand and bank overdrafts amounts included in the table above include the amounts associated with the Group’s
Acquisitions agreed in 2016
cash pool. The cash pool enables the Group to access cash in its subsidiaries to pay down the Group’s borrowings. The Group has the legal
right of set-off of balances within the cash pool. The cash at bank and in hand and bank overdrafts figures net of the amounts in the cash
25 Cash flow from operating activities
pool are disclosed below for reference:
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.
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
2017
£m
333.6
(221.3)
112.3
(145.1)
(1,499.2)
8.4
(1,523.6)
2 January 2017
31 January 2017
Foodservice
Safety
Cash at bank and in hand net of amounts in the cash pool
Non-cash items
Bank overdrafts net of amounts in the cash pool
Cash and cash equivalents
Depreciation and software amortisation
Share based payments
Provisions
Movement in net debt
Retirement benefit obligations
Other
2017
Beginning of year
Net cash inflow/(outflow)
Working capital movement
Realised losses on foreign exchange contracts
Increase in inventories
Currency translation
Increase in trade and other receivables
End of year
Increase in trade and other payables
2016
£m
139.6
2016
(12.9)
£m
126.7
27.4
10.2
(3.0)
(9.0)
Other
2.4
components
28.0
£m
(1,355.3)
(321.2)
2016
(10.2)
£m
(18.0)
50.8
(39.6)
(1,635.9)
51.3
(6.3)
Other
components
2016
£m
26 Items classified as held for sale
(1,157.9)
Beginning of year
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
Net cash inflow/(outflow)
(18.5)
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
Realised gains on foreign exchange contracts
22.9
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
Currency translation
(201.8)
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
End of year
(1,355.3)
2017
£m
141.4
2017
(29.1)
£m
112.3
31.3
11.8
(7.5)
(8.3)
Cash and cash
1.6
equivalents
28.9
£m
126.7
(12.8)
2017
–
£m
(94.3)
(1.6)
(62.8)
112.3
141.5
(15.6)
Cash and cash
equivalents
£m
50.7
34.5
–
41.5
126.7
Net debt
£m
(1,228.6)
(334.0)
(10.2)
49.2
(1,523.6)
Net debt
£m
(1,107.2)
16.0
22.9
(160.3)
(1,228.6)
27 Related party disclosures
The net cash outflow on other components of net debt comprises an increase in borrowings of £418.7m (2016: £206.1m), a repayment of
borrowings of £87.3m (2016: £210.5m) and the impact of a realised loss of £10.2m on foreign exchange contracts (2016: gain of £22.9m).
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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
137
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
138
Financial statements
NOTES CONTINUED
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 2017 the allocation period for all acquisitions completed since 1 January 2017 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.
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.
2017
Summary details of the businesses acquired or agreed to be acquired during the year ended 31 December 2017 are shown in the table below:
Sector
Foodservice
Foodservice
Safety
Safety
Safety
Safety
Retail
Safety
Safety
Foodservice, retail, other
Retail
Safety
Healthcare
Cleaning & hygiene, foodservice France
Retail
Country
Denmark
USA
Singapore
France
USA
Italy
USA
Canada
Canada
Spain
UK
China
Australia
UK
Business
Sæbe Compagniet
Packaging Film Sales
LSH
Prorisk and GM Equipement
ML Kishigo
Neri
DDS
AMFAS
Western Safety
Tecnopacking
Pixel Inspiration
HSESF
Interpath
Groupe Hedis
Lightning Packaging
Acquisitions completed in the current year
Sæbe Compagniet*
Prorisk and GM Equipement*
Aggora
Talge
Acquisitions agreed in the current year
*Acquisitions committed at 31 December 2016.
Bunzl plc Annual Report 2017
138
Bunzl plc Annual Report 2017
Foodservice
Safety
Foodservice
Foodservice
Denmark
France
UK
Brazil
2 January 2017
31 January 2017
2 January 2018
3 January 2018
Acquisition date
2017
2 January
9 January
31 January
31 January
31 March
31 March
23 May
31 May
31 May
31 May
30 June
1 August
31 October
22 November
30 November
Annualised
revenue
£m
13.3
4.7
5.1
6.8
26.0
41.2
241.9
5.8
4.2
37.5
7.3
25.6
13.4
140.2
14.7
587.7
(13.3)
(6.8)
27.0
26.3
620.9
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
139
Financial statements
Financial statements
NOTES CONTINUED
24 Acquisitions continued
24 Acquisitions continued
The acquisition of Hedis, Comptoir de Bretagne and Générale Collectivités, collectively referred to as Groupe Hedis, is considered to
2016
be individually significant due to its impact on intangible assets. The acquisition is therefore separately disclosed in the table below.
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
A summary of the effect of other acquisitions completed in 2017 and 2016 is also shown below:
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown below:
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Customer relationships
Property, plant and equipment and software
Business
Inventories
Earthwise Bag
Trade and other receivables
Bursa Pazari
Trade and other payables
Inkozell and Mo Ha Ge
Net cash
Classic Bag
Provisions
Polaris Chemicals
Defined benefit pension liabilities
Plus II
Income tax payable and deferred tax liabilities
Apex
Fair value of net assets acquired
Blyth
Goodwill
Kingsbury Packaging
Consideration
Silwell
Tri-Star Packaging
Satisfied by:
Woodway
cash consideration
Acquisitions completed in 2016
deferred consideration
Sæbe Compagniet
Prorisk and GM Equipement
Contingent payments relating to retention of former owners
Acquisitions agreed in 2016
Cash acquired
Transaction costs and expenses
25 Cash flow from operating activities
Total committed spend in respect of acquisitions completed in the current year
The tables below give further details on the adjustments for non-cash items and the working capital movement shown in the consolidated
Spend on acquisitions committed but not completed at the year end
cash flow statement.
Spend on acquisitions committed at prior year end but completed in the current year
Total committed spend in respect of acquisitions agreed in the current year
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
Other
£m
206.6
Acquisition date
4.0
2016
55.8
9 February
65.1
30 March
(53.7)
31 May
18.1
31 May
(11.5)
31 May
–
25 July
(25.5)
26 July
258.9
31 August
98.8
14 September
357.7
30 September
30 September
30 December
350.3
7.4
2 January 2017
357.7
31 January 2017
21.1
(18.1)
9.9
370.6
32.6
(24.4)
378.8
243.9
–
243.9
2.2
(11.0)
2.2
237.3
–
–
237.3
Foodservice
Safety
Groupe
Hedis
£m
131.7
1.3
10.6
38.1
(25.2)
11.0
(3.1)
(3.1)
(36.4)
124.9
119.0
243.9
2017
Total
£m
338.3
5.3
66.4
103.2
(78.9)
29.1
(14.6)
(3.1)
(61.9)
383.8
217.8
601.6
Denmark
France
Non-cash items
The net cash outflow in the year in respect of acquisitions comprised:
Depreciation and software amortisation
Share based payments
Provisions
Retirement benefit obligations
Cash consideration
Other
Cash acquired
Deferred consideration in respect of prior year acquisitions
Net cash outflow in respect of acquisitions
Working capital movement
Transaction costs and expenses
Payments relating to retention of former owners
Increase in inventories
Total cash outflow in respect of acquisitions
Increase in trade and other receivables
Increase in trade and other payables
Although the acquisition of DDS is not considered to be individually material, it is nevertheless a larger acquisition and accounts for
approximately 22% of the total cash outflow in respect of acquisitions in 2017.
Groupe
Hedis
£m
243.9
(11.0)
–
232.9
0.8
–
233.7
Other
£m
350.3
(18.1)
9.5
341.7
8.4
4.7
354.8
2016
£m
Annualised
80.2
revenue
(0.5)
£m
16.5
13.2
44.1
32.3
(32.3)
19.3
1.0
7.4
(3.8)
2.9
(1.0)
17.8
(17.8)
6.6
86.4
5.7
51.0
5.4
137.4
7.9
27.8
36.0
124.4
182.3
13.0
12.4
137.4
6.4
18.2
201.1
(1.0)
6.8
161.4
22.8
–
184.2
2016
£m
27.4
10.2
(3.0)
2016
£m
(9.0)
124.4
2.4
(1.0)
28.0
36.2
159.6
2016
5.9
£m
11.1
(18.0)
176.6
(39.6)
51.3
(6.3)
594.2
7.4
601.6
23.3
(29.1)
12.1
607.9
32.6
(24.4)
616.1
2017
£m
31.3
11.8
2017
(7.5)
Total
£m
(8.3)
594.2
1.6
(29.1)
28.9
9.5
574.6
2017
9.2
£m
4.7
(94.3)
588.5
(62.8)
141.5
(15.6)
26 Items classified as held for sale
Acquisitions completed in the year ended 31 December 2017 contributed £297.4m (2016: £85.7m) to the Group’s revenue and £25.4m
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
(2016: £11.2m) to the Group’s adjusted operating profit for the year ended 31 December 2017.
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
The estimated contributions from acquisitions completed during the year to the results of the Group for the year ended 31 December if such
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
acquisitions had been made at the beginning of the year, are as follows:
27 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
Revenue
management as related parties for the purpose of IAS 24 ‘Related Party Disclosures’. Details of the relevant relationships with these related
Adjusted operating profit
parties are disclosed in the Directors’ remuneration report, Note 20 and Note 21 respectively. All transactions with subsidiaries are eliminated
on consolidation.
The estimated revenue which would have been contributed by the acquistions agreed during the current year to the results for the year ended
31 December 2017 if such acquisitions had been made at the beginning of the year is £620.9m (2016: £201.1m).
2017
£m
587.7
57.0
2016
£m
182.3
21.5
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
139
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
140
Financial statements
NOTES CONTINUED
24 Acquisitions continued
2016
Summary details of the businesses acquired during the year ended 31 December 2016 are shown in the table below. In addition to the
acquisitions completed during 2016, the Company also entered into agreements during 2016 to acquire two further businesses, these being
Sæbe Compagniet and Prorisk and GM Equipement, which were completed in 2017. Details for these committed acquisitions are also
shown 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
Acquisitions completed in 2016
Sæbe Compagniet
Prorisk and GM Equipement
Acquisitions agreed in 2016
Sector
Grocery
Foodservice
Healthcare
Retail
Cleaning & hygiene
Cleaning & hygiene
Cleaning & hygiene
Safety
Foodservice
Foodservice
Foodservice
Retail
Country
USA
Turkey
Germany
United Kingdom
Belgium
Canada
Canada
Czech Republic
United Kingdom
Hungary
United Kingdom
United Kingdom
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
Foodservice
Safety
Denmark
France
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
25 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
2017
£m
31.3
11.8
(7.5)
(8.3)
1.6
28.9
2017
£m
(94.3)
(62.8)
141.5
(15.6)
2016
£m
27.4
10.2
(3.0)
(9.0)
2.4
28.0
2016
£m
(18.0)
(39.6)
51.3
(6.3)
26 Items classified as held for sale
At 31 December 2017, assets and liabilities held for sale related to OPM, a non-core subsidiary in France, as prior to the year end the Group had
received a binding offer to purchase the business, the acceptance of which was subject to completion of a consultation process with the relevant
works council. The disposal of OPM was subsequently completed on a cash and debt free basis on 2 February 2018. Revenue of the business in
2017 was £50.3m and the net assets held for disposal at 31 December were £12.4m.
27 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. All transactions with subsidiaries are eliminated
on consolidation.
Bunzl plc Annual Report 2017
140
Bunzl plc Annual Report 2017
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
141
Financial statements
COMPANY BALANCE SHEET
at 31 December 2017
STRATEGIC REPORT
Fixed assets
Tangible assets
Intangible assets
Investments
Current assets
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
5
6
6
7
8
9
10
11
11
2017
£m
0.3
1.3
687.5
689.1
1.7
1,209.0
429.9
0.5
1,641.1
(106.6)
1,534.5
2,223.6
(1.7)
(1.1)
2,220.8
108.0
171.4
5.6
16.1
1,919.7
2,220.8
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
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 26 February 2018 and signed on its behalf by
Frank van Zanten, Chief Executive and Brian May, Finance Director.
The Accounting policies and other Notes on pages 143 to 147 form part of these financial statements.
† Profit and loss account includes a net profit after tax of £38.9m (2016: £176.2m). 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.
Bunzl plc Annual Report 2017
141
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
142
Financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
at 31 December 2017
At 1 January 2017
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
2016 interim dividend
2016 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2017
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 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
Share
capital
£m
107.9
Share
premium
£m
167.5
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Own
shares
£m
(132.4)
Profit and loss account
Retained
earnings
£m
2,139.8
38.9
Total
shareholders’
funds
£m
2,304.5
38.9
0.1
3.9
(20.8)
30.3
108.0
171.4
5.6
16.1
(122.9)
4.6
20.3
(4.2)
59.6
(42.8)
(95.4)
(30.3)
11.7
2,042.6
4.6
20.3
(4.2)
59.6
(42.8)
(95.4)
4.0
(20.8)
–
11.7
2,220.8
Share
capital
£m
107.7
Share
premium
£m
163.9
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Profit and loss account
Retained
Own
earnings
shares
£m
£m
628.4
(118.9)
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)
Bunzl plc Annual Report 2017
142
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
143
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 2017. 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. In most cases the accounting policies for the Company are fully aligned with the equivalent accounting policy for the Group as stated
on pages 105 to 111 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 2017 are disclosed in the Related undertakings note in the Shareholder information section on pages 155 to 160.
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, and 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.
Bunzl plc Annual Report 2017
143
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
144
Financial statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
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 2017 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 2017
Net book value at 31 December 2016
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
Short
leasehold
improvement
£m
Fixtures,
fittings and
equipment
£m
Total
tangible
assets
£m
Total
intangible
assets
£m
0.1
–
0.1
0.1
–
0.1
–
–
1.5
–
1.5
1.1
0.1
1.2
0.3
0.4
1.6
–
1.6
1.2
0.1
1.3
0.3
0.4
2017
£m
684.4
6.4
690.8
1.5
0.2
1.7
0.2
0.2
0.4
1.3
1.3
2016
£m
676.4
8.0
684.4
3.3
3.3
687.5
681.1
Bunzl plc Annual Report 2017
144
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
146
145
Financial statements
Financial statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
Share based
payments
£m
1.8
–
–
(0.3)
1.5
–
(0.1)
1.4
Defined benefit
pension scheme
£m
(1.0)
0.2
(1.2)
6.3
4.3
0.1
(4.2)
0.2
5 Deferred tax asset
9 Retirement benefits
Recognised deferred tax assets net of deferred tax liabilities are attributable to the following:
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.
Other
The amounts included in the Company financial statements related to the defined benefit pension scheme at 31 December were:
£m
0.2
2017
(0.1)
£m
–
2.8
–
0.6
0.1
(1.5)
–
1.9
–
0.1
2017
£m
21.0
(2.0)
1.3
20.3
4.6
24.9
2017
£m
2017
£m
428.8
(25.3)
1.1
(2.8)
429.9
7.3
(0.6)
20.3
1,209.0
(1.1)
Net deferred
tax asset
£m
1 January 2016
1.0
2016
Amounts included in profit for the year
0.1
Recognised in profit or loss
£m
(1.2)
Reclassification to current tax
2.1
Current service cost (net of contributions by employees)
6.0
Recognised in other comprehensive income or directly in equity
(0.4)
Net interest expense/(income)
5.9
31 December 2016/1 January 2017
(1.5)
Contributions paid by participating subsidiaries linked to service
0.1
Recognised in profit or loss
0.2
Total charge to profit for the year
(4.3)
Recognised in other comprehensive income or directly in equity
1.7
31 December 2017
2016
Amounts recognised in other comprehensive income
£m
Deferred tax is calculated in full on temporary differences under the liability method. The UK corporation tax rate will be reduced from 19% to
35.5
Actual return less expected return on pension scheme assets
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
Experience (loss)/gain on pension scheme liabilities
5.6
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
(77.3)
Impact of changes in assumptions relating to the present value of pension scheme liabilities
more than one year. No deferred tax asset has been recognised in respect of unutilised capital losses of £70.6m (2016: £70.6m).
(36.2)
Actuarial gain/(loss) on defined benefit pension scheme
4.6
Contributions paid by participating subsidiaries not linked to service
6 Debtors
(31.6)
Total credit/(charge) to other comprehensive income
2016
£m
2016
£m
236.8
5.4
0.8
(2.1)
237.6
7.2
0.4
(36.2)
1,500.0
(25.3)
Debtors: amounts falling due within one year
Movement in defined benefit pension scheme deficit
Amounts owed by Group undertakings
Beginning of year
Prepayments and other debtors
Current service cost
Contributions
Net interest (expense)/income
Debtors: amounts falling due after more than one year
Actuarial gain/(loss)
Amounts owed by Group undertakings
End of year
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
Changes in the present value of defined benefit pension scheme liabilities
England base rate.
Beginning of year
Current service cost
7 Creditors: amounts falling due within one year
Interest expense
Contributions by employees
Actuarial loss
Trade creditors
Benefits paid
Amounts owed to Group undertakings
End of year
Other tax and social security contributions
Income tax payable
Accruals and deferred income
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Interest income
8 Provisions
Actuarial gain
Contributions by the Company
Contributions by participating subsidiaries
Beginning of year
Contributions by employees
Utilised or released
Benefits paid
End of year
End of year
2017
£m
347.6
2.8
9.2
2017
0.7
£m
0.6
0.7
(13.5)
82.4
347.4
0.9
10.5
2017
12.1
£m
106.6
322.3
8.6
20.9
1.2
2017
£m
6.1
1.7
0.7
–
(13.5)
1.7
346.3
2016
£m
271.3
2.1
10.4
2016
0.7
£m
71.7
1.4
(8.6)
81.9
347.6
0.7
–
2016
10.9
£m
94.9
276.7
10.8
35.5
1.2
2016
£m
6.0
1.7
0.7
–
(8.6)
1.7
322.3
The provisions relate to properties, where amounts are held against liabilities for repairs and dilapidations, and other claims.
The actual return on pension scheme assets was £29.5m (2016: £46.3m). 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 (£91.5m (2016: £89.6m)), deferred members (£132.7m
(2016: £137.9m)) and pensioners (£123.2m (2016: £120.1m)).
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
145
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
146
Financial statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
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 expense/(income)
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 (loss)/gain on pension scheme liabilities
Impact of changes in assumptions relating to the present value of pension scheme liabilities
Actuarial gain/(loss) on defined benefit pension scheme
Contributions paid by participating subsidiaries not linked to service
Total credit/(charge) to other comprehensive income
Movement in defined benefit pension scheme deficit
Beginning of year
Current service cost
Contributions
Net interest (expense)/income
Actuarial gain/(loss)
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
Benefits paid
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Interest income
Actuarial gain
Contributions by the Company
Contributions by participating subsidiaries
Contributions by employees
Benefits paid
End of year
2017
£m
2.8
0.6
(1.5)
1.9
2017
£m
21.0
(2.0)
1.3
20.3
4.6
24.9
2017
£m
(25.3)
(2.8)
7.3
(0.6)
20.3
(1.1)
2017
£m
347.6
2.8
9.2
0.7
0.6
(13.5)
347.4
2017
£m
322.3
8.6
20.9
1.2
6.1
0.7
(13.5)
346.3
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 £29.5m (2016: £46.3m). 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 (£91.5m (2016: £89.6m)), deferred members (£132.7m
(2016: £137.9m)) and pensioners (£123.2m (2016: £120.1m)).
Bunzl plc Annual Report 2017
146
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
146
147
Financial statements
Financial statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
10 Share capital
9 Retirement benefits
2017
The Company operates a number of retirement benefit schemes in the UK, including both a defined benefit and defined contribution schemes.
£m
A description of the characteristics and risks to which the Company is exposed in relation to the UK defined benefit pension scheme together
Issued and fully paid ordinary shares of 321⁄7p each
108.0
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:
Number of ordinary shares in issue and fully paid
2017
2017
Beginning of year
Amounts included in profit for the year
£m
Issued – option exercises
324,455
Current service cost (net of contributions by employees)
2.8
End of year
Net interest expense/(income)
0.6
Contributions paid by participating subsidiaries linked to service
(1.5)
11 Reserves
1.9
Total charge to profit for the year
Included in the profit and loss account within retained earnings is £1,209.0m (2016: £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
2016
Amounts recognised in other comprehensive income
unrealised. Until these outstanding balances are settled in cash the relevant amounts outstanding are not distributable as dividends to the
£m
Company’s shareholders. Excluding these amounts the Company has substantial distributable reserves as explained further in the Financial
35.5
Actual return less expected return on pension scheme assets
review on page 26.
Experience (loss)/gain on pension scheme liabilities
5.6
(77.3)
Impact of changes in assumptions relating to the present value of pension scheme liabilities
The own shares reserve includes ordinary shares of the Company held by the Company in an employee benefit trust. The assets, liabilities and
(36.2)
Actuarial gain/(loss) on defined benefit pension scheme
expenditure of the trust are included in the Company financial statements. Details of the trust and investment in own shares reserve are set out
4.6
Contributions paid by participating subsidiaries not linked to service
in Note 16 to the consolidated financial statements.
(31.6)
Total credit/(charge) to other comprehensive income
2016
2016
335,607,091 335,190,830
£m
416,261
2.1
335,931,546 335,607,091
(0.4)
(1.5)
0.2
2017
£m
21.0
(2.0)
1.3
20.3
4.6
24.9
2016
£m
107.9
The dividends paid and declared in the current and prior year are detailed in Note 17 to the consolidated financial statements.
2016
Movement in defined benefit pension scheme deficit
£m
The capital redemption reserve as presented in the statement of changes in equity records the aggregate nominal value of treasury shares that
5.4
Beginning of year
have been cancelled.
(2.1)
Current service cost
7.2
Contributions
12 Contingent liabilities and commitments
Net interest (expense)/income
0.4
Contingent liabilities
(36.2)
Actuarial gain/(loss)
Borrowings by subsidiary undertakings totalling £1,633.2m (2016: £1,352.4m) which are included in the Group’s borrowings have been
(25.3)
End of year
guaranteed by the Company.
2017
£m
(25.3)
(2.8)
7.3
(0.6)
20.3
(1.1)
Commitments
Changes in the present value of defined benefit pension scheme liabilities
Non-cancellable operating lease rentals of £3.2m (2016: £3.9m) are payable in relation to a lease with a duration of longer than five years.
Beginning of year
Current service cost
13 Employees’ and directors’ remuneration
Interest expense
Contributions by employees
The average number of persons employed by the Company during the year (including directors) was 51 (2016: 46) and the aggregate employee
Actuarial loss
costs relating to these persons were:
Benefits paid
End of year
Wages and salaries
Social security costs
Changes in the fair value of defined benefit pension scheme assets
Share based payments
Beginning of year
Pension costs
Interest income
Actuarial gain
Contributions by the Company
Conditional awards of executive share options and performance shares are granted to executive directors and other senior employees
Contributions by participating subsidiaries
of the Company. Employees of the Company can also participate in the Company’s Sharesave Scheme. Further information on the Company’s
Contributions by employees
share plans is disclosed in Note 16 to the consolidated financial statements.
Benefits paid
End of year
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
The actual return on pension scheme assets was £29.5m (2016: £46.3m). The market value of scheme assets and the present value of
as related parties for the purpose of IAS 24 ‘Related Party Disclosures’. Details of the relevant relationships with these related parties are
retirement benefit obligations at 31 December are detailed in Note 20 to the consolidated financial statements.
disclosed in the Directors’ remuneration report and Note 20 and Note 21 to the consolidated financial statements respectively.
The total defined benefit pension liability is divided between active members (£91.5m (2016: £89.6m)), deferred members (£132.7m
(2016: £137.9m)) and pensioners (£123.2m (2016: £120.1m)).
2017
£m
347.6
2.8
9.2
0.7
0.6
(13.5)
2017
347.4
£m
8.1
2017
2.2
£m
1.7
322.3
1.0
8.6
13.0
20.9
1.2
6.1
0.7
(13.5)
346.3
2016
£m
271.3
2.1
10.4
0.7
71.7
(8.6)
2016
347.6
£m
7.8
2016
2.1
£m
1.5
276.7
1.0
10.8
12.4
35.5
1.2
6.0
0.7
(8.6)
322.3
Bunzl plc Annual Report 2017
Bunzl plc Annual Report 2017
147
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
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.
The directors are also responsible for safeguarding the assets of the
Group and the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
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 International
Financial Reporting Standards (‘IFRSs’) as adopted by the European
Union and the parent company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’, and applicable law). In preparing the Group
financial statements, the directors have also elected to comply with
IFRSs, issued by the International Accounting Standards Board
(’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 Group and the Company and
of the profit or loss of the Group and the Company for that period. In
preparing the financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable IFRSs as adopted by the European Union
and IFRSs issued by IASB have been followed for the Group
financial statements and United Kingdom Accounting Standards,
comprising FRS 101, have been followed for the Company financial
statements, subject to any material departures disclosed and
explained in the financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and the
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and the Company
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.
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 Group and the Company’s
performance, business model and strategy.
Each of the directors, whose names and functions are set out on page
56 of the Annual Report confirm that, to the best of their knowledge:
• the Company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’, and applicable law), give a
true and fair view of the assets, liabilities, financial position and
profit of the Company;
• the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union - Dual
IFRS (European Union and IASB), give a true and fair view of the
assets, liabilities, financial position and profit of the Group; and
• the Annual Report includes a fair review of the development and
performance of the business and the position of the Group and the
Company, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Frank van Zanten
Chief Executive
26 February 2018
Brian May
Finance Director
148
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC
Report on the audit of the financial statements
Opinion
In our opinion:
• Bunzl plc’s Group financial statements 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 2017 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 IFRSs as adopted by the European Union;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law); 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.
We have audited the financial statements, included within the Annual Report, which comprise: the consolidated and Company balance sheets
as at 31 December 2017, the consolidated income statement and the consolidated statement of comprehensive income, the consolidated cash
flow statement, and the consolidated and Company statement of changes in equity for the year then ended; and the Notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note 1 to the 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 have been properly prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the Company.
Other than those disclosed in Note 4 to the financial statements, we have provided no non-audit services to the Group or the Company in the
period from 1 January 2017 to 31 December 2017.
Our audit approach
Overview
Materiality
• Overall Group materiality: £20 million (2016: £16 million), based on 5% of profit before taxation
• Overall Company materiality: £5 million (2016: £4 million), based on approximately 0.25% of net assets
Audit scope
• We performed audits of the financial information of 84 components spread across 28 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 taxation, pensions, acquisitions and
the impairment of goodwill and intangible assets, were performed by the Group audit team centrally
Key audit matters
• Corporate tax exposures (Group)
• Business combinations (Group)
• Impairment of goodwill and other intangible assets (Group)
• Defined benefit pension schemes (Group and Company)
149
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the
risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented
a risk of material misstatement due to fraud.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and
considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit
procedures to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. We designed audit procedures that focused on the risk of non-compliance related to laws and regulations. Our tests
included discussions with in-house legal counsel and inspection of underlying support and calculations where applicable.
We did not identify any key audit matters relating to irregularities, including fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Corporate tax exposures – Group
Refer to page 69 (Audit Committee report), page 107 (Accounting policies) and
pages 115 and 116 (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.
Business combinations – Group
Refer to page 69 (Audit Committee report), page 106 (Accounting policies) and
pages 138 to 140 (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.
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.
Management relies on external valuation specialists to value significant
intangibles acquired in business combinations. Where management has
relied on such specialists, we assessed their objectivity 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 relationship
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.
150
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and other intangible assets – Group
Refer to page 69 (Audit Committee report), page 108 (Accounting policies) and
pages 118 and 119 (Note 9).
The Group has material goodwill balances of £1,378.0m (2016: £1,191.5m)
and customer relationship intangible assets of £954.6m (2016: £737.7m)
spread across multiple geographies and relating to multiple cash generating
units (‘CGUs’).
In our testing of management’s annual goodwill and other intangible assets
impairment calculations, we used valuation experts to assist our evaluation
of the appropriateness of the models and the key assumptions used by
management.
We evaluated the reasonableness of the directors’ cash flow forecasts by
comparing the assumptions made to internal and external data.
In assessing whether the carrying amount of goodwill has been impaired,
management considers forecast cash flows of the 12 individual CGUs which
are identified on a market or geographical basis.
We focused our goodwill impairment procedures on the CGUs with the lowest
levels of headroom between each respective value in use model and carrying
value. Consideration was also given to those CGUs with the highest goodwill
and intangible balances (the most material being North America, France and
Rest of Continental Europe).
Management’s impairment assessments 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 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.
Defined benefit pension schemes - Group and Company
Refer to page 69 (Audit Committee report), pages 109 and 110 (Accounting
policies) and pages 132 to 135 (Note 20).
The Group has defined benefits pension schemes (with material schemes
in the US and the UK) with a net deficit of £51.0m at the current year end
(2016: £84.1m), 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.
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 growth 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 acceptable; and
• we obtained evidence to assess adequate historical accuracy in
management’s forecasting process.
We also evaluated management’s triggering event assessment regarding
customer list intangible assets.
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.
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 2017. In each case we considered the assumptions made by
management to be reasonable in light of the available evidence.
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 structure of the Group and the Company, 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.
151
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
We identified one financially significant component, being North America, where a full scope audit has been performed. In addition to this,
we identified seven 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 and other
procedures on a further 84 components. The components where we performed audit procedures covered over 95% of Group revenue, profit
before taxation and total assets.
Where work was performed by component auditors, detailed instructions were issued by us and the Group audit team visited North America,
Brazil, France and the UK. 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.
The Group audit team also performed the audit of the standalone Company financial statements, for which all work was performed by the
Group audit team.
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 in aggregate 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 materiality
How we determined it
Rationale for benchmark applied
Group financial statements
Company financial statements
£20 million (2016: £16 million).
£5 million (2016: £4 million).
5% of profit before taxation.
Approximately 0.25% of net assets.
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.
Considering the nature of the business and activities
in Bunzl plc (holding activities) we use the Company
Net Assets value as a basis for the calculation of the
overall materiality level.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components ranged up to £19.0 million. Certain components were audited to a local statutory audit materiality
that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1 million (Group audit)
(2016: £0.8 million) and £1 million (Company audit) (2016: £0.8 million) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw
attention to in respect of the directors’ statement in the financial statements
about whether the directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the
directors’ identification of any material uncertainties to the Group’s and the
Company’s ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial statements.
We are required to report if the directors’ statement relating to Going
Concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent
with our knowledge obtained in the audit.
We have nothing material to add or to draw attention to. However, because
not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s and Company’s ability to continue as a going
concern.
We have nothing to report.
152
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006, (CA06), ISAs (UK)
and the Listing Rules of the Financial Conduct Authority (‘FCA’) require us also to report certain opinions and matters as described below
(required by ISAs (UK) unless otherwise stated).
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report
for the year ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors’ report. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 52 of the Annual Report 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 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 to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and 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 inquiries and considering the directors’ process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the ‘Code’); and considering whether the
statements are consistent with the knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 148, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company’s position and performance,
business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing
our audit.
• The section of the Annual Report on pages 68 and 69 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
• The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
153
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BUNZL PLC CONTINUED
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities set out on page 148, the directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors
are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
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
• certain disclosures of directors’ remuneration specified by law are not made; 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.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 19 May 2014 to audit the financial statements
for the year ended 31 December 2014 and subsequent financial periods. The period of total uninterrupted engagement is four years, covering
the years ended 31 December 2014 to 31 December 2017.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 February 2018
154
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
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 2017 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 158 and 159. 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 this consolidation.
Subsidiary
undertakings
Argentina
Vicsa Steelpro S.A.
Australia
ACN 082 933 579 Pty Ltd (iii)
Atlas Health Care Pty Limited
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
Interpath Services Pty. Ltd.
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, Logística e Prestação de Serviços
Administrativos Ltda.
Bunzl Equipamentos para Protecao Individual Ltda.
Bunzl Higiene E Limpeza Ltda
Dental Sorria Ltda.
DVS Equipamentos de Proteção Individual Ltda
Labor Import Comercial Importadora Exportadora Ltda
Canada
462482 B.C. Ltd.
Atlas Environmental Facilities, Ltd.
Bunzl Canada, Inc.
Emballages Maska Inc. (iii)
Jan-Mar Sales Limited (iii)
Plus II Sanitation Supplies Inc. (iii)
Wesclean Equipment & Cleaning Supplies Limited (ii)
Western Safety Products Ltd.
Chile
B2B Web Distribuicao de Produtos Chile SpA
Bunzl Chile Holdings SpA
DPS Chile Comercial Limitada
Tecno Boga Comercial Limitada
Vicsa Safety Comercial Limitada
Registered office
address*
1
4
5
4
4
3
5
2
5
4
3
5
3
4
5
3
6
6
7
11
8
8
10
9
13
15
15
12
16
17
14
23
20
22
19
20
18
21
23
25
25
24
26
25
Subsidiary
undertakings
China
Beijing HSESF Safety Technology Co., Ltd.
Bunzl Trading (Shanghai) Limited
Diversified Distribution Systems Trading (Shanghai) Ltd.
Keenpac (Shenzhen) Trading Company Limited
Shanghai Cosafety Technology Co., Ltd.
Shanghai HSESF Safety Technology Co., Ltd.
Shanghai Mai Xi Protection Technology Co., Ltd.
Shanghai MRO Industry & Technology Co., Ltd.
Shanghai Yinghao Protection Technology Co., Ltd.
Suzhou Sai Wo Trading Co., Ltd.
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
Sæbe Compagniet ApS
France
Alpes Entretien Distribution SAS
Blanc SAS
Bourgogne Hygiene Entretien SAS
Bunzl Catering Développement SAS
Bunzl Holdings France SAS
Comatec SAS
Comptoir de Bretagne SAS
Daugeron & Fils SAS
Fichot Hygiene SAS
France Sécurité SAS
Gama 29 SAS
Générale Collectivités SAS
GM Equipement S.A.S.
Groupe Pierre Le Goff – Ile de France – Allodics – Adage SAS
Groupe Pierre Le Goff – Ile de France – ODI 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 Méditerranée 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
Hedis SAS
Hygiadis SAS
Industrie du Compactage Alimentaire Hygiene ICA
Hygiene L'image du Propre SAS
Registered office
address*
32
29
34
35
28
27
33
31
30
36
37
38
40
39
41
41
41
42
43
44
60
75
73
47
54
61
70
62
51
58
56
69
45
52
74
54
67
71
57
76
49
64
63
47
53
66
155
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION CONTINUED
Registered office
address*
Related undertakings continued
Subsidiary
undertakings
Karpie SCI
Keenpac France SAS
Ligne T SAS
Mat'hygiene SRL
Nicolas Entretien SAS
OPM France SAS
ORRU SAS
PLG Finances SAS
Prorisk S.A.S.
SCI des Saules SCI
Société Civile Immobiliere Sainte Claire Deville SC
Sodiscol SAS
Sopecal Hygiene SAS
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
Hong Kong
Bunzl Asia Limited (iii)
DDS of Hong Kong Limited
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
Thomas McLaughlin (Ireland) Limited
Yorse Ireland Unlimited Company
Israel
M.S. Global Limited
Meichaley Zahav Packages Ltd
Silco (Utensils) A.S. Limited (iii)
Italy
B2B Distribution Italy Holdings S.r.l.
Keenpac Italia S.R.L.
Neri S.p.A.
Secure Line S.r.l.
Secure Service S.r.l.
Workshop 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.
CP AG Servicios, S. de R.L. de C.V.
Diversified DS of Mexico, S. De R.L. De C.V.
Espomega S. de R.L. de C.V. (iii)
Proepta, S.A. DE C.V. (iii)
Steelpro S.A de C.V. (iii)
Registered office
address*
53
48
55
59
72
50
65
54
45
53
53
46
68
81
78
78
80
80
77
80
78
79
81
82
84
83
85
90
89
88
86
91
91
91
91
92
93
92
94
97
94
96
95
95
98
100
104
101
104
105
103
102
99
Subsidiary
undertakings
Netherlands
Allshoes Benelux B.V.
Bunzl Outsourcing Services B.V.
Bunzl Verpakkingen Arnhem B.V.
Bunzl Verpakkingen B.V.
Bunzl Verpakkingsgroep B.V.
Conpax Belfort B.V.
De Ridder B.V.
King Benelux Holding B.V.
King Nederland B.V.
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.
Romania
Bunzl Distributie SRL
Singapore
LSH Industrial Solutions Pte. Ltd
Slovakia
Eurobal, spol. s.r.o.
Spain
Bunzl Distribution Spain, S.A.U.
Faru, S.L.U.
Granger Invest, 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.
Tecnopacking, 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%)
İstanbul Ticaret Hırdavat Sanayi A.Ş.
İstanbul Ticaret İş Güvenliği ve Endüstriyel Ürünler A.Ş.
Kullanatmarket Elektronik Pazarlama Ticaret Anonim Şirketi (80%)
United Kingdom
365 Healthcare Limited
Bunzl American Holdings (No.1) Limited
Bunzl American Holdings (No.2) Limited
Bunzl Australia Forex LLP
Bunzl Finance Public Limited Company (i)
Bunzl Group Services Limited (i)
106
111
108
108
108
109
110
112
112
107
109
114
114
114
113
114
115
116
117
118
119
121
126
122
128
128
121
124
125
127
123
120
133
129
133
130
132
132
131
134
135
136
134
139
139
139
139
139
139
156
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION CONTINUED
Subsidiary
undertakings
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
DDS Management, LLC
Destiny Packaging, LLC
Diversified Distribution Systems, 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
M.L. Kishigo Manufacturing Company, 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.
Registered office
address*
143
143
143
149
143
149
152
148
143
152
149
152
149
144
141
143
143
146
152
143
142
149
150
152
143
143
145
152
152
150
143
143
154
155
Other
shareholdings
Viner-Pack Gyarto Kereskedelmi Es Szolgaltato Korlatolt
Registered office
address*
Felelossegu Tarsasag (20%) (iii)
87
*
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
Related undertakings continued
Subsidiary
undertakings
Bunzl Overseas Holdings (No. 2) Limited (i)
Bunzl Overseas Holdings (No. 3) Limited (ii)
Bunzl Overseas Holdings (No.4) Limited
Bunzl Overseas Holdings Limited
Bunzl Pension Trustees Limited (i)
Bunzl Plastics Limited (i)
Bunzl Properties Limited (i)
Bunzl Retail & Healthcare Supplies Limited
Bunzl UK Limited
Classic Bag Company Holdings Limited
Continental Chef Supplies Limited
Dialene Limited
Greenham Trading Limited (i)
GrowModule 365 Limited
Guardsman Limited
Henares Limited (i)
Howper 800 Limited (iii)
Kingsbury Packaging (Limavady) Ltd
Lee Brothers Bilston Limited
Lightning Packaging Supplies Limited
Lockhart Catering Equipment Limited
London Bio Packaging Limited
Michael Davies and Associates Limited
P.O.S. Direct Limited
Packaging 2 Buy Limited
Pixel Inspiration Holdings Limited (85%)
Portabottle Limited
Portabrands Limited
Selectuser Limited (ii)
The Classic Printed Bag Company Limited
The Porta Group Limited
Thomas McLaughlin
Tri-Star Packaging Supplies Limited
Wavelength Handling & Distribution Services Limited
Woodway Packaging Limited
Woodway UK Limited
Woodway UK South Limited (iii)
Wycombe Marsh Paper Mills Limited (i)
Yorse No. 1 Limited
Yorse No. 3 Limited (i)
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.
Bunzl Holdings Inc.
Bunzl International Services, Inc.
Bunzl Mexican Holdings II, LLC
Bunzl Mexican Holdings, LLC
Bunzl Midatlantic, LLC
Bunzl Minneapolis, LLC
Bunzl North American Holdings, Inc.
Registered office
address*
139
139
139
139
139
139
139
139
139
139
139
139
139
139
139
139
139
138
139
139
139
139
139
139
139
139
139
139
139
139
139
137
139
139
139
139
139
139
139
139
143
143
152
151
153
143
143
140
143
147
152
143
152
152
143
143
143
151
152
157
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION CONTINUED
List of registered office addresses
Address
Maipú 1300, piso 13, Ciudad de Buenos Aires, Argentina
34-48 Cosgrove Road, Enfield NSW 2136, Australia
55 Sarah Andrews Close, Erskine Park NSW 2759, Australia
Level 2, 700 Springvale Road, Mulgrave VIC 3170, Australia
Unit 1, 52 Fox Drive, Dandenong South VIC 3175, Australia
Diepoldsauer Straße 37, 6845, Hohenems, Austria
1 Rue du Bois des Hospices, 2émé étage, 7522 Tournai, Belgium
Avenue Sabin 23, 1300 Wavre, Belgium
Aarschotsesteenweg 114 3012 Leuven (Wilsele), Belgium
Oudenaardsesteenweg 19 9000 Ghent, Belgium
Rue du Cerf 190 1332 Genval, Belgium
Avenida Doutor Alberto Jackson Byington, 1435 Jardim Santa Fe, City
of Osasco, São Paulo, CEP 06273-050, Brazil
Avenida Dr. Alberto Jackson Byington, 1435 Industrial Anhanguera,
City of Osasco, São Paulo, CEP 06276-000, Brazil
City of Osasco, State of São Paulo, at Rua Padre Damaso, No. 173,
Centro, 06016-010, Brazil
Estrada Velha de Guarulhos – São Miguel, 5135, Box 311 - Jardim
Arapongas, Guarulhos, São Paulo, CEP 07210-250, Brazil
Rua Crepusculo, No 58 Bairro California, City of Belo Horizonte, Minas
Gerais, CEP 30855-435, Brazil
Rua São Domingos da Prata, 200, Bairro Vila Barros, CEP 07193-160,
Guarulhos, São Paulo, Brazil
3900-1 Place Ville-Marie, Montréal Québec H3B 4M7, Canada
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
2920 Murray Street, Port Moody BC V3H 1X2, Canada
Antiguo Camino a Coquimbo S/N Lote 1-3/ 1-9, Colina, Sanitago, Chile
Av. Presidente Eduardo Frei Montalva 5151, Conchalí, 8550678
Santiago, Chile
Avenida Boulevard, Aeropuerto Norte #9649, Pudahuel, Santiago,
Chile
2F, Building 4, No. 115 Lane 1276, Nanle Road, Songjiang District,
Shanghai, China
3F, Building 4, No. 115 Lane 1276, Nanle Road, Songjiang District,
Shanghai, China
Floor 9, Xinpeng Plaza, No. 200, Lane 91, E'shan Road, Pudong New
Area , Shanghai, 200127, China
No. 181 Zhongshe Road, Maogag Town, Songjiang District, Shanghai,
China
No. 301 Rongle East Road, Songjiang District, Shanghai, China
No. 9 Fuqian Road, Shandong Zhuang Town, Pinggu District, Beijing,
China
Room 368, Part 302, No. 211 Fute North Road, Free Trade Zone,
Shanghai, China
Room 850, No. 1111 Chang Shou Rd, Jingan District, Shanghai, China
Room 912, Central Business Tower, 88 Fuhua 1st Road, Futian,
Shenzhen, China
Southwest of No.1 House, 3F, Building A, Tower 2, Xinhaiyi, No. 58
Heshun Road, Suzhou Industrial Park, Jiangsu, China
Carrera 30 No. 15-30, Bogota D.C., Colombia
Funza, (Cundinamarca), Colombia
Dolnokrčská 2029/54a, Krč, Praha 4, 140 00, Czech Republic
Přátelstvi 1011/17, Uhřiněves, Praha 10, 10 400, Czech Republic
Greve Main 30, 2670 Greve, Denmark
Indkildevej 2 c, DK-9210, Aalborg SØ, Denmark
Kirkebjergvej 17, 4180 Sorø, Denmark
Vesterlundvej 5-7, DK-2730 Herlev, Denmark
11 C rue des Aulnes, 69410 Champagne-au-Mont-d'or, France
Key
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
Address
13 rue des Battants RN 20, 31140, Saint-Alban, France
140 rue Victor Hugo, 92300 Levallois-Perret, France
191-195 Avenue Charles de Gaulle, 9220 Neuillly-sur-Seine, Paris,
Key
46
47
France
2 Rue Paul Vaillant Couturier, 76120 Le Grand Quevilly, France
20 rue VEGA, 44470 Carquefou, France
26/28 rue Jean Perrin, 28300, Mainvilliers, France
29 avenue des Morillons, ZA des Doucettes, 95140 Garges les
Gonesses, France
440 route de Rosporden, 29334 Quimper, France
5 avenue Gutenberg, ZA Pariwest, 78310 Maurepas, France
50 Avenue d'Allemagne, Rond Point de L'Europe ZA Albasud, 82000
Montauban, France
530 rue Jacqueline Auriol ZA de Saint Thudon, 29490, Guipavas,
France
556 Chemin du Mas de Cheylon, CAP Delta 30941, Nimes, France
585, Rue Alain Colas, 29200 Brest, France
7 route de Villiers, 77780, Bourron-Marlotte, France
725 Route des Vernes Pringy, 74370, Annecy, France
Boulevard Francois-Xavier Faffeur, Zone Industrielle Lanollier, 11000,
Carcassonne, France
Lieudit la Trentaine, 77690, La Genevraye, France
Parc d'activite Des Lacs, 22 rue Saint Exupery, 33 290 Blanquefort,
France
Quai Louis Aulagne, 69 190 Saint Fons, France
Route Nationale 97, ZA Les Plantades, 83130 La Garde, France
Route Nationale, 57420, Louvigny, France
Rue Charles Remi Arnoult, 21700 Nuits Saint Georges, France
Rue de Pau, 40500 Saint-Server, France
Rue Edouard Branly, ZAC des Chamonds 58640, Varennes-Vauzelles,
France
Rue Jean-Marie David, ZA la Teillais, 35740, Pacé, France
Rue Nungesser et Coli d2A Nantes Atlantique,, 44860 Saint-Aignan de
Grand Lieu, France
Rue Pierre Pascal Fauvelle, 66000 Perpignan, France
ZI Maison Dieu RN 74, 21220 Fixin, France
ZI Val de Seine, 17 avenue Nobel, 92390 Villeneuve la Garenne, France
Zone Artisanale Maritime du Bassin de Thau, Route de Séte, 34540
Ballaruc Les Bains, France
Zone d'activite Sud Saint Jean, 57130 Jouy aux Arches, 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
11th Floor, One Pacific Place, 88 Queensway, Hong Kong, China
Room 1303, 13th Floor, Nan Fung Tower, 173 Des Voeux Road Central,
Hong Kong
Room 2103, Futura Plaza, 111 How Ming Street, Kwun Tun, Hong Kong
Unit 3-4 18F Tower 6, China Hong Kong City, Tsim Sha Tsui, Kowloon,
Hong Kong
2310 Szigetszentmiklos, Kantor ur.10, Hungary
2336 Dunavarsány, 071/33 hrsz, Hungary
H-1097 Budapest, Gyáli út 37/A, Hungary
H-2051 Biatobrágy, Vendel Park, Erdőalja út 3., Hungary
Vendel Park, Erdőalja út 3., 2051 Biatorbágy, Hungary
10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland
4 Kinneret Street, POB 1139, Airport City, Ben Gurion Airport,
7019802, Israel
Emek Ha‘Ela 250, Modi‘in, P.O.B 553, LOD 7110601, Israel
Via 8 Marzo n. 6, 42025 Corte Tegge di Cavriago, Reggio Emilia, Italy
Via Brigata Reggio no. 24, Reggio Emilia, Italy
Via Guglielmo Marconi no. 35, Rozzano, Italy
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
158
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION CONTINUED
List of registered office addresses continued
Address
Via Pellicceria n. 10, 50123, Florence, Italy
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
Ave. Bonifacio Salinas 203, Col Central de Carga, CP67129, CD
Guadalupe, Nuevo Leon, Mexico
Carretera Miguel Alemán KM21 Edificio 4C Prologis Park, Apodaca,
N.L., México C.P, 66627, Mexico
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
Avenida Cafetales No. 1702, Interior 201, between streets Rancho
Recoveco and Rancho Estopila, Hacienda de Coyoacán, Coyoacán,
Mexico City, 04970, Mexico
Barnsteenstraat 1-A, 1812 SE Alkmaar, Netherlands
Curieweg 19, 3208, KJ 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
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
1 Penjuru Close, 608617, Singapore
Na pantoch 18, 831 06 Bratislava, Slovakia
Calle Castilla-León, Parcela 45 Onda, 12200, Castellón, Spain
Calle Filats, 8 Polg. Industrial Prologis Park, Sant Boi de Llobregat,
Barcelona, Spain
Calle las Palmeras 7, Polígono Industrial La Sendeilla, 28350
Ciempozuelos, 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
Parque Empresarial Las Mercedes, Edefficio 5, 3 Planta, Avenida de
Aragon 330 , Madrid 28022, Spain
Santo Domingo De La Calzada, La Rioja, 26250, Carretera De
Logrono, Spain
c/o ALR Fiduciaire Rummel SA, ch. Valmont 224, 1260, NYON,
Switzerland
c/o Weita AG, Nordring 2, 4147 Aesch, Switzerland
Güterstrasse, 4313 Möhlin, Switzerland
Nordring 2, 4147 Aesch, Switzerland
Oberebenestrasse 53, CH-5620 Bremgarten, Switzerland
Akçaburgaz Mahallesi, 3137. Sokak, No.19, Esenyurt, İstanbul, Turkey
Tersane Cad. No:115 Karaköy, İstanbul, Turkey
Şerifali Mah. Turgut Özal Blv. B Blok No:170 Ümraniye, İstanbul,
Turkey
72 Cathedral Road, Armagh, BT61 8AG, United Kingdom
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
Key
97
Address
Arthur Cox, Victoria House, Gloucester Street, Belfast, BT1 4LS,
United Kingdom
York House, 45 Seymour Street, London, W1H 7JT, United Kingdom
406 South Boulder #400, Tulsa OK 74103, United States
Corporate Creations Network Inc., 15 North Mill Street, Nyeck 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., 1430 Truxtun Avenue, 5th Floor,
Bakersfield CA 93301, 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
César Cortinas 2037, Montevideo, Uruguay
Key
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
Financial calendar
Annual General Meeting
Results for the half year to 30 June 2018
Results for the year to 31 December 2018
Annual Report circulated
2018
18 April
28 August
2019
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 2017 the Company had 4,895 (2016: 4,587) registered
shareholders who held 335.9 million (2016: 335.6 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
4,228
409
160
45
53
4,895
% of issued
share capital
2
4
11
9
74
100
159
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION CONTINUED
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.
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 and at
www.fca.org.uk/scamsmart. 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.
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.
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.
160
Bunzl plc Annual Report 2017
STRATEGIC REPORT
STRATEGIC REPORT
DIRECTORS’ REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
FIVE YEAR REVIEW
Revenue
Operating profit
Finance income
Finance expense
Profit before income tax
Income tax
Profit for the year attributable to the Company’s equity holders
2017
£m
8,580.9
456.0
10.6
(57.3)
409.3
(98.8)
310.5
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
Basic earnings per share
94.2p
80.7p
71.0p
64.5p
63.5p
Alternative performance measures†
Adjusted operating profit
Adjusted profit before income tax
Adjusted profit for the year
Adjusted earnings per share
† See Note 2w on page 110 for further details of the alternative performance measures.
589.3
542.6
393.4
119.4p
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
The cover is printed on Revive 100 silk
which is made from 100% post consumer
waste. The text is printed on Amadeus 50
Silk which is produced using 50% recycled
post-consumer waste and 50% wood fibre
from fully sustainable forests with FSC®
certification. All pulps used are Elemental
Chlorine Free (ECF). Printed in the UK by
Pureprint who are a Carbon Neutral
company. Both the manufacturing mill
and the printer are registered to the
Environmental Management System
ISO14001 and are Forest Stewardship
Council® (FSC) chain-of-custody certified.
Designed and produced by
161
Bunzl plc Annual Report 2017
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
York House
45 Seymour Street
London W1H 7JT
www.bunzl.com