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Building a
sustainable
future
Bunzl plc Annual Report 2019
Detail
pg 18
We have a
proven strategy
We offer a
unique service
We are committed
to sustainability
Detail
pg 14
Detail
pg 34
In this report
Strategic report
1
2
4
6
10
12
14
16
18
22
24
32
34
50
56
Financial highlights
Group at a glance
Chairman’s statement
Chief Executive Officer’s review
Investment case
Purpose, values and culture
Service offering
Business model
Strategy
Key performance indicators
Operating review
Engaging with our stakeholders
Sustainability
Principal risks and uncertainties
Financial review
Directors’ report
66
68
77
80
85
114
Board of directors
Corporate governance report
Nomination Committee report
Audit Committee report
Directors’ remuneration report
Other statutory information
Financial statements
118
119
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of
changes in equity
Consolidated cash flow statement
Notes
Company balance sheet
Company statement of changes
in equity
Notes to the Company financial
statements
Statement of directors’
responsibilities
Independent auditors’ report to
the members of Bunzl plc
Shareholder information
Five year review
120
121
122
124
169
170
171
177
178
184
192
www.bunzl.com
Financial highlights
Our long term track record of strong cash generation has enabled us to pay a
growing dividend over the past 27 years and to support our growth strategy
by making acquisitions and reinvesting in the underlying business.
Adjusted earnings per share*
Cash conversion*
Dividend per share
132.2p
(IAS 17 – 2019: 132.4p; 2018: 129.6p)
101%
(2018: 94%)
1.0%
Growth at constant exchange rates
(Actual exchange rates +2.2%)
51.3p
(2018: 50.2p)
2.2%
Revenue
Adjusted operating profit*
Adjusted profit before income tax*
£9,326.7m
(2018: £9,079.4m)
1.0%
£653.3m
£578.2m
(IAS 17 – 2019: £630.9m; 2018: £614.0m)
(IAS 17 – 2019: £579.1m; 2018: £559.0m)
1.5%
2.4%
Growth at constant exchange rates
(Actual exchange rates +2.7%)
Growth at constant exchange rates
(Actual exchange rates +2.8%)
Growth at constant exchange rates
(Actual exchange rates +3.6%)
Operating profit
Profit before income tax
Basic earnings per share
£528.4m
£453.3m
104.8p
(IAS 17 – 2019: £506.0m; 2018: £466.2m)
(IAS 17 – 2019: £454.2m; 2018: £424.8m)
(IAS 17 – 2019: 105.0p; 2018: 98.4p)
Growth at actual exchange rates +8.5%
Growth at actual exchange rates +6.9%
Growth at actual exchange rates +6.7%
* Alternative performance measure (see Note 4 on page 134).
Growth at constant exchange rates is calculated by comparing the 2019 results to the results for 2018 retranslated at the average exchange rates used for 2019.
Basis of preparation IFRS 16 ‘Leases’
The Group adopted International Financial Reporting
Standard (‘IFRS’) 16 ‘Leases’ with effect from
1 January 2019 using the modified retrospective
approach to transition and, in accordance with the
standard, the Group’s financial results for the year
ended 31 December 2018 have not been restated.
As a result, the financial results for the year ended
31 December 2019 are not directly comparable with
those for the year ended 31 December 2018. However,
in order to provide a meaningful comparison between
the two reporting periods, where appropriate to do
so, the Group’s financial results for the year ended
31 December 2019 are also presented in accordance
with IAS 17 ‘Leases’, being the accounting standard
that was applicable for the year ended 31 December
2018. Unless otherwise stated, all references in this
Annual Report to growth rates and year-on-year
comparisons relating to the Group’s statutory and
alternative performance measures are stated on a
consistent basis under IAS 17. Further details of the
impact of the adoption of IFRS 16 on the Group’s
financial results are set out in Notes 1 and 3.
Reconciliation of alternative performance measures to statutory measures
for the year ended 31 December 2019
Adjusting items
Customer
relationships
amortisation
£m
(107.3)
Acquisition
related
items
£m
(17.6)
Alternative
performance
measures
£m
653.3
12.4
(87.5)
Statutory
measures
£m
528.4
12.4
(87.5)
Operating profit
Finance income
Finance expense
578.2
(137.6)
(107.3)
29.1
(17.6)
4.4
453.3
(104.1)
Profit before income tax
Income tax
440.6
(78.2)
(13.2)
349.2
Profit for the year
132.2p
(23.4)p
(4.0)p
104.8p
Basic earnings per share
IFRS
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
Further details of the Group’s alternative performance measures are set out in Note 4.
Bunzl plc Annual Report 2019
1
Strategic reportFinancial statementsDirectors’ report
Group at a glance
We provide a one-stop-shop, on-time and
in-full specialist distribution service across
more than 30 countries, supplying a broad
range of internationally sourced non-food
products to a variety of market sectors.
19,000
Employees
31
Countries
6
Market sectors
160
Acquisitions since 2004
27
Years of dividend growth
North America
Revenue
£5,473.2m
% of 2019 revenue
59%
Adjusted operating profit*
£343.6m
• Revenue broadly unchanged
at constant exchange rates.
• Adjusted operating profit* up
0.6% at constant exchange rates.
• Operating margin* unchanged
at 6.0%.
• Return on operating capital*
down from 48.4% to 45.5%.
Read more
pg 24
Markets served
(% of 2019 revenue)
7% 2%
11%
29%
12%
13%
26%
Foodservice
Grocery
Safety
Cleaning & hygiene
Retail
Healthcare
Other
2
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Directors’ report
Financial statements
Continental Europe
UK & Ireland
Revenue
£1,829.8m
% of 2019 revenue
20%
Revenue
£1,242.1m
% of 2019 revenue
13%
Rest of the World
Latin America and Asia Pacific
Revenue
£781.6m
% of 2019 revenue
8%
Adjusted operating profit*
Adjusted operating profit*
Adjusted operating profit*
£182.1m
£87.1m
£61.6m
• Revenue up 3.0% at constant
• Revenue down 1.7% at constant
• Revenue up 8.8% at constant
exchange rates.
• Adjusted operating profit* up
2.6% at constant exchange rates.
• Operating margin* unchanged
at 9.8%.
• Return on operating capital*
down from 60.4% to 60.1%.
exchange rates.
• Adjusted operating profit* down
4.1% at constant exchange rates.
• Operating margin* down from
6.9% to 6.7%.
• Return on operating capital*
down from 87.8% to 84.4%.
exchange rates.
• Adjusted operating profit* up 8.3%
at constant exchange rates.
• Operating margin* down from 7.6%
to 7.5%.
• Return on operating capital* down
from 31.9% to 31.0%.
Read more
pg 26
Read more
pg 28
Read more
pg 30
Foodservice 29%
Grocery 26%
Safety 13%
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.
Cleaning &
hygiene 12%
Cleaning and hygiene materials, including
chemicals and hygiene paper, to cleaning
and facilities management companies and
industrial and public sector customers.
Other 2%
A variety of product ranges to other end
user markets.
Goods-not-for-resale, including food
packaging, films, labels and cleaning
and hygiene supplies, to grocery stores
and supermarkets.
Personal protection and safety equipment,
including gloves, boots, hard hats, ear and
eye protection and other workwear, to
industrial and construction markets.
Retail 11%
Healthcare 7%
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.
Healthcare consumables, including
gloves, swabs, gowns, bandages and
other healthcare related equipment
and cleaning and hygiene products
to hospitals, care homes and other
facilities serving the healthcare sector.
* Alternative performance measure (see Note 4 on page 134).
Bunzl plc Annual Report 2019
3
Strategic report
Chairman’s statement
Bunzl’s success is derived
from the strength, resilience
and reliability of our
business model, combined
with the execution of our
long established, consistent
and proven strategy.
Philip Rogerson
Chairman
Results
Against the background of the mixed
macroeconomic and market conditions
which prevailed during 2019 across the
countries and sectors in which we operate,
I am pleased to report that Bunzl has
produced another resilient performance.
The return on average operating capital on
an IAS 17 basis decreased from 50.7% in
2018 to 48.4%, principally as a result of an
increase in average capital employed in the
underlying business, and the return on
invested capital on an IAS 17 basis was
down from 15.0% to 14.6%.
Group revenue was £9,326.7 million
(2018: £9,079.4 million), an increase of 2.7%,
and adjusted operating profit was £653.3
million with adjusted earnings per share of
132.2p. On an IAS 17 basis, adjusted
operating profit was £630.9 million, an
increase of 2.8% (2018: £614.0 million), while
adjusted earnings per share were 132.4p
(2018: 129.6p), an increase of 2.2%.
Overall currency translation movements,
principally the weakening of sterling against
the US dollar, had a positive impact on the
reported Group growth rates at actual
exchange rates. At constant exchange rates,
revenue increased by 1.0% and adjusted
operating profit on an IAS 17 basis rose by
1.5% with adjusted earnings per share up
1.0% and the Group operating margin up
from 6.7% to 6.8%.
Dividend
The Board is recommending a final dividend
of 35.8p. This brings the total dividend
for the year to 51.3p, up 2.2% compared to
2018. Shareholders will again have the
opportunity to participate in our dividend
reinvestment plan.
Strategy
We continue to pursue our consistent and
proven strategy of developing the business
through organic growth, consolidating the
markets in which we compete through
focused acquisitions and continuously
improving the quality of our operations,
thereby making our businesses more
efficient and sustainable.
We look to achieve organic growth by
applying our extensive resources and
specialist knowledge and expertise to
enable our customers to reduce or eliminate
the hidden costs of sourcing and distributing
a broad range of goods-not-for-resale and to
make their businesses more sustainable.
By offering an efficient and cost-effective
one-stop-shop to meet their product demands,
combined with the provision of a variety of
value-added, innovative, sustainable and
customised service solutions, our customers
can focus on their core businesses and
achieve purchasing efficiencies and savings,
while freeing up working capital, improving
their distribution capabilities, reducing
carbon emissions and simplifying their
own internal administration processes.
Although we purchased fewer businesses
in 2019 than in recent years, growth through
acquisitions remains a key element of our
strategy which has enabled us to build
leading positions in a number of market
sectors in the Americas, Europe and
Asia Pacific.
Investment
Investment in the business to support our
growth strategy, enhance our asset base
and improve the efficiency and sustainability
of our operations is an ongoing process.
4
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Delivering
value for our
stakeholders
During the year we have continued
to expand and improve our facilities,
consolidate our warehouse footprint
and enhance our IT systems and digital
platforms. Together these investments
help us to improve our service offering
and customer experience which helps
us to retain a competitive advantage.
Sustainability
During the year we have focused on
the further development of the Group’s
sustainability strategy. This has included
the recruitment of experts embedded within
the business areas, headed by a new Group
Head of Sustainability and the development
of our new sustainability framework
which brings together all strands of our
responsibilities in this area as a large
international company. Since we are not
a manufacturer, and given our size and
expertise, we have a unique position in the
supply chain which enables us to advise our
customers on their sustainability strategies
and, at the same time, benefit from our
relationships with our extensive supplier
base in order to bring a broad range of
sustainable products to market.
We see the development and delivery of an
effective people strategy as a key part of our
sustainability framework. We have made
good progress in identifying the key
capabilities we need to grow as a business,
developing a robust leadership pipeline and
articulating the values underpinning the
culture we wish to foster across our diverse
group of businesses. The launch of our new
Senior Leadership Programme is a tangible
example of our people strategy in action.
Particularly powerful has been the
opportunity for Board members to spend
time with attendees of the programme
from across the Group and also to attend
employee forum meetings in both Europe
and North America which has allowed the
directors to engage with representatives of
the wider workforce.
As a service oriented company, the hard work,
loyalty and enthusiasm of our employees
around the world are critical to our ongoing
growth and success. I would like to thank
everyone for their significant contributions
and achievements during the year.
Board
As announced in May 2019, after more
than 13 years in the role of Finance Director
and 25 years with Bunzl, Brian May retired
from the Board on 31 December 2019 and
will leave the Group at the end of February
2020. On behalf of the Board, I would like to
thank Brian for the outstanding contribution
he has made to Bunzl’s success over many
years. He leaves the Group with our very
best wishes and our deepest gratitude and
thanks for his dedicated service to Bunzl.
Brian has been succeeded by Richard Howes
who joined the Board and assumed the role
of Chief Financial Officer on 1 January 2020.
Richard has a wealth of experience across
a number of sectors, working for multi-site
businesses with substantial global footprints.
He also has a strong track record of
leading finance functions at a number of
international public companies. We are
pleased to welcome him to Bunzl.
Peter Ventress joined the Board on 1 June
2019 as a non-executive director and
Chairman designate. Peter has a strong
track record both as an executive and
Share price range p
High
Low
2,551p
1,943p
2,465
2,452
2,551
2,436
1,950
1,820
2,016
1,936
1,943
1,671
1,735
1,367
1,450
1,167
1,014
852
884
777
616
676
10
11
12
13
14
15
16
17
18
19
non-executive director of a number of
international distribution businesses
and will bring valuable knowledge and
experience to Bunzl. He will assume the
role of Chairman of the Board and of the
Nomination Committee following my
retirement at the conclusion of the
Company’s Annual General Meeting
in April 2020.
Eugenia Ulasewicz, who has served as
a non-executive director since April 2011,
will also be retiring after the Company’s
Annual General Meeting in April. Her
independent advice and significant
contribution to the Board’s deliberations
have been greatly appreciated and she
will leave with our thanks and best wishes.
Philip Rogerson
Chairman
24 February 2020
Bunzl plc Annual Report 2019
5
Strategic reportFinancial statementsDirectors’ report Chief Executive Officer’s review
We have delivered a
resilient set of results
which demonstrate the
strength of our value
proposition and the robust
competitive position of our
diversified businesses
across our fragmented
international markets.
Frank van Zanten
Chief Executive Officer
Key highlights
• Revenue up 1.0% and adjusted profit
before income tax up 2.4% at constant
exchange rates
• Group operating margin up from 6.7%
to 6.8% at constant exchange rates
• Continued strong cash conversion
of 101% and free cash flow growth
of 10%
• Committed acquisition spend of
£124 million during the year with
four acquisitions announced in
recent months (annualised revenue
£300 million) and a promising pipeline
• 27 year track record of dividend
growth continues with a 2.2%
increase in the dividend for the year
Overview
We have once again demonstrated the
strength, resilience and reliability of our
business model and strategy which together
have delivered a resilient set of results
against the backdrop of challenging trading
conditions in some of our markets. It is
particularly pleasing to see that the Group
operating margin has increased at constant
exchange rates from 6.7% to 6.8%.
During the year we continued to invest
in IT and digital projects and launched
additional digital platforms to enhance
further our customers’ experience.
Collaboration and sharing of best practice
between our businesses around the world
have increased with a view to bringing
additional benefits for our customers.
The sustainability agenda has continued to
develop with a particular focus on single-use
plastics. By providing specialist advice
and assistance and promoting alternatives
to plastic products and supporting the
development of innovative products, we have
been able to offer customers more choice as
they look to increase the compostability and
recyclability of many of the items that they
use and thereby make their businesses
more sustainable.
As a non-manufacturer, our global sourcing
capabilities combined with the services
provided by our Asia sourcing office have
again proved to be a competitive advantage
when dealing with our customers. Although
we have not yet seen any material impact
on our supply chain, we are continuing
to monitor the situation relating to the
Coronavirus in China which might impact
our ability to import certain products if the
restrictions on manufacturing activities
continue for a sustained period of time.
Operating performance
With 88% of the Group’s revenue generated
outside the UK, the weakening of sterling
against certain currencies, particularly the
US dollar and the Canadian dollar, partly
offset by the strengthening of sterling
against the euro, Australian dollar and
Brazilian real, has had a positive translation
impact of between 1% and 2% on the
Group’s reported results. As in previous
reporting periods, the operations, including
the relevant growth rates and changes in
operating margin (which, as referred to
earlier in this Annual Report, for consistency
are presented on the basis of the results
prepared under IAS 17), are therefore
reviewed below at constant exchange rates
to remove the impact of these currency
6
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report A strong and
diversified
business with a
proven strategy
for growth.
A unique service
offering with
customers at
its heart.
Proactive
approach to
sustainable
products.
Depth and breadth
of our business
Customised solutions that
can be fully integrated
Our approach to
sustainability
We are continuing to pursue our long
established, consistent, proven and
successful compounding strategy in
order to create value for our stakeholders
and through which we have built leading
positions in a number of market sectors
in the Americas, Europe and Asia Pacific.
Our unique service offering is at the
heart of our business, and the reason
our customers choose to buy from us.
Our customised solutions enable us to
add value to our customers’ operations
ensuring they receive their orders
on-time and in-full whatever their
requirements.
Sustainability is core to how Bunzl does
business and how we’ll grow in the
future. We have recently developed a
new sustainability framework and
strengthened our team of sustainability
experts who will work to embed this
across our businesses internationally.
movements. Changes in the level of revenue
and profits at constant exchange rates have
been calculated by retranslating the results
for 2018 at the average rates used for 2019.
In addition, this Annual Report refers to
alternative performance measures which
exclude a number of non-operational items
such as charges for customer relationships
amortisation, acquisition related items and
the profit or loss on disposal of businesses
and any associated tax, where relevant.
We do not take these items into account
when considering the results of the
business and they are therefore removed
in calculating the profitability and other
measures by which we assess the
performance of the Group. Further details
of these alternative performance measures
are set out in Note 4 to the consolidated
financial statements.
Unless otherwise stated, all references
in this review to operating profit are to
adjusted operating profit while operating
margin refers to adjusted operating
profit as a percentage of revenue. A
reconciliation between adjusted operating
profit and statutory operating profit is
set out in Note 4 to the consolidated
financial statements.
In 2019 revenue increased 1.0% (2.7% at
actual exchange rates) to £9,326.7 million
due to the benefit of acquisitions, partly
offset by the impact of disposals made in
2018, as well as a small decline in organic
revenue of 0.2%. Operating profit was
£653.3 million. On an IAS 17 basis,
operating profit was £630.9 million, an
increase of 1.5% (2.8% at actual exchange
rates). Operating margin was 7.0% (or 6.8%
on an IAS 17 basis, up from 6.7% at constant
exchange rates and unchanged at actual
exchange rates).
In North America revenue was broadly
unchanged (up 3.7% at actual exchange
rates) due to the effect of acquisitions
offset by a decline in organic revenue which,
as indicated in previous announcements,
was principally due to lower sales to a large
grocery customer as a result of account
specific price and product specification
changes. Operating profit increased 0.6%
(4.4% at actual exchange rates) with the
operating margin of 6.0% unchanged at both
constant and actual exchange rates. Revenue
in Continental Europe rose 3.0% (1.8% at
actual exchange rates) as a result of organic
growth and the impact of acquisitions, partly
offset by the disposal of OPM in France in
February 2018, with operating profit up 2.6%
(1.1% at actual exchange rates) with the
operating margin of 9.8% also unchanged
at both constant and actual exchange rates.
In UK & Ireland revenue was down 1.7%
mainly as a result of the disposal of the
marketing services business in June 2018
and operating profit decreased 4.1% (down
4.0% at actual exchange rates) due to the
disposal and challenging market conditions,
with the operating margin decreasing from
6.9% to 6.7%. Excluding the impact of the
disposal, revenue was down 0.2% with
operating profit 1.7% lower. In Rest of the
World revenue increased 8.8% (5.6% at
actual exchange rates) principally due to the
acquisition of Volk do Brasil in January 2019
as well as organic growth and operating
profit was up 8.3% (4.6% at actual exchange
rates) with the business area operating
margin down 10 basis points at both
constant and actual exchange rates to 7.5%.
Adjusted profit before income tax was
£578.2 million. On an IAS 17 basis, adjusted
profit before income tax was £579.1 million,
an increase of 2.4% (3.6% at actual exchange
rates) due to the growth in adjusted
operating profit and a decrease in the net
finance expense. Profit before income tax
was £453.3 million and, on an IAS 17 basis,
was £454.2 million, an increase of 5.4%
(up 6.9% at actual exchange rates). Basic
earnings per share were 104.8p and adjusted
Bunzl plc Annual Report 2019
7
Strategic reportFinancial statementsDirectors’ report Chief Executive Officer’s review continued
The good progress we
have made developing
the sustainability agenda
will further enhance our
competitive advantage.
earnings per share were 132.2p. On an
IAS 17 basis, basic earnings per share were
105.0p, an increase of 5.2% (6.7% at actual
exchange rates), and adjusted earnings per
share were 132.4p, up 1.0% (2.2% at actual
exchange rates).
Once again, the operating cash flow, which
is before acquisition related items, was
very strong with cash conversion (the ratio
of operating cash flow to lease adjusted
operating profit) at 101%. The ratio of net
debt to EBITDA calculated at average
exchange rates and in accordance with the
Group’s external debt covenants, which are
based on historical accounting standards,
was 1.9 times compared to 2.0 times at the
end of 2018.
Acquisitions
Excluding Volk do Brasil which we agreed
to purchase in 2018 and completed in
January 2019, during the year we acquired
three businesses for a total committed
spend of £124 million, thereby adding
annualised revenue of £97 million. We
have made a good start in 2020 with two
businesses purchased so far this year and
a further committed acquisition which we
expect to complete at the end of March.
The acquisition pipeline is promising and
a number of discussions with potential
targets are ongoing. We have significant
financial capacity to make a number of
additional acquisitions.
In February 2019 we acquired Liberty
Glove & Safety which is engaged in
the sale of a full range of personal
protection equipment, principally gloves,
to distributors in the US. Revenue in
2018 was £70 million.
Specialist
sustainability teams
We have expanded our dedicated
team of plastics and sustainability
experts and now have 11 specialists
working in our businesses around
the world.
Through collaboration and sharing
of best practice, we have used this
expertise to design our new global
framework for sustainability and are
rolling out programmes and providing
practical advice on which solutions can
meet our customers’ needs while
making their businesses more
sustainable.
Sustainability
pg 34
Coolpack, a distributor based in the
Netherlands principally engaged in
the supply of specialist packaging to
supermarkets and the pharmaceutical,
food processor and foodservice sectors,
was acquired in April. Revenue in 2018
was £4 million.
At the end of November we purchased
FRSA. The business distributes specialist
safety and personal protection equipment
focused on fire, rescue and emergency
response services throughout Australia.
Revenue is expected to be approximately
£20 million in 2020.
At the beginning of January 2020, we
purchased Joshen Paper & Packaging, a
distributor of packaging and other goods-
not-for-resale to customers operating in the
grocery, foodservice and cleaning & hygiene
sectors in the US. Revenue is expected to
be approximately £225 million in 2020.
Today we are announcing the acquisition
of Medcorp in Brazil and ICM in Denmark.
Medcorp, a distributor of a broad range of
medical products to leading private hospitals
and redistributors in Brazil, was acquired
at the end of January 2020. Revenue in
2019 was £11 million. The purchase of ICM,
a leading distributor of personal protection
equipment to both end users and
redistributors in Denmark, is due to be
8
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report
completed at the end of March once
clearance of the transaction by the Danish
competition authority has been received.
Revenue in 2019 was £48 million.
Prospects
Although we continue to see challenging
trading conditions in some markets, our
strong competitive position, diversified
and resilient businesses and ability to
consolidate our fragmented markets
further should lead to improved growth
at constant exchange rates principally
due to the impact of the good level of recent
acquisition activity.
In North America we expect good revenue
growth due to the recent acquisition of
Joshen but will see the continued impact
on revenue in the first half of 2020 from
the 2019 price and product specification
changes with our largest grocery
customer and weakness in the grocery
and retail sectors throughout the year.
We will continue to focus on operating
costs, productivity and other efficiency
improvements. In Continental Europe,
despite mixed macroeconomic conditions
across the region, we expect to develop
further due to the combination of some
organic revenue growth and the benefit of
the proposed acquisition announced today.
In UK & Ireland growth is expected to be
limited given the prevailing uncertain
economic and market conditions. In Rest
of the World we expect to see good progress
due to a combination of organic and
acquisition growth.
In relation to acquisition activity, the
pipeline is promising with a number
of discussions ongoing.
Frank van Zanten
Chief Executive Officer
24 February 2020
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.
Frank van Zanten
Chief Executive Officer
Jim McCool
Chief Executive Officer,
North America
Alberto Grau
Managing Director,
Continental Europe
Diana Breeze
Director of Group
Human Resources
Richard Howes
Chief Financial Officer
Andrew Mooney
Director of Corporate
Development
Paul Hussey
General Counsel and
Company Secretary
Andrew Tedbury
Managing Director,
UK & Ireland
Board of directors
pg 66
Jonathan Taylor
Managing Director,
Latin America
Kim Hetherington
Managing Director,
Asia Pacific
Bunzl plc Annual Report 2019
9
Strategic reportFinancial statementsDirectors’ report Directors’ report
Financial statements
Investment case
A strong
track
record of
delivering
growth
10
Bunzl plc Annual Report 2019
Strategic report Directors’ report
Financial statements
A diversified,
balanced
and resilient
business
A consistent
and proven
compounding
strategy
Significant
opportunities
for future
growth
Disciplined
financial
management
• Profitable organic
• Significant
growth.
• Continuous operating
model improvements.
• Disciplined approach
to self-funded
acquisitions.
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.
• Presence in 31
countries.
• Six customer
focused market
sectors.
• Fragmented
markets.
• Long term
relationships
with customers
and suppliers.
Revenue from
resilient sectors
74%
A long term
track record
of good
returns for our
shareholders
• Sustained increases
in revenue, adjusted
operating profit
and adjusted
earnings per share.
• Creation of
shareholder value
through long term
dividend and share
price growth.
RAOC*
36.9%
(IAS 17: 48.4%)
ROIC*
13.6%
(IAS 17: 14.6%)
160
acquisitions
since 2004
Average cash
conversion*
since 2004
97%
27
years of
dividend growth
£3.4bn
acquisition cash flow
Group at a glance
pg 2
Our strategy
pg 18
Our strategy
pg 18
Financial review
pg 56
Chairman’s statement
pg 4
* See ‘Key performance indicators’ on pages 22 and 23.
Bunzl plc Annual Report 2019
11
Strategic report Directors’ report
Financial statements
Purpose, values and culture
Our success
is underpinned
by our values
and culture
12
Bunzl plc Annual Report 2019
Strategic report Directors’ report
Financial statements
The successful implementation
of our strategy is critical to the
delivery of the Group’s purpose
and is underpinned by the values
and behaviours that shape our
culture and the way that we
conduct our business.
During the year, further
consideration was given as to
how best to articulate Bunzl’s
core values, behaviours and
ways of working which, taken
together, form our internal
culture, and, more importantly,
shape the way in which we
interact with our key
stakeholders.
Operating companies in our
decentralised organisational
structure operate through
the application of their own sets
of values, which are guided by
the overriding Group values of
humility, responsiveness,
creativity, diversity, customer-
centricity, reliability and
transparency, with the aim of
achieving our common purpose.
s
n iti e
u
m
m
o
C
r
a
p
s
n
T r a
Stakeholders
Culture
Culture
Custo
m
ers
Values &
behaviours
e n c y
Humility
Strategy
A
c
q
nic gro w th
a
g
r
O
bility
a
i
l
e
R
s
r
e
i
l
p
p
u
S
Purpose
To deliver essential
business solutions around
the world and create long
term sustainable value
for the benefit of our
stakeholders
u
i
s
i
t
i
o
n
g
r
o
w
t
h
R
e
s
p
o
n
s
i
v
e
n
e
s
s
E
m
p
l
o
y
e
e
s
C
u
s
t
o
m
e
r
-
c
e
O
p
n
tricity
E
n
viro
n
ment
e
rating model i m p r
e
v
o
Diversit y
Culture
m e nts
Creativity
o ld ers
h
r e
a
h
S
Bunzl plc Annual Report 2019
13
Strategic report
Directors’ report
Financial statements
Service offering
A unique
offering
for our
customers
14
Bunzl plc Annual Report 2019
Strategic report One-stop-shop
Value added
services
On-time,
in-full delivery
Expert
knowledge
and advice
Delivery
options
Customised
solutions
One order,
one delivery,
one invoice
Customised
digital
solutions
Customised
management
information
Competitively
priced products
Local and
national
distribution
network
One-stop-shop: this is the very essence of
the Bunzl business model. By providing our
customers with a broad range of essential
items, readily available from stock, they are
able to focus on their core businesses, achieve
purchasing efficiencies and savings and
minimise their working capital requirements.
On-time, in-full delivery: reliability is key
to our customers. We provide an on-time and
in-full service by maintaining high product
availability, together with customised
delivery slots and ‘beyond the back door’
delivery options.
One order, one delivery, one invoice:
by ensuring we ‘stock what we sell and
sell what we stock’ our customers
receive all of their ordered items in one
consolidated delivery with one invoice to
pay, thereby reducing costs, simplifying
their internal administration and reducing
carbon emissions.
Customised digital solutions: by
using our scale and investing in our IT
capabilities we are able to offer electronic
order processing through webshops
including customised versions, apps and
Bunzl plc Annual Report 2019
Electronic Data Interchange, together with
further enhancements such as budgetary
controls and asset tagging.
Competitively priced products: our strong
and long standing relationships with the
branded manufacturers combined with our
own brand products which are principally
sourced via our Shanghai purchasing office
allow us to offer our customers a complete
range of products at competitive prices.
Local and national distribution network:
due to our extensive branch network and a
combination of our own fleet and third party
delivery options, we are able to deliver to
national, regional and local customers
wherever their location.
Customised management information:
by utilising our advanced IT systems we are
able to offer our customers a wide range of
management information tailored to their
needs ranging from consumption data
versus budget, compliant ordering, market
intelligence and supply chain studies.
Delivery options: we can adapt our
delivery options to suit our customers’
needs including direct to site, warehouse
replenishment and cross-dock delivery where
we deliver to customers’ hubs for onward
delivery by them to their sites.
Expert knowledge and advice: our
industry leading specialist sales force,
together with our locally based customer
service specialists, work with our customers
to ensure they receive the best possible
advice on their product and service needs
including sustainable alternatives, range
rationalisation options and health &
safety requirements.
Value added services: our deep industry
knowledge enables us to offer extensive
value added services to our customers.
These include, but are not limited to,
bespoke and printed product management,
product training, design and installation
services, contract mobilisations and
sustainability expertise.
15
Strategic reportFinancial statementsDirectors’ report Business model
We have a geographically diversified business portfolio operating
across more than 30 countries, serving six core, fragmented
market sectors, many of which are growing and relatively resilient
to challenging economic conditions. This diversification and
resilience allows us to mitigate the impact of shifts and changes
in demand across both geographies and sectors.
We are a one-stop-shop supplier
for non-food consumables
Our sources of
competitive advantage
We source
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 their increasing sustainability requirements.
We consolidate
By applying our resources and consolidating a broad
range of products into our extensive warehousing
infrastructure, we are able to offer our customers an
efficient one-stop-shop solution, thereby allowing them
to focus on their core businesses more effectively.
We deliver
Our delivery options include direct 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
Unique service offering
Our unique service offering is at the heart of the Bunzl
business model and the reason our customers choose to buy
from us. Our customised solutions enable us to add value to
our customers’ operations ensuring they receive their orders
on-time and in-full whatever their requirements.
Our people
Our 3,200 expert sales people supported by 2,600 locally
based customer service specialists use their deep and
detailed knowledge to work with customers to ensure that
they receive the best possible advice on all product and
service related matters. Our dedicated warehouse teams
ensure orders are picked to a high degree of accuracy and
our drivers represent Bunzl on a daily basis as the main
face-to-face contact with our customers.
Operational structure
With a decentralised operational structure, our enthusiastic,
experienced and knowledgeable management teams,
including many former business owners, are able to focus
on our customers’ needs in their local markets and create an
entrepreneurial environment, while retaining full responsibility
for the financial performance of their businesses.
Global sourcing
Our global sourcing capabilities, working with multinational
and local suppliers, together with the benefits of our
Shanghai sourcing office, including quality assurance and
quality control, allow us to provide a broad range of
competitively priced products, including an extensive range
of own brand and environmentally friendly, sustainable items.
International scale
With operations in more than 30 countries, our extensive
distribution networks mean we can deliver to customers on a
local, regional, national and international basis, giving them
complete flexibility.
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 making and successfully
integrating acquisitions, helping us to extend our geographic
footprint while at the same time enabling our acquired
businesses to continue to feel ‘local’.
16
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Creating value
for stakeholders
Our capital allocation
priorities
Cash flow
Our businesses are highly cash generative
and since 2004 we have turned on average
97% of our operating profit into cash.
This high cash generation together
with our disciplined approach to capital
allocation allows us to continue to pay a
growing dividend, reinvest in our business
and grow our business by acquisition.
Reinvestment
We continue to reinvest in our operations
including in our IT systems and
e-commerce applications, vehicle routing
and warehouse management systems
and by consolidating and upgrading our
warehouses. Our total capital expenditure
in 2019 was £36.9 million.
97%
of operating profit in to cash
Acquisitions
Applying our disciplined and controlled
approach, we have been able to self-fund
£3.4 billion of acquisition cash flow on 160
businesses since 2004 while maintaining
a prudent approach to net debt.
Dividends
Our dividend has grown every year for
27 years at a CAGR of 10% per annum.
With the pay-out ratio staying broadly
the same this is a reflection of our long
term growth in earnings.
Customers
Our customers benefit from a one-stop-shop for
essential products with one order, one delivery
and one invoice, together with many other service
options thereby lowering their cost of doing
business by reducing or eliminating many of the
hidden costs of in-house procurement and
distribution and reducing carbon emissions.
Service
offering
pg 14
Employees
We support equality and diversity throughout the
organisation and have policies and procedures
which are designed to allow our loyal and dedicated
employees to meet their training needs, maximise
their potential and provide career opportunities for
progression within the business.
Sustainability
pg 34
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.
Investment
case
pg 10
Sustainability
pg 34
Sustainability
pg 34
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.
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.
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.
Sustainability
pg 34
Our strategy
pg 18
Bunzl plc Annual Report 2019
17
Strategic reportFinancial statementsDirectors’ report Strategy
A proven
strategy
that has
consistently
delivered
growth
Revenue £bn
£9.3bn
Adjusted operating profit*∆ £m
£653m
Adjusted earnings per share*∆
10 – 12 restated on adoption of
IAS 19 (revised 2011)
132.2p
9.1
9.3
8.6
7.4
6.1
6.2
6.5
5.4
5.1
4.8
414
430
455
336
352
307
614 631
653
589
525
129.6 132.4 132.2
119.4
106.1
86.2
82.4
91.0
67.6
70.6
59.7
10
11
12
13
14
15
16
17
18
19
10
11
12
13
14
15
16
17
18
19
19
10
11
12
13
14
15
16
17
18
19
19
* Alternative performance measure (see Note 4 on page 134).
∆ See Basis of preparation IFRS 16 ‘Leases’ on page 1.
IAS 17
IFRS 16
IAS 17
IFRS 16
18
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Directors’ report
Financial statements
Winning new
customers
During the year, after a competitive
tender process, we won back the
contract to supply a large UK grocery
chain which we had lost in 2016.
In regaining the business, we were
able to demonstrate successfully our
credentials to meet the customer’s
stringent requirements across a range
of service related metrics including the
ability to deliver the highest levels of
service and to support and align with
their corporate responsibility and
environmental challenges.
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.
Winning new customers
By showcasing our unique service offering,
our sales specialists are able to show
potential customers that we can reduce
or eliminate many of the hidden costs of
in-house procurement and distribution or
fulfil their needs more effectively.
Market leading customers
Our customers are often the market leaders
in their chosen sector and therefore, as their
businesses grow, the need for our products
and service solutions also increases, thereby
contributing to our organic growth.
Expanding our offering
Once we have established a good
relationship with a customer, by using
our knowledge of the customer’s needs, we
aim to deepen and develop that relationship.
This can be achieved by expanding our
product offering either with branded or own
brand products or providing additional value
added services. Our ability to provide expert
knowledge and advice on our customers’
product and service needs, including in
relation to complex sustainability issues,
also helps to drive additional sales.
Bunzl plc Annual Report 2019
19
Strategic report
Directors’ report
Financial statements
Strategy continued
Consolidating
warehouses
During 2019, we consolidated three
businesses in the healthcare sector in
the Netherlands into one state-of-the-
art facility. The new facility is heated
via an efficient heat pump technology
and lit using motion sensored LED
lighting. In addition, we have invested
in a 650m2 ISO Class 7 cleanroom for
the storage of medical products and
vertical lift modules to maximise
our use of the extra height in the
new warehouse.
Operating model improvements
We continually strive to
improve the quality of our
operations and to make our
businesses more efficient
and sustainable. We do
this by investing in new
warehouse facilities, routing
systems, IT systems and
digital capabilities, as well
as implementing and
sharing best practice
operational procedures.
Global purchasing
By using our global scale with suppliers,
we obtain purchasing synergies which we
share with our customers in the form
of competitive selling prices.
Consolidating warehouses
As leases come to an end we are able
to review our warehouse footprint.
Sharing best practice
We use our experience and expertise from
our international businesses to share best
practice across the Group.
Environment
We focus on environmental initiatives
such as energy efficient lighting and
reducing our waste packaging, which
also lead to cost savings.
Routing and safety systems
By installing routing and safety systems,
we are able to minimise distances travelled
and encourage safe and efficient driving
practices, thereby reducing fuel and other
transport costs.
IT systems
We are continually upgrading our IT
systems and increasing functionality
to improve our customer service through
areas such as management reporting
and customer budgetary controls.
Digital capabilities
Our state-of-the-art e-commerce
solutions have increased the efficiency
of our operations and the ease of doing
business for our customers and suppliers.
20
Bunzl plc Annual Report 2019
Strategic report
Directors’ report
Financial statements
Expanding our safety
business in the US
In early 2019 we acquired Liberty
Glove & Safety, a business based in
California which operates from four
locations in the US.
The business, which has a number
of strong own brands, is engaged in
the supply of a full range of personal
protection equipment, principally
gloves, to distributors. The acquisition
has further expanded and developed
our operations serving the safety sector
in North America.
Acquisition growth
We seek out businesses
that satisfy key criteria,
including having good
financial returns often
in resilient and growing
markets, while at the same
time providing opportunities
to extract further value
as part of the Bunzl Group.
Key acquisition parameters
In considering acquisitions, we target
businesses which meet certain specific
parameters. These include businesses:
selling goods not for resale to a fragmented
customer base; whose products represent
a small percentage of total customer spend;
whose markets have scope for further
consolidation and synergies; and with
attractive financial returns.
Growth in existing countries
Our markets are very fragmented and as a
result there are numerous opportunities to
develop through acquisition in the countries
where we already have a presence. We do
this by further penetrating the sectors
in which we operate or by acquiring a
business in a sector in which we do not
currently operate within that country.
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 more than 30 countries today. However,
there are a number of potentially attractive
countries where we do not currently
operate, which gives us potential for further
future growth.
Bunzl plc Annual Report 2019
21
Strategic report
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/(decrease) in revenue for the
year excluding the impact of currency
translation, acquisitions during the first
12 months of ownership and disposals.
Organic revenue decrease of 0.2%
mainly from North America partly
offset by growth in Continental Europe
and Rest of the World.
Acquisition growth
Acquisition spend £m
Consideration paid and payable,
together with net debt assumed,
in respect of acquisitions
agreed during the year.
Committed acquisition spend of
£124 million on three businesses.
Reconciliation of revenue growth between 2018
and 2019 £m
4.3
4.3
0.4
0.3
(0.2)
15
16
17
18
19
Revenue up 3% (1% at
constant exchange rates)
from the impact of
acquisitions made in
2018 and 2019, net of
disposals made in 2018,
partly offset by a small
decline in organic revenue.
9,079
154
9,212
136
9,327
(21)
(21)
18
Currency
translation
Disposals
18#
Organic
revenue
Acquisitions
19
Annualised revenue from acquisitions £m
616
327
Estimated revenue which would have
been contributed by acquisitions agreed
during the year if such acquisitions had
been completed at the beginning of the
relevant year (see Note 27 on page 165).
184
183
124
15
16
17
18
19
The three acquisitions agreed in
2019 will add annualised revenue
of £97 million.
621
324
201
148
15
16
17
18
97
19
Operating model improvements
Operating margin %*∆
Ratio of adjusted operating profit∆
to revenue.
Operating margin on an IAS 17
basis unchanged at 6.8%.
Excluding the impact of acquisitions
during the first 12 months of
ownership and the impact of disposals
made in 2018, the 2019 operating
margin∆ on an IAS 17 basis was 6.7%,
unchanged compared to 2018 (restated
at constant exchange rates).
7.0
7.1
6.9
6.8
6.8
7.0
15
16
17
18
19
19
IAS 17
IFRS 16
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, software,
right-of-use assets, inventories and
trade and other receivables less trade
and other payables).
RAOC down to 48.4% (on an IAS 17
basis) due to an increase in average capital
employed in the underlying business
and the impact of 2018 disposals, partly
offset by a small favourable impact from
exchange rate movements.
55.5
55.9
53.1
50.7
48.4
36.9
15
16
17
18
19
19
IAS 17
IFRS 16
22
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report *
∆
#
†
See Basis of preparation IFRS 16 ‘Leases’ on page 1.
Alternative performance measure (see Note 4 on page 134).
At 2019 average exchange rates and adjusted for disposals.
Included in the external auditors’ limited assurance scope.
See the data assurance statement on the Company’s website,
www.bunzl.com. The data for 2015, 2016, 2017 and 2018 was
also assured.
Financial
Non-financial
Adjusted earnings per share p*∆
Adjusted profit∆ for the year
divided by the weighted average
number of ordinary shares in
issue (see Note 9 on page 142).
At constant exchange rates,
adjusted eps up 1% driven
by a 2% increase in adjusted
operating profit∆ and a reduction
in net interest expense, partly offset
by a higher effective tax rate and
an increase in weighted average
number of shares.
Cash conversion %∆
Operating cash flow∆ as a percentage
of lease adjusted operating profit∆ (see
Consolidated cash flow statement
on page 122).
Another strong year of cash generation
with cash conversion of 101% in 2019
and an average of 97% since 2004.
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, net 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 14.6% (on an IAS 17
basis) principally due to a combination
of the mix effect of acquisitions net
of disposals and a lower return in the
underlying business, partly offset by a
small positive impact from exchange
rate movements.
132.4
132.2
129.6
119.4
106.1
91.0
Scope 1 carbon emissions
Tonnes of CO2e per £m revenue
Measured in accordance with the
Greenhouse Gas Protocol applying
Defra conversion factors.
Scope 1 carbon emissions down 4%
at constant exchange rates (down 6%
at actual exchange rates) primarily
due to efficiency improvements.
14.7
12.6
11.3
11.4
10.7†
15
16
17
18
19
19
IAS 17
IFRS 16
12 months to 30 September.
15
16
17
18
19
97
99
97
94
100
101
15
16
17
18
19
19
IAS 17
IFRS 16
17.1
16.7
16.0
15.0 14.6
13.6
Scope 2 carbon emissions
Tonnes of CO2e per £m revenue
Measured in accordance with the
Greenhouse Gas Protocol applying
Defra UK conversion factors and IEA
factors for overseas electricity.
Scope 2 carbon emissions down 10%
at constant exchange rates (down 11%
at actual exchange rates) from the
continued implementation of low
energy lighting and also impacted
by the application of updated emission
factors for electricity.
12 months to 30 September.
Fuel usage
Litres per £000 revenue
Diesel, petrol and LPG used in the
Group’s own vehicles.
Fuel usage down 2% at constant
exchange rates (down 6% at actual
exchange rates) driven by continued
efficiency improvements.
12 months to 30 September.
5.4
4.5
3.7
3.6
3.2†
15
16
17
18
19
4.8
4.1
3.7
3.6
3.4†
15
16
17
18
19
19
IAS 17
IFRS 16
15
16
17
18
19
Bunzl plc Annual Report 2019
23
Strategic reportFinancial statementsDirectors’ report Operating review
North
America
Highlights
Market sectors
• Organic revenue marginally
down principally due to lower
sales to largest grocery customer
driven by price and product
specification changes.
• Cost savings generated by
reorganisation of grocery
and redistribution.
• Resilient operating margin,
unchanged at 6.0%.
• Retail held up well despite tough
trading conditions.
• Good overall growth in safety,
convenience store, processor
and agriculture.
• Acquisition of Liberty Glove &
Safety in February 2019 and Joshen
Paper & Packaging in January 2020.
Revenue
£5,473.2m
(2018: £5,277.8m)
0.1%†
Adjusted operating profit*
£343.6m
(IAS 17 – 2019: £331.0m;
2018: £317.1m)
0.6%†
Operating margin*
6.3%
(IAS 17 – 2019: 6.0%;
2018: 6.0%)
Employees
6,746
Locations
183
† At constant exchange rates and on an IAS 17 basis where applicable,
see Basis of preparation IFRS 16 ‘Leases’ on page 1.
* Alternative performance measure (see Note 4 on page 134).
By improving the efficiency
of their order processing,
whether through specific
dedicated web platforms
or the availability of data
analytics and budgetary
controls, we build strong
and lasting relationships
with our customers.
Jim McCool
Chief Executive Officer, North America
In North America revenue
was broadly unchanged at
£5,473.2 million as the positive
impact of recent acquisitions was
offset by a 1.2% decline in organic
revenue which, as indicated in
previous announcements, was
principally due to lower sales to
our largest grocery customer as a
result of account specific price and
product specification changes.
However we benefited from the
cost savings generated by the
reorganisation of our grocery and
redistribution businesses.
Operating profit was
£343.6 million with the operating
margin 6.3%. On an IAS 17
basis operating profit was
£331.0 million, up 0.6%,
with the operating margin
unchanged at 6.0%.
Our business serving the US grocery sector,
which had experienced significant growth
over the last two years due to additional
business won with our largest customer
towards the end of 2016, was impacted by
reduced revenue with the same customer as
well as a net reduction in sales as additional
business gains during the year were more
than offset by some losses. The business has
recently been enhanced by the acquisition of
Joshen Paper & Packaging at the beginning
24
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report our processor teams to offer our broad
assortment of high quality, cost-effective
solutions to manage our customers’ safety
and facility management programmes
effectively. We have continued to diversify
our customer base, utilising industry leading
e-commerce and digital engagement to drive
significant sales volumes with our local and
regional customer bases.
Our business serving the convenience store
sector has continued its recent history of
growth, working directly with convenience
store chains to build packaging and supply
programmes, which are then pulled through
our wholesale customer partners. Revenue
growth also came from expanding our
distribution of certain branded grocery
item categories to our wholesale customers.
We also offer category management and
managed inventories, providing our
customers with an industry-leading variety
of products with minimal investment.
Our business in Canada has faced
challenging market conditions across
several sectors. Our grocery business
has been impacted by a significant cost
saving initiative at a large customer, our
redistribution business has been affected
by a transition away from lower margin,
less profitable volume and our cleaning
& hygiene business, while performing well
in many markets, has faced a challenging
economy in Western Canada. Our industrial
packaging business has however continued
its strong performance.
of 2020 which has further consolidated our
position both in this market and also in the
foodservice and cleaning & hygiene sectors
and will provide a number of synergies and
efficiencies going forward.
Revenue in the redistribution business
serving the foodservice and cleaning &
hygiene sectors was broadly flat as we
focused on profitable organic growth within
our value-added category management
programmes which resulted in us moving
away from some unprofitable business
with a large foodservice customer during the
second quarter of the year. Our programmes,
which are designed to support our larger
national and regional foodservice customers,
enable us to operate as their category
manager for packaging and other supplies,
providing category assortment, sourcing
expertise, end-user sales support and digital
tools. By doing so, we help our customers
manage their supply chains from end to end
and connect our supplier base to their own
end user customers, pulling organic sales
growth through our customers. We are
able to deliver significant working capital
benefits for our customers through our broad
range of foodservice and cleaning & hygiene
disposable items, delivered on a just-in-time
basis. Consolidation has continued amongst
our redistribution customer base, with
two large foodservice broadline customers
being acquired during the second half of
the year by larger competitors who are also
our customers.
The more focused and streamlined
organisation structure implemented across
our grocery and redistribution businesses
to enhance our customer proposition and
improve efficiency has primarily focused on
cost savings and the creation of distribution
capacity through inventory reductions
while moving to align with our customers’
evolving business models. An increased
concentration on sourcing and leveraging
our scale across both manufacturer and
own brands will support organic growth
initiatives as we move forward.
Despite tough trading conditions in our
customers’ end markets which have led to a
number of store closures and the failure
of some retailers, our retail supplies business
has held up well with revenue slightly
ahead of the prior year. The integration
of DDS, which we acquired in 2017, with
our other retail sector focused businesses
has continued to yield sourcing and
operational synergies ahead of our
expectations, although the additional
savings achieved during the year were
broadly offset by cost increases.
Our safety business has grown well
against the backdrop of generally favourable,
but more recently moderating, economic
conditions. During the year we have faced
product cost increases from import tariffs,
the impact of which has been successfully
mitigated through a combination of price
increases to customers, purchase price
concessions from suppliers and some
resourcing of products to countries which
do not attract import tariffs. We continued
to invest in this sector with the acquisition
in February 2019 of Liberty Glove & Safety,
a supplier of personal protection equipment,
to smaller distributors across the US.
In our business focused on the agricultural
sector, we have invested in infrastructure
and capacity to support the migration of
many of our customers to more cost-effective
growing areas, principally Mexico, providing
us with a broader footprint through which
to provide our value-added distribution
services. We have also continued to benefit
from the acquisition in 2018 of Monte
Package Company, a regional supplier of
packaging to growers in the central and
southeast of the US.
Our food processor business continued to
drive organic growth and improve margins
by concentrating on product innovation
and expanding the product range.
While consolidation in this sector continues,
our focus on own label alternatives allows
Bunzl plc Annual Report 2019
25
Strategic reportFinancial statementsDirectors’ report Operating review continued
Continental
Europe
Highlights
Market sectors
• Good organic revenue growth.
• Operating margin unchanged
at 9.8%.
• Overall stable performance
in France.
• Good performances in the
Netherlands, Spain and Turkey.
• Substantial warehouse
consolidations in the Netherlands
successfully implemented.
• Recent acquisitions integrating
well and continue to trade ahead
of expectations.
Revenue
£1,829.8m
(2018: £1,797.5m)
3.0%†
Adjusted operating profit*
£182.1m
(IAS 17 – 2019: £178.8m;
2018: £176.8m)
2.6%†
Operating margin*
10.0%
(IAS 17 – 2019: 9.8%;
2018: 9.8%)
Employees
5,058
Locations
182
† At constant exchange rates and on an IAS 17 basis where applicable,
see Basis of preparation IFRS 16 ‘Leases’ on page 1.
* Alternative performance measure (see Note 4 on page 134).
Our broad portfolio of
operations across a variety
of market sectors and
countries means we are
a balanced and resilient
business that is well
positioned to meet our
customers’ requirements.
Alberto Grau
Managing Director, Continental Europe
Revenue in Continental Europe
rose by 3.0% to £1,829.8 million
due to organic growth of 1.8%
and the full year impact of the
three acquisitions made in 2018
and the part year contribution of
Coolpack acquired in April 2019,
partly offset by the disposal of
OPM in France in February 2018.
Operating profit was
£182.1 million with operating
margin of 10.0%. On an IAS 17
basis, operating profit was
£178.8 million, up 2.6%, with
the operating margin of 9.8%
unchanged at both constant
and actual exchange rates.
In France, total revenue (excluding OPM)
was marginally higher as growth in the
cleaning & hygiene and foodservice
sectors offset a decline in sales of personal
protection equipment. Overall our cleaning
& hygiene businesses traded well with
sales ahead in most sectors and the full year
impact of a significant contract catering
customer win in 2018 more than offsetting
the impact of the loss of a contract cleaning
customer. Our safety business saw lower
sales due to the loss of one larger account
although growth with other larger accounts
and good export sales offset lower sales
to smaller customers. Our foodservice
businesses have enjoyed good sales growth
in France but saw a decline in exports with
increasing competition in these markets.
26
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report
of 2019 we entered into an agreement
to acquire ICM, a distributor of personal
protection equipment to a variety of
customers including a number operating
in the wind energy sector. The acquisition
is expected to be completed at the end
of March.
Sales have continued to grow well in Spain.
The cleaning & hygiene business has
increased revenue in the contract cleaning,
foodservice, food processor, grocery and
industrial sectors more than offsetting slight
declines in the public and healthcare sectors.
In the safety sector, after a slow start, sales
finished slightly ahead of last year despite
lower levels of industrial activity in the
country. Our online medical business
continues to grow very strongly due to
new product launches and the enhanced
use of e-marketing tools. Our industrial
and disposable packaging business also
recorded high levels of growth, particularly
in the foodservice sector. In Italy, our safety
business has seen a decline in sales as a
result of the downturn in the Italian economy.
In Turkey, sales have grown due
to a combination of price inflation and
higher volumes in the healthcare sector
as numerous new tenders have been won.
In Israel, sales were ahead in the foodservice
sector following several customer wins
but lower in the bakery sector following
the bankruptcy of one major customer.
In central Europe, sales have progressed
well in the redistribution, agriculture,
food processor, contract cleaning and
foodservice sectors, partly offset by
declines in the industrial sector, principally
driven by the current difficulties in the
automotive sector, and lower sales in
the grocery sector as one of our major
customers is restructuring its operations.
In the Netherlands, sales grew well with
particularly strong performance in the
non-food retail, e-fulfilment, food processor,
healthcare, cleaning & hygiene and
packaging sectors. We successfully
consolidated three businesses in the
healthcare sector into one business which
was relocated into a single modern site to
gain efficiencies and provide an enhanced
service to our customers. Given growth in
recent years in the grocery, non-food retail
and e-fulfilment sectors, we also combined
three warehouses serving these sectors
into one new facility. In addition, we have
relocated our De Ridder business into a
larger warehouse. Coolpack, acquired in
April 2019, is trading ahead of expectations.
In Belgium, revenue was ahead of the
previous year as we continue to grow
in the facilities management, foodservice,
healthcare and public sectors, offset by
lower sales to other sectors.
In Germany, against the background of
slowing GDP growth, sales were lower in
all sectors other than in cleaning & hygiene.
In Switzerland, we have seen continued
growth in the medical and industrial
sectors although this was insufficient to
offset continued pressure in the foodservice
sector following the loss of two larger
accounts. In Austria, our business saw sales
decline, in particular related to the meat
packaging sector.
In Denmark, revenue increased principally
due to good performances in the food
processor, foodservice and leisure sectors
partly offset by lower sales to grocery and
redistribution customers. CM Supply, which
we acquired at the end of 2018 and which
specialises in own brand and customised
products and packaging for the foodservice
sector, has exceeded expectations and
continues to grow well. In July 2018 we
acquired our first business in Norway, Enor,
which sells light catering equipment to hotels
and restaurants. It is also trading well and
has benefited from a number of larger
refurbishment projects. Towards the end
Bunzl plc Annual Report 2019
27
Strategic reportFinancial statementsDirectors’ report Operating review continued
UK &
Ireland
Highlights
Market sectors
• Organic revenue broadly flat;
results impacted by disposal in
2018 (£2.2m reduction in adjusted
operating profit).
• Good revenue growth in cleaning
& hygiene and in grocery with a large
supermarket customer regained in
second half.
• Improved performance in safety in
second half due to new customer
and business wins.
• Continued difficult trading conditions
in hospitality and healthcare.
• Continued growth and expansion
in Ireland.
Revenue
£1,242.1m
(2018: £1,263.6m)
1.7%†
Adjusted operating profit*
£87.1m
(IAS 17 – 2019: £83.3m;
2018: £86.8m)
4.1%†
Operating margin*
7.0%
(IAS 17 – 2019: 6.7%;
2018: 6.9%)
Employees
3,862
Locations
103
† At constant exchange rates and on an IAS 17 basis where applicable,
see Basis of preparation IFRS 16 ‘Leases’ on page 1.
* Alternative performance measure (see Note 4 on page 134).
We are increasingly
using our knowledge and
expertise to support our
customers and work with
our suppliers to innovate
and bring more sustainable
products to market.
Andrew Tedbury
Managing Director, UK & Ireland
In UK & Ireland, revenue
decreased by 1.7% to £1,242.1
million, almost entirely due to
the impact of the disposal of the
higher than average operating
margin marketing services
business in June 2018.
Organic revenue was down
0.2% against the background of
continuing political and economic
uncertainty and challenging
market conditions and operating
profit was £87.1 million with
operating margin of 7.0%.
On an IAS 17 basis, operating
profit was £83.3 million, down
4.1%, with the operating margin
down from 6.9% to 6.7% at
both constant and actual
exchange rates. More than half
(£2.2 million) of the decline in
operating profit was as a result
of the disposal last year. After
adjusting for this, operating profit
was down 1.7%.
Our safety business was adversely impacted
by the slowdown in both the industrial and
construction markets which resulted in
reduced spend by existing customers.
Despite this, we were able to secure a
number of new customers and some new
business within the transport sector during
the latter part of the year, launching some
28
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report innovative new bespoke products.
Investment in the business continued with
the implementation of new warehouse
management systems and through the
introduction of several new e-commerce
initiatives.
Our cleaning & hygiene supplies business
grew well as we won several new customers
during the year. Investment in new digital
functionality has further enabled customers
to manage their costs and, in particular,
product compliance. We also launched a
number of new sustainable product ranges
which allow our customers to support
their own and their customers’ sustainability
objectives going forward. Further investment
in stock availability and service flexibility
is facilitating business growth with both
existing and new customers.
Within our grocery business we have now
successfully onboarded a large supermarket
chain customer which we lost in 2016.
In addition, we have secured a number of
category wins with existing customers,
building on our extensive range of goods-
not-for-resale products. Ongoing investment
in both warehouse automation and workflow
management tools, together with improved
digital features on e-commerce platforms,
have continued to enhance our value
proposition for customers. Staying close
to the marketplace and continuing to
work on both cost-effective and innovative
products is helping provide more
sustainable solutions. Our non-food
speciality retail supply businesses continued
to be impacted by a challenging market.
However, by offering innovative, new and
more sustainable materials we have been
able to enhance customers’ brands both
in-store and online. Investing in technical
expertise has improved our ability to
recommend and supply suitable packaging
that protects both customers’ products and
their reputations.
The catering industry has continued
to experience rising food and labour
costs combined with excess capacity
amongst many high street chains. This has
resulted in difficult trading conditions in
certain areas of the hospitality sector and
a number of high profile well-known
brands either ceasing to trade or scaling
back their operations.
These trends have particularly impacted
our catering supplies business as many
customers have reduced their number of
trading outlets. Despite this, as part of
our service offering, we have continued
to provide specialist and added-value
advice to customers on the most suitable
sustainable product ranges available in
the marketplace, together with future-
proofing customers’ businesses against
the background of environmental and
legislative pressures. We have also
now completed the enhancement of our
vehicle telematics platforms, giving
real-time delivery information and
greater transparency.
As previously reported, the introduction of
the new centrally-funded NHS operating
model in April has resulted in a major
reduction in sales to NHS Hospital Trust
customers in England. As a result, we
have worked hard to rightsize this part
of our healthcare business. Against this
background, we have successfully focused
our attention on winning new business in
both the private healthcare market and with
nursing homes. At the same time our own
brand product supply business has grown
with new customer wins in both wound care
and procedure packs, together with an
expansion in export business.
In Ireland our business has continued to
grow. Work is nearing completion to open a
new purpose-built distribution facility close
to Dublin airport during the first half of this
year which will provide more efficient space
for our Republic of Ireland based businesses.
In addition, investment in modern
warehouse management systems in all our
businesses is improving our efficiency and
providing customers with an enhanced
service. Improved digital platforms allow
customers to benefit from more functionality
which in turn permits them to focus on their
businesses. Further investment in our
sustainability expertise has resulted in the
successful launch of an extended range of
new sustainable product offerings for the
catering and cleaning sectors. This, together
with the provision of valuable expert advice
and our detailed understanding of customers’
needs, allows them to realise their own
environmental goals and ambitions.
Bunzl plc Annual Report 2019
29
Strategic reportFinancial statementsDirectors’ report Operating review continued
Rest
of the
World
Highlights
Market sectors
• Good organic revenue growth driven
by Latin America.
Revenue
£781.6m
(2018: £740.5m)
8.8%†
Adjusted operating profit*
£61.6m
(IAS 17 – 2019: £59.0m;
2018: £56.4m)
8.3%†
• Strong organic growth in Brazil
Operating margin*
with safety strengthened through
purchase of Volk do Brasil.
• Chile safety footwear and Mexico
safety adversely impacting margins.
• Good profit improvement in
Australia despite slower economy.
7.9%
(IAS 17 – 2019: 7.5%;
2018: 7.6%)
Employees
3,257
Locations
114
† At constant exchange rates and on an IAS 17 basis where applicable,
see Basis of preparation IFRS 16 ‘Leases’ on page 1.
* Alternative performance measure (see Note 4 on page 134).
The combination of our
extensive sourcing capabilities
and the benefits of our Asia
sourcing office with related
supplier audits to ensure
ethical and social compliance
gives us a true competitive
advantage.
Kim Hetherington,
Managing Director, Asia Pacific
In Rest of the World, revenue
increased 8.8% to £781.6 million
due to organic growth of 2.2%
and the impact of the acquisition
of Volk do Brasil at the beginning
of 2019. Operating profit was
£61.6 million with operating
margin 7.9%. On an IAS 17
basis, operating profit was
£59.0 million, up 8.3%, with the
operating margin down from
7.6% to 7.5% at both constant
and actual exchange rates.
Despite slower than expected GDP growth
during the year, trading conditions in Brazil
were more positive as some measure of
optimism returned and currency volatility
decreased in the second half. Our safety
businesses continued to enjoy strong growth
due to the strength of their brands, high
service levels and continual optimisation
of operating costs. Our foodservice business
grew sales strongly despite increased
competition in the market. Volk do Brasil,
which serves both the safety and foodservice
sectors, has been integrated smoothly and
performed ahead of expectations. In our
cleaning & hygiene business, measures
taken in 2018 to turnaround the business
were successful such that operating profit
grew strongly despite flat sales growth. In
our healthcare businesses, although our
medical supplies business had a difficult
year, our dental supplies business achieved
30
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report As a focused and service-
oriented organisation we
have continued to improve
the efficiency of our
customers’ operations
by offering them greater
choice, competitively
priced products and
excellent service solutions.
Jonathan Taylor,
Managing Director, Latin America
good growth. Our operations in this sector
were also bolstered at the end of January
2020 with the acquisition of Medcorp, a
distributor of a broad range of branded
medical products to leading private hospitals
and redistributors throughout Brazil.
In Chile, relatively low copper prices and
a weaker local currency led to slower
economic growth. The country also suffered
its worst anti-government protests in recent
years which caused widespread disruption.
Against this backdrop, our full-range safety
business performed well but our specialist
safety footwear business declined
significantly and was restructured. In the
foodservice sector, our catering supplies
business also experienced difficult trading
although conditions improved slightly in the
fourth quarter.
The Mexican economy worsened as the
year progressed which negatively impacted
infrastructure projects and manufacturing
output. As a result, our safety business,
which is more exposed to these sectors, saw
sales decline as demand for its products
lessened and customers became more
price-sensitive.
In Colombia, a weaker currency and security
concerns in border regions resulted in more
difficult trading conditions for our safety
businesses but significant cost reductions
and improvements were implemented during
the year and the performance improved
marginally during the second half. Our other
safety businesses in Peru and Argentina
saw strong growth in favourable trading
conditions although political uncertainty
returned in both countries towards the end
of the year.
In Australia, we saw a moderate increase in
revenue against the background of slower
GDP growth which impacted several of the
sectors in which we operate. Margins
came under pressure as product purchase
prices were adversely impacted by the
weaker Australian dollar. However, this was
partly addressed through a combination of
selling price increases, changes in product
mix and ongoing product resourcing which,
together with the implementation of some
cost saving initiatives, enabled the business
overall to deliver good profit improvement.
During the year we completed an internal
restructuring by consolidating our food
processor operations with our largest
distribution business predominantly focused
on the cleaning & hygiene, foodservice
and healthcare sectors, thereby combining
the strengths and infrastructure of each
business with resultant cost savings while
retaining their specialist market sector
focus. We have also continued to develop
our position in the resilient healthcare
sector. The business is seeing significant
benefits from investment in digital
technology and resources in our quest to
improve our service offering and enhance
customers’ experience.
Our Australian safety business experienced
some growth but has also been impacted by
margin pressures from the weaker currency.
Trading has benefited from new contract
wins and the successful opening of a new
facility in North West Queensland serving
major customers in this region. During the
year we rationalised our operational footprint
and closed two facilities as the property
leases expired. At the end of November we
acquired FRSA which specialises in the
distribution of safety and personal protection
equipment focused on fire, rescue and
emergency services. Our specialty healthcare
business delivered another strong
performance this year.
In Asia, our domestic safety business
in China has continued to focus on its
diversification strategy to improve its
profitability, while our export business faced
challenging market conditions but continues
to make progress to rebuild its customer
base. Our safety business in Singapore,
which is focused on the oil and gas and
pharmaceutical sectors, experienced a
slowdown within their customer base during
the second half of the year but this was
largely offset through careful margin
management and cost control.
Bunzl plc Annual Report 2019
31
Strategic reportFinancial statementsDirectors’ report Engaging with our stakeholders
The Board recognises the importance of understanding the views of Bunzl’s key stakeholders. Through a range of engagement
mechanisms, examples of which are referred to below, Bunzl is able to maintain meaningful dialogue with these groups and ensure that
their views, and the matters set out in section 172 of the Companies Act 2006 relating to the directors’ duty to promote the success of the
Company, are considered as part of the Company’s strategic decision making. The engagement mechanisms employed are reviewed
periodically to ensure that they remain effective. The following information is provided in accordance with the requirements of section
172 of the Companies Act 2006 in relation to the directors’ duty to promote the success of the Company.
Further information about how the Company engages with its stakeholders can be found in the Sustainability report on pages 34 to 49
and the Corporate governance report on pages 68 to 76.
Customers
Employees
Shareholders
How we engage with stakeholders
• We use a range of methods to engage
How we engage with stakeholders
• We report regularly to shareholders
with our employees, including
listening groups, regular team
briefings, site visits, digital apps,
newsletters, engagement surveys,
video messaging and meetings with
workforce representatives.
• The Board ensures that it understands
the views of Bunzl’s workforce
through director attendance at and
participation in employee consultation
forums, senior leadership programmes
and other employee-focused events.
• Board meetings are periodically held
at or near Group locations where the
directors meet with local management
and employees.
How we are influenced
by stakeholders
People underpin everything we do
and are the focus of our business. We
develop and implement action plans to
address points raised in our employee
engagement surveys and create an
inclusive and collaborative environment
that allows all of our people to make
a broader contribution to our success.
Relevance to strategy/
business model
It is our people who continue to deliver
the Group’s strategy for the individual
businesses and we will continue to
invest in our people to ensure that we
attract and retain the best talent.
on trading performance.
• Executive directors meet regularly
with major shareholders and report
their views to the Board. Presentations
of the half year and annual results with
question and answer sessions are
also given.
• The Chairman, Senior Independent
Director and other non-executive
directors are available to meet with
major shareholders on request. The
Board also reviews and discusses
analysts’ and brokers’ reports and
surveys of shareholder opinions
conducted by the Company’s brokers
and investor relations consultants.
• 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.
How we are influenced
by stakeholders
Engagement with shareholders helps us
to understand their views and priorities.
The feedback that we receive informs
our decision making and influences the
long term strategy of the Company.
Relevance to strategy/
business model
Engagement is a key factor in building
and maintaining shareholder trust and
in ensuring that shareholder support
continues in the long term.
How we engage with stakeholders
• Our businesses use ‘hotlines’ and
seminars and host launch days to
engage with customers and increase
their awareness of our product and
service solutions.
• We work with our customers in the
development of new, redesigned, more
sustainable or substantially improved
products.
• Our 3,200 expert sales people
supported by 2,600 locally based
customer service specialists use their
deep and detailed knowledge to work
with customers to provide the best
possible advice on all product and
service related matters.
How we are influenced
by stakeholders
Our business and livelihood depend
upon our customers. Building
strong relationships with them,
using the expertise of our commercial
teams, ensures that we gain a
deep understanding of their needs,
allowing us to identify where we can
support them.
Relevance to strategy/
business model
Bunzl’s consistent and proven strategy
of growing the business organically, by
expanding and developing our business
with existing customers and by
gaining new business with additional
customers, is key to our success. We
seek to achieve organic growth by
continually redefining and deepening
our commitment to our customers and
we apply our resources, knowledge and
expertise to offer an efficient and
cost-effective one-stop-shop solution
which is the very essence of our
business model.
32
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Environment
Suppliers
Communities
How we engage with stakeholders
• We seek to reduce both 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 their
sustainability needs.
How we engage with stakeholders
• We actively work with our suppliers to
build relationships, capability and
trust, increase sustainability within
our supply chain and provide products
and solutions to customers that are
sourced and delivered efficiently,
safely and sustainably.
• We work in partnership with
• Supplier conferences are held to
customers and suppliers to source
and promote sustainable alternatives
to single-use plastics and to support
the development of innovative
products to increase compostability
and recyclability.
How we are influenced
by stakeholders
We aim to reduce our impact on
the environment, including factors
contributing to climate change,
through a commitment to continual
improvement, complying with
environmental legislation and
regulations in the jurisdictions where
Group companies operate to ensure
that our major impacts are addressed.
Relevance to strategy/
business model
Operational efficiency forms part of our
strategy to develop the business and the
reduction of energy consumption and
waste is an integral part of this. Positive
actions with respect to the environment
and Corporate Responsibility (‘CR’),
including an increased focus on more
sustainable products, are not only
desirable in their own right but are also
of potential economic and commercial
benefit to Bunzl.
showcase examples of good practice
and build awareness of social
compliance issues.
• Our quality assurance/quality control
team in Shanghai monitors and works
with our key suppliers in Asia and
elsewhere to ensure that they meet
international standards.
• A supplier code of conduct has been
adopted and rolled out across our
supplier base.
How we are influenced
by stakeholders
Bunzl regards suppliers as partners
and works with them to help achieve
our CR policy requirements in the
delivery of our products and services.
Relevance to strategy/
business model
Our global sourcing capabilities,
working with multinational and local
suppliers, together with the benefits of
our Shanghai sourcing office, allow
us to provide a range of competitively
priced and ethically sourced products.
Such capabilities are intrinsic to our
business model and a key source of
competitive advantage.
How we engage with stakeholders
• We encourage and provide resources
and opportunities for Bunzl people
to get involved in local community
projects and to contribute to social
impact causes.
• We align the focus of our charitable
support with key environmental
activities relevant to our business.
• We support the communities where
our employees live and work and
encourage fundraising activities
championed by our businesses
and their employees locally.
How we are influenced
by stakeholders
Our employees are encouraged to
act as responsible citizens of their
communities and to support projects,
organisations and services that work
towards the common good and
improvement of their communities
and society as a whole.
Relevance to strategy/
business model
Bunzl’s operations are international but
our strength lies in the local nature of
our businesses and the communities in
which they are based. Our CR strategy
directly supports Bunzl’s strategic vision
by seeking to gain sustainable business
success through building relationships
with local stakeholders.
Bunzl plc Annual Report 2019
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Strategic reportFinancial statementsDirectors’ report Sustainability
Being part of
the responsible
solution
We know that our
customers, suppliers
and the societies in which
our businesses operate
around the world all want
to find ways to protect
our environment and to
make better use of natural
resources. That is why
sustainability is core to
how Bunzl does business
and how we will grow in
the future.
Frank van Zanten
Chief Executive Officer
From sourcing products in an ethical and
responsible way, to consolidating them in an
environmentally efficient operating model,
our approach to sustainability helps us to
minimise risk while maximising value.
Our goal is for Bunzl to be a socially and
environmentally responsible organisation
that inspires and implements solutions
that protect the environment, while
being commercially successful for
our stakeholders. To support this ambition,
we have developed a new sustainability
framework and strengthened our team of
sustainability experts who will work with
our businesses to deliver this.
We will continue to communicate our
performance in an open and honest way
and report on our performance through our
Annual Report and third party assessments
such as the FTSE4Good and CDP (formerly
Carbon Disclosure Project) index. More
details of our sustainability strategy and
framework can be found on the Bunzl plc
website in the Sustainability section at
www.bunzl.com.
A new sustainability framework
for Bunzl
It is only when sustainability issues are
dealt with in the same way as other core
business issues that real, long term value
is created. To ensure our new framework
is successful and relevant, it is aligned to
the Bunzl business model and applicable
to all the market sectors and geographies
in which we operate.
We have also identified the major
sustainability trends facing our business
and developed a set of commitments that
underpin our approach. During 2020 we
will set specific goals in the areas where
we can make the most meaningful impact
and generate the biggest results.
The theme emerging from the work is that
our new sustainability framework should
be centred around our unique position at
the centre of the supply chain with the
ability to provide sustainable solutions
to our customers in partnership with
our suppliers.
As a leading distributor and not a
manufacturer, Bunzl is not tied to any types
of materials or products and, as a result,
we can have a positive impact across the
entire supply chain by having an objective
overview of the best sustainability solutions
for each customer. Our framework is
about more than simply providing new
products; it is about how we work with our
suppliers to provide solutions ethically and
responsibly, the work we do to minimise the
environmental impact of our own operations
and the role we play in our communities.
Our framework has three key pillars
that align to the Bunzl business model:
Our suppliers (source), Our business
(consolidate) and Our customers (deliver).
Each of these pillars has its own
commitments and we will be setting
goals for these during the next year.
Further details of our framework pillars,
their commitments and our work to date
are set out in this report.
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Directors’ report
Financial statements
Delivering sustainable solutions
Our suppliers
Making sustainability accessible
Sourcing responsibly and
with integrity
Working with our suppliers
to deliver innovative solutions
Our business
A great place to work
Reducing our impact
on the environment
Supporting charities and
local communities
pg 36
pg 38
Our customers
Providing sustainable solutions
Expert advice on emerging
trends and products
Partnerships to close
the loop
pg 46
Our values: humility, responsiveness, creativity, diversity, customer-centricity, reliability, transparency
Bunzl plc Annual Report 2019
35
Strategic reportFinancial statementsDirectors’ report Sustainability continued
Our suppliers
We will source
an innovative range
of products ethically
and responsibly.
1 We will use our scale and
position in the supply chain to make
sustainable solutions accessible and
prevent shortage of supply issues as
new materials become preferable.
2 We will source responsibly and
with integrity.
3 We will proactively engage our
suppliers and work collaboratively
with them to be first to market with
new, innovative sustainability solutions
for our customers.
1
Making sustainability
accessible
2
Sourcing responsibly
and with integrity
In response to the introduction of new
legislation and feedback from their
consumers, many of our customers are
setting ambitious targets to become more
sustainable. To help them on this journey,
we are leveraging the scale of our supply
chain to make sustainable solutions more
accessible for our customers and bring
lower impact products to market.
For instance, in the Netherlands, our
customers are required to pay a waste
collection charge for the packaging materials
they use. Plastics have the highest individual
collection charge and products made from
multiple materials carry a higher overall cost.
We supply bags to retailers to use with bakery
products that are made from paper with a
plastic film window that makes the product
visible to the consumer. This means the
packaging attracts two waste collection
charges and a higher individual cost for the
plastic film component.
We have worked with one of our suppliers to
develop an innovative bag made entirely from
paper, that uses a glassine paper window
to ensure the product is still visible to the
consumer. Glassine is a smooth, translucent
form of paper that is air, water and grease
resistant. Because the bag is made from one
material, it attracts a lower waste collection
charge while maintaining the functionality
our customers require. In addition to making
a sustainable product that complies with
legislation in a more affordable way, the new
bag is made entirely from a renewable
resource.
Price is only one consideration in our
purchasing decisions. Factors such as quality,
availability, our customers’ preferences and
our sourcing policies are also taken into
account. We work with our suppliers with the
aim of ensuring that the products we supply
are, wherever possible, manufactured from
sustainably sourced raw materials and seek
to increase the range of sustainable products
made from recycled materials or are
themselves recyclable or compostable.
We work with thousands of suppliers around
the world. We expect all suppliers to meet
the same internationally recognised human
rights, environmental and quality standards
that we expect of our own businesses.
These include meeting local legislative
requirements but also 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.
Most of Bunzl’s direct suppliers are based in
countries with comparatively low levels of
social risk. We periodically carry out a social
risk assessment of our supply chain and this
helps us to deepen our understanding into
the social risk factors in countries with high
relative risks, many of which are in Asia.
With this information, we continuously
enhance and refine our work to mitigate
social risks in our supply chain, e.g. by
performing more in-depth audits in high risk
countries, optimising training materials and
increasing the communication of our
standards to high risk suppliers.
We expect all suppliers to adhere to our
supplier code of conduct as a condition of
doing business with us. The supplier code is
available in many languages and is actively
communicated by our businesses to our
suppliers, particularly in those countries
with increased risk of modern slavery and
other social risks.
Audits
We have an assurance and quality control
team based in Shanghai which performs
regular audits of our direct suppliers in Asia
to ensure that they meet our standards in
relation to human rights, conditions of work,
hygiene management systems and
environmental performance.
Suppliers who are unable to meet all the
requirements after an initial audit are given
the opportunity to comply fully within a
period of time which is deemed appropriate
for the circumstances. 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, not providing
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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 2019 we carried out a total of 707
(2018: 539) audits of suppliers located in
Asia and worked with those suppliers where
unacceptable standards were identified
to resolve any non-conformities. Thirteen
suppliers did not make sufficient progress
to address the concerns and we have
subsequently ceased our relationship with
those suppliers.
Supplier engagement
We believe that building relationships,
capacity and trust with suppliers is critical
when it comes to preventing and identifying
incidents of modern slavery. Every year,
we organise training events in Asia to work
with our suppliers to help them prevent
issues arising and to address them if they
are found.
In 2019 we carried out training events in
Kolkata, India and Shanghai, China (see
case study).
Training
All of our senior staff, including managers
and procurement and sales executives,
are required to complete corporate
responsibility training on social risks,
including modern slavery. The training
helps our employees to understand and
recognise social risks that might occur in
our supply chain and to inform them of the
appropriate actions that should be taken if
such risks materialise.
Further details are provided in our Group
Modern Slavery Statement which can be
found on the Bunzl plc website.
Key performance indicators
3
Working with our suppliers
to deliver innovative solutions
One example of how we are working with our
suppliers to bring innovative new products to
market is a project we have been working on
in partnership with Co-op in the UK. In
recent years several UK supermarkets have
moved away from using single-use plastic
carrier bags in favour of reusable plastic
‘bags for life’ made from recycled material.
In addition to offering reusable bags, Co-op
wanted to explore whether they could also
introduce a compostable bag in their shops
located in UK council areas that offered a
food waste collection from residents’ homes.
Bunzl Retail Supplies (BRS) were given the
challenge of working with their suppliers to
source an appropriate solution.
The compostable bags needed to meet the
following strict performance criteria:
• compliance with the European Directive on
compostability (EN13432) and the ability to
be compostable at home; and
• comparable in structural integrity and
performance with the single-use plastic
carrier bags they were replacing.
We worked in partnership with Co-op’s food
policy team to understand compostable
materials, the relevant European legislation
and the process of composting through both
industrial and home composting routes.
Once this was established, we reviewed
potential suppliers and performance tested
the samples received.
Supplier training
A supplier training event in Kolkata,
India was held in June 2019. The aim
of the event was to raise suppliers’
awareness of modern slavery and other
social risks and to provide support to
suppliers on how to remedy those
issues. The training featured various
interactive workshops during which
best practices and challenges were
discussed in an open and informal
dialogue with Bunzl and
other suppliers.
The supplier training event was
attended by 30 suppliers and was
very well received. The event is an
example of how enhancing supplier
relationships and creating an
atmosphere of collaboration helps
to drive progress.
Through numerous product iterations, BRS
managed to source a product that met the
criteria above. The compostable bags are
dual purpose, firstly as a carrier for shopping
and secondly for disposing of food waste at
home and are the first to be introduced by
a UK retailer. The bag is in over 1,000 of
Co-op’s food stores and replaced around
60 million single-use plastic bags in the
first year.
As a material-agnostic distributor, Bunzl is
well placed to provide its customers with
trusted and objective advice on complex
sustainability solutions like this. It also
demonstrates the strength of Bunzl’s
consolidated supply and distribution model
as the compostable bags need to be delivered
to specific distribution centres (which supply
stores located in areas with food waste
collection services), with different products
delivered to other stores.
Suppliers
Responsible sourcing, working as partners with our suppliers to encourage high levels of sustainable and ethical trading initiatives
Performance
2017
2018
2019
What we said we
would do in 2019
503
539
707 More in-depth audits
of high-risk suppliers.
Continue to optimise
and expand our audit
programme.
Supplier audits and
assessments covering
environmental and social
standards (number of
audits/assessments
carried out)
What we did
What we plan
to do in 2020
We have increased the number of Asian
suppliers that we audit by more than 30%
covering now almost all our direct Asian
suppliers. We have reviewed our audit
scope, have added additional check-points
and increased the number of employee
interviews to help ensure that all applicable
risks are covered.
Continue to expand our ethical
sourcing principles across the
Bunzl Group.
Extend the scope of our supplier
audits to increasingly include
‘downstream’ environmental
considerations.
Bunzl plc Annual Report 2019
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Strategic reportFinancial statementsDirectors’ report
Sustainability continued
Our business
We will make a
positive contribution
to our people, the
environment and
local communities.
1 We will be a great place to work and
enable our people to thrive.
2 We will reduce our impact on the
environment.
3 We will support environmental
charities and projects that are
meaningful to our local communities
and teams.
Total workforce
36%
64%
Senior management
14%
86%
Males
Females
Males
Females
Average number of employees
17%
20%
36%
27%
North America
Continental Europe
UK & Ireland
Rest of the World
Total workforce age
20%
17%
24%
39%
Under 30
30–39
40–54
Over 55
1
A great place to work
Introduction
In a world that is changing rapidly, attracting
the best people for our roles and ensuring
they are equipped with the relevant skills
and experience is critical to maintaining a
competitive advantage. The decentralised
nature of Bunzl means that there is greater
opportunity to give people the appropriate
freedom and accountability to be able to
succeed. We are very proud of our people
and all they achieve and recognise the
importance of investing in their growth.
Developing our people
Throughout the Group we are committed
to developing people through a variety of
methods such as formal development
programmes, online learning opportunities,
coaching and mentoring as well as providing
opportunities for learning and growth in
their roles.
There are numerous examples in Bunzl
of courses that have been designed and
developed specifically with our employees
in mind, from ‘Desorrollate’ in Latin America
(focused on the development of collaboration
tools) to the Young Leaders Forum in
Australia. Ensuring that we grow our
internal talent through developing those with
potential to be our leaders of the future is a
key area of focus. Two examples of this are,
the ‘DRIVE’ programme in North America,
aimed at emerging and senior leaders, and
the Bunzl University, a programme for
prospective leaders in Continental Europe.
Focusing on career development is not only
for those already in management roles.
Within UK & Ireland there is an academy
aimed at warehouse operatives and drivers
who want to advance their careers. At a
Group-wide level, 2019 saw the launch of
our new Senior Leadership Development
Programme aimed at senior leaders around
the world (see case study on page 40).
Starting in 2019, a group of around 20
leaders from across our business have come
together for four intensive learning modules
and project activities during the 18-month
long programme. We will launch a new
cohort of the programme every year.
Recognising different learning styles and
the fact that it is not always possible to
attend courses away from the workplace,
online learning gives our employees access
to a wide range of options for both work and
personal development areas. In most parts
of our business people can access online
training and e-learning products to develop
themselves. For example in the UK & Ireland,
instantly accessible to all is YELP (Your
E-Learning Portal), an online library of over
1,500 courses.
Engagement
Following the 2018 employee survey the
focus has been at a local and team level in
creating action plans that address the points
raised in an individual business’s survey
results. In North America there are action
plans for each branch location with updates
planned every six months to ensure the
plans can be refined and updated based on
real-time feedback. The types of actions that
have resulted from these local discussions
range from reviewing flexible benefit options
and sharing product information with
employees to installing communication
screens in sites, enabling the instant sharing
of information and business updates.
Some issues raised via feedback in the
employee survey were common to more than
one area or region, for example having career
opportunities made more visible. The UK &
Ireland have moved performance reviews,
career development and succession plans
online, increasing the visibility of the skills
requirements for roles and potential career
paths for managers. This enables the
creation of targeted development solutions as
well as making it easier to fill roles internally
with the best possible candidates.
Rewarding for performance
Within Bunzl we pay our employees fairly
based on their skills and experience. In line
with our overall business model, reward and
recognition for the workforce is aligned to
the markets in which the businesses operate
and reward structures are appropriate for
that environment. Locally our businesses
own and manage recognition schemes and
provide employee benefits that motivate and
retain their people.
Equality and diversity
Increasing the diversity of our workforce
strengthens our business and enables us to
respond to changing environments. Through
developing an inclusive environment that
encourages new ideas and innovation we
will improve our offering to customers and
enhance our processes and ways of working.
Although an imperfect indicator of diversity,
we have paid more attention to our Gender
pay report.
38
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report The data for gender pay gap in 2019 will be
the third year of reporting for both our UK
legal entities. Our combined gender pay gap
for 2019 for both the two UK legal entities
and plc employees is as follows:
• 16.6% gender pay gap (mean hourly pay)
• -6.9% gender pay gap (median hourly pay)
• 69.8% of women receive a bonus
• 73.2% of men receive a bonus
The two entities on which we report have
changed their workforce mix through
acquisitions and disposals which has a
greater impact than the normal, more
gradual, changes of employees leaving and
joining a business. The underlying reason
for our gender pay gap, however, remains
the same as previous years. We have more
men in senior and therefore higher paid
positions and a relative low turnover in these
senior roles.
The focus continues to be on practical
interventions to ensure we can truly deliver
the aims of our diversity policy. For example
the introduction of a new competency
framework to ensure consistency in the
performance review process; and ensuring
that our recruitment, performance review,
career development and succession planning
processes continue to be free from gender
bias. We recognise that to reduce the gender
pay gap in the future the focus needs to be
on attracting and developing women into
Bunzl at all levels and to this aim the
Inspiring Women in Bunzl (‘IWIB’) network
has been set up (see case study).
Inspiring Women
in Bunzl
We are taking action to address a
common issue that faces many large
organisations, the under-representation
of women at a senior level. In the UK &
Ireland the MD for our retail business,
Helen Cockerham, has created a
network for a number of women who
have been identified as having the
potential to advance into leadership
roles within the Group. Called the
‘Inspiring Women in Bunzl’ network,
its goal is to be a catalyst for Bunzl
leading the way in creating a
supportive and empowering culture
for women to achieve their goals.
Over the course of 2019, the network
has defined its objectives, which are
to foster and nurture a pipeline of
confident and talented women who can
progress their careers alongside their
male colleagues to the benefit of Bunzl.
Every member of the group has
worked hard to engage the leaders
of their operating companies and
we have already seen an increase in
the proportion of director roles held
by women.
The IWIB network is
such a positive step. By
sharing our vision and
mission with colleagues
and with the support
of the Board we will
inspire other women
to see that Bunzl is a
diverse and equal
company to work for.
Lucy Wilkinson
Head of Brand, Protec Direct
Key performance indicators
Employees
Engaging with our employees with clear communications and the provision of training and development opportunities
Performance
2017
2018
2019
What we said we
would do in 2019
What we did
What we plan
to do in 2020
Employee turnover:
Voluntary
13.0% 14.6% 15.4% Continue to monitor turnover and
Exit interviews in largest regions.
take action where necessary.
Online tracking of joiners and
leavers enables greater visibility
and analysis.
Gender diversity:
Women at senior
management level
11% 13% 14% Raise awareness and further
develop training and look for
opportunities for wider
participation.
Succession planning
improvements.
Inspiring Women in Bunzl
(see case study).
Continue to conduct exit
interviews and monitor voluntary
turnover.
Broaden networks for women
in Bunzl.
Provide focused development
interventions for high potential
women.
Employee engagement
index score
–
74% –
Detailed action plans to be devised
to address significant issues
raised and celebrate successes.
Regular review of action plans
at site level.
Relaunch our employee
engagement survey in 2020.
Bunzl plc Annual Report 2019
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Sustainability continued
Board engagement
The annual meeting of the European
Information and Consultation Forum
was held in June in the UK. The
representatives heard from both
Business Area Heads, Alberto Grau
and Andrew Tedbury about
performance, strategy and plans for
their respective business areas,
Continental Europe and UK & Ireland.
In addition, for the first time a non-
executive director, Vanda Murray,
attended the meeting. She held a
private session with the forum
representatives, concentrating on
issues arising from the employee
survey, and gathering views and
opinions on Bunzl as a place to work.
A similar session was held by Lloyd
Pitchford, another non-executive
director, with employees from
Bunzl North America (‘BNA’).
Feedback was very positive and
both employees and non-executive
directors really appreciated
hearing a different perspective and
understanding more deeply the issues
and concerns of the wider workforce.
Senior Leadership
Development
Programme
The Senior Leadership Development
Programme is a custom designed
programme delivered by an external
faculty which brings around 20 senior
leaders from around the world together
over a period of 18 months to develop
their leadership capability. The four
modules (strategic leadership,
entrepreneurial leadership, commercial
leadership and organisational
leadership) combine formal learning
with visits to relevant Bunzl businesses
and participants undertake project and
coaching activities between modules.
A huge benefit of this programme is
the informal learning and networking
that happens during and after the
programme has run.
Health and wellness
Bunzl believes in creating an environment
which enables employees to be happy and
motivated at work. There has therefore
been investment in programmes that are
specifically aimed at employee well-being.
In several business areas, there are formal
support tools and services such as Employee
Assistance Programmes (‘EAP’) or Wellness
Programmes that enable employees to
access health screening assessments.
Employees are encouraged to adopt healthy
habits and working practices throughout
Bunzl and examples in the businesses range
from providing employees with fruit and
lunchtime yoga sessions to sharing advice
and tips on how to improve both their mental
and physical health.
Code of conduct
The Group’s business code of conduct is
disseminated to every employee as a guide
to how employees are expected to conduct
themselves both from a corporate and
individual perspective. The code of conduct
clearly states that employees must 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. The code of
conduct is supported by a set of e-learning
modules, covering matters such as anti-
bribery, health & safety, competition laws
and modern slavery. The business code of
conduct has been revised and reissued to
employees in 2019.
No material breaches of our code of conduct
were recorded in 2019. 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 2 (2018: 10) calls
or letters were received through our
confidential whistle blowing process,
‘Speak Up’, none of which related to any
issues of material concern.
At the end of 2019 we partnered with an
independent organisation to introduce
a new way to report or ‘whistle blow’
concerns. This new approach enables
employees to raise issues online or via a
local telephone service and describe their
concerns in their native language in a totally
confidential manner.
Key performance indicators
Health & safety
Improving safety in our warehouses and on our vehicles
Performance
2017
2018
2019
What we said we
would do in 2019
What we did
Reduction in accident
incidence rate
(% change year on year)
-20% +17% +1% Reduce the Group
accident incidence
rate by 5% from
2018.
Reduction in accident
severity rate
(% change year on year)
-22% +25% +31% Reduce the Group
accident severity
rate by 5% from
2018.
In 2019, the accident incidence rate increased by 1%
while the accident severity rate increased by 31%.
We continued to see the impact of tight employment
markets with higher numbers of new recruits, and
have therefore improved our safety onboarding
programmes to ensure that new employees are
adequately trained for the job. The increase in the
severity rate is principally related to a number of
accidents with long periods of absence in North
America and France.
What we plan
to do in 2020
Reduce the Group accident
incidence rate by 5% from
2019.
Reduce the Group accident
severity rate by 5% from 2019.
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We anticipate this will increase the number
of cases raised by making access easier.
This will also provide us with better data
on the types of concerns identified and the
locations from where they have been raised.
forklift trucks, use of newer and safer
machinery and equipment and customised
areas for storage of hazardous materials.
New forklift trucks are fitted with warning
lights and cameras.
Our objective is to minimise the risks,
particularly relating to the operation of our
warehouses and vehicles, in order to reduce
accidents involving manual handling,
falling, slipping and tripping and impact
with equipment which remain the highest
causes of accidents. All our businesses are
required to comply with local legislation and
Group safety policies. The compliance with
these regulations and policies is audited
by a team of safety professionals. Safety
standards are also reviewed as part of our
internal audit process.
Incidence rate
Average number of incidents per month
per 100,000 employees
110
101
95
96* †
81
15
16
17
18
19
12 months to 30 September.
Severity rate
Average number of days lost per month
per 100,000 employees
3
0
6
3
,
9
0
4
,
2
†
*
0
1
1
,
3
0
7
3
0 2
9
8
1
,
,
15
16
17
18
19
12 months to 30 September.
* In 2019 we improved our accident recording standards and
updated the guidance on recording work-related accidents.
† Included in the external auditors’ limited assurance scope.
See data assurance statement which is available on our
website, www.bunzl.com. The data for previous years was
also assured as detailed in the respective Annual Reports.
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 its own specific
focus but all are aimed at reducing accidents
and injuries on the road. Three of our UK
businesses have implemented the Fleet
Operator Recognition Scheme (‘FORS’),
a nationally accredited scheme which
promotes best transport practices, across all
of their operating locations. The scheme
measures fleet performance and aims to
drive up standards across areas such as fuel
efficiency, carbon emissions and road safety.
In North America, where we have our
largest fleet, we are constantly looking for
ways to educate our drivers on how to be
more safe behind the wheel. In 2018 we
introduced two new defensive driving
programmes and as a result we have seen
in 2019 a significant reduction in serious
vehicular accidents.
B-Safe
In order to drive compliance with
regulations and internal standards, we
have introduced various digital
solutions across Bunzl, one of which is
B-Safe. B-Safe is a flexible mobile data
collection platform that was designed
to Bunzl specifications. It has an
intuitive user interface making the
collection of health & safety related
data simpler and more accurate. Bunzl
locations can build their own custom
inspection and checklist forms or use
the corporate pre-populated forms.
Inspections can be completed on-the-
go, tasks assigned and alerts and
reminders set up.
Launched in early 2019, B-Safe already
has 400 users across Bunzl and is used
for various purposes such as
warehouse safety inspections, pre-use
inspections of vehicles and evaluation
of emergency evacuations.
Employees/human rights
Bunzl adheres to the Universal Declaration
of Human Rights and upholds the
Fundamental Principles and Rights at
Work policies, defined by the ILO, as well
as applicable local laws. The countries
in which Bunzl operates have their own
laws banning child and forced labour and
promoting human rights.
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 of directors and is available on our
website, www.bunzl.com.
Health & safety
As a business with a large warehouse
footprint and fleet, health & safety is an area
of significant focus by the Board. One factor
that continued to impact our incidence and
severity rates in 2019 is the challenging
conditions in the employment markets
worldwide. Tight employment markets are
leading to increased employee turnover
and shorter job tenures which can have a
negative impact on injury rates as less
experienced employees have an increased
risk of being involved in a workplace injury.
Our businesses have various onboarding
tools and programmes in place to ensure
that all new employees are adequately
trained for the job and coached by more
experienced colleagues. In North America
we have focused on implementation of a new
onboarding programme in 2019. New safety
and HR onboarding booklets were rolled out
and training requirements revised. A step-by-
step introduction of the employee to their new
work environment was implemented.
In 2019, we continued to invest in new
facilities across the Group. We started
operating in several new state-of-the-art
warehouse facilities that were designed from
the ground up. This allowed us to make
layouts more efficient and logical and
implement many safety improvements such
as improved segregation of pedestrians and
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Sustainability continued
We continue to take steps to embed a
more proactive safety culture in Bunzl.
In North America, we have carried out a
comprehensive safety perception survey
for our Bunzl Retail Services Division. The
survey was completed by 800 participants
across 14 locations. The survey measured
the percent positive responses by the
participants to a set of recognised safety
indicators. The results were compared
against a multi-industry database and a
gap analysis was performed. The survey
resulted in an action plan for each location.
Improvement actions included engaging
with employees at each level to participate
in a safety steering team, identifying the
top issues that were most important to
employees and creating continuous
improvement teams to identify solutions
to the issues.
In France, where we have the highest
incidence and severity rates in the Group,
we have started to roll out a comprehensive
training programme for middle management.
The training will help create a more
proactive safety culture by developing the
skills needed to conduct effective safety
observations and enable discussions to take
place with employees about safe and unsafe
work practices. This series of training
sessions is a first step towards planned
ISO 45001 certification in France.
Our businesses in North America have
implemented a new online Environmental
Health and Safety (‘EHS’) management
system. The new system has streamlined
our reporting processes and helped
maintain compliance with local reporting
requirements. Additionally, it is playing a
role in an EHS culture shift, through the
system’s ability to report leading indicators
(such as ‘near miss’ incidents), dashboard
metrics and customised reports. Another
example of continuous improvement within
North America was the piloting of a new
ergonomics training programme aimed at
challenging the way employees perform their
job functions. Targeting the reduction of
injuries with specific work instructions
(‘moves’) that have been customised to the
facility’s work environment, the training also
covers wellness, recovery and stretching.
Details of our performance from 2015 to 2019
are provided in the bar charts on page 41.
The accident data provided covers more than
99% of the Group by revenue.
Greenhouse gas emissions (Group)
Data for the period 1 October to 30 September
Scope 1
Scope 2
Total gross emissions
Total carbon emissions per £m revenue
Greenhouse gas emissions (UK)*
Scope 1
Scope 2
Total gross emissions
Total carbon emissions per £m revenue
Energy consumption (UK)*
Natural gas (cubic meter)
Fuel (litres)
Electricity (kWh)
Tonnes of CO2e
Base year 2010
95,249
28,757
124,006
26.3
2018
99,848
31,615
131,463
15.0
2019†
99,193
29,594
128,787
13.9
Tonnes of CO2e
2018
17,606
3,263
20,869
17.5
2019
17,211
2,660
19,871
17.0
2018
617,969
6,224,877
11,526,592
2019
469,573
6,271,182
10,405,385
† Included in the external auditors’ limited assurance scope. See data assurance statement on our website www.bunzl.com. The data for
2018 was also assured as detailed in the 2018 Annual Report.
* Energy usage and carbon emissions disclosed separately to early adopt to the requirements of the UK Streamlined Energy and
Carbon Reporting (‘SECR’) policy.
2
Reducing our impact
on the environment
Our efficient one-stop-shop operating model
allows our customers to benefit from both a
lower cost and a lower environmental impact
of doing business. We have an extensive
operations footprint across more than 30
countries. The products available from our
broad range 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,
cutting fuel usage and carbon emissions.
Climate change poses a number of potential
risks for Bunzl, from both a physical (e.g.
isolated events such as increased intensity
of storms, heatwaves or higher average
operating temperatures) and regulatory
(e.g. new or strengthened carbon reduction
commitments) perspective.
We seek to minimise the contribution of
Bunzl’s operations to climate change and
to prevent other harmful effects on the
environment. Operational efficiency forms
part of a long-established and successful
strategy to develop the business and the
reduction of energy consumption is an
integral part of this. 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 2020.
Our businesses in the US have been
increasingly exposed to hurricanes and other
severe weather conditions. To ensure the
safety of our employees and the continuity
of our service to our customers, we have
developed detailed business continuity
plans. When we learn that a hurricane
could make landfall and impact an area
where we have Bunzl operations, the
emergency preparation and response plans
are put into action. Those plans could
include deployment of emergency equipment
(such as back-up power generators, extra
trucks and trailers), extra support (temporary
or permanent Bunzl employees ), review of
the safety of housing and commuting routes
of employees, IT backup and, if necessary,
evacuation of the location concerned.
Our reported environmental data includes all
businesses that are subsidiaries of the Group
for financial reporting purposes, except for
recent acquisitions where there has been
insufficient opportunity for the businesses to
adopt our reporting guidelines. The revenue
from these businesses is not included when
calculating the indexed emissions. The
reported data covers around 99.5% of the
Group by revenue.
A number of locations in UK & Ireland,
Asia Pacific and Continental Europe have
renewed their ISO 14001 certification.
Approximately 23% of the Group’s
operations are certified to ISO 14001
(measured by revenue). Certification is
based on processes and practices which
42
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Strategic reportFinancial statementsDirectors’ report training programmes. At Group level, diesel
consumed by our commercial fleet remained
constant, despite sales growth. 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. Automated
vehicle routing systems help our business
to ensure deliveries are planned to limit the
distance covered by each vehicle in order to
reduce fuel costs, as well as environmentally
harmful emissions. Our fleet of commercial
vehicles in North America is the largest in
the Group with over 700 vehicles. North
America has implemented state-of-the-art
routing software, allowing its operations
teams to maximise fleet utilisation, meaning
that the same number of vehicles can deliver
more goods more efficiently, reducing fuel
usage and cutting emissions to air. In 2019,
the use of routing optimisation in North
America contributed to a reduction of total
distance driven in that business area,
equivalent to a saving in fuel consumption
of approximately 0.8 million litres of diesel.
Natural gas is principally used for the
heating of buildings. This depends on
weather conditions and therefore varies
considerably by business area. At Group
level, the consumption of natural gas
remained constant.
Scope 2 emissions: Electricity consumption
has decreased by 0.4%. The increases we
have seen in some areas as a result of
increases in warehouse space have been
offset by energy efficiency improvements
and closure of some other locations. Per £
of revenue, our electricity consumption has
reduced by 4% at constant exchange rates.
Scope 1 carbon emissions
Tonnes of CO2 per £m revenue
14.7
12.6
11.3 11.4
10.7†
15
16
17
18
19
Measured in accordance with the Greenhouse
Gas Protocol applying DEFRA conversion factors.
12 months to 30 September.
Scope 2 carbon emissions
Tonnes of CO2 per £m revenue
5.4
4.5
3.7
3.6
3.2†
15
16
17
18
19
Measured in accordance with the Greenhouse
Gas Protocol applying DEFRA UK conversion
factors and IEA factors for overseas electricity.
12 months to 30 September.
† Included in the external auditors’ limited assurance scope.
See data assurance statement which is available on our
website, www.bunzl.com. The data for previous years was
also assured as detailed in the respective Annual Reports.
Lighting is our highest category of electricity
consumption and we continue to invest in
energy efficient lighting at all our sites to
reduce energy usage. New buildings
designed as Bunzl warehouses have the
specification of LED lighting which, when
possible, is coupled with proximity switching
and dimming facilities to take advantage of
any natural lighting.
are implemented Group wide through our
EHS management programme, although
some parts of the business have not elected
to become formally certified.
Scope 1 emissions: Fuel for transportation
remains our highest source of CO2e
emissions, contributing 81% of Scope
1 and 62% of combined Scope 1 and 2
emissions. Of those emissions relating to
transportation, 78% 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
LED lighting
Lighting is our highest category of
electricity consumption. With today’s
lighting technologies, the energy of
lighting a warehouse can be reduced
by as much as 50% to 70% over
traditional lighting.
In the UK & Ireland, all our major
warehouse locations have been
converted to LED lighting to make our
work environment brighter, safer and
less expensive to operate. The improved
light levels help reduce accidents,
improve the working environment and
eliminate significant work at height
activities such as bulb replacement,
reducing our workplace risk.
Whenever there is an opportunity at
one of our locations, we upgrade the
lighting to LED and implement other
energy saving measures such as
occupancy sensors. In 2019, we
completed 11 LED retrofit projects in
North America which will result in
savings of 1.9 million kWh every year.
Also, three new facilities were opened
which were equipped with LED lighting
as part of our standard specification.
Our North American team is continuing
to look to make more lighting upgrades
in the coming year as we seek to further
reduce our carbon footprint and make
a positive impact on the environment.
Denton Bruce,
Senior EHS director Bunzl North
America.
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Sustainability continued
In addition, as energy contracts are renewed,
our businesses are moving to low carbon
energy where this makes commercial sense
and is supported by the local infrastructure.
Scope 3: Our reporting comprises emissions
from third party carriers, business flights,
waste and electricity transmission losses.
The bar graph opposite shows that third
party carriers produce the largest proportion
of our reported Scope 3 emissions. These
emissions arise due to some of our
businesses not having 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.
Waste
In 2019 we worked to improve the consistency
and accuracy of waste measurement
and reporting, although accurate waste
measurement remains challenging in
geographies with less advanced waste
management infrastructures. The amount
of waste generated in our facilities is
approximately 22,900 tonnes which is
similar to the amount of waste generated in
previous years. We actively work to reduce
the waste and enhance waste recycling
rates at our facilities. Recycling rates strongly
depend on the locally available waste
recycling options. In 2019, approximately 63%
of the waste was recycled. This excludes any
post-disposal waste treatment and recycling
carried out by waste handlers.
The reported waste data covers approximately
95% of the Group by revenue. Waste is also
included in our Scope 3 emissions calculation.
Water
Direct water usage is not a significant
environmental impact for our business as it
is principally confined to staff hygiene and
workplace cleaning. Our estimated water
usage is 170,000m3 of water per year. 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 our locations.
Key performance indicators
Environment/climate change
Reducing our impact on the environment by reducing carbon emissions
Scope 3 carbon emissions
Tonnes of CO2e per £m revenue
0.2
0.4
1.6
13.0
0.2
0.3
1.2
11.7
0.1
0.3
1.1
9.6
0.1
0.2
1.0
12.5
0.1
0.2
1.1
11.2
15
16
17
18
19
Waste
Electricity transmission
Business travel
Third party carriers
12 months to 30 September.
Performance
2017
2018
2019
What we said we
would do in 2019
11.3
11.4
10.7† Reduce emissions by
1% against 2018.
Carbon emissions:
Scope 1 (tonnes of
CO2e/£m revenue)
Carbon emissions:
Scope 2 (tonnes of
CO2e/£m revenue)
3.7
3.6
3.2†
(This reduction target
excludes any foreign
exchange translation effect
on revenue numbers.)
Reduce emissions by
2% against 2018.
(This reduction target
excludes any foreign
exchange translation
effect on revenue numbers.)
Total Scope 1 & 2
emissions (tonnes
of CO2e/£m
revenue)
15.0
15.0
13.9† Reduce emissions by
1% against 2018.
(This reduction target
excludes any foreign
exchange translation effect
on revenue numbers.)
What we did
The 2019 figure represents a 6% decrease in
Scope 1 emissions versus 2018, including the effect
of foreign exchange rate fluctuation. At constant
exchange rates the emissions reduced by 4%.
Reduction of these emissions is primarily driven
by fuel and routing efficiency improvements.
The 2019 figure represents a 11% reduction in
Scope 2 emissions versus 2018, including the effect
of foreign exchange rate fluctuation. At constant
exchange rates the reduction in emissions is 10%.
Our Scope 2 emissions take into account changes
to the average country specific emission factors,
but do not take into account low carbon electricity
purchases (representing approximately 13% of
electricity purchased).
The remaining improvement in the Scope 2 index
has been driven by the continued implementation
of energy efficiency improvements such as low
energy lighting.
The 2019 figure represents a 7% reduction in total
Scope 1 and 2 emissions versus 2018, including the
effect of foreign exchange translation. At constant
exchange rates the reduction in emissions is 5%.
What we plan
to do in 2020
Reduce emissions by 1%
against 2019.
(This reduction target
excludes any foreign
exchange translation
effect on revenue numbers.)
Reduce emissions by 2%
against 2019.
(This reduction target
excludes any foreign
exchange translation
effect on revenue numbers.)
Reduce emissions by 1%
against 2019.
(This reduction target
excludes any foreign
exchange translation effect
on revenue numbers.)
† Included in the external auditors’ limited assurance scope. See data assurance statement which is available on our website, www.bunzl.com. The data for previous years was also assured as detailed in the
respective Annual Reports.
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3
Supporting charities and
local communities
Bunzl’s operations are international but
our strength lies in the local nature of our
businesses. We support the communities
where our employees live and work
and encourage fundraising activities
championed by our businesses and their
employees locally. For example, there have
been various charity runs in the UK, the
Netherlands, Switzerland and France
which raised money for charities including
Alzheimer’s research and those supporting
disabled people.
We are complementing our new
sustainability framework and approach
to single-use plastics by realigning the
focus of our Group charity work to support
environmental activities in three key areas:
• charitable projects that encourage
packaging reuse and recycling and work
to educate consumers;
• litter clean-up and prevention initiatives
operating in our markets, giving our
employees the opportunity to get involved;
and
• projects that build new waste management
infrastructure and develop recycling skills
in some of the world’s poorest places,
often in areas where plastic leakage to
the natural environment is highest.
Where possible and appropriate, Bunzl
also looks to donate stock free of charge
(‘in-kind’). Group wide, Bunzl donated a
total of £659,000 to charitable causes during
2019. This does not include amounts
donated by Bunzl in matching funds raised
by employees for local charities.
An example of an initiative we supported in
2019 was our funding for a detailed research
project which monitored the levels of air
pollution that people in London are exposed
to daily. The research involved fitting air
quality monitors to a diverse group of
Londoners. This included a school pupil,
a college student, a member of the UK
Parliament, a construction worker, a lorry
driver, a gas engineer, a cyclist, a doctor,
an office worker, a runner and Ben Webster,
Environment Editor of the UK’s Times
newspaper, who ran a feature on the project.
The results are being analysed but the
intention is that the findings will lead to
a series of practical interventions under
the ‘Air We Share’ banner that will reduce
Londoners’ exposure to poor air quality.
For example, based on the findings so far,
Bunzl is exploring the development of a
well-being programme to help employees
reduce their risk of exposure to poor air
quality. Other interventions will include
social media communication to help people
take less polluted routes between busy areas
and community awareness campaigns
aimed at schools, colleges and other groups.
Charity partnerships
Bunzl Healthcare has a long-standing
partnership with St John Ambulance.
A donation to the ‘Young People’s First
Aid’ programme has given over 10,000
pupils free training in key first aid
skills, that could one day help them
to save a life.
This year St John Ambulance has
taken delivery of a third, custom built
treatment vehicle donated by Bunzl. It
will provide support at major events
and medical care in city centres and at
community projects which will help
reduce the pressure on the NHS.
Key performance indicators
Community
Providing support to our local communities through employee fundraising, matched funding and donations of stock and cash to charitable organisations
Performance
2017
2018
2019
742
607
659
What we said we
would do in 2019
Continue to support
relevant charities.
Charity donations
(£000s)
What we did
We have supported a number of projects for
healthcare, environmental and conservation
charities both locally within our businesses and
centrally at Bunzl plc. Our focus next year will be
to support environmental charities and we expect
donations to be similar to 2019.
What we plan
to do in 2020
Continue charity programme
with increased focus on
environmental charities.
Bunzl plc Annual Report 2019
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Sustainability continued
Our customers
We will deliver
sustainable products
and solutions
that improve our
customers’ businesses.
1 We will support our customers to
become more environmentally
sustainable by providing innovative
solutions and lower impact products.
2 We will give our customers trusted,
objective and expert advice on complex
sustainability issues.
3 We will partner with organisations
across our supply chain to bring a
circular economy approach to the
products we distribute.
We offer a wide product range to our
customers and provide the support and
expertise required for them to make
informed choices. We also work with our
suppliers to ensure that the products we
supply are, wherever possible, manufactured
from sustainably sourced raw materials
and seek to increase the range of
sustainable products that are made from
recycled materials or are themselves
recyclable or compostable.
Why the plastic challenge
matters to Bunzl
Plastic is a material with many positive
attributes. It keeps the weight and fuel
emissions of vehicles down and contributes
significantly to minimising food waste in
retail supply chains. When considering the
overall environmental impact (energy use,
water consumption, carbon emissions,
land use) of a product, plastic will frequently
be the most resource efficient material
for a given application. As a material it
typically uses less water, land and energy
to manufacture and keeps carbon
emissions low during transportation
because it is lightweight.
When plastic is used only once or is
not properly recycled, it damages our
environment, pollutes our oceans and can
enter the food chain. As a leading distributor
of a variety of plastic-based products,
we recognise that we have a responsibility
to act. Our ambition is to work with our
customers and suppliers to lead the industry
towards a more sustainable approach to
single-use plastics.
Our customers, who are some of the world’s
leading brands, are being put under pressure
by their own customers to reduce their
plastic waste footprint. It is a complex
challenge: the daily running of their
businesses depends on the products we
provide and there are many plastic products
where no viable alternative exists today.
We are however determined to rise to the
challenge. Our scale and unique position
at the centre of the supply chain gives us
a powerful opportunity to be part of the
solution. We can offer alternatives to
single-use plastics, and plastics that are
more recyclable and compostable, because
we are not wedded to any particular
materials. We are agile when it comes
to changing our range and see this as
an opportunity for growth in both our
customers’ businesses and our own.
We are improving our service to customers
with clear information on the total
environmental impact of the products we
distribute. We are also exploring ways to
connect supplier innovation with customer
needs to develop more sustainable solutions.
It will not happen overnight but in time
we believe we can help contribute to
a world with much less plastic waste in our
environment – working with our customers,
suppliers and other stakeholders to make
this crucial shared goal a reality.
Our ambition is to work
with our customers and
suppliers to lead the
industry towards a more
sustainable approach
to single-use plastics.
Reusable foodservice products
from Bunzl Catering Supplies
46
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Strategic reportFinancial statementsDirectors’ report A partnership to
close the loop
One of our safety businesses, France
Sécurité, has collaborated with the
specialist recycling company Terracycle
to offer customers an end of life
solution for the personal protection
equipment (‘PPE’) they buy. Customers
can purchase a ‘zero waste box’ which
they then fill with their chosen PPE.
Once full, the box gets collected and
sent to Terracycle who organise the
recycling of the materials. By offering
this service to customers, France
Sécurité is providing their customers
with an end of life solution for
disposable products, while promoting
a circular economy.
Link to sustainability
www.bunzl.com/
sustainability
1
Providing sustainable
solutions
To save resources and protect our natural
environment, many of the world’s leading
companies are setting targets for their
packaging to become more sustainable.
Because we are not wedded to any particular
materials, we can:
• provide objective advice and expertise on
sustainable products for our customers;
• work with our customers to find solutions
for their sustainability challenges; and
• collaborate with our suppliers and join
the dots with end customer needs to bring
innovative solutions to market.
Across the business and in multiple
geographies, we are already working with
suppliers and customers to find sustainable
solutions for the products they use. Since
2015, we have been working in partnership
with the Climate Neutral Group to supply
Coop Supermarkten in the Netherlands
with a ‘climate neutral’ reusable carrier bag.
The process for developing a climate neutral
product involves calculating the lifecycle
greenhouse gas emissions associated
with the carrier bag (the carbon footprint).
We then develop and implement measures
that reduce the carbon footprint of the
product. Bunzl Retail and Industry
Netherlands worked to reduce the carbon
footprint of the reusable carrier bag by using
97% post-consumer recycled plastic in its
composition. This plastic comes from
recycled PET bottles, a material that has a
much lower carbon footprint when compared
to using virgin plastic.
Coop Netherlands works
closely together with Bunzl
to meet our sustainability
goals for packaging.
Bunzl not only understands
where we want to go from
a sustainability point of
view but also has a good
understanding of the retail
sector. This combination
makes for a very effective
collaboration which we
very much appreciate.
Ralph Lenoire
Manager Facilitair, Coop Netherlands
Finally Coop offset the remaining
greenhouse gas emissions that cannot
be avoided. The offset project Coop are
supporting invests in the manufacture,
distribution and sale of efficient cookstoves
in Uganda, Africa. The objective is to
improve access to cleaner, healthier, more
cost-effective cooking methods for local
households, replacing open fires that cause
deforestation, produce large amounts
of smoke and cause respiratory disease.
The project not only provides a carrier
bag made from recycled plastic, but also
combats climate change, improves indoor
air quality in many Ugandan households
and improves the living conditions of women
and children who spend less time collecting
firewood for cooking. The entire process
for developing the reusable carrier bag
has been externally verified by the Climate
Neutral Group which is shown by the
Climate Neutral product logo on the bag.
This is an example of how Bunzl is helping
customers reach their sustainability targets
by innovating the way that the packaging
products we supply are designed and
produced as well as effectively collaborating
across the supply chain to bring more
sustainable alternatives to market.
Bunzl plc Annual Report 2019
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Sustainability continued
Over the past three years
Bunzl Catering Supplies
(BCS) has been a valued
and trusted partner to us
at DFDS. Their approach
to sustainability and the
resources they offer has
been crucial in supporting
our ambition to be the most
sustainable ferry service.
It was great to be able to
welcome Justin, BCS’s
new Head of Sustainability
aboard earlier in the year
to understand our business
and we look forward to
continuing to work with
him and his team to lead the
way and be as sustainable
as possible.
Dave Lewis
Food & Beverage Category Manager
DFDS
2
Expert advice on emerging
trends and products
3
Partnerships to close
the loop
We recognise that the lifecycle of
packaging does not end at the point of sale.
Organisations across the recycling and
waste disposal systems sectors are looking
for inventive ways to create a world where
packaging waste is significantly reduced.
By working together with these groups
and our customers, suppliers and other
stakeholders, we want to ensure Bunzl
becomes part of that solution.
We want to partner with organisations
throughout the supply chain to tackle
sustainability issues, such as securing better
end of life options for packaging and our
ultimate aim is to bring a circular economy
approach to the products we distribute.
One example of how we have been doing
this is a partnership with one of our grocery
customers in North America.
A grocery customer approached Bunzl
North America for information on recycling
opportunities for film-based plastics in 2018.
Instead of just offering knowledge and
advice, we decided to partner with the
customer to create a film-based recycling
programme using Bunzl North America’s
infrastructure.
The store teams collect clear, film-based
plastic (e.g. produce bags, pallet wrap, etc)
throughout the week, our drivers then load
the collected plastic at the time of each
store’s weekly Bunzl delivery and backhaul
the material to one of our Distribution
Centres. Our warehouse teams then use our
waste management equipment to bale the
plastic before it is sent for recycling by a local
service provider.
Many of our customers are under pressure
to reduce their plastic waste footprint.
This is a complex challenge as the daily
running of our customers’ businesses
depends on the products we provide and
there are many single-use plastic products
where no viable alternative exists today. As a
materials-agnostic distributor and with a
dedicated team of plastics and sustainability
experts, Bunzl is well placed to provide
customers with trusted and objective
advice on complex sustainability issues.
Across the business, our expert advice
has already helped our customers find
sustainable solutions for the challenges
they face. For example, Bunzl Catering
Supplies (BCS) in the UK has been working
with DFDS, one of the world’s leading ferry
operators, to provide practical advice and
up-to-the-minute expertise on which
alternative packaging can meet their
operational needs while making their
business operations more sustainable.
The BCS sustainability team participated in
onboard service visits of popular ferry routes
and reviewed the packaging used and end
of life options onboard. As with a number of
their other customers, BCS also employed
their ‘Sustainable Future Footprint Tool’
which helped to assess DFDS’s current
product portfolio and identified opportunities
to reduce their impact by shifting to more
sustainable alternatives.
To simplify the number and complexity of
materials being used, the most recyclable
alternative options were recommended,
with a clear focus on single-material solutions.
Following the recommendations made by
the BCS team, DFDS began discussions
with port authorities in Calais and Dunkirk
in France to ensure all parties are
collaborating to improve ongoing recycling
processes. The onboard segregation of food,
glass, plastic (primarily recycled PET),
cardboard and general waste has improved
and single-use plastic cutlery, toothpicks and
stirrers have been replaced with more
sustainable alternatives.
48
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report TFCD recommendations
We welcome the development of the
Task Force on Climate-related Financial
Disclosures (‘TCFD’) recommendations.
Climate and environmental risks are
currently already included in our risk
management processes and we consider
our disclosures on governance, strategy,
risk management and metrics and targets
to be already broadly in line with most of the
TCFD recommendations. In 2020 we will
undertake a gap analysis of our reporting
against the TCFD recommendations to
identify action to bring disclosure further
in line with the recommendations. This
analysis will also include a review of our
climate change risk management process,
with an aim to broaden our consideration
of the actual and potential business impacts
of climate change. The assessment of the
materiality of the impacts of climate-related
risks and opportunities on our business
will take into consideration different long
term climate-related scenarios.
Non-financial information statement
In accordance with sections 414CA and 414CB of the Companies Act 2006, we have set out
where the relevant non-financial information we need to report against can be found in this
Annual Report:
Business
model
pg 16
Social matters
pg 34
Employees
pg 34
Anti-bribery and
corruption matters
pg 34
Human rights
pg 34
Environmental
matters
pg 34
Where principal risks have been identified in relation to any of the matters listed above,
these can be found on pages 50 to 55. Our non-financial key performance indicators are set
out on pages 22 to 23.
View our sustainability codes, policies and standards, together with
information concerning the due diligence and monitoring procedures carried
out in relation thereto, at www.bunzl.com
Bunzl plc Annual Report 2019
49
Strategic reportFinancial statementsDirectors’ report
Principal risks and uncertainties
Bunzl operates in six core market sectors across more than 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 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 2019.
Risk assessment
Risk identification
Inherent risk assessment
• Every business, business area,
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
assessed and carefully monitored.
• The inherent impact and 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 and safety, environmental,
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, focusing on the evolving risk
landscape, emerging risks and 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 as well as 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 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.
• The Group’s decentralised management structure allows for
the establishment of clear ownership of risk identification and
management at the business level within the framework of Bunzl’s
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 75 and 76 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.
50
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Principal risks and uncertainties
The Group operates in six core market
sectors across more than 30 countries which
exposes it to many risks and uncertainties,
not all of which are necessarily within the
Group’s control. The risks summarised
below represent 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. However, these risks do not
comprise all of the risks that the Group may
face and accordingly this summary is not
intended to be exhaustive.
In addition, the Group’s financial
performance is partially dependent on
general global economic conditions, the
deterioration of which could have an adverse
effect on the Group’s business and results of
operations. Although this is not considered
by the Board to be a specific principal risk
in its own right, many of the risks referred
to below could themselves be impacted by
the economic environment prevailing in the
Group’s markets from time to time.
The risks are presented by category of risk
(Strategic, Operational and Financial) and
are not presented in order of probability
or impact. The relevant component of the
Group’s strategy that each risk impacts is
also noted:
Organic growth
Acquisition growth
Operating model improvements
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 internally, leveraging the
results of an external review that was
performed during 2017. This review
looked at the relationships, connections
and interdependencies between risks,
recognising that risks do not always occur
in isolation, and contributed to the Group’s
assessment of the adequacy of risk
management and mitigating activities.
Overall, the nature and type of the principal
risks and uncertainties affecting the Group,
and the likelihood and impact of each of the
principal risks crystallising, are considered
to be materially unchanged compared to
the 2018 Annual Report, with one exception.
Last year it was reported that an area of
emerging risk that Bunzl was proactively
monitoring was the increase in legislation
and changes in consumer preferences
discouraging the use of certain single-use
plastic products. The Group has focused in
particular on the grocery and foodservice
sectors in the UK & Ireland and Continental
Europe where there is a high customer and
consumer awareness of sustainability
concerns and the legislation is strictest. The
Group expects that the level of sustainability
concerns of customers and consumers is likely
to increase and additional legislation will be
introduced covering new product groups
or countries. As a result, a new significant
strategic risk has been included below as
risk 6, Sustainability driven market changes.
The Board is continuing to monitor
the potential risks associated with the
UK having left the European Union
(‘Brexit’). Although Bunzl is a UK
headquartered company, more than 85% of
the Group’s revenue, profit and cash flow is
generated outside the UK. Bunzl is highly
decentralised, with each business in the
Group operating as a standalone company,
largely focused on customers in the country
in which it is incorporated. Within the UK,
less than 20% of the products purchased are
direct imports from overseas, of which most
are from countries outside of the European
Union (‘EU’). Accordingly, Bunzl’s ability to
service its customers’ needs, whether they
are inside or outside the EU, is unlikely to
be affected materially by Brexit.
Notwithstanding this assessment, as the
definitive trading arrangements for Brexit
have not yet been finalised, 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 to Bunzl arising from the failure of
the UK government to agree appropriate
arrangements with the EU will most likely
be the following:
• foreign exchange volatility on the Group’s
translated results which, as noted in risk 9,
Currency translation, is not hedged.
Therefore, a strengthening or weakening
of sterling will result in a change in the
Group’s reported results;
• the imposition of trade tariffs could result
in an increase in product costs in the UK.
This is reflected in risk 3, Cost inflation,
and mitigated by the actions noted for that
risk; and
• supply chain disruption as UK ports are
unable to cope with additional border
checks leading to inventory shortages.
Selected UK warehouses are applying
for simplified customs freight procedures
authorisation (‘CFSP’) to attempt to
minimise port delays. Additional stocks
of certain items will be held to minimise
the risk of inventory shortages.
The Board is also monitoring the ongoing
situation with respect to trade tariffs in the
United States of America (‘US’). During 2019
the impact of additional trade tariffs levied
on products imported into the US were
mitigated through price increases or by
identifying alternative sources of supply.
Since the year end the US has signed a
preliminary agreement with China which
will reduce the impact of some of these
tariffs in the future. Based on these
mitigations and recent developments,
and the assessment of the potential risks
associated with Brexit explained above, the
Group does not consider that its principal
risks and uncertainties have changed as
a result of the Brexit or US trade tariff
related risks.
Finally, the Board is continuing to keep
the developing situation relating to the
Coronavirus (COVID-19) in China under
review. Although the Group only has a
relatively small distribution business in
China and is not a manufacturer, Group
companies around the world do import
products from China for onward sale to their
customers. At the present time, the Group’s
supply chain is not considered to be at risk
since the Group’s businesses had previously
built up higher levels of stocks than usual in
advance of the Chinese New Year and, in
any event, tend to hold higher stock levels of
many of the products whose production has
been affected by the factory shutdowns in
China. In addition, alternative sources of
supply are being sought. However, should
the impact of the virus continue to restrict
manufacturing activities in China for a
sustained period of time, the Group may
face some shortages of certain products.
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.
Bunzl plc Annual Report 2019
51
Strategic reportFinancial statementsDirectors’ report Principal risks and uncertainties continued
Organic growth
Operating model improvements
Acquisition growth
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is managed or mitigated
Change to
risk level
in 2019
Strategic risks
1. Competitive
pressures
Revenue and profits
are reduced as
the Group loses
a customer or
lowers prices due
to competitive
pressures
• 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, switch to a competitor
or 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.
• 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 enhance
further 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.
2. Product cost
deflation
Revenue and profits
are reduced due to
the Group’s need to
pass on cost price
reductions
• A reduction in the cost of products bought by the
Group, due to suppliers passing on lower commodity
prices (such as plastic or paper) or other price
reductions, lower trade tariffs 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 profits may also be lower due to the
above factors if operating costs are not reduced
commensurate with the reduction in revenue.
• 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.
3. Cost inflation
Profits are reduced
from the Group’s
inability to pass on
product or operating
cost increases
• Significant or unexpected cost increases by suppliers,
due to the pass through of higher commodity prices
(such as plastic or paper) or other price increases,
higher trade tariffs and/or foreign currency
fluctuations, could adversely impact profits if the
Group is unable to pass on such product cost
increases to customers.
• Operating profits may also be lower due to the
above factors if selling prices are not increased
commensurate with the increases in operating costs.
4. Inability to
make further
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 160 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 based in different countries so that
it is not dependent on any one source of supply for any
particular product, or overly exposed to a particular
country changing trade tariffs, and can purchase
products at the most competitive prices.
• The majority of the Group’s transactions are carried
out in the functional currencies 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 continually looks at ways to improve
productivity and implement other efficiency measures to
manage and, where possible, reduce its operating costs.
• The Group maintains a large acquisition database which
continues to grow with targets identified by managers of
current Bunzl businesses, research undertaken by the
Group’s dedicated and experienced in-house corporate
development team and information 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.
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Strategic reportFinancial statementsDirectors’ report
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is managed or mitigated
Change to
risk level
in 2019
5. Unsuccessful
acquisition
Profits are
reduced, including
by an impairment
charge, due to
an unsuccessful
acquisition or
acquisition
integration
6. Sustainability
driven market
changes
Revenue and profits
are reduced from
the Group’s inability
to offer sustainable
products in response
to changes in
legislation, consumer
preferences or
the competitive
environment
• Inadequate pre-acquisition due diligence related to a
• The Group has established processes and procedures for
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.
detailed pre-acquisition due diligence related to
acquisition targets and the post-acquisition integration
thereof.
• Furthermore, the loss of key people or customers,
• The Group’s acquisition strategy is to focus on those
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
charge against any associated intangible assets.
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.
• Regulations have been announced in the EU and
• Bunzl’s scale and unique position as a distributor at the
UK that target reductions or prohibitions of certain
plastic-based products and new legislation
discouraging the use of certain single-use plastic
products is being considered in other countries.
• An increasing number of consumers are
making changes to their behaviour in response to
environmental and sustainability concerns, often in
advance of changes in legislation. These changes are
likely to lead to a reduction in demand for single-use
plastic-based products that the Group sells while,
at the same time, increase demand for sustainably
sourced, recyclable or reusable alternatives.
• The Group’s revenue and profits could be reduced if it
is unable to offer more sustainably sourced, recyclable,
compostable, biodegradable or re-useable alternatives
that replace products that cannot be sold due to
legislation, or products where demand is lower due
to changes in consumer preferences.
centre of the supply chain, supported by dedicated
sustainability managers, gives the Group an opportunity
to provide customers with advice about alternative
products which are sustainably sourced, recyclable,
compostable, biodegradable or reusable, or a
combination of these.
• The Group maintains strong relationships with a variety
of different suppliers enabling the Group to innovate,
source and offer the broadest possible range of products
that meet a variety of sustainability objectives, whether
in response to legislative changes, consumer preference
driven changes or a desire to offer market-leading
products to the Group’s customers.
• The Group maintains high service levels and close
contact with its customers. Data on customer product
usage, coupled with the Group’s detailed product
knowledge, ensures that the Group is well-positioned
to be able to support its customers in shaping and
achieving their sustainability strategies (such as a
reduction in single-use plastics).
Operational risks
7. Cyber security
failure
Revenue and profits
are reduced as the
Group is unable to
operate and serve
its customers’
needs due to
being 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 connectivity with third parties
and 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 and/or
a fine under applicable data protection legislation.
• 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 have been
deployed across all regions to enhance the knowledge of
Bunzl personnel and 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. The Group
Chief Information Officer and Group Head of Information
Security coordinate activity in this area.
Bunzl plc Annual Report 2019
53
Strategic reportFinancial statementsDirectors’ report
Principal risks and uncertainties continued
Organic growth
Operating model improvements
Acquisition growth
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is managed or mitigated
Change to
risk level
in 2019
Financial risks
8. Availability of
funding
Insufficient
liquidity in financial
markets leading
to insolvency
• 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 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 majority of the Group’s revenue and profits are
• The Group does not hedge the impact of exchange rate
9. Currency
translation
Significant change
in foreign exchange
rates leading to
a reduction in
reported results
and/or a breach of
banking covenants
earned in currencies other than sterling, the Group’s
presentation 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.
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 reduces the volatility of the
ratio of net debt to EBITDA from foreign exchange
movements. In addition, net debt for the purposes
of covenant calculations in the Group’s financing
documents is calculated using average rather than
closing exchange rates. Consequently, any significant
movement in exchange rates towards the end of an
accounting period should not materially affect the ratio
of net debt to EBITDA. Both these factors minimise
the risk that banking covenants will be breached as
a result of 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.
• At the same time the Group monitors international
developments in tax law and practice, adapting its
approach where necessary to do so.
10. Increase in
taxation
Increases in
Group tax rate
and/or cash tax
• The resolution of uncertain prior year tax matters or
the introduction of legislative changes could cause
a higher tax expense and higher cash tax payments,
thereby adversely affecting the Group’s profits and
cash flows.
• In particular, 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.
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Strategic reportFinancial statementsDirectors’ report
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 UK
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 2022.
Assessment of the prospects of the
Company and its viability statement
In accordance with provision 31 of the UK
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
more than 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 2022.
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 16 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 strategic and operational risks
to the Group’s organic growth and a
significant increase in working capital;
• the impact of the crystallisation of the
principal strategic and operational risks to
the Group’s organic and acquisition growth
and significant increases in both working
capital and the effective tax rate, without
mitigating actions; and
• a reverse stress test scenario which
identified what would need to happen to
cause the Company to suffer 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 and US private
placement notes as and when they mature.
In the first two stress tests it was found that
the Group was resilient and in particular it
remained in compliance with the relevant
financial covenants. The conditions required
to create the reverse stress test scenario,
were so severe that they were considered
to be implausible.
Bunzl plc Annual Report 2019
55
Strategic reportFinancial statementsDirectors’ report Financial review
Through our high rate of
cash conversion over many
years, the Group has been
able to make considerable
investments in self-financed
acquisitions which have
compounded to generate
substantial growth, while
maintaining a strong balance
sheet and growing dividends.
Richard Howes
Chief Financial Officer
Revenue
Up 2.7% at actual exchange rates
£9,326.7m
(2018: £9,079.4m)
+1.0%†
Profit for the year◊
Up 7.2% at actual exchange rates
£349.2m
(IAS 17 – 2019: £349.9m; 2018: £326.5m)
+5.7%†
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 %*
◊ See Basis of preparation IFRS 16 ‘Leases’ on page 1.
† At constant exchange rates and on an IAS 17 basis (where relevant).
* Alternative performance measure (see Note 4 on page 134).
Adjusted operating profit*◊
Up 2.8% at actual exchange rates
Adjusted earnings per share*◊
Up 2.2% at actual exchange rates
£653.3m
132.2p
(IAS 17 – 2019: £630.9m; 2018: £614.0m)
(IAS 17 – 2019: 132.4p; 2018: 129.6p)
+1.5%†
+1.0%†
Cash conversion*
Continued strong cash conversion
101%
(2018: 94%)
IFRS
2019
£m
9,326.7
653.3
578.2
132.2p
51.3p
528.4
453.3
104.8p
36.9%
13.6%
101%
Proforma
IAS 17◊
2019
£m
9,326.7
630.9
579.1
132.4p
51.3p
506.0
454.2
105.0p
48.4%
14.6%
100%
Dividend
Long track record of dividend
growth continues
51.3p
(2018: 50.2p)
+2.2%
2018
£m
Growth as
reported◊
Growth at
constant
exchange◊
2.7%
2.8%
3.6%
2.2%
2.2%
8.5%
6.9%
6.7%
1.0%
1.5%
2.4%
1.0%
7.0%
5.4%
5.2%
9,079.4
614.0
559.0
129.6p
50.2p
466.2
424.8
98.4p
50.7%
15.0%
94%
56
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report
As in previous years this review refers to a number of alternative performance measures which management uses to assess the performance
of the Group. Details of the Group’s alternative performance measures are set out in Note 4 to the consolidated financial statements on
pages 134 and 135.
Impact of IFRS 16 ‘Leases’
The main impact of adopting IFRS 16 with effect from 1 January 2019 has been for the Group to recognise right-of-use assets at transition
of £449.4 million together with lease liabilities of £498.3 million. As at 31 December 2019 the right-of-use assets were £432.9 million and the
lease liabilities were £480.0 million. Further details about the impact of the adoption of IFRS 16 are shown in Note 1b and Note 3 to the
consolidated financial statements on pages 124 and 125 and page 133 respectively. Note 3 shows the Group’s financial results for the year
ended 31 December 2019 presented in accordance with IAS 17 ‘Leases’, the accounting standard that was applicable for the year ended
31 December 2018, in order to provide a meaningful comparison with the prior year.
Currency translation
Currency translation has had a positive impact on the Group’s reported results, increasing revenue, profits and earnings by between 1%
and 2%. The positive exchange rate impact was principally due to the effect on average exchange rates of the weakening of sterling against
certain currencies during the year, particularly the US dollar and Canadian dollar, partly offset by the strengthening of sterling against the
euro, Australian dollar and Brazilian real.
Average exchange rates
US$
Euro
Canadian$
Brazilian real
Australian$
Closing exchange rates
US$
Euro
Canadian$
Brazilian real
Australian$
2019
1.28
1.14
1.69
5.04
1.84
2019
1.32
1.18
1.72
5.33
1.88
2018
1.33
1.13
1.73
4.87
1.79
2018
1.27
1.11
1.74
4.94
1.81
Revenue
Revenue increased to £9,326.7 million (2018: £9,079.4 million), up 1.0% at constant exchange rates (up 2.7% at actual exchange rates),
reflecting the benefit of acquisitions, partly offset by the impact of disposals in 2018 and a small decrease in organic revenue, which was
down 0.2%.
Movement in revenue (£m)
9,500
9,250
9,000
8,750
8,500
154.1
9,079.4
(21.2)
9,212.3
(21.3)
135.7
9,326.7
2018 revenue
Currency translation
Disposals
2018 rebased
Organic revenue
Acquisitions
2019 revenue
Bunzl plc Annual Report 2019
57
Strategic reportFinancial statementsDirectors’ report Financial review continued
Operating profit
Adjusted operating profit was £653.3 million. On an IAS 17 basis, adjusted operating profit increased to £630.9 million (2018: £614.0 million),
an increase of 1.5% at constant exchange rates (up 2.8% at actual exchange rates).
The adjusted operating profit margin was 7.0%. On an IAS 17 basis and at constant exchange rates, the adjusted operating profit margin
increased from 6.7% to 6.8% (unchanged at actual exchange rates).
Movement in adjusted operating profit (£m)
700
650
600
550
500
614.0
2018 adjusted
operating profit
(IAS 17)
7.4
9.5
630.9
22.4
653.3
Currency translation
2019 growth
2019 adjusted
operating profit
(IAS 17)
Impact of
IFRS 16
‘Leases’
2019 adjusted
operating profit
(IFRS 16)
Operating profit was £528.4 million. On an IAS 17 basis, operating profit was £506.0 million, an increase of 7.0% at constant exchange rates
(up 8.5% at actual exchange rates).
600
Movement in operating profit (£m)
550
500
450
400
6.9
3.3
476.4
466.2
20.1
9.5
506.0
22.4
528.4
2018
operating profit
(IAS 17)
Currency
translation
Non-repeat
of GMP
equalisation
charge in 2018
2018
rebased
Growth in
adjusted
operating profit
(IAS 17)
Decrease in
customer
relationships
amortisation and
acquisition
related items
2019
operating profit
(IAS 17)
Impact of
IFRS 16
‘Leases’
2019
operating profit
(IFRS 16)
The GMP equalisation charge in 2018 of £3.3 million was the non-recurring cost of the equalisation of guaranteed minimum pensions
(‘GMP’) between male and female members of the Group’s UK defined benefit pension scheme following the High Court judgment in 2018
in the case of Lloyds Banking Group Pensions Trustees Limited vs Lloyds Bank plc and others.
Customer relationships amortisation, acquisition related items and the GMP equalisation charge in 2018 are excluded from the calculation
of adjusted operating profit as they do not relate to the underlying operating performance and distort comparability between businesses and
reporting periods. Accordingly, these items are not taken into account by management when assessing the results of the business and are
removed in calculating adjusted operating profit and other alternative performance measures by which management assess the performance
of the Group.
Interest
The net finance expense was £75.1 million including interest on lease liabilities of £23.3 million. On an IAS 17 basis, the net finance expense
of £51.8 million decreased by £4.1 million at constant exchange rates, mainly from a lower average level of net debt and lower average interest
rates in the year.
58
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Profit before income tax
Adjusted profit before income tax was £578.2 million. On an IAS 17 basis, adjusted profit before income tax was £579.1 million (2018:
£559.0 million), up 2.4% at constant exchange rates (up 3.6% at actual exchange rates), due to the growth in adjusted operating profit
and the reduction in net interest expense.
Movement in adjusted profit before income tax (£m)
600
575
550
525
500
6.5
559.0
9.5
4.1
579.1
(0.9)
578.2
2018 adjusted profit
before income tax
(IAS 17)
Currency translation
Growth in adjusted
operating profit
(IAS 17)
Decrease
in net finance
expense
(IAS 17)
2019 adjusted profit
before income tax
(IAS 17)
Impact of
IFRS 16
‘Leases’
2019 adjusted profit
before income tax
(IFRS 16)
Profit before income tax was £453.3 million. On an IAS 17 basis, profit before income tax was £454.2 million (2018: £424.8 million),
an increase of 5.4% at constant exchange rates (up 6.9% at actual exchange rates).
Movement in profit before income tax (£m)
500
6.0
3.3
13.6
454.2
(0.9)
453.3
20.1
424.8
(13.6)
420.5
450
400
350
300
2018 profit
before income
tax (IAS 17)
Currency
translation
Non-repeat
of GMP
equalisation
charge in 2018
Non-repeat
of profit on
disposal of
businesses in
2018
2018
rebased
Growth in
adjusted
profit before
income tax
(IAS 17)
Decrease in
customer
relationships
amortisation
and acquisition
related items
2019 profit
before income
tax (IAS 17)
Impact of
IFRS 16
‘Leases’
2019 profit
before income
tax (IFRS 16)
The profit on disposal of businesses of £13.6 million in 2018 was the pre-tax profit on disposal of OPM in France and the marketing services
business in the UK, two non-core businesses which were no longer considered to be a strategic fit within the portfolio of the Group’s
businesses. There have been no disposals of businesses in 2019. Disposal of businesses is a non-recurring item and does not relate to
underlying operating performance and is therefore not taken into account by management when assessing the performance of the Group.
Accordingly, it is removed in calculating adjusted profit before income tax and other alternative performance measures by which management
assesses the performance of the Group.
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. Management of taxes is therefore 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 is published on the Bunzl plc website within the Corporate governance section.
The effective tax rate (being the tax rate on adjusted profit before income tax) for the year was 23.8% (2018: 23.1%) and the reported tax rate
on statutory profit before income tax was 23.0% (2018: 23.1%). The increase in the effective tax rate from the prior year is mainly due to a
reduction in the tax relief available for share options. The adoption of IFRS 16 did not have a significant impact on either the effective tax rate
or the reported tax rate.
The effective tax rate is expected to remain at around 24% in 2020. However, as explained in the Principal risks and uncertainties section
on pages 50 to 55, the Group identifies an increase in taxation as a principal risk for the Group and the tax rate could be affected by legislative
changes or the resolution of prior year tax matters.
One of the tax risks affecting the Group is the European Commission’s assertion that part of the UK’s tax regime amounts to State aid.
Further details about this risk, and other aspects of taxation, are given in Note 8 to the consolidated financial statements on pages 140 to
142. In addition, the Group is required to make an additional cash tax payment in 2020 of approximately £19 million for tax plus interest and
penalties in relation to a tax dispute in Brazil. The Group has provided for the best estimate of the ultimate liability in this matter and expects
to recover the remainder once the legal process is completed.
Bunzl plc Annual Report 2019
59
Strategic reportFinancial statementsDirectors’ report Financial review continued
Earnings per share
Profit after tax was £349.2 million. On an IAS 17 basis, profit after tax increased to £349.9 million (2018: £326.5 million), up 5.7% and an
increase of £18.8 million at constant exchange rates (up 7.2% at actual exchange rates), due to a £23.4 million increase in profit before income
tax, partly offset by a £4.6 million increase in the tax charge.
Adjusted profit after tax was £440.6 million. On an IAS 17 basis, adjusted profit after tax was £441.3 million (2018: £429.9 million), up 1.5%
and an increase of £6.4 million at constant exchange rates (up 2.7% at actual exchange rates), due to a £13.6 million increase in adjusted profit
before income tax, partly offset by an increase in the effective tax rate, with tax on adjusted profit before income tax increasing by £7.2 million
at constant exchange rates.
The weighted average number of shares increased to 333.3 million from 331.7 million in 2018 due to employee share option exercises, partly
offset by share purchases into the employee benefit trust.
Basic earnings per share were 104.8p. On an IAS 17 basis, basic earnings per share were 105.0p (2018: 98.4p), up 5.2% at constant exchange
rates (up 6.7% at actual exchange rates). Adjusted earnings per share were 132.2p. On an IAS 17 basis, adjusted earnings per share were
132.4p (2018: 129.6p), an increase of 1.0% at constant exchange rates (up 2.2% at actual exchange rates).
Movement in basic eps (p)
110
105
100
95
90
1.4
3.2
98.4
(2.4)
4.7
0.2
(0.5)
105.0
(0.2)
104.8
2018
basic eps
(IAS 17)
Currency
translation
Non-repeat of
2018 one-off
items*
Increase in
adjusted
profit before
income tax
(IAS 17)
Decrease in
customer
relationships
amortisation
and acquisition
related items
Decrease
in reported
tax rate
Increase in
weighted
average
number of
shares
2019
basic eps
(IAS 17)
Impact of
IFRS 16
‘Leases’
2019
basic eps
(IFRS 16)
* Non-repeat of 2018 one-off items relates to the GMP equalisation charge and profit on disposal of businesses.
Movement in adjusted eps (p)
3.2
1.5
129.6
(1.3)
(0.6)
132.4
(0.2)
132.2
2018
adjusted eps
(IAS 17)
Currency
translation
Increase in
adjusted profit
before income tax
(IAS 17)
Increase
in effective
tax rate
Increase in
weighted average
number of shares
2019
adjusted eps
(IAS 17)
Impact of
IFRS 16
‘Leases’
2019
adjusted eps
(IFRS 16)
140
130
120
110
60
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report 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 on an IAS 17 basis.
2019
15.5
35.8
51.3
2.6
Growth
2.0%
2.3%
2.2%
2018
15.2
35.0
50.2
2.6
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 2019 dividend is 2.2% higher than the 2018 dividend,
which compares with the adjusted earnings per share growth of 2.2% at actual exchange rates and 1.0% at constant 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,
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 Group’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 2019, Bunzl has sustained a growing dividend
to shareholders over the past 27 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 50 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 2019 Bunzl plc had sufficient distributable reserves to cover more than four years of dividends at the cost of the 2019 dividends,
which is expected to be approximately £171 million.
Acquisitions
The Group completed four acquisitions during the year ended 31 December 2019 with a total committed spend of £159.4 million. The
estimated annualised revenue and adjusted operating profit of the acquisitions completed during the year were £136.7 million and
£17.0 million respectively.
Excluding the Volk do Brasil acquisition that had been agreed at 31 December 2018, but completed in January 2019, the estimated annualised
revenue of the acquisitions was £96.6 million, with committed acquisition spend of £124.3 million. Acquisition spend reflects the cash
consideration paid, which in certain instances includes amounts paid for the benefit of tax deductions for amortisation of intangible assets
and estimated earnout consideration for future profit growth.
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 retention of former owners
Net cash acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions completed in the current year
Spend on acquisitions committed 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
£m
103.2
39.8
143.0
138.6
4.4
143.0
13.4
(1.1)
4.1
159.4
–
(35.1)
124.3
Bunzl plc Annual Report 2019
61
Strategic reportFinancial statementsDirectors’ report
Financial review continued
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net cash acquired
Deferred consideration in respect of prior year acquisitions
Net cash outflow in respect of acquisitions
Acquisition related items*
Total cash outflow in respect of acquisitions
* Acquisition related items comprise £3.8 million of transaction costs and expenses paid and £15.4 million of payments relating to retention of former owners.
Cash flow
A summary of the cash flow for the year is shown below:
Cash generated from operations†
Payment of lease liabilities
Net capital expenditure
Operating cash flow†
Net interest excluding interest on lease liabilities
Tax
Free cash flow
Dividends
Acquisitions◊
Disposal of businesses
Employee share schemes
Net cash inflow
† Before acquisition related items.
◊ Including acquisition related items.
£m
138.6
(1.1)
6.1
143.6
19.2
162.8
2019
£m
814.1
(151.6)
(28.8)
633.7
(51.2)
(125.6)
456.9
(167.3)
(162.8)
–
(27.7)
99.1
2018
£m
607.1
–
(28.6)
578.5
(49.1)
(113.2)
416.2
(152.2)
(184.2)
55.1
50.0
184.9
Movement
£m
207.0
(151.6)
(0.2)
55.2
(2.1)
(12.4)
40.7
(15.1)
21.4
(55.1)
(77.7)
(85.8)
The Group’s free cash flow of £456.9 million was £40.7 million higher than in 2018, principally due to the increase in operating cash flow
of £55.2 million, partly offset by higher cash outflows relating to interest and tax. The Group’s free cash flow was principally used to finance
dividend payments of £167.3 million in respect of 2018 (2018: £152.2 million in respect of 2017) and an acquisition cash outflow of
£162.8 million (2018: £184.2 million).
As a result of the adoption of IFRS 16, for meaningful comparison with prior periods, the Group has updated its definition of cash conversion
to be operating cash flow, which now includes the payment of lease liabilities as a deduction, as a percentage of lease adjusted operating
profit, being adjusted operating profit after adding back the depreciation of right-of-use assets and deducting the payment of lease liabilities.
Cash conversion in 2019 was 101% (2018: 94%).
Operating cash flow
Adjusted operating profit
Add back depreciation of right-of-use assets
Deduct payment of lease liabilities
Lease adjusted operating profit
2019
£m
633.7
653.3
128.1
(151.6)
629.8
2018
£m
578.5
614.0
–
–
614.0
Cash conversion (operating cash flow as a percentage of lease adjusted operating profit)
101%
94%
62
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report Net debt
Net debt excluding lease liabilities decreased by £139.5 million during the year to £1,247.0 million (2018: £1,386.5 million), due to the net cash
inflow of £99.1 million and a £40.4 million decrease due to currency translation.
Movement in net debt (£m)
1,386.5
(99.1)
(40.4)
1,247.0
480.0
1,727.0
2,000
1,500
1,000
500
0
Net debt at
31 December 2018
Net cash inflow
Currency
translation
Net debt excluding
lease liabilities at
31 December 2019
Lease liabilities
Net debt including
lease liabilities at
31 December 2019
As noted previously, the Group adopted IFRS 16 with effect from 1 January 2019 and as a result now recognises lease liabilities, which
are initially based on the present value of the future payments required under each lease discounted at either the interest rate implicit in the
lease or the incremental borrowing rate of the lessee. The movement in the lease liabilities from the transition date of 1 January 2019 to
31 December 2019 was as follows:
Movement in lease liabilities
Lease liabilities at 31 December 2018
Lease liabilities on transition
Acquisitions
New leases
Interest charge in the year
Payment of lease liabilities
Remeasurement adjustments
Currency translation
Lease liabilities at 31 December 2019
£m
–
498.3
6.5
105.2
23.3
(151.6)
14.4
(16.1)
480.0
Net debt to EBITDA calculated at average exchange rates and based on historical accounting standards, in accordance with the Group’s
external debt covenants, was 1.9 times (2018: 2.0 times).
Balance sheet
Summary balance sheet at 31 December:
Intangible assets
Right-of-use assets
Property, plant and equipment
Working capital
Other net liabilities
Net pension deficit
Net debt excluding lease liabilities
Lease liabilities
Equity
Return on average operating capital under IAS 17*
Return on invested capital under IAS 17*
* On an IFRS 16 basis, at 31 December 2019, return on average operating capital was 36.9% and return on invested capital was 13.6%.
2019
£m
2,290.9
432.9
118.3
943.4
(278.2)
3,507.3
(36.0)
(1,247.0)
(480.0)
1,744.3
2018
£m
2,382.5
–
122.4
948.3
(333.7)
3,119.5
(38.5)
(1,386.5)
–
1,694.5
48.4%
14.6%
50.7%
15.0%
Bunzl plc Annual Report 2019
63
Strategic reportFinancial statementsDirectors’ report Financial review continued
On an IAS 17 basis, return on average operating capital decreased to 48.4% from 50.7% in 2018 and return on invested capital of 14.6%
was down from 15.0% in 2018, both due to a lower return in the underlying business driven by an increase in average capital employed.
Intangible assets decreased by £91.6 million to £2,290.9 million due to an amortisation charge of £114.7 million and a decrease from currency
translation of £98.2 million, partly offset by intangible assets arising on acquisitions in the year of £111.5 million and software additions
of £9.8 million.
As a result of the adoption of IFRS 16 ‘Leases’ on 1 January 2019, the Group now recognises right-of-use assets. The right-of-use assets at
31 December 2019 were £432.9 million, arising from £449.4 million recognised on the transition to IFRS 16 ‘Leases’ on 1 January 2019,
additional right-of-use assets from new leases during the year of £105.2 million, an increase from acquisitions of £6.5 million and an increase
from remeasurement adjustments of £14.4 million, partly offset by a depreciation charge of £128.1 million and a decrease from currency
translation of £14.5 million.
Working capital decreased from the prior year end by £4.9 million to £943.4 million due to decreases from currency translation and the
underlying business, partly offset by increases from acquisitions and the impact of the adoption of IFRS 16 due to the removal of accruals
and prepayments relating to leases.
The Group’s net pension deficit of £36.0 million at 31 December 2019 was £2.5 million lower than at 31 December 2018, principally due to
contributions of £14.9 million during the year and a decrease from currency translation more than offsetting increases from service cost and
net interest expense and an actuarial loss of £8.3 million. The actuarial loss principally arose from an increase in pension liabilities due to
a decrease in discount rates, partly offset by higher than expected returns on pension scheme assets.
Shareholders’ equity increased by £49.8 million during the year to £1,744.3 million.
Movement in shareholders’ equity (£m)
2,000
1,700
1,400
1,100
800
349.2
1,694.5
(23.9)
1,670.6
(167.3)
13.8
(91.2)
(6.1)
(24.7)
1,744.3
2018
shareholder
equity
Impact of
transition
to IFRS 16
Restated
equity at
1 January
2019
Profit for
the year
Dividends
Currency
(net of tax)
Actuarial loss
on pension
schemes
(net of tax)
Share based
payments
(net of tax)
Employee
share schemes
(net of tax)
2019
shareholders’
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. The Group’s approach to the balance sheet is to maintain an investment grade credit rating and the Company’s current credit
rating with Standard & Poor’s is BBB+. 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. 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.
64
Bunzl plc Annual Report 2019
Strategic reportFinancial statementsDirectors’ report 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 to EBITDA, calculated at average exchange rates and in accordance with the debt covenants,
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 2019 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. Debt covenants are based on historical
accounting standards.
The Group has substantial funding available comprising multi-currency credit facilities from the Group’s banks, US private placement notes
and a senior bond. At 31 December 2019 the nominal value of US private placement notes outstanding was £1,012.1 million (2018: £1,120.6
million) with maturities ranging from 2020 to 2028. The £300 million senior bond matures in 2025 and the Group’s committed bank facilities
mature between 2021 and 2024. At 31 December 2019 the available committed bank facilities totalled £1,062.4 million (2018: £1,043.8 million)
of which £63.0 million (2018: £104.3 million) was drawn down, providing headroom of £999.4 million (2018: £939.5 million).
600
Committed facilities maturity profile by year (£m)
500
400
300
200
100
0
243
80
2021
83
2020
285
114
280
152
191
63
125
300
169
119
133
2022
2023
2024
2025
2026
2027
38
2028
Bank facilities – undrawn
Senior 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 16 to the consolidated financial
statements on pages 147 to 154.
Richard Howes
Chief Financial Officer
24 February 2020
Bunzl plc Annual Report 2019
65
Strategic reportFinancial statementsDirectors’ report Board of directors
The Board continues to provide strong, effective leadership and
independent scrutiny and challenge while promoting the long term
success of the Company for the benefit of its stakeholders as a whole.
Philip Rogerson
Chairman
Peter Ventress
Chairman designate
Appointment
Appointed to the Board in January 2010 and became Chairman
in March 2010. Chairman of the Nomination Committee.
Experience
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 a non-executive director of Blancco
Technology Group plc. He will retire from the Board at the conclusion
of the Annual General Meeting (‘AGM’) on 15 April 2020.
Appointment
Appointed to the Board as a non-executive director and Chairman
designate on 1 June 2019 and will become Chairman and Chairman
of the Nomination Committee at the conclusion of the AGM on
15 April 2020 following the retirement of Philip Rogerson.
Experience
He was formerly a non-executive director of Premier Farnell plc,
Staples Solutions NV and Softcat plc and was Chief Executive
Officer of Berendsen plc from 2010 to 2016. Prior to this he held
several senior executive roles including International President of
Staples Inc and Chief Executive Officer of Corporate Express NV,
a Dutch quoted company which was subsequently acquired by
Staples. He is currently Chairman of Galliford Try plc and Senior
Independent Director of Signature Aviation plc.
Frank van Zanten
Chief Executive Officer
Richard Howes
Chief Financial Officer
Appointment
Executive director since February 2016 and Chief Executive Officer
and member of the Nomination Committee from April 2016.
Experience
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, before rejoining
Bunzl in 2005 as Managing Director, Continental Europe. He is a
non-executive director of Grafton Group plc but will retire from this
position on 29 April 2020. He has been nominated to be appointed as
a member of the Supervisory Board of Koninklijke Ahold Delhaize
NV with effect from 8 April 2020.
Appointment
Appointed Chief Financial Officer designate in September 2019
and joined the Board and became Chief Financial Officer in
January 2020.
Experience
He qualified as a Chartered Accountant with Ernst & Young before
moving to the investment bank Dresdner Kleinwort Benson. During
his career he has held a number of senior positions at Geest plc and
Bakkavor Group plc, including that of Chief Financial Officer of
Bakkavor Group. He was Chief Financial Officer of Coats Group plc
between 2012 and 2016 and prior to joining Bunzl was Chief
Financial Officer of Inchcape plc.
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Strategic reportFinancial statementsDirectors’ report Committee membership
Member of the Audit Committee
Member of the Remuneration Committee
Member of the Nomination Committee
Independent director
Lloyd Pitchford
Non-executive director
Appointment
Non-executive director since March 2017 and Chairman of the
Audit Committee.
Experience
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. Since 2014 he has been Chief
Financial Officer of Experian plc.
Eugenia Ulasewicz
Non-executive director
Appointment
Non-executive director since April 2011.
Experience
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 from 1998 until 2013.
She is a non-executive director of Signet Jewelers Limited, Vince
Holding Corp. and Hudson Ltd. She will retire from the Board at the
conclusion of the AGM on 15 April 2020.
Vanda Murray OBE
Senior Independent Director
Appointment
Non-executive director since February 2015, Senior Independent
Director and Chair of the Remuneration Committee.
Experience
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 Chair of Marshalls plc
and a non-executive director of Redrow plc.
Stephan Nanninga
Non-executive director
Appointment
Non-executive director since May 2017.
Experience
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 the Board
of 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 a member
of the Supervisory Board of CM.com and a non-executive director
of IMCD N.V.
Bunzl plc Annual Report 2019
67
Financial statementsStrategic reportDirectors’ report
Corporate governance report
Governance has a key role to play in the culture of our organisation
and the Board is committed to ensuring that Bunzl’s purpose,
values and high standards of corporate governance are set from
the top and embedded throughout the Group.
Philip Rogerson
Chairman
Introduction from Philip Rogerson, Chairman of the Board
One of my key responsibilities as Chairman
is to ensure that the Board delivers effective
leadership to support the creation and
delivery of strong and sustainable financial
and operational performance for the Group
and long term value for our stakeholders.
The Board recognises that sustainable
business success is not possible without a
clear corporate purpose and sound corporate
governance. Good governance is the
foundation of what we do at Bunzl and an
integral part of the way we deliver our
strategy. It underpins our strong corporate
values and culture and the way we do
business and also provides the framework
within which the entrepreneurial drive in the
business can continue to flourish. Without
good governance, we would be unable to
deliver on our core purpose of delivering
essential business solutions around the
world and creating long term sustainable
success for the benefit of our stakeholders.
The Board is committed to ensuring that
the Company’s purpose, values, culture
and high standards are set from the top
and embedded throughout the Group.
The executive directors and executive
management team play an integral role in
this by promoting positive behaviour to
ensure that our commonly held values are
put into practice every day and that our
people understand how we expect them to
help the Company achieve its purpose.
The Board monitors adherence to the
Group’s corporate culture in a number of
ways, including by visiting Group locations
and interacting with employees from
across the business. The Board also
reviews the results of the Group’s biennial
global employee engagement survey, whistle
blowing data and accident statistics, all of
which are considered to be culture
indicators. During the year, various
members of the Board attended employee
forums and employee-focused events,
further details of which can be found later
in this report and on page 40 of the
Sustainability report. Such visits have
helped to ensure that the Board has an
understanding of wider workforce
engagement and areas of interest. I believe
that this, together with our robust
governance framework, allows the Board to
lead the Group in the right direction as we
develop and pursue our future strategy,
while ensuring that good governance
principles and practices are adhered to.
Stakeholder engagement
As I reported in last year’s Corporate
governance report, The Companies
(Miscellaneous Reporting) Regulations 2018
(the ‘Regulations’) and the Financial Reporting
Council’s (‘FRC’) 2018 edition of the UK
Corporate Governance Code (the ‘Code’) were
published during 2018. Both the Regulations
and the Code applied to the Company from
1 January 2019 and all references to the
Code in this report relate to the 2018 edition
which applied to the 2019 financial year.
The Regulations and the Code put greater
emphasis on stakeholders and give
prominence to the requirement for boards
to adopt a longer term time horizon when
considering issues and making decisions.
feedback we receive. Further information
on stakeholder engagement can be found
on pages 32 and 33.
Workforce engagement
During the year, the Board considered the
requirements that have been introduced
by the Code in respect of workforce
engagement. We have an experienced,
diverse and dedicated workforce which we
recognise as a key asset of our business and
their voice is critical to our success. We are a
global company with operations in multiple
locations and employees coming from many
different perspectives and it is therefore
essential that our engagement methods
suit the nature of our business and our
workforce. As I have already mentioned,
the employee voice is heard by the Board
throughout the year through several different
channels, further details of which can be
found on pages 32 and 33 and in the
Sustainability report on pages 34 to 49. We
strongly believe that this holistic approach
to engagement is the most effective method
and allows the Board to understand, monitor
and assess the culture of the business and
its alignment with the Company’s purpose,
values and strategy. The Board intends
to build on these established means of
engagement, so that we can continue to
listen effectively and respond as necessary
and appropriate to the employee voice.
At Bunzl we understand the importance of
long term thinking and believe that effective
stakeholder engagement is critical to
fostering mutually beneficial relationships
and securing our long term success. We
believe that it takes a diversity of perspectives
to deliver positive outcomes for all our
stakeholders and we seek to engage
proactively with them to understand their
views. This in turn enables us to make better
decisions based on the well-informed
Board changes
On 10 May 2019, the Company announced
that Brian May, Finance Director, would be
retiring from the Company and would be
succeeded by Richard Howes as Chief
Financial Officer. Brian May stepped down
from the Board on 31 December 2019 and
will leave the Group at the end of February
2020. Brian’s significant contribution to
the Company’s success has been greatly
appreciated and he leaves the Board with
68
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report More information about Bunzl’s engagement
with its suppliers, customers and wider
stakeholder groups can be found on pages
32 and 33 and in the Sustainability report
on pages 34 to 49.
Board composition
As at 31 December 2019, the Board was
made up of eight members comprising a
Chairman, a Chairman designate, a Chief
Executive Officer, a Finance Director and
four non-executive directors.
As reported in last year’s Annual Report,
at the end of 2018 Philip Rogerson completed
his third three year term in office and in
recognition of the new provisions of the
Code, which states that the Chair of a listed
company should not remain in post beyond
nine years from the date of their first
appointment to the Board, a process led by
Vanda Murray, the Senior Independent
Director, was undertaken to identify and
appoint Philip Rogerson’s successor. This
process led to the appointment of Peter
Ventress on 1 June 2019 as a non-executive
director and Chairman designate. Peter
Ventress will assume the role of Chairman
of the Board and of the Nomination
Committee following Philip Rogerson’s
retirement at the conclusion of the
Company’s forthcoming AGM.
Following the announcement on 10 May
2019 that Brian May, Finance Director,
would be retiring from the Board on
31 December 2019, Richard Howes joined
the Company as Chief Financial Officer
designate on 1 September 2019, becoming
Chief Financial Officer and a director on
1 January 2020.
As announced today, Eugenia Ulasewicz,
who has been a non-executive director
since April 2011, will retire from the
Board following the Company’s AGM
on 15 April 2020.
Brief biographical details of the current
directors are given on pages 66 and 67
and further information on the Nomination
Committee’s approach to succession
planning can be found in its report on
pages 77 to 79.
Compliance statement
It is the Board’s view that, for the year
ended 31 December 2019, with the
exception of provision 38 which states
that the pension contribution rates for
executive directors, or payments in lieu,
should be aligned with those available
to the workforce, the Company has been
fully compliant with all of the relevant
principles and provisions set out in the
Code. Further information concerning
the Company’s approach to pension
contribution rates for executive directors
can be found on page 93 of the Directors’
remuneration report. 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.
Employee engagement statement
The Board regards employee engagement
as a matter of great importance and, during
the year, the directors were involved in a
number of different initiatives aimed at
further enhancing their understanding of the
views and interests of Bunzl’s employees.
More information about these initiatives
and the relevance of such engagement in
the context of the Company’s strategy can
be found on pages 32 and 33 and in the
Sustainability report on pages 34 to 49.
In addition, information concerning the
arrangements in place to communicate and
consult with Bunzl’s employees can also be
found in the Sustainability report and in the
Other statutory information section on pages
114 to 116. The Company encourages
employee involvement in its performance
through a variety of different means,
including the operation of all employee share
plans, bonus and commission schemes
and other incentive arrangements.
Engagement with suppliers,
customers and other stakeholders
Understanding the views of our stakeholders
is a key priority for the Board and Bunzl
as a whole. It helps to focus our resources,
engagement and reporting activities
by addressing those issues that matter
most to our business and to our wider
stakeholders. Fostering strong business
relationships is an intrinsic part of our
long established, consistent, proven and
successful compounding strategy and a key
consideration in all of our decision making.
the Company’s thanks and best wishes.
In addition, as reported in last year’s
Annual Report, I will step down as
Chairman and as a director at the
conclusion of the Company’s forthcoming
Annual General Meeting (‘AGM’), with
Peter Ventress having been appointed to
succeed me at that time.
Further details concerning the Board
changes that took place during the year
can be found later in this report and in
the Nomination Committee report on
pages 77 to 79.
Board evaluation
An externally facilitated evaluation of the
Board and its Committees was once again
undertaken during 2019 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. Further
information concerning the evaluation
can be found on page 73.
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 2019.
The Board will continue to strengthen the
Group’s governance processes to ensure
that the business as a whole is aligned
with best practice and that our approach
to disclosure remains understandable
and transparent.
Philip Rogerson
Chairman
24 February 2020
Bunzl plc Annual Report 2019
69
Financial statementsStrategic reportDirectors’ report Corporate governance report continued
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. Each
of the non-executive directors is considered
to 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, with the exception of Philip
Rogerson and Eugenia Ulasewicz who will
retire at the conclusion of the AGM, each
of the directors in office at the date of this
Annual Report will be subject to re-election
at the forthcoming AGM.
Board activity in 2019
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 around the world where the
directors have the opportunity to meet and
interact with executives from different
businesses within the Group’s portfolio as
well as observe the operations in situ. The
Group’s overall strategy is reviewed and
discussed both at a separate strategic
planning meeting and during Board
meetings held over the course of the year.
As part of this strategic planning process,
presentations are made by the Chief
Executive Officer, the Chief Financial Officer
and the heads of the business areas, together
with the Director of Corporate Development.
Further details of the Board meetings that
were held overseas during 2019 can be found
in the adjacent case study.
During 2019, in addition to the discussions
relating to the Group’s strategy that took
place during the year, a number of the
Group’s executives made presentations to
the Board about a variety of diverse topics.
These included reviews of business
performance, potential acquisition
opportunities, the post-acquisition
performance of businesses acquired in
prior years, the Group’s financing facilities
and treasury policies, the Group insurance
programmes, tax risks and strategy, the
Group risk assessment, information
security risks and controls, supplier
audits carried out, an update on recent
developments in sustainability matters,
whistle blowing reports and health &
safety performance metrics.
An area of particular focus during the year
included information technology (‘IT’)
and information security (‘IS’), following
the appointment by the Company of a
professional services firm to assist with the
performance of IT and IS internal audits.
The directors considered the work so far
undertaken by the firm and agreed that the
Company should establish an IS risk
assessment and develop further its IS policy.
The Board will continue to oversee the
enhancement of the Company’s approach
to IT and IS risks.
The Board also reviewed and approved a
new corporate responsibility framework,
including a revised and extended set of
related policies.
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 71.
Meetings
The Board met on seven occasions during
2019. Directors’ attendance at those
meetings is set out below:
Meetings attended
Philip Rogerson
Peter Ventress1
Frank van Zanten
Brian May2
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
7
4
7
7
7
7
7
7
1. Peter Ventress was appointed as a director on 1 June 2019 and
attended all of the Board meetings held between that date and
the end of the year.
2. Brian May retired as a director on 31 December 2019.
Board in action – Board meetings in Chicago,
US and Valencia, Spain
The Board held its June and October
2019 meetings in Chicago, US and
Valencia, Spain respectively.
The meeting in Chicago afforded
members of the management team in
Bunzl North America the opportunity
to meet with the directors and give
presentations on Bunzl North America’s
digital strategy, which is underpinned by
continuous improvement, driven by data
analysis and customer insight. The
ability to innovate is very important to
help meet our customers’ rapidly evolving
wants and needs and the presentations
covered topics such as the various
initiatives being undertaken to meet
customer demand, including in respect
of the customer experience, e-commerce
and digital marketing. The directors were
informed of the industry leading digital
solutions that have been developed
for Bunzl North America’s customers,
including mobile applications, data
modelling and analytics. The directors
were also provided with information on
the continued investment that is being
directed to enhancing digital capabilities,
automation and outsourcing as part of
the ongoing productivity drive of
the business.
During their visit to Valencia the directors
met with senior management from the
Continental Europe business area and
the Group’s Spanish subsidiaries. They
also visited one of the locally based
subsidiaries, Quirumed, and received
presentations on the digital capabilities
being employed by the business,
including the company’s e-commerce
value proposition and the improvements
brought about by such capabilities.
The directors regard these site visits as
an important part of their continuing
education and development, as well as
an integral part of the induction process
for new directors. They help directors
enhance further their understanding
of the Group’s activities through direct
experience of seeing processes in
operation and by having discussions with
a range of employees. Such interactions
not only provide the Board with an
opportunity to assess and monitor the
Group’s culture and its alignment with
the Group’s strategy and values but are
also essential in helping the Board to
understand better the broader long term
impact of its decisions on the Group’s
stakeholders both nationally and
internationally, including employees,
customers, suppliers and the
communities in which the Group operates.
70
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Governance structure
The Board has ultimate responsibility for the overall leadership of the Group. To ensure the directors maintain overall control over strategic,
financial, 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 consideration. 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 Corporate governance report.
Board
Nomination Committee
Chairman
Philip Rogerson
Audit Committee
Chairman
Lloyd Pitchford
Remuneration Committee
Chair
Vanda Murray
Members
Peter Ventress
Frank van Zanten
Vanda Murray
Eugenia Ulasewicz
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.
.
Members
Vanda Murray
Eugenia Ulasewicz
Stephan Nanninga
Members
Eugenia Ulasewicz
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
Determines the policy for executive
director remuneration and sets all
elements of the remuneration and benefits
of the Chairman, executive directors and
senior management.
For more information
see pages 77 to 79
For more information
see pages 80 to 84
For more information
see pages 85 to 113
Matters reserved for the Board
The table below summarises some of the matters which are required to be brought to the Board for consideration:
Shareholders
• Matters requiring shareholder
approval.
• Circulars and significant shareholder
communications.
Capital allocation
and structure
• Significant capital expenditure/disposals.
• Significant business acquisitions/disposals.
Policies and
statements
• Material Group policies and statements
and major changes thereto, for example:
• Material changes to the Group’s
capital structure.
• Major property leases.
– tax strategy;
– treasury policy;
– modern slavery statement;
• Material increases in borrowing and
– equality and diversity policy; and
loan facilities.
– risk appetite.
People and
leadership
• Appointment/removal of directors
and Company Secretary.
• Non-executive directors’ remuneration.
• Board Committee constitution and
terms of reference.
Strategy and
management
• The Group’s strategic aims and objectives.
• Annual budget and strategic plan.
Financial reporting,
risk and controls
• Financial results and announcements
relating thereto.
• Final and interim dividends.
• Auditor appointment/removal.
• Risk management and internal controls.
Bunzl plc Annual Report 2019
71
Financial statementsStrategic reportDirectors’ report 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 Officer and is available on a flexible basis to
provide advice, counsel and support to the Chief Executive Officer; 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 Officer
The Chief Executive Officer is responsible for the leadership and the operational and
performance management of the Company within the strategy agreed by the Board.
The Chief Executive Officer:
• 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 Officer 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
Officer, which is set
out in writing and
has been agreed
by the Board.
Chief Financial Officer
The Chief Financial Officer supports the Chief Executive Officer 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.
Senior Independent Director
A key role of the Senior Independent Director is to be available to shareholders if they have concerns which contact
through the normal channels of Chairman, Chief Executive Officer or Chief Financial Officer 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.
Independent non-executive
directors
The non-executive directors play an important 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 offer strategic guidance, evaluate
information provided and constructively challenge management’s viewpoints, assumptions and performance.
Executive and non-
executive directors
Board gender
Non-executive
director tenure
2
2
6
6
2
1
3
Executive
Non-executive
(includes Chairman)
Male
Female
0 – 3 years
3 – 6 years
6+ years
72
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Performance evaluation
The Chairman is responsible, with support
from the Nomination Committee, for
ensuring that the Company has an effective
Board with a suitable range of skills,
knowledge, experience and diversity and
that directors have sufficient time available
to discharge their duties effectively. In
furtherance of this, the Company has a
formal performance evaluation process for
the Board, its Committees and individual
directors overseen by the Chairman. In
addition, any additional significant external
appointments are subject to Board approval
prior to such appointments being undertaken
by a director.
The evaluation includes a detailed
questionnaire and individual discussions
between the Chairman and each director
when their individual training and
development needs are reviewed and their
other time commitments are considered.
Following the evaluation, the Board identifies
a number of key priorities in order to improve
the Board’s performance and further details
of the priorities identified as part of the
evaluation that was carried out in 2019 can
be found below.
Key priorities identified in 2018
Examples of action taken
Outcome
1. Continuing to develop a greater understanding
1. Presentations made to the Board on matters
of the relevant digital and technological
developments affecting the Group’s businesses.
concerning information technology,
information security, digital strategy and the
digital capabilities being employed by Group
businesses.
2. Increasing the emphasis on human resources,
2. In addition to usual Nomination Committee
people and management of succession
planning at both Board and senior
management levels.
3. Further engagement with executives who are
not on the Board to increase the Board’s
exposure to the Group’s senior management
below Board level.
4. Focusing on the operational initiatives required
in order to maintain or improve the Group’s
operating margins with a particular focus on
North America.
activities, additional presentation made to the
Board by the Director of Group HR in respect
of succession planning for executive and
senior management level appointments.
3. Members of the senior management team
invited to present at Board and Committee
meetings. Directors and senior management
team members also attended and participated
in employee consultation forums, senior
leadership programmes and other employee-
focused events.
4. Reorganisation of largest business in North
America and other restructurings and
operational initiatives helped to maintain
North America operating margin and increase
the Group operating margin from 6.7% to
6.8% at constant exchange rates.
Key priorities identified in 2019
1. Managing the sustainability agenda which, while potentially a threat to the Company’s business,
is also seen as a potential opportunity.
2. Continuing to focus on the threats and opportunities presented by digital and technological
developments, including those relating to artificial intelligence.
3. Continuing to focus on talent management and development with a view to developing further
the succession plans for the Company’s senior management team.
The Board is satisfied that
the priorities identified
following the evaluation
carried out in 2018 have
been adequately addressed
during 2019.
As a result of the
performance evaluation
process carried out in 2019,
the Board concluded that
both it and its Committees
are operating effectively.
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.
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 carry
out an annual performance evaluation. 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.
The facilitator of the external evaluation,
Lintstock, does not provide any other
services to, or have any other connection
with, the Company.
The Board is cognisant of the requirements
in the Code and the new associated
guidance relating to board performance
evaluations, which indicates that
questionnaire-based external evaluations
are unlikely to be sufficiently broad.
The Board intends to carry out a more
comprehensive external evaluation for
the year ending 31 December 2020 or
31 December 2021 and will report formally
on the findings of such evaluation in the
relevant Annual Report.
Bunzl plc Annual Report 2019
73
Financial statementsStrategic reportDirectors’ report Corporate governance report continued
Information and support
Board agendas are set by the Chairman in
consultation with the Chief Executive Officer
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.
Since his appointment to the Board as
Chairman designate on 1 June 2019, Peter
Ventress has been following a formal and
extensive induction programme. This has
included a comprehensive suite of resources
providing detailed information on the Group,
as well as orientation from members of
Bunzl’s Executive Committee and other
functional areas. He has also visited some
Group locations and will over the coming
months undertake a number of additional
site visits which will provide him with
the opportunity to witness the Group’s
operations in situ while engaging with
employees and senior management from
across the business. Further details of the
induction process undertaken by Richard
Howes following his appointment as Chief
Financial Officer designate on 1 September
2019 can be found opposite.
Board in action – Chief Financial Officer’s induction
Following his appointment as Chief Financial Officer designate on 1 September 2019
and prior to becoming Chief Financial Officer and a director on 1 January 2020,
Richard Howes undertook a structured and comprehensive induction programme,
tailored to his needs. The induction programme, which included an extensive handover
with the retiring Finance Director, Brian May, allowed him to familiarise himself
with the business quickly and develop a thorough understanding of Bunzl’s culture,
its strategic priorities and the markets in which it operates. The programme also
provided him with the opportunity to establish relationships and links to employees
across the Group.
Diverse formats were employed during the induction process to communicate
information, including reading materials, meetings with employees, senior management
and fellow directors, briefings and training from external advisers, sessions with the
Company’s external auditors and corporate brokers, site visits and investor roadshow
meetings. In addition, Richard Howes also attended meetings of the Executive Committee.
Richard Howes’s training and development needs will be reviewed regularly by
the Chief Executive Officer and the Company Secretary and will be assessed by
the Chairman as part of the formal performance evaluation.
An overview of the activities and areas covered as part of the induction programme
to date is set out below:
Key induction events 2019
September • Investor roadshows in the UK and the US.
• Site tours of Bunzl’s operations in California, Chicago and Kansas, US.
• Meetings with banks and analysts.
October
• Introductory meetings with members of the UK senior management team.
• Visit to Barcelona, Spain, including a warehouse tour and presentations from
senior executives of the Group’s Spanish, Italian, Israeli and Turkish businesses.
• Visits to Group businesses in Chile and Brazil, including site tours, a meeting
with local lawyers and presentations by local senior management.
• Attended an overseas meeting of the Board of directors.
November
• Visits to several of the Group’s businesses in France, including warehouse tours
and insights provided by local management.
• Attendance at the Group’s Global Safety Sector meeting in Düsseldorf, Germany.
• Site tours of Bunzl’s operations and the sourcing and QA/QC office in
Shanghai, China.
• Site visit to the Group’s Innovation Centre in Australia and meetings with
employees of the Group’s Australian businesses and the local partner from the
external auditors.
• Visit to the Group’s LSH business in Singapore.
December
• Site visits to a number of Bunzl’s operations in the UK and Ireland and meetings
with local management teams.
• Attended a meeting of the Board of directors.
• Attended a meeting of the Audit Committee.
74
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report The Board considered whether the 2019
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
2019 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
emerging and 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 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 2019 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 50 to
55. 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
Officer, Chief Financial Officer 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, as well as responsibility for
establishing 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 code of conduct, anti-bribery
and corruption and whistle blowing
policies) based on honesty, integrity, fair
dealing and compliance with the local laws
and regulations of the countries in which
the Group operates;
• continual investment in IT systems to
ensure the production of timely and
accurate management information relating
to the operation of the Group’s businesses;
• a well established consolidation and
reporting system for the statutory accounts
and monthly management accounts; 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.
Directors are continually updated on the
Group’s businesses and their markets
and the changes to the competitive and
regulatory environments in which they
operate. Training and development needs
of the Board are kept under review and
directors attend external courses where it
is considered appropriate for them to do so.
Conflicts of interest
The directors are required to avoid situations
where they have, or could have, a direct or
indirect interest that conflicts, or possibly
may conflict, with the Company’s interests.
In accordance with the Companies Act 2006,
the Company’s Articles of Association allow
the Board to authorise potential conflicts of
interest that may arise and to impose such
limits or conditions as it thinks fit.
Directors are required to give notice of any
potential situational and/or transactional
conflicts which are then considered by
the Board and, if deemed appropriate,
authorised accordingly. A director is not
however permitted to participate in such
considerations or to vote in relation to their
own conflicts.
The Board has considered and authorised
a number of potential situational conflicts
all of which relate to the holding of external
directorships and have been entered on
the Company’s conflicts register. No actual
conflicts have been identified during the
year. The Board considers that these
procedures operate effectively.
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 177 and the auditors’
report on pages 178 to 183 includes a
statement by the external auditors about
their reporting responsibilities. As set out
on page 124, 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 of 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.
Bunzl plc Annual Report 2019
75
Financial statementsStrategic reportDirectors’ report 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 31 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.
By order of the Board
Paul Hussey
Secretary
24 February 2020
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 80 to 84;
• 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 2019.
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 are 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 its findings are
reported to Group and business area
management as well as to the Audit
Committee and the external auditors;
76
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Nomination Committee report
Principal responsibilities
of the Committee
Board structure
• 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
and senior management in the future.
• Reviewing annually a succession planning
presentation in relation to the Company’s
senior 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 Officer.
• 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.
The Committee is committed to ensuring that the directors
and senior management have the requisite skills, knowledge,
experience and diversity to support our consistent and proven
strategy and deliver our common purpose.
Philip Rogerson
Chairman and Chairman of the Nomination Committee
Meetings
The Committee met on four occasions
during 2019. Members’ attendance at those
meetings is set out below:
Meetings attended
Philip Rogerson
Peter Ventress1
Frank van Zanten
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
4
1
4
4
4
4
4
1. Peter Ventress was appointed as a director on 1 June 2019 and
attended all of the Committee meetings held between that date
and the end of the year.
Introduction from
Philip Rogerson
On behalf of the Board, I am pleased to
report on the Nomination Committee’s
activities during the financial year ended
31 December 2019.
Key areas of focus for the Committee during
2019 have been Board composition and
Board and senior management succession
planning. The need to refresh the Board but
at the same time maintain a knowledgeable
and experienced team of non-executive
directors is essential and is something that
we have continued to address in our
succession planning discussions. When
searching for potential candidates to fill
Board vacancies, the Committee considers
the skills, experience and attributes required
to create a diverse Board which can continue
to drive the Company forward in fulfilment
of its purpose and strategic goals. The
Committee also seeks to ensure that all
relevant principles and provisions of the UK
Corporate Governance Code (the ‘Code’)
concerning Board composition and structure
continue to be met.
Over the last 12 months there have
been a number of changes to the Board.
As I mentioned in the Corporate governance
report on pages 68 to 76, at the end of 2018
I completed my third three year term in office
and, in recognition of the new provisions of
the 2018 edition of the Code, which states
that the Chair of a listed company should not
remain in post beyond nine years from the
date of their first appointment to the Board,
a process, which was led by Vanda Murray,
our Senior Independent Director, was
undertaken to identify and appoint my
successor. This process led to the
appointment of Peter Ventress as a non-
executive director and Chairman designate
on 1 June 2019. Peter will assume the role
of Chairman of the Board and of the
Nomination Committee following my
retirement at the conclusion of the
Company’s forthcoming Annual General
Meeting (‘AGM’). During the year, the
Committee also oversaw the appointment of
Richard Howes, initially as Chief Financial
Officer designate from 1 September 2019
and subsequently Chief Financial Officer
and a director from 1 January 2020 to
succeed Brian May who stepped down from
the Board on 31 December 2019.
In addition, Eugenia Ulasewicz, who has
been a non-executive director since April
2011, is also due to retire at the forthcoming
AGM. A process to appoint her successor is
underway, further details of which are
included in the report that follows.
We will continue to monitor the balance of
the Board to ensure that broad and extensive
expertise is continuously available so that
the Company can continue to be led
effectively both in the present and the future.
Philip Rogerson
Chairman and Chairman of the
Nomination Committee
24 February 2020
Bunzl plc Annual Report 2019
77
Financial statementsStrategic reportDirectors’ report Nomination Committee report continued
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 Officer and all of the independent
non-executive directors. In accordance with
the provisions of the Code, the majority of
the members are independent non-executive
directors. The Secretary to the Committee
is the Company Secretary.
Role
The Committee’s principal role is to lead the
process for appointments to the Board,
whether to fill any vacancies that may arise
or to change the number of Board members,
ensure plans are in place for orderly
succession to both the Board and senior
management positions and oversee the
development of a diverse pipeline for
succession. 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 2019, are available on the
Company’s website, www.bunzl.com.
Activities
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 and long term,
to ensure that there is the right mix of skills
and experience as the Company evolves.
As announced on 25 February 2019, in
recognition of the new provisions of the
revised Code and the fact that Philip
Rogerson has been a director since January
2010, the Company undertook a thorough
search, led by Vanda Murray, the Company’s
Senior Independent Director, to identify and
appoint Philip Rogerson’s successor. 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 the
Chairman in the future, the Committee
prepared and agreed a detailed specification
for the role and appointed an external search
consultancy, Russell Reynolds Associates,
to assist it in the recruitment process.
This process led to the appointment of Peter
Ventress as a non-executive director and
Chairman designate on 1 June 2019. Peter
Ventress is an experienced chairman with
a strong track record both as an executive
and non-executive director of a number of
international distribution businesses and
he has brought valuable knowledge and
experience to the Board. He will assume
the role of Chairman of the Board and of the
Nomination Committee following Philip
Rogerson’s retirement at the conclusion
of the Company’s forthcoming AGM.
In addition to searching for a successor
to the Chairman, during the year the
Committee undertook, with the assistance
of Russell Reynolds Associates, an extensive
search and selection process for a Chief
Financial Officer to succeed Brian May.
The Committee agreed a role specification
and undertook a detailed review of a
number of candidates, leading to a
shortlist of potential candidates. Following
a comprehensive review process, the
Committee made a clear recommendation
to the Board, culminating in the appointment
of Richard Howes on 1 September 2019,
initially as Chief Financial Officer designate
and subsequently Chief Financial Officer
and a director from 1 January 2020. Richard
Howes has a wealth of experience across
a number of sectors, working for multi-site
businesses with substantial global
footprints. He also has a strong track record
of leading finance functions at a number
of international public companies.
As a result of Eugenia Ulasewicz’s
forthcoming retirement, the Committee,
assisted by Russell Reynolds Associates,
is presently undertaking a process to recruit
a further non-executive director. The
Committee has agreed that the search
criteria should include, in particular,
successful senior business executives with
extensive international management
experience across a range of businesses,
ideally operating in the distribution or
service sectors, with detailed knowledge
of digital technologies and processes which
will be invaluable to the future development
of the Group. It is important that the chosen
candidate is able to play a supportive role to
the executive management team, while at the
same time providing strategic input into the
Company’s direction and development.
It is also a requirement that the prospective
director can provide wise counsel and
independence of mind and challenge
management constructively by offering
impartial, independent and objective advice.
Russell Reynolds Associates does not
provide any other services to, or have
any connection with, the Company or
individual directors.
During the year, 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 undertaken when
considering and recommending the
nomination of directors for re-election at the
2019 AGM. Further details concerning the
Board evaluation process that was carried
out during 2019, together with information
on the key priorities identified as part of the
review, can be found in the Corporate
governance report on pages 68 to 76.
The Committee also continues to take
an active interest in the quality and
development of talent and capabilities below
Board level. In this connection, the Chief
Executive Officer presented his annual
management succession plan to the
Committee for its consideration. This
process helps to ensure that appropriate
opportunities are in place to develop high
performing individuals and to increase
diversity in senior roles across the Group.
Diversity policy
Within the Group’s businesses, the Board
is committed to greater diversity, in its
broadest sense, whether in terms of ideas,
skills, knowledge, experience, education,
gender, social and ethnic backgrounds,
cognitive and personal strengths, or any
other relevant measure.
When considering director appointments,
one of the objectives is to maintain a diverse
Board. While the Board 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, the directors
78
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report recognise the benefits of greater diversity
and will take account of this when
considering any particular appointment.
However, the 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 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 Sustainability report on
pages 34 to 49.
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.
Further information about the Company’s
workforce diversity is set out on pages
38 and 39.
Bunzl plc Annual Report 2019
79
Financial statementsStrategic reportDirectors’ report Audit Committee report
Ensuring the integrity of the Group’s financial reporting and
risk management and assurance processes continues to be
one of the Committee’s key priorities. This is discharged
through active oversight and challenge of the decisions
and key judgements made by management and the critical
assurance activities of the Group.
Lloyd Pitchford
Chairman of the Audit Committee
Principal responsibilities
of the Committee
Financial 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; and
– the effectiveness of the Company’s
internal financial controls.
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 2019. Members’ attendance at those
meetings is set out below:
Lloyd Pitchford
Eugenia Ulasewicz
Vanda Murray
Stephan Nanninga
Meetings attended
4
4
4
4
Introduction from
Lloyd Pitchford
I am pleased to report on the key activities
and focus of the Audit Committee
during the year ended 31 December
2019. The Committee has continued to
discharge its duties effectively and to the
highest standards and to challenge and
provide appropriate oversight of the
decisions and key judgements made by
management to ensure that stakeholder
interests are protected.
Robust and transparent financial reporting
combined with proactive and focused
risk management are essential components
of Bunzl’s governance framework. The
Committee plays a key role in overseeing the
integrity of the Group’s financial statements,
as well as ensuring that a sound system
of risk management and internal control
is in place and I believe that this, together
with the Board’s efforts in harnessing and
promoting a strong risk focused culture,
play an essential role in assuring the long
term viability of the Company.
As part of its responsibility to monitor the
integrity of the financial statements, the
Committee ensures 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 2019 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. The Committee
is satisfied that these matters have been
properly recorded in the Company’s books
and records and accounted for appropriately.
In fulfilling its oversight responsibilities in
respect of the Group’s risk management
and control environment, during 2019 the
Committee reviewed the process by which
current and emerging risks had been
identified by management and the Board
and the processes and controls in place to
manage and mitigate these risks. Further
information on the Committee’s activities in
relation to risk management can be found
later in this report.
During the year the Committee assessed
the implementation of IFRS 16, the new
accounting standard relating to the
presentation of leases, particularly reviewing
its impact on the Consolidated and Company
balance sheets and the appropriateness of
disclosures to be made.
In accordance with the internal audit charter,
the effectiveness and quality of the internal
audit function is assessed externally at
least once every five years. In 2019, the
Committee engaged a professional services
firm to carry out such an independent
external assessment, the conclusions of
which were considered by and discussed
with the Committee and enabled it to satisfy
80
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Financial statementsDirectors’ reportStrategic report Composition
The Committee comprises 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 Committee meetings by
invitation together with the Head of Internal
Audit, representatives from the external
auditors and members of the Group finance
team. Following his appointment as Chief
Financial Officer designate and prior to
his appointment to the Board, Richard
Howes also attended Committee meetings.
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, the
Chairman of the Committee, Lloyd Pitchford,
is considered by the Board to have recent
and relevant financial experience. The
Committee considers independent thinking
to be crucial in assessing the work of
management and the assurance provided
by the internal and external audit functions
and believes that each of the Committee
members brings an appropriate mindset
to their role.
Role
Audit committees have a clearly defined role
in the corporate governance framework of
listed companies. The Audit Committee acts
independently of management to ensure that
the interests of the Company’s 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. This framework comprises a
number of important elements, including the
Company’s risk management and internal
control systems, the internal and external
audit functions and the regular reporting
of the Company’s performance against
budgets, forecasts and prior year results.
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
2019 but unchanged, 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 the Chairman of the Committee who held
a number of meetings with each of them
during the year outside formal Committee
meetings. The Chairman of the Committee
also liaises with the Chief Financial Officer
as necessary to ensure robust oversight and
challenge in relation to financial control and
risk management.
The Committee’s performance and
effectiveness are reviewed annually by
both the Committee and as part of the Board
performance evaluation. The Chairman
of the Committee also meets with each
Committee member independently to
ensure that their individual views about
the operation of the Committee are taken
into account.
Activities
The Committee has developed its agenda
to enable, over the course of a year, active
oversight of all key areas of responsibility
and to facilitate more in-depth reviews of
those topics which are of particular
importance or pertinence.
The Chairman of the Committee holds
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 periodically held
during Committee meetings between the
Committee and the Head of Internal
Audit and the external auditors without
management present. Following each
Committee meeting, any significant findings
are reported to the Board and copies of the
minutes of the Committee meetings are
circulated to all of the directors and to the
itself that the quality, experience and
expertise of the Group’s internal audit
function continue to be appropriate for
the business.
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.
This report reflects the requirements
placed on committees by the Financial
Reporting Council’s (‘FRC’) UK
Corporate Governance Code (the ‘Code’)
and applicable 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 compliance with
the relevant provisions of the 2018 edition
of the Code which applied to the
financial year ended 31 December 2019.
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.
By providing an overview of the
Committee’s role and a meaningful
insight into its activities during the
past year, this report demonstrates how
the Committee has discharged its
responsibilities effectively. I hope that you
will find it both useful and informative.
Lloyd Pitchford
Chairman of the Audit Committee
24 February 2020
Bunzl plc Annual Report 2019
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Financial statementsStrategic reportDirectors’ report Audit Committee report continued
external auditors. The Chairman of the
Committee also attends the Annual General
Meeting (‘AGM’) to respond to any
shareholder questions that might be raised
on the Committee’s activities.
The Committee’s activities in 2019 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
noting, in particular, the impact on the
results of the adoption of IFRS 16 ‘Leases’
which was applicable to the Company for
the 2019 financial year;
• reviewing the effectiveness of the risk
management process;
• receiving and considering reports from the
Head of Internal Audit concerning the work
undertaken by the internal audit function,
including in relation to the function’s
ongoing quality assurance and
improvement programme;
• reviewing and approving the internal audit
work programme for the coming year;
• receiving and considering a report from the
Head of Internal Audit relating to an
analysis of trends in internal audit findings;
• 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, including
receiving and considering a Risk and
Assurance Map;
• reviewing the Company’s annual controls
self-assessment process and related
controls framework;
• reviewing the Committee’s terms of
reference;
• reviewing the Committee’s effectiveness
following an externally facilitated
performance evaluation;
• receiving and considering a report from
a professional services firm in relation to
an external quality assessment of the
internal audit function;
• 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.
The Committee will continue to keep its
activities under review and focused on the
audit, assurance and risk processes within
the business. By doing so, the Committee
will ensure that in the future it is 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 2019, the
Committee reviewed the 2019 half yearly
financial report and related news release, the
2019 Annual Report (including the financial
statements), the 2019 annual results news
release and the reports from the external
auditors on the outcomes of their half year
review and their audit relating to 2019.
As part of its work, the Committee
considered the following significant
accounting matters in relation to the
Company’s financial statements together
with the adequacy of the associated
disclosures 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 2019. 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 27 to the consolidated
financial statements.
The carrying value of goodwill
and 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 of
each of the CGUs and customer relationships
intangible assets (including the sensitivity
of the outcome of impairment testing to the
use of different assumptions) and considered
the external auditors’ testing thereof. The
Committee noted that an impairment charge
of £4.0 million had been recognised in the
year relating to the customer relationships
intangible asset of a business in China in
the Asia Pacific CGU within Rest of the
World. After due challenge and debate,
the Committee concluded that it was
satisfied with the assumptions and
judgements applied in relation to the
impairment testing and agreed that there
was no other impairment to goodwill or
customer relationships intangible assets.
Details of the key assumptions and
judgements used are set out in Note 12
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,
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Financial statementsDirectors’ reportStrategic report 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 23
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.
One of the tax risks identified concerns the
European Commission’s assertion that part
of the UK’s tax regime amounts to State aid.
Further details on this risk, and on other
aspects of taxation, are given in Note 8
to the consolidated financial statements.
In addition, and as detailed in the Financial
review on page 59, the Group will be
required to make an additional cash tax
payment in 2020 in connection with an
ongoing tax dispute in Brazil.
Following appropriate debate and challenge,
the Committee was satisfied with the key
judgements and proposed disclosures
related to tax made by management.
The Committee believes 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.
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 Chief Financial Officer, the Head
of Internal Audit and the external auditors.
In particular the Committee considered the
scope and results of the 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 current and emerging 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 10 in-house
auditors, including the Head of Internal Audit
who reports jointly to the Chairman of the
Audit Committee and the Chief Financial
Officer. 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, 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 relationship
between the Committee, the auditor and
the Company’s management is appropriate
and that the external auditors remain
independent of the Company. Written
confirmation is received from the external
auditors as to whether they consider
themselves independent within the meaning
of their firm’s own ethics and independence
criteria, which must be consistent with the
FRC’s Revised Ethical Standard 2016 and
other relevant regulatory and professional
requirements. Key members of the audit
team are also required to rotate off the
Company’s audit after a specific period
of time, as discussed further below.
In addition, 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
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 the Committee Chairman. It is
the Company’s policy to assess the non-audit
services to be performed by the Company’s
auditors on a case-by-case basis to ensure
adherence to the prevailing ethical standards
and regulations. In the main, other firms are
used by the Company to provide non-audit
services. However, if the provision of a
service by the Company’s auditors is not
prohibited and adequate safeguards are in
place, it is sometimes appropriate for this
additional work to be carried out by the
Company’s auditors. Details of the fees paid
to the external auditors in 2019 in respect of
the audit and for non-audit services are set
out in Note 6 to the consolidated financial
statements. The ratio of the fees relating to
non-audit services to audit services in 2019
was 6%.
Bunzl plc Annual Report 2019
83
Financial statementsStrategic reportDirectors’ report Audit Committee report continued
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, in accordance with the CMA
Order, Paul Cragg stepped down as audit
partner following the completion of the
external audit of the Company’s financial
statements for the year ended 31 December
2018 after five years in post. He has been
succeeded by Neil Grimes. Accordingly, the
Company confirms that it has complied with
the provisions of the CMA Order for the 2019
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 2020 be put to shareholders at
the forthcoming AGM.
Auditors’ effectiveness reviews
During 2019 the Committee undertook reviews of the effectiveness of both the Company’s external audit process for the 2018 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.
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 2018 financial statements
and that the internal audit function continued to be
effective, efficient and appropriately resourced.
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.
In addition, during the course of 2019, the Committee
engaged a professional services firm to carry out a
quality assessment of the internal audit function
which was subsequently considered and discussed by
the Committee as part of the effectiveness review of the
internal audit function.
Save for the external quality assessment of the internal
audit function, which, in accordance with the internal
audit charter, is required to be undertaken at least once
every five years, the Committee will carry out similar
effectiveness reviews in 2020 in respect of the audit of the
2019 financial statements and the internal audit function.
84
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Directors’ remuneration report
The remuneration of our executive directors
reflects a resilient performance in more
challenging market conditions.
Vanda Murray OBE
Chair of the Remuneration Committee
Compliance statement
This report has been prepared on behalf
of, and has been approved by, the Board.
It complies with the Large and Medium-sized
UK Companies and Groups (Accounts and
Reports) (Amendment) Regulations
2013 (the ‘Regulations’), the Corporate
Governance Code (the ‘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.
In accordance with the Regulations, at the
2020 Annual General Meeting (‘AGM’) the
Company will be asking shareholders to
vote on two separate resolutions as follows:
• the binding triennial vote on the directors’
remuneration policy (as set out on pages 88
to 96) which will, subject to shareholder
approval, become formally effective as at
the date of the 2020 AGM; and
• an advisory vote on the Annual report
on directors’ remuneration as set out on
pages 99 to 112 which provides details of
the remuneration earned by directors for
performance in the year ended
31 December 2019.
Introduction from
Vanda Murray
I am pleased to present the Directors’
remuneration report for the year ended
31 December 2019 which has been prepared
by the Remuneration Committee and
approved by the Board.
Context of remuneration
The Company has produced a resilient
set of results in 2019 against the background
of mixed macroeconomic and market
conditions. Although the Company’s
earnings per share growth and the return
on average operating capital for the year
were slightly below budget, we saw a strong
cash flow performance and made good
progress against our strategic objectives.
Remuneration policy
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 current
remuneration policy has contributed to
our success by aligning reward to
sustainable performance. This has been
endorsed by our shareholders who approved
last year’s remuneration report with a
96% vote in favour.
This year, we have consulted with
shareholders on our proposed policy
for 2020. We did consider a range of
alternatives, but our conclusion remains
that our current structure continues to
drive the right behaviours. The revisions
that we have proposed are in response
to the constructive input of shareholders
and emerging best practice.
Appointment of a new
Chief Financial Officer
As announced in May 2019, after more than
13 years in the role of Finance Director and
25 years with Bunzl, Brian May decided to
retire from the Company. Richard Howes
joined the Company on 1 September 2019,
initially as Chief Financial Officer designate
before joining the Board and assuming the
role of Chief Financial Officer on 1 January
2020. Following a period of handover,
Brian May stepped down from the Board
on 31 December 2019 and will leave the
Group at the end of February 2020.
Richard Howes’ remuneration arrangements
on joining were discussed and agreed by
the Committee in April 2019 and were in
line with our current remuneration policy.
Having proposed the revisions to the policy
described below, some further adjustments
have been made to his remuneration upon
his appointment to the Board and these are
described in detail on page 109.
Bunzl plc Annual Report 2019
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Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Proposed amendments to our directors’
remuneration policy for 2020
In the development of our proposals, the
Committee has considered both broader
investor sentiment and recent changes to
the Code. We have consulted with major
shareholders and have looked closely at
the recent guidance issued by the main
institutional investor bodies. While many
of the Code’s new requirements are already
consistent with the direction of changes
that we made to our policy in 2017, we are
proposing some further amendments, the
most major of which are as follows:
• as is becoming best practice, the pension
allowances for newly appointed directors,
including Richard Howes, will be in line
with those of the wider workforce. Frank
van Zanten has volunteered to a phased
reduction of his current pension allowance
to 23.75% in 2020, and further reductions
in 2021 and 2022 to a level of 20% from the
end of 2022;
• to ensure alignment between the Chief
Executive Officer and shareholders, the
minimum shareholding requirement
will be increased from 250% to 300% of
base salary. We are also formalising our
policy for post-cessation shareholdings; all
directors will be required to retain vested
shares post-cessation during the two years
post-vesting;
• as the maximum quantum of performance
share awards was uncompetitive, the
maximum annual grant of performance
shares under the Long-Term Incentive Plan
(‘LTIP’) will be increased to 175% of salary
but awards in 2020 will be well below this
maximum. We are reducing the maximum
annual share option award from 250% to
225% of salary;
• in line with best practice, threshold
payouts under the annual bonus scheme
will be reduced to 25% of the maximum
opportunity. On target payouts remain at
50% of maximum; and
• while we are not proposing any changes
to the structure of our fixed, short term or
long term variable pay metrics, we plan to
adjust the peer group of companies used
for benchmarking and total shareholder
return (‘TSR’) comparison purposes. We
are proposing to use a broader peer group
including all FTSE 100 companies ranked
from 11 to 100. A broader peer group
gives us a more consistent view of our
comparative performance and better
reflects Bunzl’s market capitalisation.
Further details on all of the proposed
revisions to the policy are provided on
page 89 of this report.
Performance and reward for 2019
The long term business strategy has
remained constant during 2019 with a
focus on organic and acquisition growth
and operating model improvements.
This year Group revenue was up 1.0% and
adjusted operating profit increased by 1.5%
in each case at constant exchange rates.
The variable pay outcomes are consistent
with the assessment of outturns for the
business performance metrics. The
Committee has not exercised discretion
to override the calculation of payout on
vesting outcomes. All performance metrics
used for variable pay elements have been
determined by reference to financial targets
and outcomes calculated under IAS 17.
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
to incentivise the delivery of a stretching
performance. Annual bonus payments are
based on a combination of key financial
targets, with a minority based on personal
objectives. A resilient financial performance
in 2019 resulted in an annual bonus for the
Chief Executive Officer of 59.5% of his
maximum opportunity, which equates to
107.1% of salary. The annual bonus for the
Finance Director, Brian May, was 62.3%
of his maximum opportunity, which equates
to 93.4 % of salary. In line with the terms
of his appointment, the new Chief Financial
Officer, Richard Howes, received a pro-rated
bonus for the four months since he joined
Bunzl in September 2019. This resulted in
an award equivalent to 54.9% of the
maximum, equating to 87.9% of his salary
for the period. In addition, he received
compensation for the bonus forfeited from
his previous employer, details of which are
set out on page 109.
LTIP
The Committee assessed the outturn of the
LTIP awards with performance conditions
linked to performance periods that ended
during or at the end of the 2019 financial year.
Share options granted under the LTIP Part A
in 2017 were subject to an adjusted earnings
per share (‘eps’) growth target over the three
year period to 31 December 2019. The eps
growth of 27.1% which was adjusted to
exclude two disposals of businesses during
the period, will result in 100% of the options
vesting during the 2020 financial year.
Performance share awards granted under
the LTIP Part B were subject to an eps
growth target over the three year period to
31 December 2018 and a relative TSR target
over the three year periods to 31 March 2019
and 30 September 2019 respectively. The
eps growth of 42.4% and the relative TSR
performance for the relevant performance
periods resulted in 75.2% and 50.0% of
the performance shares vesting in April
and October 2019 respectively.
The current remuneration policy allows
maximum annual grants under the LTIP of
250% of base salary for share options and
150% of base salary for performance shares.
However, in 2019 award levels were held
below these maximum levels at 200% of
base salary for share options for the Chief
Executive Officer and 95% for the Finance
Director. Performance share awards were
130% for the Chief Executive Officer and
52.5% for the Finance Director.
Chief Executive Officer pay ratio
As required by the Regulations, we
have disclosed in this year’s Directors’
remuneration report the ratio between the
Chief Executive Officer’s remuneration
and the median, lower quartile and upper
quartile of UK employees. The Committee
considers the executive remuneration
approach to be appropriate in the context
of this, and other internal and external
reference points.
Remuneration arrangements
for the 2020 financial year
Base salary
The base salaries of Frank van Zanten and
Richard Howes have been increased by
3% effective from 1 January 2020. This is
broadly in line with the increases awarded
to the wider workforce across the business.
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For the 2020 financial year, the Chief
Executive Officer’s maximum annual bonus
opportunity continues to be 180% of base
salary. For the Chief Financial Officer, the
maximum annual bonus opportunity will
be 160% of base salary. The on-target bonus
is 50% of the maximum, namely 90% of
base salary for the Chief Executive Officer
and 80% of base salary for the Chief
Financial Officer.
The annual bonus performance measures
continue to be a balanced scorecard of
measures of eps, return on average operating
capital (‘RAOC’), operating cash flow and
personal performance linked to certain
specified strategic non-financial goals.
These metrics are all key to the successful
implementation of the business strategy.
If eps performance falls below the threshold
level, no bonus will be payable for any
element of the scorecard. This ensures that
sustained financial performance underpins
bonus payouts.
Threshold, target and stretch levels for all
financial measures are disclosed in the
relevant year’s remuneration report. We
have disclosed the performance ranges that
apply to our bonus plans on a retrospective
basis since 2016 and we will continue to
do so in the future.
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.
This ensures that the scale of reward on
offer is proportionate and always linked
to performance.
LTIP
Under the current policy, the maximum
annual award for share options is 250%
of base salary and 150% of base salary for
the performance share element of the LTIP.
Award levels of share options for 2020 will
once again be held at the same levels as
2017, 2018 and 2019, at 200% of base salary.
Performance shares will be granted at 120%
of base salary for Richard Howes, with 150%
of base salary for Frank van Zanten, as he
has now clearly established himself in the
Chief Executive Officer’s role. The resulting
LTIP award levels for 2020 are materially
lower than the FTSE 100 mid-market levels
and below the maximum levels permitted by
the proposed 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
TSR condition.
LTIP awards are subject to a two year
post-vesting holding period which was
introduced for awards granted on or after
the 2017 AGM for the executive directors.
The holding period continues to apply to any
awards retained where an executive director
leaves employment.
Priorities for 2020
Having reviewed our policy in detail in 2019,
I do not anticipate any major changes in the
focus of the Committee in 2020. We will
continue to support the executive directors
in achieving the right balance between the
management of short term challenges and
the long term sustainability of the Group.
Conclusions
Our directors’ remuneration policy
continues to drive the required levels of
performance from the executive directors
and has supported the continued resilient
performance of the Group in challenging
market conditions. Once again, I am very
grateful for the time that shareholders
have given to the consideration of our
proposed amendments to the policy and
the constructive nature of the feedback we
have received. In the following pages you
will find details of:
• the proposed directors’ remuneration
policy for 2020 to 2022;
• a new ‘At a glance’ guide to executive
directors’ remuneration;
• the annual report on remuneration for 2019;
and
• our approach to the application of the
proposed remuneration policy in 2020.
I hope that you will find this report to be
clear and helpful in understanding our
remuneration policy and practices.
Vanda Murray OBE
Chair of the Remuneration Committee
24 February 2020
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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 positioning the overall remuneration package 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 targets 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 on the attitude of executives
towards risk within the business. In addition, the Committee has the discretion to take into account performance on environmental, social
and governance matters.
Overview
The directors’ remuneration policy has been reviewed during the year and is submitted for approval in the required triennial vote at the 2020
Annual General Meeting (‘AGM’). The overall approach to remuneration remains consistent and the changes proposed are modest to ensure
the policy continues to support the performance of the business and addresses the requirements of the revised UK Corporate Governance
Code (the ‘Code’).
If it is approved by shareholders at the 2020 AGM, the new directors’ remuneration policy will be formally effective from the date of the
meeting but will be applied for the full financial year. It has been designed to meet the following objectives:
• Clarity: maintain transparency, clear alignment with shareholder value creation and promotion of longer term, sustained performance;
• Predictability: continue to ensure that targets are stretching (but realistic), the quantum of reward reflects both Company and individual
performance and there are appropriate award caps and Committee discretions in place;
• Support the Company’s business strategy – for example, the use of share options alongside performance shares to align the executive
directors and management with the Company’s growth objectives;
• Simplicity: ensure that the remuneration structures avoid unnecessary complexity;
• Risk is appropriately managed: variable pay should drive performance within the Company’s risk appetite and encourage a prudent and
balanced approach to the business;
• Alignment to culture: the remuneration principles encourage the behaviour from the executive directors that the Committee expects to see
throughout the business; and
• Proportionality: the link between individual awards, the delivery of strategy and long term performance of the Group is clear.
In setting the remuneration policy for the executive directors, the Committee has taken into consideration a number of different factors:
• the Committee applies the principles set out in the Code and also takes into account best practice guidance issued by the major UK
institutional investor bodies 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 with policy and employment conditions for the rest of the Group to ensure that there is alignment of
principles between the two;
• the Committee considers the external market in which the Group operates and uses benchmark remuneration data from time to time to
inform its decisions. However, the Committee recognises that such data should be used as a guide only (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; and
• the Committee ensures there is no conflict of interest and excludes the relevant director for the part of the meeting when their remuneration
is discussed.
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 are disclosed in the relevant year’s remuneration
report. This facilitates alignment between the interests of shareholders and the total remuneration paid to the executive directors.
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The table below summarises how the proposed policy compares with the current policy.
Retirement
benefit
Summary of key features of current
policy being amended
Defined contribution to pension, or cash
allowance of equivalent value, is capped
at 25% of base salary for new executive
directors and 30% of base salary under
legacy arrangements.
Annual
bonus
The current threshold level of bonus is 49%
of base salary.
Summary of proposed revisions to the policy
In line with emerging best practice, defined contribution to pension, or
cash allowance of equivalent value, is capped at the level that applies to
the majority of the Bunzl workforce in the UK. This is currently 5% of
base salary.
The defined contribution or cash allowance of equivalent value, for the
Chief Financial Officer, Richard Howes, has been aligned to the wider
workforce at 5% of base salary upon his appointment to the Board.
The cash allowance for the Chief Executive Officer, Frank van Zanten,
will reduce from the current level of 25% to 23.75% in 2020; 22.5% in
2021; 21.25% in 2022 and 20% by 1 January 2023.
As is wider market practice, the threshold level of bonus is reducing to
25% of the maximum opportunity. Any dividend equivalents that accrue
on deferred share awards under the Deferred Annual Share Bonus
Scheme (‘DASBS’) over the period of deferral will be in shares
and will only be released to the extent that the relevant award vests.
Long term
incentives
structure
The maximum annual award of performance
shares under the LTIP Part B is 150% of
base salary.
As the current maximum awards are uncompetitive in the market, the
maximum annual award of performance shares will be 175% of base
salary. This will allow more scope to incentivise long term performance.
The maximum annual award of executive
share options under the Long Term Incentive
Plan (‘LTIP’) LTIP Part A is 250% of base
salary. The Committee would not normally
grant above 200% of salary to incumbent
directors.
However, for 2020 performance share grants, awards will not exceed
150% of base salary.
The peer group for the relative Total Shareholder Return (‘TSR’)
performance metric is being amended to include all companies
ranked FTSE 11–100 across all sectors, better reflecting Bunzl’s
market capitalisation.
Minimum
shareholding
requirement
The Chief Executive Officer’s shareholding
requirement is 250% of base salary. The
requirement for other executive directors is
200% of base salary.
Post-vesting
holding
requirement
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.
The maximum annual award of executive share options will be
reduced to 225% of base salary. However, the Committee would not
normally grant above 200% of salary to incumbent directors.
In line with emerging best practice, the Chief Executive Officer’s
shareholding requirement will be 300% of base salary. The requirement
for other executive directors will continue to be 200% of base salary. This
new minimum shareholding requirement will be met within a reasonable
timeframe of the adoption of the new policy. Deferred shares held under
the DASBS (net of tax) will count towards the shareholding requirement.
Any unvested or vested but unexercised awards under the LTIP will not
count towards the shareholding requirement.
For newly recruited executive directors the requirement will be to build
this holding within five years of joining.
Post-cessation: all executive directors will be required to hold exercised
LTIP shares (net of tax) post-cessation of employment, during the two
years from vesting. Good leavers who are permitted to retain LTIP awards
will hold these until the normal vesting dates, plus a further two year
holding period post-vesting, giving a post-cessation holding period of
up to five years.
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Remuneration policy for executive directors
The Committee engages with, and seeks the views of, the Company’s major investors and investor representative bodies on any significant
changes to the directors’ 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 the policy or sooner if appropriate.
The following table summarises each element of the proposed remuneration policy for the executive directors, explaining how each element
operates, links to the corporate strategy and reflects the characteristics of our business. The policy will be formally effective following
shareholder approval at the 2020 AGM with those parts of the policy applicable to the LTIP applying for the full 2020 financial year. If approved
this policy supersedes that approved by shareholders in 2017.
Salary
Purpose
• recognise knowledge, skills and experience as well as reflect the scope and size of the role
• reward individual performance without encouraging undue risk
Operation
• paid in 12 equal monthly instalments during the year
• reviewed annually by the Committee, 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 an appropriate comparator group
• 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 2019 and 2020 are set out on pages 100 and 110 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 targets have been achieved. The level of bonus for each metric is determined by
reference to the actual performance relative to that metric’s performance targets, on a sliding scale basis
• any bonus is paid as 50% in cash and 50% in shares (with the shares normally deferred for three years under the DASBS). If
any executive resigns during the period of deferral any outstanding DASBS awards would normally lapse
• any dividend equivalents that accrue on deferred shares over the period of the deferral will be allocated in shares and will only
be released to the extent the relevant award vests
• malus and clawback provisions apply under the DASBS to allow the recoupment of bonus for three years from the end of the
relevant performance year in the event of material misstatement of performance, a significant failure of risk control or serious
misconduct. Malus and clawback also apply to the cash element of the bonus award
• non-pensionable
Maximum
potential value
• the annual bonus policy maximum is 180% of base salary
• the annual target bonus opportunity is 50% of the maximum
• the level of annual bonus for threshold performance is 25% of the maximum
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Performance metrics
Metrics will be set each year by the Committee aligned to the Company’s key strategic objectives.
The current bonus metrics are as follows:
• growth at constant exchange rates in the Company’s eps against a relevant target;
• the Company’s return on average operating capital (‘RAOC’) performance;
• the Company’s operating cash flow, being cash generated from operations before acquisition related items less net capital
expenditure less payment of lease liabilities; and
• personal objectives linked to certain specified strategic goals.
• the use of eps, RAOC and operating cash flow measures are seen as appropriate as they form part 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. 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
• strategic non-financial goals reward individual contribution to the success of the Company linked to certain specified strategic
goals – these stretching goals allow a focus each year on important operational goals and strategic milestones
• bonus awards are at the Committee’s discretion and may also take into account performance on environmental, social and
governance matters as appropriate
• the performance metrics and targets are reviewed annually to ensure they remain appropriate. The Committee retains the
discretion to set alternative metrics as appropriate
• 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
The current weighting of these metrics is as follows:
• eps – 50%;
• RAOC – 15%;
• operating cash flow – 15%; and
• strategic non-financial goals – 20%.
There is an eps underpin, such that if eps is below threshold there is no bonus payout.
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. They have been chosen as
although growing the profitability of the business is a key objective, equally important is the focus on cash and effective
investment in capital.
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
• if any executive resigns during the period before vesting, awards would normally lapse
• all awards are subject to the discretions contained in the relevant plan rules
Maximum
potential value
Executive share options
• maximum annual award of 225% of base salary
• annual grant levels for executive directors will not normally exceed 200% of base salary
• for 2020, grants will not exceed 200% of base salary for the incumbent executive directors
Performance shares
• maximum annual award of 175% of base salary
• for 2020, awards will not exceed 150% of base salary for the Chief Executive Officer and 120% for the Chief Financial Officer
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Long term incentives continued
Performance metrics
Performance and service conditions must be met over a three year performance period. Metrics and targets are set each year by
the Committee. The current metrics are as follows:
Executive share options
• the 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 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
Performance shares
• the 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 11–100. It
aligns the rewards received by executives with the returns received by shareholders
• 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 below 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 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
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 (‘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
• rules of the above plan 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)
Performance metrics
• service conditions apply
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Purpose
• provision of competitive retirement benefits
• retain executive directors
Operation
• all defined benefit pension plans in the Group have been closed to new entrants since 2003, with any new recruits being
offered defined contribution retirement arrangements and/or a pension allowance
• pension contributions and allowances are normally paid monthly
Maximum
potential value
• company pension contributions to defined contribution retirement arrangements or cash allowances for new executive
directors will be aligned with those for the wider workforce in the UK – currently 5% of base salary
• the cash allowance for the Chief Financial Officer will be capped at 5% of base salary. The pension allowance for the Chief
Executive Officer, who was appointed in April 2016, will be phased down to 23.75% in 2020, 22.5% in 2021, 21.25% in 2022
and 20% by 1 January 2023
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, 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 such items as costs of 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
Shareholding requirement and post-cessation holding 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 normally allowed for executives who are promoted
from within the Company to achieve the required shareholding. For new executive directors the requirement will be to attain
this holding within five years of joining the Company
• the holding does not include any unvested LTIP awards or vested but unexercised share options or performance shares
• deferred shares held under the DASBS will count towards the minimum shareholding requirement (net of the expected tax
that will apply on vesting)
• post-cessation: all executive directors are required to retain exercised LTIP shares (net of sales to settle tax and other
transaction costs), post-cessation of appointment, during the two years from vesting. Good leavers who are permitted to retain
LTIP awards will hold these until the normal three year vesting dates plus a further two year holding period post-vesting
Maximum
potential value
• the Chief Executive Officer’s shareholding requirement is 300% of base salary. The requirement for other executive directors
is 200% of base salary. This includes any holdings of deferred shares under the DASBS (net of tax) but does not include any
unvested or vested but unexercised share options or performance shares under the LTIP
Performance metrics
• not applicable
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Fees policy for Chairman and non-executive directors (the ‘NEDs’)
The following table summarises the fees policy for the Chairman and the NEDs.
Fees
Purpose
Operation
• provision of a competitive fee to attract and retain 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
• fees for additional responsibilities or significant additional time commitment may be paid where appropriate
• the NEDs and the Chairman are not eligible to receive benefits and do not participate in pension or incentive plans
• the NEDs’ fees are reviewed annually in January each year and the Chairman’s fee is reviewed normally biennially, the latest
review being with effect from January 2020
• the Board as a whole considers the policy and structure for the NEDs’ fees on the recommendation of the Chairman and the
Chief Executive Officer. 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
Taxable benefits
and expenses
• taxable expenses incurred in the course of carrying out NED duties are reinstated and grossed up to include tax payable
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 the
Company’s remuneration policy.
The Committee consulted with major shareholders and shareholder representative bodies on the remuneration policy that is subject to
approval by shareholders at the 2020 AGM.
Two rounds of consultation were conducted with the Company’s top 20 shareholders. Between the first and second rounds of consultation,
further changes were made to the policy, in light of the feedback received.
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;
• 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);
• determining the performance metrics or targets;
• 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 the 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.
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Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Legacy arrangements
The approved directors’ remuneration policy gives 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 (such
as the payment of a pension or the vesting of LTIP awards already in place). Details of any payments to former directors will be set out in
the remuneration report as they arise.
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.
Recruitment of directors – approach to remuneration
Executive directors
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.
Any fixed or 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, may be made under section 9.4.2 of the Listing Rules and would take
account of the nature, time horizons and performance requirements attached to the awards forfeited. Shareholders will be informed of any
such arrangements at the time of appointment.
The payments made to Richard Howes upon joining the Company as Chief Financial Officer are detailed on page 109.
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 if appropriate to take into account the new appointment.
Non-executive directors
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.
Executive directors’ service contracts
Frank van Zanten’s and Richard Howes’ service contracts provide 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 date
of each service contract is noted in the table below:
Frank van Zanten
Richard Howes (appointed to the Board 1 January 2020)
Date of service contract
13 January 2016
10 May 2019
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*
Eugenia Ulasewicz*
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Peter Ventress
Date of
appointment
1 January 2010
1 April 2011
1 February 2015
1 March 2017
1 May 2017
1 June 2019
Date of last
re-appointment
at AGM
17 April 2019
17 April 2019
17 April 2019
17 April 2019
17 April 2019
n/a
Length of
service as at
2020 AGM
10 years 3 months
9 years
5 years 2 months
3 years 1 month
2 years 11 months
10 months
* Philip Rogerson and Eugenia Ulasewicz will both retire from the Board at the conclusion of the 2020 AGM.
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.
Bunzl plc Annual Report 2019
95
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Policy on payment for departure from office
On termination of an executive director’s service contract, the Committee will take into account the departing director’s duty to mitigate their
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)
Base salary, pension
and benefits
Annual bonus cash
Paid up to the date
employment ends and
any untaken holidays
pro-rated to the
leaving date.
Paid up to the date employment ends, including any untaken holidays
pro-rated to such date. 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 will
normally result in no
bonus being paid.
Cessation of employment during a bonus year or after the year end but prior to
the normal bonus payment date will result in cash and deferred bonus being
paid and pro-rated for the relevant portion of the financial year worked and
performance achieved.
Annual bonus deferred
shares
Unvested deferred
shares will lapse.
Executive share
options
Unvested executive
share options will lapse.
Performance shares
Unvested performance
shares will lapse.
In the case of the death of an executive, all deferred shares will be transferred
to the estate as soon as possible after death. In all other cases, subject to the
discretion of the Committee, unvested deferred shares will be transferred to
the individual on a date determined by the Committee.
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.
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 will normally
be subject to time proration. 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.
Departure on
agreed terms
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.
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
As per HMRC
regulations.
As per HMRC regulations.
Other
None.
Disbursements such as legal costs and outplacement fees.
Note
The Committee will have the authority to settle or mitigate any potential claims against the Company, e.g. for unfair dismissal etc, that might arise on termination.
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 balance between 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 greater freedom to act and the consequences
of their decisions are likely to have a broader and more far reaching time span of effect than those decisions made by employees with more
limited responsibility. As a consequence only executive directors, Executive Committee members and other key employees (currently 29
people) are granted both executive share option awards 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.
96
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report 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 2020 the majority of employees across the Group have received average salary increases ranging from 2% to 3%, dependent on
geographical location with the principal exception being those employees based in parts of Latin America, China and Turkey where 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
including all elements of remuneration, 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 monitors
employees’ views through regular employee surveys.
Remuneration scenarios
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 at least 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 two executive directors for 2020, in line with the proposed new directors’ remuneration policy, is illustrated in the bar charts below.
Frank van Zanten
Below threshold performance
(Total £1,174,713)
Target performance
(Total £2,905,036)
Stretch performance
(Total £4,635,358)
Stretch + 50% share price
increase (Total £5,655,805)
Richard Howes
Below threshold performance
(Total £626,048)
Target performance
(Total £1,615,363)
Stretch performance
(Total £2,604,678)
Stretch + 50% share price
increase (Total £3,186,628)
82%
18%
33%
7%
28%
32%
21%
5%
34%
40%
17%
4%
28%
51%
95%
5%
37%
2%
29%
32%
23%
1%
36%
40%
19%
1%
29%
51%
Salary and benefits
Pension
Bonus (Cash/DASBS)
LTIP
Notes
a) For 2020 there are two executive directors, following the retirement of Brian May on 31 December 2019 and the appointment of Richard Howes on 1 January 2020.
b) Salary represents annual salary for 2020. Benefits such as a car or car allowance and private medical insurance have been included based on 2019 figures. In the case of Frank van Zanten, benefits also
include certain outstanding elements of the international relocation package, which are gross amounts before taxes, referred to on page 99.
c) Pension represents the value of the annual pension allowance for Frank van Zanten and Richard Howes.
d) Below threshold performance comprises salary, benefits and pension only with no bonus awarded and no LTIP awards vested.
e) Target performance comprises annual bonus awarded at target level (i.e. for 2020 an on-target bonus of 90% of base salary for Frank van Zanten and 80% of base salary for Richard Howes 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.
f) Stretch performance comprises annual bonus awarded at maximum level (i.e. for 2020, the maximum annual bonus will be 180% of base salary for Frank van Zanten and 160% of base salary for Richard
Howes 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.
g) Stretch performance plus 50% share price increase shows the effect of a 50% growth in the Company’s share price on the value of the LTIP awards.
Bunzl plc Annual Report 2019
97
Financial statementsStrategic reportDirectors’ report
Directors’ remuneration report continued
2019 remuneration at a glance
Remuneration principles
Summary of executive directors’ remuneration for the year
Materially differentiate reward
according to performance
Reward competitively to attract and
retain the best talent
Breakdown of fixed and variable pay
to be appropriate to each role
Framework to be transparent with
clear line of sight from performance
to individual outcomes
Chief Executive Officer
Frank van Zanten
£000
.
6
5
3
7
.
5
1
2
3
.
7
9
5
0
1
,
.
6
7
4
4
1
,
.
6
3
3
4
.
7
2
2
9
2
.
4
7
3
,
1
.
7
0
5
5
1
,
2
.
4
7
3
,
1
Finance Director
Brian May*
£000
Chief Financial Officer
Richard Howes*
£000
.
3
1
7
4
.
9
4
8
5
.
7
0
7
7
.
1
8
7
3
8
.
2
3
5
5
.
8
8
7
.
0
4
8
5
.
9
5
5
8
5
.
8
8
7
8
.
6
9
4
.
0
5
6
5
.
0
4
0
9
.
0
5
6
5
2018
2019
Max
2018
2019
Max
2019
Max
Salary + benefits + pension
Bonus
LTIP
* Brian May retired from the Board on 31 December 2019 and Richard Howes was appointed to the Board on 1 January 2020.
The numbers shown for Richard Howes have not been pro-rated.
Alignment of performance and remuneration 2019
Total opportunity
Result†
Annual bonus
To motivate and
reward the achievement
of the Company’s
strategic and
operational objectives
LTIP
To motivate and reward
performance linked to
long term success
Eps
Linked financial KPI: eps
RAOC
Linked financial KPI: RAOC and operating profit
Operating cash flow
Linked financial KPI: cash conversion
Non-financial strategic goals
Payable to the executive directors in relation
to agreed non-financial strategic goals
Total bonus opportunity/result
Eps
Linked financial KPI: eps
TSR
Linked financial KPI: dividend per share
and share price
Total LTIP opportunity/result
15%
15%
20%
LTIP A
LTIP B
LTIP B
† For the Chief Executive Officer only.
Note
Further details about the Company’s annual bonus and long term incentive plans can be found on pages 90 to 92.
50%
50%
50%
100%
100%
100%
Proposed application of policy for 2020
Unchanged
• Annual bonus metrics and quantum
• LTIP-balance of options and performance shares
• Core benefits
Key changes◊
• 3% increase to base pay for Chief Executive Officer and
Chief Financial Officer
• Alignment of cash pension allowance with wider workforce
(new directors)
• Reduction in % of bonus paid for threshold performance
• Reduction of cash pension allowance (Chief Executive Officer)
• Increased minimum shareholding requirement and the
formalisation of post-vesting shareholding requirement in the
event of cessation
◊ Does not include proposed policy changes where there will be no impact in 2020.
Chief Executive Officer pay ratios
The full time equivalent salary for all employees in the UK
& Ireland business area has been calculated for the 2019
financial year. These employees were then ordered from
the highest to lowest paid and the median, 25th and 75th
percentile employee identified. In order to compare the
equivalent benefits details to those of the Chief Executive
Officer, bonus and benefits received were added to the
employee’s salary details.
25th
percentile
pay ratio
44:1
131:1
Median
pay ratio
38:1
110:1
75th
percentile
pay ratio
27:1
74:1
CEO single
figure 2019
£000
861.5
2,730.5
Salary
Total remuneration
98
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Annual report on directors’ remuneration for 2019
This report sets out the elements of remuneration paid to, or earned by, the directors in respect of the financial year 2019.
Single total figure of remuneration 2019 (audited information)
Executive directors
Salary
£000
2018
2019
861.5
570.6
836.4
554.0
1,432.1 1,390.4
Taxable
benefits
£000
2018
Bonus
£000
2018
2019
402.1
17.1
922.7 1,059.7
584.9
532.8
419.2 1,455.5 1,644.6
2019
297.3
16.6
313.9
LTIP
£000
2018
321.5
471.3
792.8
Pension
£000
2018
Total
£000
2018
2019
209.1 2,730.5 2,828.8
199.6 1,699.4 1,826.9
408.7 4,429.9 4,655.7
2019
215.4
201.3
416.7
2019
433.6
378.1
811.7
Frank van Zanten
Brian May
Total
Notes
a) The figures above represent remuneration earned as directors during the relevant financial year including the bonus of which the cash element, 50% of the bonus, is paid in the year following that in which
it is earned. The other 50% of the bonus shown above is deferred and conditionally awarded as shares under the rules of the Deferred Annual Share Bonus Scheme (‘DASBS’). Shares relating to the 2018
deferred bonus were awarded in 2019 as shown in the table on page 111 and the shares relating to the 2019 deferred bonus will be awarded in 2020.
b) The annual bonus for 2019 was determined according to a formulaic calculation in respect of eps, RAOC and operating cash flow measures, while the Committee used its judgement to assess performance
of individual objectives (20% of the bonus).
c) The eps and ROACE measures (both target and actual) are based on IAS 17.
d) Benefits provided for all executive directors include a car or car allowance and medical insurance coverage for them and their families. Frank van Zanten’s benefits total is lower in 2019 and the only
significant element relates to rent costs (£101,981 grossed up to include tax payable). Other elements included are school fees, tax advice, international medical insurance, travel and removal costs.
e) The long term incentives are in the form of awards under the LTIP granted in April and October 2016 and March and September 2017. The performance metrics for LTIP A were eps growth and for LTIP B
were eps growth and TSR, further details of which are on pages 102 and 103. The portion of the total LTIP figures (2019: £811,700 2018: £792,800) that are attributable to share price growth are £31,149 for
2019 and £261,108 for 2018.
f) The figures shown in relation to 2018 for the LTIP have been restated from those figures shown in the 2018 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 3 March 2019 and 2 September 2019 at the closing mid-market share price of 2,394p and 2,059p respectively.
Non-executive directors
Philip Rogerson – Chairman
Eugenia Ulasewicz
Jean-Charles Pauze
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Peter Ventress
Total
Board fees
£000
2018
357.0
70.4
70.4
70.4
70.4
70.4
–
709.0
2019
357.0
71.8
–
71.8
71.8
71.8
41.9
686.1
Committee
Chair/SID
fees
£000
2018
–
–
–
36.0
18.0
–
–
54.0
2019
–
–
–
37.0
19.0
–
–
56.0
Taxable
payments/
expenses
£000
2018
1.0
71.2
6.7
5.8
0.2
9.6
–
94.5
2019
1.2
73.0
–
4.9
0.4
10.4
–
89.9
Total
£000
2018
358.0
141.6
77.1
112.2
88.6
80.0
–
857.5
2019
358.2
144.8
–
113.7
91.2
82.2
41.9
832.0
Notes
a) Jean-Charles Pauze retired from the Board on 31 December 2018.
b) Peter Ventress joined the Board as Chairman designate on 1 June 2019.
c) Taxable payments/expenses for non-executive directors are costs incurred for travel and accommodation in order to attend Board meetings in London. These costs have been grossed up to include the
tax payable.
Payments for loss of office (audited information)
No payments were or are to be made to former directors in respect of loss of office.
Bunzl plc Annual Report 2019
99
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Departure terms of Brian May (audited information)
As announced on 10 May 2019, Brian May retired from the Board on 31 December 2019 and will leave the Group at the end of February 2020.
Full details of his departure terms are set out in the statement required by section 430(2B) of the Companies Act 2006 which can be found
on www.bunzl.com in the Investors section under Corporate governance (Remuneration). The Committee determined the following treatment
within the terms of the Company’s approved remuneration policy approved by shareholders at the 2017 AGM and published in the 2017
Annual Report:
• salary, benefits and pension allowance were paid as usual until the leaving date;
• no payment in lieu of notice was made;
• annual cash bonus for the 2019 financial year will be paid in March 2020 subject to performance over this period and as determined by the
Committee in accordance with the rules of the bonus plan (any part of his bonus payment that would otherwise have been allocated to him
under the DASBS in relation to the 2019 financial year will be satisfied in cash in accordance with the plan rules);
• any deferred shares outstanding at the Leaving Date, which were awarded under the DASBS in relation to the 2016, 2017 and 2018 financial
years, will vest in full on 1 March 2020;
• no grants or awards under the LTIP were made after 10 May 2019, the date of the announcement;
• any grants and awards outstanding at the Leaving Date, which were made under the LTIP Parts A and B in 2017, 2018 and earlier in 2019,
will vest on the normal vesting date subject to satisfaction of (i) the existing performance conditions and (ii) his outstanding awards under
the LTIP Part B (performance shares) being time pro-rated and reduced in proportion to the amount of the relevant three year vesting period
that has elapsed since the relevant grant date up to the Leaving Date. This is provided that prior to the relevant vesting date Brian May has
not worked in any capacity for a competitor organisation. Malus and clawback provisions will continue to apply; and
• the grants and awards outstanding at the Leaving Date which were made under the LTIP Part A and Part B after 23 August 2017 will also
be subject to a two year post-vesting holding requirement in accordance with the relevant rules of the LTIP (with the exception of any shares
sold to meet any income tax and other withholding obligations).
Payments to past directors (audited information)
No other payments were made to former directors during the year.
Executive directors’ annual salary (audited information)
Executive directors’ salaries were reviewed with effect from 1 January 2019 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
Salary
from
1 January
2019
£861,500
£570,600
Salary
from
1 January
2018
£836,400
£554,000
Increase
in salary
2018 to
2019
3%
3%
Executive directors’ salaries were also reviewed with effect from 1 January 2020 and the increases awarded are shown on page 110.
Executive directors’ external appointments
Frank van Zanten served as a non-executive director of Grafton Group plc in 2019 and during the year retained fees of €70,000. Brian May
served as a non-executive director of United Utilities Group PLC in 2019 and during the year retained fees of £82,000.
Non-executive directors’ fees (audited information)
The Chairman’s fee is reviewed every two years and, as a result, no review took place during 2019. The fees for the non-executive directors
were reviewed with effect from 1 January 2019 in accordance with the normal fees policy.
Chairman’s fee
Non-executive director fee
Supplements:
Senior Independent Director
Audit Committee Chairman
Remuneration Committee Chair
With effect from
January 2019
Fees paid
in 2018
Increase in fees
2018 to 2019
£357,000
£71,800
£357,000
£70,400
£18,000
£19,000
£19,000
£18,000
£18,000
£18,000
–
2%
–
5.6%
5.6%
The Chairman’s and the non-executive directors’ fees were reviewed with effect from 1 January 2020 and the increases awarded are shown
on page 110.
100
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Performance against annual bonus targets (audited information)
The annual bonus plan and DASBS currently operate as set out in the policy section on pages 90 and 91. Frank van Zanten’s and Brian May’s
awards related to the Group’s eps, RAOC, operating cash flow performance and personal performance on individual objectives. The results
for 2019 against the targets set were as follows and the Committee did not exercise any discretion to override the formulaic outcomes:
Group performance
Weighting
50%
15%
15%
20%
Scorecard performance metric
eps (p)
% of target
RAOC %
% of target
Operating cash flow (£m)
% of target
Non-financial strategic goals
Threshold
125.9p
93%
46.6%
96%
555.9
95%
Target
135.4p
100%
48.6%
100%
585.2
100%
see details below
Stretch
151.6p
112%
50.6%
104%
614.5
105%
Actual outturn calculated
at constant exchange rates
133.2p
98.4%
48.4%
99.6%
633.7
108.3%
Note
The actual outturn calculated at constant exchange rates is the actual result of the relevant measures retranslated at the exchange rates used in setting the target for that measure.
There is an eps underpin to retain focus on eps growth, such that if the eps threshold is not met, there is no pay-out under any element
of the scorecard.
Non-financial strategic goals
Following a review of performance against specific personal objectives for 2019, the Committee determined the bonus percentage payable in
relation to the non-financial strategic goals. The specific objectives, and the related evaluation of performance, are shown in the table below:
Frank van Zanten – Chief Executive Officer
Objective
• Implement an expanded sustainability strategy focused on ‘single-
use plastics’, including the broader engagement of stakeholders
using a clear statement of intent, and the establishment of the
appropriate internal governance.
• Deliver underlying profit growth versus last year.
• Support smooth succession processes for the senior management
team including the transition to a new Chief Financial Officer.
Evaluation
• a new strategy, including a clear statement of intent has been created
and communicated to key external stakeholders;
• a new network of sustainability experts has been recruited, and a
new strategic framework has been agreed by the Group
Sustainability Committee, a subset of the leadership team;
• headline net operating margin up from 6.7% to 6.8% at constant
exchange rates and underlying net operating margin of 6.7% flat at
constant exchange rates, against the background of mixed
macroeconomic and market conditions. Pro-active cost measures
and good margin management have contributed to a good margin
performance; and
• particular focus given to a thorough handover and induction process
for Richard Howes, and development and succession plans for the
leadership team have included several specific activities.
% of base salary awarded
27.0
Brian May – Finance Director
Objective
• Manage a smooth succession and handover process for the new
Evaluation
• very effective handover to Richard Howes over a period of four
Chief Financial Officer.
months;
• Improve working capital performance measured by the working
capital/sales% compared to 2018.
• Continue to drive digital progress in the Group (suppliers and
customers), measured by the proportion of transactions with
suppliers and customers carried out via EDI and web ordering.
• working capital during the first half of the year was impacted by the
integration of some businesses in North America but the working
capital performance improved significantly during the second half of
the year leading to a strong cash conversion of 101%; and
• good progress on digital conversion, with 62% of orders in 2019 now
processed via electronic channels.
% of base salary awarded
25.5
Bunzl plc Annual Report 2019
101
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Accordingly the total payments under the annual bonus plans were:
Frank van Zanten
Brian May
Note
Brian May’s bonus payment for 2019 is 100% in cash as outlined in his departure terms.
Total bonus payment (cash and deferred shares split 50/50) as a % of salary
2019
107.1%
93.4%
2018
126.7%
105.6%
2017
109.2%
94.9%
2016
75.3%
76.6%
2015
–
73.8%
The monetary values of the bonus payments for 2019 and 2018 are included in the table on page 99. The deferred shares portion of the bonus
is required to be held under the DASBS for a period of three years and is subject to continued employment.
LTIP grants/awards with performance periods ending in 2019 (audited information)
Executive share option awards – LTIP Part A
Executive share option awards, granted three years previously, are due to vest on 2 March 2020 and 1 September 2020. No discretion to
override the formulaic calculation of outcomes or the share price movement was exercised:
LTIP Part A – 2 March 2017 and 1 September 2017 awards
Performance measure
eps growth (over three year
period to 31 December 2019)
Vesting schedule
25% vesting for threshold performance,
100% vesting for maximum performance
Threshold
target (5% p.a.
compounded)
Maximum
target (8% p.a.
compounded)
Actual eps
growth
% vesting
(max 100%)
15.8%
26.0%
27.1%*
100%
Frank van Zanten
Brian May
Date of grant
2 March 2017
1 September 2017
2 March 2017
1 September 2017
Grant price
p
2,335
2,310
2,335
2,310
Number of
shares granted
34,946
35,324
21,994
22,232
Average share price
31 December
2019
2,048
2,048
2,048
2,048
Vesting
outcome
100%
100%
100%
100%
Estimated
value of
award vesting
£0
£0
£0
£0
Note
The estimated values of awards vesting are 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
2019 (2,048p) and is the same as the figures included in the single total remuneration table on page 99.
* The eps growth to 31 December 2019 has been adjusted to exclude two businesses one in France and one in the UK that were disposed of during the period of calculation. The Committee approved this
adjustment on the basis that the directors and the recipients should not be penalised for the decision to dispose of non-core businesses.
Performance shares – LTIP Part B
Awards of performance shares were made to the executive directors on 11 April 2016 and 11 October 2016 and vested during 2019. The
Committee assessed the performance of the Company against the relevant performance conditions and no discretion to override the
formulaic outcomes or the share price movement was exercised.
102
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report LTIP Part B – 11 April and 11 October 2016 awards
Performance measure
eps growth
(over three year
period to
31 December 2018)
Vesting
schedule
25% vesting for
threshold performance,
100% vesting for
maximum performance
Threshold
target
(6% p.a.
compounded)
Maximum
target
(12% p.a.
compounded)
Actual eps
growth
% vesting
(max 50%)
19.1%
40.5%
42.4%
50%
Performance measure
TSR relative to comparator
group of bespoke peer
companies, and equivalent
ranking
Performance
period
1 April 2016 to
31 March 2019
1 October 2016 to
30 September 2019
Vesting
schedule
25% vesting for
threshold performance,
100% vesting for
maximum performance
Threshold
target
(median)
27.8%
15.5 out of 30
7.8%
15 out of 29
Maximum
target
(upper quartile)
74.6%
8 out of 30
55.9%
7.75 out of 29
Actual TSR
36.8%
12.96 out of 30
(4.9)%
24.10 out of 29
% vesting
(max 50%)
25.2%
0%
Frank van Zanten
Brian May
Date of grant
11 April 2016
11 October 2016
11 April 2016
11 October 2016
Number of
shares granted
10,369
23,428
13,566
11,967
Value of
award at grant
£212,668
£544,701
£278,239
£278,233
Vesting
outcome – eps
50%
50%
50%
50%
Vesting
outcome – TSR
25.2%
0%
25.2%
0%
Shares
vested
7,798
11,714
10,202
5,983
Value of
award vesting
£196,432
£237,209
£256,988
£121,156
Note
Included in the single total figure of remuneration on page 99 is the value of these vested awards at the closing mid-market share price on the dates of vesting, 11 April 2019 and 11 October 2019, which were
2,519p and 2,025p respectively.
Total pension entitlements (audited information)
Frank van Zanten
Brian May
Pension plan’s
normal
retirement age
–
60
Additional value of
pension on early
retirement
–
–
Pension value
in the year from
Defined Benefit
scheme
–
£79,530
Value of cash
allowance including
any company Defined
Contribution in 2019
£215,375
£121,725
Total pension
2019
£215,375
£201,255
Notes
a) As Chief Executive Officer Frank van Zanten received a pension allowance of 25% of base salary during 2019. This will reduce from 1 January 2020 in accordance with the proposed new directors’
remuneration policy.
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 £166,200 for tax year 2019/20 and £160,800 for tax year 2018/19.
c) In addition to benefits from the BPP, Brian May received a pension allowance of 30% of base salary above the pensionable salary cap which permitted him to make provision, of his own choice, in respect
of that part of his salary which exceeds the cap.
Bunzl plc Annual Report 2019
103
Financial statementsStrategic reportDirectors’ report 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/March and August/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 February and September 2019 and performance share awards were granted in April and October 2019 under the
LTIP in accordance with the policy as approved at the 2017 AGM.
LTIP interests awarded during the financial year (audited information)
Frank van Zanten
Brian May
Plan
LTIP Part A
LTIP Part B
LTIP Part A
LTIP Part B
LTIP Part A
LTIP Part B
Type of interest
Share options
Performance shares
Share options
Performance shares
Share options
Performance shares
Date of grant
Basis of award
28.02.19 100% of salary
65% of salary
08.04.19
11.09.19 100% of salary
65% of salary
07.10.19
28.02.19
95% of salary
08.04.19 52.5% of salary
Face value
£000
861.5
560.0
861.5
560.0
542.1
299.5
Number of
shares
36,273
22,072
40,887
27,817
22,824
11,807
Performance
period end date
31.12.21
31.03.22
31.12.21
30.09.22
31.12.21
31.03.22
Notes
a) 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 LTIP Part A on 28 February 2019 and on
11 September 2019 at a value of 2,375p and 2,107p per share respectively. The option price used at exercise is the market price on the day prior to grant. Performance shares were awarded under the LTIP
Part B on 8 April 2019 and 7 October 2019 at a value of 2,537p and 2,013p per share respectively.
b) No LTIP awards were granted to Brian May after the date of his retirement was announced on 10 May 2019. See page 100 for the departure terms for Brian May.
Performance conditions for 2019 awards
The performance conditions for the executive share options and performance shares awarded under the LTIP to the Company’s executive
directors, Executive Committee members and selected key employees in 2019 were as detailed below. In each case when threshold
performance is met 25% of the award will vest.
Executive share option awards – LTIP Part A
Executive share options may vest 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 5%
5%
Between 5% and 8%
8% or above
Proportion of share option awards exercisable
Nil
25%
Pro rata between 25% and 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 share option awards exercisable
Nil
25%
Pro rata between 25% and 100%
100%
The extent to which the other half of the performance share awards may vest is subject to the Company’s TSR performance, a combination
of both the Company’s share price and dividend performance during the three year performance period, relative to the TSR performance of
a specified comparator group of similarly sized companies with large international presence. Given the unique nature of Bunzl’s combined
operations a broad range of listed companies either side of Bunzl in terms of size (excluding companies in the financial services, oil & gas and
natural resources sectors and those without a significant international presence) are considered to be appropriate for TSR comparison
purposes. These performance share awards may vest based on the following sliding scale:
104
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report 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% and 100%
100%
The applicable comparator group for the 2019 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 92. 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 2019
1.6%
0.7%
Statement of directors’ shareholding and share interests (audited information)
As at 31 December 2019, each of the executive directors and their connected persons have a shareholding as follows:
Frank van Zanten
Brian May
Requirement for share ownership as a
percentage of salary (31 December 2019)
250%
200%
Actual share ownership as a percentage of salary at
31 December 2019 at the closing mid-market price
(2,065p)
250%
416%
Note
The shareholding requirement for the Chief Executive Officer, Frank van Zanten, will increase to 300% of salary under the proposed new directors’ remuneration policy. Shares contributing to the share
ownership % will include deferred shares held under the DASBS (net of tax) but not any unvested or vested but unexercised LTIP awards.
Bunzl plc Annual Report 2019
105
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Interests in shares and share options (audited information)
The interests of the directors, and their connected persons, in the Company’s ordinary shares and share options at 31 December 2019 were:
Unvested and
subject to
holding period
(DASBS)
56,621
34,445
–
–
–
–
–
–
Owned
outright
104,438
114,995
10,000
4,000
3,000
4,000
–
–
Shares
Unvested and
subject to
performance
conditions
(LTIP Part B)
132,315
62,768
–
–
–
–
–
–
Options (LTIP Part A and Sharesave)
Total
interests held
Unvested and
subject to
performance
conditions
225,222
116,000
–
–
–
–
–
–
Unvested
subject to
continued
employment
1,923
1,758
–
–
–
–
–
–
Vested but not
exercised
42,636
21,553
–
–
–
–
–
–
563,155
351,519
10,000
4,000
3,000
4,000
–
–
Frank van Zanten
Brian May
Philip Rogerson
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Peter Ventress
Stephan Nanninga
Note
No changes to the directors’ ordinary share interests shown in this remuneration report have taken place between 31 December 2019 and 24 February 2020.
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 10 year period. The Company’s TSR performance against the FTSE 350 Support Services Sector over a 10 year period commencing on
2 January 2010 is shown below.
Bunzl
FTSE 350 Support Services
Source: Thomson Reuters Datastream
550
500
450
400
350
300
250
200
150
100
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
106
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report
Chief Executive Officer’s pay in last 10 years
The table below summarises the Chief Executive Officer’s single total figure of remuneration, annual bonus and long term incentive pay out
as a percentage of maximum opportunity for 2019 and the previous nine years.
Single total figure of
remuneration £000
Annual variable element
award rates against
maximum opportunity
Long term incentive
vesting rates against
maximum opportunity
LTIP Part A
(share options)
LTIP Part B
(performance
shares)
2010
2011
2012
2013
2014
2015
2016
MR
2016
FvZ
2017
2018
2019
2,314.2 3,394.1 3,502.9 4,387.6 4,766.8 3,937.9 2,353.3 1,492.0 2,812.0 2,828.8 2,730.5
71% 99% 67% 91% 85% 64%
0 % 67% 73% 70%
60%
100% 100% 100% 100% 100% 100% 100 %
0% 100% 100% 100%
65% 29% 45% 62% 89% 69% 82%
0% 69% 54%
63%
Notes
a) The data for 2016 splits out the amounts relating to Michael Roney (‘MR’) 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 (‘FvZ’) 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) The single total figure of remuneration in relation to 2018 has been restated from the figure shown in the 2018 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 2019 on page 99.
Percentage change in Chief Executive Officer’s remuneration
The table below sets out the increase in the salary, benefits and bonus of the Chief Executive Officer 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 2019 and leavers and joiners in either year have been removed from the data to prevent distortion.
Salary
Benefits
Bonus
Chief Executive
Percentage change
(2019 vs 2018)
3%
-26%
-13%
UK and US
management
population
Percentage change
(2019 vs 2018)
3%
6%
-31%
Notes
a) Benefits are annualised and include the relocation benefits for Frank van Zanten included in the single figure table on page 99. In 2018 these benefits were excluded. With these benefits included the
percentage change from 2017 to 2018 was 3% for benefits.
b) US and UK management population includes any promotional increases that occurred during either year.
c) Bonus relates to the performance targets of the companies for which the relevant individuals work.
Bunzl plc Annual Report 2019
107
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Chief Executive Officer pay ratios
The table below sets out the comparisons between the 25th, median and 75th percentile employees in the UK with reference to 31 December
2019 and the Chief Executive Officer’s salary and salary and benefits as detailed in the single figure table. To calculate these ratios we have
determined full time equivalent total remuneration, as this is the most statistically robust method.
Each employee’s pay and benefits were calculated using each element of employee remuneration, consistent with the Chief Executive Officer.
Adjustments were made to include the bonus paid in 2019 compared to the Chief Executive Officer’s bonus paid in 2020 in respect of
performance in 2019.
The Chief Executive Officer’s remuneration package is weighted more heavily towards variable pay than the wider workforce and that means
the ratio is likely to fluctuate depending on the performance of the Company.
Year
2019 salary
2019 total remuneration
Chief Executive Officer
25th percentile employee
Median employee
75th percentile employee
25th percentile pay ratio
44:1
131:1
Median pay ratio
38:1
110:1
75th percentile pay ratio
27:1
74:1
Salary
£861,500
£19,422
£22,484
£31,500
Total remuneration
£2,730,500
£20,880
£24,905
£36,718
The salary and total remuneration of the median employee is consistent with the reward and progression policy for UK employees.
Relative importance of spend on pay
The table below shows a comparison between the overall expenditure on pay and dividends paid to shareholders for 2019 and 2018 (as stated
in Note 24 and Note 20 to the consolidated financial statements on pages 163 and 158 respectively).
£m
Overall expenditure on pay
Dividend paid in the year
Notes
a) Overall expenditure on pay excludes employer’s social security costs and the GMP equalisation charge in 2018.
b) Dividends paid in the year relate to the previous financial year’s interim and final dividends.
2019
785.8
167.3
2018
772.0
152.2
Percentage
change
1.8%
9.9%
c) The percentage change in overall expenditure on pay includes the impact of changes in exchange rates from 2018 to 2019 and the incremental effect of acquisitions net of disposals, details of which are
referred to in the Chief Executive Officer’s review on page 6 and in the Financial review on page 57.
108
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Remuneration arrangements for 2020
Remuneration arrangements for Richard Howes – Chief Financial Officer
Richard Howes joined the Company on 1 September 2019 as Chief Financial Officer designate and was appointed to the Board on 1 January
2020 as Chief Financial Officer.
His remuneration arrangements on joining the Company were as follows:
• a base salary of £565,000 per annum;
• a cash supplement in lieu of pension contributions of 15% of base salary;
• other benefits in line with the current directors’ remuneration policy, including a car allowance, life assurance and private medical insurance
for himself and his family;
• a pro-rated annual bonus opportunity for the period from 1 September to 31 December 2019, in line with the current directors’ remuneration
policy; and
• the opportunity to be considered for a grant of performance shares and share options under the LTIP from 2020.
In addition, Richard Howes was compensated for specific items of remuneration which he forfeited as a result of leaving his previous
employer, as follows:
• a payment of £200,000 (split 50:50 between cash and shares, to be deferred for three years under the DASBS) to compensate him for the loss
of his annual bonus from his previous employer; and
• a number of share awards to compensate him for unvested awards under his previous employer’s long term incentive plan, as follows:
(a) an award in respect of 39,538 Bunzl shares which is linked to the relevant performance conditions from his previous employer (subject to
a cap of 50% of the shares awarded, i.e. 19,769 shares) which will vest on 26 May 2020;
(b) an award in respect of 46,824 shares which is linked to the relevant Bunzl performance conditions (applied to awards granted under the
LTIP Part B in April 2018) and is due to vest on 10 April 2021; and
(c) an award in respect of 59,112 shares which is linked to the relevant Bunzl performance conditions (applied to awards granted under the
LTIP Part B in April 2019) and is due to vest on 11 April 2022.
On his appointment to the Board on 1 January 2020, the remuneration arrangements for Richard Howes were confirmed as follows:
• a base salary of £581,950 per annum;
• a cash supplement in lieu of pension contributions of 5% of base salary;
• other benefits in line with the current directors’ remuneration policy, including a car allowance, life assurance and private medical insurance
for himself and his family;
• an annual bonus with a maximum opportunity of 160% of base salary (target opportunity of 80% and threshold opportunity of 40%), to be
split 50:50 between cash and shares to be deferred for three years under the DASBS plan; and
• grants of shares in 2020 under the LTIP as follows:
– LTIP Part A – share options equivalent in value to 200% of base salary; and
– LTIP Part B – performance shares equivalent in value to 120% of base salary.
These arrangements are all in line with the proposed new directors’ remuneration policy for 2020.
Bunzl plc Annual Report 2019
109
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Salary (audited information)
The salary increases for the executive directors for 2020, which are in line with increases that have been implemented for other employees in
the Group as discussed on page 97, are as follows:
Frank van Zanten
Richard Howes
Salary from
1 January 2020
£887,345
£581,950
Salary from
1 January 2019
£861,500
n/a
Increase
in salary
2019 to 2020
3.0%
n/a
2020 bonus targets
The structure of Frank van Zanten’s and Richard Howes’ annual bonus for 2020 remains unchanged and is described on pages 90 and 91.
The balanced scorecard of performance measures, based on eps, RAOC, operating cash flow and specified strategic goals and with an eps
underpin continues as outlined for 2019. If eps performance falls below the threshold level there will be no bonus paid. 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). Under the proposed policy, 25% of the maximum opportunity is payable for threshold
performance, and 50% for target performance. 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, financial performance targets are confidential at the start of the year
as they are short term and market sensitive and therefore are disclosed in the remuneration report which is published following the year end.
Performance measures for long term incentives to be awarded in 2020
Grants of executive share options and performance shares awarded to executive directors and senior executives in 2020 will be subject to
the same performance conditions as those executive share options and performance share awards granted in 2019 as detailed on pages 104
and 105.
Chairman’s and non-executive directors’ fees for 2020
The Chairman’s and the non-executive directors’ fees were reviewed with effect from 1 January 2020.
The Chairman’s fee is reviewed every two years with the previous review taking effect from 1 January 2018. 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 Chair
With effect from
1 January 2020
£368,000
£71,800
£18,000
£20,000
£20,000
Fees paid in 2019
£357,000
£71,800
£18,000
£19,000
£19,000
Increase in fees
2019 to 2020
3.1%
–
–
5.3%
5.3%
110
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report 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 2019
The awards granted to each director of the Company and any director with an interest in the Company under the DASBS are set out
in the table below. Further information relating to the deferred bonus is provided on page 90.
Frank van Zanten
Brian May
Awards
(shares)
held at
1 January
2019
8,190
11,504
22,789
9,831
9,001
13,120
Shares
awarded
during
2019
22,328
12,324
Shares
vested
during
2019
8,190
9,831
Total number
of awards
(shares) at
31 December
2019
–
11,504
22,789
22,328
–
9,001
13,120
12,324
Normal
vesting
date
01.03.19
01.03.20
01.03.21
01.03.22
01.03.19
01.03.20
01.03.21
01.03.22
Share
price
at grant
p
1,933
2,255
1,955
2,373
1,933
2,255
1,955
2,373
Market
price
at vesting
p
2,394
Monetary
value of
vested
awards
£000
196
2,394
235
Note
The deferred element of the 2019 annual bonus plan as shown on page 99 is not included in the table above as the appropriate number of shares have not yet been awarded. No shares lapsed during the year.
Brian May’s awards due to vest in 2020, 2021 and 2022 will vest in line with his departure terms as set out on page 100.
LTIP
The tables below show the number of executive share options and performance shares held by the executive directors under
the LTIP during 2019.
Executive share options – LTIP Part A
Frank van Zanten
Total
Brian May
Total
Notes
a) Executive share options were exercised during 2019 by:
Options held at
1 January
2019
15,300
17,396
16,135
42,636
34,946
35,324
42,782
35,010
–
–
239,529
25,887
21,553
21,994
22,232
26,920
22,030
–
140,616
Grant
date
26.02.15
27.08.15
03.03.16
02.09.16
02.03.17
01.09.17
01.03.18
31.08.18
28.02.19
11.09.19
03.03.16
02.09.16
02.03.17
01.09.17
01.03.18
31.08.18
28.02.19
Exercise
price
p
1,920
1,687
1,945
2,336
2,335
2,310
1,955
2,389
2,375
2,107
1,945
2,336
2,335
2,310
1,955
2,389
2,375
Options
exercisable
between
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
01.03.21–29.02.28
31.08.21–30.08.28
28.02.22–27.02.29
11.09.22–10.09.29
03.03.19–02.03.20
02.09.19–01.09.20
02.03.20–01.03.21
01.09.20–31.08.21
01.03.21–29.02.22
31.08.21–30.08.22
28.02.22–27.02.23
Options
held at
31 December
2019
–
–
–
42,636
34,946
35,324
42,782
35,010
36,273
40,887
267,858
–
21,553
21,994
22,232
26,920
22,030
22,824
137,553
(i) Frank van Zanten on 1 March 2019 in respect of 15,300 ordinary shares at an exercise price of 1,920p and 17,396 ordinary shares at an exercise price of 1,687p, at a market price of 2,376p; and on 4 March
2019 in respect of 16,135 ordinary shares at an exercise price of 1,945p, at a market price of 2,411p; resulting in a total gain of £264,738; and
(ii) Brian May on 4 March 2019 in respect of 25,887 ordinary shares at an exercise price of 1,945p, at a market price of 2,411p, resulting in a gain of £120,537.
b) The mid-market price of a share on 31 December 2019 was 2,065p and the range during 2019 was 1,943p to 2,551p.
Bunzl plc Annual Report 2019
111
Financial statementsStrategic reportDirectors’ report Directors’ remuneration report continued
Performance shares – LTIP Part B
Awards
(shares)
held at
1 January
2019
10,369
23,428
19,565
19,887
22,510
20,464
–
–
116,223
13,566
11,967
12,097
12,297
13,916
12,651
–
76,494
Conditional
shares
awarded
during
2019
–
–
–
–
–
–
22,072
27,817
49,889
–
–
–
–
–
–
11,807
11,807
Award
date
11.04.16
11.10.16
10.04.17
09.10.17
09.04.18
08.10.18
08.04.19
07.10.19
11.04.16
11.10.16
10.04.17
09.10.17
09.04.18
08.10.18
08.04.19
Market
price per
share
at award
p
2,051
2,325
2,346
2,308
2,090
2,299
2,537
2,013
2,051
2,325
2,346
2,308
2,090
2,299
2,537
Lapsed
awards
(shares)
during
2019
2,571
11,714
–
–
–
–
–
–
14,285
3,364
5,984
–
–
–
–
–
9,348
Exercised
awards
(shares)
during
2019
7,798
11,714
–
–
–
–
–
–
19,512
10,202
5,983
–
–
–
–
–
16,185
Market
price
per share
at exercise
p
2,113
1,948
–
–
–
–
–
–
1,896
1,896
–
–
–
–
–
Awards
(shares)
held at
31
December
2019
–
–
19,565
19,887
22,510
20,464
22,072
27,817
132,315
–
–
12,097
12,297
13,916
12,651
11,807
62,768
Value at
exercise
£000
165
228
–
–
–
–
–
–
193
113
–
–
–
–
–
Frank van Zanten
Total
Brian May
Total
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 92.
Sharesave schemes
Frank van Zanten
Brian May
Options at
1 January
2019
964
959
1,197
976
–
Grant
date
29.03.16
27.03.18
21.03.14
20.03.15
29.03.19
Exercise
price
p
1,556
1,564
1,253
1,536
1,916
Options
exercisable
between
01.05.21–31.10.21
01.05.23–31.10.23
01.05.19–31.10.19
01.05.20–31.10.20
01.05.24–31.10.24
Options at
31 December
2019
964
959
–
976
782
112
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report The operation of the Committee
Committee membership, role and remit
The Committee comprises all the independent non-executive directors of the Company. While neither the Chairman of the Board, the
Chairman designate nor the Chief Executive Officer are members of the Committee, they normally attend meetings by invitation except when
the Committee is considering their personal remuneration. The Secretary to the Committee is the Director of Group Human Resources.
The primary role of the Committee is to determine the policy and practice for the remuneration of the Chairman, the executive directors of the
Board and senior management (directly below Board level). The Committee’s terms of reference, which were reviewed by both the Committee
and the Board in 2019, are available on the Company’s website, www.bunzl.com.
The Committee proposes the directors’ remuneration policy for shareholder approval. It also governs the implementation of the policy,
ensuring that the remuneration for the 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, shareholders’ views and the Group’s
broader remuneration arrangements when setting the Group’s performance related incentives and ensures compliance with UK corporate
governance good practice.
The following independent non-executive directors were members of the Committee during 2019:
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Date of appointment to
the Committee
Meetings eligible
to attend in 2019
Meetings
attended in 2019
20 April 2011
1 February 2015
1 March 2017
1 May 2017
4
4
4
4
4
4
4
4
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 Board 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: £16,872 (WTW) and £118,631 (Aon Hewitt)
respectively for such work undertaken in 2019. Advisers are appointed by the Committee and reviewed periodically. The Committee conducts
regular reviews of the effectiveness of the advisers.
Statement of voting at the 2019 AGM for the remuneration report and at the 2017 AGM for the remuneration policy
The remuneration report and remuneration policy received the following shareholder votes in 2019 and 2017 respectively, being the years that
they were last voted on by shareholders:
Remuneration report (2019 AGM)
Remuneration policy (2017 AGM)
Notes
a) The votes ‘For’ include votes given at the Company Chairman’s discretion.
Votes cast
278,212,127
259,865,084
Votes For
267,821,934
239,494,126
% of shares
voted
96.27
92.16
Votes
Against
10,390,193
20,370,958
% of shares
voted
3.73
7.84
Votes
Withheld
52,731
11,215,438
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.
Vanda Murray OBE
Chair of the Remuneration Committee
24 February 2020
Bunzl plc Annual Report 2019
113
Financial statementsStrategic reportDirectors’ report Other statutory information
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
15 April 2020 at 11.00 am, is set out in
a separate letter from the Chairman
to shareholders.
Dividends
An interim dividend of 15.5p was paid on
2 January 2020 in respect of 2019 and the
directors are recommending a final dividend
of 35.8p, making a total for the year of 51.3p
per share (2018: 50.2p). Dividend details
are given in Note 20 to the consolidated
financial statements. Subject to shareholder
approval at the 2020 AGM, the final dividend
will be paid on 1 July 2020 to those
shareholders on the register at the close
of business on 22 May 2020.
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 market in
the form of American Depositary Receipts.
Details of changes to the issued share capital
during the year are set out in Note 19 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 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 19 to the consolidated
financial statements.
Rights and obligations attaching to
shares
Subject to the provisions of the Companies
Act 2006 and without prejudice to any rights
attached to any existing shares, the
Company may resolve by ordinary resolution
to issue shares with such rights and
restrictions as set out in such resolution or
(if there is no such resolution or so far as it
does not make specific provision) as the
Board may decide. Subject to the provisions
of the Companies Act 2006 and of any
resolution of the Company passed pursuant
thereto and without prejudice to any rights
attached to existing shares, the Board is duly
authorised to issue and allot, grant options
over or otherwise dispose of the Company’s
shares on such terms and conditions and at
such times as it thinks fit. If at any time the
share capital of the Company is divided into
different classes of shares, the rights
attached to any class may be varied or
abrogated by special resolution passed at
a separate general meeting of such holders.
Subject to the rights attached to any existing
shares, rights attached to shares will be
deemed to be varied by the reduction of
capital paid up on the shares and by the
allotment of further shares ranking in
priority in respect of dividend or capital or
which confer on the holders more favourable
voting rights than the first-mentioned
shares, but will not otherwise be deemed
to be varied by the creation or issue of
further shares.
Power to issue and allot shares
The directors are generally and
unconditionally authorised under the
authorities granted at the 2019 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
11 March 2019, 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 2019, 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.
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
114
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report • is or has been suffering from mental or
physical ill health and the Board resolves
that his or her office be vacated; or
• is absent without permission from Board
meetings for six consecutive months and
the Board resolves that his or her office be
vacated; or
• becomes bankrupt or compounds with
his or her creditors generally; or
• is prohibited by law from being a director;
or
• ceases to be a director by virtue of any
provisions of company law or is removed
from office pursuant to the Articles.
Biographical details of all of the current
directors are set out on pages 66 and 67.
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
apart from Philip Rogerson and Eugenia
Ulasewicz who will retire from Board at the
conclusion of the AGM.
Directors’ interests in the Company’s
ordinary shares are shown in Note 22 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 2019. 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 85 to 113.
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 2019
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 Sustainability report on pages 34
to 49.
Substantial shareholdings
As at 31 December 2019, 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
BlackRock, Inc.
Mawer Investment Management Ltd.
Date of
notification
06.03.17
18.07.19
Number of
shares
17,257,793
16,961,895
% of issued
share capital
5.14
5.04
No other notifications have been received between 31 December 2019 and 24 February 2020.
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 2019 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
2019, the Company did not purchase any of
its own shares pursuant to this authority or
the authority granted at the 2018 AGM and
no shares have been purchased between
31 December 2019 and 24 February 2020.
As a result, directors again propose to seek
the equivalent authority at the 2020 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
Bunzl plc Annual Report 2019
115
Financial statementsStrategic reportDirectors’ report 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 referred to above
and are explained in more detail in the
Strategic report on pages 1 to 65.
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
24 February 2020.
By order of the Board
Paul Hussey
Secretary
24 February 2020
Other statutory information continued
Greenhouse gas emissions
Information relating to greenhouse
gas emissions has been set out in the
Sustainability report on pages 34 to 49.
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 employee 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 Sustainability
report on pages 34 to 49.
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.
Political donations
During 2019, 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 56 to 65 and in the Notes to
the financial statements on pages 124 to 168.
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 EBT referred to in Note 19 to the
consolidated financial statements on page
156, 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 65.
Strategic report and Directors’ report
Pages 1 to 65 inclusive consist of the
Strategic report and pages 66 to 116
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.
116
Bunzl plc Annual Report 2019
Financial statementsDirectors’ reportStrategic report Strategic report
Directors’ report
Financial statements
Financial
statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated cash flow statement
118
119
120 Consolidated balance sheet
121
122
124 Notes
169 Company balance sheet
170
171
177
178
184 Shareholder information
192 Five year review
Company statement of changes in equity
Notes to the Company financial statements
Statement of directors’ responsibilities
Independent auditors’ report to the members of Bunzl plc
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
117
117
Directors’ reportStrategic reportFinancial statements Consolidated income statement
for the year ended 31 December 2019
The Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019 using the modified retrospective approach to transition and, in
accordance with the standard, the Group’s financial results for the prior year have not been restated. As a result, with the exception of
revenue, the financial results shown below for the year ended 31 December 2019 are not directly comparable with the prior year. To provide
a meaningful comparison with the prior year an alternative presentation of the Group’s results prepared under IAS 17 ‘Leases’, the previous
accounting standard for leases, is shown in Note 3.
Revenue
Operating profit
Finance income
Finance expense
Profit on disposal of businesses
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
GMP equalisation charge
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
5
5
7
7
28
8
9
9
5
5
5
6
7
7
8
9
2019
£m
9,326.7
528.4
12.4
(87.5)
–
453.3
(104.1)
349.2
2018
£m
9,079.4
466.2
11.6
(66.6)
13.6
424.8
(98.3)
326.5
104.8p
104.5p
98.4p
97.8p
528.4
466.2
107.3
17.6
–
653.3
12.4
(87.5)
578.2
(137.6)
440.6
111.1
33.4
3.3
614.0
11.6
(66.6)
559.0
(129.1)
429.9
132.2p
129.6p
† See Note 4 on page 134 for further details of the alternative performance measures.
◊ Excluding the profit on disposal of businesses and associated tax where relevant.
The Accounting policies and other Notes on pages 124 to 168 form part of these consolidated financial statements.
118
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Directors’ reportFinancial statementsStrategic report Strategic report
Directors’ report
Financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2019
Profit for the year
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pension schemes
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences on foreign operations
Movement from translation reserve to income statement on disposal of foreign operation
Gain/(loss) taken to equity as a result of effective net investment hedges
(Loss)/gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve to inventory/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
2019
£m
349.2
2018
£m
326.5
23
8
8
(8.3)
2.2
(6.1)
(104.1)
–
16.9
(0.5)
(4.3)
0.8
(91.2)
(97.3)
251.9
11.0
(3.7)
7.3
3.0
(2.4)
(7.5)
7.9
(4.4)
(0.4)
(3.8)
3.5
330.0
Consolidated income statement
for the year ended 31 December 2019
The Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019 using the modified retrospective approach to transition and, in
accordance with the standard, the Group’s financial results for the prior year have not been restated. As a result, with the exception of
revenue, the financial results shown below for the year ended 31 December 2019 are not directly comparable with the prior year. To provide
a meaningful comparison with the prior year an alternative presentation of the Group’s results prepared under IAS 17 ‘Leases’, the previous
accounting standard for leases, is shown in Note 3.
Profit for the year attributable to the Company’s equity holders
Earnings per share attributable to the Company’s equity holders
Revenue
Operating profit
Finance income
Finance expense
Profit on disposal of businesses
Profit before income tax
Income tax
Basic
Diluted
Alternative performance measures†
Operating profit
Adjusted for:
Customer relationships amortisation
Acquisition related items
GMP equalisation charge
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
5
5
7
7
8
28
9
9
5
5
5
6
7
7
8
9
2019
£m
9,326.7
528.4
12.4
(87.5)
–
453.3
(104.1)
349.2
2018
£m
9,079.4
466.2
11.6
(66.6)
13.6
424.8
(98.3)
326.5
104.8p
104.5p
98.4p
97.8p
528.4
466.2
107.3
17.6
–
653.3
12.4
(87.5)
578.2
(137.6)
440.6
111.1
33.4
3.3
614.0
11.6
(66.6)
559.0
(129.1)
429.9
132.2p
129.6p
† See Note 4 on page 134 for further details of the alternative performance measures.
◊ Excluding the profit on disposal of businesses and associated tax where relevant.
The Accounting policies and other Notes on pages 124 to 168 form part of these consolidated financial statements.
118
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Directors’ reportStrategic reportFinancial statements
Consolidated balance sheet
at 31 December 2019
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Defined benefit pension 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
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
Lease liabilities
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
Lease liabilities
Derivative financial liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
2019
£m
2018
£m
10
11
12
23
18
13
14
26
19
26
23
17
25
18
26
26
15
17
25
118.3
432.9
2,290.9
10.8
11.5
3.7
2,868.1
1,177.2
1,254.1
6.7
3.4
610.5
3,051.9
5,920.0
108.3
184.0
(111.8)
16.2
1,547.6
1,744.3
1,314.2
46.8
19.5
2.4
33.9
358.2
–
127.5
1,902.5
469.7
83.7
1,502.8
81.0
6.5
121.8
7.7
2,273.2
4,175.7
5,920.0
122.4
–
2,382.5
3.4
5.9
4.0
2,518.2
1,213.6
1,330.0
4.0
12.6
477.7
3,037.9
5,556.1
108.1
178.5
(24.6)
20.2
1,412.3
1,694.5
1,456.3
41.9
29.4
2.9
41.3
–
5.1
153.7
1,730.6
333.5
74.9
1,613.6
91.9
6.1
–
11.0
2,131.0
3,861.6
5,556.1
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 24 February 2020 and signed on its behalf by
Frank van Zanten, Chief Executive Officer and Richard Howes, Chief Financial Officer.
120
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Consolidated balance sheet
at 31 December 2019
Strategic report
Directors’ report
Financial statements
Consolidated statement of changes in equity
for the year ended 31 December 2019
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Defined benefit pension 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
Total current assets
Total assets
Equity
Share capital
Share premium
Translation reserve
Other reserves
Retained earnings
Liabilities
Interest bearing loans and borrowings
Defined benefit pension liabilities
Other payables
Income tax payable
Provisions
Lease liabilities
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
Lease liabilities
Derivative financial liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Total equity attributable to the Company’s equity holders
Notes
10
11
12
23
18
13
14
26
19
26
23
17
25
18
26
26
15
17
25
2,290.9
2,382.5
2,868.1
2,518.2
2019
£m
118.3
432.9
10.8
11.5
3.7
1,177.2
1,254.1
6.7
3.4
610.5
3,051.9
5,920.0
108.3
184.0
(111.8)
16.2
1,547.6
1,744.3
46.8
19.5
2.4
33.9
358.2
–
127.5
1,902.5
469.7
83.7
81.0
6.5
121.8
7.7
2,273.2
4,175.7
5,920.0
2018
£m
122.4
–
3.4
5.9
4.0
1,213.6
1,330.0
4.0
12.6
477.7
3,037.9
5,556.1
108.1
178.5
(24.6)
20.2
1,412.3
1,694.5
41.9
29.4
2.9
41.3
–
5.1
153.7
1,730.6
333.5
74.9
91.9
6.1
–
11.0
2,131.0
3,861.6
5,556.1
1,314.2
1,456.3
1,502.8
1,613.6
At 31 December 2018
Impact of transition to IFRS 16
Restated equity at 1 January 2019
Profit for the year
Actuarial loss on defined benefit
pension schemes
Foreign currency translation differences
on foreign operations
Gain taken to equity as a result of
effective net investment hedges
Loss recognised in cash flow hedge
reserve
Movement from cash flow hedge reserve
to inventory/income statement
Income tax credit on other
comprehensive expense
Total comprehensive income
2018 interim dividend
2018 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2019
At 1 January 2018
Profit for the year
Actuarial gain on defined benefit
pension schemes
Foreign currency translation differences
on foreign operations
Movement from translation reserve to
income statement on disposal of
foreign operation
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 inventory/income statement
Income tax credit/(charge) on other
comprehensive income
Total comprehensive income
2017 interim dividend
2017 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2018
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 24 February 2020 and signed on its behalf by
Frank van Zanten, Chief Executive Officer and Richard Howes, Chief Financial Officer.
Share
capital
£m
108.1
Share
premium
£m
178.5
Translation
reserve
£m
(24.6)
Capital
redemption
£m
16.1
Other reserves
Cash flow
hedge
£m
1.6
Merger
£m
2.5
Retained earnings
Own
shares
£m
(63.9)
Earnings
£m
Total
equity
£m
1,476.2 1,694.5
(23.9)
1,452.3 1,670.6
349.2
(23.9)
349.2
108.1
178.5
(24.6)
2.5
16.1
1.6
(63.9)
(104.1)
16.9
–
(87.2)
0.2
5.5
(0.5)
(4.3)
0.8
(4.0)
(30.4)
24.4
108.3
184.0
(111.8)
2.5
16.1
(2.4)
(69.9)
(8.3)
(8.3)
(104.1)
16.9
(0.5)
(4.3)
2.2
343.1
(50.7)
3.0
251.9
(50.7)
(116.6) (116.6)
5.7
(30.4)
–
13.8
1,617.5 1,744.3
(24.4)
13.8
Share
capital
£m
108.0
Share
premium
£m
171.4
Translation
reserve
£m
(17.9)
Capital
redemption
£m
16.1
Other reserves
Cash flow
hedge
£m
(1.3)
Merger
£m
2.5
Retained earnings
Own
shares
£m
(122.9)
Earnings
£m
Total
equity
£m
1,292.7 1,448.6
326.5
326.5
3.0
(2.4)
(7.5)
0.2
(6.7)
0.1
7.1
7.9
(4.4)
(0.6)
2.9
45.6
13.4
108.1
178.5
(24.6)
2.5
16.1
1.6
(63.9)
11.0
11.0
3.0
(2.4)
(7.5)
7.9
(4.4)
(3.7)
333.8
(46.2)
(4.1)
330.0
(46.2)
(106.0) (106.0)
7.2
45.6
–
15.3
1,476.2 1,694.5
(13.4)
15.3
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Directors’ reportStrategic reportFinancial statements
Consolidated cash flow statement
for the year ended 31 December 2019
Cash flow from operating activities
Profit before income tax
Adjusted for:
net finance expense
customer relationships amortisation
acquisition related items
profit on disposal of businesses
GMP equalisation charge
Adjusted operating profit
Adjustments:
depreciation and software amortisation
other 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
Disposal of businesses
Cash outflow from investing activities
Cash flow from financing activities
Interest paid excluding interest on lease liabilities
Dividends paid
Increase in borrowings
Repayment of borrowings
Realised gains on foreign exchange contracts
Payment of lease liabilities – principal
Payment of lease liabilities – interest
Proceeds from issue of ordinary shares to settle share options
Proceeds from exercise of market purchase share options
Purchase of employee trust shares
Cash outflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of year
Increase in cash and cash equivalents
Currency translation
Cash and cash equivalents at end of year
Notes
2019
£m
2018
£m
453.3
424.8
7
12
5
29
29
29
27
10,12
27
28
20
25
25
26
75.1
107.3
17.6
–
–
653.3
160.0
(3.5)
4.3
814.1
(19.2)
(125.6)
669.3
9.8
(36.9)
8.1
(143.6)
–
(162.6)
(61.0)
(167.3)
75.5
(173.7)
13.6
(128.3)
(23.3)
5.7
15.8
(49.2)
(492.2)
55.0
111.1
33.4
(13.6)
3.3
614.0
32.6
(0.8)
(38.7)
607.1
(13.9)
(113.2)
480.0
2.0
(31.1)
2.5
(170.3)
55.1
(141.8)
(51.1)
(152.2)
71.6
(228.5)
3.3
–
–
7.2
42.8
–
(306.9)
14.5
31.3
144.2
14.5
(17.9)
140.8
112.3
31.3
0.6
144.2
122
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Directors’ reportFinancial statementsStrategic report
Consolidated cash flow statement
for the year ended 31 December 2019
Strategic report
Directors’ report
Financial statements
Consolidated cash flow statement continued
for the year ended 31 December 2019
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
Payment of lease liabilities
Operating cash flow
Adjusted operating profit
Add back depreciation of right-of-use assets
Deduct payment of lease liabilities
Lease adjusted operating profit
Cash conversion (operating cash flow as a
percentage of lease adjusted operating profit)◊
† See Note 4 on page 134 for further details of the alternative performance measures.
Notes
25
11
25
2019*
£m
814.1
(36.9)
8.1
(151.6)
633.7
653.3
128.1
(151.6)
629.8
2018
£m
607.1
(31.1)
2.5
–
578.5
614.0
–
–
614.0
101%
94%
* The Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019 which, while having no overall net cash flow impact, significantly distorts comparisons with previous periods
for certain line items, particularly because the payment of lease liabilities is now included as a deduction within financing activities whereas previously under IAS 17 ‘Leases’
operating lease charges were included as a deduction within cash flow from operating activities. See Note 1b for further details of the impact of the transition to IFRS 16.
◊ Following the adoption of IFRS 16 the Group has updated its definition of cash conversion to be operating cash flow, which now includes the payment of lease liabilities as a
deduction, as a percentage of lease adjusted operating profit, being adjusted operating profit after adding back depreciation of right-of-use assets and deducting the payment of
lease liabilities.
Cash flow from operating activities
Profit before income tax
Adjusted for:
net finance expense
customer relationships amortisation
acquisition related items
profit on disposal of businesses
GMP equalisation charge
Adjusted operating profit
Adjustments:
depreciation and software amortisation
other non-cash items
working capital movement
Cash outflow from acquisition related items
Income tax paid
Cash inflow from operating activities
Cash generated from operations before acquisition related items
Cash flow from investing activities
Interest received
Purchase of property, plant and equipment and software
Sale of property, plant and equipment
Purchase of businesses
Disposal of businesses
Cash outflow from investing activities
Cash flow from financing activities
Interest paid excluding interest on lease liabilities
Dividends paid
Increase in borrowings
Repayment of borrowings
Realised gains on foreign exchange contracts
Payment of lease liabilities – principal
Payment of lease liabilities – interest
Proceeds from issue of ordinary shares to settle share options
Proceeds from exercise of market purchase share options
Purchase of employee trust shares
Cash outflow from financing activities
Cash and cash equivalents at start of year
Increase in cash and cash equivalents
Currency translation
Cash and cash equivalents at end of year
Notes
2019
£m
2018
£m
453.3
424.8
10,12
27
28
7
12
5
29
29
29
27
20
25
25
26
75.1
107.3
17.6
–
–
653.3
160.0
(3.5)
4.3
814.1
(19.2)
(125.6)
669.3
9.8
(36.9)
8.1
(143.6)
–
(162.6)
(61.0)
(167.3)
75.5
(173.7)
13.6
(128.3)
(23.3)
5.7
15.8
(49.2)
(492.2)
144.2
14.5
(17.9)
140.8
55.0
111.1
33.4
(13.6)
3.3
614.0
32.6
(0.8)
(38.7)
607.1
(13.9)
(113.2)
480.0
2.0
(31.1)
2.5
(170.3)
55.1
(141.8)
(51.1)
(152.2)
71.6
(228.5)
3.3
–
–
7.2
42.8
–
(306.9)
112.3
31.3
0.6
144.2
Increase in cash and cash equivalents
14.5
31.3
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123
123
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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.
a. Basis of accounting
The consolidated financial statements for the year ended 31 December 2019 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 (‘IFRIC’) 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.
b. Newly adopted accounting policies
(i) IFRS 16 ‘Leases’
The Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019 using the modified retrospective approach to transition. The new
standard requires that the Group’s leased assets are recorded as right-of-use assets together with their corresponding lease liabilities.
Adoption of the new standard has had a material impact on the Group’s consolidated financial statements, with right-of-use assets of
£449.4m recognised on transition together with lease liabilities of £498.3m. As at 31 December 2019 the right-of-use assets were £432.9m
and the lease liabilities were £480.0m.
The Group’s lease portfolio consists of approximately 5,000 leases principally for warehouses, offices, vehicles and equipment for which
the Group has been collating data for a number of years in preparation for the new standard. This data has been used in conjunction with
a lease accounting tool specifically developed for the Group to provide the accounting entries required under IFRS 16.
On transition the lease liabilities have been measured at the present value of the remaining lease payments, discounted using the
incremental borrowing rate on the date of transition. The right-of-use assets have been measured at the carrying amounts that would have
been in place had the standard been applied since the commencement of each lease, discounted using the incremental borrowing rate at the
date of transition. The weighted average incremental borrowing rate applied to the Group’s lease portfolio on 1 January 2019 was 4.8%.
On transition the Group elected not to reassess whether a contract is, or contains, a lease, instead relying on the assessment already made
in applying International Accounting Standard (‘IAS’) 17 ‘Leases’ and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’.
In addition, the Group applied the following available practical expedients permitted by the standard:
• the exclusion of leases relating to low value assets (less than £5,000 when new);
• the exclusion of short term leases, being those with a lease term of 12 months or less;
• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and
• reliance on its assessment of whether leases are onerous immediately prior to the date of transition.
The impact of the adoption of IFRS 16 on the opening balance sheet as at 1 January 2019 is shown in the table below:
Right-of-use assets
Net deferred tax liabilities
Other receivables
Accruals
Lease liabilities
Equity
As at
31.12.2018
£m
–
(149.7)
74.2
(277.2)
–
(1,694.5)
Impact of
IFRS 16*
£m
449.4
7.6
(3.0)
20.4
(498.3)
23.9
Restated
1.1.2019
£m
449.4
(142.1)
71.2
(256.8)
(498.3)
(1,670.6)
* Since the Group's half yearly financial report for the six months ended 30 June 2019 there have been refinements to some of the Group's lease assumptions relating to term changes
and rent changes up to the date of transition. This has changed the transition disclosures previously disclosed as part of the Group's half yearly financial report for the six months
ended 30 June 2019, though the differences are not significant.
Under IFRS 16, the operating lease expense previously recorded in operating costs has been replaced by a depreciation charge, which
is lower than the operating lease expense recognised under IAS 17, the previous accounting standard for leases, and a separate interest
expense, recorded in finance expense. This significantly impacts certain line items in the Group’s Consolidated income statement and
distorts comparisons with the prior year since, in accordance with the standard, as a result of the Group transitioning to IFRS 16 using the
modified retrospective approach, the prior year has not been restated. However, in order to provide a meaningful comparison with the prior
year, the Group’s financial results for the year ended 31 December 2019 have also been presented in accordance with IAS 17. The results for
the year ended 31 December 2019 under IAS 17 are referred to as ‘Proforma IAS 17’. Note 3 includes a Consolidated income statement
showing the results for the year ended 31 December 2019 both as reported under IFRS 16 and on a Proforma IAS 17 basis.
124
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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.
1 Basis of preparation continued
A summary of the impact of the adoption of IFRS 16 on the Group’s results for the year ended 31 December 2019 is shown in the
table below:
Strategic report
Directors’ report
Financial statements
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*
* Alternative performance measures – see Note 4.
Proforma
IAS 17
2019
£m
630.9
12.4
(64.2)
579.1
(137.8)
441.3
132.4p
Impact of
IFRS 16
£m
22.4
–
(23.3)
(0.9)
0.2
(0.7)
(0.2)p
IFRS
2019
£m
653.3
12.4
(87.5)
578.2
(137.6)
440.6
132.2p
There is no net cash flow impact arising from the adoption of the new standard. The Group has however updated the definition of cash
conversion, one of its alternative performance measures, to give meaningful comparisons with prior periods (see Note 4). The Group’s
principal debt covenants, which are net debt to EBITDA and interest cover, are measured against debt covenants based on historical
accounting standards and are therefore unaffected by the adoption of IFRS 16. The Group does not intend to alter its approach going
forward as to whether assets should be leased or bought.
The lease liabilities as at the transition date of 1 January 2019 are reconciled to the operating lease commitments reported as at
31 December 2018 as follows:
Operating lease commitments disclosed as at 31 December 2018
Discounted using the lessee’s incremental borrowing rate at 1 January 2019
Leases committed not yet started
Adjustments from different treatment of extension and termination options
Short term and low value leases recognised on a straight line basis as an expense
Lease liability recognised as at 1 January 2019
Ageing of lease liabilities recognised:
Current lease liabilities
Non-current lease liabilities
Lease liability recognised as at 1 January 2019
See Note 2g for the Group’s lease accounting policy.
1 January 2019
£m
623.7
(77.5)
(68.9)
33.2
(12.2)
498.3
119.3
379.0
498.3
(ii) IFRIC 23 ‘Uncertainty over Income Tax Treatments’
The Group applied IFRIC 23 ‘Uncertainty over Income Tax Treatments’ with effect from 1 January 2019. The interpretation clarifies the
application of the recognition and measurement requirements in IAS 12 ‘Income Taxes’ where there is uncertainty over income tax
treatments. The interpretation provides guidance on determining whether uncertain tax positions should be considered separately or
together and that measurement should be either the single most likely outcome or the probability weighted sum of a range of outcomes,
whichever better predicts the resolution. There was no material impact on the Group’s consolidated financial statements as a result of the
application of IFRIC 23.
There are no other new standards or amendments to existing standards that are effective that have had a material impact on the Group,
nor does the Group anticipate any new or revised standards and interpretations that are effective from 1 January 2020 and beyond to have
a material impact on its consolidated results or financial position.
Notes
1 Basis of preparation
a. Basis of accounting
The consolidated financial statements for the year ended 31 December 2019 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 (‘IFRIC’) 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.
b. Newly adopted accounting policies
(i) IFRS 16 ‘Leases’
The Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019 using the modified retrospective approach to transition. The new
standard requires that the Group’s leased assets are recorded as right-of-use assets together with their corresponding lease liabilities.
Adoption of the new standard has had a material impact on the Group’s consolidated financial statements, with right-of-use assets of
£449.4m recognised on transition together with lease liabilities of £498.3m. As at 31 December 2019 the right-of-use assets were £432.9m
and the lease liabilities were £480.0m.
The Group’s lease portfolio consists of approximately 5,000 leases principally for warehouses, offices, vehicles and equipment for which
the Group has been collating data for a number of years in preparation for the new standard. This data has been used in conjunction with
a lease accounting tool specifically developed for the Group to provide the accounting entries required under IFRS 16.
On transition the lease liabilities have been measured at the present value of the remaining lease payments, discounted using the
incremental borrowing rate on the date of transition. The right-of-use assets have been measured at the carrying amounts that would have
been in place had the standard been applied since the commencement of each lease, discounted using the incremental borrowing rate at the
date of transition. The weighted average incremental borrowing rate applied to the Group’s lease portfolio on 1 January 2019 was 4.8%.
On transition the Group elected not to reassess whether a contract is, or contains, a lease, instead relying on the assessment already made
in applying International Accounting Standard (‘IAS’) 17 ‘Leases’ and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’.
In addition, the Group applied the following available practical expedients permitted by the standard:
• the exclusion of leases relating to low value assets (less than £5,000 when new);
• the exclusion of short term leases, being those with a lease term of 12 months or less;
• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and
• reliance on its assessment of whether leases are onerous immediately prior to the date of transition.
The impact of the adoption of IFRS 16 on the opening balance sheet as at 1 January 2019 is shown in the table below:
Right-of-use assets
Net deferred tax liabilities
Other receivables
Accruals
Lease liabilities
Equity
As at
31.12.2018
£m
–
(149.7)
74.2
(277.2)
Impact of
IFRS 16*
£m
449.4
7.6
(3.0)
20.4
Restated
1.1.2019
£m
449.4
(142.1)
71.2
(256.8)
(498.3)
–
(498.3)
(1,694.5)
23.9
(1,670.6)
* Since the Group's half yearly financial report for the six months ended 30 June 2019 there have been refinements to some of the Group's lease assumptions relating to term changes
and rent changes up to the date of transition. This has changed the transition disclosures previously disclosed as part of the Group's half yearly financial report for the six months
ended 30 June 2019, though the differences are not significant.
Under IFRS 16, the operating lease expense previously recorded in operating costs has been replaced by a depreciation charge, which
is lower than the operating lease expense recognised under IAS 17, the previous accounting standard for leases, and a separate interest
expense, recorded in finance expense. This significantly impacts certain line items in the Group’s Consolidated income statement and
distorts comparisons with the prior year since, in accordance with the standard, as a result of the Group transitioning to IFRS 16 using the
modified retrospective approach, the prior year has not been restated. However, in order to provide a meaningful comparison with the prior
year, the Group’s financial results for the year ended 31 December 2019 have also been presented in accordance with IAS 17. The results for
the year ended 31 December 2019 under IAS 17 are referred to as ‘Proforma IAS 17’. Note 3 includes a Consolidated income statement
showing the results for the year ended 31 December 2019 both as reported under IFRS 16 and on a Proforma IAS 17 basis.
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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 184 to 187 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 the issued share capital of a subsidiary is acquired, and the acquisition includes an option to purchase the
remaining share capital 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) Disposal of businesses
Where a subsidiary undertaking is sold, the profit or loss on disposal is calculated as the difference between the aggregate of the fair value
of the consideration received and the carrying amount of the assets and liabilities of the subsidiary on the date of disposal less any
transaction costs relating to the disposal. On the disposal of a subsidiary with assets and liabilities denominated in foreign currency, the
cumulative translation difference associated with that subsidiary in the translation reserve is credited or debited to the profit or loss on
disposal recognised in the income statement. Cash received on disposal of businesses is shown within investing activities in the
Consolidated cash flow statement, net of cash and cash equivalents disposed of and transaction costs.
(iv) 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 representing a single performance obligation which is satisfied upon
delivery of the relevant goods. Revenue related to the provision of services is recognised when the service is provided, which for the majority
of the Group’s service revenue represents a single performance obligation. Revenue is not recognised if there is significant uncertainty
regarding recovery of the consideration due.
Revenue is valued at invoiced amounts, excluding sales taxes and including estimates for variable consideration where relevant, such as
returns and discounts, for which a liability is recognised as required. Returns and early settlement discount liabilities are based on
experience over an appropriate period whereas volume discount liabilities are based on agreements with customers and expected volumes.
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.
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Notes continued
2 Accounting policies
financial statements.
a. Basis of consolidation
(i) Subsidiaries
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the consolidated
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 184 to 187 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 the issued share capital of a subsidiary is acquired, and the acquisition includes an option to purchase the
remaining share capital 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) Disposal of businesses
Where a subsidiary undertaking is sold, the profit or loss on disposal is calculated as the difference between the aggregate of the fair value
of the consideration received and the carrying amount of the assets and liabilities of the subsidiary on the date of disposal less any
transaction costs relating to the disposal. On the disposal of a subsidiary with assets and liabilities denominated in foreign currency, the
cumulative translation difference associated with that subsidiary in the translation reserve is credited or debited to the profit or loss on
disposal recognised in the income statement. Cash received on disposal of businesses is shown within investing activities in the
Consolidated cash flow statement, net of cash and cash equivalents disposed of and transaction costs.
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in
(iv) Transactions eliminated on consolidation
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.
Revenue is valued at invoiced amounts, excluding sales taxes and including estimates for variable consideration where relevant, such as
returns and discounts, for which a liability is recognised as required. Returns and early settlement discount liabilities are based on
experience over an appropriate period whereas volume discount liabilities are based on agreements with customers and expected volumes.
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
d. Cost of goods sold
rebate income related to those inventories.
Strategic report
Directors’ report
Financial statements
2 Accounting policies continued
e. Supplier rebates
The Group has various rebate arrangements with a number of suppliers. Some of these arrangements are based on the volume of products
purchased and others are based on the volume of products sold. Supplier rebate income is recognised in cost of goods sold concurrent
with the sale of the inventories to which it relates and is calculated by reference to the expected consideration receivable from each rebate
arrangement. Substantially all supplier rebate income is unconditional and non-judgemental. Supplier rebate income is not recognised
if there is significant uncertainty regarding recovery of the amount due. Supplier rebate income accrued but not yet received is included
in other receivables.
f. Share based payments
The Group operates a number of equity settled share based payment compensation plans. Details of these plans are outlined in Note 19
and the Directors’ remuneration report. The total expected expense is based on the fair value of options and other share based incentives
on the grant date, calculated using a valuation model, and is spread over the expected vesting period with a corresponding credit to equity.
g. Leases
The Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019. Until 31 December 2018, the Group applied IAS 17, the previous
accounting standard for leases. From 1 January 2019, the Group’s accounting policy for leases under IFRS 16 is as follows:
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, comprising the initial amount of the lease liability plus any initial direct costs incurred and any lease payments made at or before
the lease commencement date, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight line
method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. The lease liability is
initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate
implicit in the lease. If that rate cannot readily be determined, as is the case in the vast majority of the leasing activities of the Group, the
lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an
asset in a similar economic environment with similar terms and conditions. The lease liability is subsequently measured at amortised cost
using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index/rate
or a change in the Group’s assessment of whether it will exercise an extension or termination option. When the lease liability is remeasured,
a corresponding adjustment is made to the right-of-use asset.
Judgements are involved in determining the lease term, particularly because termination options are included in a number of property
leases across the Group to facilitate operational flexibility. The majority of termination options held are exercisable only by the Group and
not by the respective lessor. In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise a termination option. Periods after the date of a termination option are only included in the lease term if it is reasonably
certain that the lease will not be terminated. The assessment of the lease term is reviewed if a significant event or a significant change in
circumstances occurs that is within the control of the Group.
Payments associated with short term leases and leases of low value assets are recognised on a straight line basis as an expense in profit or
loss. Short term leases are leases with a lease term of 12 months or less. Low value assets are assets with a value of less than £5,000 when
new, typically small items of IT equipment, office equipment and office furniture.
h. Income tax
Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or recoverable on the taxable income or loss for the year using tax rates enacted or substantively
enacted at the balance sheet date and any adjustments in respect of prior years. Current tax payable is recognised when it is probable that
the Group will be required to settle the obligation. The Group’s policy for accounting for current tax payable or receivable where it is
uncertain is described in more detail in Note 2y – Sources of estimation uncertainty part (iv) – Taxation.
The Group is principally engaged in the delivery of goods to customers representing a single performance obligation which is satisfied upon
delivery of the relevant goods. Revenue related to the provision of services is recognised when the service is provided, which for the majority
of the Group’s service revenue represents a single performance obligation. Revenue is not recognised if there is significant uncertainty
Deferred tax is provided using the balance sheet liability method providing for temporary differences arising between tax bases and carrying
amounts in the consolidated financial statements. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted at the balance sheet date.
c. Revenue
regarding recovery of the consideration due.
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Notes continued
2 Accounting policies continued
Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of
assets and liabilities that affect neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future and where the Company controls the timing of the reversal. A deferred tax
asset is recognised only to the extent that it is probable that future taxable profit will be available against which the temporary difference
can be utilised.
i. Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment losses. The carrying values of
property, plant and equipment are periodically reviewed for impairment when events or changes in circumstances indicate that the carrying
values may not be recoverable. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items.
j. Depreciation
Depreciation is charged to profit or loss on a straight line basis to write off cost less estimated residual value over the assets’ estimated
remaining useful lives. The estimated useful lives are as follows:
Buildings
Plant and machinery
Fixtures, fittings and equipment
Freehold land
50 years (or depreciated over life of lease if shorter than 50 years)
3 to 12 years
3 to 12 years
Not depreciated
Assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
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 (‘CGUs’) 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 values of software are
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 10 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 CGU 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.
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Notes continued
can be utilised.
i. Property, plant and equipment
separate items.
j. Depreciation
2 Accounting policies continued
Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of
assets and liabilities that affect neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future and where the Company controls the timing of the reversal. A deferred tax
asset is recognised only to the extent that it is probable that future taxable profit will be available against which the temporary difference
Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment losses. The carrying values of
property, plant and equipment are periodically reviewed for impairment when events or changes in circumstances indicate that the carrying
values may not be recoverable. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as
Depreciation is charged to profit or loss on a straight line basis to write off cost less estimated residual value over the assets’ estimated
remaining useful lives. The estimated useful lives are as follows:
Buildings
Plant and machinery
Fixtures, fittings and equipment
Freehold land
3 to 12 years
3 to 12 years
Not depreciated
50 years (or depreciated over life of lease if shorter than 50 years)
Assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
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 (‘CGUs’) and is tested annually for
impairment. Negative goodwill arising on acquisition is recognised immediately in the income statement.
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
(ii) Customer relationships
range from 10 to 19 years.
(iii) Software
to 10 years.
l. Impairment
m. Inventories
Software is stated at historical cost less accumulated amortisation and any impairment losses. The carrying values of software are
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
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 CGU exceeds its recoverable amount, with impairment losses being recognised in the income statement.
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.
Strategic report
Directors’ report
Financial statements
2 Accounting policies continued
n. Trade and other receivables
Trade and other receivables are initially measured at fair value, which for trade receivables is equal to the consideration expected to be
received from the satisfaction of performance obligations, plus any directly attributable transaction costs. Subsequent to initial recognition
these assets are measured at amortised cost less any provision for impairment losses including expected credit losses. In accordance with
IFRS 9 the Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics
such as the ageing of the debt and the credit risk of the customers. An historical credit loss rate is then calculated for each group and then
adjusted to reflect expectations about future credit losses. The Group does not have any significant contract assets.
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. The Group has contract liabilities in the form of deferred income which arises
from consideration received in advance of the satisfaction of performance obligations.
p. Financial instruments
Classification and measurement
Under IFRS 9 ‘Financial Instruments’, financial instruments are initially measured at fair value with subsequent measurement depending
upon the classification of the instrument. IFRS 13 ‘Fair Value Measurement’ defines fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All non-derivative financial assets and liabilities are subsequently held at amortised cost unless they are in a fair value hedge relationship.
Financial assets and liabilities held in a fair value hedge relationship are classified at fair value through profit or loss and are initially
measured at fair value with subsequent changes in fair value recorded in the income statement.
Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their
fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as either:
• a hedge of the fair value of recognised assets or liabilities or a firm commitment (‘fair value hedge’);
• a hedge of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions
(‘cash flow hedge’); or
• a hedge of a net investment in a foreign operation (‘net investment hedge’).
The Group documents its risk management objectives and strategy for undertaking its hedge transactions. At inception of hedge
relationships, the Group documents the economic relationship between the hedging instruments and the hedged items.
The fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is
more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is 12 months or less.
(i) Fair value hedge
Where a derivative instrument is designated and qualifies as a hedge of a recognised asset or liability, all changes in the fair value of the
derivative are recognised immediately in the income statement within finance expense. The carrying value of the hedged item is adjusted
by the change in fair value that is attributable to the risk being hedged with changes recognised in the income statement, also within finance
expense. The gain or loss relating to any ineffective portion of the hedging arrangement is recognised immediately in the income statement.
If the hedge relationship is de-designated, then from the point of de-designation there is no further fair valuing of the hedged item.
Any previous adjustment to the carrying amount of the hedged item is amortised over the remaining maturity of the hedged item.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the cash
flow hedge reserve within equity. The gain or loss relating to any ineffective portion is recognised immediately in the income statement.
Where a derivative instrument is designated and qualifies as a hedge of a forecast transaction, only the change in fair value of the forward
contract related to the spot component is designated as the hedging instrument. Gains or losses relating to the effective portion of the
change in the spot component of the forward contract are initially recognised in the cash flow hedge reserve within equity. The change
in the forward element of the contract that relates to the hedged item is recognised in the income statement.
Gains or losses accumulated in equity are reclassified to the income statement when the hedged item affects profit or loss or to the non-
financial asset when the hedged item results in the recognition of a non-financial asset with the deferred gains or losses ultimately being
recognised in the income statement as the non-financial asset affects profit or loss.
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Notes continued
2 Accounting policies continued
When a hedging instrument expires, any cumulative deferred gain/loss in equity relating to that instrument remains in equity until the
forecast transaction occurs at which point it is reclassified to the income statement. When the forecast transaction is no longer expected
to occur, the cumulative deferred gain/loss recorded in equity is immediately reclassified to the income statement.
(iii) Net investment hedge
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in foreign
operations are recognised directly in equity to the extent the hedge is effective and are accumulated in a separate reserve within equity.
To the extent that the hedge is ineffective such differences are recognised in the income statement.
(iv) Other derivative instruments
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that do not qualify
for hedge accounting are recognised immediately in the income statement.
q. Cash and cash equivalents
Cash and cash equivalents, as reported in the cash flow statement, comprises cash at bank and in hand and bank overdrafts. Cash at bank
and in hand includes cash balances and short term deposits with maturities of three months or less from the date the deposit is made.
r. Net debt
Net debt is defined as interest bearing loans and borrowings adjusted for the fair value of interest rate swaps on fixed interest rate
borrowings and other derivatives managing the interest rate risk and currency profile less cash and cash equivalents.
s. Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event
that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
t. Investment in own shares
The cost of shares held either directly (treasury shares) or indirectly (employee benefit trust shares) is deducted from equity. Repurchased
shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold or
reissued, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is recognised in
retained earnings.
At each reporting date the Group remeasures the value of the shares held in the employee benefit trust to present them in the own shares
reserve at the market value of those shares at the reporting date. This is done through a reclassification from retained earnings to the own
shares reserve. This movement has no effect on the actual numbers of shares held by the employee benefit trust.
u. Retirement benefits
(i) Defined contribution pension schemes
A defined contribution pension scheme is a post-employment benefit scheme under which the Company pays fixed contributions into a
separate fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay
all employee benefits relating to employee service in the current and prior periods. Obligations for contributions to defined contribution
pension schemes are recognised as an expense in the income statement in the periods during which services are rendered by employees.
(ii) Defined benefit pension schemes
A defined benefit pension scheme is a post-employment benefit plan other than a defined contribution pension scheme. Defined benefit
pension schemes are recognised on the balance sheet as a defined benefit pension asset or a defined benefit pension liability based on
the difference between the fair value of pension scheme assets and the present value of pension scheme liabilities.
The present value of pension scheme liabilities is 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) is 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 or finance income in the income statement.
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Notes continued
Strategic report
Directors’ report
Financial statements
2 Accounting policies continued
When a hedging instrument expires, any cumulative deferred gain/loss in equity relating to that instrument remains in equity until the
forecast transaction occurs at which point it is reclassified to the income statement. When the forecast transaction is no longer expected
to occur, the cumulative deferred gain/loss recorded in equity is immediately reclassified to the income statement.
2 Accounting policies continued
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.
(iv) Other derivative instruments
q. Cash and cash equivalents
r. Net debt
s. Provisions
(iii) Net investment hedge
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in foreign
operations are recognised directly in equity to the extent the hedge is effective and are accumulated in a separate reserve within equity.
To the extent that the hedge is ineffective such differences are recognised in the income statement.
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that do not qualify
for hedge accounting are recognised immediately in the income statement.
Cash and cash equivalents, as reported in the cash flow statement, comprises cash at bank and in hand and bank overdrafts. Cash at bank
and in hand includes cash balances and short term deposits with maturities of three months or less from the date the deposit is made.
Net debt is defined as interest bearing loans and borrowings adjusted for the fair value of interest rate swaps on fixed interest rate
borrowings and other derivatives managing the interest rate risk and currency profile less cash and cash equivalents.
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event
that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
The cost of shares held either directly (treasury shares) or indirectly (employee benefit trust shares) is deducted from equity. Repurchased
shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold or
reissued, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is recognised in
t. Investment in own shares
retained earnings.
At each reporting date the Group remeasures the value of the shares held in the employee benefit trust to present them in the own shares
reserve at the market value of those shares at the reporting date. This is done through a reclassification from retained earnings to the own
shares reserve. This movement has no effect on the actual numbers of shares held by the employee benefit trust.
u. Retirement benefits
(i) Defined contribution pension schemes
A defined contribution pension scheme is a post-employment benefit scheme under which the Company pays fixed contributions into a
separate fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay
all employee benefits relating to employee service in the current and prior periods. Obligations for contributions to defined contribution
pension schemes are recognised as an expense in the income statement in the periods during which services are rendered by employees.
(ii) Defined benefit pension schemes
A defined benefit pension scheme is a post-employment benefit plan other than a defined contribution pension scheme. Defined benefit
pension schemes are recognised on the balance sheet as a defined benefit pension asset or a defined benefit pension liability based on
the difference between the fair value of pension scheme assets and the present value of pension scheme liabilities.
The present value of pension scheme liabilities is 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) is 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 or finance income in the income statement.
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. Hyperinflationary economies
Where the Group has operations in countries to which hyperinflation accounting applies, the financial statements of the business concerned
are accounted for under IAS 29 ‘Financial Reporting in Hyperinflationary Economies’.
x. Judgements made in applying the Group’s accounting policies
In the course of preparing the financial statements, other than judgements involved in determining lease terms under the application
of IFRS 16 and in determining estimates and assumptions (see Note 2y below), no other judgements have been made in the process
of applying the Group’s accounting policies that have had a significant effect on the amounts recognised in the financial statements.
In measuring its right-of-use assets and lease liabilities, management is required to make judgements, particularly in relation to lease
termination options. Periods after the date of a termination option are only included in the lease term if it is reasonably certain that the lease
will not be terminated. While management determine lease terms across the Group on a case-by-case basis, if different judgements were
applied relating to a number of leases, it could have a significant effect on the overall amounts recognised in the financial statements.
y. Sources of estimation uncertainty
In applying the Group’s accounting policies various transactions and balances are valued using estimates or assumptions. Should these
estimates or assumptions prove incorrect, there may be an impact on the following year’s financial statements. As at 31 December 2019,
sources of estimation uncertainty where there was a significant risk of material adjustment to the carrying amounts of assets and liabilities
within the next financial year were limited to the following items:
(i) Accounting for business combinations
Part of the Company’s strategy is to grow through acquisitions. Acquisitions are accounted for using the acquisition method as described in
the business combinations accounting policy, Note 2a(ii), and the goodwill accounting policy, Note 2k(i). This includes the determination of
fair values for assets and liabilities acquired, including the separate identification of intangible assets, which use assumptions and estimates
and are therefore subjective. The Group has developed a process to meet the requirements of IFRS 3 including the separate identification of
customer relationships intangible assets based on estimated future performance and customer attrition rates. External valuation specialists
are used where appropriate. The process applied is described in Note 27. Given the relatively low level of acquisition activity during the
year, the estimates applied in 2019 are unlikely to lead to a significant misstatement in the next financial year. However it remains likely to
be a source of material uncertainty in future years.
(ii) Recoverability of goodwill and customer relationships intangible assets
As noted above, part of the Company’s strategy is to grow through acquisitions which has led to material goodwill and customer
relationships intangible assets being recognised on the balance sheet. Goodwill, which is allocated across CGUs, is tested annually to
determine if there is any indication of impairment by comparing the carrying amount of the goodwill to the recoverable amount of the CGU
to which it has been allocated. Assumptions and estimates are 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 estimates and
assumptions used in performing impairment testing are described in Note 12. Customer relationships assets are also reviewed annually
for indicators of impairment and if an indicator of impairment exists then similar recoverability testing, involving the use of estimates and
assumptions, is performed for the business to which the customer relationships asset relates. The useful economic lives of customer
relationships intangible assets are also reviewed at least annually, with any revisions to the original estimated useful economic lives
accounted for prospectively. The goodwill balance as at 31 December 2019 was £1,403.6m (2018: £1,420.4m) and the amount of customer
relationships intangible assets as at 31 December 2019 was £864.9m (2018: £941.2m).
(iii) Defined benefit pension schemes
The measurement of the present value of defined benefit pension scheme liabilities involves the use of various actuarial assumptions.
The Group uses independent actuarial experts to assist with the estimation of the discount rates, inflation rates and longevity assumptions
used for the measurement of defined benefit pension scheme liabilities but the actual liabilities could be materially different. The main risks
to which the Group is exposed in relation to the valuation of the defined benefit pension schemes are described in Note 23. The Group’s net
pension deficit balance as at 31 December 2019 was £36.0m (2018: £38.5m).
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Notes continued
2 Accounting policies continued
(iv) Taxation
The Group operates in many countries and is therefore subject to tax laws in a number of different tax jurisdictions. The amount of tax
payable or receivable on profits or losses for any period is subject to the agreement of the tax authority in each respective jurisdiction and
the tax liability or asset position is open to review for several years after the relevant accounting period ends. In determining the provisions
for income taxes, management is required to make assumptions based on interpretations of tax statute and case law, which it does after
taking account of professional advice and prior experience.
The majority of the Group’s tax payable balance of £83.4m (2018: £94.8m) relates to provisions for uncertain tax matters. Uncertainties
in respect of enquiries and additional tax assessments raised by tax authorities are measured by management according to the guidance
provided by IFRIC 23 ‘Uncertainty over Income Tax Treatments’ but 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.
Although not likely to lead to a material adjustment in the next financial year, the principal uncertainty relates to 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.
Overall, management does not consider there to exist a significant risk of material adjustment within the next financial year because
tax provisions cover a range of matters across multiple tax jurisdictions with a variety of timescales before such matters are expected to
be concluded.
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Financial statements
Notes continued
2 Accounting policies continued
(iv) Taxation
The Group operates in many countries and is therefore subject to tax laws in a number of different tax jurisdictions. The amount of tax
payable or receivable on profits or losses for any period is subject to the agreement of the tax authority in each respective jurisdiction and
the tax liability or asset position is open to review for several years after the relevant accounting period ends. In determining the provisions
for income taxes, management is required to make assumptions based on interpretations of tax statute and case law, which it does after
taking account of professional advice and prior experience.
3 Proforma IAS 17 Consolidated income statement
As referred to in Note 1b, the Group adopted IFRS 16 ‘Leases’ with effect from 1 January 2019 using the modified retrospective approach to
transition. In accordance with the standard, the prior year has not been restated and, as a result, the financial results for the year ended 31
December 2019 are not directly comparable with the prior year. However, in order to provide a meaningful comparison with the prior year
which was accounted for under IAS 17 ‘Leases’, the table below, and also other Notes where relevant, show the Group’s financial results for
the year ended 31 December 2019 presented in accordance with IAS 17 under the heading ‘Proforma IAS 17’.
The majority of the Group’s tax payable balance of £83.4m (2018: £94.8m) relates to provisions for uncertain tax matters. Uncertainties
in respect of enquiries and additional tax assessments raised by tax authorities are measured by management according to the guidance
provided by IFRIC 23 ‘Uncertainty over Income Tax Treatments’ but 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.
Revenue
IFRS
2019
£m
9,326.7
Impact of
IFRS 16
£m
–
Notes
5
Proforma
IAS 17
2019
£m
9,326.7
IAS 17
2018
£m
9,079.4
Although not likely to lead to a material adjustment in the next financial year, the principal uncertainty relates to 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
Overall, management does not consider there to exist a significant risk of material adjustment within the next financial year because
tax provisions cover a range of matters across multiple tax jurisdictions with a variety of timescales before such matters are expected to
Aid provisions.
be concluded.
Operating profit
Finance income
Finance expense
Profit on disposal of businesses
Profit before income tax
Income tax
Profit for the year attributable to the Company’s equity holders
5
7
7
28
8
528.4
12.4
(87.5)
–
453.3
(104.1)
349.2
22.4
–
(23.3)
–
(0.9)
0.2
(0.7)
506.0
12.4
(64.2)
–
454.2
(104.3)
349.9
466.2
11.6
(66.6)
13.6
424.8
(98.3)
326.5
Earnings per share attributable to the Company’s equity holders
Basic
Diluted
9
9
104.8p
104.5p
(0.2)p
(0.2)p
105.0p
104.7p
98.4p
97.8p
Alternative performance measures†
Operating profit
Adjusted for:
Customer relationships amortisation
Acquisition related items
GMP equalisation charge
Adjusted operating profit◊
Finance income
Finance expense
Adjusted profit before income tax◊
Tax on adjusted profit
Adjusted profit for the year◊
5
5
5
6
7
7
8
528.4
22.4
506.0
466.2
107.3
17.6
–
653.3
12.4
(87.5)
578.2
(137.6)
440.6
–
–
–
22.4
–
(23.3)
(0.9)
0.2
(0.7)
107.3
17.6
–
630.9
12.4
(64.2)
579.1
(137.8)
441.3
111.1
33.4
3.3
614.0
11.6
(66.6)
559.0
(129.1)
429.9
Adjusted earnings per share◊
9
132.2p
(0.2)p
132.4p
129.6p
† See Note 4 on page 134 for further details of the alternative performance measures.
◊ Excluding the profit on disposal of businesses and associated tax where relevant.
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Notes continued
4 Alternative performance measures
In addition to the various performance measures defined under IFRS, the Group reports a number of other 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 (‘GAAP’) and are therefore known as ‘alternative performance
measures’. Accordingly, these measures, which are not designed to be a substitute for any of the IFRS measures of performance, may not
be directly comparable with other companies’ alternative performance measures. The principal alternative performance measures used
within the consolidated financial statements and the location of the reconciliation to equivalent IFRS measures are shown and defined in the
table below:
Adjusted operating
profit
Operating profit before customer relationships amortisation, acquisition related items, the GMP equalisation
charge and profit or loss on disposal of businesses (reconciled in the following table and in the Consolidated
income statement)
Adjusted operating profit as a percentage of revenue
Profit before income tax, customer relationships amortisation, acquisition related items, the GMP equalisation
charge and profit or loss on disposal of businesses (reconciled in the following table)
Profit for the year before customer relationships amortisation, acquisition related items, the GMP equalisation
charge, profit or loss on disposal of businesses and the associated tax (reconciled in the following table)
Tax on adjusted profit before income tax as a percentage of adjusted profit before income tax (reconciled in Note 8)
Adjusted profit for the year divided by the weighted average number of ordinary shares in issue (reconciled in
the following table and in Note 9)
Adjusted profit for the year divided by the diluted weighted average number of ordinary shares (reconciled in
Note 9)
Operating margin
Adjusted profit
before income tax
Adjusted profit for
the year
Effective tax rate
Adjusted earnings
per share
Adjusted diluted
earnings per share
Operating cash flow* Cash generated from operations before acquisition related items after deducting purchases of property, plant
Cash conversion*
Return on average
operating capital*
Return on invested
capital*
EBITDA
Constant exchange
rates
and equipment and software and adding back the proceeds from the sale of property, plant and equipment and
deducting the payment of lease liabilities (as shown in the Consolidated cash flow statement)
Operating cash flow as a percentage of lease adjusted operating profit, being adjusted operating profit after
adding back the depreciation of right-of-use assets and deducting the payment of lease liabilities (as shown in
the Consolidated cash flow statement)
The ratio of adjusted operating profit to the average of the month end operating capital employed (being
property, plant and equipment, software, right-of-use assets, inventories and trade and other receivables less
trade and other payables)
The ratio of adjusted operating profit to the average of the month end invested capital (being equity after adding
back net debt, lease liabilities, net defined benefit pension scheme liabilities, cumulative customer relationships
amortisation, acquisition related items and amounts written off goodwill, net of the associated tax)
Adjusted operating profit on an historical GAAP basis, before depreciation of property, plant and equipment
and software amortisation and after adjustments as permitted by the Group’s debt covenants, principally to
exclude share option charges and to annualise for the effect of acquisitions and disposal of businesses
Growth rates at constant exchange rates are calculated by retranslating the results for the year ended
31 December 2018 at the average rates for the year ended 31 December 2019 so that they can be compared
without the distorting impact of changes caused by foreign exchange translation. The principal exchange rates
used for 2019 and 2018 can be found in the Financial review on page 57
* Following the adoption of IFRS 16 on a modified retrospective basis with effect from 1 January 2019 the definitions of these alternative performance measures have been updated.
These alternative performance measures exclude the charge for customer relationships amortisation, acquisition related items, the GMP
equalisation charge, profit or loss on disposal of businesses and any associated tax, where relevant.
Acquisition related items comprise deferred consideration payments relating to the retention of former owners of businesses acquired,
transaction costs and expenses, adjustments to previously estimated earn outs and interest on acquisition related income tax. Customer
relationships amortisation, acquisition related items and any associated tax are considered by management to form part of the total spend
on acquisitions or are non-cash items resulting from acquisitions. The GMP equalisation charge was a non-recurring cost in 2018 of the
equalisation of guaranteed minimum pension between male and female members of the Group’s UK defined benefit pension scheme
following the High Court judgment in 2018 in the case of Lloyds Banking Group Pensions Trustees Limited vs Lloyds Bank plc and others.
Disposal of businesses represents the profit or loss on disposal of non-core businesses. None of these items relate to the underlying
operating performance of the business and, as a result, they distort comparability between businesses and reporting periods. Accordingly,
these items are not taken into account by management when assessing the results of the business and are removed in calculating the
profitability measures by which management assesses 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
134
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Notes continued
4 Alternative performance measures
In addition to the various performance measures defined under IFRS, the Group reports a number of other 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 (‘GAAP’) and are therefore known as ‘alternative performance
measures’. Accordingly, these measures, which are not designed to be a substitute for any of the IFRS measures of performance, may not
be directly comparable with other companies’ alternative performance measures. The principal alternative performance measures used
within the consolidated financial statements and the location of the reconciliation to equivalent IFRS measures are shown and defined in the
table below:
Adjusted operating
Operating profit before customer relationships amortisation, acquisition related items, the GMP equalisation
profit
charge and profit or loss on disposal of businesses (reconciled in the following table and in the Consolidated
Operating margin
Adjusted operating profit as a percentage of revenue
income statement)
Adjusted profit
Profit before income tax, customer relationships amortisation, acquisition related items, the GMP equalisation
before income tax
charge and profit or loss on disposal of businesses (reconciled in the following table)
Adjusted profit for
Profit for the year before customer relationships amortisation, acquisition related items, the GMP equalisation
the year
charge, profit or loss on disposal of businesses and the associated tax (reconciled in the following table)
Effective tax rate
Tax on adjusted profit before income tax as a percentage of adjusted profit before income tax (reconciled in Note 8)
Adjusted earnings
Adjusted profit for the year divided by the weighted average number of ordinary shares in issue (reconciled in
per share
the following table and in Note 9)
Adjusted diluted
Adjusted profit for the year divided by the diluted weighted average number of ordinary shares (reconciled in
earnings per share
Note 9)
Operating cash flow* Cash generated from operations before acquisition related items after deducting purchases of property, plant
and equipment and software and adding back the proceeds from the sale of property, plant and equipment and
deducting the payment of lease liabilities (as shown in the Consolidated cash flow statement)
Cash conversion*
Operating cash flow as a percentage of lease adjusted operating profit, being adjusted operating profit after
adding back the depreciation of right-of-use assets and deducting the payment of lease liabilities (as shown in
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, right-of-use assets, inventories and trade and other receivables less
the Consolidated cash flow statement)
trade and other payables)
Return on invested
The ratio of adjusted operating profit to the average of the month end invested capital (being equity after adding
capital*
EBITDA
back net debt, lease liabilities, net defined benefit pension scheme liabilities, cumulative customer relationships
amortisation, acquisition related items and amounts written off goodwill, net of the associated tax)
Adjusted operating profit on an historical GAAP basis, before depreciation of property, plant and equipment
and software amortisation and after adjustments as permitted by the Group’s debt covenants, principally to
exclude share option charges and to annualise for the effect of acquisitions and disposal of businesses
Constant exchange
Growth rates at constant exchange rates are calculated by retranslating the results for the year ended
rates
31 December 2018 at the average rates for the year ended 31 December 2019 so that they can be compared
without the distorting impact of changes caused by foreign exchange translation. The principal exchange rates
used for 2019 and 2018 can be found in the Financial review on page 57
* Following the adoption of IFRS 16 on a modified retrospective basis with effect from 1 January 2019 the definitions of these alternative performance measures have been updated.
Acquisition related items comprise deferred consideration payments relating to the retention of former owners of businesses acquired,
transaction costs and expenses, adjustments to previously estimated earn outs and interest on acquisition related income tax. Customer
relationships amortisation, acquisition related items and any associated tax are considered by management to form part of the total spend
on acquisitions or are non-cash items resulting from acquisitions. The GMP equalisation charge was a non-recurring cost in 2018 of the
equalisation of guaranteed minimum pension between male and female members of the Group’s UK defined benefit pension scheme
following the High Court judgment in 2018 in the case of Lloyds Banking Group Pensions Trustees Limited vs Lloyds Bank plc and others.
Disposal of businesses represents the profit or loss on disposal of non-core businesses. None of these items relate to the underlying
operating performance of the business and, as a result, they distort comparability between businesses and reporting periods. Accordingly,
these items are not taken into account by management when assessing the results of the business and are removed in calculating the
profitability measures by which management assesses 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
Strategic report
Directors’ report
Financial statements
4 Alternative performance measures continued
consolidated financial statements for the year ended 31 December 2018, with the exception of the definition of cash conversion and its
components, return on average operating capital and return on invested capital, which have been updated following the adoption of IFRS 16.
For 2019, both the statutory measures and the alternative performance measures are also shown on a Proforma IAS 17 basis to enable a
meaningful comparison with prior periods.
Reconciliation of alternative performance measures to statutory measures
The principal profit related alternative performance measures, being adjusted operating profit, adjusted profit before income tax, adjusted
profit for the year and adjusted earnings per share, are reconciled to the most directly reconcilable statutory measures in the tables below,
both on an IFRS and on a Proforma IAS 17 basis.
Adjusting items
Customer
relationships
amortisation
£m
(107.3)
Acquisition
related
items
£m
(17.6)
GMP
equalisation
charge
£m
–
Year ended 31 December 2019
IFRS
Adjusted operating profit
Finance income
Finance expense
Disposal of businesses
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit for the year
Alternative
performance
measures
£m
653.3
12.4
(87.5)
–
578.2
(137.6)
440.6
(107.3)
29.1
(78.2)
(17.6)
4.4
(13.2)
Adjusted earnings per share
132.2p
(23.4)p
(4.0)p
Adjusting items
Customer
relationships
amortisation
£m
(107.3)
Acquisition
related
items
£m
(17.6)
GMP
equalisation
charge
£m
–
Proforma IAS 17
Adjusted operating profit
Finance income
Finance expense
Disposal of businesses
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit for the year
Alternative
performance
measures
£m
630.9
12.4
(64.2)
–
579.1
(137.8)
441.3
(107.3)
29.1
(78.2)
(17.6)
4.4
(13.2)
Adjusted earnings per share
132.4p
(23.4)p
(4.0)p
Disposal of
businesses
£m
Statutory
measures
£m
528.4 Operating profit
12.4 Finance income
(87.5) Finance expense
–
–
–
–
– Disposal of businesses
453.3 Profit before income tax
(104.1) Income tax
349.2 Profit for the year
–
104.8p Basic earnings per share
Disposal of
businesses
£m
Statutory
measures*
£m
506.0 Operating profit
12.4 Finance income
(64.2) Finance expense
–
–
–
–
–
Disposal of businesses
454.2 Profit before income tax
(104.3) Income tax
349.9 Profit for the year
–
105.0p Basic earnings per share
–
–
–
–
–
–
–
–
These alternative performance measures exclude the charge for customer relationships amortisation, acquisition related items, the GMP
equalisation charge, profit or loss on disposal of businesses and any associated tax, where relevant.
Year ended 31 December 2018
* See Note 3 for the reconciliation of the Proforma IAS 17 statutory measures for the year ended 31 December 2019 to the equivalent IFRS statutory measures.
Adjusting items
As previously reported under IAS 17
Adjusted operating profit
Finance income
Finance expense
Disposal of businesses
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit for the year
Customer
relationships
amortisation
£m
(111.1)
Acquisition
related
items
£m
(33.4)
GMP
equalisation
charge
£m
(3.3)
Alternative
performance
measures
£m
614.0
11.6
(66.6)
559.0
(129.1)
429.9
(111.1)
29.6
(81.5)
(33.4)
3.5
(29.9)
(3.3)
0.5
(2.8)
Disposal of
businesses
£m
Statutory
measures
£m
466.2 Operating profit
11.6 Finance income
(66.6) Finance expense
13.6 Disposal of businesses
424.8 Profit before income tax
(98.3) Income tax
326.5 Profit for the year
13.6
13.6
(2.8)
10.8
Adjusted earnings per share
129.6p
(24.6)p
(9.0)p
(0.9)p
3.3p
98.4p Basic earnings per share
134
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Directors’ reportStrategic reportFinancial statements
Notes continued
5 Segment analysis
The Group results are reported as four business areas based on geographical 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. During the year ended 31 December 2019 segmental results have been reviewed on both an IFRS and Proforma IAS 17 basis. The
segmental results for the year ended 31 December 2019 are therefore shown under both bases.
Year ended 31 December 2019
IFRS
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
North
America
£m
5,473.2
Continental
Europe
£m
1,829.8
UK &
Ireland
£m
1,242.1
Rest of the
World
£m
781.6
343.6
(36.8)
(6.6)
300.2
182.1
(40.9)
(5.9)
135.3
87.1
(8.2)
(2.0)
76.9
61.6
(21.4)
(3.1)
37.1
Corporate
£m
(21.1)
(21.1)
Purchase of property, plant and equipment
Depreciation of property, plant and equipment
Additions to right-of-use assets
Depreciation of right-of-use assets
Purchase of software
Software amortisation
8.8
8.8
56.6
61.8
4.8
2.4
8.8
8.2
29.2
29.9
2.1
2.6
5.7
4.1
12.4
20.4
1.4
0.9
3.7
3.3
7.0
15.5
1.5
1.3
0.1
0.1
–
0.5
–
0.2
North
America
£m
5,473.2
Continental
Europe
£m
1,829.8
UK &
Ireland
£m
1,242.1
Rest of the
World
£m
781.6
331.0
(36.8)
(6.6)
287.6
178.8
(40.9)
(5.9)
132.0
83.3
(8.2)
(2.0)
73.1
59.0
(21.4)
(3.1)
34.5
Corporate
£m
(21.2)
(21.2)
Proforma IAS 17
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
Total
£m
9,326.7
653.3
(107.3)
(17.6)
528.4
12.4
(87.5)
453.3
578.2
(104.1)
349.2
27.1
24.5
105.2
128.1
9.8
7.4
Total
£m
9,326.7
630.9
(107.3)
(17.6)
506.0
12.4
(64.2)
454.2
579.1
(104.3)
349.9
136
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5 Segment analysis
The Group results are reported as four business areas based on geographical 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. During the year ended 31 December 2019 segmental results have been reviewed on both an IFRS and Proforma IAS 17 basis. The
segmental results for the year ended 31 December 2019 are therefore shown under both bases.
Notes continued
Year ended 31 December 2019
IFRS
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
Additions to right-of-use assets
Depreciation of right-of-use assets
Purchase of software
Software amortisation
Proforma IAS 17
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
North
America
£m
5,473.2
343.6
(36.8)
(6.6)
300.2
Continental
Europe
£m
UK &
Ireland
£m
1,829.8
1,242.1
182.1
(40.9)
(5.9)
135.3
87.1
(8.2)
(2.0)
76.9
Rest of the
World
£m
781.6
61.6
(21.4)
(3.1)
37.1
Corporate
£m
(21.1)
(21.1)
8.8
8.8
56.6
61.8
4.8
2.4
North
America
£m
5,473.2
331.0
(36.8)
(6.6)
287.6
8.8
8.2
29.2
29.9
2.1
2.6
178.8
(40.9)
(5.9)
132.0
5.7
4.1
12.4
20.4
1.4
0.9
83.3
(8.2)
(2.0)
73.1
3.7
3.3
7.0
15.5
1.5
1.3
World
£m
781.6
59.0
(21.4)
(3.1)
34.5
0.1
0.1
0.5
–
–
0.2
Corporate
£m
(21.2)
(21.2)
Continental
Europe
£m
UK &
Ireland
£m
1,829.8
1,242.1
Rest of the
Total
£m
9,326.7
653.3
(107.3)
(17.6)
528.4
12.4
(87.5)
453.3
578.2
(104.1)
349.2
27.1
24.5
105.2
128.1
9.8
7.4
Total
£m
9,326.7
630.9
(107.3)
(17.6)
506.0
12.4
(64.2)
454.2
579.1
(104.3)
349.9
Strategic report
Directors’ report
Financial statements
5 Segment analysis continued
Year ended 31 December 2018
As previously reported under IAS 17
Revenue
Adjusted operating profit/(loss)
Customer relationships amortisation
Acquisition related items
GMP equalisation charge
Operating profit/(loss)
Finance income
Finance expense
Disposal of businesses
Profit before income tax
Adjusted profit before income tax
Income tax
Profit for the year
North
America
£m
5,277.8
317.1
(34.1)
(11.8)
Continental
Europe
£m
1,797.5
176.8
(51.0)
(14.5)
UK &
Ireland
£m
1,263.6
86.8
(9.4)
(3.0)
Rest of the
World
£m
740.5
56.4
(16.6)
(4.1)
271.2
111.3
74.4
35.7
Corporate
£m
(23.1)
(3.3)
(26.4)
Purchase of property, plant and equipment
Depreciation of property, plant and equipment
Purchase of software
Software amortisation
6.6
9.1
4.2
1.9
8.0
8.2
2.9
3.6
4.0
4.1
1.3
1.2
3.1
3.0
0.7
1.2
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
Interest on acquisition related income tax
0.2
0.1
0.1
0.2
2019
£m
13.3
4.1
(0.3)
0.5
17.6
Total
£m
9,079.4
614.0
(111.1)
(33.4)
(3.3)
466.2
11.6
(66.6)
13.6
424.8
559.0
(98.3)
326.5
21.9
24.5
9.2
8.1
2018
£m
19.1
5.5
8.3
0.5
33.4
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 businesses in Latin America and
Asia Pacific 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 results.
The revenue presented relates to external customers. Sales between the business areas are not material. Each of the business areas
supplies a range of products to customers operating primarily in the foodservice, grocery, safety, cleaning & hygiene, retail and healthcare
market sectors but results are not monitored on this basis. The performance of the four business areas is assessed by reference to adjusted
operating profit and this measure also represents the segment results for the purposes of reporting in accordance with IFRS 8. Debt and
associated interest is managed at a Group level and therefore has not been allocated across the business areas.
In the year ended 31 December 2019 the Group had no customer that represented 10% or more of total Group revenue (2018: one customer).
Revenue generated in the parent company’s country of domicile, the UK, for the year ended 31 December 2019 was £1,143.5m
(2018: £1,168.9m).
As noted above, the businesses within each operating segment operate in a number of different countries and sell products across a
range of market sectors, with the vast majority of revenue generated from the delivery of goods to customers. The following table provides
a breakdown of revenue by market sector. The other category covers a wide range of market sectors, none of which is sufficiently material
to warrant separate disclosure.
136
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137
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Directors’ reportStrategic reportFinancial statements
Notes continued
5 Segment analysis continued
Revenue by market sector
Foodservice
Grocery
Safety
Cleaning & hygiene
Retail
Healthcare
Other
2019
£m
2,710.9
2,399.8
1,208.7
1,110.9
1,036.3
618.6
241.5
9,326.7
2018
£m
2,656.5
2,388.5
1,090.8
1,065.3
1,001.6
618.3
258.4
9,079.4
The table below reconciles segment assets and liabilities to the Group’s total assets and total liabilities. Unallocated assets and liabilities
include corporate assets and liabilities, tax assets and liabilities, cash at bank and in hand, bank overdrafts, interest bearing loans and
borrowings, derivative financial assets and liabilities and defined benefit pension assets and liabilities. Non-current assets (other than
derivative financial assets and deferred tax assets) in the parent company’s country of domicile, the UK, at 31 December 2019 were £418.8m
(2018: £334.4m).
At 31 December 2019
IFRS
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Proforma IAS 17
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
At 31 December 2018
As previously reported under IAS 17
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
North
America
£m
2,246.2
Continental
Europe
£m
1,567.6
UK &
Ireland
£m
809.8
Rest of the
World
£m
640.0
Unallocated
£m
2,246.2
1,567.6
809.8
640.0
880.0
522.8
421.3
173.4
880.0
522.8
421.3
173.4
656.4
656.4
2,178.2
2,178.2
North
America
£m
2,047.6
Continental
Europe
£m
1,463.4
UK &
Ireland
£m
719.9
Rest of the
World
£m
603.8
Unallocated
£m
2,047.6
1,463.4
719.9
603.8
666.4
414.1
322.9
134.1
666.4
414.1
322.9
134.1
655.2
655.2
2,176.7
2,176.7
North
America
£m
2,125.4
Continental
Europe
£m
1,594.0
UK &
Ireland
£m
727.3
Rest of the
World
£m
595.7
Unallocated
£m
2,125.4
1,594.0
727.3
595.7
745.5
444.0
327.8
126.2
745.5
444.0
327.8
126.2
513.7
513.7
2,218.1
2,218.1
Total
£m
5,263.6
656.4
5,920.0
1,997.5
2,178.2
4,175.7
Total
£m
4,834.7
655.2
5,489.9
1,537.5
2,176.7
3,714.2
Total
£m
5,042.4
513.7
5,556.1
1,643.5
2,218.1
3,861.6
138
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The table below reconciles segment assets and liabilities to the Group’s total assets and total liabilities. Unallocated assets and liabilities
include corporate assets and liabilities, tax assets and liabilities, cash at bank and in hand, bank overdrafts, interest bearing loans and
borrowings, derivative financial assets and liabilities and defined benefit pension assets and liabilities. Non-current assets (other than
derivative financial assets and deferred tax assets) in the parent company’s country of domicile, the UK, at 31 December 2019 were £418.8m
Notes continued
5 Segment analysis continued
Revenue by market sector
Foodservice
Grocery
Safety
Retail
Healthcare
Other
Cleaning & hygiene
(2018: £334.4m).
At 31 December 2019
IFRS
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Proforma IAS 17
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
At 31 December 2018
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
2019
£m
2,710.9
2,399.8
1,208.7
1,110.9
1,036.3
618.6
241.5
2018
£m
2,656.5
2,388.5
1,090.8
1,065.3
1,001.6
618.3
258.4
9,326.7
9,079.4
£m
656.4
656.4
2,178.2
2,178.2
£m
655.2
655.2
2,176.7
2,176.7
£m
513.7
513.7
2,218.1
2,218.1
Total
£m
5,263.6
656.4
5,920.0
1,997.5
2,178.2
4,175.7
Total
£m
4,834.7
655.2
5,489.9
1,537.5
2,176.7
3,714.2
Total
£m
5,042.4
513.7
5,556.1
1,643.5
2,218.1
3,861.6
North
America
£m
2,246.2
Continental
Europe
£m
1,567.6
UK &
Ireland
£m
809.8
Rest of the
£m
640.0
World
Unallocated
2,246.2
1,567.6
809.8
640.0
880.0
522.8
421.3
173.4
880.0
522.8
421.3
173.4
North
America
£m
2,047.6
Continental
Europe
£m
1,463.4
UK &
Ireland
£m
719.9
Rest of the
£m
603.8
World
Unallocated
2,047.6
1,463.4
719.9
603.8
666.4
414.1
322.9
134.1
666.4
414.1
322.9
134.1
2,125.4
1,594.0
727.3
595.7
745.5
444.0
327.8
126.2
745.5
444.0
327.8
126.2
As previously reported under IAS 17
North
America
£m
2,125.4
Continental
Europe
£m
1,594.0
UK &
Ireland
£m
727.3
Rest of the
£m
595.7
World
Unallocated
Strategic report
Directors’ report
Financial statements
6 Analysis of operating income and expenses
Cost of goods sold
Employee costs (Note 24)
GMP equalisation charge
Depreciation of property, plant and equipment (Note 10)
Depreciation of right-of-use assets (Note 11)
Amortisation of intangible assets (Note 12)
Acquisition related items (Note 5)
Impairment losses on trade receivables (Note 14)
Profit on disposal of property, plant and equipment
Expense relating to short term leases and low value assets
Rentals payable under operating leases and subleases
Lease and sublease income
Other operating expenses
Net operating expenses
2019
£m
7,033.2
873.8
–
24.5
128.1
114.7
17.6
6.9
(4.7)
7.1
–
(2.6)
599.7
8,798.3
2018
£m
6,851.8
859.4
3.3
24.5
–
119.2
33.4
3.5
(1.4)
–
145.4
(0.9)
575.0
8,613.2
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.
The GMP equalisation charge in 2018 of £3.3m was the non-recurring cost of the equalisation of guaranteed minimum pensions between
male and female members of the Group’s UK defined benefit pension scheme following the High Court judgment in 2018 in the case of
Lloyds Banking Group Pensions Trustees Limited vs Lloyds Bank plc and others.
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
all other services
Total auditors’ remuneration
UK
£m
0.5
Overseas
£m
–
0.4
0.1
0.1
1.1
2.6
–
–
2.6
2019
Total
£m
0.5
3.0
0.1
0.1
3.7
UK
£m
0.4
Overseas
£m
–
0.4
0.1
0.1
1.0
2.5
–
–
2.5
2018
Total
£m
0.4
2.9
0.1
0.1
3.5
Audit related assurance services comprise the review of the half yearly financial report for the six months ended 30 June. 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 80 to 84.
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Directors’ reportStrategic reportFinancial statements
Notes continued
7 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
Lease interest expense
Interest expense from foreign exchange contracts
Net interest expense on defined benefit pension schemes in deficit
Fair value (loss)/gain on US private placement notes in a hedge relationship
Fair value gain/(loss) on interest rate swaps in a hedge relationship
Foreign exchange (loss)/gain on intercompany funding
Foreign exchange gain/(loss) on external debt and foreign exchange forward contracts
Interest related to income tax
Other finance expense
Finance expense
Net finance expense
IFRS
2019
£m
4.4
7.2
0.2
0.6
12.4
(56.6)
(23.3)
(3.9)
(1.3)
(10.7)
10.8
(42.6)
42.7
(1.5)
(1.1)
(87.5)
(75.1)
Proforma
IAS 17
2019
£m
4.4
7.2
0.2
0.6
12.4
(56.6)
–
(3.9)
(1.3)
(10.7)
10.8
(42.6)
42.7
(1.5)
(1.1)
(64.2)
(51.8)
2018
£m
5.3
5.7
0.1
0.5
11.6
(59.8)
–
(3.6)
(1.4)
8.3
(8.2)
43.5
(43.5)
(1.2)
(0.7)
(66.6)
(55.0)
The foreign exchange loss or gain on intercompany funding arises as a result of the retranslation of foreign currency intercompany loans.
This loss or gain on intercompany funding is substantially matched by the foreign exchange gain or loss on external debt and foreign
exchange forward contracts not in a hedge relationship, which minimises the foreign currency exposure in the consolidated income statement.
8 Income tax
Current tax on profit
current year
adjustments in respect of prior years
Deferred tax on profit
current year
adjustments in respect of prior years
Income tax on profit
IFRS
2019
£m
122.8
(7.8)
115.0
(11.3)
0.4
(10.9)
104.1
Proforma
IAS 17
2019
£m
122.8
(7.8)
115.0
(11.1)
0.4
(10.7)
104.3
2018
£m
122.8
(6.9)
115.9
(16.6)
(1.0)
(17.6)
98.3
In assessing the underlying performance of the Group, management uses adjusted profit before income tax. The tax effect of the adjusting
items (see Note 4) is excluded in monitoring the effective tax rate (being the tax rate on adjusted profit before income tax) which is shown in
the table below. The Group’s expectations for the effective tax rate in 2020 are included in the Financial review on page 59.
Income tax on profit
Tax associated with adjusting items
Tax on adjusted profit
Profit before income tax
Adjusting items
Adjusted profit before income tax
Reported tax rate
Effective tax rate
140
140
IFRS
2019
£m
104.1
33.5
137.6
453.3
124.9
578.2
23.0%
23.8%
Proforma
IAS 17
2019
£m
104.3
33.5
137.8
454.2
124.9
579.1
23.0%
23.8%
2018
£m
98.3
30.8
129.1
424.8
134.2
559.0
23.1%
23.1%
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report
Notes continued
7 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
Lease interest expense
Interest expense from foreign exchange contracts
Net interest expense on defined benefit pension schemes in deficit
Fair value (loss)/gain on US private placement notes in a hedge relationship
Fair value gain/(loss) on interest rate swaps in a hedge relationship
Foreign exchange (loss)/gain on intercompany funding
Foreign exchange gain/(loss) on external debt and foreign exchange forward contracts
The foreign exchange loss or gain on intercompany funding arises as a result of the retranslation of foreign currency intercompany loans.
This loss or gain on intercompany funding is substantially matched by the foreign exchange gain or loss on external debt and foreign
exchange forward contracts not in a hedge relationship, which minimises the foreign currency exposure in the consolidated income statement.
IFRS
2019
£m
4.4
7.2
0.2
0.6
12.4
(56.6)
(23.3)
(3.9)
(1.3)
(10.7)
10.8
(42.6)
42.7
(1.5)
(1.1)
(87.5)
(75.1)
IFRS
2019
£m
122.8
(7.8)
115.0
(11.3)
0.4
(10.9)
104.1
IFRS
2019
£m
104.1
33.5
137.6
453.3
124.9
578.2
Proforma
IAS 17
2019
£m
4.4
7.2
0.2
0.6
12.4
(56.6)
–
(3.9)
(1.3)
(10.7)
10.8
(42.6)
42.7
(1.5)
(1.1)
(64.2)
(51.8)
Proforma
IAS 17
2019
£m
122.8
(7.8)
115.0
(11.1)
0.4
(10.7)
104.3
Proforma
IAS 17
2019
£m
104.3
33.5
137.8
454.2
124.9
579.1
2018
£m
5.3
5.7
0.1
0.5
11.6
(59.8)
–
(3.6)
(1.4)
8.3
(8.2)
43.5
(43.5)
(1.2)
(0.7)
(66.6)
(55.0)
2018
£m
122.8
(6.9)
115.9
(16.6)
(1.0)
(17.6)
98.3
2018
£m
98.3
30.8
129.1
424.8
134.2
559.0
Interest related to income tax
Other finance expense
Finance expense
Net finance expense
8 Income tax
Current tax on profit
current year
adjustments in respect of prior years
Deferred tax on profit
current year
adjustments in respect of prior years
Income tax on profit
Income tax on profit
Tax associated with adjusting items
Tax on adjusted profit
Profit before income tax
Adjusting items
Adjusted profit before income tax
Reported tax rate
Effective tax rate
140
In assessing the underlying performance of the Group, management uses adjusted profit before income tax. The tax effect of the adjusting
items (see Note 4) is excluded in monitoring the effective tax rate (being the tax rate on adjusted profit before income tax) which is shown in
the table below. The Group’s expectations for the effective tax rate in 2020 are included in the Financial review on page 59.
Strategic report
Directors’ report
Financial statements
8 Income tax continued
Tax on other comprehensive income/(expense)
and equity
Actuarial (loss)/gain on defined benefit pension schemes
Foreign currency translation differences on foreign
operations
Movement from translation reserve to income statement
on disposal of foreign operation
Gain/(loss) taken to equity as a result of effective net
investment hedges
(Loss)/gain recognised in cash flow hedge reserve
Movement from cash flow hedge reserve to inventory/
income statement
Other comprehensive (expense)/income
Dividends
Issue of share capital
Employee trust shares
Share based payments
Other comprehensive expense and equity
Gross
£m
(8.3)
Tax credit
£m
2.2
2019
Net
£m
(6.1)
Gross
£m
11.0
Tax credit
£m
(3.7)
(104.1)
–
16.9
(0.5)
(4.3)
(100.3)
(167.3)
5.7
(30.4)
13.5
(278.8)
–
–
–
0.1
0.7
3.0
–
–
–
0.3
3.3
(104.1)
3.0
–
16.9
(0.4)
(3.6)
(97.3)
(167.3)
5.7
(30.4)
13.8
(275.5)
(2.4)
(7.5)
7.9
(4.4)
7.6
(152.2)
7.2
45.6
12.9
(78.9)
–
–
0.2
(1.3)
0.7
(4.1)
–
–
–
2.4
(1.7)
2018
Net
£m
7.3
3.0
(2.4)
(7.3)
6.6
(3.7)
3.5
(152.2)
7.2
45.6
15.3
(80.6)
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 year of 19.0% (2018: 19.0%). The adjustments to the tax charge at the weighted average rate to determine the income tax on
profit are as follows:
Profit before income tax
Tax charge at weighted average rate (2019: 23.3%; 2018: 25.1%)
Effects of:
non-deductible expenditure
impact of intercompany finance
change in tax rates
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
Leases
Other
Deferred tax on profit
23.0%
23.8%
23.0%
23.8%
23.1%
23.1%
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
2019
£m
453.3
2018
£m
424.8
105.6
106.5
6.4
(0.4)
(1.0)
(7.4)
0.9
104.1
2019
£m
0.4
1.7
(13.6)
1.0
(0.4)
(0.2)
0.2
(10.9)
7.5
(5.1)
(2.3)
(7.9)
(0.4)
98.3
2018
£m
–
0.8
(14.3)
(0.5)
0.7
–
(4.3)
(17.6)
141
141
Directors’ reportStrategic reportFinancial statements
Notes continued
8 Income tax continued
Future tax liabilities may be affected by the European Commission’s (‘the Commission’) assertion that part of the UK’s tax regime amounts
to State aid. Management has considered the Commission’s decision of 2 April 2019 and does not agree with their conclusion that the
UK tax legislation up until December 2018 partially represents State aid. The Group has filed an appeal with the EU General Court for
annulment of this decision and notes that HM Government has also lodged an appeal. The potential amount payable for this risk is
estimated to be between £nil and £36m as at 31 December 2019 depending on the outcome of the legal appeal process and the basis of
calculation. The final impact on the Group remains uncertain but based on the current legal analysis the Group does not consider any
provision to be required for this risk. Resolution of this issue will depend on the decision of the EU General Court and any further
legal appeals.
In addition, the Group is required to make an additional cash tax payment in 2020 of approximately £19m for tax plus interest and penalties
in relation to a tax dispute in Brazil. The Group has provided for the best estimate of the ultimate liability in this matter and expects to
recover the remainder once the legal process is completed.
9 Earnings per share
Profit for the year
Adjusted for:
customer relationships amortisation
acquisition related items
GMP equalisation charge
profit on disposal of businesses
tax credit on adjusting items
Adjusted profit for the year
Basic weighted average number of ordinary shares in issue (million)
Dilutive effect of employee share plans (million)
Diluted weighted average number of ordinary shares (million)
Basic earnings per share
Adjustment
Adjusted earnings per share
Diluted basic earnings per share
Adjustment
Adjusted diluted earnings per share
IFRS
2019
£m
349.2
107.3
17.6
–
–
(33.5)
440.6
IFRS
2019
333.3
1.0
334.3
104.8p
27.4p
132.2p
104.5p
27.3p
131.8p
Proforma
IAS 17
2019
£m
349.9
107.3
17.6
–
–
(33.5)
441.3
Proforma
IAS 17
2019
333.3
1.0
334.3
105.0p
27.4p
132.4p
104.7p
27.3p
132.0p
2018
£m
326.5
111.1
33.4
3.3
(13.6)
(30.8)
429.9
2018
331.7
2.2
333.9
98.4p
31.2p
129.6p
97.8p
31.0p
128.8p
142
142
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Directors’ reportFinancial statementsStrategic report
8 Income tax continued
Future tax liabilities may be affected by the European Commission’s (‘the Commission’) assertion that part of the UK’s tax regime amounts
to State aid. Management has considered the Commission’s decision of 2 April 2019 and does not agree with their conclusion that the
UK tax legislation up until December 2018 partially represents State aid. The Group has filed an appeal with the EU General Court for
annulment of this decision and notes that HM Government has also lodged an appeal. The potential amount payable for this risk is
estimated to be between £nil and £36m as at 31 December 2019 depending on the outcome of the legal appeal process and the basis of
calculation. The final impact on the Group remains uncertain but based on the current legal analysis the Group does not consider any
provision to be required for this risk. Resolution of this issue will depend on the decision of the EU General Court and any further
In addition, the Group is required to make an additional cash tax payment in 2020 of approximately £19m for tax plus interest and penalties
in relation to a tax dispute in Brazil. The Group has provided for the best estimate of the ultimate liability in this matter and expects to
recover the remainder once the legal process is completed.
Notes continued
legal appeals.
9 Earnings per share
Profit for the year
Adjusted for:
customer relationships amortisation
acquisition related items
GMP equalisation charge
profit on disposal of businesses
tax credit on adjusting items
Adjusted profit for the year
Basic weighted average number of ordinary shares in issue (million)
Dilutive effect of employee share plans (million)
Diluted weighted average number of ordinary shares (million)
Basic earnings per share
Adjustment
Adjusted earnings per share
Diluted basic earnings per share
Adjustment
Adjusted diluted earnings per share
IFRS
2019
£m
349.2
107.3
17.6
–
–
(33.5)
440.6
IFRS
2019
333.3
1.0
334.3
104.8p
27.4p
132.2p
104.5p
27.3p
131.8p
Proforma
IAS 17
2019
£m
349.9
107.3
17.6
–
–
(33.5)
441.3
Proforma
IAS 17
2019
333.3
1.0
334.3
105.0p
27.4p
132.4p
104.7p
27.3p
132.0p
2018
£m
326.5
111.1
33.4
3.3
(13.6)
(30.8)
429.9
2018
331.7
2.2
333.9
98.4p
31.2p
129.6p
97.8p
31.0p
128.8p
Strategic report
Directors’ report
Financial statements
10 Property, plant and equipment
2019
Cost
Beginning of year
Acquisitions
Additions
Disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
90.1
0.1
4.3
(8.2)
(3.1)
83.2
45.2
3.7
(5.8)
(1.5)
41.6
157.0
0.3
11.9
(11.9)
(5.9)
151.4
105.4
11.9
(10.8)
(4.4)
102.1
105.1
0.8
10.9
(12.3)
(3.9)
100.6
79.2
8.9
(12.4)
(2.5)
73.2
Total
£m
352.2
1.2
27.1
(32.4)
(12.9)
335.2
229.8
24.5
(29.0)
(8.4)
216.9
Net book value at 31 December 2019
41.6
49.3
27.4
118.3
2018
Cost
Beginning of year
Acquisitions
Additions
Disposals
Disposal of businesses
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Disposal of businesses
Currency translation
End of year
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
93.3
0.2
1.8
(2.8)
(4.8)
2.4
90.1
45.3
3.5
(2.4)
(3.0)
1.8
45.2
148.5
1.3
10.1
(6.4)
(2.0)
5.5
157.0
97.7
12.0
(5.8)
(1.6)
3.1
105.4
103.9
1.6
10.0
(4.5)
(6.4)
0.5
105.1
77.5
9.0
(4.4)
(4.2)
1.3
79.2
Total
£m
345.7
3.1
21.9
(13.7)
(13.2)
8.4
352.2
220.5
24.5
(12.6)
(8.8)
6.2
229.8
Net book value at 31 December 2018
44.9
51.6
25.9
122.4
142
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143
143
Directors’ reportStrategic reportFinancial statements
Notes continued
11 Right-of-use assets
2019
Net book value at beginning of year
Right-of-use assets on transition to IFRS 16
Acquisitions (Note 27)
Additions
Depreciation charge in the year
Remeasurement adjustments
Currency translation
Net book value at 31 December 2019
12 Intangible assets
2019
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
Property
£m
–
359.4
5.7
65.3
(91.4)
13.8
(11.3)
341.5
Motor vehicles
£m
–
65.4
0.2
30.4
(27.8)
0.6
(2.4)
66.4
Equipment
£m
–
24.6
0.6
9.5
(8.9)
–
(0.8)
25.0
Total
£m
–
449.4
6.5
105.2
(128.1)
14.4
(14.5)
432.9
Goodwill
£m
Customer
relationships
£m
Software
£m
Total
£m
1,420.4
39.8
(56.6)
1,403.6
1,719.2
71.7
–
–
(80.0)
1,710.9
778.0
107.3
–
(39.3)
846.0
72.5
–
9.8
(4.6)
(3.0)
74.7
51.6
7.4
(4.6)
(2.1)
52.3
3,212.1
111.5
9.8
(4.6)
(139.6)
3,189.2
829.6
114.7
(4.6)
(41.4)
898.3
Net book value at 31 December 2019
1,403.6
864.9
22.4
2,290.9
2018
Cost
Beginning of year
Acquisitions
Additions
Disposals
Disposal of businesses
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Disposal of businesses
Currency translation
End of year
Goodwill
£m
Customer
relationships
£m
Software
£m
Total
£m
1,378.0
33.9
(10.1)
18.6
1,420.4
1,613.8
96.7
–
–
(15.9)
24.6
1,719.2
659.2
111.1
–
(3.9)
11.6
778.0
64.5
0.1
9.2
(0.3)
(2.7)
1.7
72.5
45.4
8.1
(0.3)
(2.5)
0.9
51.6
3,056.3
130.7
9.2
(0.3)
(28.7)
44.9
3,212.1
704.6
119.2
(0.3)
(6.4)
12.5
829.6
Net book value at 31 December 2018
1,420.4
941.2
20.9
2,382.5
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 27.
144
144
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Strategic report
Directors’ report
Financial statements
12 Intangible assets continued
Impairment tests
The carrying amount of goodwill is allocated across CGUs and is tested annually for impairment by comparing the recoverable amount
of each CGU with its carrying value.
A description of the Group’s principal activities is set out in the Chief Executive Officer’s review. There is no significant difference in the
nature of activities across different geographies. The identification of CGUs reflects the way the business is managed and monitored on a
geographical basis, taking into account the generation of cash flows and the sharing of synergies. Given the similar nature of the activities
of each CGU, a consistent methodology is applied across the Group in assessing CGU recoverable amounts. The recoverable amount is the
higher of the value in use and the fair value less the costs of disposal. The value in use is the present value of the cash flows expected to be
generated by the CGU over a projection period together with a terminal value. The projection period is the time period over which future
cash flows are predicted. The Group’s methodology is to use a projection period of five years consisting of detailed cash flow forecasts
for the first two years and CGU specific growth assumptions for years three, four and five. For periods after this five year period, the
methodology applies a long term growth rate specific to the CGU to derive a terminal value. Cash flow expectations exclude any future
cash flows that may arise from restructuring or other enhancements to the cash generating activities of the CGU and reflect management’s
expectations of the range of economic conditions that may exist over the projection period.
The value in use calculations are principally sensitive to revenue growth, including any significant changes to the customer base,
achievability of future profit margins and the discount rates used in the present value calculation. The information used for valuation
purposes takes into consideration past experience and the current economic environment with regard to customer attrition rates and
additions to the customer base, the ability to introduce price increases and new products and experience in controlling the underlying cost
base. This information is used to determine a long term growth rate which is consistent with the geographic segments in which the Group
operates and management’s assessment of future operating performance and market share movements. The discount rates used are
determined with assistance provided by external valuation specialists.
The Group allocates goodwill across 11 CGUs (2018: 11). Based on our impairment testing, no impairments were identified to the carrying
value of goodwill within the Group.
At 31 December 2019 North America, France and Rest of Continental Europe carried a significant amount of goodwill in comparison with
the total value of the Group’s goodwill. At 31 December 2019 the carrying value of goodwill in respect of North America was £428.9m
(2018: £417.7m), France was £247.1m (2018: £262.7m) and Rest of Continental Europe was £183.6m (2018: £195.0m). At 31 December 2019
the aggregate amount of goodwill attributable to the Group’s CGUs, excluding North America, France and Rest of Continental Europe,
was £544.0m (2018: £545.0m), none of which is individually significant.
For North America, France and Rest of Continental Europe, the weighted average long term growth rate used in 2019 was in the range
of 2.5%–3.5% (2018: 2.5%–3.5%) reflecting anticipated revenue and profit growth. A pre-tax discount rate in the range of 7%–10%
(2018: 7%–9%) has been applied to the value in use calculations reflecting market assessments of the time value of money at the balance
sheet date. Similar assumptions have been applied to the other CGUs but where appropriate the directors have considered alternative
market risk assumptions to reflect the specific conditions arising in individual CGUs with long term growth rates ranging from 2.5%–6.5%
(2018: 2.5%–6.5%) and discount rates ranging from 7%–16% (2018: 6%–16%).
As part of the annual impairment testing for goodwill, the Group also considered whether there were any indicators that individual customer
relationships assets were impaired by comparing the recoverable amounts to the carrying values of the customer relationships assets.
Recoverable amount was based on value in use. An impairment charge of £4.0m relating to the customer relationships intangible asset of a
business in China within the Asia Pacific CGU was recognised in the year. This charge is included within the customer relationship charge
for the year. There were no other such impairments.
Sensitivity to changes in key assumptions
Impairment testing is dependent on management’s estimates and judgements, particularly as they relate to the forecasting of future cash
flows, expected long term growth rates and the discount rates selected. Key assumptions on which value in use calculations are dependent
relate to the discount rates used and revenue growth including the impact of changes to the underlying customer base from customer
attrition and the rate at which new customer relationships are introduced and established.
As part of the annual impairment testing, management performed sensitivity analysis by modelling the impact of higher discount rates, and
reviewing the combination of discount rates and long term growth rates which would bring the value in use to the net book value or below.
From this sensitivity testing management has concluded that no reasonably possible change in key assumptions would result in a material
change to the carrying amounts of any of the Group’s intangible assets in the next 12 months.
Property
Motor vehicles
Equipment
£m
–
359.4
5.7
65.3
(91.4)
13.8
(11.3)
341.5
Goodwill
£m
Customer
relationships
£m
Software
£m
Total
£m
1,420.4
1,719.2
39.8
71.7
(56.6)
1,403.6
(80.0)
1,710.9
£m
–
65.4
0.2
30.4
(27.8)
0.6
(2.4)
66.4
–
–
778.0
107.3
–
(39.3)
846.0
–
–
(15.9)
24.6
659.2
111.1
–
(3.9)
11.6
778.0
£m
–
24.6
0.6
9.5
(8.9)
–
(0.8)
25.0
72.5
–
9.8
(4.6)
(3.0)
74.7
51.6
7.4
(4.6)
(2.1)
52.3
64.5
0.1
9.2
(0.3)
(2.7)
1.7
72.5
45.4
8.1
(0.3)
(2.5)
0.9
51.6
Total
£m
–
449.4
6.5
105.2
(128.1)
14.4
(14.5)
432.9
3,212.1
111.5
9.8
(4.6)
(139.6)
3,189.2
829.6
114.7
(4.6)
(41.4)
898.3
3,056.3
130.7
9.2
(0.3)
(28.7)
44.9
3,212.1
704.6
119.2
(0.3)
(6.4)
12.5
829.6
Customer
Goodwill
relationships
£m
£m
Software
£m
Total
£m
1,378.0
33.9
1,613.8
96.7
(10.1)
18.6
1,420.4
1,719.2
Net book value at 31 December 2019
1,403.6
864.9
22.4
2,290.9
Net book value at 31 December 2018
1,420.4
941.2
20.9
2,382.5
Both goodwill and customer relationships have been acquired as part of business combinations. Further details of acquisitions made in the
Bunzl plc Annual Report 2019
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145
145
Notes continued
11 Right-of-use assets
2019
Net book value at beginning of year
Right-of-use assets on transition to IFRS 16
Acquisitions (Note 27)
Additions
Depreciation charge in the year
Remeasurement adjustments
Currency translation
Net book value at 31 December 2019
12 Intangible assets
2019
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
2018
Cost
Beginning of year
Acquisitions
Additions
Disposals
Disposal of businesses
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Disposal of businesses
Currency translation
End of year
year are set out in Note 27.
144
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Notes continued
13 Inventories
Goods for resale
2019
£m
1,177.2
2018
£m
1,213.6
During the year £5.5m (2018: £6.0m) was written off from inventories due to obsolescence or damage. The provision for slow moving,
obsolete or defective inventories at 31 December 2019 was £80.3m (2018: £84.4m).
14 Trade and other receivables
Trade receivables
Prepayments
Other receivables
The Group does not have any significant contract assets.
The ageing of trade receivables at 31 December was:
Current
0–30 days overdue
31–90 days overdue
Over 90 days overdue
2019
£m
1,020.2
70.3
163.6
1,254.1
2018
£m
1,083.1
74.2
172.7
1,330.0
Gross
£m
832.9
146.2
42.9
22.1
1,044.1
2019
Provision
£m
3.8
1.4
1.5
17.2
23.9
Gross
£m
847.5
186.4
55.6
19.2
1,108.7
2018
Provision
£m
3.4
1.8
2.2
18.2
25.6
The trade receivables provision includes provisions for expected credit losses and credit notes to be issued. The movement in the provision
during the year was as follows:
Beginning of year
Acquisitions
Charge
Utilised and unused
Currency translation
End of year
15 Trade and other payables – current
Trade payables
Other tax and social security contributions
Other payables
Accruals and contract liabilities
2019
£m
25.6
0.1
6.9
(7.6)
(1.1)
23.9
2019
£m
1,067.9
23.7
151.2
260.0
1,502.8
2018
£m
25.2
0.8
3.5
(3.8)
(0.1)
25.6
2018
£m
1,143.9
25.9
161.1
282.7
1,613.6
The Group’s contract liabilities are limited to deferred income of £4.4m (2018: £5.5m). This arises from contracts with customers in the form
of consideration that has been received in advance of the satisfaction of performance obligations.
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During the year £5.5m (2018: £6.0m) was written off from inventories due to obsolescence or damage. The provision for slow moving,
obsolete or defective inventories at 31 December 2019 was £80.3m (2018: £84.4m).
Gross
£m
832.9
146.2
42.9
22.1
1,044.1
2019
Provision
£m
3.8
1.4
1.5
17.2
23.9
Gross
£m
847.5
186.4
55.6
19.2
1,108.7
The trade receivables provision includes provisions for expected credit losses and credit notes to be issued. The movement in the provision
during the year was as follows:
Notes continued
13 Inventories
Goods for resale
14 Trade and other receivables
Trade receivables
Prepayments
Other receivables
The Group does not have any significant contract assets.
The ageing of trade receivables at 31 December was:
Current
0–30 days overdue
31–90 days overdue
Over 90 days overdue
Beginning of year
Acquisitions
Charge
Utilised and unused
Currency translation
End of year
15 Trade and other payables – current
Other tax and social security contributions
Trade payables
Other payables
Accruals and contract liabilities
2019
£m
2018
£m
1,177.2
1,213.6
1,020.2
1,083.1
2019
£m
70.3
163.6
2018
£m
74.2
172.7
1,254.1
1,330.0
2018
Provision
£m
3.4
1.8
2.2
18.2
25.6
2018
£m
25.2
0.8
3.5
(3.8)
(0.1)
25.6
2018
£m
25.9
161.1
282.7
2019
£m
25.6
0.1
6.9
(7.6)
(1.1)
23.9
2019
£m
23.7
151.2
260.0
1,067.9
1,143.9
1,502.8
1,613.6
The Group’s contract liabilities are limited to deferred income of £4.4m (2018: £5.5m). This arises from contracts with customers in the form
of consideration that has been received in advance of the satisfaction of performance obligations.
Strategic report
Directors’ report
Financial statements
16 Risk management and financial instruments
Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Group monitors the return on average operating capital employed and the return on invested capital
(as defined on page 134) as well as the level of total shareholders’ equity and the amount of dividends paid to ordinary shareholders.
The principal covenant limits are net debt to EBITDA, calculated at average exchange rates and in accordance with the Group’s external
debt covenants, 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. Additionally, compliance with the Group’s biannual debt covenants is
monitored on a monthly basis and formally tested at 30 June and 31 December. During 2019 all covenants have been complied with and
based on current forecasts it is expected that such covenants will continue to be complied with for the foreseeable future. Debt covenants
are based on historical accounting standards.
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 and, in order to do so, the Group arranges a mixture of borrowings from different sources with a variety of maturity dates.
The Group’s businesses provide a high and consistent level of cash generation which helps fund future development and growth. The
Group seeks to maintain an appropriate balance between the higher returns that might be possible with higher levels of borrowings and the
advantages and security afforded by a sound capital position.
There were no changes to the Group’s approach to capital management during the year and the Group is not subject to any externally
imposed capital requirements.
Treasury policies and controls
The Group has a centralised treasury department to control external borrowings and manage liquidity, interest rate, 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.
Derivatives and hedge accounting
The Group designates derivatives which qualify as hedges for accounting purposes as either (a) a hedge of the fair value of a recognised
asset or liability; (b) a hedge of the cash flow risk resulting from changes in interest rates or foreign exchange rates; or (c) a hedge of a net
investment in a foreign operation. The accounting treatment for hedges and derivatives is set out in the financial instruments’ accounting
policy in Note 2p. The Group tests the effectiveness of hedges on a prospective basis to ensure compliance with IFRS 9. Information about
the methods and assumptions used in determining the fair value of derivatives is provided under the ‘Financial instruments’ section on
pages 129 and 130.
Hedge effectiveness
For hedges of foreign currency purchases and sales, the Group enters into cash flow hedge relationships where the critical terms of the
hedging instrument are similar to those of the hedged item, such as notional amount, expected maturity date and currency. Hedge
ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated. The Group therefore
performs a quantitative hedge effectiveness assessment to calculate any ineffectiveness during the period.
Part of the Group’s fixed rate debt portfolio is swapped to floating using interest rate swaps where the hedged items are individual tranches
of fixed rate debt. These interest rate swaps are held in fair value hedges with critical terms exactly matching those of the underlying hedged
items, such as notional amounts, payment dates, reset dates, maturity dates and currencies. As all critical terms matched during the year,
the economic relationship was 100% effective. The Group therefore performs a qualitative assessment of effectiveness. If changes in
circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging
instrument, the Group will perform a quantitative assessment of effectiveness. Hedge ineffectiveness may arise due to a change in credit
risk of the counterparty or if there is a change in timings or amounts of the hedged cash flows.
There was no material ineffectiveness during 2019 in relation to the interest rate swaps or the forward currency contracts.
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Notes continued
16 Risk management and financial instruments continued
Risk management
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group continually monitors net
debt and forecast cash flows to ensure that sufficient facilities are in place to meet the Group’s requirements in the short, medium and long
term and, in order to do so, arranges borrowings from a variety of sources.
The Group has substantial funding available comprising multi-currency credit facilities from the Group’s banks, US private placement notes
and a senior unsecured bond.
Loans, borrowings and net debt
Bank overdrafts
Bank loans
US private placement notes
Finance lease creditors
Borrowings due within one year
Bank 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 excluding lease liabilities
Lease liabilities
Net debt including lease liabilities
2019
£m
(469.7)
(0.4)
(83.3)
–
(553.4)
(63.1)
(953.1)
(298.0)
–
(1,314.2)
10.1
(1,857.5)
610.5
(1,247.0)
(480.0)
(1,727.0)
2018
£m
(333.5)
(6.9)
(67.8)
(0.2)
(408.4)
(104.3)
(1,054.3)
(297.6)
(0.1)
(1,456.3)
0.5
(1,864.2)
477.7
(1,386.5)
–
(1,386.5)
Further information on the movement in net debt and lease liabilities is shown in Note 26.
The total available committed funding at 31 December 2019 was £2,374.5m (2018: £2,464.4m). The committed funding maturity profile at
31 December 2019 is set out in the chart below.
Committed funding maturity profile by year
£m
285
114
280
152
191
63
125
300
169
119
133
2022
2023
2024
2025
2026
2027
38
2028
243
80
2021
83
2020
The undrawn committed bank facilities available at 31 December were as follows:
Expiring within one year
Expiring after one year but within two years
Expiring after two years
Bank facilities – undrawn
Senior bond
Bank facilities – drawn
US private placement notes
2019
£m
–
243.1
756.3
999.4
2018
£m
40.0
152.6
746.9
939.5
In addition, the Group maintains overdraft and uncommitted facilities to provide short term flexibility. At 31 December 2019 there were no
loans secured by fixed charges on property (2018: none).
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Financial statements
16 Risk management and financial instruments continued
Risk management
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group continually monitors net
debt and forecast cash flows to ensure that sufficient facilities are in place to meet the Group’s requirements in the short, medium and long
term and, in order to do so, arranges borrowings from a variety of sources.
The Group has substantial funding available comprising multi-currency credit facilities from the Group’s banks, US private placement notes
16 Risk management and financial instruments continued
Contractual maturity profile
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 contractual undiscounted cash flows and therefore include interest cash flows (forecast using LIBOR interest rates at 31 December in
the case of floating rate financial assets and liabilities). Derivative assets and liabilities have been included within the tables since they
predominantly relate to derivatives which are used to manage the interest cash flows on the Group’s debt. Bank loans have been drawn
under committed facilities and can be refinanced on maturity from these same facilities. Accordingly they have been aged based on the
maturity dates of the underlying facilities. Foreign currency cash flows have been translated using spot rates as at 31 December.
Contractual cash (outflows)/inflows
2019
Financial liabilities
Bank overdrafts
Bank loans
US private placement notes
Senior bond
Lease payments
Trade and other payables
Derivative financial instruments
Net settled:
Interest rate swaps
Gross settled:
Foreign exchange inflows
Foreign exchange outflows
Total
2018
Financial liabilities
Bank overdrafts
Bank loans
US private placement notes
Senior bond
Finance lease creditors
Trade and other payables
Derivative financial instruments
Net settled:
Interest rate swaps
Gross settled:
Foreign exchange inflows
Foreign exchange outflows
Total
Total
contractual
cash flows
£m
Within one
year
£m
After
one year
but within
two years
£m
After
two years
but within
five years
£m
(469.7)
(67.1)
(1,184.1)
(340.7)
(570.7)
(1,498.6)
(4,130.9)
(469.7)
(1.2)
(117.1)
(6.8)
(138.8)
(1,479.1)
(2,212.7)
12.3
1.6
1,089.3
(1,091.6)
10.0
(4,120.9)
1,089.3
(1,091.6)
(0.7)
(2,213.4)
–
(1.0)
(110.8)
(6.8)
(118.5)
(19.5)
(256.6)
1.6
–
–
1.6
–
(64.9)
(464.4)
(20.3)
(198.1)
–
(747.7)
4.8
–
–
4.8
Total
contractual
cash flows
£m
Within one
year
£m
After
one year
but within
two years
£m
After
two years
but within
five years
£m
(333.5)
(117.1)
(1,338.0)
(347.4)
(0.3)
(1,643.0)
(3,779.3)
(333.5)
(8.5)
(106.9)
(6.8)
(0.2)
(1,613.6)
(2,069.5)
(3.5)
(0.3)
1,741.9
(1,738.2)
0.2
(3,779.1)
1,741.5
(1,737.8)
3.4
(2,066.1)
–
(1.5)
(121.7)
(6.8)
(0.1)
(29.4)
(159.5)
(0.3)
0.4
(0.4)
(0.3)
–
(107.1)
(451.1)
(20.3)
–
–
(578.5)
(0.8)
–
–
(0.8)
After
five years
£m
–
–
(491.8)
(306.8)
(115.3)
–
(913.9)
4.3
–
–
4.3
After
five years
£m
–
–
(658.3)
(313.5)
–
–
(971.8)
(2.1)
–
–
(2.1)
(255.0)
(742.9)
(909.6)
Contractual cash (outflows)/inflows
(159.8)
(579.3)
(973.9)
Notes continued
and a senior unsecured bond.
Loans, borrowings and net debt
Bank overdrafts
Bank loans
US private placement notes
Finance lease creditors
Borrowings due within one year
Bank loans
US private placement notes
Senior bond
Finance lease creditors
Borrowings due after one year
Gross debt
Cash at bank and in hand
Net debt excluding lease liabilities
Lease liabilities
Net debt including lease liabilities
2019
£m
(469.7)
(0.4)
(83.3)
–
(553.4)
(63.1)
(953.1)
(298.0)
–
2018
£m
(333.5)
(6.9)
(67.8)
(0.2)
(408.4)
(104.3)
(1,054.3)
(297.6)
(0.1)
(1,314.2)
(1,456.3)
10.1
0.5
(1,857.5)
(1,864.2)
610.5
477.7
(1,247.0)
(1,386.5)
(480.0)
–
(1,727.0)
(1,386.5)
Derivatives managing the interest rate risk and currency profile of the debt
Further information on the movement in net debt and lease liabilities is shown in Note 26.
The total available committed funding at 31 December 2019 was £2,374.5m (2018: £2,464.4m). The committed funding maturity profile at
31 December 2019 is set out in the chart below.
Committed funding maturity profile by year
£m
The undrawn committed bank facilities available at 31 December were as follows:
Expiring within one year
Expiring after one year but within two years
Expiring after two years
2019
£m
–
243.1
756.3
999.4
2018
£m
40.0
152.6
746.9
939.5
In addition, the Group maintains overdraft and uncommitted facilities to provide short term flexibility. At 31 December 2019 there were no
loans secured by fixed charges on property (2018: none).
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Notes continued
16 Risk management and financial instruments continued
(b) Interest rate risk
The Group is funded by a mixture of fixed and floating rate debt with the Group’s main interest rate risk arising on its floating rate debt.
Interest rate swaps and interest rate caps are used to manage the interest rate risk profile.
The table below shows the fixed/floating rate debt mix after interest rate swaps. Of the US private placement notes of £1,036.4m (2018:
£1,122.1m), there are US dollar denominated amounts totalling £235.7m (2018: £377.1m), with maturities ranging from 2026 to 2028, which
have been swapped to floating rates using interest rate swaps which reprice every three or six months.
During 2019, £137.9m of interest rate swaps were terminated in line with the Group’s interest rate risk management policy. This resulted
in de-designation of a number of fair value hedge relationships. At the date of de-designation, there was a fair value adjustment on the US
private placement notes which will be amortised to the income statement across the remaining life of the debt. At 31 December 2019 this
remaining fair value adjustment on the US private placement notes was a credit of £12.2m*.
The interest rate risk on the floating rate liability is managed using interest rate options. 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 and are repriced every
three months.
Bank loans are drawn for various periods of up to three months at interest rates linked to LIBOR.
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 overdrafts
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
Effects of hedge accounting on the financial position and performance
The effects of the interest rate swaps on the Group’s financial position and performance are as follows:
Interest rate swaps
Net carrying amount (asset) (£m)
Notional amount (£m)
Maturity date range
Hedge ratio
Fair value (loss)/gain on US private placement notes in a hedge relationship (£m)
Fair value gain/(loss) on interest rate swaps in a hedge relationship (£m)
2019
£m
2018
£m
(1,036.4)
(298.0)
(1,334.4)
235.7
(1,098.7)
(1,122.1)
(297.6)
(1,419.7)
377.1
(1,042.6)
(469.7)
(63.5)
(533.2)
(235.7)
(768.9)
(333.5)
(111.2)
(444.7)
(377.1)
(821.8)
10.1
–
(1,857.5)
0.5
(0.3)
(1,864.2)
2019
2018
11.5
223.5
2026–2028
1:1
(10.7)
10.8
0.7
375.6
2025–2028
1:1
8.3
(8.2)
* In the Consolidated cash flow statement the cash inflow of £12.2m from the cancellation of the interest rate swap is shown within increase in borrowings.
150
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–
–
+1%
£m
0.6
1.3
Impact on profit before tax
–1%
£m
Impact on equity
–1%
£m
–
–
+1%
£m
0.6
1.3
During 2019, £137.9m of interest rate swaps were terminated in line with the Group’s interest rate risk management policy. This resulted
in de-designation of a number of fair value hedge relationships. At the date of de-designation, there was a fair value adjustment on the US
private placement notes which will be amortised to the income statement across the remaining life of the debt. At 31 December 2019 this
remaining fair value adjustment on the US private placement notes was a credit of £12.2m*.
2019
2018
Strategic report
Directors’ report
Financial statements
16 Risk management and financial instruments continued
Sensitivity to movements in interest rates
After taking account of hedge relationships, a change of 1% in the interest rate forward curves on 31 December would have affected profit
before income tax for the year and equity as at the year end as a result of changes in the fair values of derivative assets and liabilities at that
date by the amounts shown below:
Notes continued
16 Risk management and financial instruments continued
(b) Interest rate risk
The Group is funded by a mixture of fixed and floating rate debt with the Group’s main interest rate risk arising on its floating rate debt.
Interest rate swaps and interest rate caps are used to manage the interest rate risk profile.
The table below shows the fixed/floating rate debt mix after interest rate swaps. Of the US private placement notes of £1,036.4m (2018:
£1,122.1m), there are US dollar denominated amounts totalling £235.7m (2018: £377.1m), with maturities ranging from 2026 to 2028, which
have been swapped to floating rates using interest rate swaps which reprice every three or six months.
The interest rate risk on the floating rate liability is managed using interest rate options. 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 and are repriced every
three months.
Bank loans are drawn for various periods of up to three months at interest rates linked to LIBOR.
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 overdrafts
Bank loans
Total floating rate debt
Interest rate swaps (floating leg)
Floating rate liability
Finance lease creditors
Gross debt
Interest rate swaps
Net carrying amount (asset) (£m)
Notional amount (£m)
Maturity date range
Hedge ratio
Derivatives managing the interest rate risk and currency profile of the debt
Effects of hedge accounting on the financial position and performance
The effects of the interest rate swaps on the Group’s financial position and performance are as follows:
2019
£m
2018
£m
(1,036.4)
(298.0)
(1,334.4)
235.7
(1,122.1)
(297.6)
(1,419.7)
377.1
(1,098.7)
(1,042.6)
(469.7)
(63.5)
(533.2)
(235.7)
(768.9)
10.1
–
(333.5)
(111.2)
(444.7)
(377.1)
(821.8)
0.5
(0.3)
(1,857.5)
(1,864.2)
2019
2018
2026–2028
2025–2028
11.5
223.5
1:1
(10.7)
10.8
0.7
375.6
1:1
8.3
(8.2)
(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
Average rate
Closing rate
2019
1.28
1.14
2018
1.33
1.13
2019
1.32
1.18
2018
1.27
1.11
The majority of the Group’s transactions are carried out in the respective functional currencies of the Group’s operations and so transaction
exposures are usually relatively limited. Where they do occur the Group’s policy is to hedge exposures of highly probable forecast
transactions using forward foreign exchange contracts and these are designated as cash flow hedges. During the year the Group hedged
highly probable forecast transactions for periods of up to 18 months. However, the economic impact of foreign exchange on the value of
uncommitted future purchases and sales is not hedged. As a result, sudden and significant movements in foreign exchange rates can
impact profit margins where there is a delay in passing the resulting price increases on to customers.
For the year ended 31 December 2019, all foreign exchange cash flow hedges were effective with a cumulative pre-tax loss of £2.9m
(2018 cumulative pre-tax gain of £1.9m) recognised in equity at the end of the year and this will affect the income statement during 2020.
Effects of hedge accounting on the financial position and performance
Forward foreign currency hedges in relation to inventory purchases
Net carrying amount ((liability)/asset) (£m)
Notional amount at 31 December 2019 (£m)
Maturity date range
Hedge ratio
Change in value of hedged items since 1 January (£m)
Change in fair value of outstanding foreign currency forward contracts since 1 January (£m)
2019
2018
(2.9)
131.5
2020
1:1
4.8
(4.8)
1.9
140.5
2019–2020
1:1
(3.6)
3.6
The majority of the Group’s borrowings are effectively denominated in US dollars, sterling and euros, aligning them to the respective
functional currencies of the component parts of the Group’s EBITDA. This currency profile is achieved using short term foreign exchange
contracts and foreign currency debt, which are designated as hedging instruments to achieve net investment hedge accounting at a
Group level. This currency composition minimises the impact of movements in foreign exchange rates on the ratio of net debt to EBITDA.
No ineffectiveness was recorded from net investments in foreign entity hedges.
The currency profile of the Group’s net debt excluding lease liabilities at 31 December is set out in the table below:
Fair value (loss)/gain on US private placement notes in a hedge relationship (£m)
Fair value gain/(loss) on interest rate swaps in a hedge relationship (£m)
* In the Consolidated cash flow statement the cash inflow of £12.2m from the cancellation of the interest rate swap is shown within increase in borrowings.
US dollar
Sterling
Euro
Other
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2019
£m
485.3
426.7
295.9
39.1
1,247.0
2018
£m
598.4
351.4
375.2
61.5
1,386.5
151
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Directors’ reportStrategic reportFinancial statements
Notes continued
16 Risk management and financial instruments continued
The Group also enters into foreign currency derivatives to hedge intercompany loans economically although these do not qualify for hedge
accounting and therefore gains and losses are recorded in the income statement. These currency derivatives are subject to the same risk
management policies as all other derivative contracts.
Sensitivity to movements in foreign exchange rates
For the year ended 31 December 2019, a movement of one cent in the US dollar and euro average exchange rates would have changed profit
before income tax by £1.7m and £0.8m respectively (2018: £1.5m and £0.7m) and adjusted profit before income tax by £2.0m and £1.2m
respectively (2018: £1.8m and £1.2m).
If a 10% strengthening or weakening of sterling had taken place on 31 December it would have increased/(decreased) profit before income
tax and (decreased)/increased 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 income tax since equity is translated using the closing exchange rates at the year end and profit before income 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
income tax to a movement in exchange rates on 31 December and the resulting movement in profit before income tax is due solely to the
translation effect on monetary items. This analysis assumes that all other variables, in particular interest rates, remain constant.
2019
2018
Impact on profit before tax
+10%
£m
1.7
0.8
–10%
£m
(2.1)
(1.0)
Impact on equity
–10%
£m
205.0
192.7*
+10%
£m
(174.1)
(160.7)*
* During the year the calculation of the sensitivity to movements in foreign exchange rates was amended and as a result the 2018 amounts have been restated to aid comparability.
(d) Credit risk
Credit risk is the risk of loss in relation to a financial asset due to non-payment by the relevant counterparty. The Group’s objective is to
reduce its exposure to counterparty default by restricting the type of counterparty it deals with and by employing an appropriate policy in
relation to the collection of financial assets.
The Group’s financial assets are cash at bank and in hand, derivative financial instruments and trade and other receivables which represent
the Group’s maximum exposure to credit risk in relation to financial assets. The maximum exposure to credit risk for cash at bank and in
hand, derivative financial assets (see page 154) and trade and other receivables (see Note 14) is their respective carrying amounts.
Dealings are restricted to those banks with the relevant combination of geographic presence and suitable credit rating. The Group
continually monitors the credit ratings of its counterparties and the credit exposure to each counterparty.
For trade and other receivables, the amounts represented in the balance sheet are net of any impairment losses measured using the
expected credit loss model. Note 14 sets out an analysis of trade and other receivables and the provision for doubtful debts in respect
of trade receivables.
At the balance sheet date there were no significant concentrations of credit risk (2018: none).
152
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Notes continued
Strategic report
Directors’ report
Financial statements
16 Risk management and financial instruments continued
The Group also enters into foreign currency derivatives to hedge intercompany loans economically although these do not qualify for hedge
accounting and therefore gains and losses are recorded in the income statement. These currency derivatives are subject to the same risk
16 Risk management and financial instruments continued
Financial instruments
Financial assets and liabilities
management policies as all other derivative contracts.
Sensitivity to movements in foreign exchange rates
For the year ended 31 December 2019, a movement of one cent in the US dollar and euro average exchange rates would have changed profit
before income tax by £1.7m and £0.8m respectively (2018: £1.5m and £0.7m) and adjusted profit before income tax by £2.0m and £1.2m
respectively (2018: £1.8m and £1.2m).
If a 10% strengthening or weakening of sterling had taken place on 31 December it would have increased/(decreased) profit before income
tax and (decreased)/increased 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 income tax since equity is translated using the closing exchange rates at the year end and profit before income 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
income tax to a movement in exchange rates on 31 December and the resulting movement in profit before income tax is due solely to the
translation effect on monetary items. This analysis assumes that all other variables, in particular interest rates, remain constant.
Impact on profit before tax
Impact on equity
+10%
£m
1.7
0.8
–10%
£m
(2.1)
(1.0)
+10%
£m
(174.1)
(160.7)*
–10%
£m
205.0
192.7*
2019
2018
(d) Credit risk
* During the year the calculation of the sensitivity to movements in foreign exchange rates was amended and as a result the 2018 amounts have been restated to aid comparability.
Credit risk is the risk of loss in relation to a financial asset due to non-payment by the relevant counterparty. The Group’s objective is to
reduce its exposure to counterparty default by restricting the type of counterparty it deals with and by employing an appropriate policy in
relation to the collection of financial assets.
The Group’s financial assets are cash at bank and in hand, derivative financial instruments and trade and other receivables which represent
the Group’s maximum exposure to credit risk in relation to financial assets. The maximum exposure to credit risk for cash at bank and in
hand, derivative financial assets (see page 154) and trade and other receivables (see Note 14) is their respective carrying amounts.
Dealings are restricted to those banks with the relevant combination of geographic presence and suitable credit rating. The Group
continually monitors the credit ratings of its counterparties and the credit exposure to each counterparty.
For trade and other receivables, the amounts represented in the balance sheet are net of any impairment losses measured using the
expected credit loss model. Note 14 sets out an analysis of trade and other receivables and the provision for doubtful debts in respect
of trade receivables.
At the balance sheet date there were no significant concentrations of credit risk (2018: none).
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
Lease liabilities
Trade and other payables
Financial liabilities 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 derivatives
Total financial liabilities
2019
£m
2018
£m
610.5
1,183.8
477.7
1,330.0
11.5
0.3
0.3
2.8
1,809.2
(469.7)
(63.5)
(1,036.4)
(298.0)
–
(480.0)
(1,498.6)
–
(3.2)
(3.8)
(0.7)
(3,853.9)
5.8
3.8
4.9
4.0
1,826.2
(333.5)
(111.2)
(1,122.1)
(297.6)
(0.3)
–
(1,643.0)
(5.1)
(1.9)
(2.1)
(7.0)
(3,523.8)
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. There were no transfers
between levels for recurring fair value measurements during the year.
At 31 December 2019 the fair values, based on unadjusted market data, of the US private placement notes was £1,069.4m (2018: £1,132.1m)
and of the senior unsecured bond was £306.7m (2018: £290.1m).
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 £3.2m (2018: £14.1m) 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.
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Directors’ reportStrategic reportFinancial statements
Notes continued
16 Risk management and financial instruments continued
Offsetting of financial assets and liabilities
The following table sets out the Group’s derivative financial assets and liabilities that are subject to counterparty offsetting or master netting
agreements. The master netting agreements regulate settlement amounts in the event either party defaults on their obligations.
2019
Derivative financial assets
Derivative financial liabilities
2018
Derivative financial assets
Derivative financial liabilities
17 Provisions
Current
Non-current
Beginning of year
Charge
Acquisitions
Disposal of business
Utilised or released
Currency translation
End of year
Gross
amounts
offset in the
balance sheet
£m
–
–
Net amounts
recognised
in the
balance sheet
£m
14.9
(7.7)
Amounts not
offset in the
balance sheet
£m
(1.9)
1.9
Gross
amounts
£m
14.9
(7.7)
Net
amounts
£m
13.0
(5.8)
18.5
(16.1)
–
–
18.5
(16.1)
–
–
18.5
(16.1)
Properties
£m
18.7
0.6
0.3
–
(0.2)
(0.7)
18.7
Other
£m
28.7
1.1
1.1
–
(8.4)
(0.8)
21.7
2019
Total
£m
47.4
1.7
1.4
–
(8.6)
(1.5)
40.4
Properties
£m
20.8
0.5
0.9
(1.0)
(2.6)
0.1
18.7
2019
£m
6.5
33.9
40.4
Other
£m
24.4
6.0
4.4
–
(6.2)
0.1
28.7
2018
£m
6.1
41.3
47.4
2018
Total
£m
45.2
6.5
5.3
(1.0)
(8.8)
0.2
47.4
The properties provision includes provisions for repairs and dilapidations. These provisions cover the relevant periods of the lease
agreements, which typically extend from one to 10 years, up to the expected termination date.
Other provisions include expected legal and environmental claims, onerous contracts and other liabilities based on management’s best
estimate of the liability at the balance sheet date, determined by reference to known factors and past experience of similar items.
Management expects these amounts to be settled within the next one to five years.
The Group is a defendant in a number of legal proceedings incidental to its operations. While any litigation has an element of uncertainty,
management does not expect that the actual outcome of any such proceedings, either individually or in the aggregate, will be materially
different to the amounts provided.
154
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16 Risk management and financial instruments continued
Offsetting of financial assets and liabilities
The following table sets out the Group’s derivative financial assets and liabilities that are subject to counterparty offsetting or master netting
agreements. The master netting agreements regulate settlement amounts in the event either party defaults on their obligations.
Notes continued
Derivative financial assets
Derivative financial liabilities
2019
2018
Derivative financial assets
Derivative financial liabilities
17 Provisions
Current
Non-current
Beginning of year
Charge
Acquisitions
Disposal of business
Utilised or released
Currency translation
End of year
Gross
Net amounts
amounts
offset in the
recognised
in the
Amounts not
offset in the
amounts
balance sheet
balance sheet
balance sheet
amounts
£m
–
–
–
–
£m
14.9
(7.7)
18.5
(16.1)
£m
(1.9)
1.9
Net
£m
13.0
(5.8)
–
–
18.5
(16.1)
Gross
£m
14.9
(7.7)
18.5
(16.1)
Properties
Properties
£m
18.7
0.6
0.3
–
(0.2)
(0.7)
18.7
Other
£m
28.7
1.1
1.1
–
(8.4)
(0.8)
21.7
2019
Total
£m
47.4
1.7
1.4
–
(8.6)
(1.5)
40.4
£m
20.8
0.5
0.9
(1.0)
(2.6)
0.1
18.7
2019
£m
6.5
33.9
40.4
Other
£m
24.4
6.0
4.4
–
(6.2)
0.1
28.7
2018
£m
6.1
41.3
47.4
2018
Total
£m
45.2
6.5
5.3
(1.0)
(8.8)
0.2
47.4
The properties provision includes provisions for repairs and dilapidations. These provisions cover the relevant periods of the lease
agreements, which typically extend from one to 10 years, up to the expected termination date.
Other provisions include expected legal and environmental claims, onerous contracts and other liabilities based on management’s best
estimate of the liability at the balance sheet date, determined by reference to known factors and past experience of similar items.
Management expects these amounts to be settled within the next one to five years.
The Group is a defendant in a number of legal proceedings incidental to its operations. While any litigation has an element of uncertainty,
management does not expect that the actual outcome of any such proceedings, either individually or in the aggregate, will be materially
different to the amounts provided.
Strategic report
Directors’ report
Financial statements
18 Deferred tax
Property, plant and equipment
Defined benefit pension schemes
Goodwill and customer relationships
Share based payments
Leases
Provisions
Inventories
Other
Deferred tax asset/(liability)
Set-off of tax
Net deferred tax asset/(liability)
Asset
£m
1.2
7.6
3.9
5.4
7.4
11.2
7.0
22.8
66.5
(62.8)
3.7
Liability
£m
(10.8)
(1.9)
(166.5)
–
–
(0.4)
(8.6)
(2.1)
(190.3)
62.8
(127.5)
2019
Net
£m
(9.6)
5.7
(162.6)
5.4
7.4
10.8
(1.6)
20.7
(123.8)
–
(123.8)
Asset
£m
1.3
6.3
3.2
8.6
–
12.2
7.1
19.4
58.1
(54.1)
4.0
Liability
£m
(10.0)
(0.7)
(183.5)
–
–
(0.2)
(10.2)
(3.2)
(207.8)
54.1
(153.7)
2018
Net
£m
(8.7)
5.6
(180.3)
8.6
–
12.0
(3.1)
16.2
(149.7)
–
(149.7)
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
£14.6m (2018: £16.7m).
No deferred tax has been recognised in respect of unutilised capital losses of £94.7m (2018: £96.1m) 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
Impact of transition to IFRS 16
Restated net deferred tax liability at beginning of year
Acquisitions
Credit to income statement
Recognised in other comprehensive income and equity
Reclassified to current tax
Currency translation
End of year
2019
£m
149.7
(7.6)
142.1
1.2
(10.9)
(2.5)
0.3
(6.4)
123.8
2018
£m
154.6
–
154.6
4.2
(17.6)
4.6
2.5
1.4
149.7
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Directors’ reportStrategic reportFinancial statements
Notes continued
19 Share capital and share based payments
Issued and fully paid ordinary shares of 3217p each
Number of ordinary shares in issue and fully paid
Beginning of year
Issued – option exercises
End of year
2019
£m
108.3
2018
£m
108.1
2019
2018
336,425,304 335,931,546
493,758
336,792,607 336,425,304
367,303
The Company operates a number of share plans for the benefit of employees of the Company and its subsidiaries. Further details of the
share plans as they relate to the directors of the Company are set out in the Directors’ remuneration report.
Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan
For many years, the Company has operated all employee savings related share option schemes. The existing scheme in the UK, the
Sharesave Scheme (2011), was approved by shareholders at the 2011 Annual General Meeting. It is an HM Revenue & Customs (‘HMRC’)
tax advantaged scheme and is open to all UK employees, including UK based executive directors.
The Irish Sharesave Plan, which is approved by the Irish Revenue Commissioners, and the International Sharesave Plan, were first
introduced in 2006 and have since been extended, most recently following the approval of the Sharesave Scheme (2011).
The Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan operate on a similar basis with options granted to
participating employees who have completed at least three months of continuous service at a discount of up to 20% of the market price
prevailing shortly before the invitation to apply for the options. Depending on the scheme, options are normally exercisable either three
or five years after they have been granted with employees saving up to £500 (2018: £500) per month (or the equivalent value in other
currencies under the International Sharesave Plan) or €500 (2018: €500) per month under the Irish Sharesave Plan.
Long Term Incentive Plan 2004 (‘2004 LTIP’) and 2014 (‘2014 LTIP’)
The 2004 LTIP was approved by shareholders at the 2004 Annual General Meeting and expired in May 2014. No further share options
or performance share awards have been granted under the 2004 LTIP since that date. The 2014 LTIP was approved by shareholders
at the 2014 Annual General Meeting and replaced the 2004 LTIP. The operation of both LTIPs is overseen by the Remuneration Committee
of the Board and each is divided into two parts.
Part A of the LTIP relates to the grant of market priced executive share options. In normal circumstances options granted under Part A are
only exercisable if the relevant performance condition has been satisfied. The performance condition is based on the Company’s adjusted
earnings per share growth exceeding UK RPI inflation over three financial years by a specified margin (for the 2004 LTIP) or meeting certain
specified targets (for the 2014 LTIP).
Part B of the LTIP relates to the grant of performance share awards which are conditional rights to receive shares in the Company for nil
consideration. A performance share award will 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 subject to the Company’s adjusted earnings per share growth exceeding UK RPI inflation over three years by a
specified margin (for the 2004 LTIP) or meeting certain specified targets (for the 2014 LTIP).
Investment in own shares
The Company holds a number of its ordinary shares in an employee benefit trust. The principal purpose of this trust is to hold shares
in the Company for subsequent transfer to certain senior employees and executive directors 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 in the Directors’ remuneration report. The assets, liabilities and expenditure of the trust have been incorporated in the
consolidated financial statements. Finance expenses and administration charges are included in the income statement on an accruals
basis. At 31 December 2019 the trust held 3,383,452 (2018: 2,698,287) shares, upon which dividends have been waived, with an aggregate
nominal value of £1.1m (2018: £0.9m) and market value of £69.9m (2018: £63.9m).
156
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Notes continued
19 Share capital and share based payments
Issued and fully paid ordinary shares of 3217p each
Number of ordinary shares in issue and fully paid
Beginning of year
Issued – option exercises
End of year
2019
£m
108.3
2018
£m
108.1
2019
2018
336,425,304 335,931,546
367,303
493,758
336,792,607 336,425,304
The Company operates a number of share plans for the benefit of employees of the Company and its subsidiaries. Further details of the
share plans as they relate to the directors of the Company are set out in the Directors’ remuneration report.
Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan
For many years, the Company has operated all employee savings related share option schemes. The existing scheme in the UK, the
Sharesave Scheme (2011), was approved by shareholders at the 2011 Annual General Meeting. It is an HM Revenue & Customs (‘HMRC’)
tax advantaged scheme and is open to all UK employees, including UK based executive directors.
The Irish Sharesave Plan, which is approved by the Irish Revenue Commissioners, and the International Sharesave Plan, were first
introduced in 2006 and have since been extended, most recently following the approval of the Sharesave Scheme (2011).
The Sharesave Scheme, International Sharesave Plan and Irish Sharesave Plan operate on a similar basis with options granted to
participating employees who have completed at least three months of continuous service at a discount of up to 20% of the market price
prevailing shortly before the invitation to apply for the options. Depending on the scheme, options are normally exercisable either three
or five years after they have been granted with employees saving up to £500 (2018: £500) per month (or the equivalent value in other
currencies under the International Sharesave Plan) or €500 (2018: €500) per month under the Irish Sharesave Plan.
Long Term Incentive Plan 2004 (‘2004 LTIP’) and 2014 (‘2014 LTIP’)
The 2004 LTIP was approved by shareholders at the 2004 Annual General Meeting and expired in May 2014. No further share options
or performance share awards have been granted under the 2004 LTIP since that date. The 2014 LTIP was approved by shareholders
at the 2014 Annual General Meeting and replaced the 2004 LTIP. The operation of both LTIPs is overseen by the Remuneration Committee
of the Board and each is divided into two parts.
Part A of the LTIP relates to the grant of market priced executive share options. In normal circumstances options granted under Part A are
only exercisable if the relevant performance condition has been satisfied. The performance condition is based on the Company’s adjusted
earnings per share growth exceeding UK RPI inflation over three financial years by a specified margin (for the 2004 LTIP) or meeting certain
specified targets (for the 2014 LTIP).
Part B of the LTIP relates to the grant of performance share awards which are conditional rights to receive shares in the Company for nil
consideration. A performance share award will 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 subject to the Company’s adjusted earnings per share growth exceeding UK RPI inflation over three years by a
specified margin (for the 2004 LTIP) or meeting certain specified targets (for the 2014 LTIP).
Investment in own shares
The Company holds a number of its ordinary shares in an employee benefit trust. The principal purpose of this trust is to hold shares
in the Company for subsequent transfer to certain senior employees and executive directors 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 in the Directors’ remuneration report. The assets, liabilities and expenditure of the trust have been incorporated in the
consolidated financial statements. Finance expenses and administration charges are included in the income statement on an accruals
basis. At 31 December 2019 the trust held 3,383,452 (2018: 2,698,287) shares, upon which dividends have been waived, with an aggregate
nominal value of £1.1m (2018: £0.9m) and market value of £69.9m (2018: £63.9m).
Strategic report
Directors’ report
Financial statements
19 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 (£)
Number of 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 (£)
2019
28.02.19–07.10.19
20.19–25.51
nil–24.41
3,457,106
1–5
17–19
0.7–10
0.7–6.3
0.3–1.0
2.0–2.5
1.95–23.84
2018
01.03.18–19.12.18
19.36–24.04
nil–24.01
3,179,752
3–5
17–18
2–10
2.2–6.3
0.9–1.3
1.9–2.4
1.91–13.38
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 £23.76
(2018: £23.04). The total charge for the year relating to share based payments was £13.5m (2018: £12.9m). After tax the total charge was
£13.5m (2018: £10.6m).
Details of share options and awards which have been granted and exercised, those which have lapsed during 2019 and those outstanding
and available to exercise at 31 December 2019, whether over new issue or market purchase shares, under the Sharesave Scheme (2011),
International Sharesave Plan, Irish Sharesave Plan, the 2004 LTIP Part A and Part B and 2014 LTIP Part A and Part B, are set out in the
following table:
Options
outstanding
at 01.01.19
Number
706,784
Number
263,069
Grants/
awards
2019
Price (£)
19.16
Lapses*
2019
Number
185,825 12.53-19.16 108,501
Exercises
2019
Price (£)
Number
Options
outstanding
at 31.12.19
Price (£)
675,527 15.36-19.16
Number
Options
available
to exercise
at 31.12.19
Number
9,694
91,149
16,279
–
–
278,536
46,032
1,436,140
14,796
19.16
19.16
–
–
8,496,943 2,561,116 21.07-24.41
nil
525,493
1,063,142
12,042,373 3,457,106
266,497 15.64-19.16
42,309 15.64-19.16
73,639 15.56-18.68
15.56
11,135
317,115 5.85-15.97
nil
29,549
8,867
–
–
767,146 16.38-23.89 509,428
nil 152,841
154,112
1,519,327
1,004
1,023
1,119,025 6.77-15.66 1,119,025
4,441
9,781,485 16.38-24.41 3,076,378
78,119
1,281,682
4,289,684
809,186 13,170,966
10,355
4,441
nil
nil
Sharesave Scheme (2011)
International Sharesave
Plan
Irish Sharesave Plan
2004 LTIP Part A
2004 LTIP Part B
2014 LTIP Part A
2014 LTIP Part B
* Share option lapses relate to those which have either been forfeited or have expired during the year.
For the options outstanding at 31 December 2019, the weighted average fair values and the weighted average remaining contractual lives
(being the time period from 31 December 2019 until the lapse date of each share option) are set out below:
Sharesave Scheme (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
outstanding
(£)
4.95
5.16
5.11
2.82
14.64
Weighted
average
remaining
contractual
life
(years)
2.15
1.95
1.95
7.35
4.40
156
Bunzl plc Annual Report 2019
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Bunzl plc Annual Report 2019
157
157
The outstanding share options and performance share awards are exercisable at various dates up to September 2029.
Directors’ reportStrategic reportFinancial statements
Notes continued
20 Dividends
2017 interim
2017 final
2018 interim
2018 final
Total
Total dividends per share for the year to which they relate are:
Interim
Final
Total
2019
£m
50.7
116.6
167.3
2019
15.5p
35.8p
51.3p
2018
£m
46.2
106.0
152.2
Per share
2018
15.2p
35.0p
50.2p
The 2019 interim dividend of 15.5p per share was paid on 2 January 2020 and comprised £51.7m of cash. The 2019 final dividend of 35.8p
per share will be paid on 1 July 2020 to shareholders on the register at the close of business on 22 May 2020. The 2019 final dividend will
comprise approximately £119m of cash.
21 Contingent liabilities
Bank guarantees
2019
£m
2.2
2018
£m
2.5
In addition see Note 8 on page 142 for details of the separate contingent liability relating to the European Commission’s assertion that part
of the UK’s tax regime amounts to State aid.
22 Directors’ ordinary share interests
The interests of the directors, and their connected persons, in the share capital of the Company at 31 December were:
Philip Rogerson
Peter Ventress*
Frank van Zanten
Brian May
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
2019
10,000
–
104,438
114,995
4,000
3,000
4,000
–
240,433
2018
10,000
–
93,991
105,240
4,000
3,000
4,000
–
220,231
* Peter Ventress was appointed as a director of the Company on 1 June 2019.
Brian May retired as a director of the Company on 31 December 2019.
Details of the directors’ options and awards over ordinary shares made under the 2014 LTIP, Sharesave Scheme (2011) and DASBS are set
out in the Directors’ remuneration report. No changes to the directors’ ordinary share interests shown in this Note and the Directors’
remuneration report have taken place between 31 December 2019 and 24 February 2020.
158
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Directors’ reportFinancial statementsStrategic report
Total dividends per share for the year to which they relate are:
Notes continued
20 Dividends
2017 interim
2017 final
2018 interim
2018 final
Total
Interim
Final
Total
comprise approximately £119m of cash.
21 Contingent liabilities
Bank guarantees
of the UK’s tax regime amounts to State aid.
22 Directors’ ordinary share interests
Philip Rogerson
Peter Ventress*
Frank van Zanten
Brian May
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
The 2019 interim dividend of 15.5p per share was paid on 2 January 2020 and comprised £51.7m of cash. The 2019 final dividend of 35.8p
per share will be paid on 1 July 2020 to shareholders on the register at the close of business on 22 May 2020. The 2019 final dividend will
In addition see Note 8 on page 142 for details of the separate contingent liability relating to the European Commission’s assertion that part
The interests of the directors, and their connected persons, in the share capital of the Company at 31 December were:
2019
£m
50.7
116.6
167.3
2019
15.5p
35.8p
51.3p
2018
£m
46.2
106.0
152.2
Per share
2018
15.2p
35.0p
50.2p
2019
£m
2.2
2018
£m
2.5
2019
10,000
–
104,438
114,995
4,000
3,000
4,000
–
2018
10,000
–
93,991
105,240
4,000
3,000
4,000
–
240,433
220,231
* Peter Ventress was appointed as a director of the Company on 1 June 2019.
Brian May retired as a director of the Company on 31 December 2019.
Details of the directors’ options and awards over ordinary shares made under the 2014 LTIP, Sharesave Scheme (2011) and DASBS are set
out in the Directors’ remuneration report. No changes to the directors’ ordinary share interests shown in this Note and the Directors’
remuneration report have taken place between 31 December 2019 and 24 February 2020.
Strategic report
Directors’ report
Financial statements
23 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 2019 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 trustee, in agreement with the Company, has 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 2018 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 2019 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
of 1974, the Pension Protection Act of 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 pension scheme. The last annual review was carried out by a qualified
actuary as at 1 January 2019 and showed that there was a required annual contribution of $6.5m. In 2020, the Group plans to contribute
$8.0m for the 2019 plan year to cover prudently this required contribution and anticipate future funding needs. In 2019, the Group also paid
a contribution of $8.0m for the 2018 plan year. The annual review as at 1 January 2020 is ongoing.
Risks
The main risks to which the Group is exposed in relation to the defined benefit pension schemes are described below:
• Inflation risk – the majority of the UK scheme’s liabilities increase in line with inflation and, as a result, if inflation is greater than expected
the liabilities will increase. The impact of high inflation is capped each year for the UK scheme’s benefits. The US scheme’s liabilities are
not directly tied to inflationary increases.
• Interest rate risk – a fall in bond yields will increase the value of the schemes’ liabilities. A proportion of both the UK and US schemes’
assets are invested in liability matching assets to mitigate the interest rate and also the inflation risk.
• Mortality risk – the assumptions adopted by the Group make allowance for future improvements in life expectancy. However, if life
expectancy improves at a faster rate than assumed, this would result in greater payments from the schemes and consequently increases in
the schemes’ liabilities. The mortality assumptions are reviewed on a regular basis to minimise the risk of using an inappropriate assumption.
158
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159
159
Directors’ reportStrategic reportFinancial statements
Notes continued
23 Retirement benefits continued
• Investment risk – the schemes invest in a diversified range of asset classes to mitigate the risk of falls in any one area of the investments.
In the UK, the trustee implements partial currency hedging on the overseas assets to mitigate currency risk.
The risks mentioned above could lead to a material change to the deficit or surplus of the pension schemes. Given the long term time
horizon of the schemes’ cash flows, the assumptions used can lead to volatility in the scheme valuations from year to year. The Company
and the trustee seek to mitigate actively the risks associated with the schemes.
A higher defined benefit obligation could lead to additional funding requirements in future years. Any deficit measured on a funding
valuation basis, which may differ from the actuarial valuation under IAS 19, will generally be financed over a period that ensures the
contributions are appropriate to the Group and in line with the relevant regulations.
Financial information
The amounts included in the consolidated financial statements at 31 December were:
Amounts included in the income statement
Defined contribution pension schemes
Defined benefit pension schemes
current service cost (net of contributions by employees)
Total included in employee costs excluding past service cost
Defined benefit pension schemes
past service cost
Total included in employee costs
Amounts included in finance (income)/expense
Net interest income on defined benefit pension schemes in surplus
Net interest expense on defined benefit pension schemes in deficit
Total charge to the income statement
2019
£m
25.1
5.2
30.3
–
30.3
(0.2)
1.3
31.4
2018
£m
22.4
6.9
29.3
3.3
32.6
(0.1)
1.4
33.9
The past service cost in 2018 of £3.3m relates to the cost of the equalisation of guaranteed minimum pensions between male and female
members of the Group’s UK defined benefit pension scheme following the High Court judgment in 2018 in the case of Lloyds Banking
Group Pensions Trustees Limited vs Lloyds Bank plc and others.
Amounts recognised in the statement of comprehensive income
Actual return less expected return on pension scheme assets
Experience gain on pension scheme liabilities
Impact of changes in financial assumptions relating to the present value of pension scheme liabilities
Impact of changes in demographic assumptions relating to the present value of pension scheme liabilities
Actuarial (loss)/gain on defined benefit pension schemes
2019
£m
68.9
1.3
(79.1)
0.6
(8.3)
The cumulative amount of net actuarial losses arising since 1 January 2004 recognised in the statement of comprehensive income at
31 December 2019 was £99.8m (2018: £91.5m).
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 were:
UK
Longevity at age 65 for current pensioners (years)
Longevity at age 65 for future pensioners (years)
US
Longevity at age 65 for current and future pensioners (years)
2019
22.0
23.4
21.6
2018
£m
(25.6)
2.0
32.1
2.5
11.0
2018
22.2
23.6
21.7
160
160
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report
Notes continued
23 Retirement benefits continued
• Investment risk – the schemes invest in a diversified range of asset classes to mitigate the risk of falls in any one area of the investments.
In the UK, the trustee implements partial currency hedging on the overseas assets to mitigate currency risk.
The risks mentioned above could lead to a material change to the deficit or surplus of the pension schemes. Given the long term time
horizon of the schemes’ cash flows, the assumptions used can lead to volatility in the scheme valuations from year to year. The Company
and the trustee seek to mitigate actively the risks associated with the schemes.
A higher defined benefit obligation could lead to additional funding requirements in future years. Any deficit measured on a funding
valuation basis, which may differ from the actuarial valuation under IAS 19, will generally be financed over a period that ensures the
contributions are appropriate to the Group and in line with the relevant regulations.
Financial information
The amounts included in the consolidated financial statements at 31 December were:
Amounts included in the income statement
Defined contribution pension schemes
Defined benefit pension schemes
current service cost (net of contributions by employees)
Total included in employee costs excluding past service cost
Defined benefit pension schemes
past service cost
Total included in employee costs
Amounts included in finance (income)/expense
Net interest income on defined benefit pension schemes in surplus
Net interest expense on defined benefit pension schemes in deficit
Total charge to the income statement
The past service cost in 2018 of £3.3m relates to the cost of the equalisation of guaranteed minimum pensions between male and female
members of the Group’s UK defined benefit pension scheme following the High Court judgment in 2018 in the case of Lloyds Banking
Group Pensions Trustees Limited vs Lloyds Bank plc and others.
Amounts recognised in the statement of comprehensive income
Actual return less expected return on pension scheme assets
Experience gain on pension scheme liabilities
Impact of changes in financial assumptions relating to the present value of pension scheme liabilities
Impact of changes in demographic assumptions relating to the present value of pension scheme liabilities
Actuarial (loss)/gain on defined benefit pension schemes
The cumulative amount of net actuarial losses arising since 1 January 2004 recognised in the statement of comprehensive income at
31 December 2019 was £99.8m (2018: £91.5m).
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 were:
Longevity at age 65 for current pensioners (years)
Longevity at age 65 for future pensioners (years)
Longevity at age 65 for current and future pensioners (years)
2019
£m
25.1
5.2
30.3
–
30.3
(0.2)
1.3
31.4
2019
£m
68.9
1.3
(79.1)
0.6
(8.3)
2019
22.0
23.4
21.6
2018
£m
22.4
6.9
29.3
3.3
32.6
(0.1)
1.4
33.9
2018
£m
(25.6)
2.0
32.1
2.5
11.0
2018
22.2
23.6
21.7
UK
US
160
Strategic report
Directors’ report
Financial statements
23 Retirement benefits continued
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation rate
2019
3.4%
2.2%
2.1%
2.2%
2018
3.6%
2.2%
2.9%
2.2%
UK
2017
3.6%
2.2%
2.6%
2.2%
2019
3.0%
–
3.1%
2.3%
2018
3.0%
–
4.2%
2.3%
US
2017
3.0%
–
3.6%
2.3%
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 2019 as a result of reasonably possible
changes to key assumptions was:
UK
US
Impact of change
in longevity
–1 year
£m
13.4
4.3
+1 year
£m
(13.3)
(3.2)
Impact of change
in inflation rate
–0.25%
£m
9.3
0.1
+0.25%
£m
(10.7)
(0.1)
Impact of change
in discount rate
–0.25%
£m
(18.7)
(4.4)
+0.25%
£m
17.5
4.2
The market value of pension scheme assets and the present value of retirement benefit obligations at 31 December were:
2019
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
Defined benefit pension schemes in surplus
Total surplus/(deficit) before tax
Deferred tax
Total surplus/(deficit) after tax
2018
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
Defined benefit pension schemes in surplus
Total surplus/(deficit) before tax
Deferred tax
Total surplus/(deficit) after tax
UK
£m
129.9
259.6
0.5
390.0
(379.2)
–
(379.2)
–
10.8
10.8
(1.9)
8.9
UK
£m
101.0
231.1
0.4
332.5
(329.1)
–
(329.1)
–
3.4
3.4
(0.6)
2.8
US
£m
57.2
50.9
13.4
121.5
(140.2)
(11.9)
(152.1)
(30.6)
–
(30.6)
3.1
(27.5)
US
£m
49.4
49.7
16.0
115.1
(131.1)
(11.8)
(142.9)
(27.8)
–
(27.8)
2.5
(25.3)
Other
£m
5.8
6.0
13.3
25.1
(28.9)
(12.4)
(41.3)
(16.2)
–
(16.2)
4.5
(11.7)
Other
£m
4.7
5.6
11.3
21.6
(24.4)
(11.3)
(35.7)
(14.1)
–
(14.1)
3.7
(10.4)
Of the pension scheme assets, £512.3m (2018: £449.4m) are valued based on quoted market prices.
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
Bunzl plc Annual Report 2019
Total
£m
192.9
316.5
27.2
536.6
(548.3)
(24.3)
(572.6)
(46.8)
10.8
(36.0)
5.7
(30.3)
Total
£m
155.1
286.4
27.7
469.2
(484.6)
(23.1)
(507.7)
(41.9)
3.4
(38.5)
5.6
(32.9)
161
161
Directors’ reportStrategic reportFinancial statements
Notes continued
23 Retirement benefits continued
Movement in net deficit
Beginning of year
Current service cost
Past service cost
Contributions
Net interest expense
Actuarial (loss)/gain
Currency translation
End of year
Changes in the present value of defined benefit pension scheme liabilities
Beginning of year
Acquisitions
Current service cost
Past service cost
Interest expense
Contributions by employees
Actuarial loss/(gain)
Benefits paid
Currency translation
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Acquisitions
Interest income
Actuarial gain/(loss)
Contributions by employer
Contributions by employees
Benefits paid
Currency translation
End of year
2019
£m
(38.5)
(5.2)
–
14.9
(1.1)
(8.3)
2.2
(36.0)
2019
£m
507.7
–
5.2
–
15.8
0.7
77.2
(25.7)
(8.3)
572.6
2019
£m
469.2
–
14.7
68.9
14.9
0.7
(25.7)
(6.1)
536.6
2018
£m
(51.0)
(6.9)
(3.3)
14.9
(1.3)
11.0
(1.9)
(38.5)
2018
£m
531.5
0.7
6.9
3.3
14.6
0.7
(36.6)
(22.6)
9.2
507.7
2018
£m
480.5
0.7
13.3
(25.6)
14.9
0.7
(22.6)
7.3
469.2
The actual return on pension scheme assets was a gain of £83.6m (2018: loss of £12.3m).
The Group expects to pay approximately £15.3m in contributions to the defined benefit pension schemes in the year ending 31 December
2020 (expected as of 31 December 2018 for the year ending 31 December 2019: £15.6m) including £7.0m for the UK (expected as of
31 December 2018 for the year ending 31 December 2019: £7.3m).
The weighted average duration of the defined benefit pension scheme liabilities at 31 December 2019 was approximately 19.1 years
(2018: 18.3 years) for the UK and 11.7 years (2018: 11.4 years) for the US.
The total defined benefit pension scheme liabilities are divided between active members (£193.0m (2018: £174.0m)), deferred members
(£174.9m (2018: £150.7m)) and pensioners (£204.7m (2018: £183.0m)).
162
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Notes continued
23 Retirement benefits continued
Movement in net deficit
Beginning of year
Current service cost
Past service cost
Contributions
Net interest expense
Actuarial (loss)/gain
Currency translation
End of year
Beginning of year
Acquisitions
Current service cost
Past service cost
Interest expense
Actuarial loss/(gain)
Benefits paid
Currency translation
End of year
Contributions by employees
Beginning of year
Acquisitions
Interest income
Actuarial gain/(loss)
Contributions by employer
Contributions by employees
Benefits paid
Currency translation
End of year
Changes in the present value of defined benefit pension scheme liabilities
Changes in the fair value of defined benefit pension scheme assets
2019
£m
(38.5)
(5.2)
–
14.9
(1.1)
(8.3)
2.2
(36.0)
2019
£m
507.7
5.2
–
–
15.8
0.7
77.2
(25.7)
(8.3)
572.6
2019
£m
469.2
–
14.7
68.9
14.9
0.7
(25.7)
(6.1)
536.6
2018
£m
(51.0)
(6.9)
(3.3)
14.9
(1.3)
11.0
(1.9)
(38.5)
2018
£m
531.5
0.7
6.9
3.3
14.6
0.7
(36.6)
(22.6)
9.2
507.7
2018
£m
480.5
0.7
13.3
(25.6)
14.9
0.7
(22.6)
7.3
469.2
The actual return on pension scheme assets was a gain of £83.6m (2018: loss of £12.3m).
The Group expects to pay approximately £15.3m in contributions to the defined benefit pension schemes in the year ending 31 December
2020 (expected as of 31 December 2018 for the year ending 31 December 2019: £15.6m) including £7.0m for the UK (expected as of
31 December 2018 for the year ending 31 December 2019: £7.3m).
The weighted average duration of the defined benefit pension scheme liabilities at 31 December 2019 was approximately 19.1 years
(2018: 18.3 years) for the UK and 11.7 years (2018: 11.4 years) for the US.
The total defined benefit pension scheme liabilities are divided between active members (£193.0m (2018: £174.0m)), deferred members
(£174.9m (2018: £150.7m)) and pensioners (£204.7m (2018: £183.0m)).
Strategic report
Directors’ report
Financial statements
24 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
Pension costs excluding past service cost
Share based payments
GMP equalisation charge
2019
6,746
5,058
3,862
3,257
18,923
61
18,984
2019
£m
742.0
88.0
30.3
13.5
873.8
–
873.8
2018
6,531
5,007
4,037
3,210
18,785
61
18,846
2018
£m
729.8
87.4
29.3
12.9
859.4
3.3
862.7
In addition to the above, acquisition related items for the year ended 31 December 2019 include deferred consideration payments of £13.3m
(2018: £19.1m) relating to the retention of former owners of businesses acquired.
Key management remuneration
Salaries and short term employee benefits
Share based payments
Retirement benefits
2019
£m
6.4
2.0
0.9
9.3
2018
£m
7.1
1.7
0.9
9.7
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
2019
£m
0.7
1.9
1.2
3.8
2018
£m
0.8
2.7
2.3
5.8
Following the retirement of Patrick Larmon on 31 December 2018, the number of executive directors reduced from three to two.
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 £0.4m (2018: £2.9m). The aggregate
market value of performance share awards exercised by directors under long term incentive schemes during the year was
£0.7m (2018: £1.2m). The aggregate market value of share awards exercised by directors under the DASBS was £0.4m (2018: £0.6m).
162
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Notes continued
25 Lease liabilities
The Group leases certain property, plant, equipment and vehicles under non-cancellable operating lease agreements. These leases have
varying terms and renewal rights. From 1 January 2019, on adoption of IFRS 16 ‘Leases’, the Group has recognised right-of-use assets and
lease liabilities for these leases, except for short term and low value leases.
Movement in lease liabilities
2019
Beginning of year
Lease liabilities on transition to IFRS 16
Acquisitions (Note 27)
New leases
Interest charge in the year
Payment of lease liabilities
Remeasurement adjustments
Currency translation
End of year
Ageing of lease liabilities:
Current lease liabilities
Non-current lease liabilities
End of year
£m
–
498.3
6.5
105.2
23.3
(151.6)
14.4
(16.1)
480.0
121.8
358.2
480.0
As at 31 December 2019, the Group had £33.2m of leases which had been committed to but which had not yet started. Such leases are
not included in the Group’s lease liabilities as at 31 December 2019. In relation to leases which are included in lease liabilities, there are
potential further future cash flows of £46.2m if termination options are not exercised and extension options are exercised.
The cash outflow for low value and short term leases was £7.1m for the year ended 31 December 2019.
At 31 December 2018 the total future minimum lease payments under non-cancellable operating leases in accordance with IAS 17, the
previous accounting standard for leases, were:
Within one year
Between one and five years
After five years
26 Cash and cash equivalents and net debt
Cash at bank and in hand
Bank overdrafts
Cash and cash equivalents
Interest bearing loans and borrowings – current liabilities
Interest bearing loans and borrowings – non-current liabilities
Derivatives managing the interest rate risk and currency profile of the debt
Net debt excluding lease liabilities
Lease liabilities
Net debt including lease liabilities
Land &
buildings
£m
104.8
286.5
121.2
512.5
2019
£m
610.5
(469.7)
140.8
(83.7)
(1,314.2)
10.1
(1,247.0)
(480.0)
(1,727.0)
2018
Other
£m
36.8
70.1
4.3
111.2
2018
£m
477.7
(333.5)
144.2
(74.9)
(1,456.3)
0.5
(1,386.5)
–
(1,386.5)
The cash at bank and in hand and bank overdrafts amounts included in the table above include the amounts associated with the Group’s
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 which is an enforceable right which the Group intends to use. The cash at bank and in hand
and bank overdrafts figures net of the amounts in the cash pool are disclosed below for reference:
Cash at bank and in hand net of amounts in the cash pool
Bank overdrafts net of amounts in the cash pool
Cash and cash equivalents
164
164
2019
£m
180.6
(39.8)
140.8
2018
£m
187.8
(43.6)
144.2
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Notes continued
Lease liabilities on transition to IFRS 16
Movement in lease liabilities
2019
Beginning of year
Acquisitions (Note 27)
New leases
Interest charge in the year
Payment of lease liabilities
Remeasurement adjustments
Currency translation
End of year
Ageing of lease liabilities:
Current lease liabilities
Non-current lease liabilities
End of year
25 Lease liabilities
The Group leases certain property, plant, equipment and vehicles under non-cancellable operating lease agreements. These leases have
varying terms and renewal rights. From 1 January 2019, on adoption of IFRS 16 ‘Leases’, the Group has recognised right-of-use assets and
lease liabilities for these leases, except for short term and low value leases.
£m
–
498.3
6.5
105.2
23.3
(151.6)
14.4
(16.1)
480.0
121.8
358.2
480.0
2018
Other
£m
36.8
70.1
4.3
111.2
2018
£m
477.7
(333.5)
144.2
(74.9)
0.5
–
Land &
buildings
£m
104.8
286.5
121.2
512.5
2019
£m
610.5
(469.7)
140.8
(83.7)
10.1
(480.0)
(1,314.2)
(1,456.3)
(1,247.0)
(1,386.5)
(1,727.0)
(1,386.5)
2019
£m
180.6
(39.8)
140.8
2018
£m
187.8
(43.6)
144.2
As at 31 December 2019, the Group had £33.2m of leases which had been committed to but which had not yet started. Such leases are
not included in the Group’s lease liabilities as at 31 December 2019. In relation to leases which are included in lease liabilities, there are
potential further future cash flows of £46.2m if termination options are not exercised and extension options are exercised.
The cash outflow for low value and short term leases was £7.1m for the year ended 31 December 2019.
At 31 December 2018 the total future minimum lease payments under non-cancellable operating leases in accordance with IAS 17, the
previous accounting standard for leases, were:
Within one year
Between one and five years
After five years
26 Cash and cash equivalents and net debt
Cash at bank and in hand
Bank overdrafts
Cash and cash equivalents
Interest bearing loans and borrowings – current liabilities
Interest bearing loans and borrowings – non-current liabilities
Derivatives managing the interest rate risk and currency profile of the debt
Net debt excluding lease liabilities
Lease liabilities
Net debt including lease liabilities
Cash at bank and in hand net of amounts in the cash pool
Bank overdrafts net of amounts in the cash pool
Cash and cash equivalents
The cash at bank and in hand and bank overdrafts amounts included in the table above include the amounts associated with the Group’s
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 which is an enforceable right which the Group intends to use. The cash at bank and in hand
and bank overdrafts figures net of the amounts in the cash pool are disclosed below for reference:
Strategic report
Directors’ report
Financial statements
26 Cash and cash equivalents and net debt continued
Movement in net debt
2019
Beginning of year
Net cash inflow
Realised gains on foreign exchange contracts
Currency translation
End of year excluding lease liabilities
Lease liabilities
End of year including lease liabilities
2018
Beginning of year
Net cash inflow
Realised gains on foreign exchange contracts
Currency translation
End of year
Net debt
£m
(1,386.5)
99.1
13.6
26.8
(1,247.0)
(480.0)
(1,727.0)
Net debt
£m
(1,523.6)
184.9
3.3
(51.1)
(1,386.5)
Cash and cash
equivalents
£m
144.2
14.5
–
(17.9)
140.8
–
140.8
Cash and cash
equivalents
£m
112.3
31.3
–
0.6
144.2
Other
components
£m
(1,530.7)
84.6
13.6
44.7
(1,387.8)
(480.0)
(1,867.8)
Other
components
£m
(1,635.9)
153.6
3.3
(51.7)
(1,530.7)
The net cash inflow (2018: inflow) on other components of net debt comprises an increase in borrowings of £75.5m (2018: £71.6m),
a repayment of borrowings of £173.7m (2018: £228.5m) and the impact of a realised gain of £13.6m on foreign exchange contracts
(2018: gain of £3.3m).
27 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. There were no significant adjustments to the assets acquired and liabilities assumed in 2019 relating to
acquisitions completed in 2018. At 31 December 2019 the allocation period for all acquisitions completed since 1 January 2019 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 to 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.
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Notes continued
27 Acquisitions continued
2019
Summary details of the businesses acquired or agreed to be acquired during the year ended 31 December 2019 are shown in the table
below:
Business
Volk do Brasil*
Liberty Glove & Safety
Coolpack
FRSA
Acquisitions completed in the current year
Volk do Brasil*
Acquisitions agreed in the current year
* Acquisition committed at 31 December 2018.
Acquisition of 80% of share capital.
Sector
Safety
Safety
Foodservice
Safety
Country
Brazil
US
Netherlands
Australia
Acquisition date
2019
2 January
21 February
4 April
29 November
Safety
Brazil
2 January
There were no significant acquisitions in 2019 (2018: none).
A summary of the effect of acquisitions completed in 2019 and 2018 is shown below:
Customer relationships
Property, plant and equipment and software
Right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
Net cash
Provisions
Lease liabilities
Income tax payable and deferred tax liabilities
Fair value of net assets acquired
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to retention of former owners
Net cash 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
Annualised
revenue
£m
40.1
73.4
3.1
20.1
136.7
(40.1)
96.6
2018
£m
96.7
3.2
–
26.8
23.5
(21.0)
3.6
(5.3)
–
(10.8)
116.7
33.9
150.6
148.5
2.1
150.6
12.7
(3.6)
5.5
165.2
39.5
(22.0)
182.7
2019
£m
71.7
1.2
6.5
25.9
17.4
(10.8)
1.1
(1.4)
(6.5)
(1.9)
103.2
39.8
143.0
138.6
4.4
143.0
13.4
(1.1)
4.1
159.4
–
(35.1)
124.3
166
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Summary details of the businesses acquired or agreed to be acquired during the year ended 31 December 2019 are shown in the table
Sector
Safety
Safety
Foodservice
Safety
Country
Brazil
US
Netherlands
Australia
Acquisition date
2019
2 January
21 February
4 April
29 November
Volk do Brasil*
Safety
Brazil
2 January
There were no significant acquisitions in 2019 (2018: none).
A summary of the effect of acquisitions completed in 2019 and 2018 is shown below:
Notes continued
27 Acquisitions continued
2019
below:
Business
Volk do Brasil*
Liberty Glove & Safety
Coolpack
FRSA
Acquisitions completed in the current year
Acquisitions agreed in the current year
* Acquisition committed at 31 December 2018.
Acquisition of 80% of share capital.
Customer relationships
Property, plant and equipment and software
Right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
Income tax payable and deferred tax liabilities
Fair value of net assets acquired
Net cash
Provisions
Lease liabilities
Goodwill
Consideration
Satisfied by:
cash consideration
deferred consideration
Contingent payments relating to retention of former owners
Net cash acquired
Transaction costs and expenses
Total committed spend in respect of acquisitions completed in the current year
Spend on acquisitions committed 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
Annualised
revenue
£m
40.1
73.4
3.1
20.1
136.7
(40.1)
96.6
2018
£m
96.7
3.2
–
26.8
23.5
(21.0)
3.6
(5.3)
–
(10.8)
116.7
33.9
150.6
148.5
2.1
150.6
12.7
(3.6)
5.5
165.2
39.5
(22.0)
182.7
2019
£m
71.7
1.2
6.5
25.9
17.4
(10.8)
1.1
(1.4)
(6.5)
(1.9)
103.2
39.8
143.0
138.6
4.4
143.0
13.4
(1.1)
4.1
159.4
–
(35.1)
124.3
Strategic report
Directors’ report
Financial statements
27 Acquisitions continued
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net cash acquired
Deferred consideration in respect of prior year acquisitions
Net cash outflow in respect of acquisitions
Transaction costs and expenses paid
Payments relating to retention of former owners
Total cash outflow in respect of acquisitions
2019
£m
138.6
(1.1)
6.1
143.6
3.8
15.4
162.8
2018
£m
148.5
(3.6)
25.4
170.3
7.8
6.1
184.2
Acquisitions completed in the year ended 31 December 2019 contributed £109.0m (2018: £151.2m) to the Group’s revenue and £14.5m
(2018: £19.2m) to the Group’s adjusted operating profit for the year ended 31 December 2019.
The estimated contributions from acquisitions completed during the year to the results of the Group for the year ended 31 December if such
acquisitions had been made at the beginning of the year, are as follows:
Revenue
Adjusted operating profit
2019
£m
136.7
17.0
2018
£m
162.0
20.7
The estimated revenue which would have been contributed by the acquisitions agreed during the current year to the results for the year
ended 31 December 2019 if such acquisitions had been made at the beginning of the year is £96.6m (2018: £148.1m).
The total amount of goodwill expected to be deductible for tax purposes in relation to acquisitions completed during the year is £29.8m
(2018: £13.4m).
2018
Summary details of the businesses acquired or agreed to be acquired during the year ended 31 December 2018 are shown in the table
below:
Business
Aggora
Talge
Revco
QS
Monte Package Company
Enor
CM Supply
Acquisitions completed in 2018
Aggora*
Talge*
Volk do Brasil†
Acquisitions agreed in 2018
Acquisition of 85% of share capital.
* Acquisitions committed at 31 December 2017.
† Acquisition committed at 31 December 2018.
Sector
Foodservice
Foodservice
Safety
Cleaning & hygiene
Foodservice
Foodservice
Foodservice
Country
UK
Brazil
US
Netherlands
US
Norway
Denmark
Foodservice
Foodservice
Safety
UK
Brazil
Brazil
Acquisition date
2018
2 January
3 January
9 January
1 March
9 March
12 July
11 December
2 January 2018
3 January 2018
2 January 2019
Annualised
revenue
£m
27.0
28.4
28.6
4.9
43.4
25.7
4.0
162.0
(27.0)
(28.4)
41.5
148.1
Although not considered to be individually material, Revco accounted for approximately 25% of the total cash outflow in respect of
acquisitions during the year ended 31 December 2018.
28 Disposal of businesses
The Group did not dispose of any businesses during the year ended 31 December 2019. Disposal of businesses in 2018 related to OPM in
France and marketing services in the UK, two businesses which were no longer considered to be a strategic fit within the portfolio of the
Group’s businesses. The disposals were completed on 2 February 2018 and 7 June 2018 respectively.
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Notes continued
29 Cash flow from operating activities
The tables below give further details on the adjustments for depreciation and software amortisation, other non-cash items and the working
capital movement shown in the Consolidated cash flow statement.
Depreciation and software amortisation
Depreciation of right-of-use assets
Other depreciation and software amortisation
Other non-cash items
Share based payments
Provisions
Retirement benefit obligations
Other
Working capital movement
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
2019
£m
128.1
31.9
160.0
2019
£m
13.5
(6.3)
(9.7)
(1.0)
(3.5)
2019
£m
15.2
38.9
(49.8)
4.3
2018
£m
–
32.6
32.6
2018
£m
12.9
(6.4)
(8.0)
0.7
(0.8)
2018
£m
(96.6)
(44.6)
102.5
(38.7)
30 Related party disclosures
The Group has identified the directors of the Company, their close family members, the Group’s 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 23 and Note 24 respectively. All transactions with subsidiaries are
eliminated on consolidation.
168
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Strategic report
Directors’ report
Financial statements
29 Cash flow from operating activities
The tables below give further details on the adjustments for depreciation and software amortisation, other non-cash items and the working
capital movement shown in the Consolidated cash flow statement.
Notes continued
Depreciation and software amortisation
Depreciation of right-of-use assets
Other depreciation and software amortisation
Other non-cash items
Share based payments
Provisions
Retirement benefit obligations
Other
Working capital movement
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
The Group has identified the directors of the Company, their close family members, the Group’s 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 23 and Note 24 respectively. All transactions with subsidiaries are
30 Related party disclosures
eliminated on consolidation.
2019
£m
128.1
31.9
160.0
2019
£m
13.5
(6.3)
(9.7)
(1.0)
(3.5)
2019
£m
15.2
38.9
(49.8)
4.3
2018
£m
–
32.6
32.6
2018
£m
12.9
(6.4)
(8.0)
0.7
(0.8)
2018
£m
(96.6)
(44.6)
102.5
(38.7)
Company balance sheet
at 31 December 2019
Fixed assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments
Current assets
Deferred tax asset
Defined benefit pension 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
Deferred tax liability
Lease liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Provisions
Lease liabilities
Net assets
Capital and reserves
Share capital
Share premium
Other reserves
Capital redemption reserve
Profit and loss account†
Total shareholders’ funds
Notes
3
4
3
5
6
11
7
7
8
6
10
9
10
12
13
13
2019
£m
0.2
1.2
1.1
707.0
709.5
–
10.8
837.9
571.9
0.7
1,421.3
(116.9)
(0.5)
(0.7)
1,303.2
2,012.7
2018
£m
0.3
–
1.2
695.9
697.4
1.0
3.4
952.4
604.8
0.7
1,562.3
(110.1)
–
–
1,452.2
2,149.6
(1.7)
(0.9)
(1.7)
–
2,010.1
2,147.9
108.3
184.0
5.6
16.1
1,696.1
2,010.1
108.1
178.5
5.6
16.1
1,839.6
2,147.9
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 24 February 2020 and signed on its behalf by
Frank van Zanten, Chief Executive Officer and Richard Howes, Chief Financial Officer.
The Accounting policies and other Notes on pages 171 to 176 form part of these financial statements.
† Profit and loss account includes a net profit after tax for the year of £35.0m (2018: £6.3m). 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.
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169
Directors’ reportStrategic reportFinancial statements
Company statement of changes in equity
for the year ended 31 December 2019
At 31 December 2018
Impact of transition to IFRS 16
Restated equity at 1 January 2019
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
2018 interim dividend
2018 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2019
At 1 January 2018
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
2017 interim dividend
2017 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2018
Share
capital
£m
108.1
Share
premium
£m
178.5
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Profit and loss account
Retained
Own
earnings
shares
£m
£m
1,903.5
(63.9)
(0.3)
Total
shareholders’
funds
£m
2,147.9
(0.3)
108.1
178.5
5.6
16.1
(63.9)
1,903.2
35.0
2,147.6
35.0
4.5
2.2
(0.4)
41.3
(50.7)
(116.6)
(24.4)
13.2
1,766.0
4.5
2.2
(0.4)
41.3
(50.7)
(116.6)
5.7
(30.4)
–
13.2
2,010.1
0.2
5.5
(30.4)
24.4
108.3
184.0
5.6
16.1
(69.9)
Share
capital
£m
108.0
Share
premium
£m
171.4
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Profit and loss account
Retained
Own
earnings
shares
£m
£m
2,042.6
(122.9)
6.3
Total
shareholders’
funds
£m
2,220.8
6.3
4.5
3.1
(0.4)
13.5
(46.2)
(106.0)
(13.4)
13.0
1,903.5
4.5
3.1
(0.4)
13.5
(46.2)
(106.0)
7.2
45.6
–
13.0
2,147.9
0.1
7.1
45.6
13.4
108.1
178.5
5.6
16.1
(63.9)
170
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Company statement of changes in equity
for the year ended 31 December 2019
Restated equity at 1 January 2019
108.1
178.5
16.1
(63.9)
1,903.2
2,147.6
Share
capital
£m
108.1
Share
premium
£m
178.5
Other
reserves
£m
5.6
5.6
Profit and loss account
Capital
redemption
reserve
£m
16.1
Own
shares
£m
(63.9)
Retained
earnings
£m
1,903.5
(0.3)
shareholders’
Total
funds
£m
2,147.9
(0.3)
35.0
35.0
At 31 December 2018
Impact of transition to IFRS 16
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
2018 interim dividend
2018 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2019
At 1 January 2018
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
2017 interim dividend
2017 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2018
4.5
2.2
(0.4)
41.3
(50.7)
(116.6)
(24.4)
13.2
4.5
3.1
(0.4)
13.5
(46.2)
(13.4)
13.0
4.5
2.2
(0.4)
41.3
(50.7)
(116.6)
5.7
(30.4)
–
13.2
4.5
3.1
(0.4)
13.5
(46.2)
7.2
45.6
–
13.0
(30.4)
24.4
Own
shares
£m
(122.9)
45.6
13.4
0.2
5.5
Share
capital
£m
108.0
Share
premium
£m
171.4
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Profit and loss account
Retained
earnings
£m
2,042.6
6.3
shareholders’
Total
funds
£m
2,220.8
6.3
0.1
7.1
(106.0)
(106.0)
108.1
178.5
5.6
16.1
(63.9)
1,903.5
2,147.9
Strategic report
Directors’ report
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 have been 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. The Company adopted IFRS 16 ‘Leases’ with effect
from 1 January 2019 using the modified retrospective approach to transition. The adoption of IFRS 16 did not have a material impact on
the Company. There are no other new standards, amendments or interpretations that are applicable to the Company for the year ended
31 December 2019. 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
108.3
184.0
5.6
16.1
(69.9)
1,766.0
2,010.1
• 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 policies for the Group
as stated on pages 126 to 132 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, leases, intangible assets, income tax, trade and other payables, 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 2019 are disclosed in the Related undertakings note in the Shareholder information section on pages
184 to 187.
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 19
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.
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Directors’ reportStrategic reportFinancial statements
Notes to the Company financial statements continued
2 Accounting policies continued
d. Intercompany and other receivables
Intercompany and other receivables are initially measured at fair value. Subsequent to initial recognition these assets are measured at
amortised cost less any provision for impairment losses. The Group measures impairment losses using the expected credit loss model
in accordance with IFRS 9. There were no impairment losses on intercompany or other receivables during the year (2018: none).
e. 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.
f. Judgements made in applying the Company’s accounting policies
In the course of preparing the financial statements, other than judgements involved in determining estimates and assumptions (see Note 2g
below), no judgements have been made in the process of applying the Company’s accounting policies that have had a significant effect on
the amounts recognised in the financial statements.
g. Sources of estimation uncertainty
In applying the Company’s accounting policies various transactions and balances are valued using estimates or assumptions. Should these
estimates or assumptions prove incorrect, there may be an impact on the following year’s financial statements. As at 31 December 2019,
sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are the carrying value of investments, as explained below, and the measurement of the defined
benefit pension scheme liability which is explained in Note 2u to the consolidated financial statements.
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 Property, plant and equipment and intangible assets
Cost
Beginning of year
Additions
Disposals
End of year
Accumulated depreciation and amortisation
Beginning of year
Disposals
Charge in year
End of year
Net book value at 31 December 2019
Net book value at 31 December 2018
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
–
–
1.6
–
(0.2)
1.4
1.3
(0.2)
0.1
1.2
0.2
0.3
1.7
–
(0.2)
1.5
1.4
(0.2)
0.1
1.3
0.2
0.3
1.8
0.1
–
1.9
0.6
–
0.2
0.8
1.1
1.2
172
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Notes to the Company financial statements continued
2 Accounting policies continued
d. Intercompany and other receivables
Intercompany and other receivables are initially measured at fair value. Subsequent to initial recognition these assets are measured at
amortised cost less any provision for impairment losses. The Group measures impairment losses using the expected credit loss model
in accordance with IFRS 9. There were no impairment losses on intercompany or other receivables during the year (2018: none).
e. 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.
f. Judgements made in applying the Company’s accounting policies
In the course of preparing the financial statements, other than judgements involved in determining estimates and assumptions (see Note 2g
below), no judgements have been made in the process of applying the Company’s accounting policies that have had a significant effect on
the amounts recognised in the financial statements.
g. Sources of estimation uncertainty
In applying the Company’s accounting policies various transactions and balances are valued using estimates or assumptions. Should these
estimates or assumptions prove incorrect, there may be an impact on the following year’s financial statements. As at 31 December 2019,
sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are the carrying value of investments, as explained below, and the measurement of the defined
benefit pension scheme liability which is explained in Note 2u to the consolidated financial statements.
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 Property, plant and equipment and intangible assets
Cost
Beginning of year
Additions
Disposals
End of year
Beginning of year
Disposals
Charge in year
End of year
Accumulated depreciation and amortisation
Net book value at 31 December 2019
Net book value at 31 December 2018
Short
leasehold
improvement
Fixtures,
fittings and
equipment
£m
Total
tangible
assets
£m
Total
intangible
assets
£m
£m
0.1
–
–
0.1
0.1
0.1
–
–
–
–
1.6
–
(0.2)
1.4
1.3
(0.2)
0.1
1.2
0.2
0.3
1.7
–
(0.2)
1.5
1.4
(0.2)
0.1
1.3
0.2
0.3
1.8
0.1
–
1.9
0.6
–
0.2
0.8
1.1
1.2
Strategic report
Directors’ report
Financial statements
4 Right-of-use assets
Net book value
Beginning of year
Right-of-use assets on transition to IFRS 16
Depreciation charge in the year
End of year
5 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
6 Deferred tax asset/(liability)
Recognised deferred tax assets net of deferred tax liabilities are attributable to the following:
1 January 2018
Recognised in profit or loss
Recognised in other comprehensive income or directly in equity
31 December 2018/1 January 2019
Impact of transition to IFRS 16
Recognised in profit or loss
Recognised in other comprehensive income or directly in equity
31 December 2019
Defined benefit
pension scheme
£m
0.2
(0.4)
(0.4)
(0.6)
–
(0.9)
(0.4)
(1.9)
Share based
payments
£m
1.4
–
0.1
1.5
–
–
(0.3)
1.2
No deferred tax asset has been recognised in respect of unutilised capital losses of £68.5m (2018: £70.6m).
7 Debtors
Debtors: amounts falling due within one year
Amounts owed by Group undertakings
Prepayments and other debtors
Debtors: amounts falling due after more than one year
Amounts owed by Group undertakings
Property
£m
–
1.7
(0.5)
1.2
2019
£m
699.2
11.1
710.3
Total
£m
–
1.7
(0.5)
1.2
2018
£m
690.8
8.4
699.2
3.3
3.3
707.0
695.9
Net deferred
tax asset/
(liability)
£m
1.7
(0.4)
(0.3)
1.0
0.1
(0.9)
(0.7)
(0.5)
2018
£m
603.6
1.2
604.8
Other
£m
0.1
–
–
0.1
0.1
–
–
0.2
2019
£m
568.7
3.2
571.9
837.9
952.4
The carrying value of the amounts owed by Group undertakings falling due after more than one year is a reasonable approximation of their
fair values. These amounts have a fixed repayment date and are interest bearing at an interest rate which is reset periodically based on the
Bank of England base rate.
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Directors’ reportStrategic reportFinancial statements
Notes to the Company financial statements continued
8 Creditors: amounts falling due within one year
Trade creditors
Amounts owed to Group undertakings
Other tax and social security contributions
Income tax payable
Accruals
Amounts due to Group undertakings are repayable on demand and are not interest bearing.
9 Provisions
Beginning of year
Utilised or released
End of year
2019
£m
1.2
82.5
0.3
21.0
11.9
116.9
2019
£m
1.7
–
1.7
The provisions relate to properties, where amounts are held against liabilities for repairs and dilapidations, and other claims.
10 Lease liabilities
2019
Beginning of year
Lease liabilities on transition to IFRS 16
Interest charge in the year
Payments of lease liabilities
End of year
Ageing of lease liabilities:
Current lease liabilities
Non-current lease liabilities
End of year
2018
£m
1.5
82.4
0.4
14.2
11.6
110.1
2018
£m
1.7
–
1.7
£m
–
(2.3)
(0.1)
0.8
(1.6)
(0.7)
(0.9)
(1.6)
In accordance with IAS 17, the previous accounting standard for leases, at 31 December 2018 the total future minimum lease payments
under a non-cancellable operating lease with a duration of between one and five years was £2.5m.
11 Retirement benefits
The Company operates a number of retirement benefit schemes in the UK, including both 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 23 to the consolidated financial
statements. The amounts included in the Company financial statements relating 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)
Past service cost
Net interest income
Contributions paid by participating subsidiaries linked to service
Total charge to profit for the year
2019
£m
2.0
–
(0.2)
(1.3)
0.5
2018
£m
2.5
3.3
(0.1)
(1.4)
4.3
The past service cost in 2018 of £3.3m relates to the cost of the equalisation of guaranteed minimum pensions between male and female
members of the Group’s UK defined benefit pension scheme following the High Court judgment in 2018 in the case of Lloyds Banking
Group Pensions Trustees Limited vs Lloyds Bank plc and others.
174
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Directors’ reportFinancial statementsStrategic report
Notes to the Company financial statements continued
Strategic report
Directors’ report
Financial statements
8 Creditors: amounts falling due within one year
11 Retirement benefits continued
Amounts recognised in other comprehensive income
Actual return less expected return on pension scheme assets
Experience gain on pension scheme liabilities
Impact of changes in assumptions relating to the present value of pension scheme liabilities
Actuarial gain on defined benefit pension scheme
Contributions paid by participating subsidiaries not linked to service
Total credit to other comprehensive income
116.9
110.1
Movement in defined benefit pension scheme surplus/(deficit)
Beginning of year
Current service cost
Past service cost
Contributions
Net interest income
Actuarial gain
End of year
Changes in the present value of defined benefit pension scheme liabilities
Beginning of year
Current service cost
Past service cost
Interest expense
Contributions by employees
Actuarial loss/(gain)
Benefits paid
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Interest income
Actuarial gain/(loss)
Contributions by the Company
Contributions by participating subsidiaries
Contributions by employees
Benefits paid
End of year
2019
£m
52.7
–
(50.5)
2.2
4.5
6.7
2019
£m
3.4
(2.0)
–
7.0
0.2
2.2
10.8
2019
£m
329.1
2.0
–
9.4
0.5
50.5
(12.3)
379.2
2019
£m
332.5
9.6
52.7
1.2
5.8
0.5
(12.3)
390.0
2018
£m
(18.3)
0.4
21.0
3.1
4.5
7.6
2018
£m
(1.1)
(2.5)
(3.3)
7.1
0.1
3.1
3.4
2018
£m
347.4
2.5
3.3
8.9
0.6
(21.4)
(12.2)
329.1
2018
£m
346.3
9.0
(18.3)
1.2
5.9
0.6
(12.2)
332.5
The actual return on pension scheme assets was a gain of £62.3m (2018: loss of £9.3m). The market value of scheme assets and the present
value of retirement benefit obligations at 31 December are detailed in Note 23 to the consolidated financial statements. The total defined
benefit pension liability is divided between active members (£86.2m (2018: £74.6m)), deferred members (£147.8m (2018: £127.8m)) and
pensioners (£145.2m (2018: £126.7m)).
Amounts due to Group undertakings are repayable on demand and are not interest bearing.
The provisions relate to properties, where amounts are held against liabilities for repairs and dilapidations, and other claims.
Trade creditors
Amounts owed to Group undertakings
Other tax and social security contributions
Income tax payable
Accruals
9 Provisions
Beginning of year
Utilised or released
End of year
Lease liabilities on transition to IFRS 16
10 Lease liabilities
2019
Beginning of year
Interest charge in the year
Payments of lease liabilities
End of year
Ageing of lease liabilities:
Current lease liabilities
Non-current lease liabilities
End of year
In accordance with IAS 17, the previous accounting standard for leases, at 31 December 2018 the total future minimum lease payments
under a non-cancellable operating lease with a duration of between one and five years was £2.5m.
11 Retirement benefits
The Company operates a number of retirement benefit schemes in the UK, including both 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 23 to the consolidated financial
statements. The amounts included in the Company financial statements relating to the defined benefit pension scheme at 31 December
Amounts included in profit for the year
Current service cost (net of contributions by employees)
were:
Past service cost
Net interest income
Contributions paid by participating subsidiaries linked to service
Total charge to profit for the year
The past service cost in 2018 of £3.3m relates to the cost of the equalisation of guaranteed minimum pensions between male and female
members of the Group’s UK defined benefit pension scheme following the High Court judgment in 2018 in the case of Lloyds Banking
Group Pensions Trustees Limited vs Lloyds Bank plc and others.
2019
£m
1.2
82.5
0.3
21.0
11.9
2019
£m
1.7
–
1.7
2019
£m
2.0
–
(0.2)
(1.3)
0.5
2018
£m
1.5
82.4
0.4
14.2
11.6
2018
£m
1.7
–
1.7
£m
–
(2.3)
(0.1)
0.8
(1.6)
(0.7)
(0.9)
(1.6)
2018
£m
2.5
3.3
(0.1)
(1.4)
4.3
2019
£m
108.3
2018
£m
108.1
12 Share capital
Issued and fully paid ordinary shares of 3217p each
Number of ordinary shares in issue and fully paid
Beginning of year
Issued – option exercises
End of year
2018
336,425,304 335,931,546
493,758
336,792,607 336,425,304
367,303
2019
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175
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Notes to the Company financial statements continued
13 Reserves
Included in the profit and loss account within retained earnings is £837.9m (2018: £952.4m) relating to dividends which were declared from
the Company’s subsidiary undertakings during the year ended 31 December 2016 but which were not settled in cash and are therefore
unrealised. Until these outstanding balances are settled in cash the relevant amounts outstanding are not distributable as dividends to the
Company’s shareholders. Excluding these amounts the Company has substantial distributable reserves to cover more than four years of
dividends at the cost of the dividends paid or payable in relation to the year ended 31 December 2019, which is expected to be
approximately £171m.
The capital redemption reserve of £16.1m (2018: £16.1m) as presented in the statement of changes in equity records the aggregate nominal
value of treasury shares that have been cancelled.
The own shares reserve of £69.9m (2018: £63.9m) as presented in the statement of changes in equity comprises ordinary shares of the
Company held by the Company in an employee benefit trust. The assets, liabilities and expenditure of the trust are included in the Company
financial statements. Details of the trust and investment in own shares reserve are set out in Note 19 to the consolidated financial statements.
The dividends paid and declared in the current and prior year are detailed in Note 20 to the consolidated financial statements.
14 Contingent liabilities
Borrowings by subsidiary undertakings totalling £1,375.1m (2018: £1,525.6m) which are included in the Group’s borrowings have been
guaranteed by the Company.
15 Employees’ and directors’ remuneration
The average number of persons employed by the Company during the year (including directors) was 53 (2018: 53) and the aggregate
employee costs relating to these persons were:
Wages and salaries
Social security costs
Share based payments
Pension costs
2019
£m
9.2
1.4
1.1
1.0
12.7
2018
£m
8.8
2.2
2.3
1.1
14.4
Conditional awards of executive share options and performance shares are granted to executive directors and other senior employees of the
Company. Employees of the Company can also participate in the Company’s Sharesave Scheme. Further information on the Company’s
share plans is disclosed in Note 19 to the consolidated financial statements.
16 Related party disclosures
The Company has identified the directors of the Company, their close family members, its key management, the UK pension scheme and
its subsidiary undertakings 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 23 and Note 24 to the consolidated financial statements and
the Related undertakings note in the Shareholder information section on pages 184 to 187.
176
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Directors’ reportFinancial statementsStrategic report
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’s and the Company’s
performance, business model and strategy.
Each of the directors, whose names and functions are set out
on pages 66 and 67 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.
By order of the Board
Frank van Zanten
Chief Executive Officer
24 February 2020
Richard Howes
Chief Financial Officer
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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 2019 and of the Group’s profit and cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as
adopted by the European Union;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (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 2019; the Consolidated income statement and Consolidated statement of comprehensive income, the Consolidated
cash flow statement, and the Consolidated and Company statements 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 6 to the financial statements, we have provided no non-audit services to the Group or the Company in the
period from 1 January 2019 to 31 December 2019.
Our audit approach
Overview
Materiality
• Overall Group materiality: £29 million (2018: £28 million), based on 5% of adjusted profit before tax.
• Overall Company materiality: £20 million (2018: £6 million), based on 1% of net assets value (0.5% of net assets value in
prior year).
Audit scope
• We performed full scope audits and other procedures of the financial information of 93 components spread across 29 different
countries across North America, Continental Europe, UK & Ireland and Rest of the World.
• Specific audit procedures in relation to various Group activities, 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).
• IFRS 16 ‘Leases’ (Group).
• Defined benefit pension schemes (Group and Company).
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As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to breaches of environmental regulations and unethical and prohibited business practices, and we considered the extent to which
non-compliance might have a material effect on the preparation of financial statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the Companies Act 2006 and the UK Listing Rules. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined
that the principal risks were related to posting inappropriate journal entries to manipulate financial results and management bias in
accounting estimates.
The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or component
auditors included discussions with in-house legal counsel, assessment of matters reported on the Group’s whistleblowing helpline,
challenging assumptions and judgements made by management in their significant accounting estimates and testing journal entries.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, 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.
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
Corporate tax exposures – Group
How our audit addressed the key audit matter
Refer to page 83 (Audit Committee report), pages 127 and 128
(Accounting policies) and pages 140 to 142 (Note 8).
We assessed management’s process for identifying uncertain tax positions and the
related accounting policy of providing for tax exposures.
The Group operates in a number of countries 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.
We engaged our taxation specialists to assist us in challenging the appropriateness
of management’s judgements in relation to these positions and to understand the current
status of tax assessments and investigations, including monitoring developments in
ongoing disputes and regulatory changes. We read recent correspondence with local tax
authorities to satisfy ourselves that the tax provisions had been appropriately recorded or
adjusted to reflect the latest external developments. We also considered factors such as
possible penalties and interest.
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.
We then determined whether the calculations were in line with the accounting standards
and that the methodology and principles had been applied consistently.
Based on the procedures performed, we determined the provisions reflect management’s
current best estimate of the expected economic outflows.
We considered the appropriateness of the related disclosures in Note 8 to the
financial statements.
Based on the procedures performed, we noted no material issues arising from our work.
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Key audit matter
Business combinations – Group
Refer to page 82 (Audit Committee report), page 126 (Accounting
policies) and pages 165 to 167 (Note 27).
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.
Impairment of goodwill and other intangible assets – Group
Refer to page 82 (Audit Committee report), page 128 (Accounting
policies) and pages 144 and 145 (Note 12).
The Group has material goodwill balances of £1,403.6 million
(2018: £1,420.4 million) and customer relationship intangible
assets of £864.9 million (2018: £941.2 million) spread across
multiple geographies and relating to multiple cash generating
units (‘CGUs’).
In assessing whether the carrying amount of the goodwill assets
has been impaired, management considers forecast cash flows
of the 11 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.
We also focused our impairment procedures on recently
acquired businesses or in circumstances where a triggering
event occurred during the year and where a further impairment
assessment was performed by management.
Management’s impairment assessment involves significant
estimation, principally relating to short and long-term revenue
growth, future profitability and discount rates. Due to the
acquisitive nature of the Group and the magnitude of the
aggregated related goodwill and 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.
How our audit addressed the key audit matter
Management relies on external valuation specialists for larger acquisitions to value
significant intangibles acquired in business combinations. Where management has
relied on such specialists, we assessed their objectivity and competence and tested the
results of their work and found no material issues.
We focused in particular on the following areas:
• we challenged the methodology and key assumptions used in determining the value of
the customer relationship assets for the more significant acquisitions;
• we evaluated the consideration paid or payable in respect of acquisitions made;
• we determined whether 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; and
• we assessed material adjustments made to prior period acquisitions.
Based on the procedures performed, we noted no material issues arising from our work.
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 particular:
• we compared short term revenue growth rates to the latest strategic plans and found
them to be consistent. We also compared against external market data and found the
assumptions to be plausible based on past and current performance;
• we determined that long-term growth rates are generally consistent when compared to
third party nominal GDP rates;
• we found the achievability of future margins to be plausible based on past and current
performance and consistent with budgets;
• we challenged the discount rate used to determine the present value by assessing the
cost of capital for the Company and comparable organisations and considered them to
be acceptable; and
• we obtained evidence to assess historical accuracy in management’s
forecasting process.
We also evaluated management’s triggering event assessment regarding customer list
intangible assets.
As described in Note 12 to the consolidated financial statements, management concluded
that there is an impairment charge of £4.0 million relating to the customer relationships
intangible asset of a business in China within the Asia Pacific CGU. We concur with
this assessment.
Based on management’s own sensitivity calculations, no other 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.
Completeness and accuracy of lease liability and right-of-use asset – Group
Refer to page 127 (Accounting policies), page 144 (Note 11) and
164 (Note 25).
On adoption of IFRS 16, the Group recognised right-of-use
assets and lease liabilities of £449.4 million and £498.3 million
respectively, which is material in the context of the Consolidated
balance sheet.
The impact of not capturing all leases across the Group, not
capturing all relevant data points from each lease and/or
inaccurately calculating the right-of-use asset or lease liability
could be material.
We assessed management’s process for identifying leases.
We focused in particular on the following areas:
• we audited the lease input data for a sample of leases;
• we then recalculated the right-of-use asset and lease liability balances for the sample
selected and compared these to the outputs from management’s IFRS 16 model;
• we audited the assumptions used in the incremental borrowing rates used to discount
the future cash flows associated with the right-of-use asset and lease liability.
• we assessed the reconciliation of the lease liability between IAS 17 and IFRS 16.
We considered the appropriateness of the related disclosures in Notes 11 and 25 to the
financial statements.
Based on the procedures performed, we noted no material issues arising from our work.
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How our audit addressed the key audit matter
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 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 2019. In each case we
considered the assumptions made by management to be reasonable in light of the
available evidence.
Defined benefit pension schemes – Group and Company
Refer to pages 82 and 83 (Audit Committee report), pages 130
and 131 (Accounting policies) and pages 159 to 162 (Note 23).
The Group has defined benefit pension schemes (with material
schemes in the US and the UK) with a net surplus in the UK of
£10.8 million and a net deficit across the remaining schemes of
£46.8 million at the current year end (2018: net surplus in the
UK of £3.4 million and a net deficit across the remaining
schemes of £41.9 million), 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.
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 they operate.
We identified one financially significant component, being North America, where a full scope audit has been performed. We identified five
components across UK, France and Australia 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 87 components. The
components where we performed audit procedures covered over 94% of Group revenue, adjusted 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,
France, UK, Belgium and Romania. Telephone discussions were also held with component auditors at these locations and with a number of other
component teams that the Group audit team did not visit in person. Specific audit procedures over central functions and areas of significant
judgement, including taxation, pensions, acquisitions and the impairment of goodwill and other intangible assets, were performed by the Group
audit team centrally.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and 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
£29 million (2018: £28 million).
Group financial statements
Company financial statements
£20 million (2018: £6 million).
How we determined it
5% of adjusted profit before tax.
1% of net assets value (0.5% of net assets value in prior year).
Rationale for
benchmark applied
Given that the Group’s businesses are profit oriented
and the directors use adjusted profit measures to assess
the performance of the business, we believe that adjusted
profit before tax is the best benchmark to use.
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 was up to £25 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 £1.5 million (Group audit)
(2018: £1.4 million) and £1.5 million (Company audit) (2018: £1.4 million) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
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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 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. For example, the terms of the United Kingdom’s
withdrawal from the European Union are not clear, and it is difficult to
evaluate all of the potential implications on the Group’s trade, customers,
suppliers and the wider economy.
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 to report.
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 2019 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 51 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)
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We have nothing to report in respect of our responsibility to report when:
• the statement given by the directors, on page 177, 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 81 and 82 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.
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 177, 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 directors 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 6 years, covering the
years ended 31 December 2014 to 31 December 2019.
Neil Grimes (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 February 2020
Bunzl plc Annual Report 2019
183
Directors’ reportStrategic reportFinancial 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 2019 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 187 to 189. 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.
Subsidiary
undertakings
Argentina
Vicsa Steelpro S.A.
Australia
Atlas Health Care Pty Limited
Bunzl Australasia Holdings Pty Limited
Bunzl Australasia Limited
Bunzl Brands & Operations Pty Limited
Bunzl Catering Supplies Limited
Bunzl Food Processor Supplies Pty Limited
Bunzl Outsourcing Services Limited
Fire Rescue Safety Australia Pty Ltd (80%)
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
Établissements Glorieux SA
King Belgium NV
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 Proteção Individual Ltda.
Dental Sorria Ltda.
DVT Comércio, Importação e Exportação Ltda.
Labor Import Comercial Importadora
Exportadora Ltda
VCH – Importadora, Exportadora e Distribuição
de Produtos Ltda.
Canada
Bunzl Canada, Inc.
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
6
5
5
4
6
3
6
2
5
4
6
4
5
6
4
7
7
8
12
10
11
9
16
15
14
17
18
19
13
20
21
21
23
22
21
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 BeiZhi Industrial Technology Co., LTD
Shanghai Cosafety Technology Co., Ltd.
Shanghai HSESF Safety Technology Co., Ltd.
Shanghai Mai Xi Protection Technology Co., Ltd.
Shanghai Yinghao Protection Technology Co., Ltd.
Suzhou Sai Wo Trading Co., Ltd.
Vicsa Commerce and Trading (Shanghai) Co., Ltd
Colombia
Importadores Exportadores Solmaq SAS
Tecnoboga Colombia S.A.S.
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
CM Supply ApS
MultiLine A/S
Saebe 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
Registered
office address
29
26
32
33
28
25
24
31
27
34
30
35
35
36
38
37
39
39
39
40
41
42
43
58
73
71
68
52
59
68
60
49
56
54
67
44
50
72
52
184
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report Subsidiary
undertakings
Groupe Pierre Le Goff Bourgogne Franche-Comte
Registered
office address
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 Rhône-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
Keenpac France SAS
Ligne T SAS
Mat’hygiene SAS
Nicolas Entretien SAS
ORRU SAS
PLG Finances SAS
Prorisk S.A.S.
SCI des Saules SCI
Société Civile Immobilière Sainte Claire Deville SC
Sodiscol SAS
Sopecal Hygiene SAS
Germany
Bäumer 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
Keenpac Asia Limited
Hungary
Bunzl CEE Kft
Bunzl Magyarország Kft.
Propack Kereskedelmi Korlátolt Felelősségű Társaság
Silwell Kereskedelmi Korlátolt Felelősségű Társaság
Ireland
Bunzl Finance Ireland Unlimited Company(ii)
Bunzl Hospitality Supplies Ireland Limited
Bunzl Ireland Limited
Latharna Ireland Finance No. 1 Unlimited Company
Latharna Ireland Finance No. 2 Unlimited Company(ii)
Thomas McLaughlin (Ireland) Limited
65
69
55
74
48
62
61
46
51
64
47
53
57
70
63
52
44
51
51
45
66
78
75
75
77
77
79
77
75
76
78
80
81
82
85
85
85
84
86
86
86
86
86
86
Subsidiary
undertakings
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.
Mexico
Bunzl De Mexico SA de CV(ii)(iii)
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)
Steel pro S.A de C.V.(iii)
Web Distribucion Safety Mexico, S. de R.L. de C.V.
Netherlands
Allshoes Benelux B.V.
Bunzl Outsourcing Services B.V.
Bunzl Verpakkingen Arnhem B.V.
Coolpack B.V.
De Ridder B.V.
King Nederland B.V.
Majestic Products B.V.
QS Nederland B.V. (85%)
Worldpack Trading B.V.
New Zealand
Bunzl Outsourcing Services NZ Limited
Corded Strap (NZ) Limited
ICB Cleaning Supplies Limited
Nelson Packaging Supplies Limited
Norway
Art Trading AS
Culina AS
Enor AS
Riise & G G Storkjøkken AS
Skien Storkjøkken AS (51%)
Peru
Vicsa Safety Peru S.A.C.
Puerto Rico
Melissa Sales Corp.
Romania
Bunzl Distributie SRL
Singapore
Registered
office address
86
87
88
87
90
89
90
92
91
93
99
97
98
95
94
101
100
96
102
103
111
106
105
109
108
110
104
107
113
114
112
114
116
116
117
117
115
118
119
120
Bunzl plc Annual Report 2019
185
Directors’ reportStrategic reportFinancial statements Shareholder information continued
Related undertakings continued
Subsidiary
undertakings
LSH Industrial Solutions Pte. Ltd
Slovakia
Eurobal, spol. s.r.o.
Spain
Bunzl Distribution Spain, S.A.U.
Bunzl Mallorca 2018, S.L.U.
Faru, S.L.U.
Guantes Juba, S.A.U.
Juba Personal Protective Equipment, S.L.U.
Lovilia Spain, S.L.U.
Marca Proteccion Laboral, S.L.U.
Marvel Proteccion Laboral, S.L.U.
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 Pazarı İnşaat Sanayi Ve Ticaret Anonim Şirketi
İstanbul Ticaret Hırdavat Sanayi A.Ş.
İstanbul Ticaret İş Güvenliği ve Endüstriyel Sanayi
Ürünler A.Ş
Kullanatmarket Elektronik Pazarlama Ticaret
Anonim Şirketi
United Kingdom
365 Healthcare Limited
Aggora (Technical) Limited(iii)
Aggora Group Ltd(iii)
Aggora Limited
Aggora Projects Ltd(iii)
Bunzl American Holdings (No.1) Limited
Bunzl American Holdings (No.2) Limited
Bunzl Finance Public Limited Company(i)
Bunzl Group Services Limited(i)
Bunzl Holding GTL Limited(i)
Bunzl Holding LCE Limited
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
GrowModule 365 Limited
Guardsman Limited
Registered
office address
121
122
124
125
129
130
130
124
126
127
128
123
135
131
135
132
134
134
133
136
138
139
137
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
Subsidiary
undertakings
Henares Limited(i)
Howper 800 Limited(iii)
Kingsbury Packaging (Limavady) Ltd
Lee Brothers Bilston Limited
Lightning Packaging Supplies Limited
London Bio Packaging Limited
Packaging 2 Buy Limited
Portabottle Limited
Portabrands Limited
Selectuser Limited(ii)
The Classic Printed Bag Company Limited
The Porta Group Limited
Tri-Star Packaging Supplies 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 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.
Bunzl Northeast, LLC
Bunzl Processor Distribution, LLC
Bunzl Retail Services, LLC
Bunzl Retail, LLC
Bunzl Southwest Holdings, LLC
Bunzl US Holdings LLC
Bunzl USA Holdings LLC
Bunzl USA LLC
Bunzl Utah, LLC
Bunzl Western Holdings, Inc.
Cool-Pak, LLC
Destiny Packaging, LLC
Earthwise Bag Company, Inc.
Foodhandler Inc.
Green Source, LLC
Hi-Valu, LLC
International Sourcing Company Inc.(iii)
Registered
office address
141
141
140
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
141
146
146
156
155
144
146
146
154
146
149
156
156
156
146
146
146
142
156
146
146
156
146
152
156
156
156
150
146
156
156
145
147
146
146
148
186
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report List of registered office addresses
Subsidiary
undertakings
John Tillman Company
Keenpac, LLC
Keepsafe, LLC
Liberty Glove & Safety, LLC
M.L. Kishigo Manufacturing Company, LLC
Masteragents LLC
Papercraft Southwest, LLC
Prime Source, LLC
R3 Safety, LLC
R3, LLC
Revco Industries, Inc.(iii)
Right Choice Distribution, LLC
SAS Safety Corporation
Steiner Industries, Inc.
TSN East, LLC
TSN West, LLC
U.S. Glove Co., Inc.
Western Glove Manufacturing, Inc.
Uruguay
Steelpro Safety S.A.
Other shareholdings
Viner-Pack Gyarto Kereskedelmi Es Szolgaltato
Korlatolt Felelossegu Tarsasag(iii) (20%)
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
Bunzl plc Annual Report 2019
Registered
office address
156
146
143
156
152
146
156
146
146
151
145
146
156
153
146
146
157
145
Address
Maipú 1300, piso 13, Ciudad de Buenos Aires, Argentina
17 Millrose Drive, Malaga WA 6090, Australia
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, 2iémé étage, 7522 Tournai,
Key
1
2
3
4
5
6
7
Belgium
Aarschotsesteenweg 114 3012 Leuven (Wilsele), Belgium
Avenue Sabin 23, 1300 Wavre, 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
Estrada Velha de Guarulhos – São Miguel, 5135, Box 301 –
Jardim Arapongas, city of Guarulhos, São Paulo,
CEP 07210-250, Brazil
Estrada Velha de Guarulhos – São Miguel, 5135, Box 311 –
158
Jardim Arapongas, city of Guarulhos, São Paulo,
CEP 07210-250, Brazil
Registered
office address
Rua Cardeal Arcoverde, 2365, Andar 5, Conjunto 51,
Pinheiros, CEP 05407-003, Brazil
Rua Crepusculo, No 58 Bairro California, City of Belo
Horizonte, Minas Gerais, CEP 30855-435, Brazil
83
Rua João Thomaz Pinto, No. 1570, Shed A, Modules 6, 7 and 8
Condominium Byblos, district of Canhanduba, City of Itajaí,
State of Santa Catarina, 88.313-045, Brazil
Rua Padre Damaso 165, 173 e 187, Osasco, São Paulo,
CEP 06016-010, Brazil
SNR Dentons LLP, 77 King Street West, Suite 400, Toronto
ON M5K 0A1, Canada
Av. Presidente Eduardo Frei Montalva 5151, Conchalí,
8550678 Santiago, Chile
Avenida Boulevard, Aeropuerto Norte #9649, Pudahuel,
Santiago, Chile
Camino Coquimbo N’ 16.000, Colina, Sanitago, 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 3123, Building 3, 112-118 Gaoyi Road, Baoshan District,
Shanghai, 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
8
9
10
11
12
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26
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28
29
30
31
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Directors’ reportStrategic reportFinancial statements Shareholder information continued
List of registered office addresses continued
Address
Room 912, Central Business Tower, 88 Fuhua 1st Road,
Key
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
Km 7 Vía Medellín, Parque Empresarial Celta, Módulo 1,
Bodega 49, 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
Jydekrogen 7, DK-2625, Vallensbaek, 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
13 rue des Battants RN 20, 31140, Saint-Alban, France
140 rue Victor Hugo, 92300 Levallois-Perret, France
191-195 Avenue Charles de Gaulle, 92200 Neuilly-sur-Seine,
Paris, France
2 Rue Paul Vaillant Couturier, 76120 Le Grand Quevilly,
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, Le Grand Guelen, 29000 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
Lannolier, 11000, Carcassonne, France
Lieudit la Trentaine, 77690, La Genevraye, France
Parc d’activité Des Lacs, 22 rue Saint Exupéry, 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
33
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Address
ZI Maison Dieu RN 74, 21220 Fixin, France
ZI Val de Seine, 17 avenue Nobel, 92390 Villeneuve la
Key
71
Garenne, France
Zone Artisanale Maritime du Bassin de Thau, Route de Séte,
34540 Ballaruc Les Bains, France
Zone d’activité Sud Saint Jean, 57130 Jouy aux Arches,
France
Elbestraße 1-3, 45768 Marl, Germany
Friedrichstrasse 2, 40699 Erkrath, Germany
Malteserstrasse 139-143, 12277, Berlin, Germany
Maysweg 11, 47918 Tönisvorst, Germany
Stadtweide 17, 46446 Emmerich, Germany
11th Floor, One Pacific Place, 88 Queensway, 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
2336 Dunavarsány, 071/33 hrsz, Hungary
H-1097 Budapest, Gyáli út 37/A, 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
Corsa Italia n.6, 50123 Florence, Italy
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
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
Avenida Cafetales No. 1702, Interior 201, between streets
Rancho Recoveco and Rancho Estopila, Hacienda de
Coyoacán, Coyoacán, 04970, Mexico
Avenida Circunvalación Agustín Yáñez 2613, int 1A-110,
Arcos Vallarta Sur, 44500 Guadalajara, Jalisco
Calle Rio San Lorenzo No. 503, Col. Fuentes del Valle, CP
6620, CD San Pedro Garza Garcia, Nuevo León, Mexico
Carretera al CUCBA No. 400 Interior 5 Colonia La Venta del
Astillero, C.P. 45221 Zapopan, Jalisco
Carretera Corredor Tijuana Rosarito 2000 Exterior 15202.
Interior Mt3 A, Colonia Zona Cerril General, Tijuana, Baja
California
Carretera Miguel Alemán KM21 Edificio 4C Prologis Park,
Apodaca, N.L., México C.P, 66627, Mexico
Galileo # 11, Colonia Polanco V Secc., Delagación Miguel
Hidalgo, 11560, Ciudad de México, Mexico
Pablo A. Gonzalez Garza Pte., 820, Chepevera, Monterrey,
Nuevo León, 64030, Mexico
Rio San Lorenzo No. 503 Local I, Col. Fuentes Del Valle, San
Pedro Garza Garcia, C.P. 66220, Mexico
Barnsteenstraat 1-A, 1812 SE Alkmaar, Netherlands
Bijsterhuizen 3005C, 6604 LP Wijchen, Netherlands
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
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97
98
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100
101
102
103
104
188
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report Address
De Kronkels 31c, 3752LM Bunschoten-Spakenburg,
Netherlands
Delta 57, 6825 ML Arnhem, Netherlands
Esp 125, 5633 AA Eindhoven, Netherlands
Grotewei 2, 4004 LW Tiel, Netherlands
Industrieweg 11B, 1566JN, Assendelft, Netherlands
Jan Campertlaan 6, 3201AX, Spijkenisse, Netherlands
Rondebeltweg 82, 1329 BG Almere, Netherlands
686 Rosebank Road, Avondale, Auckland, 1026, New Zealand
97 Sawyers Arm Road, Christchurch, 8052, New Zealand
KPMG Level 5, 79 Cashel Street, Christchurch, 8140,
New Zealand
Bedriftsveien 24, 3735 Skien, Norway
c/o Enor AS, Holmaveien 20, 1339 Vøyenenga, Norway
Holmaveien 20, 1339 Vøyenenga, Norway
Av. Santa Rosa 350. Ate., Lima, Peru
PO Box 6494, PR 00914-6494, San Juan, Puerto Rico
Sat Dragomiresti-Deal, Comuna Dragomiresti-Vale, DE 287/1,
Bucharest West Logistic Park, Cladirea C, Unitatea C01,
Ilfov, Romania
1 Penjuru Close, 608617, Singapore
Na pántoch 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
Key
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
Cartagena, Murcia, poligono industrial Cabezo Beaza,
Avenida Bruselas, 30353, esquina calle Amsterdam, parcela
R 100, Spain
126
Cartagena, Murcia, poligono industrial Cabezo Beaza,
Avenida Luxemburgo, calle Artes y Oficios, nave B-3, Spain
127
Corretger No 115-117-119, Parque Empresarial Táctica,
Paterna, 46980, Valencia, Spain
Edificio Plaza, Nave 5, Ali-4 Plataforma Logistica de Zaragoza,
50197, Zaragoza, 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,
Istanbul, Turkey
Akçaburgaz Mahallesi, 3137. Sokak, No.19, K. 1, Esenyurt,
Istanbul, Turkey
128
129
130
131
132
133
134
135
136
137
Address
Arapcami Mah, Tersane Cad, No. 115, Beyoğlu, Istanbul,
Turkey
Şerifali Mah., Turgut Özal Blv, B Blok No:170/1, Ümraniye,
İstanbul, Turkey
Arthur Cox, Victoria House, 15-17 Gloucester Street, Belfast,
BT1 4LS, United Kingdom
York House, 45 Seymour Street, London, W1H 7JT,
United Kingdom
701 Emerson #500, St Louis MO 63141-9111, United States
7503 Nottoway Place, Springfield VA 22150, United States
Corporate Creations Network Inc., 1001 State Street #1400,
Erie PA 16501, United States
Corporate Creations Network Inc., 11380 Prosperity Farms Rd
#221E, Palm Beach Gardens FL 33410, United States
Corporate Creations Network Inc., 12747 Olive Boulevard,
Suite 300, St. Louis, MO 63141, St. Louis County,
United States
Corporate Creations Network Inc., 15 North Mill Street, Nyack
NY 10960, United States
Corporate Creations Network Inc., 205 Powell Place,
Brentwood TN 37027-7522, 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., 3106 Ingersoll Avenue,
Des Moines, IA 50321 IL, United States
Corporate Creations Network Inc., 3411 Silverside Road,
Tatnall Building Ste 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., 406 South Boulder #400,
Tulsa OK 74103, 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., West 505 Riverside Avenue
#500, Spokane WA 99201, United States
César Cortinas 2037, Montevideo, Uruguay
Key
138
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144
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147
148
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150
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152
153
154
155
156
157
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Bunzl plc Annual Report 2019
189
Directors’ reportStrategic reportFinancial statements Shareholder information continued
Financial calendar
Annual General Meeting
Results for the half year to 30 June 2020
Results for the year to 31 December 2020
Annual Report circulated
2020
15 April
24 August
2021
March
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 2019 the Company had 5,058 (2018: 4,920)
registered shareholders who held 336.8 million (2018: 336.4 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
4,353
427
185
37
56
5,058
% of issued
share capital
2
4
13
7
74
100
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, seven 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 programme that trades on the over-the-counter 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
190
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report
Shareholders may if they wish have their dividend payments paid
directly into their bank account in certain foreign currencies.
Please contact the Company’s registrar on +44 (0) 370 889 3257
to request further information about the currencies for which this
service is available.
Share dealing
Bunzl plc shares can be traded through most banks and
stockbrokers. The Company’s registrar also offers an internet
and telephone dealing service. Further details can be found at
www.computershare.trade/ 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.
Independent auditors
PricewaterhouseCoopers LLP
Corporate brokers
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.
Bunzl plc Annual Report 2019
191
Directors’ reportStrategic reportFinancial statements Five year review
Revenue
Operating profit
Finance income
Finance expense
Profit on disposal of businesses
Profit before income tax
Income tax
Profit for the year attributable to the
Company’s equity holders
IFRS
2019
£m
9,326.7
528.4
12.4
(87.5)
–
453.3
(104.1)
Proforma
IAS 17◊
2019
£m
9,326.7
506.0
12.4
(64.2)
–
454.2
(104.3)
349.2
349.9
Basic earnings per share
104.8p
105.0p
Alternative performance measures†
Adjusted operating profit
Adjusted profit before income tax
Adjusted profit for the year
Adjusted earnings per share
◊ See Basis of preparation IFRS 16 ‘Leases’ on page 1.
653.3
578.2
440.6
132.2p
630.9
579.1
441.3
132.4p
† See Note 4 on page 134 for further details of the alternative performance measures.
2018
£m
9,079.4
466.2
11.6
(66.6)
13.6
424.8
(98.3)
326.5
98.4p
614.0
559.0
429.9
129.6p
2017
£m
8,580.9
456.0
10.6
(57.3)
–
409.3
(98.8)
310.5
94.2p
589.3
542.6
393.4
119.4p
2016
£m
7,429.1
409.7
7.1
(53.9)
–
362.9
(97.0)
265.9
80.7p
525.0
478.2
349.6
106.1p
2015
£m
6,489.7
366.5
4.8
(48.6)
–
322.7
(90.0)
232.7
71.0p
455.0
411.2
298.1
91.0p
192
Bunzl plc Annual Report 2019
Directors’ reportFinancial statementsStrategic report Bunzl plc
York House
45 Seymour Street
London
W1H 7JT
www.bunzl.com