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DELIVERING
VALUE FOR OUR
CUSTOMERS
Bunzl plc Annual Report 2020
We are a focused and successful specialist international
distribution and services Group with operations across the
Americas, Europe, Asia Pacific and UK & Ireland. We support
businesses all over the world with a variety of products that
are essential for our customers in the successful operation
of their businesses.
WE GO ABOVE AND BEYOND
TO DELIVER END-TO-END
CUSTOMER SOLUTIONS
RESPONSIBLE
SOURCING
Read more page 20
SMART
CONSOLIDATION
Read more page 22
EFFICIENT
DELIVERY
Read more page 24
DELIVERING ON OUR
PURPOSE AND VALUES
Read more page 14
www.bunzl.com
HIGHLIGHTS
CONTENTS
Adjusted earnings per share*
Adjusted operating profit*
164.9p
(2019: 132.2p)
+26.6%
£778.4m
(2019: £653.3m)
+20.9%
Growth at constant exchange rates
(Actual exchange rates +24.7%)
Growth at constant exchange rates
(Actual exchange rates +19.1%)
Cash conversion*
103%
(2019: 101%)
Dividend per share
(2019: 51.3p)
54.1p
+5.5%
Revenue
£10,111.1m
(2019: £9,326.7m)
+9.4%
Growth at constant exchange rates
(Actual exchange rates +8.4%)
* Alternative performance measure (see Note 3 on page 158).
Operating profit
£618.5m
(2019: £528.4m)
Growth at actual exchange rates +17.1%
Basic earnings per share
128.8p
(2019: 104.8p)
Growth at actual exchange rates +22.9%
Committed acquisition spend
£445m
Sustainability materiality assessment
conducted and priorities set
54
External stakeholders interviewed
Reconciliation of alternative performance measures to statutory measures
for the year ended 31 December 2020
Adjusting items
Alternative
performance
measures
£m
Customer
relationships
and brands
amortisation
£m
Acquisition
related items
£m
Non-
recurring
pension
scheme
charges
£m
Statutory
measures
£m
Adjusted operating
profit
Finance income
Finance expense
Adjusted profit
778.4
10.4
(73.2)
(100.4)
(42.7)
(16.8)
618.5 Operating profit
10.4 Finance income
(73.2) Finance expense
before income tax
715.6
(100.4)
(42.7)
(16.8)
555.7 Profit before income tax
Tax on adjusted
profit
Adjusted profit
for the year
Adjusted earnings
(165.1)
24.5
10.7
4.2
(125.7)
Income tax
550.5
(75.9)
(32.0)
(12.6)
430.0 Profit for the year
per share
164.9p
(22.7)p
(9.6)p
(3.8)p 128.8p Basic earnings per share
Strategic report
Highlights
1
At a glance
2
Chairman’s statement
4
Navigating Covid-19
6
Chief Executive Officer’s review
8
Our purpose-led business model
14
and strategy
Our core values
Our business model
Investment case
16
18
26
28 Our strategy
32
34 Operating review
42
60
64
75
84
Sustainability
Section 172 statement
Principal risks and uncertainties
Financial review
Taskforce on Climate related
Financial Disclosures (TCFD)
Non-financial information
Key performance indicators
85
Board of directors
Corporate governance report
Directors’ report
92
94
104 Nomination Committee report
108 Audit Committee report
114 Directors’ remuneration report
140 Other statutory information
Financial statements
144
145
Consolidated income statement
Consolidated statement of
comprehensive income
146 Consolidated balance sheet
147
Consolidated statement of changes
in equity
Consolidated cash flow statement
148
150 Notes
193 Company balance sheet
194
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
195
201
202
212 Shareholder information
220 Five year review
This review refers to alternative performance measures which
exclude charges for customer relationships and brands
amortisation, acquisition related items, non-recurring pension
scheme charges and the profit or loss on disposal of businesses
and any associated tax, where relevant. 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 they are removed in calculating the profitability
measures by which management assesses the performance of the
Group. Further details of these alternative performance measures
can be found in Note 3 on page 158.
Growth at constant exchange rates is calculated by comparing
the 2020 results to the results for 2019 retranslated at the average
exchange rates used for 2020.
Bunzl plc Annual Report 2020
1
Strategic report At a glance
SUPPORTING BUSINESSES
GLOBALLY WITH A VARIETY
OF ESSENTIAL PRODUCTS
MARKETS SERVED
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 and responsibly sourced non-food
products to a variety of market sectors.
GROCERY
26%
of Group revenue
Goods-not-for-resale, including food
packaging, films, labels, cleaning
and hygiene supplies and personal
protection equipment to grocery stores,
supermarkets and convenience stores.
FOODSERVICE
25%
of Group revenue
SAFETY
14%
of Group revenue
Non-food consumables, including food
packaging, disposable tableware, guest
amenities, catering equipment, cleaning
and hygiene products and safety items, to
hotels, restaurants, contract caterers, food
processors and the leisure sector.
Personal protection and safety equipment,
including gloves, boots, hard hats, ear
and eye protection and other workwear,
as well as cleaning and hygiene supplies,
to industrial and construction markets.
CLEANING
& HYGIENE
13%
of Group revenue
Cleaning and hygiene materials, including
chemicals and hygiene paper, to cleaning
and facilities management companies and
industrial and public sector customers.
RETAIL
10%
of Group revenue
HEALTHCARE
10%
of Group revenue
OTHER
2%
of Group revenue
Goods-not-for-resale, including packaging
and other store supplies and a full range
of cleaning and hygiene products, to retail
chains, boutiques, department stores,
home improvement chains, office supply
companies and related e-commerce
sales channels.
Healthcare consumables, including
gloves, masks, swabs, gowns, bandages
and other healthcare related equipment
and cleaning and hygiene products
to hospitals, care homes and other
facilities serving the healthcare sector.
A variety of product ranges to other end
user markets.
28
Years of dividend
growth
19,853
Employees
31
Countries
172
Acquisitions
since 2004
2
Bunzl plc Annual Report 2020
OUR BUSINESS
REGIONS
We operate across
the Americas, Europe
Asia Pacific and UK
& Ireland with our
global HQ in London,
UK. We are continually
developing our global
network to ensure we
deliver the best service
to our customers.
Rest of the World
North America
Adjusted operating profit (£m)*
£104.2m
2019: £61.6m
Adjusted operating profit (£m)*
£395.7m
2019: £343.6m
Continental Europe
Adjusted operating profit (£m)*
£238.1m
2019: £182.1m
UK & Ireland
Adjusted operating profit (£m)*
£68.6m
2019: £87.1m
13%
29%
49%
9%
* Alternative performance measure (see Note 3 on page 158). Percentages stated are the business areas’
adjusted operating profit compared to the Group’s adjusted operating profit before corporate costs.
Bunzl plc Annual Report 2020
3
Strategic report Chairman’s statement
DEMONSTRATING THE
RESILIENCE OF OUR
PORTFOLIO
‘ I have been truly impressed by Bunzl’s response
to the pandemic. During a challenging year the
Group has demonstrated the resilience and agility
of its business model, the strength of its supply
chain network and the dedication of its employees
across the globe.’
Peter Ventress
Chairman
Share price range p
2,436
2,465
2,452
2,551 2,603
1,820
1,950
1,671
1,735
2,016
1,936
1,943
1,450
1,367
1,167
852
1,014
884
676
11
12
13
14
15
16
17
18
19
20
1,277
Low
High
2,603p
1,277p
Over the last year, which was my first as
Bunzl’s Chairman, I have admired the
strength of the Bunzl business model, its
consistent and proven strategy and the
strength of its people. The Covid-19
pandemic has had a significant operational
impact on us globally which has required our
colleagues across the Group to change the
way they do business and interact with our
key stakeholders. Given the essential nature
of the products Bunzl supplies, we were able
to continue operating throughout the
pandemic. The Group’s ability to respond
has been supported by its decentralised
model, its motivated workforce and the
benefit of multi-year investments into its
technology infrastructure and supply chains,
particularly its Asia sourcing and auditing
operation based in Shanghai. Our in-house
team in Asia is well established and enabled
us to source high quality products from
audited suppliers at a time when products
were scarce. On a constant exchange rate
basis, the Group delivered impressive
revenue growth of 9.4%, a 20.9% increase
in adjusted operating profit and a rise of
26.6% in adjusted earnings per share.
Bunzl continued to demonstrate strong cash
conversion and, after repaying employee-
related government support packages and
bringing forward the settlement of tax
deferrals where possible to do so, as well as
announcing eight acquisitions, ended the
year with a strong balance sheet and net
debt to EBITDA of only 1.5 times. The
strength of the Group’s financial position
enables a continued focus on longer term
strategic growth priorities despite continued
near term uncertainties.
Strategic priorities
We continue to pursue a consistent and
proven strategy of developing the business
through a combination of organic growth,
operational improvements and acquisition
growth. As the new Chairman I am very
supportive of the Group’s ambitions and
believe in the opportunities ahead. We
committed £445 million of spend on
acquisitions during 2020, demonstrating
our ability to continue to consolidate our
fragmented markets. Alongside this, we have
a major role to play in supporting customers,
communities and the environment, and as a
4
Bunzl plc Annual Report 2020
OUR PEOPLE IN ACTION IN 2020
Colleagues
Bunzl’s people have been on the front line
throughout the pandemic, supplying essential
products to key workers and ensuring crucial
supply chains could continue to operate. The
Group has taken all appropriate measures
to keep colleagues safe and to ensure their
outstanding efforts have been rewarded.
Customers
Bunzl’s colleagues have gone above and beyond
to support our customers during the pandemic.
They have worked tirelessly to source and
deliver orders from large quantities of in-demand
personal protection equipment, to new innovative
products that our customers have needed to
comply with restrictions and new safety protocols.
Communities
Bunzl is a decentralised business comprised
of many operating companies. Our businesses
are very local and throughout the pandemic
have supported local communities in various
ways. Examples include donating masks to
vulnerable communities and lunchbox
packaging for free school meals.
proactive leader in the transition to a more
sustainable future. I am really pleased with
the progress we have made this year.
People and culture
Bunzl’s core asset is its workforce and 2020
showcased the importance of this. Our front
line colleagues have gone above and beyond
to support our customers and we have
sought to recognise their dedication,
including through appropriate rewards and
‘thank you’ gifts. We value our people and,
despite the challenges in some of our
operations during 2020, the number of Bunzl
employees at the end of the year increased
by 5% alongside revenue growth of 9% at
constant exchange rates.
The Group’s decentralised model makes
the business very local and it is admirable
to see how our people have been involved
in supporting their local communities during
the year. On top of enhanced charitable
donations made by the Group, the 20%
reduction in fees and base salaries paid to
the Board, Executive Committee members
and Business Area Managing Directors
during the second quarter of 2020 were also
donated to charities.
Talent is a key pillar of focus for the Board
and during 2020 we continued to further
assess our talent development programmes
which focus on ensuring that we have
the right capabilities for the future and a
strong succession pipeline across leadership
positions. The Group is further developing
its diversity programmes with unconscious
bias training initiatives launched in
North America and UK & Ireland and the
appointment of a Director of Diversity and
Inclusion in North America. Whilst gender
is not the only focus for diversity,
encouragingly the number of women
in UK & Ireland’s leadership team has
increased by 40% over the last two years
and women now represent 40% and 38%
of our Executive Committee and Board
respectively, demonstrating the importance
of business-led initiatives to drive diversity.
We are committed to further developing
programmes to support a diverse workforce.
Shareholder returns
The Board is recommending a final dividend
of 38.3p, 7.0% higher than the prior year,
resulting in a full year dividend of 54.1p.
This represents a 5.5% increase compared
to the 2019 total dividend, and Bunzl’s 28th
consecutive year of dividend growth, with
the Group remaining committed to ensuring
sustainable dividend growth. With the
Annual General Meeting held on 15 April
2020, during the heightened period of
uncertainty in the early days of the
pandemic, the final dividend for the year
ended 31 December 2019 was no longer
proposed by the Board at that meeting.
However, following a better than expected
trading performance, the Board decided to
reinstate the final dividend for the year ended
31 December 2019 at the same level as
originally proposed through the payment of
an additional interim dividend for the year
ended December 2019 which was paid
on 16 November 2020.
Since 2004 Bunzl has returned £1.6 billion
to shareholders through dividends and has
committed £3.9 billion in acquisitions to
support an adjusted earnings per share
compound annual growth rate of 11% over
the period.
Governance
During 2020 Philip Rogerson stepped
down as Chairman and as a director and
I succeeded him as Chairman having joined
as Chairman designate in June 2019. I would
like to thank Philip for his strong leadership of
and guidance to the Group throughout the 10
years he was on the Board. Eugenia Ulasewicz
also retired as a non-executive director, having
joined the Board in 2011. She provided many
years of valuable insight across North America
and retail markets. I also want to thank Brian
May, who retired after 25 years at Bunzl, for
13 years of which he held the position of
Chief Financial Officer, for his significant
contribution to the Group’s development. Brian
was succeeded at the beginning of 2020 by
Richard Howes who was appointed after an
extensive search process.
During the year the Board also welcomed
two new non-executive directors. Vinodka
(Vin) Murria OBE joined the Board in June.
Vin has exceptional experience in the
technology sector and was awarded her
OBE in 2018 for services to the digital
economy. Further, given her experience
as a successful entrepreneur, Vin draws
on invaluable knowledge that has a strong
relevance to Bunzl’s decentralised and
entrepreneurial culture. In December 2020,
we also welcomed Maria Fernanda Mejía.
She has extensive international experience,
particularly in North America and Latin
America, strong knowledge of distribution
and supply chain management and a
valuable background in marketing and
communications through multiple leadership
positions in the FMCG sector.
Peter Ventress
Chairman
1 March 2021
Bunzl plc Annual Report 2020
5
Strategic report Navigating Covid-19
RESPONDING
TO CHALLENGING
CIRCUMSTANCES
Our ability to respond quickly and effectively to
the demands of the pandemic has been underpinned
by the strength of our supply chain and our reliable,
added-value Asia sourcing and auditing operation.
OUR RESILIENCE COMES FROM...
Strength of our
of business model
Strong global supply chains
Bunzl has a long track record
of delivering stable and
consistent results. We are
a key component in global
supply chains and provide
essential items our customers
need in order to operate their
businesses.
Read more page 18
The strength of our global
supply chains allowed the Group
to quickly and efficiently source
products for customers across
our markets. In particular, our
Asia sourcing and auditing
operation has been a significant
asset to the Group.
Read more page 12
Diversified sector portfolio
across geographies
Local agility and responsiveness
driven by decentralisation
Bunzl operates in more than
30 countries and across
six market sectors. This
diversification enabled the
Group to offset the impact to
the businesses which were
more materially affected by
the pandemic.
Read more page 2
Bunzl’s decentralised nature
and entrepreneurial DNA
supported local responsiveness
and agility. This enabled our
teams to navigate these
challenging circumstances
and continue to deliver solutions
for our customers.
Read more page 21
Dedicated and
hardworking colleagues
Critical supplier status
Our colleagues worked
tirelessly throughout 2020 to
support our customers. They
have been on the front line,
supplying essential products
to key workers and ensuring
businesses could continue to
operate safely.
Read more page 8
Given the essential nature of the
products the Group supplies and
the sectors that we service, we
have often been designated a
critical supplier and remained
open throughout the pandemic
in 2020.
Read more page 8
6
Bunzl plc Annual Report 2020
Financial strength of the business
and good financial controls
Top 8 Covid-19 related products
Masks
Gloves
Balance sheet strength,
together with strong financial
controls, provided reassurance
to our customers. Over the year
customers trusted Bunzl with
large prepayments required to
source Covid-19 related products.
Read more page 75
Sanitisers
Disinfectants
Infrastructure investments capable
of supporting digital shift
Disposable wipes
Coveralls
Previous investments in
technology supported a shift
to digital ordering, and over
the year 66% of orders were
made digitally.
Read more page 23
Face shields
Eye protection
Strong collaboration and learnings
between global teams
We were able to leverage the
benefit of our global footprint,
with management teams across
the Group supporting each other
and providing crucial learnings
over the period.
Read more page 16
2.6x
Revenue from top 8
Covid-19 related
products compared
to 2019
Bunzl plc Annual Report 2020
7
Strategic report Chief Executive Officer’s review
STRONG COMMITMENT
TO OUR VALUES AND
PURPOSE
Thank you to
all our Bunzl heroes
‘Our number one priority during 2020 has been the
well-being of our colleagues and customers and I am
exceptionally proud of how our people have responded.
Our ability to respond quickly and effectively to
customer needs has given our customers the confidence
to trust their business with us. Our teams have worked
tirelessly and have demonstrated a strong commitment
to our core values including reliability, responsiveness
and humility. Revenue growth of 9.4% at constant
exchange rates reflects this dedication and I am
incredibly proud of the Bunzl family which now includes
almost 20,000 colleagues. At Bunzl we seek to achieve a
balance of focus across all stakeholders, and I believe the
strength of this has been demonstrated in 2020.’
Key highlights
• £10 billion revenue milestone reached,
supported by underlying revenue growth
of 4.8%.
• Adjusted operating profit up 20.9% at
constant exchange rates, up 19.1% at
actual exchange rates.
• Reported operating profit up 18.7% at
constant exchange rates, up 17.1% at
actual exchange rates.
• Return on average operating capital 45.4%
with return on invested capital 16.2%.
• Continued strong cash conversion of 103%
and free cash flow growth of 27.3%.
• 28 year track record of dividend growth
continues with a 5.5% increase in the
dividend for the year.
• Digital order volumes 66% of total orders,
up from 62% in 2019.
• Committed acquisition spend of
£445 million, second highest spend in
Bunzl’s history; pipeline remains active.
• In-depth materiality assessment
conducted to prioritise sustainability
ambitions.
• Substantial increase in charity donations
and government support repaid.
Overview
Against the backdrop of extremely
challenging trading conditions caused by
the Covid-19 pandemic which impacted all
our geographies, the Group performed very
well during 2020. Our strong position within
supply chains, sourcing and delivering
essential goods, led to our classification
as a critical supplier and, as a result, our
businesses have remained open throughout
the pandemic. While the Group’s resilient
performance over 2020 has been supported
by our diversified portfolio and historical
investments in our supply chains and digital
infrastructure, it is principally our people
who have driven our results. From the outset
of the pandemic, we prioritised the health
and safety of our workers, establishing
appropriate cleaning and social distancing
protocols in our facilities and rapidly
implemented technologies to allow for remote
working environments where possible, thereby
allowing us to continue to serve our customers
effectively. The Group has prioritised the
well-being of its colleagues and I am pleased
to see that during a challenging year Bunzl’s
employee survey showed colleagues are
highly engaged, are very willing to recommend
Bunzl as a place to work and have a strong
sense of pride about the service Bunzl gives
its customers. Importantly, they know we
have processes and procedures in place to
help keep them safe.
Our overall trading performance during
2020 has benefited from the breadth of the
customer sectors and geographies the Group
operates in and the wide range of products
supplied. The substantial declines in
profitability in the lower margin foodservice
and retail sectors were more than offset by
strong performances in the generally higher
margin safety, cleaning & hygiene and
healthcare sectors, primarily driven by
significant sales volumes of Covid-19 related,
mostly own brand, products such as gloves,
masks and sanitisers. Performance over
2020 as a whole broadly reflected these
diverging trends from the start of the second
quarter onwards.
Operating performance
With less than 10% of operating profit
generated inside the UK, and due to the
strengthening of sterling in recent months,
the Group was adversely impacted 1% to 2%
by currency translation. The commentary
below is stated at constant exchange rates
unless otherwise highlighted. In 2020
revenue increased 9.4% (8.4% at actual
exchange rates) to £10,111.1 million. Within
this, underlying revenue, which is organic
growth of 5.3% adjusted for an extra trading
day impact of 0.5%, grew by 4.8%. In
addition, acquisitions contributed revenue
growth of 4.1%. Adjusted operating profit
was £778.4 million, an increase of 20.9%
8
Bunzl plc Annual Report 2020
Regional performance
North America
Continental Europe
UK & Ireland
Rest of the World
Revenue (£m)
2020
5,843.8
2,127.3
1,287.7
852.3
2019
5,473.2
1,829.8
1,242.1
781.6
Growth at
constant
exchange
7.2%
15.6%
3.5%
21.6%
Organic
growth
1.0%
15.1%
2.6%
17.6%
Adjusted operating
profit* (£m)
2020
395.7
238.1
68.6
104.2
2019
343.6
182.1
87.1
61.6
Growth at
constant
exchange
15.7%
30.8%
(21.2)%
94.0%
Operating margin*
2020
6.8%
11.2%
5.3%
12.2%
2019
6.3%
10.0%
7.0%
7.9%
* Alternative performance measure (see Note 3 on page 158)
(19.1% at actual exchange rates) and operating
margin was 7.7%, up from 7.0% in 2019 at
both constant and actual exchange rates.
An initial surge in demand for hygiene
paper followed by strong volume growth
of Covid-19 related products, such as
disposable gloves, masks, sanitisers and
disinfectants, resulted in significant
growth over the year. Our global sourcing
capabilities, strong supplier relationships
and decentralised structure allowed our
category management teams to react quickly
and make available these products, often our
own brands, to our customers. Our financial
strength was a significant asset over the
period, enabling customers to trust the
Group with significant pre-payments
required to secure certain Covid-19 related
products. At the same time, each of our
businesses took prudent measures to
manage both operating costs and customer
credit risks.
Within underlying revenue growth of 4.8%,
sales of the top 8 Covid-19 related products,
being masks, sanitisers, gloves, disinfectants,
coveralls, disposable wipes, face shields and
eye protection, and which are primarily own
brand, contributed underlying revenue
growth of 14.6%. These products represented
22% of total Group revenue with the revenue
they generated 2.6 times the comparable
2019 level. Around 40% of the Covid-19
related growth was attributable to larger
orders than Bunzl would typically see and
these orders were generated predominately
by governments and healthcare organisations,
with more than half fulfilled in the second
quarter of 2020 as customers sought to build
stocks of essential items at the start of the
pandemic. Smaller orders were generally
from existing customers, including Covid-19
related products that they may not have
sourced previously, and while sales were
highest in the second quarter demand
remained strong through the second half.
The benefit to underlying growth from
Covid-19 related product sales was partially
offset by the decline of sales across other
product ranges which impacted the Group’s
underlying revenue growth by 9.8%. This
decline in other product sales was greatest
during the second quarter of the year when
pandemic-related restrictions were at their
most onerous, with the level of decline reducing
meaningfully in the third quarter and
improving moderately in the final quarter.
Overall total underlying growth accelerated
from 2.8% in the first half of the year to 6.7%
growth in the second half of the year.
Our performance across our sectors and
geographies has been reflective of the
diverging trends between sales of Covid-19
related products and other products and our
customer sector diversification has strongly
supported our resilience over the year.
We saw the strongest growth in the
healthcare, safety and cleaning & hygiene
sectors, with combined growth of 31%, and
a decline in the foodservice and retail sectors
of 6% although we saw an improved second
half performance compared to the second
quarter. The grocery sector grew 8%, with
second half organic growth stronger than
in the first half. Group operating margin
performance largely reflected the mix effect
of increased revenues in the higher margin
healthcare, safety and cleaning & hygiene
sectors and fewer sales to the retail and
foodservice sectors which tend to have
lower margins. The increase in higher
margin own brand penetration, volume
leverage on larger Covid-19 related orders
and price inflation on some Covid-19 related
products further supported operating
margins. Businesses and geographies more
heavily weighted to foodservice and retail
have conversely seen margins impacted
by lower sales in these customer sectors and
by increased provisions relating to customer
credit exposure. The Group has also seen
a number of customers either entering
insolvency processes or showing specific
credit stress indicators that have impacted
the recoverability of receivables and
customer specific inventory particularly in
the foodservice and retail sectors. This has
resulted in a net charge of approximately
£15 million being taken during the year to
reflect the risks around recoverability.
In addition, there is a heightened risk of
further recoverability issues with customers,
mainly in these same sectors, as government
support is withdrawn and the trading
uncertainty continues. Consequently, the
Group has taken an additional net charge
of approximately £10 million in the year
relating to aged receivables and customer
specific inventory for those customers
identified as having a high or medium
credit risk. In addition, the Group has seen
an increase in the level of slow moving
inventory as the Covid-19 pandemic and
the associated government imposed
control measures have continued to impact
customer demand across a range of market
sectors. This has resulted in a net charge
of approximately £15 million in the year to
increase slow moving inventory provisions.
Our North America business area was
impacted by its exposure to the foodservice
and retail sectors in the first half of the
year, but following a strong recovery of its
redistribution and retail businesses in the
second half, achieved organic growth of
1.0% over 2020. Continental Europe and
the Rest of the World benefited from their
exposures to the safety, healthcare and
cleaning & hygiene sectors with organic
revenue growth of 15.1% and 17.6%,
respectively. The UK & Ireland business
was the most impacted by its exposure to
the foodservice and retail sectors. Although
organic revenue was up 2.6%, operating
margin was materially impacted.
Reported operating profit was £618.5 million,
an increase of 18.7% (17.1% at actual
exchange rates). Adjusted profit before
income tax was £715.6 million, an increase
of 25.6% (23.8% at actual exchange rates)
due to the growth in adjusted operating
profit and a decrease in the net finance
expense. The lower net finance expense
was due to lower average interest rates
and lower average net debt levels over the
year. Reported profit before income tax was
£555.7 million, an increase of 24.4% (up
22.6% at actual exchange rates). The
effective tax rate of 23.1% reduced from
23.8% in 2019 due to a higher credit for
share-based payment expense and a
larger benefit from reduced prior year
tax exposures. Basic earnings per share
were 128.8p, an increase of 24.8% (22.9%
at actual exchange rates), and adjusted
earnings per share were 164.9p, an increase
of 26.6% (24.7% at actual exchange rates).
Cash conversion (operating cash flow as a
percentage of lease adjusted operating profit)
remained strong over the period at 103% and
Bunzl plc Annual Report 2020
9
Strategic report Chief Executive Officer’s review continued
the Group delivered free cash flow growth
of 27.3% over the year at actual exchange
rates. The cash flow benefited from advance
payments from customers net of upfront
payments to suppliers of £34 million.
Excluding these net advanced payments,
cash conversion was 99%. Net capital
expenditure of £31.9 million compares to
£28.8 million in 2019 and reflected continued
investment in IT and digital technologies,
as well as warehouse consolidations and
upgrades. The Group ended the year with
net debt, excluding lease liabilities, of
£1,255.0 million and 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 1.5 times
compared to 1.9 times at the end of 2019.
Return on average operating capital grew
strongly to 45.4% compared to 36.9% in 2019
and return on invested capital was 16.2%
compared to 13.6% in 2019, both due to a
higher return in the underlying business
driven by an increase in adjusted operating
profit and lower average operating capital.
Organic growth and operational
efficiency
Organic growth in 2020 was mainly driven
by our ability to rapidly fulfil the heightened
demand for Covid-19 related products,
supported by the Group’s Asia sourcing and
auditing operation based in Shanghai and
our ability to secure essential products
through a large network of Bunzl approved
and audited suppliers. Consequently, over
the year we expanded the range of products
supplied to many of our customers. Digital
technologies further supported our
performance, with 66% of orders placed
in 2020 made through Electronic Data
Interchange and our webshops compared
to 62% in the prior year. Digital continues
to be a key strategic priority for the business,
given the value it provides to our customers
and how it differentiates Bunzl’s proposition.
During 2020 we saw good growth in the
number of digital solutions offered to our
customers. In addition, we continued to focus
on operational efficiencies with multiple
warehouse consolidations and further
investments to optimise delivery routes.
Operational efficiency was further supported
by lower travel expenses.
Acquisitions
During 2020 Bunzl’s committed spend
on acquisitions was £445 million, adding
annualised revenue of £602 million. This
compares to a spend of £124 million in 2019
and an average spend of approximately
£310 million over the last five years. The
eight announced transactions have locations
across each of our business areas and
operate in multiple market sectors.
The Group acquired two sizeable North
America focused businesses during the
year. At the beginning of January 2020,
Bunzl 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. The business
generated annualised revenue of
£255 million in 2020 and integration is
progressing well with purchasing synergies
being achieved and back office efficiencies
generated. In September, the Group
completed the acquisition of MCR Safety
which distributes a variety of largely own
brand personal protection equipment (PPE)
and other safety products to distributors
operating in a number of end user markets.
The business has operations in North
America, Mexico, Latin America and Europe
and supplies gloves, eye protection and
workwear in particular. MCR Safety is a high
quality business with a strong leadership
team and has a well-established portfolio
of own brand products which complements
Bunzl’s existing product range and
significantly strengthens and expands
our safety operations both in the US and
elsewhere. In 2019 revenue was £194 million.
In December 2020 the Group also completed
the acquisition of Snelling, a Canadian
packaging and cleaning and hygiene
supplies business with annual revenue
in 2019 of £28 million.
In Brazil we purchased Medcorp and
SP Equipamentos in January and November
respectively. Medcorp is a distributor of a
broad range of medical products to leading
private hospitals and redistributors in
Brazil with 2019 revenue of £9 million. SP
Equipamentos is a leading PPE distributor
based in São Paulo with revenue in 2019 of
£22 million.
Bodyguard Workwear, a distributor focused
on PPE distribution in the UK and Ireland
with 2019 revenue of £8 million, was
acquired in February 2020. In September we
acquired Abco Kovex, a distributor of flexible
packaging based in Ireland with revenue of
£20 million in 2019.
ICM, a leading distributor of PPE to both end
users and redistributors in Denmark, with
2019 revenue of £49 million, was acquired
at the end of October 2020.
Today we are announcing the completion
of three acquisitions since the start of 2021.
In January we acquired Deliver Net, a
healthcare distributor to care homes in the
UK, with revenue of £20 million in 2020.
The business is closely aligned with our
existing care home business in the UK and
we anticipate being able to develop the
business through the introduction of
additional product offerings such as care
home equipment. In February we completed
the acquisition of Disposable Discounter, an
online distributor of foodservice disposable
products to a highly fragmented customer
base. The business has grown strongly in
recent years and operates mostly in the
Netherlands but has recently started to
expand across Europe. The business
generated £18 million of revenue in 2020,
has attractive growth potential and
supports Bunzl’s continued development
of e-commerce capabilities. Lastly, we also
completed the acquisition of Pinnacle, a
leading distributor of cleaning & hygiene
in Saskatchewan, Canada, in February.
The company generated £11 million of
revenue in 2020 and supports a wide range
of customers in the education, facilities
management and care home sectors. The
business is highly complementary to our
existing cleaning & hygiene business
in Canada.
Bunzl ended the year with net debt to
EBITDA of 1.5 times, despite the acquisition
spend in 2020, providing the Group with
substantial capacity for further self-funded
acquisitions. Our pipeline is active, and we
see significant opportunities for continued
acquisition growth in our existing markets,
both where we have more limited and no
sector presence, as well as potential to
expand into new markets.
Equitable and sustainable growth
We understand our role as a proactive leader
in the transition to a more sustainable and
equitable future. We have an opportunity
to support people, communities and the
environment through our role in global
supply chains. As a major player in its
industry, Bunzl is a trusted partner to its
customers, collaborating with leading
companies across sectors to help them
achieve the sustainability objectives most
relevant to their industries and fulfil their
ambitious sustainability commitments while
growing the Group’s business.
Following an in-depth materiality
assessment during 2020, the Group has
identified four key areas of focus for the
business going forward: ensuring a
responsible and ethical supply chain;
ensuring a diverse thriving workforce;
taking action on climate change; and
helping customers to transition to more
sustainable packaging.
Global supply chains have expanded
customer choice and lowered costs but
this comes with a responsibility to ensure
communities and workers’ rights are
respected in the process. Based in Shanghai,
our industry-leading sourcing and auditing
operation opened in 2008. The operation
10
Bunzl plc Annual Report 2020
OUR KEY
SUSTAINABILITY THEMES
1
Protecting human rights
and driving broad-
based growth through
responsible supply chains
What we are doing
• We have been auditing our Asian
supply chain since 2008 to ensure the
highest quality and labour standards
for products sourced from the region.
• We will continue to focus on enhancing
our leading practices relating to supply
chain oversight.
2
Investing in a diverse
workforce and thriving
communities
What we are doing
• Our decentralised business model is
supportive of employee-led focus and
we strive to ensure our employees
thrive at Bunzl.
• We continue to develop our diversity
and inclusion employer practices.
3
Taking action on climate
change by reducing
emissions
What we are doing
• Bunzl’s consolidated deliveries reduce
the Group’s carbon footprint, with
Bunzl’s CO2 generated per pound of
revenue having reduced 53% over the
last 10 years.
• In 2021 we will refine our long term
carbon targets to reduce carbon in our
operations in line with climate science.
4
Providing sustainable
solutions and supporting
circular economy
techniques that keep waste
out of nature
What we are doing
• Bunzl plays a key role in the supply
chain as an adviser to customers on
the shift to sustainable solutions; our
expertise and capabilities are a
differentiator for customers.
• We will be accelerating our progress
in providing alternative sustainable
products, with this supported by the
setting of new commitments in our
most material and relevant retail,
foodservice and grocery businesses.
Read more page 42
ensures our suppliers from Asia, the
Group’s most significant high-risk sourcing
region, are subject to frequent stringent
labour and quality checks. This capability
sets Bunzl apart from its peers, gives
customers the reassurance they need and
allows the Group to directly help suppliers to
improve their practices. Similarly, the Group
appreciates the importance of responsible
sourcing regarding raw materials and seeks
to purchase responsibly sourced wood fibre
products and largely purchases its paper
related products through leading branded
companies with their own stringent
certifications. Going forward, the Group
will continue to focus on enhancing its
industry leading practices relating to supply
chain oversight.
Companies may not grow sustainably if
they cannot attract, retain and get the best
out of diverse talent. The businesses in
Bunzl have a long track record as local
employers and I am proud of the progress
we have made to create a diverse and
inclusive working environment, particularly
with regards to gender representation over
the last couple of years. I am pleased that
our Board and Executive Committee now
comprise 38% and 40% women, respectively.
While the Group continues to focus on
improving gender representation across
the Group and in more senior positions, we
will be expanding programmes to focus
on other groups, in particular to increase
ethnic diversity.
Given Bunzl’s one-stop-shop operating
model, including combined consolidated
delivery, we provide a carbon efficient
solution for customers which limits the
number of deliveries. Over the last 10 years
the total carbon emissions from Bunzl’s
operations has remained stable despite the
business growing substantially and revenue
doubling, driving an increase in efficiency
of more than 50%. However, we recognise
that there is more that can be done and in
2021 will be setting a new long term carbon
reduction target to further reduce carbon in
our operations.
Finally, the Group recognises its
responsibility to be part of the solution
on reducing waste and we are proactively
working with our customers and suppliers
to lead the industry towards a sustainable
approach to single use plastics. Bunzl is
not a manufacturer and can easily switch
between suppliers and products and is
therefore well placed to play this role,
providing sustainable product solutions
and independent expert advice on emerging
trends and product categories. In addition
to its other product ranges, Bunzl’s own
brand offering also provides a cost-effective
solution for customers. For example, in
Bunzl plc Annual Report 2020
11
Strategic report Chief Executive Officer’s review continued
2020 our businesses in Australia and
New Zealand sold over 39 million Sustain
products, our own brand range which is
made from paper and plant-based products,
and while in its early days I am pleased that
Bunzl’s Continental Europe business area
has launched a new own brand sustainable
range under the brand Verive. Further,
the Group continues to train sustainability
experts across sales teams to work closely
with customers to help them achieve their
packaging targets, including moving to
more sustainable product ranges. Going
forward we will continue our progress in
proactively providing alternative sustainable
products, supported by the setting of
new commitments within our businesses
serving the retail, foodservice and
grocery sectors.
Sustainability is a vital part of the Bunzl
equation and integral to our strategy and the
Group will be refining its ambitions against
each of these key areas over the course
of 2021.
Prospects
The Group’s expectations for 2021 remain
unchanged and visibility remains limited on
the future extent and duration of pandemic-
related restrictions, the speed of the roll out
of vaccination programmes and the
pandemic’s macroeconomic impact. At
constant exchange rates the Group expects
robust revenue growth in 2021 over the prior
year, after excluding larger Covid-19 related
orders which strongly supported the
performance in 2020 and which are not
expected to repeat. The Group expects a
recovery in sales of other products to be
broadly offset by a decline in smaller
Covid-19 related orders, while recent
acquisitions will contribute to the Group’s
performance in 2021. Given the growth
trends in 2020, after excluding larger
Covid-19 related orders we expect good
organic revenue growth in the first half of
2021 to be followed by a moderate decline
in the second half of the year. Overall, the
foodservice and retail sectors, which were
more heavily impacted by pandemic-related
restrictions in 2020, are expected to
demonstrate recovery in the second half of
2021 but will remain below 2019 levels for
the year. Persistently stronger sterling would
however negatively impact reported growth.
Group operating margin is expected to
return to a more historical level.
Focus on our Shanghai sourcing office
Bunzl’s Asia sourcing and auditing operation based in Shanghai is responsible for both sourcing
products and for quality assurance and quality control. Each of the c.1,300 suppliers Bunzl works
with in the region has to meet strict product quality control thresholds and the Group has a zero
tolerance policy to unethical trading practices, such as modern slavery. We conduct around 700
in-person supplier audits each year which cover c.95% of annual spend.
During 2020 the Shanghai team was instrumental to the Group’s ability to source large quantities
of quality products, despite the unprecedented demand. The team provided customers with
crucial assurance around their orders which was especially important given the level of
pre-payments required. Products were tested by the team prior to placing orders and the actual
orders were inspected prior to shipment. In some circumstances, Bunzl representatives were also
sent to factories to inspect products coming off the production line to ensure quality and speed of
delivery. Over the period March to December, the team sourced 8.5 billion gloves and 480 million
masks, and conducted more than 1,500 pre-shipment inspections.
At constant exchange rates, revenue growth
in North America is expected to be robust
driven by the continued benefit from
acquisitions and the lower proportion of
larger Covid-19 related orders seen in 2020.
Revenue in both Continental Europe and
UK & Ireland is expected to decline given
the higher proportion of larger orders seen
in 2020 which were strong contributors to
growth. Rest of the World revenue is also
expected to decline, driven by the reduced
support from Covid-19 related sales.
Looking ahead, Bunzl’s longer term
prospects remain attractive. The last year
has reinforced the resilience and quality of
the Bunzl model by demonstrating the agility
that comes with a decentralised business
model, the critical role we play in supply
chains and to customers and our highly cash
generative nature. We expect to see some
benefit from enhanced hygiene trends across
most of our business areas and believe that
our credentials as a proactive leader in
providing sustainable solutions are a
growing competitive advantage. Further, we
believe the merits of joining the Bunzl family
have only been strengthened as a result of
the pandemic and this is reflected in the
conversations we are having with a number
of acquisition targets. The Group remains
committed to creating value through its
proven and consistent strategy of driving
organic growth, delivering operational
improvements and further consolidating
our markets through strategic acquisitions.
Frank van Zanten
Chief Executive Officer
1 March 2021
12
Bunzl plc Annual Report 2020
CONNECTED AND COLLABORATIVE:
OUR LEADERSHIP TEAM
While it might have been virtual in 2020, leaders from
across the Group meet regularly to review performance,
discuss trends affecting our businesses and seek further
opportunities for growth and competitive advantage.
1
3
5
7
9
2
4
6
8
10
1
Frank van Zanten*
Chief Executive Officer
2
Richard Howes*
Chief Financial Officer
3
Jim McCool
Chief Executive Officer, North America
4
Diana Breeze*
Director of Group Human Resources
5
Alberto Grau
Managing Director, Continental Europe
6
Andrew Mooney*
Director of Corporate Development
7
Suzanne Jefferies*
General Counsel and Company Secretary
8
Andrew Tedbury
Managing Director, UK & Ireland
9
Jonathan Taylor
Managing Director, Latin America
10
Kim Hetherington
Managing Director, Asia Pacific
* Members of the Executive Committee
Board of directors page 92
Bunzl plc Annual Report 2020
13
Strategic report Our purpose-led business model and strategy
DELIVERING LONG TERM
SUSTAINABLE VALUE
WHAT
Essential business
solutions...
ONE-STOP-SHOP
WE SOURCE
THROUGH OUR
CORE VALUES
Humility
Read more page 20
Responsiveness
WE CONSOLIDATE
Creativity
Diversity
Customer-
centricity
Reliability
Transparency
Read more page 22
WE DELIVER
Read more page 24
We ensure:
• Customer-centric service model
• Simplification and efficiency
• Local agility and knowledge
• Value-add services and expertise
• Sustainable and responsible solutions
• Reliability
OUR
PURPOSE
We believe that
our purpose is to
deliver essential
business solutions
around the world
and create long
term sustainable
value for the
benefit of all
stakeholders.
Read more page 16
14
Bunzl plc Annual Report 2020
HOW
create long term
sustainable value...
A COMPOUNDING STRATEGY
THAT CONSISTENTLY
DELIVERS…
WITH SUSTAINABILITY
A VITAL PART OF THE
EQUATION
ORGANIC
GROWTH
RESPONSIBLE SUPPLY
CHAINS
Read more page 28
OPERATING MODEL
IMPROVEMENTS
INVESTING IN A
DIVERSE WORKFORCE
WHY
for the benefit for
all stakeholders
Customers
Colleagues
Read more page 29
ACQUISITION
GROWTH
Read more page 30
SUSTAINABLE AND
EQUITABLE GROWTH
Read more page 31
We deliver:
• Growth opportunities
• Strong track record
• Resilience
• Good return on invested capital
• Strong cash generation
TAKING ACTION ON
CLIMATE CHANGE
Environment
PROVIDING
SUSTAINABLE
SOLUTIONS
We provide:
• Industry-leading supplier audits
and control
• Decentralised business model that is
supportive of a focus on our colleagues
• Carbon efficiency through consolidation
• Supplier flexibility to source alternative
and more sustainable products
Shareholders
Suppliers
Communities
Read more page 42
Read more page 60
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
15
15
Strategic report
Our core values
AN ETHOS AND
VALUES THAT
UNITE OUR
DIFFERENT
GEOGRAPHIES
This pandemic has reinforced our belief
that our greatest asset is our people.
16
16
Bunzl plc Annual Report 2020
OUR SHARED BELIEFS
During the year we conducted an extensive
review into what our employees believe sets
Bunzl apart from others. These beliefs show
what is most important to Bunzl’s people
and demonstrate how the Group’s purpose
and values run through the organisation.
We Believe...
• that the safety and security of our people
is our first priority;
• that through diversity, we build strength;
• that an entrepreneurial spirit provides
endless possibilities;
• that together we can achieve anything;
• in creating a sustainable environment
for us and those who follow;
• that through innovation we find more
dynamic solutions;
• that it’s our business to enhance
our customers’ business;
• that our global supply chain brings local benefits;
• that investing in our local communities
is the right thing to do;
• that technology enables success;
• that motivated people create happy customers; and
• that at Bunzl, everyone counts.
We...
• are transparent;
• show humility;
• are reliable; and
• are responsive.
Read more page 59
A responsible business
We have taken actions as a responsible business operating
throughout the pandemic that reflect our values.
• The safety of our employees has been our top priority.
• We have continued to regularly check in on the well-being
of our people throughout the pandemic, which has
included local surveys, a Group wide pulse survey and
virtual listening sessions with members of the Board.
• We have rewarded our front line heroes, from our
warehouse staff to our delivery drivers, in a range of ways
from regular performance bonuses and one-off ‘thank you’
bonuses to gift cards, meals offered between shifts and
personal protection equipment products supplied for
family members.
• We have returned all government assistance initially
received, with the stronger parts of the business able to
support those operations which have been more adversely
impacted by the pandemic.
• Bunzl’s Group wide employees at the end of the year had
grown by 5%.
• During 2020, the Group substantially increased its
donations to charities with senior management salary
reductions at the start of the year donated on top of a
general increase in Group donations.
+5%
Group wide employees
Bunzl plc Annual Report 2020
17
Strategic report Our business model
ESSENTIAL
BUSINESS SOLUTIONS
We provide our customers with essential items
that are necessary for their businesses to operate.
We reliably source, consolidate and deliver these
items through customised solutions, providing
both efficiency and value-added benefits.
OUR SOURCES OF
COMPETITIVE
ADVANTAGE
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 3,300 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.
Decentralised model
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 scale and strength of relationships
with multinational and local suppliers, together
with the benefits of our Asia sourcing and
auditing operation based in Shanghai, allow
us to provide a broad range of responsibly
sourced and competitively priced products,
including an extensive range of own brand
and 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’. Since
2004 we have acquired 172 businesses.
OUR CAPITAL
ALLOCATION
PRIORITIES
Cash flow
Our businesses are highly cash generative and
since 2004 we have turned on average 98% 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 to
deliver organic growth 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 net
capital expenditure in 2020 was £31.9 million.
103%
of adjusted operating profit into cash
Acquisitions
Applying our disciplined and controlled
approach, we have been able to commit
£3.9 billion of cash generated to 172
acquisitions since 2004 while maintaining
a prudent approach to net debt.
Dividends
Our dividend has grown every year for
28 years at a CAGR of 10% per annum. We are
committed to ensuring sustainable dividend
growth in-line with our progressive policy.
Read more page 27
DELIVERING LONG TERM SUSTAINABLE VALUE TO OUR STAKEHOLDERS
18
Bunzl plc Annual Report 2020
OUR SERVICE OFFERING
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.
One-stop-shop
Value-added
services
On-time,
in-full
delivery
WE SOURCE
Read more page 20
Expert
knowledge
and advice
Delivery
options
CUSTOMISED
SOLUTIONS
One order,
one delivery,
one invoice
WE CONSOLIDATE
Read more page 22
Customised
digital
solutions
WE DELIVER
Read more page 24
Sustainability
expertise
Local and
national
distribution
network
Competitively
priced
products
Market sectors
Grocery
Foodservice
Safety
Retail
Cleaning
& Hygiene
Healthcare
Other
DELIVERING LONG TERM SUSTAINABLE VALUE TO OUR STAKEHOLDERS
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
19
19
Strategic report Our business model – source, consolidate, deliver
WE SOURCE
RESPONSIBLE
SUPPLY CHAIN,
RESPONSIVE
TEAMS
20
Bunzl plc Annual Report 2020
Our teams quickly and efficiently
sourced vital, quality supplies
during a year of unprecedented
challenges.
Value-added services
Our deep industry knowledge enables
us to offer extensive value-added services
to our customers. These include bespoke
and printed product management,
product training, design and installation
services, contract mobilisations and
sustainability expertise.
c.150
operating businesses
across Bunzl
19,853
employees with c.3,300 expert
sales people and c.2,600 customer
service specialists
>20
year average relationship
with the Top 40 customers
in North America
Global sourcing
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. Our scale
allows us to source competitively priced
products through a large network of
multinational and local suppliers and, using
our Asia sourcing and auditing operation,
ensure quality and ethical sourcing. As
a distributor, we are not tied to particular
products and can therefore help our
customers to source the right products for
their specific needs.
Local, customer-centric model focused
on solutions
With a decentralised operational structure,
Bunzl’s experienced and knowledgeable
teams are able to focus on their customers’
needs in their local markets and create an
energised entrepreneurial environment,
but with access to investment enabled by
Bunzl’s scale. We are a solution provider
and work with customers to determine the
most appropriate products for their needs,
including providing specialist advice
around environmental solutions and health
& safety requirements. We further provide
management information tailored to specific
needs ranging from consumption data
versus budget, compliant ordering, market
intelligence and supply chain studies.
Bunzl plc Annual Report 2020
21
Strategic report Our business model – source, consolidate, deliver continued
WE CONSOLIDATE
SMART,
CUSTOMISED
SOLUTIONS
22
Bunzl plc Annual Report 2020
Our distribution centres have
remained open and, with new
ways of working, we continued
to consolidate and deliver products
to our customers.
492
warehouses worldwide
66%
of orders digitally received
in 2020
One-stop-shop
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 with a single delivery to an
agreed site. On one pallet delivered directly
to each site we can ensure our customers
have everything they need from cleaning
materials to customised safety goggles,
efficiently consolidating products from
multiple suppliers in one delivery and
through one invoice. This ensures our
customers can focus on their business,
whilst also ensuring both economic and
environmental efficiencies.
Customised digital ordering
With personalised digital solutions we
enable customers and their employees to
seamlessly order when further products are
needed. We are able to offer electronic order
processing through webshops, including
customised versions, apps and Electronic
Data Interchange, together with further
enhancements, such as budgetary controls.
Carbon efficient model
Our consolidation model drives a reduced
carbon footprint in comparison to
competitors who process smaller,
unconsolidated orders.
Bunzl plc Annual Report 2020
23
Strategic report Our business model – source, consolidate, deliver continued
WE DELIVER
DELIVERY MODEL
SUPPORTIVE
TO CARBON
EFFICIENCIES
24
Bunzl plc Annual Report 2020
Reliability is an essential
component of our service and,
despite the significant challenges
faced, our teams have adapted
to continue to deliver throughout
the year.
Extensive 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 local, regional and national customers
wherever their location.
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.
Tailored offering
We adapt our delivery options to suit our
customers’ needs, including direct to site,
warehouse replenishment and cross-dock
deliveries where we deliver to customers’
hubs for onward delivery by them to their
own sites.
An example relationship
with a customer in
the US
Key products sourced: Paper items,
packaging and cleaning products
Number of suppliers utilised in 2020: 307
Own brand utilisation: Various products
(including gloves, disinfectant and bin bags)
Level of account manager interaction: Daily
Average number of units in each delivery:
97 units of various SKUs
Sustainability requirements: The customer
has joined the Ellen MacArthur Foundation
and so Bunzl is helping them to transition to
alternative product options
Digital offering: Online portal customised
so that each of the customer’s c.800 stores
can replenish items from a customised list
depending on their individual stock levels
Number of sites
delivered to in 2020
c.800
Number of deliveries
made in 2020
42,000
Number of SKUs
delivered in 2020
2,300
Bunzl plc Annual Report 2020
25
Strategic report Investment case
A STRONG TRACK RECORD
FOR DELIVERING GROWTH
Bunzl has a compounding growth strategy that
consistently delivers, with sustainability a vital
part of the equation.
A DIVERSIFIED,
BALANCED AND
RESILIENT
BUSINESS
A CONSISTENT
AND PROVEN
COMPOUNDING
STRATEGY
SIGNIFICANT
OPPORTUNITIES
FOR FUTURE
GROWTH
• Global presence in 31 countries
• Profitable organic growth
• Significant opportunities to grow
• Six customer focused market sectors
• Operating model improvements
• Fragmented markets
• Disciplined approach to self-funded
• Long term customer and supplier
relationships
Revenue CAGR since 2004
+9%
Adjusted operating profit CAGR
since 2004
+10%
acquisitions
Average organic revenue growth
since 2004
+c.2%
Acquisitions since 2004
172
Self-funded committed acquisition
spend since 2004
£3.9bn
in existing countries
• Scope for further geographic and
new sector expansion
Committed acquisition spend in
2020 on businesses in existing
markets
£445m
Net debt to EBITDA, excluding
leases, provides substantial
capacity for further self-funded
acquisitions
1.5x
26
Bunzl plc Annual Report 2020
SUSTAINABLE
AND EQUITABLE
GROWTH
DISCIPLINED
FINANCIAL
MANAGEMENT
• Industry-leading supplier audits
• Consistently strong cash conversion
and control
• Carbon efficiency through
consolidation
• Supplier flexibility to source
alternative and more sustainable
products
• Decentralised business model that
is supportive to a focus on our
colleagues
In-person supplier audits in Asia
over 2020
680
Scope 1 and 2 tonnes of CO2e per
£m revenue since 2010
-c.50%
• Efficient capital allocation
• Strong balance sheet
ROIC
16.2%
RAOC
45.4%
Cash conversion
103%
A LONG TERM
TRACK RECORD
OF RETURNS FOR
SHAREHOLDERS
• Sustained increases in revenue,
adjusted operating profit and
adjusted earnings per share
• Long term dividend growth and total
shareholder return
• A focus on ensuring that future
growth remains sustainable
Annual dividend growth
28 years
Adjusted earnings per share
growth
31.7p
in 2004
to
164.9p
in 2020
Bunzl plc Annual Report 2020
27
Strategic report Our strategy
LONG TERM
SUSTAINABLE VALUE
A compounding strategy that consistently delivers,
with sustainability a vital part of the equation.
Our strategy is founded on a focus
on organic growth, operating model
improvements and growth through
acquisition, with a commitment that
this growth is sustainable and equitable.
Within these core pillars, our strategic
priorities enable Bunzl to maintain and
strengthen its competitive advantages.
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.
Digital investment
During 2020, we launched eight new
webshops across six of our Latin America
markets. These new webshops are
predominately focused on the safety sector
and have been developed to enhance
customer experience and further
differentiate Bunzl’s proposition. In
addition, we have continued to develop
other technology solutions which simplify
the ordering process for customers in the
region, such as an ability to track orders
and assign order limits. Whilst digital
penetration in Latin American markets
is lower than in some of Bunzl’s other
markets, digital ordering is growing
strongly and we have been able to leverage
our global experience to support the
acceleration of investment in the region.
Overall, our investments into digital
technology contributed to a meaningful
increase in orders placed digitally in
Latin America over 2020.
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.
Contract renewal
During 2020 Bunzl renewed a multi-year
contract with a logistics customer in the
Netherlands. We are now their preferred
supplier of around 1,000 products, up from 600
previously, across branded items, packaging
materials, disposables and transport
packaging. The contract was secured on the
strength of our commitment to sustainable
solutions and our levels of customer service.
The sustainable solutions of particular
importance to this customer include air
reduction on packaging which improves
transport-related carbon, thinner products
which reduce waste and green packaging.
Also, we now provide the customer with a
business intelligence tool to analyse data
relating to their usage of all products sourced.
28
Bunzl plc Annual Report 2020
Strategic report
Warehouse efficiency
Bunzl Irish Merchants and Bunzl
Cleaning & Safety Supplies moved into a
new warehouse facility in 2020. The new
warehouse features the highest Energy
Performance Certification rating for a
warehouse environment and has systems
in place to harvest rainwater, electric
chargers for vehicles and energy efficient
lighting throughout. The move was driven
by both business and environmental
criteria and rationale.
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
We continuously review strategic
opportunities to improve our warehouse
footprint in order to drive efficiencies as
leases come to an end.
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 industry leading e-commerce
solutions have increased the efficiency
of our operations and the ease of doing
business for our customers and suppliers.
UK finance shared service centre
During 2020, the UK & Ireland business kicked off a project to create
a finance shared service centre to support all operating companies
in the UK, covering general accounting, accounts payable and cash
management. This will not only drive efficiencies and further enhance
controls but will also allow the operating business finance functions to
focus more on commercial support. This is a significant project for the
UK & Ireland team, with 20 operating companies included in the scope.
Bunzl plc Annual Report 2020
29
Strategic report 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.
Our strategy continued
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.
Building our business
in the Netherlands
Our Netherlands business is almost three
times larger than it was 10 years ago. Growth
has been supported by 14 acquisitions since
our entry into the market in 1994 with the
purchase of Hopa, a foodservice business.
The Netherlands business today has a
presence across all six of our main customer
sectors although significant opportunities
for further expansion remain.
3x
larger than
in 2010
14
acquisitions
25+
years of
acquisition
growth
1994
• Hopa
2007
• King
2010
• Sleegers
• Van't Veer
2014
• Allshoes
• De Ridder
2018
• QS
2005
• Gelpa
2008
• Worldpack
• Weerstra
2011
• D-Care
• Majestic
2015
• Janssen
Packaging
2019
• Coolpack
30
Bunzl plc Annual Report 2020
Acquisition growth
Our commitment to grow our strategy
Sustainable and equitable growth
Bunzl is committed to sustainable
and equitable growth. As the world
navigates the continuing Covid-19
pandemic and strives to ‘build
back better’, the supply of essential
products and services to end markets,
such as grocery, foodservice, safety,
cleaning & hygiene, retail and
healthcare matter now more than ever.
Bunzl is a central player in these critical
supply chains, providing everyday
products and services that the economies
and societies in which we operate depend
on – from the PPE that keep doctors and
nurses safe, to the containers that protect
food in the supermarkets, and the
packaging that enables home delivery
of goods and meals.
Unique position in supply chain
Crucially, we are a distributor not a
manufacturer. That means we can
respond quickly to changing customer
needs and consumer trends. Our
decentralised model, with around 150
businesses across the world, means we
are perfectly positioned to identify and
seize on new opportunities and to serve
our customers where and when they need
us. That was clear in our ability to rise to
the Covid-19 challenge.
It also means we are a proactive leader in
the transition to a more sustainable and
equitable future. As a major player in our
industry, it is our responsibility to support
our customers in determining and
delivering their strategies. That is why
we are a trusted partner to our customers,
collaborating with leading companies
across sectors to help them achieve their
objectives and fulfil their ambitious
sustainability commitments while at the
same time growing our business.
Working with our customers
We are collaborating with some of
the world’s largest companies across
Europe and North America on reducing
their single use plastic footprint and
transitioning to more sustainable
products. This is just one example of
how we build enduring and high value
relationships with our customers which
benefit Bunzl and this is increasingly
becoming a condition of doing business.
Of the last 10 UK & Ireland tenders we
participated in, our sustainability
credentials were a prerequisite for seven.
Integral to wider business strategy
We grow by acquisition and it matters
that potential partners see Bunzl as
a place where they can benefit from
Bunzl’s scale and experience – whether
related to health & safety practices,
employee training and well-being or
the latest low-carbon products and
operating processes.
As a leading FTSE 100 business, we
are committed to creating financial and
social value through a business model
and corporate practices that benefit all
stakeholders. We have committed to
consistent disclosure of our material
sustainability issues in alignment with
the leading Environmental, Social and
Governance (‘ESG’) standards and
frameworks because it is clear to us that
we can only deliver for our customers and
grow our business when our employees,
suppliers and communities succeed
alongside us.
Bunzl’s focus pillars
Our priority areas of focus are:
• Responsible supply chain
• Diverse workforce
• Climate change
• Sustainable products
Read more page 42
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.
Evolving the US
business through
acquisition over
10 years
Bunzl North America revenue and profit
has more than doubled in the last 10 years
with this growth supported by a number of
acquisitions. Acquisitions have also helped
to diversify the business with the percentage
of revenue from grocery and foodservice
redistribution activities decreasing within
the mix, while safety, agriculture, cleaning
& hygiene and non-food retailing have
increased. Diversification is an important
element of the Bunzl model and strongly
supported the Group’s performance in
2020. Examples of acquisitions that have
contributed to the development of the
North America business area include
Tillman in 2015 which broadened our
safety presence and Wesclean in 2013
which enhanced our cleaning & hygiene
presence in Canada. We have completed
35 acquisitions in North America since
2010, including the acquisitions of Joshen
Paper and Packaging, MCR Safety and
Snelling in 2020.
Bunzl plc Annual Report 2020
31
Strategic report
Key performance indicators
MEASURING OUR
STRATEGIC PROGRESS
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.
Organic growth
Organic revenue growth %
Organic revenue growth %
5.3
4.3
4.3
0.3
(0.2)
16
17
18
19
20
Acquisition growth
Acquisition spend £m
Acquisition spend £m
616
445
184
183
124
16
17
18
19
20
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 increase of 5.3%
was driven by the strength of
Covid-19 related sales.
Reconciliation of revenue growth
Reconciliation of revenue growth
between 2019 and 2020 £m
between 2019 and 2020 £m
9,327
43
445
384
10,111
(88)
Revenue up 8% (9% at
constant exchange rates)
driven by underlying
revenue growth,
acquisitions made in
2019 and 2020, and a
small benefit from an
additional trading day
compared to 2019.
19
Currency
translation
Impact of
additional
trading
day
Under-
lying
revenue
growth
Acquisitions
20
Consideration paid and payable,
together with net debt/cash
assumed, in respect of acquisitions
agreed during the year.
Committed acquisition spend
of £445 million with eight
announced acquisitions.
Annualised revenue
Annualised revenue
from acquisitions £m
from acquisitions £m
621
602
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 26 on
page 189).
201
148
16
17
18
97
19
20
Return on average
Return on average
operating capital %∆
operating capital %*∆
55.9
53.1
50.7
45.4
48.4 36.9
Operating model improvements
Operating margin %∆
Operating margin %*∆
Ratio of adjusted operating profit∆
to revenue.
7.7
7.1
6.9
6.8
6.8
7.0
Operating margin of 7.7%
compared to 7.0% in 2019.
Excluding the impact of
acquisitions during the first 12
months of ownership, the 2020
operating margin∆ was 7.7%, up
from 7.0% in 2019 (restated at
constant exchange rates).
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 up to 45.4% from 36.9%
in 2019 due to a higher return in
the underlying business driven
by an increase in adjusted
operating profit and lower average
operating capital.
16
17
18
19
19
20
IAS 17
IFRS 16
16
17
18
19
19
20
IAS 17
IFRS 16
32
Bunzl plc Annual Report 2020
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.
∆ Alternative performance measure (see Note 3 on page 158).
† Included in the external auditors’ limited assurance scope.
See the data assurance statement on the Company’s website,
www.bunzl.com. The data for 2016, 2017, 2018 and 2019 was
also assured.
Financial
Adjusted earnings
Adjusted earnings
per share p∆
per share p*∆
164.9
129.6
132.4
132.2
119.4
106.1
16
17
18
19
19
20
IAS 17
IFRS 16
Cash conversion %∆
Cash conversion %∆
99
97
94
100
101
103
16
17
18
19
19
20
IAS 17
IFRS 16
Return on invested
capital %∆
Return on invested
capital %*∆
16.7
16.0
16.2
15.0
14.6
13.6
Non-financial
Scope 1 carbon emissions
Scope 1 carbon emissions
Tonnes of CO2e per £m revenue
Tonnes of CO2e per £m revenue
Measured in accordance with the
Greenhouse Gas Protocol applying
Defra conversion factors.
12.6
11.3 11.4
10.7
9.5†
16
17
18
19
20
Scope 2 carbon emissions
Scope 2 carbon emissions
Tonnes of CO2e per £m revenue
Tonnes of CO2e per £m revenue
4.5
3.7
3.6
3.2
2.9†
16
17
18
19
20
Scope 1 carbon emissions
down 12% at constant exchange
rates (down 11% at actual
exchange rates) primarily
due to unusual business
circumstances, with activity in
some businesses impacted by
pandemic-related restrictions.
12 months to 30 September.
Measured in accordance with the
Greenhouse Gas Protocol applying
Defra UK conversion factors and
IEA factors for overseas electricity.
Scope 2 carbon emissions down
11% at constant exchange rates
(down 10% at actual exchange
rates) driven by the continued
implementation of energy
efficiency improvements such
as low energy lighting.
12 months to 30 September.
Fuel usage
Litres per £000 revenue
Diesel, petrol and LPG used in the
Group’s own vehicles.
Fuel usage
Litres per £000 revenue
4.1
3.7
3.6
3.4
3.1†
Fuel usage down 9% at constant
exchange rates (down 11% at
actual exchange rates) primarily
due to unusual business
circumstances with activity in
some businesses impacted by
pandemic-related restrictions.
12 months to 30 September.
Adjusted profit for the year∆
divided by the weighted average
number of ordinary shares in
issue (see Note 8 on page 165).
At constant exchange rates,
adjusted eps up 26.6% driven
by a 20.9% increase in adjusted
operating profit∆ and a reduction
in net interest expense and a
lower effective tax rate.
Operating cash flow∆ as a
percentage of lease adjusted
operating profit∆ (see Consolidated
cash flow statement on page 148).
Another strong year of cash
generation with cash conversion
of 103% in 2020 and an average
of 98% since 2004.
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 and brands
amortisation, acquisition related
items and amounts written off
goodwill, net of the associated tax).
ROIC up to 16.2% due to a higher
return in the underlying business
driven by an increase in adjusted
operating profit and lower average
operating capital.
16
17
18
19
19
20
IAS 17
IFRS 16
16
17
18
19
20
Bunzl plc Annual Report 2020
33
Strategic report Operating review
NORTH AMERICA
‘ Our global sourcing capabilities and
strong supplier relationships allowed our
category management teams to quickly
react and source in-demand categories
to our customers.’
Jim McCool
Chief Executive Officer, North America
MARKET SECTORS
FINANCIAL
HIGHLIGHTS
Revenue
£5,843.8m
(2019: £5,473.2m)
7.2%†
Adjusted operating profit*
£395.7m
(2019: £343.6m)
15.7%†
Operating margin*
6.8%
(2019: 6.3%)
† Growth at constant exchange rates.
* Alternative performance measure (see Note 3 on page 158).
In North America, revenue increased 7.2% to
£5,843.8 million supported by the acquisition
of Joshen Paper & Packaging in January,
MCR Safety in September and Snelling in
December. The business area saw organic
revenue growth of 1.0% with significant
growth in Covid-19 related products offset
by a decline in revenue from other products
resulting from the adverse effect of Covid-19,
principally in the retail and foodservice
sectors. The impact from previously
announced lower sales to a large grocery
customer as a result of account specific price
and product specification changes during
the first half of the year was partially
reversed in the second half. The favourable
mix to typically higher margin safety and
cleaning & hygiene sectors, as well as some
price inflation, supported margins over the
year. This benefit more than offset the
increased provisions relating to our credit
exposure to customers in retail and
foodservice. Further, with customers focused
on navigating the pandemic, we saw a
greater prevalence of contract extensions
and lower tender activity. During 2020 North
America delivered adjusted operating profit
of £395.7 million with operating margin of
6.8%, up from 6.3% in 2019.
In our largest business serving the US
grocery sector, revenue increased by 6%,
supported by the acquisition of Joshen Paper
& Packaging at the beginning of the year
although the business has had a short term
dilutive effect on the operating margin. We
saw a significant surge in volumes in the
early stages of the Covid-19 pandemic, which
subsequently stabilised modestly below
prior year levels, albeit with a shift in the
mix of products. Although demand for
freshly prepared food packaging declined
significantly, this was largely offset by
increases in sales of PPE and cleaning
& hygiene products, resulting in a more
favourable margin mix.
At the beginning of the year, our redistribution
business was trading strongly above prior
year levels, due to favourable organic growth
as well as the impact of the acquisition of
Joshen Paper & Packaging, but the
34
Bunzl plc Annual Report 2020
7,078
Employees
197
Locations
foodservice sector experienced a significant
decline in revenue from the second quarter
as Covid-19 related shutdowns impacted
demand. We experienced sequential
improvement throughout the second half
of 2020 as foodservice outlets reopened,
only to slow once again as a new round of
restrictions and closures hit the foodservice
industry during the fourth quarter. Overall,
during 2020 foodservice revenue declined
despite significant growth in disposable
gloves and demand related price inflation, as
well as a shift towards takeaway packaging.
A focus on enhanced cleaning protocols as
well as some underlying demand fuelled
overall growth in our business serving the
cleaning & hygiene sector. Overall, our
redistribution business grew 8%. Our
category management programmes are well
positioned to help our key customers adapt
quickly to changes in product categories and
demand, leveraging our broad inventories
and providing enhanced liquidity through
improved inventory management. As part
of a wider network review prior to the
pandemic, we reduced excess capacity and
streamlined the operations by consolidating
two facilities in the Chicago market and
closing a facility in Indiana. The agility
afforded by our national logistics platform,
global sourcing and internal product
category management teams provided
increased value and allowed us to partner
with our customers on bespoke solutions,
matching the rapidly changing dynamics
in the grocery and foodservice sectors.
Our retail supplies business was
significantly impacted by Covid-19 related
closures of department stores and clothing-
based retailers, with sales volume declines
and increased customer credit risk exposure.
We were able to mitigate some of the impacts
by providing our customers with packaging
and supplies to support their rapid shift to
online trading and also by sourcing Covid-19
related products to support their store
reopening efforts, particularly in the home
improvement sector. We continued plans
for the optimisation and streamlining of
our retail distribution facilities footprint,
with the integration of two large facilities
Wandanext
Bunzl is the exclusive distributor of Wandanext, a digital cleaning and management system which
optimises cleaning activities and resources to improve hygiene in public spaces. The system has
been developed with Bunzl Canada and provides real-time data and analytics on cleaning activities,
consumption patterns and compliance with specific cleaning protocols for customers. This allows
our customers to optimise their cleaning programmes, improve the user experience and reduce cost
and waste.
continues to benefit from its category
management programmes with large
convenience store operators covering a broad
range of food packaging, store supplies and
cleaning & hygiene categories, in
collaboration with its wholesale partners.
Finally, our business in Canada also
experienced significant Covid-19 related
growth, principally in the safety and
cleaning & hygiene sectors as well as
product price inflation, overcoming declines
principally in the foodservice sector.
in Pennsylvania finalised during the
third quarter.
Overall, our safety business grew strongly
due to high demand for masks and
disposable gloves and the impact of recent
acquisitions, most notably MCR Safety.
These gains were partly offset by the
unfavourable impact of underlying declines
in the industrial and oil & gas sectors.
Our food processor business continued
its history of strong organic growth and
also benefited significantly from increased
safety and cleaning & hygiene protocols
in customer plants, mitigating declines
associated with short term Covid-19 related
plant closures. We leveraged our digital
platforms and technologies to engage
effectively with our customers with whom
we have not been able to meet with
in person.
Our business serving the agricultural
sector enjoyed good growth, including the
increased demand for prepacked food from
consumers at grocery stores, and benefited
from increased focus on sourcing and supply
chain management. We continue to evolve
our distribution footprint with the changing
footprint of our customers to provide efficient
and cost-effective value-added solutions as
they migrate into new areas, principally
in Mexico.
Our business serving the convenience store
sector saw good growth despite the negative
impact of Covid-19 related shutdowns and
greatly reduced travel. The business
Bunzl plc Annual Report 2020
35
Strategic report Operating review
CONTINENTAL
EUROPE
‘ Despite the challenges of 2020, we
have continued to make progress on
initiatives that we believe will support
the business for the longer term. In
particular, we have been working on
enhancing our sustainability offering,
providing responsible solutions and
advice which is an important
component of our differentiated value-
added proposition for customers.’
Alberto Grau
Managing Director, Continental Europe
MARKET SECTORS
FINANCIAL
HIGHLIGHTS
Revenue
£2,127.3m
(2019: £1,829.8m)
15.6%†
Adjusted operating profit*
£238.1m
(2019: £182.1m)
30.8%†
Operating margin*
11.2%
(2019: 10.0%)
† Growth at constant exchange rates.
* Alternative performance measure (see Note 3 on page 158).
Revenue in Continental Europe rose
significantly, increasing by 15.6% to
£2,127.3 million. Organic growth was 15.1%
and was strongly supported by a number of
significant government orders for masks and
other Covid-19 related products which,
together with a general increase in revenue
from Covid-19 related products across a
broad range of customers, more than offset
the very challenging trading conditions,
particularly in the foodservice sector. We
benefited from delays to retendering activity
and proactively extended existing contracts
where possible. The acquisition of ICM at the
end of October further supported growth.
Despite an increase in provisions relating to
our credit exposure from customers in the
retail and foodservice sectors, margins grew
strongly as a result of a mix change to higher
margin sectors and own brand imported
products, the meaningful operating leverage
on larger Covid-19 related orders and price
inflation on some Covid-19 related products.
Adjusted operating profit rose by 30.8%
to £238.1 million with operating margin
improving to 11.2% from 10.0% in the prior
year (up 130 basis points at constant
exchange rates).
In France, both of our cleaning & hygiene
businesses significantly benefited from
increased sales of Covid-19 related products
with strong growth in the public, healthcare,
food processing and industrial sectors. Sales
to contract cleaners were broadly flat as they
saw lower levels of activity due to home
working but cleaning requirements
increased. Sales to the foodservice sector
were significantly lower given the impact
of lockdowns on our hotel, restaurant and
contract caterer customers. These
lockdowns also had a materially adverse
impact on our two dedicated foodservice
businesses. Our safety business benefited
from a significant Covid-19 related order
of masks from a government purchasing
agency. Sales to other customers were
slightly lower as several key customers,
particularly in the aerospace sector, reduced
their production capacity. Revenue overall
in France, however, grew strongly, even
36
Bunzl plc Annual Report 2020
5,042
Employees
176
Locations
excluding the large government Covid-19
related orders.
In the Netherlands, we enjoyed strong
growth in the healthcare, cleaning & hygiene
and e-commerce fulfilment sectors. Our
safety business benefited from a substantial
order for masks from a governmental
organisation which we were able to fulfil at
short notice with the assistance of our Asia
sourcing and auditing operation. We also
delivered significant levels of Covid-19
related products to the Dutch police and
sales of PPE to other customers also
progressed well. Our grocery business
recorded good growth after a slow start to
the year during which some customers
closed their fresh food stores and in-house
bakeries during the first lockdown. Sales
in our retail business were lower due to the
lockdowns despite winning a significant
order for hand sanitiser from an international
retailer as it reopened its stores. Our
foodservice business saw a significant fall
in revenue as many of its customers
were forced to close for part of the year.
Coolpack, which was acquired in April 2019,
continues to trade ahead of expectations.
Total revenue in the Netherlands, excluding
larger Covid-19 related orders, was broadly
flat on the prior year.
In Belgium, our cleaning & hygiene
businesses delivered significant revenue
growth due to increased sales in the
healthcare and facilities management sectors
more than offsetting lower sales in the
foodservice sector. We also provided
Covid-19 related products to regional
governments. Revenue at our grocery
business declined mainly due to the loss
of one larger account during the second
half of 2019.
In Germany, significant sales growth in our
cleaning & hygiene business did not offset
the decline in sales at our foodservice and
specialist safety workwear businesses due
to the lockdowns. In Switzerland, however,
growth in the medical and industrial sectors
more than compensated for lower
Government Covid-19 orders
During 2020 our Continental European teams helped various governmental agencies to source
Covid-19 related products. We were selected for these contracts due to our ability to source large
quantities of high quality products that met regulatory standards at competitive prices and which
we were able to deliver quickly and reliably. We were trusted because of the strength of our
reputation as an established and financially strong supply chain operator. We sourced most
of these products through our Asia sourcing and auditing operations.
well. In Israel, sales were lower in the bakery
sector and significantly lower in the
foodservice sector due to lockdowns.
In Central Europe, sales grew well in all
three countries in which we are present,
namely Hungary, Romania and the Czech
Republic, with strength in the cleaning &
hygiene and safety sectors as well as the
food processing sector. We also won a
significant order for Covid-19 related
products from the Hungarian government.
foodservice sales. In Austria, our food
packaging business reported lower sales,
mainly due to a reduction in sales of products
used in packaging food for the foodservice
and education sectors as well as a reduction
of sales of industrial packaging products.
In Denmark, lower sales to the fitness and
foodservice sectors were more than offset
by growth in the cleaning & hygiene, safety,
grocery and public sectors. In Norway,
our catering equipment business saw
significantly lower sales due largely to
the impact of restrictions on hotels and
restaurants and resulting lower investment
in new equipment.
In Spain, our safety and medical businesses
recorded strong growth which more than
offset lower sales to the foodservice, contract
cleaning and industrial packaging sectors.
In Italy, our safety business suffered from
lower industrial activity due to the lockdown
in the first part of the year but recovered in
the second half with full year sales only
marginally behind 2019 levels, supported
by sales of Covid-19 related products.
In Turkey, we saw significant growth in
sales of disposable gloves to hospitals, food
processors and grocery stores as increased
demand and currency devaluation resulted
in inflation. From the summer onwards we
won a number of tenders to supply the
Turkish government’s purchasing agency
with disposable gloves due to our ability to
source these reliably from Asia. Sales of
safety products also progressed extremely
Bunzl plc Annual Report 2020
37
Strategic report Operating review
UK & IRELAND
‘ While some businesses have been
harder hit by the pandemic than others
all teams worked tirelessly to continue
to support customers in new and
innovative ways. By doing so, I believe
we have strengthened many customer
relationships over this period.’
Andrew Tedbury
Managing Director, UK & Ireland
MARKET SECTORS
FINANCIAL
HIGHLIGHTS
Revenue
£1,287.7m
(2019: £1,242.1m)
3.5%†
Adjusted operating profit*
£68.6m
(2019: £87.1m)
(21.2)%†
Operating margin*
5.3%
(2019: 7.0%)
† Growth at constant exchange rates.
* Alternative performance measure (see Note 3 on page 158).
In UK & Ireland, revenue increased 3.5% to
£1,287.7 million driven by organic growth of
2.6% as well as the acquisition of Bodyguard
Workwear in February and Abco Kovex in
September. Growth was similarly enhanced
by the sale of Covid-19 related products,
despite the heavy weighting to the adversely
affected foodservice and retail sectors.
Despite the increase in revenue, adjusted
operating profit reduced to £68.6 million,
down 21.2% compared to 2019, and
operating margin declined to 5.3%.
Operating margin was meaningfully
impacted by the declines in the foodservice
and retail sectors, with the operating
businesses servicing these customers
largely standalone with limited scope for
fixed cost sharing, and also due to an
increase in provisions relating to our credit
exposure in these sectors.
Our portfolio of safety businesses saw
strong growth during 2020. The demand
for masks, gloves and eye protection
increased significantly during the period
as we provided a full range of quality
assured products to our customers in
government and industry. These sales
helped to offset an underlying decline in
the demand from manufacturing and
construction customers who, in turn,
suffered declines in production throughout
the pandemic. Over the year, we continued
to invest in digital solutions and further
developed ways for our customers to control
both quantity and quality of their products
via our bespoke web offering. Towards the
end of the year, we secured some new long
term supply arrangements resulting from the
UK government’s investment in transport
infrastructure and, in addition, extended our
contractual arrangements with many of our
larger customers.
In our cleaning & hygiene supplies business
we saw increased demand for sanitisers and
cleaning products as our customers sought
to ensure the safety of their employees
during the pandemic. However, with many
of our customers’ offices closed and with
their staff working remotely, our supply of
everyday consumables, such as hygiene
38
Bunzl plc Annual Report 2020
3,808
Employees
94
Locations
paper and hand towels was negatively
impacted. Despite this we continued to work
with facilities management companies and
local authorities to ensure customer sites
could be supplied intelligently, with the
correct volume of supplies prior to re-
opening after lockdown. We improved our
vehicle telematics system during the period,
providing important carbon impact data for
our customers together with up-to-date
information on their orders.
Our grocery business experienced large
increases in demand for Covid-19 related
products. Working alongside our
supermarket customers we sourced new
products to help with the change in buying
habits, including the move to more home
deliveries. During the year we opened a
brand-new purpose-built facility in Burton
Latimer near Kettering to facilitate our
growth and improve service levels, with
efficiencies also achieved through the
consolidation of one of our larger non-food
retail packaging businesses into the site.
Our non-food retail packaging businesses
experienced mixed trading with e-commerce
products, such as cardboard packaging and
void fill growing rapidly on the back of an
increase in lockdown influenced online
consumer buying, although we saw a decline
in high street packaging products such as
branded bags.
The pandemic has caused a severe impact to
our foodservice businesses, with a series of
lockdowns and restrictions since March
2020 limiting business to pubs, restaurants
and hotels. Reduced footfall to offices and
the declines in leisure and sporting events
limited the activities of contract caterers,
whose business then focused on supplying
educational and hospital facilities. Despite
the impact of Covid-19 related restrictions,
we continued to supply products and
services to those sectors which remained
open and experienced good growth in food
takeaway packaging.
Conversely the pandemic has resulted in
significant growth in all our healthcare
related businesses. Although elective
Sustainable packaging mandate in Ireland
During 2020, we helped one of our customers in Ireland to achieve their goal of removing all
plastic packaging products that were at risk from future legislation in their market. We utilised our
proprietary technology to assess their existing product range to determine what was at risk in order
to provide alternative suggestions. We subsequently transitioned all of the identified products, which
were largely single use plastics, to alternatives. Given our ability to source sustainable products we
were able to achieve this within a month. In addition, to ensure a fully circular solution, we provided
recommendations on waste procedures to support the switch to these sustainable solutions.
Following the success of the project we are now working with the customer to source sustainable
alternatives for other foodservice items.
surgery in UK hospitals has been depressed
by approximately 40% and our volumes
of standard hospital consumables have
been curtailed, the demand for masks,
gowns, visors and gloves during the final
nine months of 2020 grew considerably
as healthcare institutions sought to build
up inventory of essential products. Whether
supplying the NHS directly, or supplying
nursing and care homes, the need for
reliable, certified and consistent supply,
backed up by our team of product and
technical experts and very strong supply
chains, resulted in a major surge in
orders. Looking ahead, the high level of
inventory held by our customers could limit
future demand.
Ireland was significantly impacted by the
pandemic as our sizeable foodservice
businesses saw material declines associated
with lockdowns and restricted hospitality.
Those supplying the health service,
government institutions and facilities
management customers, however, grew
as a result of the large demand for Covid-19
related products. Despite the operational
challenges provided by the pandemic, we
moved into a larger purpose-built
distribution facility close to Dublin airport,
thereby improving our service to customers,
and enhanced our digital offering with
further investment in expertise. The flexible
packaging distributor Abco Kovex based in
Dublin, which we acquired in September, is
integrating well and has enhanced our
product offering and expanded our customer
base in Ireland.
We also executed a number of pre-pandemic
plans to consolidate other warehousing
facilities, utilising technology to do so. In
addition to the consolidation of two
businesses into the new facility in Dublin,
we also exited one catering warehouse in
Durham by utilising our existing network
of catering facilities. Furthermore, we have
started to establish some shared service
capabilities in finance and HR to drive back
office synergies. We continued to develop
our digital offerings with investment in
finance AI tools and by allowing our
customers to place orders with all their
suppliers, including Bunzl, via our state-of-
the-art marketplace technology. We have
also strengthened our sustainability
credentials by building a team of dedicated
experts, a full range of sustainable product
alternatives and a complete set of
sophisticated tools to give our customers
valuable insights into their current and
future purchases, helping them to manage
their supply chain in a more responsible
manner going forward. Finally, although
Brexit provided some operational complexity
and required us to increase our
stockholdings in certain products to protect
supply to our customers, our businesses
have continued to operate without any
material disruption.
Bunzl plc Annual Report 2020
39
Strategic report Operating review
REST OF THE WORLD
‘ Digital capabilities enhance our
customer offering and our investments
continue to pay off with strong growth
in the penetration of digital orders
across Latin America over the year.’
Jonathan Taylor
Managing Director, Latin America
‘ Our sourcing and quality control
operation in Shanghai has been a clear
USP for the Group over the year. It has
ensured that we could supply high
levels of essential products that were
quality assured and procured through
an ethical supply chain.’
Kim Hetherington
Managing Director, Asia Pacific
MARKET SECTORS
FINANCIAL
HIGHLIGHTS
Revenue
£852.3m
(2019: £781.6m)
21.6%†
Adjusted operating profit*
£104.2m
(2019: £61.6m)
94.0%†
Operating margin*
12.2%
(2019: 7.9%)
† Growth at constant exchange rates.
* Alternative performance measure (see Note 3 on page 158).
3,248
Employees
116
Locations
In Rest of the World, revenue increased
21.6% to £852.3 million driven by organic
growth of 17.6% as well as the acquisition
in Brazil of Medcorp in January 2020 and
SP Equipamentos in November. FRSA in
Australia, which was acquired in November
2019, further supported growth in 2020.
Adjusted operating profit grew by 94.0%
to £104.2 million with operating margin
increasing from 7.9% to 12.2% from 7.9%
in the prior year (up 450 basis points at
constant exchange rates).
Our businesses in Latin America were
positively impacted by the pandemic with
strength in our safety businesses and the
ability to source Covid-19 related products,
particularly gloves, delivering significant
growth. In addition, we continued
accelerating our digital investments with
the launch of 10 new digital platforms across
all our countries in the region, which
supported a meaningful increase in digital
orders placed over the year compared to the
prior year.
In Brazil, our safety businesses saw very
strong growth which was supported by price
inflation as the demand for PPE increased
dramatically and as a result of currency
devaluation. In our foodservice business,
demand for our gloves from multiple sectors
remained very high throughout the year,
generating high growth in sales. Our
hygiene business, on the other hand, saw
more modest growth as several large
foodservice and institutional customers
reduced their purchases as a result of
pandemic-related restrictions. Over the year
the business used the opportunity to develop
a sustainable range of cleaning chemicals
designed to meet a higher post Covid-19
demand from its customers for sustainable
cleaning and hygiene products. We also
saw strong growth in sales in our healthcare
business, led mainly by continued
improvements in our medical business
and bolstered by high demand for several
Covid-19 related healthcare products. Our
recent acquisition, Medcorp, produced a
resilient first year performance broadly in
line with expectations despite a reduction
in routine hospital procedures during
the pandemic.
In Chile, a good industrial recovery in
the second half of the year, together with
additional sales of Covid-19 related
products led to strong growth in our safety
businesses. Our safety footwear business,
which had declined during 2019,
successfully achieved a second half
turnaround. In the foodservice sector, our
catering supplies business deployed its
supply chain and logistics expertise to meet
high demand for PPE which successfully
offset declines in its traditional foodservice
40
Bunzl plc Annual Report 2020
customer base and led to good growth in
sales. The business continued to focus on
its sustainable packaging solutions by
developing a range for the growing home-
delivery market.
In Mexico, our safety business saw very
strong growth as sales of Covid-19 related
products more than offset declines in the
industrial customer base. This growth,
however, reduced as the year progressed
due to the weaker underlying industrial
demand in the country.
In Colombia, our Visca safety business
benefited from strong PPE sales. In
Argentina, our safety business also
continued to deliver high sales growth due
to both Covid-19 related sales and very high
price inflation. Finally, in Peru, despite very
weak underlying industrial demand
throughout the year, sales grew strongly
from the sale of PPE.
Asia Pacific, which is weighted to the
healthcare and cleaning & hygiene sectors,
performed strongly throughout the year.
The business benefited from several large
opportunities with state and federal
government health departments as well as
strong demand from the traditional customer
base in aged, primary and community care.
The increased volumes more than offset
a downturn in our traditional hospitality
customer base where customers were closed
for extended periods or operating at reduced
capacity due to pandemic-related restrictions
in most states.
Our speciality Australian healthcare
business had another good year and
continued to build on the momentum seen in
the first half of 2020. The existing customer
base saw high demand for Covid-19 testing
swabs, which offset reduced volumes in
pathology and blood collection due to
reduced patient visits to doctors’ surgeries,
and the increase in hygiene awareness
positively impacted traditional winter flu
season demand.
Our Australian safety businesses
experienced good growth due to increased
demand and ongoing improvements and
initiatives implemented over the past few
years. Some parts of the business were
adversely impacted by customer closures but
were able to offset this impact with strong
sales of PPE and hygiene products across
the wider customer base. The business is
in the process of expanding our cleaning
& hygiene programme and made
enhancements to our range of PPE which
will complement our market offering.
FRSA, our emergency services specialist
distributor, finished the year strongly and
Success of FRSA integration
In November 2019, Bunzl acquired Fire Rescue Safety Australia (FRSA), a distributor focused on
providing specialist safety and PPE products for fire, rescue and emergency response services.
Integration during 2020 progressed according to plan, with the process being in-line with Bunzl’s
approach to all acquisitions. In the first 100 days we focused on ensuring financial controls and
standardised reporting systems were in place, we communicated Bunzl policies to our new
colleagues, including health and well-being, HR processes and corporate responsibility, and
reviewed IT and systems infrastructure. Our integration plan further included a safety audit and
safety training and we refined purchasing opportunities early in the process. Bunzl’s formula allows
businesses to maintain their local commercial autonomy while ensuring that they are appropriately
integrated into the Group and given access to regional product, customer and supply chain support
where desired. The integration has been a success with the business gaining new contracts over
2020 as well as entering New Zealand.
Our safety business in Singapore had
another good performance and was able
to offset the slowdown in the oil & gas sector
with an increase in the sales of PPE and
cleaning & hygiene products. The business
has benefited from work undertaken prior
to the pandemic to expand their product
and service offering across new and
existing customers.
has settled well into the Bunzl family.
The business was initially impacted by
reallocation of government budgets towards
healthcare but was able to offset this by
growth in other categories. These budgets
are expected to return to previous levels to
ensure sufficient funds are available to
meet the ongoing requirement to maintain
essential fire safety services. We also
expanded our service capabilities following
a number of large contract wins and
successfully started to service customers
in New Zealand.
In Asia, our domestic safety business in
China had a stronger performance, due to
the increased demand for Covid-19 related
products. The domestic end-user business,
however, continued to be subscale and in
recent years had been loss making with
limited opportunities to develop own brand
products. As a result, the decision was made
to close this business and its main operating
facility at the end of 2020 and to focus our
China-based business on our export
operations and value-added distribution
services for Bunzl customers globally. As
a result of this restructuring in China, the
Group has incurred impairment charges
on goodwill and customer relationships
intangible assets of £14.8 million.
Bunzl plc Annual Report 2020
41
Strategic report Sustainability
SUSTAINABILITY AT BUNZL:
A VITAL PART OF THE EQUATION
Our goal is for Bunzl to be a responsible and resilient
organisation that inspires and implements solutions
that protect the environment, while being
commercially successful for our stakeholders.
In early 2020 we launched our new
sustainability framework which brings
together all strands of our responsibilities
in this area as a large international company.
It is based on our business model and
the major sustainability trends facing
our business.
We have built on our approach this year by
conducting our first materiality assessment
to ensure our activities take account of the
significant social and environmental topics
that are of most interest to our stakeholders.
We have also aligned our approach with,
and identified our contribution to, the United
Nations Sustainable Development Goals
(‘UN SDGs’), (see page 56), developed a new
climate change strategy and published our
first report applying the recommendations
of the Task Force on Climate-related
Financial Disclosures (‘TCFD’), (see our
index on page 84).
Our approach to sustainability is broad and
our framework has been designed to cover
all of our responsibilities in this area; from
working with our suppliers to developing
innovative new solutions and reducing our
impact on the environment, to the health and
safety of our teams and supporting charities.
Our reporting this year focuses on our most
material sustainability themes, as guided by
our materiality assessment, but more detail
is given on our work to contribute to the
other issues covered by our framework in
the ESG Appendix.
Our framework contains a number of
commitments our operating businesses are
working to deliver and, using the results
from our materiality assessment, we will
now work to set specific goals in the areas
where we can make the most meaningful
impact and generate the biggest results.
OUR FRAMEWORK
FOR SUSTAINABILITY
Delivering
sustainable solutions
Our
suppliers
Our
business
Our
customers
• Making sustainability
• Investing in a
• Providing
accessible
• Responsible
supply chains
(key theme 1)
• Working with our
suppliers to deliver
innovative solutions
diverse workforce
(key theme 2)
• Taking action on
climate change
(key theme 3)
• Supporting charities
and local communities
sustainable
solutions
(key theme 4)
• Expert advice on
emerging trends
and products
• Partnerships to
close the loop
Our values
Humility / Responsiveness / Creativity / Diversity /
Customer-centricity / Reliability / Transparency
42
Bunzl plc Annual Report 2020
‘ Bunzl are more forward thinking
than others in their marketplace and
always demonstrate a collaborative
approach to sustainability.’
Bunzl customer, materiality assessment feedback
KEY SUSTAINABILITY THEMES
To ensure we continue to prioritise and report on the environmental,
social and governance topics that are most of interest to our
stakeholders we conducted our first materiality assessment in 2020.
1
Respecting human rights
and driving broad-based
growth through responsible
supply chains
2
Investing in a diverse
workforce and thriving
communities
Read more page 44
Read more page 46
3
Taking action on climate change
by reducing emissions
4
Providing sustainable
solutions and supporting
circular economy techniques
that keep waste out of nature
Read more page 48
Read more page 50
MATERIALITY
ASSESSMENT
Read more page 54
UN SDGs
We have identified 5 priority SDGs:
Bunzl plc Annual Report 2020
43
Strategic report
Sustainability continued
1RESPECTING HUMAN
1RESPECTING HUMAN
RIGHTS AND DRIVING
RIGHTS AND DRIVING
BROAD-BASED GROWTH
BROAD-BASED GROWTH
THROUGH RESPONSIBLE
THROUGH RESPONSIBLE
SUPPLY CHAINS
SUPPLY CHAINS
SDG ALIGNMENT
Read more on page 56
Why it matters
Our focus areas now
Global supply chains have expanded
customer choice and lowered costs but
this comes with a responsibility to ensure
communities and workers’ rights are
respected in the process. International efforts
to protect human rights and guarantee
employee well-being have made significant
progress but challenges persist in many
parts of the world.
Our scale and industry-leading sourcing and
auditing function based in Shanghai allows
us to have a thorough level of oversight over
our supply chain in the vital Asian sourcing
market. This is a competitive advantage in
our industry, with our 50-strong team
regularly auditing direct suppliers in the
region to ensure that the products they
manufacture are of the highest quality and
they are treating their employees fairly.
If we find instances of forced labour or
overtime or wage violations, we quickly get
them resolved through in-depth engagement
with the supplier. If resolution is not possible
within a reasonable time frame (usually six
months) then we terminate the relationship.
We are committed to taking what we have
learned and expanding our ethical sourcing
principles across other sourcing areas in the
Group, commissioning an independent
review to benchmark our approach against
best practice and extending the scope of our
supplier audits to include ‘downstream’
environmental considerations, for example,
raw material sourcing.
Auditing our supply chain – because
we and our customers expect the
highest quality and labour standards
for the products we provide.
Product stewardship – we respect all
legal requirements regarding raw
materials and manufacturing processes
that are relevant to our product ranges.
• 98% of our supply chain in Asia, where
we have the largest proportion of
suppliers situated in countries identified
in international rankings (such as the
Global Slavery Index) as high-risk for
human rights issues is currently
covered by direct auditing and
assurance practices.
• During 2020, our team in Asia audited
680 suppliers; 619 had no critical
issues, while 61 underwent remediation
efforts to bring them up to the required
standard. Following these remediation
efforts, we terminated relationships
with 15 suppliers who failed to make
enough progress.
We provide thousands of customers all over
the world with essential hygiene and health
products and renewable wood fibre materials
sourced from branded suppliers make up
a substantial component of these.
• We seek only to purchase responsibly
sourced wood fibre products and will not
knowingly accept from our supply chain
any paper-based products that may
contain wood fibre harvested illegally
or sourced from protected forest areas.
• 22% of our global revenue comes
from paper-related products and we
source a significant proportion of
these from leading global suppliers who
practice sustainable forestry techniques
that regenerate forests and maintain
productive capacity. Many of the products
we source are made from post-consumer
recycled (PCR) content and our largest
suppliers exclusively use material from
certified sources.
• For example, all the wood fibre products
we source from our largest global tissue
supplier come only from sources that
are certified according to FSC® or
PEFC™ standards.
• In Bunzl Australia, 85% of the paper
products in our washroom category
(facial tissue, hand towels etc) are FSC®
accredited with full traceability back
to source.
44
Bunzl plc Annual Report 2020
‘ All wood fibre products sourced from our
largest global tissue supplier come only
from sources that are certified according
to FSC® or PEFC™ standards.’
Next priorities for action
• Continue to focus on enhancing our
leading practices relating to supply
chain oversight.
• During 2021 we will commission an
independent review of our approach
to responsible sourcing, including a
benchmarking exercise of our current
approach against best practice.
680
suppliers in Asia
audited during 2020
In Australia
85%
of the paper products in
our washroom category are
FSC® accredited with full
traceability back to source
Bunzl plc Annual Report 2020
45
Strategic report
Sustainability continued
2INVESTING IN A
DIVERSE WORKFORCE
AND THRIVING
COMMUNITIES
SDG ALIGNMENT
Read more on page 57
Why it matters
Our focus areas now
The cohesion and inclusivity of the world’s
workforces and communities are under the
spotlight like never before, as businesses and
societies grapple with persistent gender
discrimination, systemic racism and local
inequalities. Companies will not grow
sustainably if they are unable to attract,
retain and get the best out of diverse talent.
Increasingly there is a greater focus of
responsibility to the communities where
they operate.
Bunzl is a large family of local businesses
serving multiple sectors across a wide
range of geographies. The companies in
our Group have a track record locally of
creating an inclusive working environment
where people can bring their best wherever
they come from. However, we know there
is more we can do to build on this diversity
of talent to create opportunities for
progression into leadership roles from
under-represented groups.
We are committed to improving the
representation of women and those from
minority ethnic backgrounds, particularly
in the leadership population, and taking
steps to ensure that we have a truly
inclusive culture.
Accelerating diversity and inclusive
employer practices – because our
people are fundamental to our
future success.
• We have doubled the number of women
in our UK & Ireland management teams
over the past 18 months.
• We have created a new role in North
America: Senior Director of Diversity
and Inclusion.
• Starting at the top of the organisation,
we have increased the number of
female members of the Board
(appointing both Vin Murria and Maria
Fernanda Mejía in 2020), moving us
from 28.5% to 37.5% women on the
Board. With Suzanne Jefferies added to
our Executive Committee our female
representation on the Committee has
increased to 40% in 2020.
• For the first time, we have run our
employee survey this year with the
ability to analyse the data by ethnicity.
This has started in North America and
where we feel understanding how our
people feel in different groups will
benefit our people practices. The results
told us that overall we have a highly
engaged workforce with no significant
differences reported for under-
represented employee populations. We
will look to collect and review all
employee survey data by ethnicity
where it is permitted to do so.
Investing in local communities – because
we are deeply embedded in the places
where we operate.
We are very proud to have supported
our local communities with tailored and
relevant assistance during the Covid-19
pandemic when it mattered most. Some
examples include:
• donating PPE to hospitals in Spain at the
height of the Covid-19 pandemic in March;
• providing over one million masks to
organisations across North America,
including schools, hospitals, non-profit
organisations and first responders;
• donating packaging containers to deliver
15,000 lunchboxes in the UK for school
children in need;
• supporting the Red Cross in New Zealand
with their delivery of hot meals to those in
need;
• using our sourcing strength to provide
clear masks for those who lipread in
Romania;
• donating disposable products to a local
foodbank in Scotia, New York;
• working with OzHarvest, a food rescue
organisation in Australia which collects
quality excess food from local
communities and gives it to those in need;
and
• donating over £200,000 to support vaccine
research, social justice programmes and
food banks to support local communities
in North America.
46
Bunzl plc Annual Report 2020
Excellent
engagement scores
At the end of 2020 we moved to a new way
of understanding the views of our people.
Historically Bunzl has surveyed employees
globally once every two years through a mixture
of online and paper surveys. As an organisation
we wanted to move to a more digital solution that
could be completed quickly and easily by
everyone online either through a phone or tablet.
Equally important was to use a solution that
enables us to analyse the data by different
employee segments, such as gender, tenure
or age, giving us invaluable insights into how
inclusive our culture is.
We felt that during such a period of change with
Covid-19, it was critical to give our employees the
opportunity to share their views so we could listen
to and better understand their perspectives and
ideas. Our focus was to ensure that changes
required to working practices were effective and
that everyone felt safe while working for Bunzl
during this difficult time.
In November 2020 we surveyed all our
employees and we are incredibly proud
of the results we received:
responded during the survey period
74%
82%
would recommend Bunzl
to a friend or family member
88%
are proud of the service
we give to our customers
90%
know what to do if they have a
concern about health and safety
While the Board and leadership team have
closely scrutinised the results, the real power
of the insights is at a local level. Hundreds of
conversations are taking place to ensure the
results are understood, actions are identified and
there is a plan in place to monitor progress.
We plan to conduct a more comprehensive survey
of our employees during 2021.
Next priorities for action
• Setting thoughtful targets on diversity and
put the best monitoring framework for our
organisation into place.
A great place to work
Developing our people continues to be
important for us and this year has given
some opportunities for our leaders to stretch
themselves by responding to the challenges
created by the Covid-19 pandemic. We have
made sure we support our people through
this time and recognise the new skills they
have had to develop and use. This support
takes many forms, but includes formal
coaching in all our business areas, the
launch of a mentoring programme in
Australia in 2020 and a new e-learning
system in North America to enable easy
access to core skills development.
Formal development continues to be a high
priority and in 2020 we have been able to
move our core programmes to virtual
classrooms, including the OverDrive
Programme for Senior Leaders in North
America, the Bunzl Ignite Leadership
Programme in Asia Pacific with 80
participants and the Global Senior
Leadership Development Programme.
• Continuing to balance the global
and local needs of our business
through measurement and action.
In 2021 we will start by surveying
all our employees to measure their
engagement levels and gain
meaningful feedback that will
allow us to develop effective local
action plans.
Growing our talent pipelines and
increasing the diversity of people we
recruit and promote within the business
is recognised as critical to our future
success. Using only our internal talents
we have developed a Global Employer
Brand campaign that features Bunzl
ambassadors for the values that matter
to us as an organisation. This will help
us attract a wider range of applicants.
For our internal talent pipeline, in 2020,
we have continued the work on
developing those colleagues identified
with high potential. In Continental
Europe, the structured programme of
assessment, quarterly review and tailored
development plans continue for over 100
leaders. In Latin America we have
launched a new High Potential scheme,
including an in depth assessment to drive
their development plans. In North
America we have expanded our high
potential employee mentoring programme
and in the UK & Ireland we have
continued to develop our senior leaders
with a programme focused on personal
leadership development.
Bunzl plc Annual Report 2020
47
Strategic report
Sustainability continued
3TAKING ACTION ON
CLIMATE CHANGE BY
REDUCING EMISSIONS
Why it matters
The next decade will be decisive in the
world’s ability to tackle climate change. Its
impacts are already with us, as extreme
weather and biodiversity loss affects the
communities least able to withstand it.
Without concerted and ambitious action
from companies and governments, climate
change will have a devastating effect
on our businesses and our daily lives.
Bunzl is a one-stop-shop for many of the
products our customers need, which means
we are able to aggregate their orders from
a range of sources into a single delivery
and reduce transport miles and, as a
distributor rather than a manufacturer,
we do not operate energy intensive or highly
polluting facilities.
However, we recognise that our direct
operations, distribution network and
supply chains are all part of the challenge
and we applaud the ambition being
shown by our customers in setting
science based carbon reduction targets.
We acknowledge the need for Bunzl to
be part of the solution, rather than part
of the problem.
This is why Bunzl supports the
recommendations of the TCFD. For the
first time we are summarising our most
material climate-related risks and
opportunities, the potential impacts on
our business and our strategy for assessing
and managing these impacts. The full
report is published on our website and our
TCFD index is shown on page 84. We also
report on our climate change performance
through our annual response to the Carbon
Disclosure Project (‘CDP’). In 2020, we
received a B for our response to the
CDP climate change questionnaire
which represented an improvement on
our B minus score achieved in 2019.
The action we take to reduce the impacts
of climate change on both ourselves and our
stakeholders contributes strongly to the
UN SDG number 13 (see page 57).
SDG ALIGNMENT
Read more on page 57
Our focus areas now
Cutting emissions across our business
– because it is critical that we play our
part in the global effort to limit
warming.
• Since 2010 the total carbon emitted
from Bunzl’s operations has remained
stable despite the business growing
substantially and revenue doubling
over the same period.
• Our carbon efficiency (carbon
emissions relative to revenue) has
improved by more than 50% over the
last 10 years.
• Most of our businesses in the UK &
Ireland have been procuring renewable
electricity for several years. Combined
with our procurement activity in other
countries such as the US and
Switzerland, the total amount of
renewable electricity we buy across the
Group has increased to 15% in 2020.
48
Bunzl plc Annual Report 2020
Efficient lighting technologies
Lighting is our highest contributor to our electricity consumption. With today’s
advanced lighting technologies, the energy associated with illuminating a
warehouse can be reduced by as much as 70% when compared to traditional
lighting. Across the Group we have energy efficiency programmes to ensure that
whenever there is an opportunity at one of our locations, we upgrade the lighting to
Light Emitting Diode (‘LED’) fittings and implement other energy saving measures,
such as occupancy sensors. In 2020 we completed another 16 LED retrofit projects
in North America which will result in savings of 5.5 million kWh every year. These
savings represent 7% of our Group electricity usage.
Our focus areas now
Next priorities for action
Impact and assessment
Starting to consider how we can
reduce the impact of our vehicle fleet
– because we recognise low-carbon
transport is the future for our sales
teams and distribution networks.
• Bunzl Catering Supplies in the UK has
been trialling the use of biofuel in its
London fleet of vehicles. HVO
(Hydrotreated Vegetable Oil) fuel is a
second-generation biofuel made from
100% renewable raw materials that
offers net greenhouse gas (‘GHG’)
reductions of up to 90% in comparison
to standard diesel fuel. After successful
trials, the project will be launched
in 2021.
• We seek to minimise the number of
miles that our vehicles travel on the
road. Automated vehicle routing
systems help our businesses to ensure
deliveries are planned to limit the
number of journeys made by each
vehicle in order to reduce fuel usage
and carbon emissions. Bunzl North
America, which has the largest fleet of
commercial vehicles in the Group with
over 700 vehicles, has continued to
implement a new dynamic routing
system. The system rearranges our
shipments to take place on the most
optimal days, resulting in an overall
mileage reduction, while retaining high
customer service levels. In the 13
locations where the dynamic routing
system has been implemented, we have
seen an 8% reduction of miles driven
in 2020.
• Bunzl Australasia has commenced
transitioning their company vehicle
fleet to more fuel-efficient models,
including hybrids. The change will
result in a 24% reduction in overall fleet
carbon emissions.
• In 2021 we will work to set a new long
term carbon reduction target to further
reduce carbon in our operations in line
with climate science.
• Working to understand and then develop
an approach to address the GHG impact
of our supply chain and other scope 3
emissions during 2021.
• Continuing to report on our progress in
line with the TCFD framework. See our
TCFD index on page 84.
Assessing climate change scenarios
and their impact on our business
In 2020, we undertook the Group’s first
risk assessment using climate-related
scenarios to better understand the long
term impacts that climate change may
have on Bunzl in the future. We focused
our assessment on three alternative
scenarios up to 2050. Two of our
scenarios align with a global warming
trajectory of 2°C by 2100 but differ in the
speed and extent of decarbonisation over
the next 30 years (orderly and disorderly
scenarios). Our final scenario assessed
the potential impacts of a world in which
global warming exceeds 3°C by 2100
(hot-house world scenario).
In each scenario, climate change could
present a risk to Bunzl’s future financial
performance (when assessed against
Bunzl’s projected future profits). However,
our assessment suggests that in no
scenario do the climate-related risks
assessed present a significant financial
risk to the business (as defined by our risk
management processes) and therefore we
currently believe our business to be
fundamentally resilient to the potential
impacts of climate change. Moreover, the
transition to a net zero economy will
present good opportunities to the Group,
specifically through the provision of
environmentally friendly products and
sustainability expertise to customers.
For more details on our
climate change work see
www.bunzl.com/sustainability
Bunzl plc Annual Report 2020
49
Strategic report
Sustainability continued
4PROVIDING SUSTAINABLE
SOLUTIONS AND SUPPORTING
CIRCULAR ECONOMY
TECHNIQUES THAT KEEP
WASTE OUT OF NATURE
Why it matters
Our focus areas now
Providing sustainable product
solutions and expert advice on
emerging trends and product
categories – because a number of our
customers want to reduce their plastic
footprint and we can make that
a reality.
• We launched a Bunzl own brand range
of sustainable products in Europe,
Verive, for the foodservice, grocery and
retail sectors. The new range not only
provides solutions which comply with
the EU Single Use Plastics Directive but
also offers leading sustainability advice
and training via a new digital web
platform.
• In addition to our formal sustainability
teams, we have also appointed and
trained 49 sustainability ambassadors
in a number of our European and North
American operating businesses who
will work closely with our regional
customers to help them achieve the
packaging targets they are setting.
Plastic pollution is one of the defining
environmental challenges of our time. That
is truer now than ever before, as the world
steps up its use of hygiene products that
keep us safe. When plastic is used only once
or is not properly recycled, it damages our
environment, pollutes our oceans and can
enter the food chain.
The daily running of our customers’
operations depends on the items we provide.
In many cases no viable alternative to plastic
exists today – especially when it comes to
healthcare consumables like gloves and
gowns and food packaging for the grocery
and catering sectors.
At Bunzl we recognise our responsibility
to be part of the solution on designing out
waste and ensuring less plastic ends up in
nature. That is why we are working with our
customers and suppliers to lead the industry
towards a sustainable approach to
packaging and plastics.
Our scale and unique position at the centre
of the distribution system means we are well
placed to provide customers with trusted and
objective advice on complex sustainability
issues like the transition to a more circular
economy, because the life of packaging does
not end at the point of sale and neither does
our ambition.
SDG ALIGNMENT
Read more on page 57
• Bunzl Australia and New Zealand’s
Sustain and Revive own brand product
ranges were designed to deliver positive
sustainability outcomes. Sustain is made
from paper and plant-based products
produced using only renewable materials.
Revive supports the circular economy with
cold cups being made from recycled PET
materials that are widely recyclable in
Australia and New Zealand. In 2020, over
39 million Sustain products were sold into
the Australia and New Zealand market
(which includes some paper-based
products) and 31 million existing single
use plastic items were replaced.
Appointed and trained
In 2020, over
49
sustainability
ambassadors in a
number of our European
and North American
operating businesses
39m
Sustain products were
sold into the Australia
and New Zealand market
50
Bunzl plc Annual Report 2020
Our focus areas now
Next priorities for action
Supporting solutions across the supply
chain to help close the loop – because we
know that recycling systems are under
strain and that it will take inventive
cross-sector action to design out and
better capture waste.
• Our Allshoes business in the Netherlands
has created a Circular Footwear Alliance
(‘CFA’) in collaboration with two of their
competitors, a partnership designed to
create a circular economy system for work
and safety shoes. Used work shoes are
collected and dismantled before the
materials are sorted, crushed and recycled
or reused in new products. Since its launch
earlier this year, the CFA has collected
over 3,500 pairs of shoes from customers
for recycling.
• Bunzl plc is funding the development of
new waste management infrastructure
and the provision of improved social
services for marginalised waste picker
communities in Mangalore, India. We
are working with Plastics for Change
who have developed a franchise model
to create and fortify plastics recycling
businesses to pay waste pickers decent
incomes, train them in techniques
that boost their incomes and make
investments that benefit entire
communities. The project will also
prevent c.200 tonnes plastic reaching
the Indian coastline.
• We are accelerating our progress in
providing alternative sustainable
products, supported by the setting of new
commitments in our larger and most
relevant retail, foodservice and grocery
businesses in 2021.
• We are also looking to eliminate
oxo-degradable plastic products from
our ranges by 2025.
• Finally we are continuing to support the
development of new waste management
infrastructure and supporting waste
picker communities in areas of the world
where it is needed most.
Bunzl’s Circular Footwear
Alliance has collected over
3,500
pairs of shoes from
customers for recycling
Bunzl plc Annual Report 2020
51
Strategic report
Sustainability continued
SUPPORTING A MORE
CIRCULAR ECONOMY
1
Raw materials
cling
y
c
e
r
&
n
o
i
t
c
e
l
l
o
C
4
2
D
e
s
i
g
n
&
p
r
o
d
u
c
t
i
o
n
SUPPORTING
CIRCULAR
ECONOMY
TECHNIQUES
THAT KEEP
WASTE OUT
OF NATURE
u s e
e
U s e & r
3
52
Bunzl plc Annual Report 2020
SOME OF THE MANY CASE STUDIES
FROM ACROSS THE GROUP
1
Smart material
choices
2
Designing for
circularity and
doing more
with less
Expanded polystyrene is a
material that will be banned
by the EU Single Use Plastics
Directive in 2021. In Europe we
have supported customers to
meet the requirements of this
future legislation by launching
a new range of expanded
polypropylene products which
use a mono-material with a
substantially lower environmental
impact that has proven to be
easily and commercially
recyclable through several trials.
Earthwise Bag Company in
North America has launched
a new reusable bag that is made
from ocean-bound plastic.
Made with up to 90% recycled
ocean-bound plastics, the
materials are collected from
at-risk communities where they
would otherwise end up in
oceans and waterways. Each
bag offers From Shore to Store™
traceability and is certified by
OceanCycle, a social enterprise
focused on providing a chain of
custody for plastics that prevent
ocean plastic pollution.
Bunzl North America has an
exclusive agreement to supply
a new reusable and infinitely
recyclable aluminium cup to the
on-premise/foodservice sector.
The Ball Aluminum Cup™ is a
new product launched to the US
market that has been recognised
in Fast Company’s 2020 World
Changing Ideas Awards with
an honourable mention in the
consumer products category.
In the UK, we are launching
lightweight reusable stainless-
steel cutlery for the catering
and foodservice sectors
that is both reusable and
recyclable. This bridges the
gap between customers who
do not want to switch to
wooden disposables but need
an affordable, reusable option.
Bunzl Agriculture Group in
North America has introduced
new washable labels for plastic
clamshell packaging made from
a non-toxic film that is certified
recyclable by the Association of
Plastics Recycling.
3
Promoting
responsible usage
and reusable
options
We have launched a new digital,
reusable foodservice solution at
a UK university. The university
has been using Bunzl reusable
packaging onsite for the past five
years and this year they trialled
a new digital platform that tracks
the customers and their reusable
packaging and encourages them
to return it using an app.
They also introduced recyclable
paper cutlery bags to minimise
touch points when using
reusable cutlery during the
Covid-19 pandemic in onsite
catering environments. This
gives a hygienic option to
customers who do not want
to move to disposables.
The East region of our
Distribution Division in the US
has worked to roll out a reusable
bag initiative as the east coast
faces stricter restrictions on
single use plastic carrier bags.
4
Partnering to
support closed-
loop solutions
Bunzl Catering Supplies
has funded the behavioural
change charity Hubbub’s
‘In the Loop’ campaign,
designed to install new
recycling infrastructure for
on-the-go packaging in UK
city centres. Since the launch
of the programme, 2.1 million
packaging items have
been collected for recycling
across Leeds, Swansea
and Edinburgh.
We are working with
WasteAid who share waste
management and recycling
skills in some of the world’s
poorest places to fund
new waste management
infrastructure in two key
locations in Bali, Indonesia
to enable the collection,
sorting and safe recycling
of plastic waste. The projects
will provide employment,
protect children’s health
and prevent plastic reaching
the environment in an area
that suffers greatly from
marine pollution.
Bunzl plc Annual Report 2020
53
Strategic report
Sustainability continued
HOW OUR KEY THEMES
WERE IDENTIFIED:
MATERIALITY ASSESSMENT
Our success as a specialist distribution and
services Group is influenced by a constantly
changing sustainability landscape that
presents both risks and opportunities.
It is critical that we keep abreast of the
requirements of our stakeholders as new
legislation is introduced, consumer habits
and perceptions change and markets evolve.
To ensure we do this effectively and continue
to prioritise and report on the ESG topics that
are most of interest to our stakeholders, we
conducted our first materiality assessment
in 2020.
The purpose of this assessment was to:
• identify new trends on the horizon, that
could impact Bunzl’s ability to create value
in the long term;
• enable our businesses to respond to the
issues that are of most interest to our
customers and be ready to take advantage
of opportunities to develop new products
or services;
• prioritise our resources for the
sustainability issues that matter most to
our business and stakeholders, so we can
align commitments to the most important
topics; and
• enable us to report effectively on the most
material issues and identify our
contribution to the UN SDGs.
Step one:
Identification of material topics
To assess the significance of these material
topics to Bunzl we rated whether the
topic was:
• a focus area for investors (e.g. ESG rating
agencies, proprietary ESG assessments);
• on the radar screen of governments and
regulators;
• representative of emerging trends in
sustainability (including those resulting
from the Covid-19 pandemic);
• critical to Bunzl’s commercial and social
licence to operate;
• an operational or financial risk to the
organisation; and
• a pressure point for civil society, NGOs
and think-tanks.
The first step in our materiality
assessment was to identify the
material ESG topics that relate to our
business. We have defined material
topics as those that reflect the
organisations significant economic,
environmental and social impacts
or substantively influence the
assessments and decisions of
stakeholders.
We based our approach on the Bunzl
business model and our existing
sustainability framework. To ensure we
captured all the relevant material topics,
we have:
• consulted the Sustainability
Accounting Standards Board (‘SASB’)
materiality map. The materiality map
does not have a sector that directly
represents Bunzl’s operating model, so
instead we reviewed all of the general
issue categories that are most relevant
to our customers’ market sectors and
ensured these were included;
• identified the UN SDGs we contribute
to the most by working with the
social enterprise Support the Goals
(see page 56);
• included topics of interest that have
arisen during conversations with
key stakeholders over the past year
(e.g. our customers); and
• benchmarked our process against
FTSE 100 peers.
We identified 12 material ESG topics
covering 32 ESG issues that link to our
business model and Group sustainability
framework (see page 85).
54
Bunzl plc Annual Report 2020
Step two:
Stakeholders interviewed
To assess the importance of these
topics to our external stakeholders, we
developed a materiality survey that we
took to four key groups; our customers,
suppliers, investors and other external
partners, for example, charities we
work with.
The survey introduced our sustainability
framework, gave details of the material
topics and their related issues and provided
a quantitative scoring sheet together with
some supplementary questions. For example,
which of these issues do you believe are
likely to emerge or increase in importance
over the next few years?
We asked our stakeholders to complete the
scoring sheet and rate the importance of
each topic using a 1-5 (low to high) score.
Their rating was based on whether they
perceived the topic to be a priority for Bunzl
and whether their perception of our business
was significantly influenced by our
performance on that issue.
In total, 54 external stakeholders contributed
to our assessment, including 37 of our
customers and we held an interview with the
majority of these to discuss their results.
To see how we have been engaging our
stakeholders across Bunzl on sustainability
and other topics this year, see page 60.
Read more on page 60
Step three:
Plotting our materiality matrix and identifying our
material ESG topics and key sustainability themes
OUR MATERIALITY MATRIX
s
a
e
u
s
s
i
n
a
g
n
i
r
o
c
s
s
r
e
d
o
h
e
k
a
t
s
f
o
%
l
s
r
e
d
l
o
h
e
k
a
t
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r
u
o
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n
a
t
r
o
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m
I
e
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a
t
r
o
p
m
i
i
h
g
h
y
r
e
v
r
o
h
g
h
i
High
Very High
Sustainable
products
Climate change
Human rights
Diversity &
inclusion
Talent
development
Sustainable
sourcing
Responsible
marketing
Circular
economy
Corporate
governance
Health &
wellness
Dialogue &
partnerships
Charity &
community
Significance to Bunzl (0–5 years)
The results from the materiality survey and
stakeholder interviews showed the following
ESG topics to be most important to our
stakeholders: providing products and services
with sustainable attributes; taking further
action on climate change, supporting a more
circular economy; sustainable raw material
sourcing, and respecting human rights in our
supply chain.
When these are aligned with the ESG topics
that are most significant to Bunzl, the four key
themes described in section 1 of this report
emerge. Identifying these themes will help us
prioritise the most important sustainability
issues, inform our commitments in 2021 and
beyond and provide a framework for us to report
on our progress in the future.
Material ESG topic
(very high or high
score in matrix)
Sustainable sourcing
Link to our
business model
Alignment with
our sustainability
framework
Source
Our suppliers
Human rights
Diversity & inclusion
Climate change
Sustainable products
Circular economy
Consolidate
Our business
Deliver
Our customers
Key theme for Bunzl
Respecting human rights
and driving broad-based
growth through
responsible supply chains
(see pages 44 and 45)
Investing in people through
diverse workforces and
thriving communities (see
pages 46 and 47)
Taking action on climate
change by reducing
emissions (see pages 48
and 49)
Providing sustainable
solutions and supporting
circular economy
techniques that keep waste
out of nature (see pages 50
to 53)
Bunzl plc Annual Report 2020
55
Strategic report
Sustainability continued
Step four: Aligning our key themes to the
UN Sustainable Development Goals
and identifying Bunzl’s contribution
OUR PRIORITY UN SDGs
Identifying our priority goals
We have worked this year to identify the
five priority SDGs that are most relevant
to Bunzl and our stakeholders.
We started by linking each of the material
topics that formed the basis of our
materiality assessment to their most
relevant SDG and held an internal
cross-functional workshop with TBL
Services, a certified B-Corporation who
help businesses understand how
to support the Global Goals, to
identify the priority SDGs that Bunzl
contributes to.
Finally, we have used the results of our
materiality assessment to understand
which SDGs are most relevant to
our stakeholders.
The United Nations Sustainable
Development Goals (SDGs) are a
blueprint to achieve a better and more
sustainable future for all. They address
the global challenges we face, including
poverty, inequality, climate change,
environmental degradation, peace
and justice.
We recognise our role as a responsible
business to help achieve the UN SDGs and
see them as a powerful tool to galvanise
action for a more sustainable future. By
identifying the goals we contribute to the
most and working on initiatives that help to
deliver their aims, we can make a positive
contribution to their success.
In 2020 we became a corporate member of
the social enterprise initiative Support the
Goals to demonstrate how we support the
world’s most important action plan.
Support the Goals is an initiative to rate
and recognise the businesses that support
the UN SDGs.
We are delighted that our work this year has
been recognised with a 4-star rating and we
will continue to report on our progress and
identify our contribution to the SDGs in our
future reports.
SDG 8
Promote sustained, inclusive and
sustainable economic growth, full and
productive employment and decent
work for all.
How we contribute
We expect all Bunzl suppliers to meet
the same internationally recognised
human rights, environmental and
quality standards that we expect of
our own businesses. These include
meeting international requirements
for workers’ welfare and conditions of
employment, such as those set by the
International Labour Organization
(‘ILO’) and the Ethical Trading Initiative.
Progress we have made
Through our industry-leading Asia
sourcing and auditing function based
in Shanghai, we have control and
oversight over our supply chain in the
vital Asian sourcing market. 98% of
our suppliers in this region are covered
by direct auditing and assurance
practices and they are re-audited on a
biennial basis. In 2020 we completed
680 audits.
Next steps we will take
Expanding our assessment
programme into other high-risk
sourcing regions outside of Asia.
‘ We only have 10 years left to achieve
the UN’s SDGs, so it’s vitally important
every business gets behind these.
It’s fantastic to see that not only has
Bunzl already made significant
progress towards the goals, it has
a clear plan in place that considers
where their business can make the
greatest contribution in the future.’
Colin Curtis, Founder and Director, Support the Goals
56
Bunzl plc Annual Report 2020
SDG 13
Take urgent action to combat climate
change and its impacts.
SDG 12
Ensure sustainable consumption and
production patterns.
How we contribute
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. Thanks to our
extensive operations footprint, our
products are 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.
Progress we have made
Operational efficiency forms part of
a long-established and successful
strategy to develop our business and
the reduction of energy consumption
is an integral part of this. These efforts
mean our carbon footprint has
remained stable over the last 10 years
while our revenue has doubled over the
same time period. See pages 86 to 88
for data on our carbon emissions and
performance against our existing
reduction target.
Next steps we will take
Setting a new carbon reduction target
aligned to climate science for our
global operations.
How we contribute
Because we are not tied to any
particular raw materials, we can
provide objective advice and expertise
on sustainable products for our
customers, work with them 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.
Progress we have made
As well as working with customers
to find sustainable solutions for the
products they use, we are also
supporting the creation of new waste
management infrastructure. Working
with a UK charity Sea-Changers, we
have launched a new ‘coastal fountain
fund’ for the provision of water bottle
refill fountains at some of the UK’s
busiest beaches. The programme aims
to tackle the increasing problem of
plastic bottles left behind along the
coasts as marine litter. It is anticipated
that the provision of the water refill
stations will significantly reduce the
numbers of non-reusable plastic drinks
bottles on the beaches.
Next steps we will take
Setting new sustainable packaging
commitments in our most material
retail, foodservice and grocery
businesses.
SDG 5 and 10
Achieve gender equality and empower
all women and girls, and reduce
inequality within and among countries.
How we contribute
Increasing the diversity of our workforce
strengthens our business and enables
us to respond to changing environments.
By further 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.
Progress we have made
We are taking action to address a
common issue, the under-representation
of women in senior roles. In the UK &
Ireland we have created a network for
a number of women with potential to
advance into leadership roles within the
Group. The ‘Inspiring Women in Bunzl’
network’s goal is to create a supportive
and empowering culture for women to
achieve their goals. In North America
we have held several listening sessions
called ‘Voices’ with employees from
under represented groups to listen and
therefore understand their experiences
as the first step to addressing any issues
that arise as well as attracting more
people from these groups to work for us.
Next steps we will take
We will replicate the Inspiring Women
in Bunzl framework in other business
areas through setting up their
networks to achieve the same
objectives. In the UK & Ireland we have
turned our attention to creating a
network of employees from different
ethnic groups so they can inform and
drive the actions to be taken to
increase the numbers of employees we
recruit, retain and promote from these
groups. In North America we will
combine our learning from the ‘Voices’
feedback with the results of the
employee survey that can be analysed
by different groups of employees to
identify the key areas for focus.
Bunzl plc Annual Report 2020
57
Strategic report Sustainability continued
HOW WE GOVERN
SUSTAINABILITY
During 2020 we established a new governance
structure to implement our sustainability strategy
and manage the delivery of the programme across
the Bunzl Group.
SUSTAINABILITY GOVERNANCE STRUCTURE
Board
Executive Committee
Group Sustainability
Committee
Environment, Health &
Safety (‘EHS’) Committee
Supply Chain
Committee
Business area and operating
company responsibilities
The Chief Executive Officer (‘CEO’) is the
designated member of the Board of Bunzl plc
responsible for sustainability matters.
Our Business Area Heads are responsible for
identifying key sustainability risks as part of
the overall risk assessment process at Bunzl
and are responsible to the CEO and the
Board for the management of those risks.
Our Group Sustainability Committee is a
cross-functional leadership committee that
engages the management teams and
operating companies across our business
areas and provides oversight and strategic
guidance for our programme.
Chaired by our CEO and attended by
members of our executive team, the
Committee meets quarterly to ensure Bunzl
has an ambitious sustainability strategy,
which is subject to effective governance.
It will set targets and monitor progress while
providing support for our business area
sustainability teams.
The Environment, Health & Safety (‘EHS’)
Committee is responsible to the Group
Sustainability Committee for identifying
suitable policies and procedures covering
environmental and occupational health &
safety management to support continuous
improvement and regulatory compliance.
The Supply Chain Committee is responsible
to the Group Sustainability Committee for
developing processes and procedures to
assess opportunities and mitigate risks
within our global supply chains, ensuring
regulatory compliance as a minimum.
58
Bunzl plc Annual Report 2020
We Believe
This year more than any other has demonstrated that the power of Bunzl
is its people. We also know that even as an employer of over 19,000 people
we are often not well known in the recruitment marketplace. We therefore
wanted to find a way to showcase what we believe encapsulates the
essence of Bunzl and we set out to create a campaign to bring this to life
using our internal talents and capabilities.
Led by Jennifer Tiffin, the HR Director for the Asia Pacific region, we
finessed the ‘We Believe’ statements based on our Bunzl Values of
Transparency; Humility; Reliability; Customer-centricity; Diversity;
Responsiveness and Creativity. Collaborating with regional colleagues,
we identified 18 Bunzl ambassadors from 14 countries who demonstrated
these values in their actions.
Bunzl to submit concepts and chose the winning idea from Dylan Magri.
Sam Vargas, from our digital marketing team in North America, then
edited the 46 hours of video footage filmed entirely on smart phones
during the global pandemic and we are very proud of the results.
The ‘We Believe’ campaign is used in our recruitment campaigns to share
success stories on social media and internally to demonstrate the value
of our people in Bunzl. Over the coming year, we will be tracking the
effectiveness of the new brand through the success of recruitment
campaigns and visits to our social media feeds and websites.
Read more on page 17
The video and the marketing material were created by 31 people across
18 locations. To design the creative materials, we asked our designers in
Watch our video at
https://vimeo.com/467842212
Key sustainability topics discussed
by the Board in 2020
The Board continues to provide strong,
effective leadership and independent
scrutiny and challenge while promoting the
long term success of Bunzl for the benefit
of all of its stakeholders as a whole.
In 2019 sustainability was identified as an
accelerating priority for the Group and the
subject was discussed at four Board
meetings during 2020:
Meeting date
Discussion topics
15 January 2020
• Bunzl’s new Group sustainability framework.
• Programme of work for 2020, including embedding our new approach to
sustainability across the business.
• Realigning the focus of our Group charity work to support environmental activities.
17 June 2020
• The impact of Covid-19 on sustainability.
• New sustainability trends emerging as a result of the pandemic.
13 October 2020
• Virtual leadership conference session on sustainability.
• Materiality assessment and climate change strategy work.
8 December 2020 • Launch of Verive, a new own brand range of sustainable products in Europe.
• Materiality assessment results and next steps.
Bunzl plc Annual Report 2020
59
Strategic report
Section 172 statement
A STRATEGY THAT BENEFITS
ALL OUR STAKEHOLDERS
The following
information describes
how the directors have
had regard to the matters
set out in section 172(1)
(a) to (f) of the Companies
Act 2006 when performing
their duty to promote the
success of the Company.
Bunzl has a global and diverse community
of stakeholders and the Board has identified
those that it considers key as being
customers, employees, shareholders, the
environment, suppliers as well as the
communities in which we operate.
We believe that to maximise value and
secure our long term success, we must
engage proactively and constructively with
our key stakeholders in order to establish a
mutual understanding of both the Group’s
and stakeholders’ views and objectives. By
understanding our stakeholders, we can
factor into Boardroom discussions and the
Company’s strategic decision making the
potential impact of our decisions on each
stakeholder group and consider their needs
and concerns in accordance with section 172
of the Companies Act 2006. Like any
business, there are occasions when we must
take decisions that adversely affect one or
more of these groups and, in such cases, we
always seek to ensure that those impacted
are treated fairly.
Through a range of engagement
mechanisms, examples of which are referred
to on the pages that follow, Bunzl is able
to maintain meaningful dialogue with our
key stakeholders. These engagement
mechanisms are reviewed periodically and
the Board will continue to monitor and adapt
the methods used in order to ensure that
they remain appropriate and effective.
The case studies on page 63 illustrate the
typical matters considered in relation to
some of our key stakeholders, how we have
engaged with them and the impact of that
engagement and consideration, including on
principal decisions taken by the Company
during the year. Further information about
how the Company engages with its stakeholders
can also be found in the Sustainability report
on pages 42 to 59 and in the Corporate
governance report on pages 95 and 96.
Customers
Colleagues
Environment
Shareholders
Customers
Why do we
engage?
Colleagues
Environment
Shareholders
Suppliers
How do we
engage?
Communities
Relevance
to strategy
How do we
monitor the
impact
of our
actions?
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.
• 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 3,300 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.
• We engaged 37 of our customers as part of our
materiality assessment to gain their feedback on
our approach to sustainability and allow
different functions of the business to respond to
the issues that are of most interest to them.
A fundamental element of Bunzl’s consistent and
proven strategy involves growing the business
organically, by expanding and developing our
business with existing customers and by gaining
new business with additional customers. 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.
• Successful renewal of customer contracts.
• Feedback from expert sales people and customer
service specialists.
• Dialogue with customers.
• Expanding and developing our business with
existing customers.
• Gaining new business with additional
customers.
Our people underpin everything we do and
Our goal is for Bunzl to be a responsible and
Engagement with shareholders helps us to
are the focus of our business. We develop and
resilient organisation that inspires and proactively
understand their views and priorities. The
implement action plans to address points raised in
implements solutions that protect the environment,
feedback that we receive informs our decision
our employee engagement surveys and create an
while being commercially successful for our
making and influences the long term strategy
inclusive and collaborative environment that
stakeholders.
of the Company.
allows all of our people to make a broader
contribution to our success.
• We use a range of methods to engage with our
• We seek to reduce both our and our customers’
• We report regularly to shareholders on trading
employees, including listening groups, regular
impacts on the environment by reducing carbon
performance.
team briefings, site visits, digital apps,
newsletters, engagement surveys, video
messaging and meetings with workforce
representatives.
emissions, promoting the reduction of waste and
providing innovative products and services to
meet our customers’ sustainability needs.
• Executive directors meet regularly with major
shareholders and report their views to the Board.
Presentations of the half year and annual results
• We work in partnership with customers and
with question and answer sessions are also
• The Board ensures that it understands the views
suppliers to source and promote sustainable
given.
of Bunzl’s workforce through director attendance
alternatives to single use plastics and to support
at, and participation in, employee consultation
the development of innovative products to
forums, senior leadership programmes and other
increase compostability and recyclability.
employee-focused events.
• We aim to reduce our impact on the
• Board meetings are periodically held at or near
environment, including factors contributing
Group locations where the directors meet with
local management and employees. During what
has been an exceptional year, meetings have
been held virtually to ensure that the directors
to climate change, through a commitment
to continual improvement, complying with
environmental legislation and regulations in the
jurisdictions where Group companies operate to
can continue to engage with employees despite
ensure that our major impacts are addressed.
the Covid-19 pandemic.
• We have accelerated our diversity and inclusive
employer practices and established diversity
and inclusion working groups throughout the
business.
• 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.
• We engaged several of our major shareholders as
part of our materiality assessment to seek their
opinions on our approach to sustainability.
It is our people who continue to deliver the Group’s
Positive actions with respect to the environment
Engagement is a key factor in building and
strategy for the individual businesses and we will
and an increased focus on more sustainable
maintaining shareholder trust and in ensuring that
continue to invest in our people to ensure that we
products are not only desirable in their own right
shareholder support continues in the long term.
attract and retain the best talent.
but are also of potential economic and commercial
benefit to Bunzl.
• Feedback from employee forums.
• Feedback from employees.
• Feedback gathered at investor roadshows.
• Frequent Board reporting of people matters.
• Dialogue with environmental agencies.
• Analysis of AGM voting results.
• Ongoing monitoring of whistle blowing reports.
• Dialogue with government and non-
• Continuous monitoring of absence rates and
governmental agencies.
health & safety scores.
• Monitoring of results of CO2 reporting.
• Shareholder feedback.
• Analyst feedback.
• Analysis of results of major shareholder
• Ongoing monitoring of gender targets and
• Analysis and monitoring of external auditors’
consultations.
diversity metrics.
EHS assurance report.
60
Bunzl plc Annual Report 2020
Customers
Colleagues
Environment
Shareholders
Why do we
engage?
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.
• 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 3,300 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.
• We engaged 37 of our customers as part of our
materiality assessment to gain their feedback on
our approach to sustainability and allow
different functions of the business to respond to
the issues that are of most interest to them.
A fundamental element of Bunzl’s consistent and
proven strategy involves growing the business
organically, by expanding and developing our
business with existing customers and by gaining
new business with additional customers. 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.
• Successful renewal of customer contracts.
• Feedback from expert sales people and customer
service specialists.
• Dialogue with customers.
• Expanding and developing our business with
existing customers.
• Gaining new business with additional
customers.
How do we
engage?
Relevance
to strategy
How do we
monitor the
impact
of our
actions?
Our 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.
• We use a range of methods to engage 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. During what
has been an exceptional year, meetings have
been held virtually to ensure that the directors
can continue to engage with employees despite
the Covid-19 pandemic.
• We have accelerated our diversity and inclusive
employer practices and established diversity
and inclusion working groups throughout the
business.
Our goal is for Bunzl to be a responsible and
resilient organisation that inspires and proactively
implements solutions that protect the environment,
while being commercially successful for our
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.
• 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 our customers’ sustainability needs.
• We work in partnership with 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.
• 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.
• We report regularly to shareholders 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.
• We engaged several of our major shareholders as
part of our materiality assessment to seek their
opinions on our approach to sustainability.
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.
Positive actions with respect to the environment
and 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.
Engagement is a key factor in building and
maintaining shareholder trust and in ensuring that
shareholder support continues in the long term.
• Feedback from employee forums.
• Feedback from employees.
• Feedback gathered at investor roadshows.
• Frequent Board reporting of people matters.
• Dialogue with environmental agencies.
• Analysis of AGM voting results.
• Ongoing monitoring of whistle blowing reports.
• Dialogue with government and non-
• Continuous monitoring of absence rates and
governmental agencies.
health & safety scores.
• Monitoring of results of CO2 reporting.
• Shareholder feedback.
• Analyst feedback.
• Analysis of results of major shareholder
• Ongoing monitoring of gender targets and
• Analysis and monitoring of external auditors’
consultations.
diversity metrics.
EHS assurance report.
Bunzl plc Annual Report 2020
61
Strategic report Section 172 statement continued
Suppliers
Communities
Why do we
engage?
Bunzl regards suppliers as partners and works
with them to help achieve our business and
sustainability ambitions in the delivery of our
products and services.
We believe that, in order to maintain their social
licence to operate, companies must invest in and
benefit the places and communities in which they
work. It is clear to us that we can only deliver for
our customers and grow our business when our
employees, suppliers and communities succeed
alongside us.
• 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 have supported our local communities with
tailored support during the Covid-19 pandemic,
including donating PPE to hospitals and
providing face masks to schools.
• We support the communities where our
employees live and work and encourage
fundraising activities championed by our
businesses and their employees locally.
• We actively work with our suppliers to build long
term 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.
• Supplier conferences are held to showcase
examples of good practice and build awareness
of social compliance issues.
• We hosted several virtual events during 2020 to
introduce Bunzl operating companies to some of
our Asian suppliers. These events were used to
interact with potential new suppliers and allow
them to present their latest sustainable
innovations to our businesses.
• 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 do we
engage?
Relevance
to strategy
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.
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.
• Results of audits performed by Bunzl’s quality
assurance/quality control team in Shanghai.
• Feedback from communities in which Bunzl
operates.
• Monitoring of compliance with Bunzl’s Supplier
• Dialogue with other employees.
How do
we monitor
the impact
of our
actions?
code of conduct.
• Analysis of efficiency savings in procurement
activities.
• Successful renewal of procurement contracts.
• Supplier feedback.
• Monitoring of results of payment practices
and performance reporting.
• Feedback from local organisations and charities.
• Customer feedback.
62
Bunzl plc Annual Report 2020
Bunzl plc
dividend
decision
Due to the heightened macroeconomic
uncertainty caused by Covid-19, in April
2020 the Board took the difficult, yet
prudent, decision to no longer propose
a final dividend for the year ended
31 December 2019 at Bunzl’s 2020 AGM.
In making its decision, the Board
considered the interests of the Company
and its key stakeholders, principally its
shareholders, employees, customers and
suppliers. While the Board recognised the
importance of dividends to shareholders,
the directors were cognizant of the need to
maintain a robust liquidity position to
safeguard the Company’s operations and
ensure that it could continue to meet its
financial obligations and pay and support
its workforce, customers and suppliers.
The Board also recognised the importance,
for both the Company and its stakeholders,
of ensuring that the Company was
well-placed to absorb the effects of an
extended period of uncertainty.
After the Company delivered a strong set
of results for the first half of the year and in
light of the outlook for the rest of the year,
the Board considered it within the best
interests of the Company and its
shareholders to reinstate the withdrawn
dividend at the same level as originally
proposed as an additional interim dividend
for the year ended 31 December 2019. In
making its decision, the Board took account
of the results of the rigorous modelling and
stress testing that had been carried out, as
well as to the feedback received from the
Company’s advisers and brokers. Regard
was also given to the Company’s reputation
for high standards of responsible,
sustainable business conduct and to the
implications of the decision for the long
term success of Bunzl and its stakeholders.
Read more page 5
Sustainability
materiality
assessment
During 2020, we conducted our first
sustainability materiality assessment to
ensure that Bunzl’s activities take
account of those significant social and
environmental topics that are of greatest
interest to our stakeholders. As a result of
this exercise, a number of material ESG
topics were identified. In order to assess the
importance of these topics to our external
stakeholders, a materiality survey was
developed and subsequently presented to
four key stakeholder groups, these being
our investors, customers, suppliers and
other external partners, such as charities.
A total of 54 external stakeholders
contributed to the assessment and a
number of interviews were subsequently
held in order to gather the stakeholders’
feedback and discuss the survey results.
As detailed on pages 54 to 57 of the
Sustainability report, the results of the
materiality survey and stakeholder
interviews demonstrated that four specific
ESG topics were of greatest importance to
our stakeholders. When these topics were
aligned with the ESG topics that are most
significant to Bunzl, a number of key
themes subsequently emerged. Identifying
these themes will help Bunzl to prioritise
the most important sustainability issues,
inform the Group’s commitments in 2021
and beyond and provide a framework for
Bunzl to report on progress against such
commitments in the future. The stakeholder
feedback received will also help develop
and enhance further Bunzl’s sustainability-
based targets and sustainable product and
service solutions.
Read more page 54
Acquisition
of MCR
Safety
As a result of the better than expected
trading performance during the first half of
2020 and the outlook for the remainder of
the year, the Company decided to resume its
acquisition activity, having previously taken
the prudent decision to pause all such
activity in response to the uncertainty
around the impact of Covid-19. One of the
acquisitions considered by the Board, which
had been paused, concerned MCR Safety
(‘MCR’), a US-based distributor of PPE and
other safety products. In deciding whether
to approve the proposed acquisition, the
Board was cognisant of the trade-off
between protecting liquidity and cashflow
and using the money in furtherance of Bunzl’s
consistent and proven strategy of developing
the business through, amongst other things,
acquisition growth.
The Board considered how the proposed
acquisition would affect the Company’s
stakeholders, including customers,
employees, shareholders and suppliers. The
Board was also mindful of the alignment of
the transaction with the Company’s purpose,
strategy and high standards of business
conduct, the cultural fit, the financial
performance of MCR and the anticipated
synergies. Further considerations included
the risks associated with the acquisition, in
particular the potential ongoing effect of the
Covid-19 pandemic on MCR and ways of
mitigating these risks, together with the
results of the stringent due diligence
processes undertaken by management,
including anti-bribery and corruption checks
and financial due diligence.
After careful consideration, the Board
concluded that the acquisition of MCR
would complement Bunzl’s existing product
offering and significantly strengthen
Bunzl’s safety operations, both in the US
and elsewhere. The acquisition would
also afford MCR and its employees the
opportunity to develop further by being
part of the Group. The Board therefore
considered the acquisition to be in the best
long term commercial interests of the
Company and for the benefit of Bunzl’s
stakeholders as a whole.
Read more page 10
Bunzl plc Annual Report 2020
63
Strategic report Principal risks and uncertainties
A ROBUST APPROACH TO RISK
MANAGEMENT
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 ASSESSMENT
RISK
IDENTIFICATION
• Every business, business area, the Executive Committee and the
Board consider, 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.
INHERENT RISK
ASSESSMENT
• 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.
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Bunzl plc Annual Report 2020
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 details are also provided on the key risk
management activities undertaken during 2020.
Establishes the nature and extent of
risk the Group is willing to accept (its
‘risk appetite’) in pursuit of Bunzl’s
strategic objectives.
RISK MANAGEMENT
The Board
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.
The Audit Committee
Continuously monitors and oversees
the Group’s risk management and
internal controls processes and
procedures.
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.
Executive Committee
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.
Business area management
Business management
The Group’s decentralised management structure allows for
the establishment of clear ownership of risk identification and
management at the business area 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 102 and 103 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.
Bunzl plc Annual Report 2020
65
Strategic report Principal risks and uncertainties continued
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
Sustainability
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
2019 Annual Report, with one exception.
As a result of the Covid-19 pandemic, the
Group has now also included an additional
principal risk relating to the financial
collapse of either a large customer and/or
a significant number of small customers
within the retail and foodservice sectors.
Monitoring risks
The Board reviews each risk and assesses
the gross impact, applying the hypothetical
assumption there are no mitigating controls
in place, net impact and probability to set the
Group’s mitigation priorities. The register
of principal risks and uncertainties was
updated following review by the Executive
Committee and approval by the Board.
The Board is continuing to monitor risks
associated with the UK having left the
European Union (‘Brexit’). Although Bunzl
is a UK headquartered company, less than
10% of the Group’s profit is generated in 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 30%
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.
The risks to Bunzl arising from the UK
leaving the EU are:
• foreign exchange volatility on the Group’s
translated results which, as noted in risk
10, Currency translation, is not hedged.
Therefore, a strengthening or weakening
of sterling will result in a change in the
Group’s reported results;
• supply chain disruption as UK ports are
unable to cope with additional border
checks leading to inventory shortages.
Selected UK warehouses have applied for
simplified customs freight procedures
authorisation (‘CFSP’) to attempt to
minimise port delays. Additional stocks of
certain items are held to minimise the risk
of inventory shortages.
The Board is also monitoring the ongoing
situation with respect to trade tariffs in the
US. During 2020 the impact of trade tariffs
levied on products imported into the US were
mitigated through price increases or by
identifying alternative sources of supply.
Based on these mitigations and recent
developments, and the assessment of the
potential risks associated with Brexit, 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.
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Bunzl plc Annual Report 2020
Covid-19 impact
During the Covid-19 pandemic, and as explained earlier in this report, we have seen
diverging effects within our business. Increased sales of products related to Covid-19
have offset the weakness in the foodservice and retail sectors which have been impacted
by pandemic-related restrictions. Further, we have seen significant disruption from
impacted supply chains but have been able to minimise the impact given our wide-
reaching supplier relationships across multiple jurisdictions and our internal supplier
auditing capabilities in Asia that has been a source of strength over the year.
To date the net balance has been positive for Bunzl’s performance. Going forward, while
we envisage continued strength of demand for Covid-19 related products in the near-
term, our net performance will depend on how these two diverging trends continue to
play out and correlate with one another.
Emerging risks
Emerging risks are ‘new’ risks that have
the potential to crystallise at some point in
the future but are unlikely to impact the
business during the next year. The outcome
of such risks is often more uncertain.
They may begin to evolve rapidly or simply
not materialise.
The Board monitors the Group’s business
activities and external and internal
environments for new, emerging and
changing risks to ensure that these are
managed appropriately. Annually, input
from each business area is combined with
external insight to scan the horizon for
emerging risks. A summary of emerging
risks is presented for assessment to the
Audit Committee and the Board. Emerging
risks continue to be monitored as part of the
ongoing risk management processes.
Climate change is the emerging risk that is
currently being considered. Climate change
is rapidly becoming a material issue, which
may impact both Bunzl’s direct operations
and the value chain in which the Group
operates. The Group is already facing
increased pressure from some customers
who expect Bunzl to contribute to their
climate change commitments. In future,
the Group may face increased business
continuity risks from acute and chronic
climatic events. To meet increasing demands
for greater disclosure of and response to
climate-related risks, an analysis has been
undertaken to understand how Bunzl
businesses may be impacted under different
climate change scenarios. This work
was carried out as part of revising the
Group-level sustainability strategy. For
more details on our climate change work see
www.bunzl.com/sustainability and pages
48-49 of the sustainability section of
this report.
The directors confirm that they have carried
out a robust assessment of the principal and
emerging risks facing the Group, including
those that would threaten its business model,
future performance, solvency or liquidity.
Bunzl plc Annual Report 2020
67
Strategic report Principal risks and uncertainties continued
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is
managed or mitigated
Developments
in 2020
Strategic risks
1. Competitive
pressures
Revenue and profits
are reduced as the
Group loses a
customer or lowers
prices due to
competitive
pressures
Risk owner:
CEO and Business
Area Heads
Change to risk
level:
Included in viability
statement: Yes
2. Financial
collapse of either a
large customer and/
or a significant
number of small
customers
Revenue and profits
are reduced as the
Group loses
customers
Risk owner:
CEO and Business
Area Heads
Change to risk
level: New
Included in viability
statement: Yes
• The Group operates in highly
• The Group’s geographic and market
• The Group’s various sales forces
connected with customers to help them
understand the range of products
available to meet their needs and
continued to work with the customers to
develop holistic sustainability solutions
to help them achieve their sustainability
goals. This is perceived by customers to
be an important value creator.
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.
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.
• An unexpected insolvency of either a
• The Group monitors significant
• As a result of the Covid-19 pandemic,
large customer or a significant number
of small customers, particularly within
the retail and foodservice sectors, could
lead to a sudden reduction in revenue
and profits, including the cost of
impairing any irrecoverable receivables
balances, as well as operating margin
erosion due to under-used capacity.
• The Group’s revenue and profits may be
affected as well as receivables and
inventory (if customer specific inventory
is held).
developments in relationships with
key customers, including credit checks
and limits set for each customer.
• Delegation of authority limits mean
that there is oversight of all material
customer contracts at Business
Area and Executive Committee level.
At local level, customer relationships
are managed closely by the business
leaders.
many customers across the world have
been adversely impacted financially by
the government imposed lockdowns
and travel restrictions put in place to
control the pandemic as they have been
unable to operate at their normal levels.
Therefore, there is a significant risk of a
large customer and/or a large number of
small customers, particularly within
the retail and foodservice sectors,
experiencing financial difficulties, as
government support for businesses
ceases or is significantly reduced.
• In 2020, provisions were increased
relating to the Group’s credit exposure
from customers in foodservice and
retail businesses.
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Bunzl plc Annual Report 2020
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is
managed or mitigated
Developments
in 2020
Strategic risks continued
3. Product cost
deflation
Revenue and profits
are reduced due to
the Group’s need to
pass on cost price
reductions
Risk owner:
CEO and Business
Area Heads
Change to risk
level:
Included in viability
statement: Yes
• In the event of indexed or cost plus
contracts, 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, 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.
• In 2020, significant changes in demand
for products in certain categories created
an unusual level of price volatility. In
order to protect profitability, the Group
focused even more than usual on
maintaining sufficient but not excessive
inventory levels to ensure no significant
adverse impact of holding inventory in a
time of declining prices. The Group also
worked to move further away from cost
plus pricing arrangements to fee per
case with consumer price indexing to
mitigate any risks relating to product
cost deflation.
• There have been a range of activities
to reduce fuel and energy consumption,
consolidation of facilities and
minimising travel costs.
4. Cost inflation
Profits are reduced
from the Group’s
inability to pass on
product or operating
cost increases
Risk owner:
CEO and Business
Area Heads
Change to risk
level:
Included in viability
statement: Yes
• 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.
• 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.
• In response to the Covid-19 pandemic,
the Group increased use of its Shanghai
global sourcing function to secure
products supply quickly and of the
right quality. Focus on own brand
development also increased to improve
gross margins.
• Supply chains were continuously
monitored to ensure that the business
was able to compete effectively on price
and maintain margins.
• Significant exchange rate driven
inflation has wherever possible been
passed on to customers.
• 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.
Bunzl plc Annual Report 2020
69
Strategic report
Principal risks and uncertainties continued
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is
managed or mitigated
Developments
in 2020
Strategic risks continued
5. Inability to make
further acquisitions
Profit growth is
reduced from the
Group’s inability to
acquire new
companies
Risk owner:
CEO and Business
Area Heads
Change to risk
level:
Included in viability
statement: Yes
6. Unsuccessful
acquisition
Profits are reduced,
including by an
impairment charge,
due to an
unsuccessful
acquisition or
acquisition
integration
Risk owner:
CEO and Business
Area Heads
Change to risk
level:
Included in viability
statement: Yes
• The acquisition pipeline is closely
monitored with continued research
of any available opportunities for
investment.
• Despite challenging conditions, 2020
has been one of the highest years of
committed spend (£445 million).
• 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 172
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 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.
• Inadequate pre-acquisition due diligence
• The Group has established processes
• The Board reviews performance of
recent acquisitions annually. In 2020
the Board reviewed the principal
acquisitions made in 2018 and noted
that performance was in line with
expectations.
related to a 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.
• Furthermore, the loss of key people or
customers, exaggerated by inadequate
post-acquisition integration of the
business, could in turn result in
underperformance of the acquired
company compared to pre-acquisition
expectations which could lead to lower
profits as well as a need to record an
impairment charge against any
associated intangible assets.
and procedures for detailed pre-
acquisition due diligence related
to acquisition targets and the post-
acquisition integration thereof.
• The Group’s acquisition strategy is
to focus on those businesses which
operate in sectors where it has or can
develop competitive advantage and
which have good growth opportunities.
• The Group endeavours to maximise the
performance of its acquisitions through
the recruitment and retention of high
quality and appropriately incentivised
management combined with effective
strategic planning, investment in
resources and infrastructure and
regular reviews of performance by both
business area and Group management.
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Bunzl plc Annual Report 2020
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is
managed or mitigated
Developments
in 2020
Strategic risks continued
7. 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
Risk owner:
CEO and Business
Area Heads
Change to risk
level:
Included in viability
statement: Yes
• Regulations have been announced in
the EU and 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.
• Bunzl’s scale and unique position as a
distributor at the 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
8. 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
Risk owner:
CIO
Change to risk
level:
Included in viability
statement: Yes
• The frequency, sophistication and
• Concurrent with the Group’s IT
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.
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.
• The Group strategically engaged
customers to ensure Bunzl’s
sustainability strategy takes account
of significant social and environmental
topics – a detailed materiality
assessment was performed to
support this.
• A new network of 49 sustainability
ambassadors was created.
• The Group is in the process of
developing new solutions, including
customer-facing ‘consultancy’ tools
and consolidated ranges of own brand
sustainable products.
• New governance for sustainability
across the Group’s businesses was
introduced, including CEO-led quarterly
governance meetings and sustainability
presentations at four Board meetings
in 2020.
• The roll out of a range of cyber activities
to meet the ever-changing landscape
continued, including enhanced
information security and privacy
training and simulated phishing attacks
for personnel across the Group with
mandatory attendance for all
information system users.
• A global security scanning service was
rolled out to ensure vulnerabilities are
tracked, managed and remediated.
• Email protection was enhanced to
prevent the most common vector
of attack.
• Privacy enhancement programmes were
undertaken in line with changing
privacy regulations across the globe.
• Security controls were adapted to
address Covid-19 related risks and
remote working.
Bunzl plc Annual Report 2020
71
Strategic report
Principal risks and uncertainties continued
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is
managed or mitigated
Developments
in 2020
Financial risks
9. Availability of
funding
Insufficient
liquidity in financial
markets leading
to insolvency
Risk owner:
CFO
Change to risk
level:
Included in viability
statement: Yes
10. Currency
translation
Significant change in
foreign exchange
rates leading to a
reduction in reported
results and/or a
breach of banking
covenants
Risk owner:
CFO
Change to risk
level:
Included in viability
statement: No
• Insufficient liquidity in financial markets
• The Group arranges a mixture of
• The Group established a Euro Medium
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.
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.
Term Note Programme which allows the
Group to access funds in a timely
manner from the public markets.
• The Group has issued £400 million debt
under this Programme with a 2030
maturity and no covenant. These funds
can be used to refinance near term
maturities.
• The majority of the Group’s revenue and
profits are 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.
• The Group does not hedge the impact
• In 2020 currency translation had an
adverse impact on the Group’s reported
results, decreasing revenue, profits
and earnings by between 1% and 2%.
• The Group’s results are reviewed
at constant exchange rates to show
the underlying performance of the
Group excluding the currency
translation impact.
of exchange rate movements arising on
translation of earnings into sterling at
average exchange rates. The Board
believes that the benefits of its
geographical spread outweigh the risks.
• Results are reported at constant
exchange rates so that investors can
observe the underlying performance
of the Group excluding the translation
impact on the Group’s reported results.
• The Group’s borrowings are
denominated in US dollars, sterling
and euros in similar proportions to the
relative profit contribution of each of
these currencies to the Group’s EBITDA.
This 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.
72
72
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Principal risks
facing the Group
Description of risk and how it
might affect the Group’s prospects
How the risk is
managed or mitigated
Developments
in 2020
Financial risks continued
11. Increase in
taxation
Increases in Group
tax rate and/or
cash tax
Risk owner:
CFO
Change to risk
level:
Included in viability
statement: Yes
• 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.
• The Group responded to the several tax
changes enacted in response to the
Covid-19 pandemic, monitoring these
centrally as well as reacting locally.
All tax benefits taken were repaid
where possible.
• Short term reductions in taxation could
be replaced by longer term increases to
fund Covid-19 government support (e.g.
a higher federal income tax rate of 28%
(currently 21%) was proposed in the US).
The financial implications of such
changes have been modelled and any
legislative proposals that are put
forward will be monitored.
• 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.
Bunzl plc Annual Report 2020
73
Strategic report
Principal risks and uncertainties continued
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.
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 2023.
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
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
senior bonds, further details of which are set
out in Note 15 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, which took
into account the risks associated with the
continuing impact of the Covid-19 pandemic,
particularly in the foodservice and retail
sectors, on the results of the Group in the
near term, 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.
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 2023.
74
Bunzl plc Annual Report 2020
Financial review
FINANCIAL REVIEW
‘ Our businesses have reacted
admirably to the unprecedented
circumstances and this is reflected
in the strength of our financial
results. The Group’s robust
balance sheet and continued
strong cash generation have
enabled the Group to maintain
focus on key strategic priorities.’
Richard Howes
Chief Financial Officer
Adjusted operating profit*
Up 19.1% at actual exchange rates
Adjusted earnings per share*
Up 24.7% at actual exchange rates
Revenue
Up 8.4% at actual exchange rates
(2019: £9,326.7m)
£10,111.1m
+9.4%†
(2019: £653.3m)
£778.4m
+20.9%†
Operating profit
Up 17.1% at actual exchange rates
Cash conversion*
Continued strong cash conversion
(2019: £528.4m)
£618.5m
+18.7%†
103%
(2019: 101%)
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 %*
† At constant exchange rates.
* Alternative performance measure (see Note 3 on page 158).
◊ Including the reinstated 2019 final dividend, paid as an additional 2019 interim dividend.
(2019: 132.2p)
164.9p
+26.6%†
Dividend
Long track record of dividend
growth continues
(2019: 51.3p◊)
54.1p
+5.5%
2020
£m
10,111.1
778.4
715.6
164.9p
54.1p
618.5
555.7
128.8p
45.4%
16.2%
103%
2019
£m
Growth as
reported
Growth at
constant
exchange
8.4%
19.1%
23.8%
24.7%
5.5%
17.1%
22.6%
22.9%
9.4%
20.9%
25.6%
26.6%
18.7%
24.4%
24.8%
9,326.7
653.3
578.2
132.2p
51.3p
528.4
453.3
104.8p
36.9%
13.6%
101%
Bunzl plc Annual Report 2020
75
Strategic report
Financial review continued
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 3 to the consolidated financial
statements on page 158.
Currency translation
Currency translation has had a small adverse impact on the Group’s reported results, decreasing revenue, profits and earnings by between
1% and 2%. The adverse exchange rate impact was principally due to the effect on average exchange rates of the strengthening of sterling
against certain currencies during the year, particularly the Canadian dollar, Brazilian real and Australian dollar, partly offset by the
weakening of sterling against the euro.
Average exchange rates
US$
Euro
Canadian$
Brazilian real
Australian$
Closing exchange rates
US$
Euro
Canadian$
Brazilian real
Australian$
2020
1.28
1.12
1.72
6.61
1.86
2020
1.37
1.12
1.74
7.08
1.77
2019
1.28
1.14
1.69
5.04
1.84
2019
1.32
1.18
1.72
5.33
1.88
Revenue
Revenue increased to £10,111.1 million (2019: £9,326.7 million), up 9.4% at constant exchange rates (up 8.4% at actual exchange rates), due
to underlying growth of 4.8% (being organic growth adjusted for trading days), the benefit of acquisitions and an additional trading day
compared to the previous year due to 2020 being a leap year.
Movement in revenue (£m)
10,500
10,000
9,500
9,000
8,500
9,326.7
(88.1)
43.1
384.5
10,111.1
444.9
2019 revenue
Currency translation
Impact of additional
trading day
Underlying revenue
growth
Acquisitions
2020 revenue
76
Bunzl plc Annual Report 2020
Operating profit
Adjusted operating profit increased to £778.4 million (2019: £653.3 million), an increase of 21% at constant exchange rates and 19% at actual
exchange rates. Adjusted operating profit margin increased from 7.0% to 7.7% at both constant exchange rates and actual exchange rates.
This improvement in operating margin was primarily driven by the strong demand for Covid-19 related products in the higher than average
margin sectors of safety, healthcare and cleaning & hygiene and a reduction in demand in the lower than average margin sectors of
foodservice and retail, partly offset by charges relating to trade receivables and inventory provisions.
During 2020, the Group has seen a number of customers either entering insolvency processes or showing specific credit stress indicators that
have impacted the recoverability of receivables and customer specific inventory particularly in the foodservice and retail sectors. This has
resulted in a net charge of approximately £15 million being taken during the year to reflect the risks around recoverability. In addition, there is
a heightened risk of further recoverability issues with customers, mainly in these same sectors, as government support is withdrawn and the
trading uncertainty continues. Consequently, the Group has taken an additional net charge of approximately £10 million in the year relating to
aged receivables and customer specific inventory for those customers identified as having a high or medium credit risk. The Group has also
seen an increase in the level of slow moving inventory as the Covid-19 pandemic and the associated government imposed control measures
have continued to impact customer demand across a range of market sectors. This has resulted in a net charge of approximately £15 million
in the year to increase slow moving inventory provisions.
Movement in adjusted operating profit (£m)
800
750
700
650
600
134.5
778.4
653.3
(9.4)
2019 adjusted operating profit
Currency translation
2020 growth
2020 adjusted operating profit
Operating profit was £618.5 million, an increase of 19% at constant exchange rates (up 17% at actual exchange rates).
Movement in operating profit (£m)
675
625
575
525
475
134.5
(20.1)
(16.8)
618.5
528.4
(7.5)
2019 operating profit
Currency translation
Growth in adjusted
operating profit
Increase in customer
relationships and brands
amortisation and
acquisition related items
Non-recurring pension
scheme charges
2020 operating profit
Acquisition related items include £12.1 million for impairment of goodwill relating to the closure of a safety business in China within
the Asia Pacific Cash Generating Unit and £9.1 million for impairment of customer relationships assets relating to a foodservice
business in UK & Ireland, a safety business in Continental Europe and the closure of the safety business in China, as explained in
Note 11. The non-recurring pension scheme charges of £16.8 million comprise £16.4 million relating to withdrawal liability charges for
three multi-employer pension plans in North America, following the Group’s decision to withdraw from these plans due to their critical
funding status, and a £0.4 million GMP equalisation charge relating to the equalisation of guaranteed minimum pensions between
male and female members on historical transfers out of the Group’s defined benefit pension scheme following a High Court ruling on
20 November 2020 in the case of Lloyds Banking Group Pension Trustees Limited vs Lloyds Bank plc.
Customer relationships and brands amortisation, acquisition related items and the non-recurring pension scheme charges in 2020
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.
Bunzl plc Annual Report 2020
77
Strategic report Financial review continued
Net finance expense
The net finance expense for the year was £62.8 million, a decrease of £11.3 million at constant exchange rates (down £12.3 million at actual
exchange rates), mainly from lower average interest rates and a lower average level of net debt in the year.
Profit before income tax
Adjusted profit before income tax was £715.6 million (2019: £578.2 million), up 26% at constant exchange rates (up 24% at actual exchange
rates), due to the growth in adjusted operating profit and the reduction in net finance expense. Profit before income tax was £555.7 million
(2019: £453.3 million), an increase of 24% at constant exchange rates (up 23% at actual exchange rates).
Taxation
The Group’s tax strategy is to comply with tax laws in all countries in which it operates and to balance its responsibilities for controlling the
tax costs with its responsibilities to pay the appropriate level of tax where it does business. No companies are established in tax havens or
other countries for tax purposes where the Group does not have an operational presence and the Group’s de-centralised operational structure
means that the level of intragroup trading transactions is very low. The Group does not use intragroup transfer prices to shift profit into low
tax jurisdictions. The Group’s tax strategy has been approved by the Board and tax risks are 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 23.1% (2019: 23.8%) and the reported tax rate on
statutory profit was 22.6% (2019: 23.0%). Both the effective and reported tax rates for 2020 are lower than the prior year due to a higher credit
for share-based payment expense and a larger benefit from reduced prior year tax exposures.
As explained in the Principal risks and uncertainties section on pages 64 to 74, 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 decision that part of the UK’s tax regime amounts to State aid.
Further details on this risk are given in Note 7 to the consolidated financial statements but it should be noted that tax plus interest of up to
£37 million could be payable in the near future to HM Revenue & Customs as they are required to collect amounts they consider to be State
aid in line with the Commission’s decision. The Group, as well as HM Government and many other tax payers, have filed appeals to the EU
General Court on this issue but no hearing date has been set. Any such amount paid to HM Revenue & Customs will be refunded in the event
of a favourable EU General Court ruling. In addition, the Group made a cash payment during the year of BRL100.4 million (£15.2 million) for
tax plus interest and penalties in relation to a tax dispute in Brazil. This had no effect on the tax charge for the year. The Group has appealed
to the Federal Court against the BRL100.4 million assessment and expects litigation on the matter to take several years.
78
Bunzl plc Annual Report 2020
Earnings per share
Profit after tax increased to £430.0 million (2019: £349.2 million), up 25% and an increase of £85.9 million at constant exchange rates (up 23%
at actual exchange rates), due to a £108.9 million increase in profit before income tax, partly offset by a £23.0 million increase in the tax charge
at constant exchange rates.
Adjusted profit after tax was £550.5 million (2019: £440.6 million), up 27% and an increase of £116.3 million at constant exchange rates
(up 25% at actual exchange rates), due to a £145.8 million increase in adjusted profit before income tax, partly offset by a £29.5 million
increase in the tax on adjusted profit before income tax at constant exchange rates.
The weighted average number of shares increased to 333.8 million from 333.3 million in 2019 due to employee share option exercises, partly
offset by share purchases into the employee benefit trust.
Basic earnings per share were 128.8p (2019: 104.8p), up 25% at constant exchange rates (up 23% at actual exchange rates). Adjusted
earnings per share were 164.9p (2019: 132.2p), an increase of 27% at constant exchange rates (up 25% at actual exchange rates).
Movement in basic eps (p)
140
130
120
110
100
33.3
(4.3)
0.5
(3.7)
(0.2)
128.8
104.8
2019 basic EPS
(1.6)
Currency
translation
Increase in
adjusted profit
before income tax
Increase in customer
relationships and
brands amortisation
and acquisition
related items
Non-recurring
pension scheme
charges
Decrease in
reported tax rate
Increase in
weighted average
number of shares
2020 basic EPS
Movement in adjusted eps (p)
170
160
150
140
130
120
33.3
1.5
(0.2)
164.9
132.2
(1.9)
2019 adjusted EPS
Currency translation
Increase in adjusted
profit before income tax
Decrease in effective
tax rate
Increase in weighted
average number
of shares
2020 adjusted EPS
Bunzl plc Annual Report 2020
79
Strategic report Financial review continued
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)
* 2019 final dividend reinstated as an additional 2019 interim dividend.
2020
15.8
38.3
54.1
3.0
2019
15.5
35.8
51.3
2.6
Growth
1.9%
7.0%
5.5%
The Company’s practice in recent years has been to pay a progressive dividend, delivering year-on-year increases with the dividend usually
growing at a similar rate to the growth in adjusted earnings per share. However, performance in 2020 has benefited significantly from larger
Covid-19 related orders that are not expected to be repeated in 2021. The approach to setting the 2020 dividend therefore needs to reflect more
closely a more normalised level of growth in adjusted earnings per share which might otherwise have been anticipated without the benefit of
such orders. As a consequence, the Board is proposing a 2020 final dividend of 38.3p, an increase of 7% on the amount paid in relation to the
2019 final dividend. The 2020 total dividend of 54.1p is 5.5% higher than the 2019 total dividend.
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 2020, Bunzl has sustained a growing dividend to
shareholders over the past 28 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 on pages 64 to 74. 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
2020 Bunzl plc had sufficient distributable reserves to cover more than four years of dividends at the levels of those delivered in 2020, which
is expected to be approximately £181 million.
Acquisitions
The Group completed nine acquisitions during the year ended 31 December 2020 with a total committed spend of £445.0 million.
The estimated annualised revenue and adjusted operating profit of the acquisitions completed during the year were £602 million and
£50 million respectively.
The acquisitions completed during the year include the acquisition of MCR Safety, which is considered to be individually significant due to
its impact on intangible assets, adding £104.5 million to customer relationships, £13.7 million to brands and £71.8 million to goodwill. The
committed spend on this acquisition was £276.5 million. For further details of this acquisition see Note 26 on pages 189 to 191.
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 agreed and completed in the current year
£m
318.7
108.8
427.5
367.9
59.6
427.5
19.1
(8.9)
7.3
445.0
80
Bunzl plc Annual Report 2020
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net cash acquired
Deferred consideration payments
Net cash outflow in respect of acquisitions
Acquisition related items*
Total cash outflow in respect of acquisitions
* Acquisition related items comprise £7.1 million of transaction costs and expenses paid and £17.2 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
Income tax paid
Free cash flow
Dividends paid
Acquisitions◊
Net payments relating to employee share schemes
Net cash inflow
† Before acquisition related items.
◊ Including acquisition related items.
£m
367.9
(8.9)
4.2
363.2
24.3
387.5
2019
£m
814.1
(151.6)
(28.8)
633.7
(51.2)
(125.6)
456.9
(167.3)
(162.8)
(27.7)
99.1
2020
£m
968.3
(159.6)
(31.9)
776.8
(41.5)
(153.8)
581.5
(171.5)
(387.5)
(8.4)
14.1
The Group’s free cash flow of £581.5 million was £124.6 million higher than in 2019, primarily due to the increase in operating cash flow
of £143.1 million, partly offset by a higher cash outflow relating to tax. The Group’s free cash flow was primarily used to finance dividend
payments of £171.5 million in respect of 2019 (2019: £167.3 million in respect of 2018) and an acquisition cash outflow of £387.5 million
(2019: £162.8 million). Cash conversion (being the ratio of operating cash flow as a percentage of lease adjusted operating profit) was 103%
(2019: 101%). This benefited from advance payments from customers net of upfront payments to suppliers of approximately £34 million.
Excluding these net advanced payments, cash conversion was 99%.
Operating cash flow
Adjusted operating profit
Add back depreciation of right-of-use assets
Deduct payment of lease liabilities
Lease adjusted operating profit
2020
£m
776.8
778.4
134.8
(159.6)
753.6
2019
£m
633.7
653.3
128.1
(151.6)
629.8
Cash conversion (operating cash flow as a percentage of lease adjusted operating profit)
103%
101%
Net debt
Net debt excluding lease liabilities increased by £8.0 million during the year to £1,255.0 million (2019: £1,247.0 million), due to a £22.1 million
increase due to currency translation partly offset by the net cash inflow of £14.1 million. Net debt including lease liabilities was
£1,752.5 million (2019: £1,727.0 million).
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 1.5 times (2019: 1.9 times). Net debt to EBITDA calculated at average exchange rates including lease liabilities
was 1.8 times (2019: 2.1 times).
Bunzl plc Annual Report 2020
81
Strategic report Financial review continued
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
Return on invested capital
2020
£m
2,441.9
453.4
122.7
1,021.4
(323.0)
3,716.4
(44.8)
(1,255.0)
(497.5)
1,919.1
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
45.4%
16.2%
36.9%
13.6%
Return on average operating capital increased to 45.4% from 36.9% in 2019 and return on invested capital of 16.2% was up from 13.6%
in 2019, both due to a higher return in the underlying business driven by an increase in adjusted operating profit and lower average
operating capital.
Intangible assets increased by £151.0 million to £2,441.9 million due to intangible assets arising on acquisitions in the year of £296.7 million
and software additions of £8.7 million, partly offset by an amortisation charge of £110.7 million, an impairment charge of £21.2 million,
software disposals of £0.8 million and a decrease from currency translation of £21.7 million.
Right-of-use assets increased by £20.5 million to £453.4 million due to additional right-of-use assets from new leases during the year of
£100.1 million, an increase from acquisitions of £35.2 million and an increase from remeasurement adjustments of £24.2 million, partly offset
by a depreciation charge of £134.8 million and a decrease from currency translation of £4.2 million.
Working capital increased from the prior year end by £78.0 million to £1,021.4 million due to increases from acquisitions, partly offset by
a decrease in the underlying business and a decrease from currency translation.
The Group’s net pension deficit of £44.8 million at 31 December 2020 was £8.8 million higher than at 31 December 2019, principally due to an
actuarial loss of £16.2 million, increases from service cost and net interest expense, partly offset by contributions of £14.6 million during the
year. 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 £174.8 million during the year to £1,919.1 million.
Movement in shareholders’ equity (£m)
2,300
2,200
2,100
2,000
1,900
1,800
1,700
1,600
1,744.3
2019
Shareholders’
equity
430.0
(171.5)
16.2
(81.0)
(13.2)
(5.7)
1,919.1
Profit for
the year
Dividends
Currency
(net of tax)
Actuarial loss on
pension schemes
(net of tax)
Share based
payments
(net of tax)
Employee share
options (net of tax)
2020 Shareholders’
equity
Capital management
The Group’s policy is to maintain a strong capital base 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 funding strategy is to maintain an investment grade credit rating and the Company’s current credit rating with
Standard & Poor’s is BBB+. All 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.
82
Bunzl plc Annual Report 2020
Treasury policies and controls
The Group has a centralised treasury department to control external borrowings and manage liquidity, interest rate, foreign currency and
credit risks. Treasury policies have been approved by the Board and cover the nature of the exposure to be hedged, the types of financial
instruments that may be employed and the criteria for investing and borrowing cash. The Group uses derivatives to manage its foreign
currency and interest rate risks arising from underlying business activities. No transactions of a speculative nature are undertaken. The
treasury department is subject to periodic independent review by the internal audit department. Underlying policy assumptions and activities
are periodically reviewed by the executive directors and the Board. Controls over exposure changes and transaction authenticity are in place.
The Group continually monitors net debt and forecast cash flows to ensure that sufficient facilities are in place to meet the Group’s
requirements in the short, medium and long term and, in order to do so, arranges borrowings from a variety of sources. Additionally,
compliance with the Group’s biannual debt covenants is monitored on a monthly basis and formally tested at 30 June and 31 December.
The principal covenant limits are net debt, calculated at average exchange rates, to EBITDA of no more than 3.5 times and interest cover
of no less than 3.0 times. Sensitivity analyses using various scenarios are applied to forecasts to assess their impact on covenants and net
debt. During the year ended 31 December 2020 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 senior bonds. During 2020, the Group issued a £400 million bond which matures in 2030 under the terms of its Euro Medium Term
Note Programme. The bond issued extends the maturity profile of the Group’s debt portfolio and diversifies its funding sources. In addition
to this bond, the £300 million senior bond matures in 2025 and the Group’s committed bank facilities mature between 2021 and 2025.
At 31 December 2020 the nominal value of US private placement notes outstanding was £916.3 million (2019: £1,012.1 million) with maturities
ranging from 2021 to 2028. At 31 December 2020 the available committed bank facilities totalled £978.0 million (2019: £1,062.4 million) of
which £45.0 million (2019: £63.0 million) was drawn down, providing headroom of £933.0 million (2019: £999.4 million). The Group expects
to make repayments in 2021 of approximately £79 million relating to maturing US private placement notes.
Committed facilities maturity profile by year (£m)
800
700
600
500
400
300
200
100
0
300
174
45
166
2025
324
120
2024
105
79
2021
160
115
2022
170
157
2023
Bank facilities – undrawn
Senior bonds
Bank facilities – drawn
US private placement notes
400
115
2026
128
2027
36
2028
2029
2030
Further details of the Group’s capital management and treasury policies and controls are set out in Note 15 on pages 171 to 178.
Going concern
The directors, having reassessed the principal risks and uncertainties, consider it appropriate to adopt the going concern basis of accounting
in the preparation of the financial statements. In reaching this conclusion, the directors noted the Group’s strong cash performance in the
year, the substantial funding available to the Group as described above and the resilience of the Group to a range of possible downside
scenarios including those relating to the potential impacts of the Covid-19 pandemic. Further details are set out in Note 1 on page 150.
Richard Howes
Chief Financial Officer
1 March 2021
Bunzl plc Annual Report 2020
83
Strategic report
Taskforce on Climate related Financial Disclosures (TCFD)
TCFD INDEX
The Taskforce on Climate related Financial Disclosures (TCFD) has developed a voluntary climate related financial risk disclosure
framework for companies to provide information to investors, lenders, insurers and other stakeholders. We support the TCFD
recommendation and will follow the guidance on how to provide appropriate transparency of our most material climate related risks
and opportunities, the potential impacts on our business and our strategy for assessing and managing these impacts. The table below
provides a reference to where these key disclosures can be found.
Our first full TCFD statement can be found on our website www.bunzl.com/sustainability.
Topic
Disclosure summary
Disclosure
Bunzl response
Governance
Disclose the organisation’s
governance around climate
related risks and opportunities.
a) Describe the Board’s oversight of climate related risks and
opportunities.
Strategy
Disclose the actual and potential
impacts of climate related risks
and opportunities on the
organisation’s businesses,
strategy and financial planning.
b) Describe management’s role in assessing and managing
climate related risks and opportunities.
a) Describe the climate related risks and opportunities the
organisation has identified over the short, medium and
long term.
Sustainability: page 58.
Principal risks: pages 65-67.
TCFD statement.
Sustainability: page 58
Principal risks: pages 65-67.
TCFD statement.
Sustainability: page 49.
TCFD statement.
Risk
management
Disclose how the organisation
identifies, assesses and manages
climate related risks.
Metrics and
targets
Disclose the metrics and targets
used to assess and manage
relevant climate related risks
and opportunities.
b) Describe the impact of climate related risks and
opportunities on the organisation’s businesses, strategy,
and financial planning.
Principal risks: page 67.
TCFD statement.
c) Describe the resilience of the organisation’s strategy, taking
into consideration different climate related scenarios
including a 2°C or lower temperature scenario.
Sustainability: pages 48-49.
Principal risks: page 67.
TCFD statement.
a) Describe the organisation’s processes for identifying and
assessing climate related risks.
Principal risks: pages 64-67.
TCFD statement.
b) Describe the organisation’s processes for managing climate
related risks.
c) Describe how processes for identifying, assessing and
managing climate related risks are integrated into the
organisation’s overall risk management.
Principal risks: page 67.
TCFD statement.
Principal risks: pages 65-67.
TCFD statement.
a) Disclose the metrics used by the organisation to assess
climate related risks and opportunities in line with its
strategy and risk management process.
ESG appendix: pages 86-88.
TCFD statement.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions and the related risks.
ESG appendix: pages 86-88.
TCFD statement.
c) Describe the targets used by the organisation to manage
climate related risks and opportunities and performance
against targets.
ESG appendix: pages 86-87.
Sustainability: page 49.
TCFD statement.
84
Bunzl plc Annual Report 2020
Non-financial information
ESG APPENDIX
Material ESG issues mapped to our business model
Business model pillar
Source
Consolidate
Deliver
Sustainability
framework pillar
The ESG issues
relevant to Bunzl.
Identified by aligning the
issues and disclosure
topics in the SASB
materiality map to our
business model.
Our suppliers
Our business
Our customers
• Managing environmental risks in
• Equal opportunities.
• Products made from recycled content
supply chain.
• Gender, ethnic, LGBTQIA and disability
• Sustainable raw material sourcing.
diversity.
or renewable materials.
• Reusable products.
• Certification to relevant
environmental standards.
• Employee health and well-being and
• Products that are recyclable or
occupational health & safety.
compostable.
• Ethical supply chain practices.
• Attraction and retention of talent and
• Working to respect human rights
and prevent incidences of modern
slavery.
learning and development programmes.
• Reward and recognition and work life
flexibility.
• Supporting the safety and wellbeing
• Long term targets for carbon reduction.
of workers in our supply chain.
• Renewable energy sourcing, energy
efficiency and renewable energy projects.
• Low and zero carbon logistics.
• Good practices of corporate governance.
• Working to reduce environmental
impacts of products through their
lifecycle.
• Developing circular systems for
products supplied (back haul
solutions).
• Partnerships with waste management
to offer onsite circular solutions for
customers.
• Transparent, independent expert
• Compliance with laws and regulations.
product advice.
• Implementing appropriate company
• Product claims in accordance with
standards and policies.
legislation.
• Donations to local and international
• Avoiding misleading claims related to
charities.
products.
Our most material
ESG topics.
Identified by assessing
the significance to
Bunzl. These formed the
basis of our materiality
assessment.
• Supporting local communities where we
operate.
• Employee fundraising and volunteering.
• Public policy and lobbying.
• Partnerships with sustainability
advocacy groups.
• Trade association memberships.
1. Supply chain management and
3. Diversity and inclusion.
10. Availability of products and services
stewardship.
2. Human rights and fair and safe
labour.
4. Employee safety, health and wellness.
5. Talent and development.
6. Climate change and GHG emissions.
with sustainable attributes.
11. Supporting a circular economy.
12. Responsible marketing and product
labelling.
• Providing sustainable solutions and
supporting circular economy
techniques that keep waste out of
nature (see pages 50 to 53).
7. Ethics and integrity.
8. Supporting charities and local
communities.
9. Dialogue, transparency and
partnerships.
• Investing in a diverse workforce and
thriving communities (see pages 46
and 47).
• Taking action on climate change by
reducing emissions (see pages 48
and 49).
Bunzl’s material
ESG themes.
Identified by our
materiality assessment.
• Protecting human rights and
driving broad based growth through
responsible supply chains (see
pages 44 and 45).
Our priority UN SDGs.
Identified by aligning
our material ESG themes
to the UN SDGs.
Bunzl plc Annual Report 2020
85
Strategic report
Non-financial information continued
Key performance indicators
Code of conduct
The Group’s business code of conduct is a guide for every employee explaining how they are expected to conduct themselves both from a
corporate and individual perspective.
2018
2019
2020 Comment
Material breaches of code of conduct
Speak up
0
10
0
8
0 No material breaches of our code of conduct were recorded in 2020.
43 In 2020, 43 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 introduced a new way to report concerns
confidentially. This enabled employees to raise issues online or via a local
telephone service and in their native language. We believe the increase in the
number of cases in 2020 is positive, as previously we would not have known
about these cases. Usually, the issues were easily resolved at a local level.
Suppliers
Bunzl’s industry-leading sourcing and auditing function based in Shanghai works in partnership with our Asian suppliers to ensure the
highest standards of product quality and to respect human rights and driving broad-based growth through responsible supply chains. Our
Group Modern Slavery Statement gives further details on our approach which can be found on the Bunzl plc website.
Number of supplier audits
and assessments covering
environmental and social standards
2018
539
Greenhouse gas emissions data (Group)
Data for the period 1 October to 30 September
Scope 1
Total emissions (tonnes of CO2e)
Emission intensity (tonnes of CO2e/£m revenue
Natural gas usage (m3)
Fuel usage (ltr)
Scope 2
Emissions (tonnes of CO2e)
Emission intensity (tonnes of CO2e/£m revenue)
Electricity usage (MWh)
Total gross emissions
Emissions (tonnes of CO2e)
Emission intensity (tonnes of CO2e/£m revenue)
Total energy (MWh)
2019
2020 Comment
707
680 The number of audits decreased due to travel restrictions in Asia. We have
ceased our relationship with 15 suppliers that did not make sufficient
progress to resolve non-acceptable non-conformities.
Base year 2010
2018
2019
2020
95,249
20.2
6,243,763
34,256,823
99,848
11.4
8,927,790
31,140,025
99,193
10.7
8,912,413
31,523,097
90,568†
9.5†
8,082,813
29,306,537
28,757
6.1
58,875
124,006
26.3
485,995
31,615
3.6
83,423
131,463
15.0
515,183
29,594
3.2
83,062
128,787
13.9
516,775
27,421†
2.9†
80,276
117,989†
12.4†
480,711
† 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.
Scope 1
Target for 2020: Reduce emission intensity by 1% against 2019 (target excludes any foreign exchange translation effect on revenue numbers).
The 2020 Scope 1 carbon emission intensity of 9.5 tonnes of CO2e/£m revenue represents an 11% decrease versus 2019, including the effect
of foreign exchange rate fluctuations. At constant exchange rates the emissions reduced by 12%.
Reduction of these emissions has been impacted by the unusual business circumstances due to the Covid-19 pandemic. The fuel
consumption associated with company cars decreased sharply due to travel restrictions and the requirement for employees to work from
home. Fuel for transportation remains our highest source of CO2e emissions, contributing 81% of Scope 1. Of those emissions relating to
transportation, 81% are generated by our fleet of commercial vehicles.
Natural gas is principally used for the heating of buildings. This depends strongly on weather conditions and therefore varies strongly
by business area.
Target for 2021: Reduce emission intensity by 6% against 2019 (target excludes any foreign exchange translation effect on revenue).
86
Bunzl plc Annual Report 2020
Scope 2
Target for 2020: Reduce emission intensity by 2% against 2019 (target excludes any foreign exchange translation effect on revenue numbers).
The 2020 Scope 2 carbon emission intensity of 2.9 tonnes of CO2e/£m revenue represents a 10% reduction versus 2019, including the effect of
foreign exchange rate fluctuations. At constant exchange rates the reduction in emissions is 11%.
Our Scope 2 emission take into account changes to the average country specific emission factors but do not take into account low carbon
electricity purchases (representing approximately 15% of electricity purchased). The remaining improvement in the Scope 2 emissions has
been driven by the continued implementation of energy efficiency improvements such as low energy lighting.
Target for 2021: Reduce emission intensity by 10% against 2019 (target excludes any foreign exchange translation effect on revenue).
Scope 1 and 2
Target for 2020: Reduce emission intensity by 2% against 2019 (target excludes any foreign exchange translation effect on revenue).
The 2020 combined Scope 1 and 2 carbon emission intensity of 12.4 tonnes of CO2e/£m revenue represents an 11% reduction versus 2019,
including the effect of foreign exchange rate fluctuations. At constant exchange rates the reduction in emissions is 12%.
Target for 2021: Reduce emission intensity by 6% against 2019 (target excludes any foreign exchange translation effect on revenue numbers).
Scope 1 carbon emissions
(tonnes of CO2 per £m revenue)
Measured in accordance with the Greenhouse
Gas Protocol applying DEFRA conversion factors
Scope 2 carbon emissions
(tonnes of CO2 per £m revenue)
Measured in accordance with the Greenhouse
Gas Protocol applying DEFRA UK conversion
factors & IEA factors for overseas electricity
12.6
11.3
11.4
10.7
9.5†
4.5
3.7
3.6
3.2
2.9†
16
17
18
19
20
16
17
18
19
20
† 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.
Greenhouse gas emissions data (UK) *
Data for the period 1 October to 30 September
Scope 1
Total emissions (tonnes of CO2e)
Natural gas usage (m3)
Fuel usage (ltr)
Scope 2
Emissions (tonnes of CO2e)
Electricity usage (MWh)
Total gross emissions
Emissions (tonnes of CO2e)
Total energy consumption (MWh)
Emission intensity (tonnes of CO2e/£m revenue)
2018
2019
2020
17,606
617,969
6,224,877
17,211
469,573
6,271,182
15.261
486,661
5,606,760
3,263
11,527
20,869
84,415
17.5
2,660
10,405
19,871
82,084
17.0
2,847
11,140
18,108
75,812
14.9
* Energy usage and carbon emissions disclosed separately to adopt to the requirements of the UK Streamlined Energy and Carbon Reporting (‘SECR’) policy.
Bunzl plc Annual Report 2020
87
Strategic report Non-financial information continued
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 98% of the Group by revenue.
Bunzl has a Group wide approach to recording, measuring and reporting energy and climate change data. Business areas are responsible
for data input and monitoring progress against targets and providing commentary on significant variances and on the implementation of
projects aimed at improving environment, health & safety (‘EHS’) performance. All data is reported on the Bunzl Risk Management System
(‘BRMS’), the Group’s EHS reporting and consolidation system. More details can be found in the Group reporting guidelines on our website
(www.bunzl.com/sustainability/reports-and-progress.aspx).
Scope 3
Our reporting comprises emissions from third party carriers, business flights, waste and electricity transmission losses.
The bar graph 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.
Scope 3 carbon emissions
(tonnes of CO2 per £m revenue)
0.1
0.3
1.1
0.1
0.2
1.0
5.7*
5.7*
0.2
0.3
1.2
5.1*
0.1
0.2
1.1
5.4*
0.1
0.2
0.5
5.6
16
17
18
19
20
Third party
carriers
Business
travel
Electricity
transmission
Waste
12 months to 30 September
* In 2020 we have improved our methodology to calculate third party carrier emissions.
Previous years data have therefore been recalculated.
Waste
In 2020 we have continued our work to improve consistency and accuracy of waste measurement and reporting. We have introduced an
internal waste reporting tool and implemented consistent waste conversion factors across the Group. Accurate waste measurement remains
challenging in geographies with less advanced waste management infrastructures.
The amount of waste generated in our facilities in 2020 is approximately 22,900 tonnes which is similar to the amount of waste generated
in previous years. The recycling rates strongly depend on the locally available waste recycling options. In 2020, approximately 50% of the
generated waste was recycled, which is 13% lower than last year’s recycling rate. This excludes any post-disposal waste treatment and
recycling carried out by waste handlers. The decrease in the reported recycling rate in 2020 is a result of the improved waste measurement
methods that we implemented in 2020.
The reported waste data covers approximately 94% of the Group by revenue.
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 160,000m3 of water per year. The usage is slightly lower than last year due to reduced operational
hours at some of our sites due to Covid-19. 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.
88
Bunzl plc Annual Report 2020
Environmental management system certification
A number of locations in UK & Ireland, Asia Pacific and Continental Europe have ISO 14001 certification. Approximately 24% of the Group’s
operations are certified to ISO 14001 (measured by revenue). Certification is based on processes and practices which are implemented Group
wide through our EHS management programme. Some parts of the business have not elected to become formally certified.
Health & safety
Health & safety indicators
Average number of incidents per month per 100,000 employees
Average number of days lost per month per 100,000 employees
Fatalities
2016
101
2,409
1
2017
81
1,890
0
2018
95
2,370
1
2019
96
3,110
0
2020
85†
3,040†
0
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.
Targets for 2020: Reduce the Group accident incidence rate by 5% from 2019. Reduce the Group accident severity rate by 5% from 2019.
The 2020 Group accident incidence rate of 85 represents an 11% improvement versus 2019. The 2020 Group accident severity rate of 3,040
represents a 2% improvement versus 2019.
The safety rates this year have been clearly impacted by the Covid-19 pandemic. The implementation of social distancing protocols has
reduced the likelihood of incidents. Another impact was the lower business activity in some parts of our business.
Despite the challenging conditions due to the Covid-19 pandemic, we have continued the work to minimise our health & safety risks,
particularly relating to the operation of our warehouses and vehicles, such as manual handling, falling, slipping and tripping and impact with
equipment which remain the highest causes of accidents.
We have taken steps to embed a more proactive safety culture in Bunzl. In France, where we have the highest incidence and severity rates
in the Group, we have completed the roll out of a comprehensive training programme for middle management. The training is aimed to help
create a more proactive safety culture by developing the skills required to conduct effective safety observations and enabling discussions
with employees about safe and unsafe work practices.
Across the Group we are working on the introduction of leading indicators such as near misses, safety meetings, safety observations and
inspections. Consistent focus on, and reporting of, those indicators will prevent issues from becoming more serious and will engage the
employees in building a proactive safety culture across the Group.
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.
Target for 2021: Reduce the Group accident incidence rate by 5% from 2019. Reduce the Group accident severity rate by 5% from 2019.
Incidence rate
Average number of incidents per
month per 100,000 employees
Severity rate
Average number of days lost per
month per 100,000 employees
101
95
96
85†
81
3,040†
3,110
2,409
2,370
1,890
16
17
18
19
20
16
17
18
19
20
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.
Bunzl plc Annual Report 2020
89
Strategic report Non-financial information continued
People
Key performance indicators
Employees
Engaging with our employees with clear communications and the provision of learning and development opportunities
Employee turnover:
Voluntary
Gender diversity:
Women at senior
management level
Performance
2018
2019
2020
What we said we
would do in 2020
14.6% 15.4% 12.2% Continue to conduct exit
interviews and monitor voluntary
turnover
13% 14% 16% Broaden networks for women in
Bunzl.
Provide focused development
interventions for high potential
women.
Employee engagement
index score
82%*
–
88% Relaunch our employee
engagement survey in 2020.
What we did
What we plan
to do in 2021
Focussed on ensuring safe
places of work during the Covid-19
period as well as continuing with
exit interviews and understand
reasons for turnover.
Reviewed quarterly at the
Executive Committee to ensure
we understand and where
appropriate address reasons for
unintended voluntary turnover.
The networks for women for
Bunzl grew in 2020 and links
between regional networks were
established including access to
on-line development.
Monitor progress of high
potential females in network
groups to track career
development.
Ran a Pulse survey for all our
employees to measure
engagement and to understand
the impact of working for Bunzl
during Covid-19
Run a Global engagement
survey and where necessary
local surveys to better
understand trends and drivers
of engagement
* this figure has been recalculated from 74% as previously stated to be in line with the new methodology of measuring engagement through a new survey provider.
Senior management (%)
Total workforce (%)
Average number of
employees (%)
Total workforce
age profile (%)
16
84
36
64
17
20
37
26
22
15
24
39
Males
Females
Males
Females
North America
Continental Europe
UK & Ireland
Rest of the World
Under 30
30–39
40–54
Over 55
Source: HR from September 2020
(those employees eligible to receive
grants of executive share options)
Source: HR from BRMS
Source: Note 23 on page 187
Source: HR from BRMS
90
Bunzl plc Annual Report 2020
Charitable contributions
Charity donations (£000s)
2018
607
2019
669
2020
2,271
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. During the
Covid-19 pandemic, many of our businesses supported initiatives in our local communities when it mattered most, meaning our charitable
donations were higher in 2020 when compared to previous years. See page 46 for examples from across the Group.
In 2019 we realigned our corporate charity programme to focus on environmental projects related to recycling, litter prevention, clean-up and
waste management infrastructure. During 2020 we supported 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.
In addition to some of the projects referenced throughout this report (see pages 51 and 53) we have funded a number of other environmental
initiatives:
• in January 2020, together with the UK-based charity Sea-Changers, Bunzl launched a new ‘coastal fountain’ fund for the provision of water
bottle refill fountains at some of the UK’s busiest beaches. Six fountains are currently being installed across the country;
• we have also worked with The 2 Minute Foundation who launched their #2minutebeachclean campaign in 2013 which encouraged people
to make a difference by spending two minutes collecting litter from their local area. During 2020 Bunzl funded 14 litter collection boards
that have been given to community groups and schools who would not otherwise be able to afford one; and
• lastly, we have supported the Marine Conservation Society’s (‘MCS’) 2020 Beachwatch programme, a national beach cleaning and litter
survey programme where people all around the UK can care for their coastline. We also funded MCS Cool Seas initiative, a virtual
classroom project that has been teaching children about the marine environment and pollution issues across the UK.
Group wide, Bunzl donated a total of £2,271,000 to charitable causes during 2020. This does not include amounts donated by Bunzl in
matching funds raised by employees for local charities.
Bunzl plc Annual Report 2020
91
Strategic report Board of directors
THE RIGHT BALANCE OF SKILLS
AND EXPERIENCE
Our experienced Board is committed to leading by example to
demonstrate Bunzl’s strong corporate values and culture and to
promoting the long term sustainable success of the Company for
the benefit of all of its stakeholders.
Peter Ventress
Chairman
Frank van Zanten
Chief Executive Officer
Richard Howes
Chief Financial Officer
Vanda Murray OBE
Senior Independent Director
Appointment
Chairman of the Board since
April 2020, having been
Chairman designate since
June 2019. Chairman of the
Nomination Committee.
Appointment
Executive director since
February 2016 and Chief
Executive Officer and member
of the Nomination Committee
from April 2016.
Appointment
Appointed Chief Financial
Officer designate in September
2019 and joined the Board and
became Chief Financial Officer
in January 2020.
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
Holdings plc and Senior
Independent Director of
Signature Aviation plc.
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 member of the
Supervisory Board of
Koninklijke Ahold Delhaize N.V.
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.
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 currently Chair of
Marshalls plc.
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Bunzl plc Annual Report 2020
Committee membership
Member of the Audit Committee
Member of the Remuneration Committee
Member of the Nomination Committee
Independent director
Denotes Chairman
Lloyd Pitchford
Non-executive director
Stephan Nanninga
Non-executive director
Vin Murria OBE
Non-executive director
Maria Fernanda Mejía
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.
Appointment
Non-executive director since
May 2017.
Appointment
Non-executive director since
June 2020.
Appointment
Non-executive director since
December 2020.
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,
a non-executive director of IMCD
N.V. and an executive director
of Dutch Star Companies
TWO B.V.
Experience
Formerly Chief Executive Officer
of Computer Software Group plc
from 2002 until 2007, she
subsequently founded and was
Chief Executive Officer of
Advanced Computer Software
Group plc from 2008 until 2015.
She was appointed OBE in 2018
for services to the digital
economy. She is a non-executive
director of Softcat plc.
Experience
She previously held a number of
internationally based positions
at Colgate-Palmolive between
1989 and 2011. These included
most recently Vice President
and General Manager Global
Personal Care and Fragrance
Development and, prior to that,
Vice President Marketing and
Innovation, Europe and South
Pacific. From 2011 until 2019 she
was a Senior Vice President at
the Kellogg Company and
President of Kellogg Latin
America during the same period.
She is a non-executive director
of Grocery Outlet Holding Corp.
Bunzl plc Annual Report 2020
93
Directors’ report
Corporate governance report
CHAIRMAN’S INTRODUCTION
‘ Good decision making and robust governance are key to
the delivery of strong, sustainable financial and operational
performance and the Board is committed to ensuring that it
promotes the highest standards of governance and that these
standards are embedded throughout the Group.’
Peter Ventress
Chairman
Introduction from Peter Ventress,
Chairman of the Board
I write to you for the first time as Chairman,
having assumed the role in April 2020. As
I mentioned in my statement on pages 4
and 5, the global outbreak of Covid-19 and
its unprecedented effects have tested
businesses around the world. The Board
plays a vital role in ensuring the stability
of the business, particularly during times
of uncertainty, by delivering effective
leadership which supports the creation and
delivery of strong and sustainable financial
and operational performance for the Group
and long term value for our stakeholders.
However, at Bunzl, we recognise that it is
our people who are our greatest asset; they
are key to our continued success and to
the delivery of our established, consistent,
proven and successful compounding
strategy. I have been extremely impressed by
the resilience and commitment of our people
and their unwavering dedication to keeping
our operations running safely and to
providing the highest quality of service to
our customers, despite the challenges faced
this year. Further information about the
Company’s response to Covid-19 and the
pivotal role played by our people can be
found on pages 6 and 7.
The importance of good governance is never
greater than in times of macroeconomic
uncertainty. The Group’s success depends
on our continual commitment to high
corporate governance standards, as well as
a healthy and responsible culture, both in the
Boardroom and across the Group. We do not
view corporate governance as an exercise
in compliance but as an evolving and core
discipline which generates value for our
stakeholders and underpins our success.
In the current uncertain economic and
political environment, effective oversight of
strategy and risk is particularly important to
promote the long term success of the Group.
In performing this role, the Board seeks to be
responsive to both the evolving regulatory
environment and changing expectations
about the role of business in society. In
particular, the Board seeks to ensure that the
Group’s culture is aligned with its purpose
and values and that the Company has the
necessary financial and human resources to
deliver its strategy successfully. As a Board,
we are committed to ensuring that the
Company’s purpose, values and high
standards are set from the top and, with the
support of the executive directors and the
executive management team, embedded
throughout the Group. We are dedicated to
leading by example to demonstrate Bunzl’s
strong corporate values and culture which
promote the long term sustainable success
of the Company for the benefit of all of our
stakeholders. As detailed later in this report
on page 97, the Board monitors adherence
to the Group’s corporate culture in a number
of ways and we will continue to develop and
adapt our methods of engagement further
to ensure that the mechanisms in place to
monitor culture remain appropriate.
Board changes
One of the key aspects of good governance
by any Board is to plan for future
management succession. As reported last
year, following an extensive search and
selection process, Richard Howes was
appointed to succeed Brian May as Chief
Financial Officer with effect from 1 January
2020 following Brian’s retirement from the
Board at the end of December 2019. In
addition, my predecessor, Philip Rogerson,
stepped down as Chairman and as a director
at the conclusion of the Company’s 2020
Annual General Meeting (‘AGM’) and, at the
same time, Eugenia Ulasewicz retired as a
non-executive director, having been on the
Board since April 2011. After more than
30 years at Bunzl, Paul Hussey retired as
Company Secretary on 1 October 2020 and
was succeeded by Suzanne Jefferies as
Interim Company Secretary. On behalf of the
Board, I would like to express my sincere
gratitude to Brian, Philip, Eugenia and Paul
for their wise counsel and valuable
contribution to the Group over the years and
wish them well for the future.
Vin Murria OBE was appointed as a
non-executive director with effect from
1 June 2020. In addition to Vin’s experience
working in entrepreneurial, decentralised
businesses, she also has detailed and
extensive knowledge of, and experience
working in, the digital and technology
sectors which will be invaluable as we look
to expand and develop our digital and
technological capabilities in the future and
will complement the broad range of skills,
knowledge and experience already
possessed by the Board. On 23 December
2020, Maria Fernanda Mejía joined the
Board as a non-executive director. Maria
Fernanda has considerable knowledge
and international experience of distribution
and supply chain management, with a
strong background in marketing and
communications. Her experience will be
of great benefit to the Group as we continue
to develop and enhance our brand and
customer propositions around the world.
Details of an interview with Vin Murria
can be found on page 101. Further details
concerning the Board changes that took
place during the year can be found in the
Nomination Committee report on pages
104 to 107.
Board evaluation
As mentioned in last year’s Corporate
governance report, following the publication
in 2018 of the Financial Reporting Council’s
revised UK Corporate Governance Code (the
‘Code’) and the associated guidance, which
indicates that questionnaire-based external
evaluations are unlikely to be sufficiently
broad, the Board took the decision to conduct
a more comprehensive external performance
evaluation for the year ended 31 December
2020 which involved one-on-one interviews
with each of the directors. The Board
considered that having a more
comprehensive evaluation in 2020 would
support its strategic thinking and develop
its effectiveness further and I am pleased
to report that, as a result of the evaluation,
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Bunzl plc Annual Report 2020
Bunzl is a global business with operations
in multiple locations and our employees fulfil
a broad range of roles with many different
perspectives. It is therefore essential that our
engagement methods suit the nature of our
business and our workforce. 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. Further information
concerning how the Board monitors culture
can be found later in this report and details
of the actions taken in respect of workforce
engagement can be found on page 61 and in
the Sustainability report on page 47.
The following reports set out how we
have applied the principles of the Code
during the year and how we have aligned
these to our strategic plans and the interests
of our stakeholders. The Board will continue
to monitor the corporate governance agenda
and seek to strengthen further and where
necessary adapt our governance processes
to ensure that we remain at the forefront of
best practice.
Peter Ventress
Chairman
1 March 2021
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 in the report
that follows.
Environmental, social and governance
(‘ESG’) matters and sustainability
In recent years we have seen an increased
focus from stakeholders and regulators on
ESG and sustainability matters. At Bunzl,
sustainability is an important part of our
culture and the way we do business. Our
sustainability strategy is aligned to the
Company’s strategic framework and is fully
supported by the Board and the Group as a
whole. Through our sustainability strategy,
we aim to deliver long term sustainability for
our stakeholders, while impacting positively
on society and protecting the environment.
The Board believes that a socially and
environmentally sustainable and responsible
business and an inclusive and collaborative
culture are critical to creating value and to
making the Group more commercially
successful in the long term, for the benefit
of all our stakeholders. Bunzl’s reputation
for high standards of responsible and
sustainable business conduct is something
that we are extremely proud of and we will
continue to pursue our sustainability
ambitions to ensure that this reputation is
upheld. Further information about the
Company’s approach to sustainability can
be found in the Sustainability report on
pages 42 to 59.
Stakeholder engagement
As a Group, we are more conscious than ever
of the importance of stakeholder engagement
and believe that effective communication
and proactive engagement with stakeholders
is paramount in establishing a mutual
understanding of both the Group’s and
stakeholders’ objectives. We understand the
value of long term thinking and believe that
effective stakeholder engagement is critical
to fostering mutually beneficial relationships
and securing our long term success.
While the majority of engagement with
stakeholders is undertaken by our
experienced and dedicated management
teams, the Board is kept continually apprised
of stakeholder matters. The directors are also
ready whenever required to engage directly
with stakeholders, as demonstrated by the
directors’ participation in employee forums
and my attendance at occasional meetings
with investors. The Board receives regular
updates from the executive directors and
senior management on insights and
feedback from stakeholders which allows
the directors to understand and consider the
perspectives of key stakeholders in decision
making. It also allows the Board to oversee
and monitor effectively the work being done
within the stakeholder environment and
affords the directors the opportunity to
appraise and challenge, where appropriate,
the work being done by management and
any associated decisions. In addition, the
Company Secretary and I provide support
and guidance at Board meetings to ensure
that enough consideration is given to the
impact of Board decisions on stakeholder
groups. The Board is cognizant of the fact
that the relevance of each stakeholder group
may change depending on the matters
being considered and it therefore seeks to
understand the needs and priorities of the
relevant stakeholders during the decision
making process.
Being mindful of the interests of our
stakeholders is something which is
embedded in Bunzl’s DNA and is inherent
in the Group’s decision making processes.
Therefore, while decisions are frequently
made at an operational level, the directors
are confident that due consideration and
regard is always given to how the decisions
may impact its stakeholders and to the
consequences of such decisions in the long
term. Examples of how the Board and the
wider business have had regard to
stakeholder interests and the effect of that
regard can be found on pages 60 to 63.
Workforce engagement
We have an experienced, diverse and
dedicated workforce which we recognise
as a key asset of our business. At Bunzl, we
understand that the employee voice can
increase collective learning and that, when
employees feel safe to voice concerns and
contribute honestly to decision making
processes, the natural diversity within the
Group can be better leveraged, which
optimises decision making.
Throughout the year, we continued to invest
time and resources in communicating with
our people and ensuring that the employee
voice is heard by the Board. While the
directors were unable to visit many of the
Group’s locations in person during 2020 as
a result of Covid-19, they were able to engage
with employee representatives from across
the Group by way of virtual employee forums
and, in doing so, were able to hear their
views and gain valuable insights into the
matters affecting our people the most.
Bunzl plc Annual Report 2020
95
Directors’ report Corporate governance report continued
UK Corporate Governance Code compliance statement
It is the Board’s view that, for the year ended 31 December 2020,
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. As announced
on 30 March 2020, the Company has agreed a programme of
reductions which will bring the cash allowance in lieu of pension
contributions for the Company’s Chief Executive Officer in line
with the wider workforce by the beginning of 2023. Further
information concerning the Company’s approach to pension
contribution rates for executive directors can be found on page
122 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
Employee involvement in the Company’s performance is
encouraged through a variety of different means, including the
operation of all employee share plans, bonus and commission
schemes and other incentive arrangements. The Board regards
employee engagement as a matter of the utmost 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 page 61
and in the Sustainability report on pages 42 to 59. Further
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 page 142.
Engagement with suppliers, customers and other
stakeholders
Understanding the views of the Company’s stakeholders is a key
priority for the Board and Bunzl as a whole. It helps to focus the
Company’s resources, engagement and reporting activities by
addressing those issues that matter most to the Group’s
businesses and to the Company’s wider stakeholders. Fostering
strong business relationships is an intrinsic part of the Company’s
long established, consistent, proven and successful compounding
strategy and a key consideration in all decision making. More
information about Bunzl’s engagement with its suppliers,
customers and wider stakeholder groups can be found on pages
60 to 63 and in the Sustainability report on pages 42 to 59.
Board composition
As at 31 December 2020, the Board was
made up of eight members comprising
a Chairman, a Chief Executive Officer,
a Chief Financial Officer and five
non-executive directors.
Brief biographical details of the current
directors are given on pages 92 and 93
and further information on the Nomination
Committee’s approach to succession
planning can be found in its report on
pages 104 to 107.
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, 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 2020
The high calibre of debate and the
participation of all executive and
non-executive directors in meetings
allows the Board to utilise the experience
and skills of the individual directors to their
maximum potential and make decisions that
are in the best interests of the Company, for
the benefit of all stakeholders.
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 employees from different
businesses within the Group’s portfolio as
well as observe the operations in situ. Due to
Covid-19, most of the Board and Committee
meetings that took place during 2020 were
held virtually. While the directors always
welcome the opportunity to visit and
experience different parts of the business
in person, the virtual meetings were highly
effective and afforded the directors the
opportunity to interact with employees from
multiple locations across the Group.
Bunzl’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.
During 2020, 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 and
updates on 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,
digital initiatives, supplier audits carried
out, recent developments in sustainability
matters, whistle blowing reports and health
& safety performance metrics.
A key area of focus during the year was
the global spread of Covid-19. In addition
to the scheduled Board meetings, a number
of adhoc meetings were held to consider
further the effect of the pandemic on Bunzl’s
employees and other stakeholders and the
impact on the Group’s operating and
financial performance. The Board also
considered the implications of Covid-19
for the Group’s liquidity arrangements and,
in order to further diversify and strengthen
the funding sources of the Group, approved
the establishment by Bunzl Finance plc
of a £1 billion Euro Medium Term Note
Programme which is listed on the
International Securities Market of the
London Stock Exchange and which is
guaranteed by Bunzl plc.
Due to the heightened macroeconomic
uncertainty caused by Covid-19, the Board
also took the decision not to propose a final
dividend for the year ended 31 December
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Bunzl plc Annual Report 2020
2019 at the Company’s 2020 AGM. However,
following a better than expected trading
performance during the first half of the year,
the Board decided to reinstate the final
dividend as an additional interim dividend
for the year ended 31 December 2019, to be
paid in 2020, at the same level as originally
proposed (35.8p). In addition, the Board,
Executive Committee and business area
managing directors also took a 20%
reduction in fees/base salary during the
second quarter of 2020 to help support the
business. Further information concerning
the Company’s response to Covid-19 can be
found in the Strategic report on pages
6 and 7.
Sustainability and the actions being taken
in furtherance of the Group’s sustainability
ambitions were also key areas of focus for
the Board and were a standing agenda item
at its meetings. More information about the
sustainability matters that were considered
by the Board during the year can be found in
the Sustainability report on pages 42 to 59.
In addition, following the results of the
information technology (‘IT’) and information
security (‘IS’) internal audits undertaken in
2019, during the year the Board approved an
IS risk assessment and IS standard and
policy. The Board’s continued oversight of
the enhancement of the Company’s approach
to IT and IS risks will be particularly
important as the Group progresses further
with its digital ambitions.
During the year, the Board considered and
approved the Nomination Committee’s
recommendations that Vanda Murray and
Stephan Nanninga be re-appointed for a
further three-year term.
Formal Board sessions were also held to
focus on talent management and succession
plans in respect of the senior leadership
team. These sessions also considered
broader topics such as leadership talent
within the business areas and operating
companies, young talent initiatives and
diversity. In addition, during 2020 Board
members interacted with high potential
leadership talent and actively supported
diversity initiatives across the Group.
Further details of these activities can be
found in the Sustainability report on pages
46 and 47.
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 98.
HOW WE MONITOR CULTURE
Attendance at
employee forums
Site visits
Analysis of
employee survey
results
Regular Board
reporting on
people matters
Bunzl’s
culture
Monitoring of
‘culture indicators’
Dialogue
with executives
and senior
management
Adherence to
Bunzl’s business code
of conduct and other
working practices
Meetings
The table below sets out directors’
attendance at the seven scheduled Board
meetings held during 2020. Additional
meetings of the Board were also held as and
when circumstances required it to meet at
short notice.
Meetings attended
Philip Rogerson1
Peter Ventress
Frank van Zanten
Richard Howes
Eugenia Ulasewicz2
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vin Murria3
Maria Fernanda Mejía4
3
7
7
7
3
7
7
7
4
0
1. Philip Rogerson retired as a director on 15 April 2020 having
attended all of the Board meetings held between 1 January
2020 and that date.
2. Eugenia Ulasewicz retired as a director on 15 April 2020 having
attended all of the Board meetings held between 1 January
2020 and that date.
3. Vin Murria was appointed as a director on 1 June 2020 and
attended all of the Board meetings held between that date and
the end of the year.
4. Maria Fernanda Mejía was appointed as a director on
23 December 2020. No Board meetings were held between that
date and the end of the year.
Bunzl plc Annual Report 2020
97
Directors’ report Corporate governance report continued
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.
Nomination Committee
Chairman
Peter Ventress
Members
Frank van Zanten
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vin Murria
Maria Fernanda Mejía
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.
Board
Audit Committee
Chairman
Lloyd Pitchford
Members
Vanda Murray
Stephan Nanninga
Vin Murria
Maria Fernanda Mejía
Remuneration Committee
Chair
Vanda Murray
Members
Lloyd Pitchford
Stephan Nanninga
Vin Murria
Maria Fernanda Mejía
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 104 to 107
For more information
see pages 108 to 113
For more information
see pages 114 to 139
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
Policies and
statements
• Significant capital expenditure/disposals.
• Significant business acquisitions/disposals.
• Material changes to the Group’s capital
structure.
• Major property leases.
• Material Group policies and statements
and major changes thereto, for example:
– tax strategy;
– treasury policy;
– modern slavery statement;
• Material increases in borrowing and loan
– equality and diversity policy; and
facilities.
– risk appetite.
People and
leadership
Strategy and
management
Financial reporting,
risk and controls
• Appointment/removal of directors and
• The Group’s strategic aims and objectives.
• Financial results and announcements
Company Secretary.
• Non-executive directors’ remuneration.
• Board Committee constitution and terms
of reference.
• Annual budget and strategic plan.
relating thereto.
• Final and interim dividends.
• Auditor appointment/removal.
• Risk management and internal controls.
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Bunzl plc Annual Report 2020
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
6
3
5
1
2
3
Executive
Non-executive
(includes Chairman)
Male
Female
0 – 3 years
3 – 6 years
6+ years
Bunzl plc Annual Report 2020
99
Directors’ report Performance evaluation
A well-functioning Board of directors needs
diversity of experience and perspectives and
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 Code requires that the evaluation of the
Board and its Committees be externally
facilitated at least every three years. As
mentioned at the start of this report, a
comprehensive external evaluation was
carried out for the year ended 31 December
2020. The facilitator of the external
evaluation, Lintstock, does not provide any
other services to, or have any other
connection with, the Company.
Lintstock and the recommendations set out
therein were considered by the Board and
shared with each Committee. A number of
key priorities to improve the Board’s
performance further were subsequently
agreed and any progress in respect of such
priorities will be reported on formally in next
year’s Annual Report. Details of the priorities
identified as part of the evaluation that was
carried out in 2020 can be found below.
During the evaluation process, interviews
were conducted with every Board member
and the Company Secretary, according to a
set agenda tailored for the Board, which had
been agreed with the Chairman and the
Company Secretary. Following the
evaluation, a report was prepared by
Key priorities
identified during 2019
Examples of action taken
Outcome
1. Managing the
sustainability agenda
which, while potentially
a threat to the Company’s
business, is also seen as
a potential opportunity.
Sustainability matters discussed regularly at Board meetings. Details of the
sustainability topics discussed by the Board in 2020 include the launch of
the new Group sustainability framework, the undertaking of Bunzl’s first
sustainability materiality assessment, the development of a new climate
change strategy and the publication of the Company’s first Task Force on
Climate-related Financial Disclosures Index.
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.
Further information on the sustainability matters considered by the Board
during the year can be found on page 59 of the Sustainability report.
Approval of an information security risk assessment and information
security standard and policy. Presentations made to the Board concerning
information technology and information security matters, including in
relation to the use of technology to identify critical customer facing
vulnerabilities.
Regular updates provided to the Board in respect of the digital capabilities
being employed by Group businesses and the initiatives being undertaken to
accelerate digital transformation across the Group.
Formal Board sessions held at least twice a year to focus on the topic of
talent and leadership succession. Increasingly, these sessions review in
detail the succession plans to the senior leadership team, as well as broader
topics such as leadership talent within business areas and operating
companies, young talent initiatives and diversity. More informal discussions
on talent are held between Board meetings.
Board members have regular opportunities to interact with high potential
leadership talent, for example listening sessions with the participants of
business area programmes, such as the ‘Accelerate’ programme in Australia.
Board members have actively supported diversity initiatives across the
Group, for example one of the Company’s female non-executive directors
held a virtual discussion and Q&A session with a group of high potential
female managers in the UK.
The Board is satisfied that the
priorities identified following
the evaluation carried out in
2019 have been adequately
addressed during 2020.
Key priorities identified during 2020
1. Monitoring the progress being made in key strategic pillars, most notably sustainability, digitalisation,
people and growth.
2. Focusing on longer term strategy and trends.
3. The post Covid-19 transition, including returning to face-to-face meetings and site visits.
4. Finalising non-executive recruitment, with a particular focus on diversity, experience in North America
and expertise in the fields of sustainability and technology.
As a result of the performance
evaluation process carried
out in 2020, the Board
concluded that both it and its
Committees are operating
effectively.
100
Bunzl plc Annual Report 2020
Corporate governance report continued Q&A
with Vin Murria
Non-executive director
What do you think are the
main challenges faced by
company boards and how do
you think such challenges
can be overcome?
Balancing stakeholder interests is a
challenge that affects most, if not all,
boards. It is not always possible to
achieve a positive outcome for everyone
concerned, which means that, often,
trade-offs must be made. I believe that one
of the critical elements to dealing with
such circumstances is for the board, as a
whole, to consider the interests of all of the
stakeholders that may be impacted by
a particular decision and to ensure that
the directors act fairly as between
such groups.
How has the Board had to
adapt over the past year?
The Board has adapted extremely well to
holding virtual meetings and has acted
collaboratively, quickly and decisively in
response to evolving legislation and
government guidance. Board discussions
have also developed in reaction to the
pandemic, with an enhanced focus on
Bunzl’s stakeholders, including increased
engagement with our employees who
have withstood the unprecedented
challenges faced this year.
How important do you think
culture is for a business?
A healthy corporate culture is essential for
value creation and long term business
success as it ensures that everyone is
pulling in the right direction to achieve the
Company’s purpose. A strong corporate
culture commands trust and confidence
in the business, which can be key sources
of competitive advantage and can help a
company to navigate difficult periods,
such as the pandemic we are currently
experiencing. Monitoring the culture of a
company is a continuous process which
I believe has long term benefits for the
business and its stakeholders.
What do you think you bring
to the role?
I have considerable experience setting up
and running companies and have also
held and continue to hold non-executive
positions outside of Bunzl. I therefore
understand the position of the executives
and management and the challenges they
face, as well as the supervisory role that is
required from a non-executive director.
I believe that this allows me to provide
the appropriate level of support and
constructive challenge to management.
In addition to my experience working in
entrepreneurial, decentralised businesses,
I also have considerable knowledge of,
and experience working in, the digital and
technology sectors which I believe will
prove useful as Bunzl seeks to expand
and develop its digital and technological
capabilities in the future.
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.
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
Upon appointment, all new directors
undertake an induction programme which
is designed to facilitate their understanding
and awareness of the Group’s businesses,
people and processes and of their roles and
responsibilities as directors of the Company.
The induction programme is tailored to
each director’s individual needs and
normally includes meetings with senior
management and visits to some of the
Group’s locations. New directors 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.
Following their appointments to the Board
on 1 June 2020 and 23 December 2020
respectively, Vin Murria and Maria Fernanda
Mejía were provided with a comprehensive
suite of resources containing detailed
information about the Group and virtual
meetings were arranged with a number of
the executive management team. Although
so far it has not been possible for them to
visit Bunzl’s Group locations in person
as a result of Covid-19, Vin Murria has been
able to interact with employees and senior
managers from across the Group by way
of virtual meetings and workshops and
similar opportunities will be afforded to
Maria Fernanda Mejía during 2021. This
engagement will enable both Vin Murria and
Maria Fernanda Mejía to gain a valuable and
comprehensive understanding of the Group’s
operations and the strategic priorities of the
different businesses. Site visits will be
planned as soon as it is safe to do so and
will provide the new directors with the
opportunity to enhance further their
understanding of the Group’s businesses
and the environments in which they operate
and witness Bunzl’s operations in situ.
Bunzl plc Annual Report 2020
101
Directors’ report Further information about the Group’s
approach to risk management and the
principal risks and uncertainties facing
the Group can be found on pages 64 to 74.
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.
The Board believes good decision making
is enabled by a deep understanding of the
Group’s operations and people. During the
course of the year, directors receive training
and presentations to keep their knowledge
current and enhance their experience. They
are updated continually on the Group’s
businesses and their markets and the
changes to the competitive and regulatory
environments in which they operate. In
addition, the Board is kept informed of
relevant legal, regulatory and financial
developments or changes by the Company
Secretary and the Chief Financial Officer.
The Company’s legal advisers and auditors
are also invited to give presentations and
training to the Board on any specific topics
of interest.
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 201 and the auditors’ report
on pages 202 to 211 includes a statement by
the external auditors about their reporting
responsibilities. As set out on page 83,
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.
The Board considered whether the 2020
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 2020
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 2020 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.
102
Bunzl plc Annual Report 2020
Corporate governance report continued 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 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;
• 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 108 to 113;
• regular meetings are held with insurance
and risk advisers to assess the risks
throughout the Group;
• management committees, known as the
Group Sustainability Committee, the
Environment, Health & Safety Committee
and the Supply Chain Committee which
oversee issues relating principally to
environment, health & safety and business
continuity planning matters, set relevant
policies and practices and monitor 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 2020.
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 74.
By order of the Board
Suzanne Jefferies
Secretary
1 March 2021
Bunzl plc Annual Report 2020
103
Directors’ report Nomination Committee report
NOMINATION COMMITTEE REPORT
‘ The Committee is acutely aware of the benefits of diversity and inclusion
in all its forms, at Board level and throughout the Group. We aim to have
the right people focused on the things that really matter, in order to deliver
our strategy and sustainable long term value for our stakeholders.’
Peter Ventress
Chairman and Chairman of the Nomination Committee
Meetings
The table below sets out directors’
attendance at the four scheduled Committee
meetings held during 2020.
Meetings attended
Philip Rogerson1
Peter Ventress
Frank van Zanten
Eugenia Ulasewicz2
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vin Murria3
Maria Fernanda Mejía4
2
4
4
2
4
4
4
2
0
1. Philip Rogerson retired as a director on 15 April 2020 having
attended all of the Committee meetings held between
1 January 2020 and that date.
2. Eugenia Ulasewicz retired as a director on 15 April 2020
having attended all of the Committee meetings held between
1 January 2020 and that date.
3. Vin Murria was appointed as a director on 1 June 2020 and
attended all of the Committee meetings held between that date
and the end of the year.
4. Maria Fernanda Mejía was appointed as a director on
23 December 2020. No Committee meetings were held between
that date and the end of the year.
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.
Introduction from Peter Ventress
I am pleased to present the Committee’s
report for the financial year ended
31 December 2020 which highlights some
of the key areas considered by the
Committee during the year. This is my
first report as Chairman of the Committee
following my appointment at the
conclusion of the Company’s 2020 AGM.
The development and execution of an
appropriate strategy, creation of a supporting
culture and promotion of guiding behaviours
to ensure responsible and measured decision
making are all underpinned by balanced and
effective leadership. As a Committee, one of
our principal responsibilities is to ensure that
this is in place in respect of the Board and
senior management and that the Board has
the necessary skills, experience and
attributes to enable the Group to fulfil its
purpose and deliver its current and future
strategic objectives. It is also our responsibility
to ensure that robust succession and
development plans support this going
forward, while at the same time ensuring
that all relevant principles and provisions of
the UK Corporate Governance Code (the
‘Code’) concerning Board composition and
structure continue to be met.
Throughout the year, the Committee
continued its efforts to strengthen the
Board’s composition further by seeking
to recruit new non-executive directors.
This process, further details of which can
be found in the report that follows, led
to the successful appointment of Vin
Murria and Maria Fernanda Mejía as
non-executive directors on 1 June 2020 and
23 December 2020 respectively. Further
information concerning the new directors,
including their skills and experience, as well
as the other Board changes that took place
during the year, can be found later in this
report and in the Corporate governance
report on page 94.
104
Bunzl plc Annual Report 2020
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. As well as the new
appointments to the Board, during the
year the Committee also recommended
to the Board the re-appointment of
Vanda Murray and Stephan Nanninga as
non-executive directors for further three year
terms. Prior to making its recommendations
to the Board, the Committee undertook a
review of the directors’ performance,
independence and objectivity. The review
process in respect of Vanda Murray was
particularly rigorous in recognition of the fact
that she had already served two three year
terms on the Board.
As part of its deliberations, the Committee
had regard to the composition of the Board
and the skills, experience and expertise of its
membership to ensure that it had the variety
of perspectives and skills needed to help the
Company achieve its strategic aims. The
directors’ performance and ability to
contribute effectively to Board discussion
and to challenge the performance of
management were also considered, together
with their other mandates and their ability to
devote sufficient time to their duties at Bunzl.
After careful consideration, the Committee
concluded that both Vanda Murray’s and
Stephan Nanninga’s contributions to Board
and Committee discussions and debates
remained both desirable and valuable and
the Committee was unanimous in its
decision to recommend their respective
re-appointments to the Board.
Succession planning within Bunzl is a
continuous and proactive process and
arrangements are in place to ensure that
changes to the membership of the Board
are well managed. Throughout the year, the
Committee has maintained its focus on
Bunzl’s executive talent pipeline and senior
management succession plans, reflecting
the Board’s responsibility to ensure that
appropriate plans have been implemented.
Looking ahead, long term succession
planning at Board and senior management
level will remain a key priority of the
Committee and diversity, in its widest sense,
will continue to be an important factor in
identifying candidates.
in all its forms, throughout the business.
We believe that a diverse workforce benefits
from a breadth of perspective and debate
which, in turn, aids decision making and all
of the activities set out in this report were
conducted within the context of our firm
commitment to enhancing further inclusion
and diversity across the Group. The
Committee, alongside the Board, is also very
aware of the benefits of diversity at Board
level and in senior management, in terms of
gender, ethnicity and more broadly, in order
to avoid ‘group think’ and is pleased with the
progress that has been made in this area
during 2020 with the appointment of
Vin Murria and Maria Fernanda Mejía to
the Board and Suzanne Jefferies to the
Executive Committee. The Board believes
that a wide range of experience, background,
perspective, skills and knowledge contribute
towards a high performing, effective Board,
which is better able to support and direct the
business. 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.
In order to ensure that the Committee
remains effective, an evaluation of the
performance of the Board and the
Committees is undertaken every year.
In accordance with the requirements of
the Code and the associated guidance,
an independent, externally facilitated
review is undertaken at least every three
years. The last evaluation, which was
externally facilitated, was performed in
2020 and concluded that the Board
members considered the Committee to
be thorough and fully effective in fulfilling
its responsibilities. Further information
concerning the performance evaluation
process and the key priorities identified
following the review in 2020 can be found
in the Corporate governance report on
page 100.
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
and I hope that you will find it useful in
understanding the work that we have
undertaken.
The Committee continues to monitor the
evolving governance landscape and the
Company’s ability to meet the ambitions
it has in promoting inclusion and diversity,
Peter Ventress
Chairman and Chairman of the
Nomination Committee
1 March 2021
Bunzl plc Annual Report 2020
105
Directors’ 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. The senior management
succession plans take into account the views
of all Board members to ensure the plans
encompass the benefit of all their skills
and experience.
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 2020 but remain unchanged, are
available on the Company’s website,
www.bunzl.com.
Activities
Recruitment
Following a rigorous recruitment process
undertaken in 2019, Peter Ventress was
appointed as a non-executive director and
Chairman designate from 1 June 2019
and became Chairman following Philip
Rogerson’s retirement at the conclusion
of the Company’s AGM on 15 April 2020.
In addition, Richard Howes joined the
Company as Chief Financial Officer
designate on 1 September 2019 and was
appointed as Chief Financial Officer and
an executive director on 1 January 2020
following Brian May’s retirement from the
Board on 31 December 2019. Full details of
the recruitment processes undertaken were
disclosed in the Company’s Annual Report
2019 which is available on the Company’s
website, www.bunzl.com.
During the year, the Committee undertook,
with the assistance of Russell Reynolds
Associates, an extensive search and
selection process to recruit two further
non-executive directors. Russell Reynolds
Associates does not provide any other
services to, or have any connection with,
the Company or individual directors. The
Committee spent a considerable amount of
time considering the required and desirable
skills and experience that the new
non-executive directors should have and
subsequently agreeing the relevant search
criteria. Through its Board succession
planning, the Committee had identified
the need to enhance further the digital,
marketing and branding skills and
experience on the Board to support the
development of the Group’s strategy and
promote diversity of thought. The Board also
focused on candidates with substantial
experience in North America due to the scale
of Bunzl's operations in this area. It was also
deemed important that the behaviours and
values of any prospective directors were
aligned to the values and culture of the
Group. A number of potential candidates
were identified and, following further
consideration of the candidates’ individual
attributes, skill sets, knowledge and
experience in the areas that were being
sought to enhance on the Board, the
Committee concluded that recommendations
to appoint Vin Murria and Maria Fernanda
Mejía as non-executive directors should be
put to the Board. Biographical details of all
of the directors can be found on pages 92
and 93. An overview of an interview with
Vin Murria can also be found on page 101.
On 1 October 2020, Paul Hussey retired as
Company Secretary after more than 30 years
at Bunzl and was succeeded by Suzanne
Jefferies as Interim Company Secretary. A
clear and detailed brief was developed for the
position and an external search consultancy,
Egon Zehnder, was appointed to assist in the
recruitment process. In particular, the
Committee was keen to identify potential
candidates with the particular knowledge,
capabilities and experience that were desired
from the new Company Secretary. A shortlist
of candidates was prepared and, following
due consideration, a recommendation that
Suzanne Jefferies, an internal candidate, be
appointed as Interim Company Secretary
was put to the Board. Egon Zehnder does not
provide any other services to, or have any
connection with, the Company or the
individual directors.
Succession planning
The Committee recognises that having the
right directors and senior management in
place is fundamental to the Group’s long
term, sustainable success. In furtherance
of this, a key responsibility of the Committee
is to satisfy itself that a robust and rigorous
succession planning process is in place, over
both the medium and long term, to ensure
that there is the right mix of skills
and experience on the Board as the
Company evolves.
In addition, the Committee continues
to take an active interest in the quality and
development of talent and capabilities below
Board level and during the year the Chief
Executive Officer presented his annual
management succession plan to the
Committee for its consideration. This
process helps to ensure that high-performing
individuals within senior management can
be developed and nurtured in order to
strengthen the succession pipeline further,
while at the same time increasing diversity
in senior roles across the Group.
The Committee embraces the importance
of diversity and inclusion in all Board and
senior management recruitment and
challenges external search consultants
where necessary to ensure that diversity of
gender, social and ethnic backgrounds and
cognitive and personal strengths is always
considered in the selection of candidates.
However, while taking these important
considerations into account, the Committee
will continue to recommend appointments to
the Board based on merit and the individual
skills and experience of each candidate.
Evaluation
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 2020 AGM.
Further details concerning the Board
evaluation process that was carried out
during 2020, together with information on
the key priorities identified as part of the
review, can be found in the Corporate
governance report on page 100.
Inclusion and diversity
The Board and the Committee’s approach to
inclusion and diversity in the composition of
the Board and senior management is set out
in the Board’s diversity policy, which can be
found below. The Board’s diversity policy is
reviewed regularly. Further information
about the Company’s approach to inclusion
and diversity can be found on pages 46 and 47.
106
Bunzl plc Annual Report 2020
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 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. A copy of the policy can be
found on the Company's website,
www.bunzl.com.
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.
Bunzl plc Annual Report 2020
107
Directors’ report Audit Committee report
AUDIT COMMITTEE REPORT
‘ Safeguarding stakeholder interests by ensuring the integrity of the Group’s
financial reporting, risk management and assurance processes continues to
be one of the Committee’s key priorities and providing appropriate oversight
and challenge of the decisions and key judgements is a fundamental part
of this.’
Lloyd Pitchford
Chairman of the Audit Committee
Meetings
The table below sets out directors’
attendance at the four scheduled Committee
meetings held during 2020.
Meetings attended
Lloyd Pitchford
Eugenia Ulasewicz1
Vanda Murray
Stephan Nanninga
Vin Murria2
Maria Fernanda Mejía3
4
1
4
4
3
0
1. Eugenia Ulasewicz retired as a director on 15 April 2020
having attended all of the Committee meetings held between
1 January 2020 and that date.
2. Vin Murria was appointed as a director on 1 June 2020 and
attended all of the Committee meetings held between that date
and the end of the year.
3. Maria Fernanda Mejía was appointed as a director on
23 December 2020. No Committee meetings were held between
that date and the end of the year.
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.
Introduction from Lloyd Pitchford
I am pleased to present the Audit
Committee’s report for the year ended
31 December 2020. This report is intended
to provide an insight into the main activities
and key areas of focus for the Committee
during the year, together with an overview
of how the Committee has discharged its
responsibilities and provided assurance in
respect of the integrity of the Company’s
Annual Report 2020.
Following the outbreak of Covid-19, the
Group had to adapt certain business
processes, including in respect of financial
reporting, the completion of internal and
external audits on a remote basis and a
greater reliance on video technology for
holding meetings. The Committee
maintained regular dialogue with the
management team throughout the year to
ensure business processes and controls
continued to operate effectively and the
timely and accurate preparation of financial
information. In addition, the Committee
received an update from the external auditor
in June 2020 as to how they were responding
to the changes in business processes and the
impact on the wider business environment.
The work of audit committees has never
been more important, as stakeholders and
regulators demand ever more informative
and reliable reporting across a far broader
spectrum of topics than just a company’s
results and financial position. During the
year, a letter was received from the Conduct
Committee of the Financial Reporting
Council (‘FRC’) relating to its review of the
Company’s 2019 Annual Report and I am
pleased to report that no questions or queries
were raised. The letter included suggestions
concerning areas where the FRC believes
users of the accounts would benefit from
minor improvements to the Company’s
existing disclosures. These suggestions
have been considered in preparing this
Annual Report. The Company recognises
108
Bunzl plc Annual Report 2020
The last evaluation, which was externally
facilitated, was performed in 2020 and
concluded that the Board members
considered the Committee to be thorough
and effective in fulfilling its responsibilities.
Further information concerning the
performance evaluation process and the key
priorities identified can be found in the
Corporate governance report on page 100.
This report reflects the requirements
placed on audit committees by the FRC’s
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
2020. 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. As
Chairman of the Committee, I am committed
to ensuring that the Committee’s agenda is
kept under review and remains abreast of
relevant developments. I hope that you find
this report informative and take assurance
from the work that we have undertaken
during the year.
Lloyd Pitchford
Chairman of the Audit Committee
1 March 2021
that the FRC’s review was based on a
review of its Annual Report for the year
ended 31 December 2019 and did not benefit
from detailed knowledge of the Company’s
business or an understanding of the
underlying transactions entered into.
The FRC’s review provides no assurance
that the Company’s Annual Report is correct
in all material respects; the FRC’s role is
not to verify the information provided but
to consider compliance with reporting
requirements.
The Audit Committee plays a prominent
role in establishing and maintaining
‘deserved confidence’ in the Company.
Its work is pivotal in ensuring the robustness
of the Group’s risk management activities
and internal control environment, thereby
safeguarding the integrity of the financial
reporting process. During the year, we
continued to discharge our duties effectively
and to the highest standards, providing
appropriate challenge and oversight of the
decisions, assumptions and key judgements
made by management to ensure that
stakeholder interests are protected. 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.
The significant accounting matters
considered by the Committee in relation
to the 2020 financial statements were the
accounting for business combinations, the
carrying value of goodwill and customer
relationships intangible assets, defined
benefit pension schemes, taxation and, in
light of the Covid-19 pandemic, inventory
and receivables provisions. As part of this
work, the Committee undertook an in-depth
review of the Weighted Average Cost of
Capital to be applied across the Group,
with input being received from management
and external advisers. The above mentioned
significant accounting matters 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.
Areas of focus
A key area of focus throughout 2020 has
been the impact of the Covid-19 pandemic
across accounting, financial reporting and
internal control related matters. As part
of this, the Committee discussed the
implications for the audit plans and audit
procedures for the year ended 31 December
2020 with the Head of Internal Audit and
Risk and separately the external auditors
and were satisfied that they were appropriate.
During the year the Committee reviewed
the process for the identification and
mitigation of key business and emerging
risks, including in relation to changes in
the external regulatory and political
environment, such as the possible impact
of Brexit on the Group’s risk management
activities and the global spread of Covid-19.
The Committee also continued its work in
respect of monitoring and challenging,
where appropriate, the Group’s approach to
information technology (‘IT’) and information
security (‘IS’) risks and the work being
undertaken by management to evolve
and enhance further the Group’s IT and
IS controls. Further information on the
Committee’s activities in relation to risk
management can be found later in
this report.
In addition, the Committee considered
the progress being made in addressing
the points raised during the 2019 external
quality assessment of the internal
audit function.
Another area of focus for the Committee
concerned management’s use of Alternative
Performance Measures (‘APMs’) which are
designed to assist in the understanding
of the Group’s underlying financial
performance. During the year the
Committee considered the amendments
made to the definitions of APMs and the
disclosures included in the half yearly
financial report and annual financial
statements and concluded that the APMs
were appropriate for monitoring the Group’s
underlying financial performance. Details
of the Group’s APMs are set out in Note 3
to the consolidated financial statements
on page 158.
The Committee will continue to review its
activities in the light of regulatory and best
practice developments, particularly in the
area of audit reform following the recent
reviews by The Competition and Markets
Authority, Sir Donald Brydon and Sir John
Kingman and await further guidance from
the FRC and the Department for Business,
Energy & Industrial Strategy in relation to
the implementation of changes proposed in
these reviews.
Committee effectiveness
In order to ensure that the Committee
remains effective, an evaluation of the
performance of the Board and its
Committees is undertaken every year.
Bunzl plc Annual Report 2020
109
Directors’ report Audit Committee report continued
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 and Risk, representatives from the
external auditors and members of the Group
finance team. The Secretary to the
Committee is the Company Secretary.
All members contribute to the work of the
Committee and bring an appropriate balance
of financial and commercial acumen and
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. Each Committee
member brings valuable expertise to the
role and has sufficient financial and risk
management experience to enable them
to identify and raise any concerns about
internal controls, accounting judgements,
reporting obligations and any other matter
that is brought to the Committee’s attention.
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
members are of an independent mindset
and bring a diversity of perspectives,
knowledge and experience to the
Committee’s deliberations, which in turn
ensures that the Committee is able to provide
an appropriate amount of scrutiny, challenge
and support to management. Independent
thinking is an essential aspect of the
Committee’s role and is crucial in assessing
the work of management and the assurance
provided by the internal and external
audit functions.
Role
The particular role of the Audit Committee
is to act independently of management to
ensure that the interests of shareholders
are properly protected in relation to the
Company’s financial reporting and internal
control arrangements and to provide
appropriate oversight, review and challenge
of the decisions and approach taken by
management in respect of the content and
disclosures within the Company’s financial
reports. 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. It also considers whether the
disclosures made in the financial statements
are set properly in context. The Committee’s
terms of reference, which were reviewed by
both the Committee and the Board in 2020
but remain 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 Risk 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 a structured rolling
forward-looking planner, which is designed
to ensure that its responsibilities are
discharged in full during the year and to
facilitate more in-depth reviews of those
topics which are of particular importance or
pertinence. This planner is developed with
the Company Secretary and its content
reviewed regularly with the executive
directors, management and the external
auditors and adapted, where necessary, to
ensure that it meets the changing needs of
the business as the year progresses. Items
on the agenda are set with consideration of
regulatory requirements, the Company’s
reporting timetable and after considering
key issues identified by the Chief Financial
Officer, management, the Head of Internal
Audit and Risk and the external auditors.
Committee meetings are generally scheduled
close to Board meetings in order to facilitate
an effective and timely reporting process.
The Chairman of the Committee holds
preparatory discussions with the Company’s
senior management, the Head of Internal
Audit and Risk 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 Risk 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 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 2020 included:
• receiving and, where appropriate,
challenging reports from management and
the external auditors in relation to the half
yearly financial report and the annual
financial statements;
• reviewing the half yearly financial report
and the annual financial statements and
the formal announcements relating
thereto;
• reviewing the amendments made by
management to the definitions of APMs
and considering the appropriateness of
disclosures made in the half yearly
financial report and annual financial
statements;
• considering the results of the FRC’s
Audit Quality Review (‘AQR’) of
PricewaterhouseCoopers LLP (‘PwC’)
in the UK;
• considering the results of the FRC’s AQR
team’s review of PwC’s audit of the Group
for the year ended 31 December 2019;
• considering thematic reviews and
guidance from the FRC concerning annual
report disclosures;
• considering a letter from the FRC’s
Conduct Committee relating to its review
of the Company’s Annual Report 2019;
• 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;
• making recommendations to the Board
concerning the re-appointment of the
110
Bunzl plc Annual Report 2020
external auditors and approving the
remuneration and terms of engagement of
the auditors, including the audit strategy;
• reviewing the principal tax risks applicable
to the Company and the steps taken to
manage such risks;
• reviewing and approving changes to the
• receiving training on changes in
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;
and planning process for the current
financial year;
• 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 effectiveness of the risk
management process;
accounting standards and regulations;
• reviewing the Committee’s effectiveness
following an externally facilitated
performance evaluation;
• reviewing the Committee’s terms of
reference;
• considering and approving the
appointment of the new Head of Internal
Audit and Risk;
• reviewing and approving the internal audit
work programme for the coming year;
• receiving and considering reports from
the Head of Internal Audit and Risk
concerning the work undertaken by the
internal audit function, including in
relation to the function’s ongoing quality
assurance and improvement programme;
Significant matters considered in relation to the financial statements
Issue
Review and conclusion
• receiving and considering a report
concerning the progress being made in
addressing the points raised during an
external quality assessment of the internal
audit function;
• reviewing the Company’s internal audit
charter; and
• considering a paper concerning the
Chartered Institute of Internal Auditors’
new Internal Audit Code of Practice and
the implications thereof for 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.
Accounting for
business
combinations
The carrying
value of goodwill
and customer
relationships
intangible assets
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 2020, noting that, following the acquisition of MCR Safety,
the Group has also recognised a separate brand intangible asset. 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 26 to the consolidated
financial statements.
Goodwill is allocated to cash generating units (‘CGUs’) and is tested annually for impairment. During the year, the Committee
reviewed an assessment prepared by management of the composition of the Group’s CGUs, which were last formally reviewed in
2018. Having done so, the Committee was satisfied with the proposed revisions to the CGUs, to combine the five separate CGUs
within the UK & Ireland business area into one UK & Ireland CGU, as this reflects more appropriately the way that the Group is now
structured, including recent changes to management oversight and responsibility. The Committee critically reviewed and discussed
management’s report on the impairment testing of the carrying value of goodwill of each of the Group’s CGUs, noting that the
testing was conducted for each of the previous CGUs and also the revised CGUs. The Committee also critically reviewed and
discussed management’s consideration of the impairment risk on customer relationships intangible assets. In both regards, the
Committee considered 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 £14.8 million had been recognised in the year in respect of goodwill and
customer relationships intangible assets following the closure of a safety business in China within the Asia Pacific CGU.
The Committee also noted that as a result of the impairment testing the Group had recognised a net impairment charge of
£6.4 million relating to the customer relationships intangible assets of a foodservice business within the UK & Ireland CGU and a
safety business within the Rest of Continental Europe CGU. 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 based on either CGU allocation or on customer relationships intangible assets. Details of the key
assumptions and judgements used are set out in Note 11 to the consolidated financial statements.
Defined benefit
pension schemes
The Committee considered reports from management and the external auditors in relation to the valuation of the defined benefit pension
schemes and reviewed the key actuarial assumptions used in calculating the defined benefit pension liabilities, especially in relation to
discount rates, inflation rates and mortality/life expectancy. The Committee discussed the reasons for the increase in the net pension
deficit and was satisfied that the assumptions used were appropriate and were supported by independent actuarial experts.
The Committee considered the Company’s decision to withdraw from three multi-employer pension plans (‘MEPPs’) in which the
Group’s US entities participate noting that a charge of £16.4 million had been booked in the year as a non-recurring pension charge to
recognise a provision for the withdrawal liability on these plans. The Committee noted that no provision was held in relation to three
other MEPPs to which the Group’s US entities continue to contribute. The Committee also noted that the Group had recognised a
non-recurring pension charge of £0.4 million relating to the equalisation of guaranteed minimum pension between male and female
members on historical transfer values out of the Group’s UK defined benefit pension schemes. Having considered these matters
thoroughly and following discussions with the external auditors, the Committee concluded that it agreed with the accounting treatment
and disclosures made in relation to these matters. Further details on these matters and the key assumptions used are given in Note 22 to
the consolidated financial statements.
Bunzl plc Annual Report 2020
111
Directors’ report Audit Committee report continued
Issue
Taxation
Review and conclusion
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 decision that part of the UK’s tax regime is contrary to
European Union State aid provisions. Further details on this risk, and on other aspects of taxation, are given in Note 7 to the
consolidated financial statements. In addition, and as detailed in the Financial review on page 78, the Group was 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.
Inventory and
receivable
provisions
The Committee noted that a net charge of approximately £15 million had been taken during the year relating to customers either
entering insolvency processes or showing specific credit stress indicators that have impacted the recoverability of the Group’s
receivables and customer specific inventory particularly in the foodservice and retail sectors and that an additional net charge
of approximately £10 million had been taken in the year relating to aged receivables and customer specific inventory for those
customers identified as having a high or medium credit risk. The Committee also noted that a net charge of approximately
£15 million had been booked in the year to increase slow moving inventory provisions as a result of the Covid-19 pandemic and the
associated government imposed control measures having continued to impact customer demand across a range of market sectors.
Financial statements and significant
accounting matters
During the year and prior to the publication
of the Group’s results for 2020, the
Committee reviewed the 2020 half yearly
financial report and related news release, the
2020 Annual Report (including the financial
statements), the 2020 annual results news
release and the reports from the external
auditors on the outcomes of their half year
review and their audit relating to 2020.
As part of its work, the Committee
considered a number of 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. These
significant accounting matters were the
accounting for business combinations, the
carrying value of goodwill and customer
relationships intangible assets, defined
benefit pension schemes, taxation and, in
light of the Covid-19 pandemic, inventory
and receivables provisions. A summary of
these matters is set out in the table on pages
111 and 112 and further information can
be found in the relevant Notes to the
consolidated financial statements.
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 Risk 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 process for monitoring
the ongoing performance of the Company.
In relation to the risk management system,
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 function
which comprises 10 in-house auditors,
including the Head of Internal Audit and
Risk. During the year, the Committee
considered and approved the appointment
of a new Head of Internal Audit and Risk
who reports jointly to the Chairman of the
Audit Committee and the Chief Financial
Officer. The Committee also reviewed and
approved plans to recruit specialist IT audit
resource into the internal audit function.
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.
The effectiveness of the internal audit
function’s work is continually monitored
using a variety of inputs and further
information concerning the process
undertaken to assess the effectiveness of
both the internal audit function and the
external auditors can be found in this report.
External auditors’ independence
The Committee is responsible for ensuring
that the three-way relationship between the
Committee, the external auditors and the
Company’s management is appropriate
and that the external auditors remain
independent of the Company. In order to
ensure the integrity of the auditing process
and the Annual Report and financial
statements, the external auditors must be
independent of the Company and their staff
must comply with their firm’s own ethics and
independence criteria, which must, in turn,
be consistent with the FRC’s Revised
112
Bunzl plc Annual Report 2020
Ethical Standard (2019) and other relevant
regulatory and professional requirements.
Written confirmation is received from the
external auditors as to whether they consider
themselves independent within the meaning
of such criteria. 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. This
policy was updated during the year to reflect
the FRC’s Revised Ethical Standard (2019).
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 permitted 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 2020 in respect of the audit and
for non-audit services are set out in Note 5
to the consolidated financial statements.
The ratio of the fees relating to non-audit
services to audit services in 2020 was 7.2%.
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, 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, PwC
are required to rotate the audit partner
responsible for the Company’s audit every
five years. The current audit partner, Neil
Grimes, took over the position as audit
partner with effect from 1 January 2019.
Accordingly, the Company confirms that
it has complied with the provisions of the
CMA Order for the 2020 financial year.
During 2020, the Committee considered the
results of the FRC’s AQR team’s review of
PwC’s audit of the Group for the year ended
31 December 2019. The AQR team’s review
identified that there were no key review
findings and that only ‘limited improvements’
were required in relation to the audit team’s
impairment assessment of goodwill and
other intangible assets for the Latin America
CGU, in particular, its assessment of short
term cash flows. PwC’s responses were
discussed with management and with the
Committee to ensure that the points raised
by the FRC are addressed in future audits.
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 2021 be put to shareholders at
the forthcoming AGM.
Auditors’ effectiveness reviews
During 2020 the Committee undertook reviews of the effectiveness of both the Company’s external audit process for the 2019 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.
Internal audit function
The questionnaire covered a total of 36 different aspects of the
internal audit function including: purpose, authority and
responsibility; independence, objectivity and proficiency; quality
assurance processes; adequacy of resources; auditors’ skills and
capabilities; 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 2019
financial statements and that the internal audit
function continued to be effective, efficient and
appropriately resourced.
The Committee will carry out similar effectiveness
reviews in 2021 in respect of the audit of the 2020
financial statements and the internal audit function.
Bunzl plc Annual Report 2020
113
Directors’ report Directors’ remuneration report
DIRECTORS’ REMUNERATION REPORT
‘ In an extraordinary year, our diversified business model and
entrepreneurial culture has generated exceptional performance
and the remuneration of the executives for 2020 recognises
this. Following extensive consultation with shareholders, the
Committee is proposing some changes to our long term
incentives to ensure that they drive the right actions from
business leaders.’
Vanda Murray OBE
Chair of the Remuneration Committee
The responsibilities and
operation of the Committee
Committee membership role and remit
The Committee comprises all of the
independent non-executive directors of the
Company. While neither the Chairman
nor the Chief Executive Officer are members
of the Committee, they normally attend
meetings by invitation. The Director of
Group Human Resources, who acts as
secretary to the Committee, also attends
meetings. The Committee’s terms of
reference, which were reviewed by both
the Committee and the Board in 2020, but
remain unchanged, are available on the
Company’s website, www.bunzl.com.
No director plays any part in determining his
or her remuneration. During the year ended
31 December 2020, both the Chief Executive
Officer and the Chairman were consulted
and invited to attend meetings of the
Committee but were not present during
any part of the meeting when their own
remuneration was under consideration.
The independent non-executive directors
who were members of the Committee during
2020 are listed in the table below:
The primary role of the Committee is to
determine the framework and broad policy
for the remuneration of the Chairman, the
executive directors of the Board and the
senior management group directly below
Board level. The Committee proposes
the directors’ remuneration policy for
shareholder approval. It also governs the
implementation of the policy, ensuring that
the remuneration of 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 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, having due regard to the
policies and practices applied to the rest
of the employees within the Group;
Committee membership
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Eugenia Ulasewicz*
Vin Murria**
Maria Fernanda Mejía***
Retired from the Board on 15 April 2020.
*
** Joined the Board on 1 June 2020.
*** Joined the Board on 23 December 2020.
Date of appointment
to the Committee
1 February 2015
1 March 2017
1 May 2017
20 April 2011
1 June 2020
23 December 2020
Meetings
eligible to
attend
4
4
4
1
3
0
Meetings
attended
4
4
4
1
3
0
• determining the framework and broad
policy for the remuneration of the
Chairman and the executive directors
of the Board;
• 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;
• communicating and discussing any
remuneration issues with the Company’s
stakeholders as and when appropriate;
• setting and reviewing the executive
directors’ remuneration and benefits
including, but not limited to, base salary,
bonus, long term incentive plans and
retirement benefits;
• ensuring that all remuneration paid to the
executive directors is in accordance with
the Company’s previously approved
remuneration policy;
• ensuring all contractual terms on
termination, and any payments made, are
fair to the individual and the Company;
• monitoring the policies and practices
applied in respect of the remuneration
of senior executives directly below Board
level and making recommendations
as appropriate;
• overseeing the Company’s long term
incentive plans for all employees; and
• ensuring that provisions relating to
disclosure of remuneration as set out
in the relevant legislation, the Financial
Conduct Authority’s Listing Rules and
the UK Corporate Governance Code
(the ‘Code’) are fulfilled.
114
Bunzl plc Annual Report 2020
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
Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013
(the ‘Regulations’), 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
2021 Annual General Meeting (‘AGM’) the
Company will be asking shareholders to
vote on an advisory vote on the Annual
report on directors’ remuneration as set out
on pages 128 to 139 which provides details
of the remuneration earned by directors for
performance in the year ended 31 December
2020. The directors’ remuneration policy was
approved by shareholders in a binding vote
at the 2020 AGM and will be resubmitted to
shareholders for a binding vote at the 2021
AGM because further changes are proposed
this year, for the reasons explained in the
Chair’s introduction. There will also be a
vote on the proposed amendments to the
existing LTIP to facilitate the implementation
of the new policy.
Introduction from
Vanda Murray
I am pleased to present the Directors’
remuneration report for the year ended
31 December 2020.
Context of remuneration
Shortly after the start of the 2020 financial
year, the full force of the Covid-19 pandemic
became apparent and, as has been well
documented, this has had, and will continue
to have, a significant impact on the global
economy and on our six market sectors
spanning over 30 countries. In these
extraordinary circumstances, our front line
colleagues went above and beyond to meet
the needs of our customers in terms of
essential products and services.
As the Covid-19 situation began to evolve,
our key priority was the continued safety and
well-being of our Bunzl colleagues, customers
and suppliers and appropriate safeguards
were implemented in a timely manner.
Alongside this, given the uncertainty, the
Board took prudent and swift action to protect
the Company’s financial position and this
included a temporary freeze on acquisitions,
stopping discretionary spend and,
notwithstanding the Company’s balance
sheet strength, we initially took the decision
not to pay the final year dividend for the
year ended 31 December 2019. Furthermore,
the Board and broader leadership team
voluntarily took a 20% reduction in their fees
and salaries during the second quarter
of 2020.
Our ability to respond quickly and effectively
to the crisis has been underpinned by the
strength of our supply chain. The business
was also able to resume acquisitions in
the second half, reinstate the 2019 final
dividend through an additional payment
alongside the increased 2020 interim
dividend and the proposed 2020 final
dividend announced today (thereby making
it a 28th year of consecutive dividend
growth), repay employee-related government
support packages and bring forward the
settlement of tax deferrals where possible.
We also significantly increased our
charitable donations for the year, and
ensured that our frontline colleagues were
rewarded with additional bonuses in some
critical businesses.
Bunzl has produced an exceptional set
of results in 2020 against the background
of a unique set of economic and market
conditions. Clearly, some parts of our
business, particularly those operating
in the foodservice and non-food retail sectors
faced real challenges, but the other areas,
principally those serving the healthcare,
safety and cleaning & hygiene sectors,
were extremely successful in capturing
opportunities to support the global response
to the pandemic. The net Group result was
an exceptional performance against all of our
key financial and non-financial metrics due
to the remarkable ability of the leadership
team to navigate through the crisis and turn
challenges into opportunities.
Performance and reward for 2020
Annual bonus
Annual bonus payments are based on a
combination of key financial measures
comprising adjusted earnings per share,
return on average operating capital and
operating cash flow, with a minority based
on strategic objectives. 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 for
2020 was set at, or close to, the budgeted
level of performance. The Committee set a
range around the target to incentivise the
delivery of a stretching performance. An
exceptional financial performance in 2020
as referred to above resulted in a maximum
annual bonus for the Chief Executive Officer,
which equates to 180% of salary. The annual
bonus for the Chief Financial Officer was
also at maximum which equates to 160% of
his annual salary. No discretion was applied
by the Committee to adjust the bonus
outcomes and, in line with the remuneration
policy, 50% of the annual bonuses will be
delivered in shares, subject to a three year
deferral period.
Long Term Incentive Plans (‘LTIP’)
The Committee assessed the performance
for the LTIP awards with performance
conditions linked to performance periods
that ended during or at the end of the 2020
financial year. The share options were
subject to adjusted earnings per share (‘eps’)
growth targets and the performance shares
were subject to both eps growth and relative
total shareholder return (‘TSR’) targets. The
strong eps growth of 40.9% over the three
year performance period (adjusted to ensure
that the relevant eps figures were comparable)
will result in 100% of executive share
options vesting for the performance period
ended 31 December 2020. In addition, eps
growth of 27.1% over the three years to 31
December 2019 (adjusted to exclude two
disposals of businesses during the period)
and stronger relative TSR performance
resulted in 26.43% and 64.4% of
Bunzl plc Annual Report 2020
115
Directors’ report Directors’ remuneration report continued
performance shares vesting for performance
periods that ended in April and October
2020, respectively. The Committee has not
exercised discretion to amend the vesting
outcomes for any of these share awards.
The 2020 remuneration policy allows
maximum grants under the LTIP of 225%
of base salary for share options and 175%
of base salary for performance shares.
However, in 2020 award levels were held
below these maximum levels at 200% of
base salary for share options and 150%
for performance shares for the Chief
Executive Officer and 120% for the Chief
Financial Officer.
In light of the exceptional trading conditions
of 2020, and of the unpredictable impact of
Covid-19 on the business outlook, the
Committee determined at the time of grant
that a different set of eps target ranges
should apply to the LTIP awards made in
September and October 2020 than those
made in March and April 2020. These
revised ranges were deemed to be
appropriately stretching given the
exceptional circumstances facing the
business at the time and these are detailed
on page 133 of the report.
Reflecting the strong share price
performance over the calendar year, the
Committee determined that no adjustment
was required to award levels.
New directors’ remuneration policy
The 2020 directors’ remuneration policy
approved at last year’s AGM was essentially
a roll forward of the previous one but with
changes to reflect emerging best practice
(for example, pension equalisation and
enhanced shareholding guidelines). In the
normal course of events this policy would
have applied through to the end of the 2022
financial year.
The significant shock created by Covid-19
resulted in the need for the Board and
Remuneration Committee to consider
whether the 2020 policy was appropriately
aligned with the Group’s strategy as it
emerges into a period of transition and
eventual normalisation against a backdrop
of volatility in many of our markets.
The Committee concluded that a new policy
should be put forward to shareholders in
2021 which seeks to replace the dual
approach of share options and performance
shares with restricted shares.
We have undertaken an extensive
shareholder consultation exercise; I am
grateful for the constructive input from our
largest investors, and sincerely believe that
the changes we are proposing will ensure
that the leaders of the business can continue
to focus on actions that deliver long term
growth in this unprecedented market
context. The proposals also create more
simplicity, clarity and predictability of
outcome, principles which are also important
to shareholders. More details on the key
reasons for the move to restricted shares are
set out below.
• Alignment with our strategy – Our
strategy is based on three key areas of
focus: (i) profitable organic growth, (ii)
operating model improvements and (iii)
acquisition growth.
Organic growth and operating model
improvements require steady investment in
areas such as digitalisation, optimising our
warehouse footprint and sustainability to
maintain our competitive advantage. The
return on this investment benefits the
business in the medium to long term and we
wish to discourage any actions that focus on
short term impacts.
Prior to 2020, around three quarters of our
recent revenue growth had been achieved
via our self-funded acquisition strategy and
growth through acquisitions remains a key
element of our strategy. The timing and scale
of future acquisition opportunities remains
uncertain in the current market environment
and our success will depend on maintaining
a disciplined and controlled approach to
making and integrating acquisitions that
deliver financial benefit to the Group over
the long term. Restricted shares encourage
executives to pursue complementary
acquisitions that will create long term value
for Bunzl in contrast to the current LTIP with
its focus on three year eps growth.
• Significant simplification – operating
restricted shares as the sole long term
incentive is much simpler, not only
replacing two schemes with one for the
most senior leaders, but also moving from
bi-annual to annual grants. This makes it
much easier for employees to understand,
simplifies external messaging and
streamlines the operation and
administration.
• Total shareholder alignment – restricted
shares, which are granted at a significantly
lower level of quantum than share options
and performance share awards, will
accrue the value of the dividends that
would have been payable on the award’s
vested shares during the award’s vesting
and holding periods. With dividends being
such an important part of shareholders’
total return, restricted shares provide
better alignment between participants and
investors than share options and
performance shares under the current LTIP.
• Challenge in medium and long term
target setting – Setting robust yet realistic
longer term targets in the current
environment is very difficult and the
Committee wishes to avoid the prospect
of significant swings in performance
outcomes which can occur in a more
volatile market.
• Common North American practice
– Restricted shares are common in the
US and in other jurisdictions in which we
compete for talent and are an important
recruitment and retention tool in those
markets.
Restricted shares – the key terms
The main proposed change to the policy is
the replacement of our existing share options
(LTIP A) and performance shares (LTIP B)
with a single restricted share award. This
will apply to approximately 25 of the most
senior leaders, with around a further 450
managers continuing to receive share
options under the LTIP in 2021. The current
LTIP will be amended to facilitate the award
of restricted shares under Part B of the plan.
As a reminder, currently share options and
performance shares are granted on a
bi-annual basis but, as a further step towards
simplification, restricted shares will be
granted on an annual basis typically after
the announcement of the full year results.
The full details of how restricted shares will
operate are set out in the policy table on page
121 but the key headlines are as follows:
– restricted share awards will be granted
at a significantly reduced quantum from
the current awards which comprise both
share options and performance shares.
It is proposed that award levels are
125% of salary for the Chief Executive
Officer and 100% of salary for the Chief
Financial Officer. The 2020 policy
provided the opportunity to grant 225%
of salary in share options and 175% of
salary in performance shares;
– the reduced quantum of awards
recognises that there are no further
specific performance measures.
However, the vesting of the awards is
contingent on the participant still being
employed at the vesting date and the
satisfaction of a performance underpin.
In assessing performance, the
116
Bunzl plc Annual Report 2020
Committee will take into account a
whole range of financial and non-
financial metrics, as well as any material
risk/regulatory failures identified.
Performance will be assessed in the
round, with a default to full vesting
unless there has been identified material
underperformance. The Committee may
scale back the awards (including to zero)
if it is not satisfied the underpin has
been met;
– it is proposed that dividend equivalents
will accrue on restricted share awards to
the extent that they vest. This important
scheme feature ensures complete
shareholder alignment in contrast to our
existing share options and performance
share arrangements;
– a three year vesting period and a two
year post-vesting holding period will
apply so that the value of the awards
cannot be realised until the fifth
anniversary of the date;
– the same comprehensive malus and
clawback provisions used in our current
LTIP will be applied to the restricted
share awards, thereby protecting the
business from exceptional negative
events; and
– all other terms, such as change of
control, will be consistent with our
current LTIP arrangements.
Post cessation shareholding guideline
We are also taking the opportunity to
formalise our policy on post-cessation
shareholding requirements. This will apply
to the executive directors and will require
them to hold restricted shares to the value
of the shareholding guideline (i.e. the full
in-employment shareholding guideline or,
if less, the existing shareholding at the time)
for a period of two years post-cessation. This
will be implemented on a forward-looking
basis from the date of approval of the policy.
Finally, the policy table on page 122
confirms a change that was made to the
retirement arrangements for the Chief
Executive Officer after the publication of last
year’s report. Frank van Zanten’s cash
allowance in lieu of pension contributions
will be reduced to 5% of base salary by
1 January 2023, on a phased basis in order
to bring it in line with the majority pension
contribution rate of the wider workforce in
the UK.
Chief Executive Officer pay ratio
As required by the Regulations we have
again disclosed in this year’s Directors’
remuneration report the ratio between the
Chief Executive Officer’s remuneration and
the medium, lower quartile and upper
quartile of UK employees. The Committee
considers the executive remuneration in the
context of this and other internal and
external reference points.
Implementing the policy for the 2021
financial year
Base salary
The base salaries for the executive directors,
Frank van Zanten and Richard Howes,
have been increased by 2.9% effective from
1 January 2021. This is broadly in line with
that of the leadership populations across
the business.
Annual Bonus
For the 2021 financial year, the maximum
annual bonus opportunity will remain
unchanged at 180% of base salary for the
Chief Executive Officer and 160% for the
Chief Financial Officer, with on-target bonus
at 50% of the maximum.
revised LTIP to both the executive directors
and the other participants shortly after the
AGM. These will be at the quantum levels
outlined above, and will vest subject to
continued employment and the assessment
of the underpin. The Committee may scale
back the awards (including to zero) if it is not
satisfied that the underpin has been met.
Priorities for 2021
2021 is likely to be another challenging year
from a market context point of view but I am
confident that the changes we have proposed
to our policy, if approved, will further
incentivise the leadership team to respond
to these challenges in the most effective way.
Having had two consecutive years of policy
review, I do not anticipate further changes in
the course of 2021 once the changes we are
proposing have been embedded. The
Committee will monitor the effectiveness of
the new revised LTIP, stay close to the
performance of the business and ensure that
reward outcomes for executives reflect the
performance of Bunzl in the round.
The annual bonus performance measures
continue to be a balanced scorecard of eps;
return on average operating capital (‘RAOC’);
operating cash flow; and personal
performance linked to certain specified
strategic non-financial goals. The weighting
of these metrics will be slightly adjusted and,
for the first time, 10% of the opportunity for
both directors will be dependent on the
achievement of specific environmental,
social and governance (‘ESG’) objectives in
addition to the 20% for the achievement of
personal non-financial strategic objectives.
These metrics are all key to the successful
implementation of the business strategy.
Conclusions
2020 was an extraordinary year, and the
reward outturns for the executive directors
are appropriate given the very strong
performance of the business in extremely
challenging circumstances. However, I am
confident that our proposed policy will
further support our strategic direction,
reflecting the uncertain market outlook and
providing a stable basis for ensuring the long
term focus of the most senior executives in
Bunzl. I would like once again to thank
shareholders for the time they have taken
to review our proposals, and for their
constructive input.
50% of any bonus awarded will be in shares
and a three year vesting period will apply to
the shares component.
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. The principles followed
are that target setting, year by year, results in
stretching ambition, while ensuring that the
scale of reward on offer is proportionate and
always linked to performance.
LTIP
Subject to the approval of the new policy and
the amended LTIP rules by shareholders, we
expect to grant restricted shares under the
In the following pages you will find details of:
• the ‘At a Glance’ guide to executive
directors’ remuneration for 2020;
• the proposed directors’ remuneration
policy for 2021 to 2023;
• the annual report on remuneration for
2020; and
• our approach to the application of the
remuneration policy in 2021.
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
1 March 2021
Bunzl plc Annual Report 2020
117
Directors’ report Directors’ remuneration report continued
2020 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
Chief Executive Officer
Frank van Zanten
£000
Chief Financial Officer
Richard Howes
£000
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
3
.
5
3
6
2
.
7
9
5
,
1
4
.
1
7
2
,
1
5
.
2
7
4
.
7
2
2
9
2
.
4
7
3
,
1
.
7
9
5
0
1
,
.
2
7
9
5
,
1
4
.
1
7
2
,
1
.
3
7
8
2
.
1
1
3
9
2
.
7
2
6
.
1
9
5
3
.
1
1
3
9
2
.
7
2
6
8
.
6
9
4
0
.
5
6
5
Alignment of performance and remuneration 2020
Total opportunity
Result
2019
2020
Max
2019
2020
Max
Salary + benefits + pension
Bonus
LTIP
Annual bonus
To motivate and
reward the
achievement of the
Company’s strategic
and operational
objectives
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
LTIP
Eps
Linked financial KPI: eps
To motivate and reward
performance linked to
long term success
TSR
Linked financial KPI: dividend per share
and share price
Total LTIP opportunity/result
15%
15%
20%
LTIP A
LTIP B
LTIP B
50%
50%
50%
100%100%
100%
100%
Proposed application of policy for 2021
Unchanged
• Annual bonus quantum
• Core benefits
Key changes
• 2.9% increase to base pay for Chief Executive Officer and
Chief Financial Officer
• Reduction of Chief Executive Officer’s pension allowance in
line with the phasing approved at 2020 AGM
• Introduction of 10% of the maximum bonus opportunity on
the basis of achievement of environmental, social and
governance (ESG) targets
• Replacement of share option and performance share awards
with restricted share awards
• Introduction of a formal post cessation shareholding
requirement
Chief Executive Officer pay ratios
The full time equivalent salary for all Bunzl employees in the
UK & Ireland has been calculated for the 2020 financial year.
These employees were then ordered from 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 details
were added to the employee’s salary details. Due to timings of
calculation of bonus payments, those employees who receive
an annual bonus have the 2020 payment (for 2019 performance)
included and the Chief Executive Officer has the 2021 payment
(for 2020 performance) included.
25th
percentile pay
ratio
44:1
162:1
Median
pay
ratio
38:1
137:1
75th
percentile pay
ratio
27:1
90:1
CEO single
figure 2020
£000
887.3
3,503.9
Salary
Total remuneration
118
Bunzl plc Annual Report 2020
Directors’ remuneration policy
Following its approval in 2020, the directors’ remuneration policy has been further reviewed during the year and is submitted for approval
at the 2021 Annual General Meeting (‘AGM’). The overall approach to remuneration remains consistent and the changes proposed are
designed to ensure that the policy continues to support the performance of the business and addresses the requirements of the UK Corporate
Governance Code (‘the Code’).
Objectives of the policy
The proposed directors’ remuneration policy, effective from the date of the 2021 AGM, continues to meet the following objectives:
• Clarity: maintain transparency, clear alignment with shareholder value and promotion of longer term, sustained performance. For example,
the restricted share plan encourages a focus on the longer term success of the business;
• 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. For example, the underpin is broad and encourages
the Committee to focus on ‘in the round’ performance;
• Support for the Company’s business strategy: for example, aligning the executive directors’ and management’s incentives with the
Company’s growth objectives;
• Simplicity: ensure that the remuneration structures avoid unnecessary complexity. For example, the restricted share plan has only a single
annual grant of shares;
• 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 also takes 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, the Financial Conduct Authority (including the provisions of any applicable remuneration codes) and other
relevant organisations;
• the Committee has overall responsibility for the remuneration policies and structures for employees of the Group as a whole and it reviews
remuneration policy on a Group wide basis. When the Committee determines and reviews the remuneration policy for the executive
directors it considers and compares it against the pay, policy and employment conditions of the rest of the Group to ensure that there is
alignment between the two; and
• the Committee considers the external market in which the Group operates and uses comparator remuneration data from time to time to
inform its decisions. However, the Committee recognises that such data should be used as a guide only (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.
The Committee’s overall policy, having had due regard to the factors above, continues to be for a proportion of total remuneration to be
based on variable pay. This is achieved by setting base pay and benefits by reference to mid-market levels, with annual bonus linked to the
achievement of demanding performance targets and long term incentives which are designed to align the interests of the directors with those
of shareholders and the long term sustainable success of the business.
Changes to policy
The key changes to the policy proposed to shareholders are:
• the replacement of bi-annual grants of share options and performance shares with annual grants of restricted shares under the LTIP; and
• the introduction of a formal post-cessation shareholding guideline.
Bunzl plc Annual Report 2020
119
Directors’ report Directors’ remuneration report continued
Remuneration policy for executive directors
The following table summarises each element of the remuneration policy for the executive directors, explaining how each element operates
and links to the corporate strategy.
Base 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
• normally reviewed annually in December (with any changes usually effective from January). An out-of-cycle review may be
conducted if the Committee determines that it is appropriate
• takes into consideration a number of factors including (but not limited to) individual and Group performance, the size and
scope of the individual’s responsibilities, salary increases across the Group, typical salary levels for comparable roles using
appropriate comparator groups, for example similarly sized companies with a large international presence
• pensionable
Maximum
potential value
• while there is no maximum salary level, salary increases are normally considered in relation to the salary increases of other
employees in the Group and performance of the individual. Higher salary increases may be made under certain
circumstances, such as when there has been a change in role or responsibility, a major market movement or when a director
has been appointed to the Board at a lower than typical salary initially. The annual salaries for the executive directors for 2020
and 2021 are set out on pages 129 and 137 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 and reward high performing employees
• align with shareholders’ and wider stakeholders’ interests
Operation
• bonus awards are based on performance targets and objectives set by the Committee for the financial year
• at the end of the performance period, the Committee assesses the extent to which the performance measures have been
achieved. The level of bonus for each measure is determined by reference to the actual performance against the relevant
performance targets
• up to half the bonus is paid in cash and the remainder in shares relevant (with the shares normally deferred for three years
under the Deferred Annual Share Bonus Scheme (‘DASBS’) in respect of which dividend equivalents may apply to the extent
that such deferred awards vest. If a director resigns during the period of deferral any outstanding DASBS awards would
normally lapse
• malus and clawback provisions apply to the cash element of the bonus and awards made under DASBS to allow the
recoupment of bonus for three years from the end of the relevant performance year. They would be enforced in the event
of material misstatement, significant failure of risk control, serious misconduct, corporate failure (entailing the appointment
of an administrator or liquidator) or serious reputational damage, when it is clear that the issue has been caused by a
management failure to which the relevant individual has made a direct and material contribution
• bonus awards are non-pensionable and are payable at the Committee’s discretion
Maximum
potential value
• the annual bonus policy maximum is 180% of base salary
• the annual target bonus opportunity is normally set at 50% of the maximum
• the level of annual bonus for threshold performance is up to 25% of the maximum
Performance metrics
Metrics will be set each year by the Committee taking into account the Company’s key strategic objectives for the year.
For example, bonus metrics may include:
• financial measures chosen to align bonus outcomes with the underlying financial performance of the business, such as profit,
return on average operating capital (‘RAOC’) and cash flow;
• non-financial measures are linked to the achievement of personal goals or certain specified strategic goals, including
environmental, social and governance matters;
• the performance metrics and targets are reviewed each year to ensure that they remain appropriate. The Committee retains
the discretion to set alternative metrics as appropriate; and
• the specific targets will be disclosed on a retrospective basis following the end of the financial year unless they are deemed to
be commercially sensitive.
The Committee sets targets that are appropriately stretching in the context of the business outlook and taking into account
internal and external factors. Targets are set to ensure that there is appropriate alignment between stakeholder outcomes and to
ensure that they do not drive inappropriate behaviours or unacceptable levels of risk taking.
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Bunzl plc Annual Report 2020
Long term incentives
Purpose
• incentivise long term decision making as the basis for sustainable growth
• align with shareholders’ interests
• recruit and retain senior employees across the Group
Operation
Subject to the approval of the remuneration policy (and for the related updates to the rules of the LTIP) at the 2021 AGM,
executive directors may receive restricted share awards as the long term variable element of remuneration:
• restricted share awards are discretionary and will normally vest subject to continued employment after no less than three
years;
• a holding period will apply which means that restricted shares may not ordinarily be sold until at least five years after the
grant date (other than to pay relevant taxes due on vested awards);
• malus and clawback provisions apply 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 period. They would be
enforced in the event of material misstatement, significant failure of risk control, serious misconduct, corporate failure
(entailing the appointment of an administrator or liquidator) or serious reputational damage, when it is clear that the issue has
been caused by a management failure to which the relevant individual has made a direct and material contribution;
• dividend equivalents shall accrue in respect of restricted share awards to the extent that they vest, including in relation to any
holding periods; and
• all awards are subject to the discretions contained in the relevant plan rules.
• the individual restricted share limit per financial year is 125% of base salary
• the Chief Executive Officer may receive restricted shares per financial year with a face value of up to 125% of salary
• the Chief Financial Officer may receive restricted shares per financial year with a face value of up to 100% of salary
Maximum
potential value
Performance metrics
• restricted share awards are not subject to performance measures but vesting is subject to the achievement of an underpin
normally reviewed over the three financial years commencing with the financial year in which awards are granted
• in assessing the underpin, in normal circumstances the Committee may consider the Group’s overall performance, including
financial and non-financial performance over the course of the vesting period and any material risk/regulatory failures
identified. Financial performance may include elements like revenue, profitability, cash generation, and return on capital.
Non-financial performance relates to strategic priority areas focused on delivering long term success of the Company and
implementing the Group’s long term strategy. These include, for instance, making operating model improvements, own brand
development, acquisition growth, building on our competitive advantage, digital and technology improvements, focus on
ESG, including sustainability, employee satisfaction and managing risk in the business
• when considering these factors, the Committee will assess performance in the round, with the expectation of full vesting
unless there has been identified material underperformance over the period. The Committee may scale back the awards
(including to zero) if it is not satisfied the underpin has been met
Long term incentives – previous policy applied for awards up to and including October 2020
Purpose
• Subject to the approval of the remuneration policy, awards issued under the previous policy with respect to long term
incentives will continue to vest until October 2023 and therefore the policy described below will continue to apply, including
the performance metrics described
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 service. Subject to the approval of the new
policy, no further grants will be awarded to the executive directors
• 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 did not exceed 200% of base salary for the incumbent executive directors
Performance shares
• maximum annual award of 175% of base salary
• for 2020, awards did not exceed 150% of base salary for the Chief Executive Officer and 120% for the Chief Financial Officer
Bunzl plc Annual Report 2020
121
Directors’ report Directors’ remuneration report continued
Long term incentives – previous policy applied for awards up to and including October 2020 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
• encourage employees, including the executive directors, to build a shareholding through the operation of all employee share
plans such as the HM Revenue & Customs (‘HMRC’) tax advantaged Sharesave Scheme and the Internal Revenue Service
(‘IRS’) approved Employee Stock Purchase Plan (US) (‘ESPP’) in the US
Operation
• executive directors may participate in all employee schemes on the same basis as other eligible employees
• 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
• new plan rules will be proposed for the approval of shareholders at the 2021 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
Retirement benefits
Purpose
• provision of retirement benefits
• retain executive directors
Operation
• all defined benefit pension plans in the Group have been closed to new entrants since 2003 with any new recruits being
offered defined contribution retirement arrangements and/or a pension allowance
• legacy arrangements exist for the Chief Executive Officer as detailed below
• pension contributions and allowances are normally paid monthly
Maximum
potential value
• company pension contributions to defined contribution retirement arrangements or cash allowances are capped at 5% of base
salary for new executive directors and the current Chief Financial Officer
• the current Chief Executive Officer’s pension contribution has been reduced from 23.75% of base salary to 20% of base salary
with effect from 1 January 2021 and will reduce to 14% from 1 January 2022 and to 5% from 1 January 2023
Performance metrics
• not applicable
122
Bunzl plc Annual Report 2020
Other benefits
Purpose
Operation
• provision of competitive benefits which helps to recruit and retain executive directors
• benefits may include a car allowance or a car which may be fully expensed, various insurances such as life, disability and
medical and, in some jurisdictions, club expenses and other benefits provided from time to time
• some benefits may only be provided in the case of relocation, such as removal expenses, and in the case of an international
relocation might also include fees for accommodation, children’s schooling, home leave, tax equalisation and professional
advice etc
Maximum
potential value
• the value of benefits is based on the cost to the Company and varies according to individual circumstances. For example, the
cost of medical insurance varies according to family circumstances and the jurisdiction in which the family is based
Performance metrics
• not applicable
Shareholding requirement
Purpose
Operation
• strengthen the alignment between the interests of the executive directors and those of shareholders
• in employment guideline: executive directors 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 the typical
expectation for executives who are promoted from within the Company to achieve the required shareholding. It is recognised
that a longer time period may be required for externally recruited executives to achieve the expected shareholding. Unvested
deferred shares held under the DASBS will count towards the guideline (net of the expected sales for tax that would apply
on vesting)
• post-cessation guideline: from the approval of this policy, upon cessation of employment, executive directors should maintain
a shareholding for two years thereafter at a level equal to the lower of the in-employment guideline and the number of shares
vested as at cessation (net of tax) under restricted share awards granted after the approval of this policy
Maximum
potential value
• the Chief Executive Officer’s in-employment shareholding requirement is 300% of base salary. The in-employment
requirement for other executive directors is 200% of base salary.
Performance metrics
• not applicable
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
• provision of a competitive fee to attract NEDs who have a broad range of experience and skills to oversee the implementation of
the Company’s strategy
Operation
• determined in light of market practice and with reference to time commitment and responsibilities associated with the roles
• annual fees are paid in 12 equal monthly instalments during the year
• the Senior Independent Director and Chairman of the Audit and Remuneration Committees are paid an extra fee to reflect
their additional responsibilities
• the NEDs and the Chairman are not eligible to receive benefits and do not participate in pension or incentive plans. Expenses
incurred in respect of their duties as directors of the Company are reimbursed
• the NEDs’ fees are reviewed annually in January each year and the Chairman’s fee is reviewed biennially, the 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 which limit will be increased to £1,500,000 if the proposed new Articles of Associate are approved by
shareholders at the 2021 AGM.
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 reimbursed and grossed up to include tax payable
Bunzl plc Annual Report 2020
123
Directors’ report Directors’ remuneration report continued
Selection of performance measures and targets
The Committee determines the performance measures applying to the annual bonus based on the strategic priorities of the Group at the time.
The measures and their weightings may change from year to year. The bonus measures in place for the first financial year under the policy
include the use of eps, RAOC and operating cash flow measures. Each of these are aligned with the Group’s key performance indicators
(‘KPIs’). The management of capital employed together with profitability and 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 Group and allow a focus each year on important operational goals
and strategic milestones. 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 managers 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.
Statement of consideration of shareholder views
The Committee considers shareholder feedback received in relation to the AGM each year and guidance from shareholder representative
bodies more generally. In addition the Committee consults proactively with its major shareholders prior to making significant changes to its
policy. The Committee consulted with major shareholders and proxy voting groups on the remuneration policy changes to the LTIP for
executive directors in 2020. Two letters were sent to each of the major shareholders, and the proposals were adjusted accordingly based on
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 in the plans;
• determining the timing of grants and/or payments;
• determining the quantum of grants and/or payments (within the limits set out in the policy table above);
• determining the extent of vesting based on the assessment of performance, including the vesting of restricted share awards;
• 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);
• determining the appropriate choice of measures, weightings and targets for the annual bonus plan from year to year including discretion to
amend the bonus outcome, as appropriate; and
• varying 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.
Legacy arrangements
The directors’ remuneration policy approved by shareholders at the 2020 AGM gave authority to the Company to honour any commitments
entered into with current or former directors (that have been disclosed to shareholders in previous remuneration reports) or internally
promoted future directors (in each case, such as the payment of a pension or the unwind of legacy share plans). Details of any payments to
former directors will be set out in the relevant 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.
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Bunzl plc Annual Report 2020
Recruitment of executive 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 retirement and other 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 or expatriate benefits as appropriate.
Any fixed or variable pay awards for new executive directors will not exceed the maximum limits set out in the policy table above. However,
in addition, for external appointments the Committee may consider offering additional cash and/or share based elements to replace deferred
remuneration 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 normally
take account of the nature, time horizons and performance requirements attached to the awards forfeited.
Depending on the timing of the appointment, the Committee may deem it appropriate to set different annual bonus performance conditions
for the first performance year of appointment. A long term incentive award can be made shortly following an appointment (or as soon as is
practical if the Company is in a close period).
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 rates of the other non-executive directors at the time.
Executive directors’ service contracts
The service contracts for Frank van Zanten and Richard Howes 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
Date of service contract
13 January 2016
10 May 2019
Non-executive directors’ terms of appointment
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:
Peter Ventress*
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vin Murria
Maria Fernanda Mejía
Date of
appointment
1 June 2019
1 April 2011
1 February 2015
1 March 2017
1 May 2017
1 June 2020
23 December 2020
Date of last
re-appointment
at AGM
15 April 2020
15 April 2020
15 April 2020
15 April 2020
n/a
Length of
service as at
2021 AGM
1 year 10 months
n/a
6 years 2 months
4 years 1 month
3 years 11 months
10 months
3 months
* Appointed to the Board on 1 June 2019 and took up role as Chairman on 15 April 2020.
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 2020
125
Directors’ report Directors’ remuneration report continued
Policy on payment for departure from office
On termination of an executive director’s service contract, the Committee will take into account the departing director’s duty to mitigate his
loss when determining the amount of compensation. The Committee’s policy in respect of the treatment of executive directors leaving the
Group is described below and is designed to support a smooth transition from the Company taking into account the interests of shareholders:
Component
of pay
Voluntary resignation
or termination for cause
Base salary,
pension and
benefits
Annual bonus
cash
Annual bonus
deferred
shares
Paid for the proportion of
the notice period worked
and any untaken holidays
pro-rated to the leaving
date
Cessation of employment
during a bonus year will
normally result in no cash
bonus being paid
Unvested deferred shares
will lapse
Departure as a ‘good leaver’ or in other specific circumstances including on agreed terms
Paid up to the date of departure or death, including any untaken holidays pro-rated to such date. In the case
of ill health, a payment in lieu of notice may be made and, according to the circumstances, may be subject
to mitigation. In such circumstances some benefits, such as company car or medical insurance may be
retained until the end of the notice period.
Cessation of employment during a bonus year or after the year end but prior to the normal bonus payment
date will result in cash and deferred bonus being paid and pro-rated for the relevant portion of the financial
year worked and performance achieved.
In the case of the death of an executive, all deferred shares will be transferred to the estate as soon as
possible after death. In all other cases, subject to the discretion of the Committee, unvested deferred shares
will be transferred to the individual on a date determined by the Committee.
Executive
share options
Unvested executive share
options will lapse
Tax advantaged options will vest in full on the cessation of employment and be exercisable for the following
12 months after which any unexercised options will lapse.
Performance
shares
Unvested performance
shares will lapse
Restricted
shares
Unvested restricted share
awards 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. Holding period terms will ordinarily continue to run until (or be set to expire no
later than) the second anniversary of departure, commensurate with the post-cessation shareholding
requirement. However in the case of the death of an executive, the Committee will determine the extent
to which the unvested options may be exercised within 12 months of the date of death.
Subject to the discretion of the Committee, unvested performance share awards will normally be retained
by the individual for the remainder of the vesting period, remain subject to the performance conditions and
will ordinarily be subject to time proration. Holding period terms will ordinarily continue to run until (or be
set to expire on no later than) the second anniversary of departure from employment, commensurate with
the post-cessation shareholding requirement. However in the case of the death of an executive, the
Committee will determine the extent to which the unvested restricted shares may be exercised within
12 months of the date of death.
Subject to the discretion of the Committee, unvested restricted share awards will normally be retained by
the individual for the remainder of the vesting period, remain subject to the underpin conditions and will
ordinarily be subject to time proration. Holding period terms will ordinarily continue to run until (or be set
to expire on or no later than) the second anniversary of departure from employment, commensurate with the
post-cessation shareholding requirement. However in the case of the death of an executive, the Committee
will determine the extent to which the unvested shares may be exercised within 12 months of the date
of death.
Options under
Sharesave
As per HMRC regulations
As per HMRC regulations.
Other
None
Disbursements such as legal costs and outplacement fees may be paid.
Note
The Committee will have the authority to settle any legal claims against the Company, e.g. for unfair dismissal etc, that might arise on termination.
Differences in remuneration policy for executive directors and employees in general
The main difference in remuneration policy between the executive directors and employees in general is the split of fixed and performance
related pay, such as bonus and long term incentives. Overall the percentage of performance related pay, in particular longer term incentive
pay, is greater for the executive directors. This reflects that executive directors have more freedom to act and the consequences of their
decisions are likely to have a broader and more far reaching time span of effect than those decisions made by employees with more limited
responsibility. As a consequence only executive directors, Executive Committee members and other key employees (currently around
30 people) are granted both executive share options and performance share awards (which will be replaced by restricted share awards if the
proposed policy is approved). Approximately 460 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. In most cases, 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 annual bonus payments which may be commission based.
126
Bunzl plc Annual Report 2020
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.
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 Officer, as well as data on the average salary increases for leadership teams in each region
within the Group. In addition the Committee reviews and agrees all grants of executive share options, performance share awards and
restricted share awards.
The Committee considers the general basic salary increase within the geographical regions for the broader employee population when
determining the annual salary increases for the executive directors and is cognisant of the Group’s overall employment arrangements when
reviewing and implementing the executive directors’ remuneration policy. Although the Committee did not consult with employees with
regard to the remuneration policy of the executive directors, the Company does monitor employees’ views through regular employee surveys.
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 structure of the remuneration packages for on-target and stretch performance for each
of the two executive directors for 2021, in line with the proposed new remuneration policy, is illustrated in the bar charts below.
Frank van Zanten
Below threshold performance
(Total £2,408,793)
Target performance
(Total £3,230,563)
Stretch performance
(Total £4,052,334)
Stretch + 50% share price
increase (Total £4,623,007)
Richard Howes
Below threshold performance
(Total £1,244,143)
Target performance
(Total £1,723,205)
Stretch performance
(Total £2,202,267)
Stretch + 50% share price
increase (Total £2,501,680)
45%
8%
47%
34%
6%
25%
35%
27%
4%
41%
28%
23%
4%
36%
37%
50%
35%
2%
28%
1%
2%
28%
44%
25%
1%
38%
48%
35%
36%
27%
Salary and benefits
Pension
Bonus (Cash/DASBS)
LTIP
Notes
a) Salary represents annual salary for 2021. Benefits such as a car or car allowance and private medical insurance have been included based on 2020 figures. In the case of Frank van Zanten benefits also
include school fees and international health insurance.
b) Stretch performance plus 50% share price increase shows the effect of a 50% growth in the Company share price on the value of the restricted share awards.
c) Pension represents the value of the annual pension allowance for 2021 for Frank van Zanten and Richard Howes.
d) Below threshold performance comprises salary, benefits, pension with no bonus award and for restricted share awards an assumption that 100% will vest.
e) Target performance comprises annual bonus awarded at target level (i.e. for 2021 at 90% of salary for Frank van Zanten and 80% of salary for Richard Howes comprised of half cash and half deferred
shares under the DASBS) and for restricted share awards an assumption that 100% will vest.
f) Stretch performance comprises annual bonus awarded at stretch level (i.e. for 2021 at 180% of salary for Frank van Zanten and 160% of salary for Richard Howes comprised of half cash and half deferred
shares under the DASBS) and for restricted share awards an assumption that 100% will vest.
Bunzl plc Annual Report 2020
127
Directors’ report
Directors’ remuneration report continued
Annual report on directors’ remuneration for 2020
This report sets out the elements of remuneration paid to, or earned by, the directors in respect of the financial year 2020.
Single total figure of remuneration 2020 (audited information)
Executive directors
Salary
£000
Taxable
benefits
£000
2020
2019
2020
2019
2020
Frank van Zanten
Richard Howes
Total
887.3
582.0
1,469.3
861.5
–
861.5
173.4
16.1
189.5
297.3
–
297.3
1,597.2
931.1
2,528.3
Bonus
£000
2019
922.7
–
922.7
LTIP
£000
2019
472.5
–
472.5
2020
635.3
287.3
922.6
Pension
£000
2020
2019
2020
Sub-total
of fixed
pay
£000
Sub-total
of variable
pay
£000
2020
2020
Total
£000
2019
210.7
29.1
239.8
215.4
–
215.4
3,503.9 2,769.4
–
1,845.6
5,349.5 2,769.4
1,271.4 2,232.5
1,218.4
1,898.6 3,450.9
627.2
Notes
a) The figures above represent remuneration earned as directors during the relevant financial year including the bonus of which the cash element, 50% of the bonus, is paid in the year following that in which
it is earned. The other 50% of the bonus shown above is deferred and conditionally awarded as shares under the rules of the Deferred Annual Share Bonus Scheme (‘DASBS’). Shares relating to the 2019
deferred bonus were awarded in 2020 as shown in the table on page 137 and the shares relating to the 2020 deferred bonus will be awarded in 2021.
b) The executive directors waived 20% of their salary for the three month period from April to June 2020. Due to the Group’s stronger than expected performance, the Company subsequently made donations
of the amount of salary waived, to charities nominated by the directors. This amount is included within the salary figures above.
c) The annual bonus for 2020 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).
d) Benefits provided for all executive directors are a car or car allowance and medical insurance coverage for them and their families. Frank van Zanten’s benefits are lower in 2020 and include school fees,
tax advice and international health insurance.
e) The long term incentives are in the form of awards under the LTIP granted in April and October 2017 and March and August 2018. The performance metrics for LTIP A were eps growth and for LTIP B
were eps growth and TSR, further details of which are on page 131. The portion of total LTIP figures (2020:£922,600 2019:£472,500) for Frank van Zanten that are attributable to share price growth are
£219,460 for 2020 and £40,209 for 2019. For Richard Howes £0 is attributable to share price growth.
f) The figures shown in relation to 2019 for the LTIP have been restated from those figures shown in the 2019 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 2 March 2020 and 1 September 2020 at the closing mid-market share price of 1,910p and 2,420p respectively.
Non-executive directors
Peter Ventress – Chairman
Philip Rogerson
Eugenia Ulasewicz
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vin Murria
Maria Fernanda Mejía
Total
Board fees
£000
2019
41.9
357.0
71.8
71.8
71.8
71.8
–
–
686.1
2020
277.9
122.7
23.9
71.8
71.8
71.8
41.9
1.9
683.7
Committee
Chair/SID
fees
£000
2019
–
–
–
37.0
19.0
–
–
–
56.0
2020
–
–
–
38.0
20.0
–
–
–
58.0
Taxable
payments/
expenses
£000
2019
–
1.2
73.0
4.9
0.4
10.4
–
–
89.9
2020
–
0.1
20.7
–
–
3.7
–
–
24.5
Total
£000
2019
41.9
358.2
144.8
113.7
91.2
82.2
–
–
832.0
2020
277.9
122.8
44.6
109.8
91.8
75.5
41.9
1.9
766.2
Notes
a) Peter Ventress was appointed Chairman on 15 April 2020 and prior to this date received fees relevant for a non-executive director.
b) Philip Rogerson and Eugenia Ulasewicz retired from the Board on 15 April 2020.
c) Vin Murria was appointed with effect from 1 June 2020.
d) Maria Fernanda Mejía was appointed from 23 December 2020.
e) Taxable payments/expenses for non-executive directors are costs incurred for travel and accommodation in order to attend Board meetings. These costs which were lower in 2020 than in 2019 due to the
impact of the Covid-19 pandemic, have been grossed up to include the tax payable.
128
Bunzl plc Annual Report 2020
Payments for loss of office (audited information)
No payments were or are to be made to former directors in respect of loss of office.
Payments to past directors (audited information)
As disclosed in the 2019 Annual Report and accounts Brian May received the following payments: a bonus payment in March 2020 for 2019
performance at a value of £532,826; all Deferred Shares vested in full on 1 March 2020 and the value on the vesting date was £657,899; LTIP
A share options which vested on 2 September 2019 and 2 March 2020 resulted in a gain of £143,706 upon exercise on 14 October 2020; LTIP
B performance shares vested on 10 April 2020 and 9 October 2020 and the total value on exercise dates of 21 April 2020 and 15 October 2020
respectively was £203,613.
Executive directors’ annual salary (audited information)
As disclosed last year, executive directors’ salaries were reviewed with effect from 1 January 2020 in accordance with normal policy and
were increased taking into account the average salary increases for employees across the Group.
Frank van Zanten
Richard Howes
Salary from
1 January
2020
£887,345
£581,950
Salary from
1 January
2019
£861,500
£565,000
Increase in
salary 2019
to 2020
3%
3%
Executive directors’ salaries were also reviewed with effect from 1 January 2021 and the increases awarded are shown on page 137.
Executive directors’ external appointments
During 2020 Frank van Zanten served as a non-executive director of Grafton Group plc until 29 April 2020 and of Ahold Delhaize NV from
8 April 2020. During the year, he retained fees of €22,292 from Grafton Group plc and €83,125 from Ahold Delhaize NV were received.
Non-executive directors’ fees (audited information)
The Chairman’s fee is reviewed every two years with the most recent review having taken place with effect from 1 January 2020. The fees for
the non-executive directors were reviewed with effect from 1 January 2020 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 2020
£368,000
£71,800
Fees paid
in 2019
£357,000
£71,800
Increase in fees
2019 to 2020
3.1%
–
£18,000
£20,000
£20,000
£18,000
£19,000
£19,000
–
5.3%
5.3%
The non-executive directors’ fees were reviewed again with effect from 1 January 2021 and the increases awarded are shown on page 137.
Bunzl plc Annual Report 2020
129
Directors’ report Performance against annual bonus targets (audited information)
The annual bonus plan and DASBS currently operate as set out in the policy section on page 120. All of Frank van Zanten’s and Richard
Howes’ awards related to the Group’s eps, RAOC, operating cash flow performance and personal performance on individual objectives.
The maximum bonus achievable is 180% of salary for Frank van Zanten and 160% for Richard Howes. The results for 2020 against the
targets set were as follows and the Committee did not exercise any discretion over these formulaic outturns:
Group performance
Weighting
50%
15%
15%
20%
Scorecard performance metric
eps (p)
% of target
RAOC %
% of target
Operating cash flow (£m)
% of target
Threshold
125.4
95%
33.3%
96%
540.0
95%
Target
132.0
100%
35.3%
100%
568.4
100%
Stretch
145.2
110%
37.3%
104%
596.8
105%
Actual outturn calculated
at constant exchange rates
168.1
127.3%
45.4%
128.6%
783.1
137.8%
% of maximum
100%
100%
100%
Non-financial strategic goals
see details below
Notes
a) 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.
b) There was an eps underpin to retain focus on eps growth such that if an eps threshold of 125.4p was not met there would be no pay-out under any element of the scorecard.
Non-financial strategic goals
Following a review of performance against specific personal objectives for 2020, the Committee determined the bonus percentages payable to
the executive directors in relation to the non-financial strategic goals. Performance was considered in the context of the market environment
and leadership displayed by the executive directors in successfully navigating through the Covid-19 pandemic. The specific objectives, and
the related evaluation of performance, are shown in the table below.
Frank van Zanten – Chief Executive Officer
Objective
• Continue to drive the Sustainability agenda in 2020 – focusing on
the implementation of the new strategy and framework.
• Drive forward the talent agenda – building development plans for
the leadership team and integrating external high calibre recruits.
Evaluation
• Significant progress has been made on driving the sustainability agenda
including conducting a materiality assessment as the basis for setting and
communicating clear commitments.
• The Leadership Team have individual development plans and changes to the
senior team have enabled the commencement of external recruitment campaigns
for some key roles.
• Further development of the Group’s digital programmes, tools and
• Global digital sales order % increased from 62% in 2019 to 66% in
capabilities including increasing the average % of digital
transactions with customers and suppliers versus 2019.
December 2020.
% of base salary awarded
% of maximum
36%
100%
Richard Howes – Chief Financial Officer
Objective
• Improve the average working capital/sales % performance
compared to 2019.
Evaluation
• The average working capital as a % of sales performance has improved
significantly in 2020 despite the challenging market conditions.
• Recruit and onboard a new Head of Investor Relations and identify
a list of key prospect investors that fit the Company’s equity story.
• A new Head of Investor Relations has been appointed which has resulted
in a proactive Investor Relations programme.
• Agree and deliver 2020 milestones for an updated data privacy
• The key 2020 milestones for the data privacy programme have been achieved
programme.
% of base salary awarded
% of maximum
through significant personal focus from Richard Howes.
32%
100%
When assessing performance and outcomes the Committee was mindful of the Company’s broader achievements and stakeholder
experience. The outcomes are considered appropriate in light of the Company’s exceptional financial and operational performance delivered
in the most challenging of conditions. Accordingly the total payments under the annual bonus plans were:
Frank van Zanten
Richard Howes
Total bonus payment (cash and deferred shares) as a % of salary
2020
%
180
160
2019
%
107.1
–
2018
%
126.7
–
2017
%
109.2
–
2016
%
75.3
–
The monetary values of the bonus payments for 2020 and 2019 are included in the table on page 128. The deferred shares portion of the
bonus is required to be held under the DASBS rules for a period of three years and is subject to continued employment.
130
Bunzl plc Annual Report 2020
Directors’ remuneration report continued LTIP grants/awards with performance periods ending in 2020 (audited information)
Executive share options – LTIP Part A
Executive share option awards, granted three years previously, vested on 1 March 2021 and are due to vest on 31 August 2021. The
Committee assessed the performance of the Company against the relevant performance condition and no discretion was exercised to override
the formulaic outcomes including as a result of the share price movement over the performance period:
LTIP Part A – 1 March 2018 and 31 August 2018 grants
Performance measure
Eps growth (over three year period
to 31 December 2020)
Vesting schedule
25% vesting for threshold performance,
100% vesting for maximum performance
Frank van Zanten
Richard Howes
Threshold
target (5% p.a.
compounded)
Maximum
target (8% p.a.
compounded)
Actual eps
growth
% vesting
(max 100%)
15.8%
26.0%
40.9%*
100%
Date of grant
1 March 2018
31 August 2018
1 March 2018
31 August 2018
Number of
shares granted
42,782
35,010
–
–
Vesting
outcome
100%
100%
–
–
Estimated
value of
award vesting
£209,204
£19,256
–
–
Note
The estimated values of grants 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
2020 (2,444p) and are the same as the figures included in the single total remuneration table on page 128.
*
The eps growth for the three years to 31 December 2020 has been calculated by (i) restating the eps for the year ended 31 December 2020 on a proforma basis under IAS 17 in order to allow a direct
comparison with the eps for the year ended 31 December 2017 and (ii) adjusting the eps growth to exclude two businesses, one in France and one in the UK, that were disposed of during the period of
calculation. The Committee approved the adjustment relating to the disposals on the basis that the directors and the other share option 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 Frank van Zanten on 10 April 2017 and 09 October 2017 under the 2014 LTIP and vested
during 2020. The Committee assessed the performance of the Company against the relevant performance conditions and no discretion
was exercised to override the formulaic outcomes including as a result of the share price movement over the vesting period:
LTIP Part B – 10 April and 9 October 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
(6% p.a.
compounded)
Maximum
target
(12% p.a.
compounded)
Actual eps
growth
% vesting
(max 50%)
19.1%
40.5%
27.1%*
26.43%
Performance measure
TSR relative to comparator group
of bespoke peer companies
Performance
period
1 April 2017 to
31 March 2020
Vesting
schedule
Threshold
target
(median)
Maximum
target
(upper quartile)
Actual TSR
25% vesting for
threshold performance,
9.7%
14 out of 27
40.0%
7.25 out of 27
(8.8%)
20.63 out of 27
1 October 2017 to
30 September 2020
100% vesting for
maximum performance
(3.5%)
17 out of 33
15.5%
8.75 out of 33
8.6%
11.4 out of 33
% vesting
(max 50%)
0%
37.95%
Frank van Zanten
Note
Date of grant
10 April 2017
9 October 2017
Number of
shares granted
19,565
19,887
Vesting
outcome – eps
26.43%
26.43%
Vesting
outcome – TSR
0%
37.95%
Value of
award vesting
£89,338
£317,490
a) Included in the single total figure of remuneration on page 128 is the value of these vested awards for Frank van Zanten at the closing mid-market share price on the dates of vesting, 14 April 2020 (being the
closest dealing day three years after the grant date of 10 April 2017) and 9 October 2020, which were 1,728p and 2,480p respectively and for Richard Howes at the closing mid-market share price on the day
of vesting, 26 May 2020, which was 1,817p.
*
The eps growth for the three years to 31 December 2019 has been calculated by (i) restating the eps for the year ended 31 December 2019 on a proforma basis under IAS 17 in order to allow a direct
comparison with the eps for the year ended 31 December 2016 and (ii) adjusting the eps growth to exclude two businesses, one in France and one in the UK, that were disposed of during the period of
calculation. The Committee approved the adjustment relating to the disposals on the basis that the directors and the other share option recipients should not be penalised for the decision to dispose of
non-core businesses.
Bunzl plc Annual Report 2020
131
Directors’ report Compensating award – 11 September 2019
As detailed on Page 109 of 2019 Annual Report and Accounts Richard Howes received the following award to compensate him for unvested
awards under his previous employer’s long term incentive scheme with performance conditions based on eps growth and the three year
average ROCE of his previous employer.
Richard Howes
Date of grant
11 September 2019
Number of
shares granted
39,538
Number of shares
vesting
15,815
Value of
award vesting
£287,279
Note
a) Included in the single total figure of remuneration on page 128 is the value of these vested awards for Frank van Zanten at the closing mid-market share price on the dates of vesting, 14 April 2020 (being the
closest dealing day three years after the grant date of 10 April 2017) and 9 October 2020, which were 1,728p and 2,480p respectively and for Richard Howes at the closing mid-market share price on the day
of vesting, 26 May 2020, which was 1,817p.
Total pension entitlements (audited information)
Frank van Zanten
Richard Howes
Value of cash allowance
including any company
Defined Contribution in 2020
£210,745
£29,098
Total pension
2020
£210,745
£29,098
Note
Chief Executive Officer Frank van Zanten received a pension allowance of 23.75% of base salary in 2020. In 2021 this has been reduced to 20% and will continue to reduce as outlined in the policy table.
As Chief Financial Officer Richard Howes receives a pension allowance of 5% of base salary.
LTIP grant policy
Conditional awards of executive share options and performance shares have historically been granted twice a year to executive directors
and other senior executives. Executive share option awards have normally been granted in February or March and August or September
dependent on the date of announcement of the Company’s results. Performance share awards have normally been granted in April and
October each year. Executive share options were granted in March and September 2020 and performance share awards were granted in
April and October 2020 under the LTIP in accordance with the policy and performance conditions as approved at the 2020 AGM.
LTIP interests awarded during the financial year (audited information)
Frank van Zanten
Richard Howes
Plan
LTIP Part A
LTIP Part B
LTIP Part A
LTIP Part B
LTIP Part A
LTIP Part B
LTIP Part A
LTIP Part B
Date of grant
10.03.20
06.04.20
09.09.20
05.10.20
10.03.20
06.04.20
09.09.20
05.10.20
Basis of award
100% of salary
75% of salary
100% of salary
75% of salary
100% of salary
60% of salary
100% of salary
60% of salary
Face value
£000
887.3
665.5
887.3
665.5
582.0
349.2
582.0
349.2
Number of
shares
48,225
42,936
37,096
26,377
31,627
22,527
24,329
13,839
Performance
period end date
31.12.22
31.03.23
31.12.22
30.09.23
31.12.22
31.03.23
31.12.22
30.09.23
Note
The face value of the awards is calculated using the closing mid-market share price on the day prior to the grant of the award. Options were awarded under the LTIP Part A on 10 March 2020 and on 9 September
2020 at a value of 1,840p and 2,392p per share respectively. Performance shares were awarded under the LTIP Part B on 6 April 2020 and 5 October 2020 at a value of 1,550p and 2,523p per share respectively.
Performance conditions for 2020 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 2020 were as detailed below.
Executive share options – LTIP Part A March 2020
Executive share options may vest based solely on the Company’s eps growth (adjusted to exclude items which do not reflect the Company’s
underlying financial performance) over three years, based on the following sliding scale:
Absolute annual growth in the Company’s eps over a three year period
Below 5%
5%
Between 5% and 8%
8% or above
Proportion of share option awards exercisable
Nil
25%
Pro rata between 25% and 100%
100%
132
Bunzl plc Annual Report 2020
Directors’ remuneration report continued
Performance shares – LTIP Part B April 2020
The extent to which half of the awards may vest is subject to a performance condition based on the Company’s eps growth (adjusted to
exclude items which do not reflect the Company’s underlying financial performance) over three years, based on the following sliding scale:
Absolute annual growth in the Company’s eps over a three year period
Below 6%
6%
Between 6% and 12%
12% or above
Proportion of performance share awards exercisable
Nil
25%
Pro rata between 25% and 100%
100%
Performance shares – LTIP Part B April and October 2020
The extent to which half of the performance share awards may vest is subject to the Company’s TSR performance, a combination
of both the Company’s share price and dividend performance during the three year performance period, relative to the TSR performance
of a specified comparator group of similarly sized companies with large international presence. These performance share awards may vest
based on the following sliding scale:
TSR
Below median
Median
Between median and upper quartile
Upper quartile or above
Proportion of performance share awards exercisable
Nil
25%
Pro rata between 25% and 100%
100%
The applicable comparator group for the 2020 awards were those companies in the FTSE 11 – 100 with significant international operations.
Executive share options – LTIP Part A September 2020 and performance shares LTIP Part B October 2020
Executive share options granted in September 2020 may vest based solely on the Company’s eps growth (adjusted to exclude items which
do not reflect the Company’s underlying financial performance) over three years. The extent to which half of the performance shares awards
granted in October 2020 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. As referenced on page 116 in the Chair’s Statement,
granting on a bi-annual basis provided the Committee with the opportunity to revisit and consider the performance ranges for the September
and October awards so that they reflected the post-pandemic market conditions and performance expectations at the time. The Committee
considers that these are stretching performance targets in the context of internal forecasts and external consensus at the time of award.
For both share options and performance shares the following sliding scale of growth targets will apply:
Absolute annual growth in the Company’s eps over a three year period
Below 0.5%
0.5%
Between 0.5% and 3.5%
3.5% or above
Proportion of share option awards exercisable
Nil
25%
Pro rata between 25% and 100%
100%
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 122. 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 2020
1.0%
0.2%
Bunzl plc Annual Report 2020
133
Directors’ report Statement of directors’ shareholding and share interests (audited information)
As at 31 December 2020, each of the executive directors and their connected persons have a shareholding as follows:
Frank van Zanten
Richard Howes
Requirement for share ownership
as a percentage of salary (31 December 2020)
300%
200%
Actual share ownership as a percentage of salary at
31 December 2020 at the closing mid-market price
(2,443p)
435%
57%
Note
The shareholding requirement for the Chief Executive Officer, Frank van Zanten increased to 300% of salary under the remuneration policy approved at the 2020 AGM. Shares contributing to the share
ownership % include deferred shares held under the DASBS (net of tax) but not any unvested or vested but unexercised LTIP awards.
Interests in shares and share options (audited disclosure)
The interests of the directors, and their connected persons, in the Company’s ordinary shares and share options at 31 December 2020 were:
Unvested and
subject to
holding period
(DASBS)
69,787
9,774
–
–
–
–
–
–
Owned
outright
122,428
8,363
2,608
–
3,000
4,000
–
–
Shares
Unvested and
subject to
performance
conditions
(LTIP Part B)
162,176
142,302
–
–
–
–
–
–
Options (LTIP Part A and Sharesave)
Total
interests held
Unvested and
subject to
performance
conditions
240,273
55,956
–
–
–
–
–
–
Unvested
subject to
continued
employment
1,923
–
–
–
–
–
–
–
Vested but not
exercised
77,582
–
–
–
–
–
–
–
674,169
216,395
2,608
–
3,000
4,000
–
–
Frank van Zanten
Richard Howes
Peter Ventress
Vin Murria
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Maria Fernanda Mejía
Note
No changes to the directors’ ordinary share interests shown in this remuneration report have taken place between 31 December 2020 and 1 March 2021.
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, considered to be the most
appropriate comparator group, over a 10 year period commencing on 4 January 2011 is shown below.
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
450
400
350
300
250
200
150
100
50
0
2011
Bunzl
FTSE 350 Support Services
Source: Thomson Reuters Datastream
2012
2013
2014
2015
2016
2017
2018
2019
2020
134
Bunzl plc Annual Report 2020
Directors’ remuneration report continued
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 2020 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
(options)
LTIP Part B
(performance
shares)
2011
2012
2013
2014
2015
2016
MR
2016
FvZ
2017
2018
2019
2020
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
2,769.4 3,503.9
99%
67%
91%
85%
64%
0%
67%
73%
70%
60% 100%
100% 100% 100% 100% 100% 100%
0% 100% 100% 100% 100%
29%
45%
62%
89%
69%
82%
0%
69%
54%
63%
45%
Notes
a) The data for 2016 includes 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 2019 has been restated from the figure shown in the 2019 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 2020 on page 128.
Percentage change in each director’s remuneration
The table below sets out the change between 2019 and 2020 in the salary, benefits, and bonus of all directors and employees of the legal
entity which employs the Chief Executive Officer, Bunzl plc. Where it is not possible to compare employees from Bunzl plc between 2019
and 2020 due to certain employees joining or leaving the Company, these employees have been removed from the data to prevent distortion.
Chief Executive Officer – Frank van Zanten
Chief Financial Officer – Richard Howes
Chairman – Philip Rogerson/Peter Ventress
Non-executive director – Chair Remuneration Committee – Vanda Murray
Non-executive director – Eugenia Ulasewicz
Non-executive director – Chair Audit Committee – Lloyd Pitchford
Non-executive director – Stephan Nanninga
Non-executive director – Vin Murria
Non-executive director – Maria Fernanda Mejía
Average of employees in Bunzl plc
Notes
a) Benefits are annualised.
Salary/Fees
3.0%
3.0%
3.1%
0.9%
–
1.1%
–
n/a
n/a
3.2%
Benefits
(42%)
n/a
n/a
(100%)
(72%)
(100%)
(64%)
n/a
n/a
(25%)
Bonus
73%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
162%
b) Bunzl plc employees exclude any increases due to a change of role that occurred during either year.
c) Premiums for private medical insurance decreased for employees in 2020 so there was a corresponding decrease in costs for the same level of cover for employees.
d) Benefits for the non-executive directors are costs incurred for travel and accommodation in order to attend Board meetings in London and therefore have decreased in 2020 compared to 2019 due to Covid-19
travel restrictions.
Bunzl plc Annual Report 2020
135
Directors’ report 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 2020, and the Chief Executive Officer’s salary and total remuneration as detailed in the single figure table. To calculate
these ratios, the Company has used Option A and determined full time equivalent total remuneration as this is the most statistically robust
method. This includes scaling up salary for part time employees. Each employee’s pay and benefits are calculated using each element of
employee remuneration consistent with the Chief Executive Officer and no element of pay has been omitted.
Adjustments have been made to include the bonuses paid to employees in 2020, compared to the Chief Executive Officer’s bonus due to
be paid in 2021, in respect to performance in 2020. Due to the strong performance of the overall Group in 2020 and the heavier weighting
of the Chief Executive Officer’s pay towards variable pay compared to the wider workforce, there is an increase in the ratios for total
remuneration in 2020 but as expected ratios for salary remain static. The median ratio is consistent with pay policies within the organisation.
The Committee will continue to monitor movements in pay ratios.
Salary
Total remuneration
Salary
Total remuneration
Chief Executive Officer
25th percentile employee
Median employee
75th percentile employee
CEO single
figure
£887,345
£3,503,900
£861,500
£2,769,400
Year
2020
2020
2019
2019
Method
Option A
Option A
Option A
Option A
25th percentile
pay ratio
44:1
162:1
44:1
133:1
Median
pay ratio
38:1
137:1
38:1
111:1
75th percentile
pay ratio
27:1
90:1
27:1
75:1
Salary
£887,345
£20,385
£23,272
£33,119
Total remuneration
£3,503,900
£21,696
£25,517
£38,917
Relative importance of spend on pay
The table below shows a comparison between the overall expenditure on pay and dividends paid to shareholders as well as the adjusted
earnings per share for 2020 and 2019 (as stated in Note 23, Note 19 and Note 3 to the consolidated financial statements on pages 187, 182
and 159 respectively).
£m
Overall expenditure on pay
Dividends paid in the year
Adjusted earnings per share (p)
Notes
a) Overall expenditure on pay excludes employer’s social security costs.
2020
844.3
171.5
164.9
2019
785.8
167.3
132.2
Percentage
change
7.4%
2.5%
24.7%
b) Dividends paid in the year relate to the previous financial year’s interim and final dividends including in 2020 the additional interim dividend paid in relation to 2019 in lieu of the final dividend.
c) The percentage change in overall expenditure on pay includes the impact of changes in exchange rates from 2019 to 2020, details of which are referred to in the Chief Executive Officer’s review on page 8
and in the Financial review on page 75.
136
Bunzl plc Annual Report 2020
Directors’ remuneration report continued Remuneration arrangements for 2021
Salary (audited information)
The salary increases for the executive directors for 2021, which are in line with increases that have been implemented for other employees in
the Group as discussed on page 127, are as follows:
Frank van Zanten
Richard Howes
Salary from
1 January 2021
£913,078
£598,827
Salary from
1 January 2020
£887,345
£581,950
Increase
in salary
2020 to 2021
2.9%
2.9%
2021 bonus targets
The structure for Frank van Zanten and Richard Howes’ annual bonus for 2021 is a balanced scorecard of performance measures, based
on eps, RAOC, operating cash flow and specified strategic goals. The weighting of these measures has been slightly adjusted (financial
measures 70% and non financial strategic goals 20%) and 10% of the opportunity for both directors will depend on the achievement of
specific Environmental, Social and Governance objectives. The relevant performance points are: threshold; target; and maximum amount
(the level at which the bonus for that measure is capped). These performance points are determined at the start of the year. No elements of the
bonus are guaranteed. As in previous years, financial performance measures, including profit targets, are commercially sensitive and
therefore are not disclosed until the following year.
Performance measures and pricing basis for long term incentives to be awarded in 2021
Grants of restricted share awards to be made to executive directors and senior executives will not be subject to performance measures but
vesting will be subject to the achievement of an underpin normally reviewed over the three financial years commencing with the financial
year in which awards are granted. Details of the underpin are set out in the policy table. In 2021 Frank van Zanten will be granted a restricted
share award to the value of 125% of his salary and Richard Howes will be granted a restricted share award to the value of 100% of his salary.
In respect of the award to be granted in 2021, the market value at the time of grant shall be used to set the number of shares under award and
in respect of subsequent grants the 60-day average share price preceding the grant date will be used for such purposes.
Chairman’s and non-executive directors’ fees for 2021
The Chairman’s fee is reviewed every two years with the most recent review taking effect from 1 January 2020. The non-executive directors’
fees are reviewed annually and were most recently reviewed with effect from 1 January 2021. The current fee structure for the Chairman and
the non-executive directors is shown below:
Chairman’s fee
Non-executive director basic fee
Supplements:
Senior Independent Director
Audit Committee Chairman
Remuneration Committee Chairman
With effect from
1 January 2021
£368,000
£73,240
£19,000
£20,000
£20,000
Fees paid in 2020
£368,000
£71,800
£18,000
£20,000
£20,000
Increase in fees
2020 to 2021
–
2.0%
5.6%
–
–
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 2020
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 120.
Awards
(shares)
held at
1 January
2020
11,504
22,789
22,328
Shares
awarded
during
2020
24,670
9,774
Shares
vested
during
2020
11,504
Total number
of awards
(shares) at
31 December
2020
–
22,789
22,328
24,670
9,774
Normal
vesting
date
01.03.20
01.03.21
01.03.22
02.03.23
02.03.23
Share
price
at grant
p
2,255
1,955
2,373
1,870
1,870
Market
price
at vesting
p
1,910
Monetary
value of
vested
awards
£000
220
Frank van Zanten
Richard Howes
Notes
a) The normal vesting date in March 2020 fell on a non-working day and therefore the mid-market closing share price on 2 March 2020 has been used.
b) The deferred element of the 2020 annual bonus plan as shown on page 130 is not included in the table above as the appropriate number of shares have not yet been awarded. No shares lapsed during the year.
c) The shares awarded during 2020 relate to 50% of the bonus for 2019 and are a conditional award with the number of shares being determined by reference to the mid market closing share price on the day
preceding the grant date.
Bunzl plc Annual Report 2020
137
Directors’ report LTIP
The tables below show the number of executive share options and performance shares held by the executive directors under the LTIP
during 2020.
Executive share options – LTIP Part A
Frank van Zanten
Total
Richard Howes
Total
Options held at
1 January
2020
42,636
34,946
35,324
42,782
35,010
36,273
40,887
–
–
267,858
–
–
–
Grant
date
02.09.16
02.03.17
01.09.17
01.03.18
31.08.18
28.02.19
11.09.19
10.03.20
09.09.20
10.03.20
09.09.20
Exercise
price
p
2,336
2,335
2,310
1,955
2,389
2,375
2,107
1,840
2,392
Options
exercisable
between
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
10.03.23-09.03.30
09.09.23-08.09.30
1,840
2,392
10.03.23-09.03.30
09.09.23-08.09.30
Options
held at
31 December
2020
42,636
34,946
–
42,782
35,010
36,273
40,887
48,225
37,096
317,855
31,627
24,329
55,956
Notes
a) Executive share options were exercised during 2020 by Frank van Zanten on 14 October 2020 in respect of 35,324 ordinary shares at an exercise price of 2,310p and at a market price of 2,654p, resulting
in a gain of £121,603.
b) The mid-market price of a share on 31 December 2020 was 2,443p and the range during 2020 was 1,277p to 2,603p.
Performance shares – LTIP Part B
Awards
(shares)
held at
1 January
2020
19,565
19,887
22,510
20,464
22,072
27,817
–
–
132,315
39,538
46,824
59,112
–
–
145,474
Conditional
shares
awarded
during
2020
–
–
–
–
–
–
42,936
26,377
69,313
–
–
–
22,527
13,839
36,366
Award
date
10.04.17
09.10.17
09.04.18
08.10.18
08.04.19
07.10.19
06.04.20
05.10.20
11.09.19
11.09.19
11.09.19
06.04.20
05.10.20
Market
price per
share
at award
p
2,346
2,308
2,090
2,299
2,537
2,013
1,550
2,523
2,059
2,059
2,059
1,550
2,523
Lapsed
awards
(shares)
during
2020
14,395
7,085
–
–
–
–
–
–
21,480
23,723
23,723
Exercised
awards
(shares)
during
2020
5,170
12,802
–
–
–
–
–
–
17,972
15,815
–
–
–
–
15,815
Market
price
per share
at exercise
p
1,688
2,628
–
–
–
–
–
–
2,145
–
–
–
–
Awards
(shares)
held at
31
December
2020
–
–
22,510
20,464
22,072
27,817
42,936
26,377
162,176
–
46,824
59,112
22,527
13,839
142,302
Value at
exercise
£000
87
336
–
–
–
–
–
–
339
–
–
–
–
Frank van Zanten
Total
Richard Howes
Total
138
Bunzl plc Annual Report 2020
Directors’ remuneration report continued
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 122.
Sharesave Schemes
Frank van Zanten
Richard Howes
Options at
1 January
2020
964
959
–
Grant
date
29.03.16
27.03.18
–
Exercise
price
p
1,556
1,564
–
Options
exercisable
between
01.05.21-31.10.21
01.05.23-31.10.23
Options at
31 December
2020
964
959
–
–
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’), Aon Hewitt and Remuneration Consultants LLP (‘FIT’). WTW provided external
survey data on directors’ remuneration and benefit levels. A tender exercise was carried out and as a result FIT took over from Aon Hewitt
in July 2020 and provided information to determine whether, and if so to what extent, the performance conditions attached to existing share
option and performance share awards under the LTIP had been satisfied and in addition advised the Committee on the proposed changes to
the remuneration policy. The fees payable to each adviser, based on hourly rates, were: £15,600 (WTW), £44,988 (Aon Hewitt) and £65,967
(FIT) respectively for such work undertaken in 2020. Advisers are appointed by the Committee and reviewed periodically. The Committee
conducts regular reviews of the effectiveness of the advisers and is satisfied that they remain objective and independent.
Statement of voting at the 2020 AGM for the remuneration report and the remuneration policy
The remuneration report and remuneration policy received the following shareholder votes in 2020 being the year that they were last voted on
by shareholders:
Remuneration report
Remuneration policy
Notes
a) The votes ‘For’ include votes given at the Company Chairman’s discretion.
Votes cast
270,025,816
271,680,264
Votes for
255,867,135
258,786,824
% of shares
voted
94.76%
95.25%
Votes
against
14,158,681
12,893,440
% of shares
voted
5.24%
4.75%
Votes
withheld
2,230,971
576,522
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
1 March 2021
Bunzl plc Annual Report 2020
139
Directors’ report Other statutory information
OTHER STATUTORY INFORMATION
Annual General Meeting
The Notice convening the Company’s
Annual General Meeting (‘AGM’), to be held
at York House, 45 Seymour Street, London,
W1H 7JT on Wednesday 21 April 2021 at
2.00 pm, is set out in a separate letter from
the Chairman to shareholders.
Dividends
The 2020 interim dividend of 15.8p was
paid on 7 January 2021 and the directors
are recommending a final dividend of 38.3p,
making a total for the year of 54.1p per share
(2019: 51.3p). Dividend details are given in
Note 19 to the consolidated financial
statements. Subject to shareholder approval
at the 2021 AGM, the final dividend will be
paid on 1 July 2021 to those shareholders
on the register at the close of business on
21 May 2021.
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 18 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 18 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 2020 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 9 March 2020, 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 2020, 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.
140
Bunzl plc Annual Report 2020
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 2020
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 at
a general meeting.
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 42
to 59.
The office of a director shall also be vacated
pursuant to the Articles if the director:
• resigns by giving notice to the Company or
is asked to resign by all of the other
directors who are not less than three in
number; or
• is or has been suffering from mental or
physical ill health and the Board resolves
that his or her office be vacated; or
• is absent without permission from Board
meetings for six consecutive months and
the Board resolves that his or her office be
vacated; or
• becomes bankrupt or compounds with his
or her creditors generally; or
• is prohibited by law from being a director;
or
• ceases to be a director by virtue of any
provisions of company law or is removed
from office pursuant to the Articles.
Biographical details of all of the current
directors are set out on pages 92 and 93.
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.
Directors’ interests in the Company’s
ordinary shares are shown in Note 21 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 2020. 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
114 to 139.
Substantial shareholdings
As at 31 December 2020, 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
30.06.20
18.07.19
Number of
shares
17,120,005
16,961,895
% of issued
share capital
5.08
5.04
No other notifications have been received between 31 December 2020 and 1 March 2021.
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 they have been served with a
restriction notice after failing to provide the
Company with information concerning
certain interests in the Company’s shares
required to be provided under the Companies
Act 2006. Votes may be exercised in person
or by proxy. The Articles currently provide a
deadline for submission of proxy forms of 48
hours before the relevant meeting, 24 hours
before a poll is taken if such poll is taken
more than 48 hours after it was demanded
or during the meeting at which the poll was
demanded if the poll is not taken straight
away but is taken not more than 48 hours
after it was demanded.
Purchase of own shares
At the 2020 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
2020, the Company did not purchase any of
its own shares pursuant to this authority or
the authority granted at the 2019 AGM and
no shares have been purchased between
31 December 2020 and 1 March 2021. As a
result, directors again propose to seek the
equivalent authority at the 2021 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.
Bunzl plc Annual Report 2020
141
Directors’ 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 91.
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
1 March 2021.
By order of the Board
Suzanne Jefferies
Secretary
1 March 2021
Other statutory information continued
Political donations
During 2020, 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 75 to 83 and in the Notes to
the financial statements on pages 150 to 200.
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 18 to the consolidated
financial statements on page 180, 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 91.
Strategic report and Directors’ report
Pages 1 to 91 inclusive consist of the
Strategic report and pages 92 to 142
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.
Greenhouse gas emissions, energy
consumption and energy efficiency action
Information relating to greenhouse gas
emissions has been set out in the ESG
appendix on pages 85 to 91. Information
relating to energy consumption and the
actions taken by the Company to increase
energy efficiency can be found in the ESG
appendix on pages 85 to 91 and the
Sustainability report on pages 42 to 59.
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 and video
communications from the Chief Executive
Officer are periodically circulated to give
details of corporate and employee matters.
A number of subsidiary or business area
publications dealing with activities in
specific parts of the Group are also provided.
It is the Group’s policy that applicants with
a disability should be considered for
employment and career development on
the basis of their aptitudes and abilities.
Employees who develop a disability 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 42 to 59.
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 bonds (which are listed on either
the Main Market or the International
Securities Market of 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.
142
Bunzl plc Annual Report 2020
FINANCIAL
STATEMENTS
Consolidated statement of changes in equity
144 Consolidated income statement
145 Consolidated statement of comprehensive income
146 Consolidated balance sheet
147
148 Consolidated cash flow statement
150 Notes
193 Company balance sheet
194 Company statement of changes in equity
195
201
202
Notes to the Company financial statements
Statement of directors’ responsibilities
Independent auditors’ report to the members of
Bunzl plc
212 Shareholder information
220 Five year review
Bunzl plc Annual Report 2020
143
Financial statements CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2020
Revenue
Operating profit
Finance income
Finance expense
Profit before income tax
Income tax
Profit for the year attributable to the Company’s equity holders
Earnings per share attributable to the Company’s equity holders
Basic
Diluted
Alternative performance measures†
Operating profit
Adjusted for:
Customer relationships and brands amortisation
Acquisition related items
Non-recurring pension scheme charges
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
† See Note 3 on page 158 for further details of the alternative performance measures.
Notes
4
4
6
6
7
8
8
4
4
4
4
6
6
7
8
2020
£m
10,111.1
618.5
10.4
(73.2)
555.7
(125.7)
430.0
2019
£m
9,326.7
528.4
12.4
(87.5)
453.3
(104.1)
349.2
128.8p
128.3p
104.8p
104.5p
618.5
528.4
100.4
42.7
16.8
778.4
10.4
(73.2)
715.6
(165.1)
550.5
107.3
17.6
–
653.3
12.4
(87.5)
578.2
(137.6)
440.6
164.9p
132.2p
The Accounting policies and other Notes on pages 150 to 192 form part of these consolidated financial statements.
144
144
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2020
Financial statements
Notes
2020
£m
2019
£m
10,111.1
9,326.7
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Actuarial loss on defined benefit pension schemes
Loss recognised in cash flow hedge reserve†
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
(Loss)/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†
Tax on items that may be reclassified to profit or loss
Total items that may be reclassified subsequently to profit or loss
Other comprehensive expense for the year
Total comprehensive income attributable to the Company’s equity holders
Notes
2020
£m
430.0
2019
£m
349.2
22
7
7
(16.2)
(8.5)
4.6
(20.1)
(63.5)
(15.9)
–
–
0.3
(79.1)
(99.2)
330.8
(8.3)
–
2.2
(6.1)
(104.1)
16.9
(0.5)
(4.3)
0.8
(91.2)
(97.3)
251.9
† The presentation of the movements relating to the cash flow hedge reserve has been amended in the current year to more appropriately reflect the requirements of IFRS 9. Given the
immaterial amounts involved the prior year numbers have not been reclassified.
Revenue
Operating profit
Finance income
Finance expense
Profit before income tax
Income tax
Basic
Diluted
Profit for the year attributable to the Company’s equity holders
Earnings per share attributable to the Company’s equity holders
Alternative performance measures†
Operating profit
Adjusted for:
Customer relationships and brands amortisation
Acquisition related items
Non-recurring pension scheme charges
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
4
4
6
6
7
8
8
4
4
4
4
6
6
7
8
618.5
10.4
(73.2)
555.7
(125.7)
430.0
528.4
12.4
(87.5)
453.3
(104.1)
349.2
128.8p
128.3p
104.8p
104.5p
618.5
528.4
100.4
42.7
16.8
778.4
10.4
(73.2)
715.6
(165.1)
550.5
107.3
17.6
–
653.3
12.4
(87.5)
578.2
(137.6)
440.6
164.9p
132.2p
† See Note 3 on page 158 for further details of the alternative performance measures.
The Accounting policies and other Notes on pages 150 to 192 form part of these consolidated financial statements.
144
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
145
145
Financial statements
CONSOLIDATED BALANCE SHEET
at 31 December 2020
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
2020
£m
2019
£m
9
10
11
22
17
12
13
25
18
25
22
16
24
17
25
25
14
16
24
122.7
453.4
2,441.9
0.4
17.0
2.5
3,037.9
1,432.2
1,395.8
6.6
12.6
944.3
3,791.5
6,829.4
108.3
187.7
(190.9)
14.3
1,799.7
1,919.1
1,615.2
45.2
50.2
2.0
55.7
368.4
0.8
105.1
2,242.6
514.6
79.9
1,836.3
75.7
8.5
129.1
23.6
2,667.7
4,910.3
6,829.4
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
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 1 March 2021 and signed on its behalf by
Frank van Zanten, Chief Executive Officer and Richard Howes, Chief Financial Officer.
146
146
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
CONSOLIDATED BALANCE SHEET
at 31 December 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
At 1 January 2020
Profit for the year
Actuarial loss on defined benefit
pension schemes
Foreign currency translation differences
on foreign operations
Loss taken to equity as a result of
effective net investment hedges
Loss recognised in cash flow hedge
reserve
Income tax credit on other
comprehensive expense
Total comprehensive income
2019 interim dividend
2019 additional interim dividend
Movement from cash flow hedge reserve
to inventory†
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2020
Share
capital
£m
108.3
Share
premium
£m
184.0
Translation
reserve
£m
(111.8)
Capital
redemption
£m
16.1
Other reserves
Cash flow
hedge
£m
(2.4)
Merger
£m
2.5
Retained earnings
Own
shares
£m
(69.9)
Total
equity
£m
1,617.5 1,744.3
Earnings
£m
(63.5)
(15.9)
0.3
(79.1)
–
3.7
(8.5)
1.6
(6.9)
5.0
(9.4)
5.9
108.3
187.7
(190.9)
2.5
16.1
(4.3)
(73.4)
430.0
430.0
(16.2)
(16.2)
(63.5)
(15.9)
(8.5)
3.0
416.8
(51.7)
4.9
330.8
(51.7)
(119.8) (119.8)
5.0
3.7
(9.4)
–
16.2
1,873.1 1,919.1
(5.9)
16.2
Total equity attributable to the Company’s equity holders
† The presentation of the movements relating to the cash flow hedge reserve has been amended in the current year to more appropriately reflect the requirements of IFRS 9. Given the
immaterial amounts involved the prior year numbers have not been reclassified.
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
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
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
Notes
9
10
11
22
17
12
13
25
18
25
22
16
24
17
25
25
14
16
24
2,441.9
2,290.9
3,037.9
2,868.1
2020
£m
122.7
453.4
0.4
17.0
2.5
1,432.2
1,395.8
6.6
12.6
944.3
3,791.5
6,829.4
108.3
187.7
(190.9)
14.3
1,799.7
1,919.1
45.2
50.2
2.0
55.7
368.4
0.8
105.1
2,242.6
514.6
79.9
75.7
8.5
129.1
23.6
2,667.7
4,910.3
6,829.4
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
1,615.2
1,314.2
1,836.3
1,502.8
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 1 March 2021 and signed on its behalf by
Frank van Zanten, Chief Executive Officer and Richard Howes, Chief Financial Officer.
146
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147
147
Financial statements
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2020
Cash flow from operating activities
Profit before income tax
Adjusted for:
net finance expense
customer relationships and brands amortisation
acquisition related items
non-recurring pension scheme charges
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
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 (losses)/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
2020
£m
2019
£m
555.7
453.3
6
11
4
4
27
27
27
26
9,11
26
19
24
24
25
62.8
100.4
42.7
16.8
778.4
171.7
13.2
5.0
968.3
(24.3)
(153.8)
790.2
15.1
(33.1)
1.2
(363.2)
(380.0)
(56.6)
(171.5)
444.5
(133.5)
(37.1)
(137.1)
(22.5)
3.7
37.0
(49.1)
(122.2)
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)
288.0
14.5
140.8
288.0
0.9
429.7
144.2
14.5
(17.9)
140.8
148
148
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2020
CONSOLIDATED CASH FLOW STATEMENT CONTINUED
for the year ended 31 December 2020
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 3 on page 158 for further details of the alternative performance measures.
Notes
24
10
24
2020
£m
968.3
(33.1)
1.2
(159.6)
776.8
778.4
134.8
(159.6)
753.6
2019
£m
814.1
(36.9)
8.1
(151.6)
633.7
653.3
128.1
(151.6)
629.8
103%
101%
Cash flow from operating activities
Profit before income tax
Adjusted for:
net finance expense
customer relationships and brands amortisation
acquisition related items
non-recurring pension scheme charges
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
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 (losses)/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
2020
£m
2019
£m
555.7
453.3
6
11
4
4
27
27
27
26
9,11
26
19
24
24
25
62.8
100.4
42.7
16.8
778.4
171.7
13.2
5.0
968.3
(24.3)
(153.8)
790.2
15.1
(33.1)
1.2
(363.2)
(380.0)
(56.6)
(171.5)
444.5
(133.5)
(37.1)
(137.1)
(22.5)
3.7
37.0
(49.1)
(122.2)
140.8
288.0
0.9
429.7
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
Increase in cash and cash equivalents
288.0
14.5
148
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
149
149
Financial statements
NOTES
1 Basis of preparation
Bunzl plc (the ‘Company’) is a public company, which is limited by shares and is listed on the London Stock Exchange. The Company is
incorporated and domiciled in the United Kingdom and is registered in England and Wales.
a. Basis of accounting
The consolidated financial statements for the year ended 31 December 2020 have been approved by the Board of directors of Bunzl plc.
They are prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006
(‘IFRS’) and the applicable legal requirements of the Companies Act 2006. In addition to complying with International Accounting
Standards in conformity with the requirements of the Companies Act 2006, the consolidated financial statements also comply with
International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The consolidated financial statements also comply fully with IFRSs 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.
(i) Going concern
The directors, having reassessed the principal risks and uncertainties, consider it appropriate to adopt the going concern basis of
accounting in the preparation of the financial statements.
In reaching this conclusion, the directors noted the Group’s strong cash performance in the year and the substantial funding available to the
Group as described in the Financial review. The directors also considered a range of different forecast scenarios for the 12 month period to
the end of 28 February 2022 starting with a base case projection excluding any non-committed acquisition spend or changes in funding.
The resilience of the Group to a range of possible downside scenarios was factored into the directors’ considerations through two different
levels of stress testing against the base case projections. This included sensitising for the potential impacts of the Covid-19 pandemic; firstly
reflecting lower trading activity in the foodservice and retail sectors for a period of six months; and secondly the possibility of the impact
from the pandemic lasting for the remainder of the year, both resulting in lower profit and higher working capital. In all scenarios modelled
the Group maintains sufficient funding headroom and is in compliance with its debt covenants throughout the period of assessment. The
directors are therefore satisfied that the Group’s forecasts, which take into account reasonably possible changes in trading performance,
show that there are no material uncertainties over going concern, including no anticipated breach of covenants, and therefore the going
concern basis of preparation continues to be appropriate.
(ii) Impact of Covid-19 on the financial statements at 31 December 2020
The impact of the Covid-19 pandemic on the financial results for the Group for the year ended 31 December 2020 are detailed elsewhere in
this report, notably in the Chief Executive Officer’s review and the Financial review.
The Group’s accounting policies for inventories and trade and other receivables remain unchanged from those set out in the Company’s
2019 statutory accounts. However, the Covid-19 pandemic has significantly increased the potential risks from credit losses on trade
receivables and inventory, particularly in the businesses within the Group adversely affected by lockdown restrictions, notably in the
foodservice and retail sectors.
During 2020, the Group has seen a number of customers either entering insolvency processes or showing specific credit stress indicators
that have impacted the recoverability of receivables and customer specific inventory particularly in the foodservice and retail sectors. This
has resulted in a net charge of approximately £15m being taken during the year to reflect the risks around recoverability. In addition, there
is a heightened risk of further recoverability issues with customers, mainly in these same sectors, as government support is withdrawn and
the trading uncertainty continues. Consequently, the Group has taken an additional net charge of approximately £10m in the year relating to
aged receivables and customer specific inventory for those customers identified as having a high or medium credit risk. The Group has also
seen an increase in the level of slow moving inventory as the Covid-19 pandemic and the associated government imposed control measures
have continued to impact customer demand across a range of market sectors. This has resulted in a net charge of approximately £15m in
the year to increase slow moving inventory provisions. The resultant level of receivables and inventory provisions relative to the relevant
total balances at the end of December 2020 are marginally below the levels seen in the global financial crisis in 2008.
Impairment reviews of goodwill and customer relationships assets were completed towards the end of the year using cash flow projections
which took into account the latest expectations about the recovery of businesses in the market sectors impacted by the pandemic. Further
details of the impairment testing carried out are shown in Note 11.
b. Newly adopted accounting policies
There are no 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 2021 and beyond to have a material
impact on its consolidated results or financial position.
150
150
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Bunzl plc Annual Report 2019
NOTES
1 Basis of preparation
a. Basis of accounting
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.
The consolidated financial statements for the year ended 31 December 2020 have been approved by the Board of directors of Bunzl plc.
They are prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006
(‘IFRS’) and the applicable legal requirements of the Companies Act 2006. In addition to complying with International Accounting
Standards in conformity with the requirements of the Companies Act 2006, the consolidated financial statements also comply with
International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The consolidated financial statements also comply fully with IFRSs 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.
(i) Going concern
The directors, having reassessed the principal risks and uncertainties, consider it appropriate to adopt the going concern basis of
accounting in the preparation of the financial statements.
In reaching this conclusion, the directors noted the Group’s strong cash performance in the year and the substantial funding available to the
Group as described in the Financial review. The directors also considered a range of different forecast scenarios for the 12 month period to
the end of 28 February 2022 starting with a base case projection excluding any non-committed acquisition spend or changes in funding.
The resilience of the Group to a range of possible downside scenarios was factored into the directors’ considerations through two different
levels of stress testing against the base case projections. This included sensitising for the potential impacts of the Covid-19 pandemic; firstly
reflecting lower trading activity in the foodservice and retail sectors for a period of six months; and secondly the possibility of the impact
from the pandemic lasting for the remainder of the year, both resulting in lower profit and higher working capital. In all scenarios modelled
the Group maintains sufficient funding headroom and is in compliance with its debt covenants throughout the period of assessment. The
directors are therefore satisfied that the Group’s forecasts, which take into account reasonably possible changes in trading performance,
show that there are no material uncertainties over going concern, including no anticipated breach of covenants, and therefore the going
concern basis of preparation continues to be appropriate.
(ii) Impact of Covid-19 on the financial statements at 31 December 2020
The impact of the Covid-19 pandemic on the financial results for the Group for the year ended 31 December 2020 are detailed elsewhere in
this report, notably in the Chief Executive Officer’s review and the Financial review.
foodservice and retail sectors.
During 2020, the Group has seen a number of customers either entering insolvency processes or showing specific credit stress indicators
that have impacted the recoverability of receivables and customer specific inventory particularly in the foodservice and retail sectors. This
has resulted in a net charge of approximately £15m being taken during the year to reflect the risks around recoverability. In addition, there
is a heightened risk of further recoverability issues with customers, mainly in these same sectors, as government support is withdrawn and
the trading uncertainty continues. Consequently, the Group has taken an additional net charge of approximately £10m in the year relating to
aged receivables and customer specific inventory for those customers identified as having a high or medium credit risk. The Group has also
seen an increase in the level of slow moving inventory as the Covid-19 pandemic and the associated government imposed control measures
have continued to impact customer demand across a range of market sectors. This has resulted in a net charge of approximately £15m in
the year to increase slow moving inventory provisions. The resultant level of receivables and inventory provisions relative to the relevant
total balances at the end of December 2020 are marginally below the levels seen in the global financial crisis in 2008.
Impairment reviews of goodwill and customer relationships assets were completed towards the end of the year using cash flow projections
which took into account the latest expectations about the recovery of businesses in the market sectors impacted by the pandemic. Further
details of the impairment testing carried out are shown in Note 11.
b. Newly adopted accounting policies
There are no 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 2021 and beyond to have a material
impact on its consolidated results or financial position.
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 the Company’s
subsidiary undertakings is included in the Related undertakings note in the Shareholder information section on pages 212 to 217 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 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 based on the
risks and rewards associated with the option to purchase, 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.
The Group’s accounting policies for inventories and trade and other receivables remain unchanged from those set out in the Company’s
2019 statutory accounts. However, the Covid-19 pandemic has significantly increased the potential risks from credit losses on trade
receivables and inventory, particularly in the businesses within the Group adversely affected by lockdown restrictions, notably in the
(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.
150
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
151
151
Financial statements
Notes continued
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 18 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 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 (v) – Taxation.
Deferred tax is provided using the balance sheet liability method providing for temporary differences arising between tax bases and carrying
amounts in the consolidated financial statements. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of
assets and liabilities that affect neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future and where the Company controls the timing of the reversal. A deferred tax asset
is recognised only to the extent that it is probable that future taxable profit will be available against which the temporary difference can
be utilised.
i. Property, plant and equipment
Property, plant and equipment 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.
152
152
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
2 Accounting policies continued
e. Supplier rebates
other receivables.
f. Share based payments
g. Leases
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
The Group operates a number of equity settled share based payment compensation plans. Details of these plans are outlined in Note 18 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.
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 (v) – Taxation.
Deferred tax is provided using the balance sheet liability method providing for temporary differences arising between tax bases and carrying
amounts in the consolidated financial statements. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of
assets and liabilities that affect neither accounting nor taxable profits and differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future and where the Company controls the timing of the reversal. A deferred tax asset
is recognised only to the extent that it is probable that future taxable profit will be available against which the temporary difference can
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
be utilised.
i. Property, plant and equipment
separate items.
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2 Accounting policies continued
j. Depreciation
Depreciation is charged to the income statement 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 and brands
Customer relationships and brands intangible assets acquired in a business combination are recognised on acquisition and recorded
at fair value. Subsequent to initial recognition, customer relationships and brands 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 3 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 to its present location and condition. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated cost of completion and estimated cost necessary to make the sale. Provision is
made for obsolete, slow moving or defective items where appropriate.
n. Trade and other receivables
Trade and other receivables are initially measured at fair value, 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 ‘Financial Instruments’ 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 adjusted to reflect expectations about future credit losses. Inputs and assumptions used for expected credit loss provisions are
based on local operating company historical experience and expectations about future credit losses. The Group does not have any significant
contract assets.
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2 Accounting policies continued
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 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 held at amortised cost with a fair value adjustment with subsequent
changes in this fair value adjustment 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.
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.
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2 Accounting policies continued
o. Trade and other payables
p. Financial instruments
Classification and measurement
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.
Under IFRS 9, 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 held at amortised cost with a fair value adjustment with subsequent
changes in this fair value adjustment 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.
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.
2 Accounting policies continued
(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.
When the valuation of a defined benefit pension scheme results in a surplus, the recognised defined benefit pension asset is limited to the
present value of benefits available in the form of any future refunds from the pension scheme or reductions in future contributions and takes
into account the adverse effect of any minimum funding requirements.
v. Dividends
The interim dividend is recognised in the statement of changes in equity in the period in which it is paid and the final dividend in the period
in which it is approved by shareholders at the Annual General Meeting.
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Notes continued
2 Accounting policies continued
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 ‘Leases’ 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 2020,
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 and brands intangible assets based on estimated future performance and customer attrition rates. 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. The process applied is described in Note 26.
(ii) Recoverability of goodwill, customer relationships and brands intangible assets
As noted above, part of the Company’s strategy is to grow through acquisitions which has led to material goodwill, customer relationships
and brands 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 11. Customer relationships and brands intangible 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 and brands intangible assets relate. The
useful economic lives of customer relationships and brands intangible assets are also reviewed at least annually, with any revisions to the
original estimated useful economic lives accounted for prospectively. As at 31 December 2020 the goodwill balance was £1,494.6m (2019:
£1,403.6m), the amount of customer relationships intangible assets was £912.7m (2019: £864.9m) and the amount of brands intangible
assets was £12.5m (2019: £nil).
(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 22. The Group’s net
pension deficit balance as at 31 December 2020 was £44.8m (2019: £36.0m).
(iv) Trade receivables and inventory provisions
Due to the uncertainty created by the Covid-19 pandemic, trade receivables and inventory provisions are considered to be a source of
estimation uncertainty. The Group has seen a number of customers either entering insolvency processes or illustrating specific credit stress
indicators that impact the recoverability of receivables and customer specific inventory in the foodservice and retail sectors and there is a
heightened risk of further recoverability issues with customers, mainly in the foodservice and retail sectors, as government support is
withdrawn and the trading uncertainty continues. The Group has also seen an increase in the level of slow moving inventory as the
Covid-19 pandemic and the associated government imposed control measures have continued to impact customer demand across a
range of market sectors. As at 31 December 2020, the Group carried trade receivables provisions of £35.2m (2019: £23.9m) and provisions
for slow moving, obsolete or defective inventories of £132.5m (2019: £80.3m).
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2 Accounting policies continued
(v) 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 £77.7m (2019: £83.4m) 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.
The principal uncertainty relates to the legal arguments between the European Commission (‘the Commission’) and HM Government over
whether part of the UK’s tax regime is contrary to European Union State aid provisions. The Group, as well as HM Government and many
other tax payers, have filed appeals to the EU General Court (‘EU Court’) on this issue but no hearing date has yet been set. A payment of
up to £37m could be payable to HM Revenue & Customs (‘HMRC’) in 2021, but any such amount paid will be refunded in the event of a
favourable EU Court ruling on this matter. The Group considers it to be more likely than not that the EU Court decision will find the UK tax
regime did not amount to State aid and on that basis has not provided for any liability. It is, however, possible that a decision will be
received within the next year and that the decision will favour the Commission. In that case a material liability would arise of an amount
estimated to be up to £37m.
Other than the risk noted above, management does not consider there to be any additional significant risks 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.
Notes continued
2 Accounting policies continued
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 ‘Leases’ 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 2020,
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 and brands intangible assets based on estimated future performance and customer attrition rates. 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. The process applied is described in Note 26.
(ii) Recoverability of goodwill, customer relationships and brands intangible assets
As noted above, part of the Company’s strategy is to grow through acquisitions which has led to material goodwill, customer relationships
and brands 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 11. Customer relationships and brands intangible 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 and brands intangible assets relate. The
useful economic lives of customer relationships and brands intangible assets are also reviewed at least annually, with any revisions to the
original estimated useful economic lives accounted for prospectively. As at 31 December 2020 the goodwill balance was £1,494.6m (2019:
£1,403.6m), the amount of customer relationships intangible assets was £912.7m (2019: £864.9m) and the amount of brands intangible
assets was £12.5m (2019: £nil).
(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 22. The Group’s net
pension deficit balance as at 31 December 2020 was £44.8m (2019: £36.0m).
(iv) Trade receivables and inventory provisions
Due to the uncertainty created by the Covid-19 pandemic, trade receivables and inventory provisions are considered to be a source of
estimation uncertainty. The Group has seen a number of customers either entering insolvency processes or illustrating specific credit stress
indicators that impact the recoverability of receivables and customer specific inventory in the foodservice and retail sectors and there is a
heightened risk of further recoverability issues with customers, mainly in the foodservice and retail sectors, as government support is
withdrawn and the trading uncertainty continues. The Group has also seen an increase in the level of slow moving inventory as the
Covid-19 pandemic and the associated government imposed control measures have continued to impact customer demand across a
range of market sectors. As at 31 December 2020, the Group carried trade receivables provisions of £35.2m (2019: £23.9m) and provisions
for slow moving, obsolete or defective inventories of £132.5m (2019: £80.3m).
156
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157
157
Financial statements
Notes continued
3 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 margin
Adjusted profit
before income tax
Adjusted profit for
the year
Effective tax rate
Operating profit before customer relationships and brands amortisation, acquisition related items, non-
recurring pension scheme charges and profit or loss on disposal of businesses (reconciled in the following
tables and in the Consolidated income statement)
Adjusted operating profit as a percentage of revenue
Profit before income tax, customer relationships and brands amortisation, acquisition related items, non-
recurring pension scheme charges and profit or loss on disposal of businesses (reconciled in the following
tables)
Profit for the year before customer relationships and brands amortisation, acquisition related items, non-
recurring pension scheme charges, profit or loss on disposal of businesses and the associated tax (reconciled
in the following tables)
Tax on adjusted profit before income tax as a percentage of adjusted profit before income tax (reconciled in
Note 7)
Adjusted profit for the year divided by the weighted average number of ordinary shares in issue (reconciled in
the following tables and in Note 8)
Adjusted profit for the year divided by the diluted weighted average number of ordinary shares (reconciled in
Note 8)
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
Free cash flow
Lease adjusted
operating profit
Cash conversion
Return on average
operating capital
Return on invested
capital
EBITDA
Net debt excluding
lease liabilities
Constant exchange
rates
and equipment and software and adding back the proceeds from the sale of property, plant and equipment and
software and deducting the payment of lease liabilities (as shown in the Consolidated cash flow statement)
Operating cash flow after deducting payments for tax and net interest excluding interest on lease liabilities
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)
Operating cash flow as a percentage of lease adjusted operating profit (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, right-of-use assets, software, 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 and
brands amortisation, acquisition related items and amounts written off goodwill, net of the associated tax)
Adjusted operating profit on a 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
Net debt excluding the carrying value of lease liabilities (reconciled in Note 25)
Growth rates at constant exchange rates are calculated by retranslating the results for the year ended
31 December 2019 at the average rates for the year ended 31 December 2020 so that they can be compared
without the distorting impact of changes caused by foreign exchange translation. The principal exchange rates
used for 2020 and 2019 can be found in the Financial review on page 76
These alternative performance measures exclude the charge for customer relationships and brands amortisation, acquisition related items,
non-recurring pension scheme charges, 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, customer relationships asset impairment charges, goodwill
impairment charges and interest on acquisition related income tax. Customer relationships and brands 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 non-recurring pension scheme charges relate to non-recurring charges arising from the Group’s participation in a
number of defined benefit pension schemes. In the year ended 31 December 2020, these non-recurring pension scheme charges comprise
158
158
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
3 Alternative performance measures continued
the costs relating to the Group’s decision to withdraw from three multi-employer pension plans in North America and a charge relating to
the equalisation of guaranteed minimum pensions between male and female members on historical transfer values out of the Group’s UK
defined benefit pension scheme following the outcome of the High Court judgment in November 2020 in the case of Lloyds Banking Group
Pension Trustees Limited vs Lloyds Bank plc. 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 32
and 33, are used to monitor the performance of the Group and a number of these are based on, or derived from, the alternative performance
measures noted above. All alternative performance measures have been calculated consistently with the methods applied in the
consolidated financial statements for the year ended 31 December 2019.
Reconciliation of alternative performance measures to IFRS 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.
Year ended 31 December 2020
Adjusted operating profit
Finance income
Finance expense
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit for the year
Alternative
performance
measures
£m
778.4
10.4
(73.2)
715.6
(165.1)
550.5
Customer
relationships
and brands
amortisation
£m
(100.4)
Adjusting items
Acquisition
related
items
£m
(42.7)
Non-recurring
pension scheme
charges
£m
(16.8)
(100.4)
24.5
(75.9)
(42.7)
10.7
(32.0)
(16.8)
4.2
(12.6)
Statutory
measures
£m
618.5 Operating profit
10.4 Finance income
(73.2) Finance expense
555.7 Profit before income tax
(125.7) Income tax
430.0 Profit for the year
Cash conversion
Operating cash flow as a percentage of lease adjusted operating profit (as shown in the Consolidated cash flow
Adjusted earnings per share
164.9p
(22.7)p
(9.6)p
(3.8)p
128.8p Basic earnings per share
Return on average
The ratio of adjusted operating profit to the average of the month end operating capital employed (being
operating capital
property, plant and equipment, right-of-use assets, software, inventories and trade and other receivables less
Year ended 31 December 2019
Adjusted operating profit
Finance income
Finance expense
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
Customer
relationships
and brands
amortisation
£m
(107.3)
Adjusting items
Acquisition
related
items
£m
(17.6)
Non-recurring
pension scheme
charges
£m
–
(107.3)
29.1
(78.2)
(17.6)
4.4
(13.2)
Adjusted earnings per share
132.2p
(23.4)p
(4.0)p
Statutory
measures
£m
528.4 Operating profit
12.4 Finance income
(87.5) Finance expense
453.3 Profit before income tax
(104.1) Income tax
349.2 Profit for the year
104.8p Basic earnings per share
–
–
–
–
Notes continued
3 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 and brands amortisation, acquisition related items, non-
profit
recurring pension scheme charges and profit or loss on disposal of businesses (reconciled in the following
Operating margin
Adjusted operating profit as a percentage of revenue
tables and in the Consolidated income statement)
Adjusted profit
Profit before income tax, customer relationships and brands amortisation, acquisition related items, non-
before income tax
recurring pension scheme charges and profit or loss on disposal of businesses (reconciled in the following
Adjusted profit for
Profit for the year before customer relationships and brands amortisation, acquisition related items, non-
the year
recurring pension scheme charges, profit or loss on disposal of businesses and the associated tax (reconciled
Effective tax rate
Tax on adjusted profit before income tax as a percentage of adjusted profit before income tax (reconciled in
tables)
Note 7)
in the following tables)
Adjusted earnings
Adjusted profit for the year divided by the weighted average number of ordinary shares in issue (reconciled in
per share
the following tables and in Note 8)
Adjusted diluted
Adjusted profit for the year divided by the diluted weighted average number of ordinary shares (reconciled in
earnings per share
Note 8)
Operating cash flow Cash generated from operations before acquisition related items after deducting purchases of property, plant
Free cash flow
Lease adjusted
operating profit
and equipment and software and adding back the proceeds from the sale of property, plant and equipment and
software and deducting the payment of lease liabilities (as shown in the Consolidated cash flow statement)
Operating cash flow after deducting payments for tax and net interest excluding interest on lease liabilities
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)
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
back net debt, lease liabilities, net defined benefit pension scheme liabilities, cumulative customer relationships and
brands amortisation, acquisition related items and amounts written off goodwill, net of the associated tax)
Adjusted operating profit on a 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
Net debt excluding
Net debt excluding the carrying value of lease liabilities (reconciled in Note 25)
capital
EBITDA
lease liabilities
Constant exchange
Growth rates at constant exchange rates are calculated by retranslating the results for the year ended
rates
31 December 2019 at the average rates for the year ended 31 December 2020 so that they can be compared
without the distorting impact of changes caused by foreign exchange translation. The principal exchange rates
used for 2020 and 2019 can be found in the Financial review on page 76
These alternative performance measures exclude the charge for customer relationships and brands amortisation, acquisition related items,
non-recurring pension scheme charges, 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, customer relationships asset impairment charges, goodwill
impairment charges and interest on acquisition related income tax. Customer relationships and brands 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 non-recurring pension scheme charges relate to non-recurring charges arising from the Group’s participation in a
number of defined benefit pension schemes. In the year ended 31 December 2020, these non-recurring pension scheme charges comprise
158
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
159
159
Financial statements
Notes continued
4 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.
Year ended 31 December 2020
North
America
£m
Continental
Europe
£m
UK &
Ireland
£m
Rest of the
World
£m
Revenue
5,843.8
2,127.3
1,287.7
Corporate
£m
Total
£m
10,111.1
238.1
(35.6)
(8.1)
68.6
(8.8)
(7.2)
852.3
104.2
(16.2)
(19.0)
194.4
52.6
69.0
7.1
8.7
20.7
31.0
2.1
4.8
6.1
4.8
34.4
21.3
1.7
0.8
4.6
3.3
13.9
15.7
1.0
1.3
(28.2)
(0.4)
(28.6)
0.3
0.1
–
0.5
0.2
0.2
Continental
Europe
£m
UK &
Ireland
£m
Rest of the
World
£m
Corporate
£m
1,829.8
1,242.1
182.1
(40.9)
(5.9)
135.3
87.1
(8.2)
(2.0)
76.9
781.6
61.6
(21.4)
(3.1)
37.1
(21.1)
(21.1)
395.7
(39.8)
(8.4)
(16.4)
331.1
6.3
9.7
31.1
66.3
3.7
3.2
North
America
£m
5,473.2
343.6
(36.8)
(6.6)
300.2
Adjusted operating profit/(loss)
Customer relationships and brands amortisation
Acquisition related items
Non-recurring pensions scheme charges
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
Year ended 31 December 2019
Revenue
Adjusted operating profit/(loss)
Customer relationships and brands 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
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
778.4
(100.4)
(42.7)
(16.8)
618.5
10.4
(73.2)
555.7
715.6
(125.7)
430.0
24.4
26.6
100.1
134.8
8.7
10.3
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
160
160
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
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
North
America
£m
Continental
Europe
£m
UK &
Ireland
£m
5,843.8
2,127.3
1,287.7
238.1
(35.6)
(8.1)
68.6
(8.8)
(7.2)
Rest of the
World
£m
852.3
104.2
(16.2)
(19.0)
194.4
52.6
69.0
Corporate
£m
Total
£m
Notes continued
4 Segment analysis
operating profit.
Year ended 31 December 2020
Revenue
Adjusted operating profit/(loss)
Customer relationships and brands amortisation
Acquisition related items
Non-recurring pensions scheme charges
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
Year ended 31 December 2019
Revenue
Adjusted operating profit/(loss)
Customer relationships and brands 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
395.7
(39.8)
(8.4)
(16.4)
331.1
6.3
9.7
31.1
66.3
3.7
3.2
North
America
£m
5,473.2
343.6
(36.8)
(6.6)
300.2
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
7.1
8.7
20.7
31.0
2.1
4.8
182.1
(40.9)
(5.9)
135.3
6.1
4.8
34.4
21.3
1.7
0.8
87.1
(8.2)
(2.0)
76.9
5.7
4.1
12.4
20.4
1.4
0.9
4.6
3.3
13.9
15.7
1.0
1.3
Rest of the
World
£m
781.6
61.6
(21.4)
(3.1)
37.1
3.7
3.3
7.0
15.5
1.5
1.3
(28.2)
(0.4)
(28.6)
0.3
0.1
–
0.5
0.2
0.2
(21.1)
(21.1)
0.1
0.1
0.5
–
–
0.2
10,111.1
778.4
(100.4)
(42.7)
(16.8)
618.5
10.4
(73.2)
555.7
715.6
(125.7)
430.0
24.4
26.6
100.1
134.8
8.7
10.3
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
4 Segment analysis continued
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
Goodwill impairment charges (Note 11)
Customer relationships impairment charges (Note 11)
2020
£m
13.2
7.3
1.0
–
21.5
12.1
9.1
42.7
2019
£m
13.3
4.1
(0.3)
0.5
17.6
–
–
17.6
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 grocery, foodservice, 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 2020 the Group had no customer that represented 10% or more of total Group revenue (2019: no customers).
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.
Continental
Europe
£m
UK &
Ireland
£m
1,829.8
1,242.1
Corporate
£m
Total
£m
9,326.7
Revenue by market sector
Grocery
Foodservice
Safety
Cleaning & hygiene
Retail
Healthcare
Other
2020
£m
2,590.3
2,500.2
1,426.1
1,320.3
1,021.1
1,008.7
244.4
10,111.1
2019
£m
2,399.8
2,710.9
1,208.7
1,110.9
1,036.3
618.6
241.5
9,326.7
Revenue attributable to the UK, the parent company’s country of domicile, for the year ended 31 December 2020 was £1,192.6m,
representing 12% of the Group’s total (2019: £1,143.5m, representing 12% of the Group’s total). Revenue attributable to foreign countries in
total was £8,918.5m, representing 88% of the Group’s total (2019: £8,183.2m, representing 88% of the Group’s total). Six foreign countries
account for the majority of the revenue attributable to foreign countries, these being USA, Canada, France, the Netherlands, Australia and
Brazil. These six foreign countries account for 75% of the Group’s revenue (2019: 74%).
Non-current assets attributable to the UK, the parent company’s country of domicile, for the year ended 31 December 2020 was £441.2m,
representing 15% of the Group’s total (2019: £418.8m, representing 15% of the Group’s total). Non-current assets attributable to foreign
countries in total was £2,596.7m, representing 85% of the Group’s total (2019: £2,449.3m, representing 85% of the Group’s total). Six foreign
countries account for the majority of the non-current assets attributable to foreign countries, these being USA, Canada, France, the
Netherlands, Australia and Brazil. These six foreign countries account for 66% of the Group’s total non-current assets (2019: 65%).
160
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
161
161
Financial statements
Notes continued
4 Segment analysis continued
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.
At 31 December 2020
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
At 31 December 2019
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
North
America
£m
2,597.2
Continental
Europe
£m
1,669.9
UK &
Ireland
£m
930.1
Rest of the
World
£m
640.3
2,597.2
1,669.9
930.1
640.3
1,063.1
599.7
524.8
206.3
1,063.1
599.7
524.8
206.3
Unallocated
£m
991.9
991.9
2,516.4
2,516.4
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
5 Analysis of operating income and expenses
Cost of goods sold
Employee costs (Note 23)
Depreciation of property, plant and equipment (Note 9)
Depreciation of right-of-use assets (Note 10)
Amortisation of intangible assets (Note 11)
Acquisition related items (Note 4)
Non-recurring pension scheme charges (Note 22)
Net impairment losses on trade receivables (Note 13)
Loss/(profit) on disposal of property, plant and equipment
Expense relating to short term leases and low value assets
Lease and sublease income
Other operating expenses
Net operating expenses
Total
£m
5,837.5
991.9
6,829.4
2,393.9
2,516.4
4,910.3
Total
£m
5,263.6
656.4
5,920.0
1,997.5
2,178.2
4,175.7
2019
£m
7,033.2
873.8
24.5
128.1
114.7
17.6
–
6.0
(4.7)
7.1
(2.6)
600.6
8,798.3
656.4
656.4
2,178.2
2,178.2
2020
£m
7,526.3
935.1
26.6
134.8
110.7
42.7
16.8
15.9
0.8
8.0
(2.1)
677.0
9,492.6
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.
Non-recurring pension scheme charges for the year ended 31 December 2020 of £16.8m (2019: £nil) comprise a £16.4m charge relating
to the cost of the Group’s withdrawal from three multi-employer pension plans in North America and a £0.4m charge relating to the
equalisation of guaranteed minimum pension between male and female members on historical transfer values out of the Group’s UK
defined benefit pension schemes following the outcome of the High Court judgment in November 2020 in the case of Lloyds Banking Group
Pension Trustees Limited vs Lloyds Bank plc. Further details on these charges are shown in Note 22.
162
162
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
4 Segment analysis continued
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.
Notes continued
At 31 December 2020
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
At 31 December 2019
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
5 Analysis of operating income and expenses
Cost of goods sold
Employee costs (Note 23)
Depreciation of property, plant and equipment (Note 9)
Depreciation of right-of-use assets (Note 10)
Amortisation of intangible assets (Note 11)
Acquisition related items (Note 4)
Non-recurring pension scheme charges (Note 22)
Net impairment losses on trade receivables (Note 13)
Loss/(profit) on disposal of property, plant and equipment
Expense relating to short term leases and low value assets
Lease and sublease income
Other operating expenses
Net operating expenses
North
America
£m
Continental
Europe
£m
2,597.2
1,669.9
UK &
Ireland
£m
930.1
Rest of the
World
Unallocated
£m
£m
640.3
2,597.2
1,669.9
930.1
640.3
1,063.1
599.7
524.8
206.3
1,063.1
599.7
524.8
206.3
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
Total
£m
5,837.5
991.9
6,829.4
2,393.9
2,516.4
4,910.3
Total
£m
5,263.6
656.4
5,920.0
1,997.5
2,178.2
4,175.7
873.8
24.5
128.1
114.7
17.6
–
6.0
(4.7)
7.1
(2.6)
991.9
991.9
2,516.4
2,516.4
£m
656.4
656.4
2,178.2
2,178.2
935.1
26.6
134.8
110.7
42.7
16.8
15.9
0.8
8.0
(2.1)
2020
£m
2019
£m
7,526.3
7,033.2
677.0
600.6
9,492.6
8,798.3
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.
Non-recurring pension scheme charges for the year ended 31 December 2020 of £16.8m (2019: £nil) comprise a £16.4m charge relating
to the cost of the Group’s withdrawal from three multi-employer pension plans in North America and a £0.4m charge relating to the
equalisation of guaranteed minimum pension between male and female members on historical transfer values out of the Group’s UK
defined benefit pension schemes following the outcome of the High Court judgment in November 2020 in the case of Lloyds Banking Group
Pension Trustees Limited vs Lloyds Bank plc. Further details on these charges are shown in Note 22.
5 Analysis of operating income and expenses continued
Auditors’ remuneration
Audit of these financial statements
Amounts receivable by the Company’s auditors* in respect of:
audit of financial statements of subsidiaries of the Company
audit related assurance services
all other services
Total auditors’ remuneration
* Including their associates.
UK
£m
0.5
Overseas
£m
–
0.4
0.1
0.1
1.1
3.0
–
–
3.0
2020
Total
£m
0.5
3.4
0.1
0.1
4.1
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
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.
Other firms are normally used by the Company to provide non-audit services. However, if the provision of a service by the Company’s
auditors is permitted 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 108 to 113.
6 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
Interest related to income tax
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 on US private placement notes and senior bond in a hedge relationship
Fair value gain on interest rate swaps in a hedge relationship
Foreign exchange gain/(loss) on intercompany funding
Foreign exchange (loss)/gain on external debt and foreign exchange forward contracts
Interest related to income tax
Other finance expense
Finance expense
Net finance expense
2020
£m
2.6
5.3
0.3
0.1
2.1
10.4
(44.2)
(22.5)
(2.4)
(1.0)
(15.2)
15.4
3.5
(4.0)
(1.1)
(1.7)
(73.2)
(62.8)
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)
The foreign exchange gain on intercompany funding arises as a result of the retranslation of foreign currency intercompany loans. This gain
on intercompany funding is substantially matched by the foreign exchange loss on external debt and foreign exchange forward contracts
not in a hedge relationship which minimises the foreign currency exposure in the income statement.
162
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
163
163
Financial statements
Notes continued
7 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
2020
£m
161.1
(12.5)
148.6
(19.7)
(3.2)
(22.9)
125.7
2019
£m
122.8
(7.8)
115.0
(11.3)
0.4
(10.9)
104.1
In assessing the underlying performance of the Group, management uses adjusted profit before income tax. The tax effect of the adjusting
items (see Note 3) 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.
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
Tax on other comprehensive income/(expense)
and equity
Actuarial loss on defined benefit pension schemes
Foreign currency translation differences on foreign
operations
(Loss)/gain 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
Dividends
Movement from cash flow hedge reserve to inventory
Issue of share capital
Employee trust shares
Share based payments
Other comprehensive expense and equity
Gross
£m
(16.2)
(63.5)
(15.9)
(8.5)
–
(104.1)
(171.5)
6.1
3.7
(9.4)
14.9
(260.3)
2020
£m
125.7
39.4
165.1
555.7
159.9
715.6
22.6%
23.1%
Tax credit
£m
3.0
2020
Net
£m
(13.2)
Gross
£m
(8.3)
Tax credit
£m
2.2
2019
£m
104.1
33.5
137.6
453.3
124.9
578.2
23.0%
23.8%
2019
Net
£m
(6.1)
0.3
–
1.6
–
4.9
–
(1.1)
–
–
1.3
5.1
(63.2)
(104.1)
–
(104.1)
(15.9)
(6.9)
–
(99.2)
(171.5)
5.0
3.7
(9.4)
16.2
(255.2)
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
16.9
(0.4)
(3.6)
(97.3)
(167.3)
–
5.7
(30.4)
13.8
(275.5)
164
164
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
7 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
In assessing the underlying performance of the Group, management uses adjusted profit before income tax. The tax effect of the adjusting
items (see Note 3) 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.
Tax on other comprehensive income/(expense)
Tax credit
Tax credit
Actuarial loss on defined benefit pension schemes
Foreign currency translation differences on foreign
and equity
operations
(Loss)/gain 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
Dividends
Movement from cash flow hedge reserve to inventory
Issue of share capital
Employee trust shares
Share based payments
Gross
£m
(16.2)
(63.5)
(15.9)
(8.5)
–
(104.1)
(171.5)
6.1
3.7
(9.4)
14.9
(63.2)
(104.1)
2020
Net
£m
(13.2)
(15.9)
(6.9)
–
(99.2)
(171.5)
5.0
3.7
(9.4)
16.2
Gross
£m
(8.3)
16.9
(0.5)
(4.3)
(100.3)
(167.3)
–
5.7
(30.4)
13.5
£m
3.0
0.3
–
1.6
4.9
(1.1)
–
–
–
–
1.3
5.1
Other comprehensive expense and equity
(260.3)
(255.2)
(278.8)
2020
£m
161.1
(12.5)
148.6
(19.7)
(3.2)
(22.9)
125.7
2020
£m
125.7
39.4
165.1
555.7
159.9
715.6
22.6%
23.1%
£m
2.2
–
–
0.1
0.7
3.0
–
–
–
–
0.3
3.3
2019
£m
122.8
(7.8)
115.0
(11.3)
0.4
(10.9)
104.1
2019
£m
104.1
33.5
137.6
453.3
124.9
578.2
23.0%
23.8%
2019
Net
£m
(6.1)
(104.1)
16.9
(0.4)
(3.6)
(97.3)
(167.3)
–
5.7
(30.4)
13.8
(275.5)
7 Income tax continued
Factors affecting the tax charge for the year
The Group operates in many countries and is subject to different rates of income tax in those countries. The expected tax rate is calculated
as a weighted average of the tax rates in the tax jurisdictions in which the Group operates, most of which are higher than the UK statutory
rate for the year of 19.0% (2019: 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 (2020: 24.7%; 2019: 23.3%)
Effects of:
non-deductible expenditure
impact of intercompany finance
change in tax rates
prior year adjustments from acquisitions
other prior year adjustments
other current year items
Income tax on profit
Deferred tax in the income statement
Property, plant and equipment
Defined benefit pension schemes
Goodwill and customer relationships
Provisions and accruals
Inventories
Leases
Other
Deferred tax on profit
2020
£m
555.7
2019
£m
453.3
137.4
105.6
5.8
(2.1)
(0.3)
(5.1)
(10.6)
0.6
125.7
2020
£m
(0.1)
(2.6)
(16.7)
(4.4)
1.7
0.2
(1.0)
(22.9)
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)
Future tax liabilities may be affected by the Commission’s decision that part of the UK’s tax regime is contrary to European Union State
aid provisions. The Group, as well as HM Government and many other tax payers, have filed appeals to the EU Court on this issue but no
hearing date has yet been set. The potential liability for this risk is estimated to be between £nil and £37m as at 31 December 2020 and its
resolution will depend on the decision of the EU Court and any further appeals. Based on the current legal challenge the Group does not
consider any provision is required for this risk. However, the Group notes that HM Government has recently passed legislation to facilitate
collection of those amounts which HMRC considers represent State aid according to the Commission’s decision. It is possible that tax will
be payable to HMRC in 2021 of up to £37m and that a refund of the full amount would be made in the event of a favourable EU Court ruling
on this matter.
In addition and as expected, the Group made a cash payment during the year of BRL100.4m (£15.2m) for tax plus interest and penalties in
relation to a tax dispute in Brazil. This had no effect on the tax charge for the year.
8 Earnings per share
Profit for the year
Adjusted for:
customer relationships and brands amortisation
acquisition related items
non-recurring pension scheme charges
tax credit on adjusting items
Adjusted profit for the year
164
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
2020
£m
430.0
100.4
42.7
16.8
(39.4)
550.5
2019
£m
349.2
107.3
17.6
–
(33.5)
440.6
165
165
Financial statements
Notes continued
8 Earnings per share continued
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
9 Property, plant and equipment
2020
Cost
Beginning of year
Acquisitions (Note 26)
Additions
Disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
2020
333.8
1.3
335.1
128.8p
36.1p
164.9p
128.3p
36.0p
164.3p
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
83.2
2.7
4.1
(0.8)
4.7
93.9
41.6
4.5
(0.7)
3.6
49.0
151.4
4.7
9.4
(4.6)
(1.3)
159.6
102.1
12.8
(4.0)
(0.5)
110.4
100.6
1.2
10.9
(6.1)
0.5
107.1
73.2
9.3
(5.6)
1.6
78.5
2019
333.3
1.0
334.3
104.8p
27.4p
132.2p
104.5p
27.3p
131.8p
Total
£m
335.2
8.6
24.4
(11.5)
3.9
360.6
216.9
26.6
(10.3)
4.7
237.9
Net book value at 31 December 2020
44.9
49.2
28.6
122.7
2019
Cost
Beginning of year
Acquisitions (Note 26)
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
166
166
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
8 Earnings per share continued
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
9 Property, plant and equipment
2020
Cost
Beginning of year
Acquisitions (Note 26)
Additions
Disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
2019
Cost
Beginning of year
Acquisitions (Note 26)
Additions
Disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
2020
333.8
1.3
335.1
128.8p
36.1p
164.9p
128.3p
36.0p
164.3p
1.2
10.9
(6.1)
0.5
73.2
9.3
(5.6)
1.6
78.5
105.1
0.8
10.9
(12.3)
(3.9)
100.6
79.2
8.9
(12.4)
(2.5)
73.2
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
151.4
100.6
159.6
107.1
83.2
2.7
4.1
(0.8)
4.7
93.9
41.6
4.5
(0.7)
3.6
49.0
90.1
0.1
4.3
(8.2)
(3.1)
83.2
45.2
3.7
(5.8)
(1.5)
41.6
4.7
9.4
(4.6)
(1.3)
102.1
12.8
(4.0)
(0.5)
110.4
157.0
0.3
11.9
(11.9)
(5.9)
151.4
105.4
11.9
(10.8)
(4.4)
102.1
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
equipment
£m
2019
333.3
1.0
334.3
104.8p
27.4p
132.2p
104.5p
27.3p
131.8p
Total
£m
335.2
8.6
24.4
(11.5)
3.9
360.6
216.9
26.6
(10.3)
4.7
237.9
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 2020
44.9
49.2
28.6
122.7
10 Right-of-use assets
2020
Net book value at beginning of year
Acquisitions (Note 26)
Additions
Depreciation charge in the year
Remeasurement adjustments
Currency translation
Net book value at 31 December 2020
2019
Net book value at beginning of year
Right-of-use assets on transition to IFRS 16
Acquisitions (Note 26)
Additions
Depreciation charge in the year
Remeasurement adjustments
Currency translation
Net book value at 31 December 2019
11 Intangible assets
2020
Cost
Beginning of year
Acquisitions (Note 26)
Additions
Disposals
Currency translation
End of year
Accumulated amortisation and impairment
Beginning of year
Amortisation charge in year
Impairment charge in year
Disposals
Currency translation
End of year
Property
£m
341.5
30.8
62.4
(95.2)
22.7
(3.9)
358.3
Motor vehicles
£m
66.4
3.9
24.7
(29.4)
0.5
0.3
66.4
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
25.0
0.5
13.0
(10.2)
1.0
(0.6)
28.7
Equipment
£m
–
24.6
0.6
9.5
(8.9)
–
(0.8)
25.0
Total
£m
432.9
35.2
100.1
(134.8)
24.2
(4.2)
453.4
Total
£m
–
449.4
6.5
105.2
(128.1)
14.4
(14.5)
432.9
Goodwill
£m
Customer
relationships
£m
Brands
£m
Software
£m
Total
£m
1,403.6
108.8
(5.7)
1,506.7
–
12.1
–
12.1
1,710.9
172.2
–
(8.9)
1,874.2
846.0
100.1
9.1
–
6.3
961.5
–
13.7
–
(0.9)
12.8
–
0.3
–
–
–
0.3
74.7
2.0
8.7
(1.7)
1.8
85.5
52.3
10.3
–
(0.9)
1.7
63.4
3,189.2
296.7
8.7
(1.7)
(13.7)
3,479.2
898.3
110.7
21.2
(0.9)
8.0
1,037.3
Net book value at 31 December 2020
1,494.6
912.7
12.5
22.1
2,441.9
Net book value at 31 December 2019
41.6
49.3
27.4
118.3
166
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Bunzl plc Annual Report 2020
167
167
Financial statements
Notes continued
11 Intangible assets continued
2019
Cost
Beginning of year
Acquisitions (note 26)
Additions
Disposals
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Goodwill
£m
Customer
relationships
£m
Brands
£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
22.4
2,290.9
Net book value at 31 December 2019
1,403.6
864.9
Goodwill, customer relationships and brands intangible assets have been acquired as part of business combinations. Further details of
acquisitions made in the year are set out in Note 26.
Customer relationships include two businesses with individually significant customer relationships assets, MCR Safety acquired in
September 2020 and based in North America and Hedis acquired in 2017 and based in France. The net book value of customer relationships
in MCR Safety as at 31 December 2020 was £95.5m with a remaining useful economic life of 14.7 years. The net book value of customer
relationships in Hedis as at 31 December 2020 was £105.4m (2019: £108.4m) with a remaining useful economic life of 12.9 years
(2019: 13.9 years).
Following a review of the Group’s operations within the Asia Pacific CGU, the Group announced the closure of a safety business in China
with effect from 31 December 2020 and, as a result, recognised impairment charges of £14.8m during the year, comprising £12.1m relating
to goodwill and £2.7m relating to customer relationships.
Impairment testing
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. Given the unprecedented
challenges presented by the Covid-19 pandemic and the global economic impact, a particular focus has been to consider the potential
ongoing impacts of the Covid-19 pandemic on the performance of each CGU during the projection period in preparing the value in use
calculations, with specific consideration given to the potential impacts on the foodservice and retail sectors. The discount rates used are
determined with assistance provided by external valuation specialists.
168
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
11 Intangible assets continued
2019
Cost
Beginning of year
Acquisitions (note 26)
Additions
Disposals
Currency translation
End of year
Accumulated amortisation
Beginning of year
Charge in year
Disposals
Currency translation
End of year
Customer
Goodwill
relationships
£m
£m
Brands
£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
Goodwill, customer relationships and brands intangible assets have been acquired as part of business combinations. Further details of
acquisitions made in the year are set out in Note 26.
Customer relationships include two businesses with individually significant customer relationships assets, MCR Safety acquired in
September 2020 and based in North America and Hedis acquired in 2017 and based in France. The net book value of customer relationships
in MCR Safety as at 31 December 2020 was £95.5m with a remaining useful economic life of 14.7 years. The net book value of customer
relationships in Hedis as at 31 December 2020 was £105.4m (2019: £108.4m) with a remaining useful economic life of 12.9 years
(2019: 13.9 years).
Following a review of the Group’s operations within the Asia Pacific CGU, the Group announced the closure of a safety business in China
with effect from 31 December 2020 and, as a result, recognised impairment charges of £14.8m during the year, comprising £12.1m relating
to goodwill and £2.7m relating to customer relationships.
The carrying amount of goodwill is allocated across CGUs and is tested annually for impairment by comparing the recoverable amount of
Impairment testing
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. Given the unprecedented
challenges presented by the Covid-19 pandemic and the global economic impact, a particular focus has been to consider the potential
ongoing impacts of the Covid-19 pandemic on the performance of each CGU during the projection period in preparing the value in use
calculations, with specific consideration given to the potential impacts on the foodservice and retail sectors. The discount rates used are
determined with assistance provided by external valuation specialists.
11 Intangible assets continued
The Group last reviewed the composition of the Group’s CGUs in 2018. To reflect more appropriately the way that the Group is now
structured, including recent changes to management oversight and responsibility, the allocation of goodwill to CGUs for impairment testing
purposes was updated for the 2020 impairment testing exercise, with goodwill allocated across seven CGUs in 2020 (2019: eleven). The
change in the number of CGUs is driven by the consolidation of five CGUs across UK & Ireland into one combined UK & Ireland CGU for
goodwill impairment testing purposes, reflecting changes in management responsibility and a move to greater centralisation of services and
sharing of resources to drive synergies across the business area. Impairment testing was also performed in 2020 based on the previous
CGUs to ensure that no potential impairments were avoided as a result of the change to the composition of the CGUs. Based on impairment
testing using both the previous and updated CGUs no impairments were identified to the carrying value of goodwill within the Group other
than the £12.1m goodwill impairment charge specifically related to the closure of a safety business in China as noted above.
As at 31 December 2020 North America, UK & Ireland, 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 2020 the carrying value of goodwill in respect of North America was
£490.9m (2019: £428.9m), UK & Ireland was £282.4m (2019: £265.6m), France was £260.3m (2019: £247.1m) and Rest of Continental Europe
was £195.6m (2019: £183.6m). As at 31 December 2020 the aggregate amount of goodwill attributable to the Group’s CGUs, excluding North
America, UK & Ireland, France and Rest of Continental Europe, was £265.4m (2019: £278.4m), none of which is individually significant.
For North America, UK & Ireland, France and Rest of Continental Europe, the weighted average long term growth rate used in 2020 was in
the range of 2.5%–3.5% (2019: 2.5%–3.5%) reflecting anticipated revenue and profit growth. A pre-tax discount rate in the range of 7%–10%
(2019: 7%–10%) 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%–5.9%
(2019: 2.5%–6.5%) and discount rates ranging from 7%–14% (2019: 7%–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, focusing on businesses impacted adversely by the Covid-19 pandemic, including those in the
foodservice and retail sectors. As for the impairment testing for the Group’s CGUs noted above, value in use calculations were prepared
based on management’s latest expectations of the performance of the relevant business over a five year projection period and appropriate
long term growth and discount rates. As a result of this impairment testing, in addition to the impairment charge of £2.7m recognised due
to the closure of a safety business in China noted above, the Group has recognised a further impairment charge of £6.4m relating to the
customer relationships intangible asset of a foodservice business within the UK & Ireland CGU and a safety business within the Rest of
Continental Europe CGU.
The Group has also considered whether climate change would have a significant impact on the approach taken to the annual impairment
testing. For this the Group modelled the potential impacts of three alternative climate change scenarios, and concluded that, while it is an
emerging risk the Group does not expect it to have a material financial impact and is sufficiently far into the future not to warrant any
amendment to the assumptions used in the impairment testing.
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.
12 Inventories
Goods for resale
2020
£m
1,432.2
2019
£m
1,177.2
During the year £10.1m (2019: £5.5m) was written off from inventories due to obsolescence or damage. The provision for slow moving,
obsolete or defective inventories at 31 December 2020 was £132.5m (2019: £80.3m). During the year the Group has seen a heightened risk
of recoverability issues on customer specific inventory and an increase in the level of slow moving inventory as the Covid-19 pandemic
and the associated government imposed control measures have continued to impact customer demand across a range of market sectors.
This has resulted in an increase in the level of provisions required.
168
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Bunzl plc Annual Report 2020
169
169
Financial statements
Notes continued
13 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
2020
£m
1,138.0
96.1
161.7
1,395.8
2019
£m
1,020.2
70.3
163.6
1,254.1
Gross
£m
936.1
163.0
43.2
30.9
1,173.2
2020
Provision
£m
6.6
1.8
2.7
24.1
35.2
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
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
Released
Utilised
Currency translation
End of year
2020
£m
23.9
4.1
16.9
(4.3)
(4.4)
(1.0)
35.2
2019
£m
25.6
0.1
6.9
(0.9)
(6.7)
(1.1)
23.9
The movement in the year includes a net charge of £12.6m (2019: £6.0m) reflecting the increased risk of credit losses as a result of the
impact of the Covid-19 pandemic. The total net impairment losses on trade receivables during the year were £15.9m comprising the net
charge of £12.6m relating to the trade receivables provision and a £3.3m charge relating to the write-off of gross trade receivable balances
not previously provided for.
14 Trade and other payables – current
Trade payables
Other tax and social security contributions
Other payables
Accruals and contract liabilities
2020
£m
1,080.4
34.0
235.8
486.1
1,836.3
2019
£m
1,067.9
23.7
151.2
260.0
1,502.8
The Group’s contract liabilities are limited to deferred income of £82.9m (2019: £4.4m). This arises from contracts with customers in the
form of consideration that has been received in advance of the satisfaction of performance obligations.
170
170
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
13 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
Released
Utilised
Currency translation
End of year
not previously provided for.
14 Trade and other payables – current
Trade payables
Other payables
Other tax and social security contributions
Accruals and contract liabilities
Gross
£m
936.1
163.0
43.2
30.9
1,173.2
2020
Provision
£m
6.6
1.8
2.7
24.1
35.2
Gross
£m
832.9
146.2
42.9
22.1
1,044.1
1,138.0
1,020.2
2020
£m
96.1
161.7
2019
£m
70.3
163.6
1,395.8
1,254.1
2019
Provision
£m
3.8
1.4
1.5
17.2
23.9
2019
£m
25.6
0.1
6.9
(0.9)
(6.7)
(1.1)
23.9
2020
£m
23.9
4.1
16.9
(4.3)
(4.4)
(1.0)
35.2
1,080.4
1,067.9
2020
£m
34.0
235.8
486.1
2019
£m
23.7
151.2
260.0
1,836.3
1,502.8
The movement in the year includes a net charge of £12.6m (2019: £6.0m) reflecting the increased risk of credit losses as a result of the
impact of the Covid-19 pandemic. The total net impairment losses on trade receivables during the year were £15.9m comprising the net
charge of £12.6m relating to the trade receivables provision and a £3.3m charge relating to the write-off of gross trade receivable balances
The Group’s contract liabilities are limited to deferred income of £82.9m (2019: £4.4m). This arises from contracts with customers in the
form of consideration that has been received in advance of the satisfaction of performance obligations.
15 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 158) 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 2020 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.
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:
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 page 177.
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 rates 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 2020 in relation to the interest rate swaps or the forward currency contracts.
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.
170
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
171
171
Financial statements
Notes continued
15 Risk management and financial instruments continued
The Group has substantial funding available comprising multi-currency credit facilities from the Group’s banks, US private placement notes
and senior bonds. During 2020, the Group issued a £400m bond which matures in 2030 under the terms of its Euro Medium Term Note
(EMTN) Programme. The bond issued extends the maturity profile of the Group’s debt portfolio and diversifies its funding sources.
Loans, borrowings and net debt
Bank overdrafts
Bank loans
US private placement notes
Borrowings due within one year
Bank loans
US private placement notes
Senior bonds
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
2020
£m
(514.6)
(0.5)
(79.4)
(594.5)
(45.1)
(874.8)
(695.3)
(1,615.2)
10.4
(2,199.3)
944.3
(1,255.0)
(497.5)
(1,752.5)
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)
Further information on the movement in net debt and lease liabilities is shown in Note 25.
The total available committed funding at 31 December 2020 was £2,594.3m (2019: £2,374.5m). The committed funding maturity profile at
31 December 2020 is set out in the chart below.
Committed funding maturity profile by year (£m)
800
700
600
500
400
300
200
100
0
300
174
45
166
2025
324
120
2024
105
79
2021
160
115
2022
170
157
2023
Bank facilities – undrawn
Senior bonds
Bank facilities – drawn
US private placement notes
400
115
2026
128
2027
36
2028
2029
2030
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
2020
£m
105.0
160.0
668.0
933.0
2019
£m
–
243.1
756.3
999.4
In addition, the Group maintains overdraft and uncommitted facilities to provide short term flexibility. As at 31 December 2020 there were
no loans secured by fixed charges on property (2019: none).
172
172
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
Loans, borrowings and net debt
Bank overdrafts
Bank loans
US private placement notes
Borrowings due within one year
Bank loans
US private placement notes
Senior bonds
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
Derivatives managing the interest rate risk and currency profile of the debt
2020
£m
(514.6)
(0.5)
(79.4)
(594.5)
(45.1)
(874.8)
(695.3)
2019
£m
(469.7)
(0.4)
(83.3)
(553.4)
(63.1)
(953.1)
(298.0)
(1,615.2)
(1,314.2)
10.4
10.1
(2,199.3)
(1,857.5)
944.3
(1,255.0)
(497.5)
(1,752.5)
610.5
(1,247.0)
(480.0)
(1,727.0)
Further information on the movement in net debt and lease liabilities is shown in Note 25.
The total available committed funding at 31 December 2020 was £2,594.3m (2019: £2,374.5m). The committed funding maturity profile at
31 December 2020 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
2020
£m
105.0
160.0
668.0
933.0
2019
£m
–
243.1
756.3
999.4
In addition, the Group maintains overdraft and uncommitted facilities to provide short term flexibility. As at 31 December 2020 there were
no loans secured by fixed charges on property (2019: none).
15 Risk management and financial instruments continued
The Group has substantial funding available comprising multi-currency credit facilities from the Group’s banks, US private placement notes
and senior bonds. During 2020, the Group issued a £400m bond which matures in 2030 under the terms of its Euro Medium Term Note
(EMTN) Programme. The bond issued extends the maturity profile of the Group’s debt portfolio and diversifies its funding sources.
15 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 and SONIA 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.
2020
Financial liabilities
Bank overdrafts
Bank loans
US private placement notes
Senior bonds
Lease payments
Trade and other payables
Derivative financial instruments
Net settled:
Interest rate swaps
Gross settled:
Foreign exchange inflows
Foreign exchange outflows
Total
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
Contractual cash (outflows)/inflows
Total
contractual
cash flows
£m
Within one
year
£m
(514.6)
(46.6)
(1,050.7)
(793.9)
(583.9)
(1,852.5)
(4,842.2)
(514.6)
(0.6)
(109.8)
(12.8)
(146.3)
(1,802.3)
(2,586.4)
After
one year
but within
two years
£m
–
(0.3)
(142.6)
(12.8)
(122.4)
(50.2)
(328.3)
After
two years
but within
five years
£m
–
(45.7)
(501.6)
(338.3)
(184.6)
–
(1,070.2)
After
five years
£m
–
–
(296.7)
(430.0)
(130.6)
–
(857.3)
21.8
2.9
2.9
8.9
7.1
1,803.9
(1,809.6)
16.1
(4,826.1)
1,803.9
(1,809.6)
(2.8)
(2,589.2)
–
–
2.9
(325.4)
–
–
8.9
(1,061.3)
–
–
7.1
(850.2)
Contractual cash (outflows)/inflows
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)
–
(1.0)
(110.8)
(6.8)
(118.5)
(19.5)
(256.6)
–
(64.9)
(464.4)
(20.3)
(198.1)
–
(747.7)
After
five years
£m
–
–
(491.8)
(306.8)
(115.3)
–
(913.9)
12.3
1.6
1.6
4.8
4.3
1,089.3
(1,091.6)
10.0
(4,120.9)
1,089.3
(1,091.6)
(0.7)
(2,213.4)
–
–
1.6
(255.0)
–
–
4.8
(742.9)
–
–
4.3
(909.6)
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173
173
Financial statements
Notes continued
15 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 £954.2m
(2019: £1,036.4m), there are US dollar denominated amounts totalling £100.4m (2019: £235.7m), 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. Of the senior bonds of
£695.3m (2019: £298.0m), an amount totalling £396.9m (2019: £nil), with a maturity of 2030, has been swapped to floating rates using
interest rate swaps which reprice daily.
During 2020, £127.7m (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 2020 this remaining fair value adjustment on the US private placement notes was a credit of £25.1m (2019: £12.2m).
In the consolidated cash flow statement the cash inflow of £15.1m (2019: £12.2m) from the cancellation of the interest rate swap is shown
within increase in borrowings.
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 bonds
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
2020
£m
2019
£m
(954.2)
(695.3)
(1,649.5)
497.3
(1,152.2)
(514.6)
(45.6)
(560.2)
(497.3)
(1,057.5)
(1,036.4)
(298.0)
(1,334.4)
235.7
(1,098.7)
(469.7)
(63.5)
(533.2)
(235.7)
(768.9)
Derivatives managing the interest rate risk and currency profile of the debt
Gross debt
10.4
(2,199.3)
10.1
(1,857.5)
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 on US private placement notes and senior bond in a hedge relationship (£m)
Fair value gain on interest rate swaps in a hedge relationship (£m)
2020
2019
11.8
487.6
2026–2030
1:1
(15.2)
15.4
11.5
223.5
2026–2028
1:1
(10.7)
10.8
174
174
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
–
–
2020
2019
+1%
£m
0.6
0.6
Impact on profit before tax
–1%
£m
Impact on equity
–1%
£m
–
–
+1%
£m
0.6
0.6
15 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
15 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 £954.2m
(2019: £1,036.4m), there are US dollar denominated amounts totalling £100.4m (2019: £235.7m), 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. Of the senior bonds of
£695.3m (2019: £298.0m), an amount totalling £396.9m (2019: £nil), with a maturity of 2030, has been swapped to floating rates using
interest rate swaps which reprice daily.
During 2020, £127.7m (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 2020 this remaining fair value adjustment on the US private placement notes was a credit of £25.1m (2019: £12.2m).
In the consolidated cash flow statement the cash inflow of £15.1m (2019: £12.2m) from the cancellation of the interest rate swap is shown
within increase in borrowings.
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 bonds
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
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
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:
Fair value loss on US private placement notes and senior bond in a hedge relationship (£m)
Fair value gain on interest rate swaps in a hedge relationship (£m)
2020
£m
2019
£m
(954.2)
(695.3)
(1,649.5)
497.3
(1,036.4)
(298.0)
(1,334.4)
235.7
(1,152.2)
(1,098.7)
(514.6)
(45.6)
(560.2)
(497.3)
(1,057.5)
(469.7)
(63.5)
(533.2)
(235.7)
(768.9)
10.4
10.1
(2,199.3)
(1,857.5)
2020
2019
2026–2030
2026–2028
11.8
487.6
1:1
(15.2)
15.4
11.5
223.5
1:1
(10.7)
10.8
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.
US dollar
Euro
Average rate
Closing rate
2020
1.28
1.12
2019
1.28
1.14
2020
1.37
1.12
2019
1.32
1.18
(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:
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 12 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 2020, all foreign exchange cash flow hedges were effective with a cumulative pre-tax loss of £5.3m
(2019 cumulative pre-tax loss of £2.9m) recognised in equity at the end of the year and this will affect the income statement during 2021.
Effects of hedge accounting on the financial position and performance
Forward foreign currency hedges in relation to inventory purchases
Net carrying amount (liability) (£m)
Notional amount at 31 December 2020 (£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)
2020
2019
(5.3)
143.9
2021
1:1
2.4
(2.4)
(2.9)
131.5
2020
1:1
4.8
(4.8)
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:
US dollar
Sterling
Euro
Other
2020
£m
458.0
308.5
398.4
90.1
1,255.0
2019
£m
485.3
426.7
295.9
39.1
1,247.0
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.
174
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175
175
Financial statements
Notes continued
15 Risk management and financial instruments continued
Sensitivity to movements in foreign exchange rates
For the year ended 31 December 2020, a movement of one cent in the US dollar and euro average exchange rates would have changed profit
before income tax by £2.0m and £1.2m respectively (2019: £1.7m and £0.8m) and adjusted profit before income tax by £2.5m and £1.5m
respectively (2019: £2.0m 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.
2020
2019
Impact on profit before tax
+10%
£m
0.4
1.7
–10%
£m
(0.5)
(2.1)
Impact on equity
–10%
£m
200.9
205.0
+10%
£m
(192.7)
(174.1)
(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 178) and trade and other receivables (see Note 13) 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 13 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 (2019: none).
176
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Bunzl plc Annual Report 2020
Notes continued
15 Risk management and financial instruments continued
Sensitivity to movements in foreign exchange rates
For the year ended 31 December 2020, a movement of one cent in the US dollar and euro average exchange rates would have changed profit
before income tax by £2.0m and £1.2m respectively (2019: £1.7m and £0.8m) and adjusted profit before income tax by £2.5m and £1.5m
respectively (2019: £2.0m 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
0.4
1.7
–10%
£m
(0.5)
(2.1)
+10%
£m
(192.7)
(174.1)
–10%
£m
200.9
205.0
2020
2019
(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 178) and trade and other receivables (see Note 13) 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 13 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 (2019: none).
15 Risk management and financial instruments continued
Financial instruments
Financial assets and liabilities
Financial assets held at amortised cost
Cash at bank and in hand
Trade and other receivables
Financial assets held at fair value
Interest rate derivatives in fair value hedges
Foreign exchange derivatives in cash flow hedges
Foreign exchange derivatives in net investment hedges
Other foreign exchange and interest rate derivatives
Total financial assets
Financial liabilities held at amortised cost
Bank overdrafts
Bank loans
US private placement notes
Senior bonds
Lease liability
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
Other payables
Total financial liabilities
2020
£m
2019
£m
944.3
1,299.7
12.6
–
4.6
12.4
2,273.6
(514.6)
(45.6)
(954.2)
(695.3)
(497.5)
(1,793.6)
(0.8)
(5.3)
(16.3)
(2.0)
(58.9)
(4,584.1)
610.5
1,183.8
11.5
0.3
0.3
2.8
1,809.2
(469.7)
(63.5)
(1,036.4)
(298.0)
(480.0)
(1,495.4)
–
(3.2)
(3.8)
(0.7)
(3.2)
(3,853.9)
Financial assets and liabilities stated as being measured at fair value in the tables above (including all derivative financial instruments),
with the exception of other payables, 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 level two 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. Other payables measured at fair value relate to earn outs on businesses acquired. 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. There were no transfers between levels for recurring fair value measurements during the year.
As at 31 December 2020 the fair values, based on unadjusted market data, of the US private placement notes was £991.9m (2019: £1,069.4m)
and of the senior bonds was £731.6m (2019: £306.7m).
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.
176
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177
177
Financial statements
Notes continued
15 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.
2020
Derivative financial assets
Derivative financial liabilities
2019
Derivative financial assets
Derivative financial liabilities
16 Provisions
Current
Non-current
Gross
amounts
offset in the
balance sheet
£m
–
–
Net amounts
recognised
in the
balance sheet
£m
29.6
(24.4)
Amounts not
offset in the
balance sheet
£m
(19.4)
19.4
Gross
amounts
£m
29.6
(24.4)
Net
amounts
£m
10.2
(5.0)
14.9
(7.7)
–
–
14.9
(7.7)
(1.9)
1.9
2020
£m
8.5
55.7
64.2
Other
£m
28.7
1.1
1.1
(8.4)
(0.8)
21.7
13.0
(5.8)
2019
£m
6.5
33.9
40.4
2019
Total
£m
47.4
1.7
1.4
(8.6)
(1.5)
40.4
Beginning of year
Charge
Acquisitions
Utilised or released
Currency translation
End of year
Properties
£m
18.7
5.9
1.0
(1.7)
0.4
24.3
MEPP
withdrawal
£m
–
16.4
–
–
(1.1)
15.3
Other
£m
21.7
2.6
3.4
(2.5)
(0.6)
24.6
2020
Total
£m
40.4
24.9
4.4
(4.2)
(1.3)
64.2
Properties
£m
18.7
0.6
0.3
(0.2)
(0.7)
18.7
MEPP
withdrawal
£m
–
–
–
–
–
–
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.
The MEPP withdrawal provision relates to the withdrawal liability on multi-employer pension plans in North America. See Note 22 for
further details.
Group companies are, from time to time, subject to certain claims and litigation incidental to their operations and arising in the ordinary
course of business including, but not limited to, those relating to the products and services that they supply, contractual and commercial
disputes, environmental claims and employment related disputes. Other provisions include management’s best estimate of the liabilities for
such claims and litigation at the balance sheet date, determined by reference to known factors and past experience of similar items. Provision
is made if, on the basis of current information and professional advice, liabilities are considered likely to arise. Management expects these
matters to be settled within the next one to five years. While any dispute has an element of uncertainty, management does not expect that the
actual outcome of any such claims and litigation, either individually or in the aggregate, will be materially different to the amounts provided.
In the case of unfavourable outcomes, the Group may benefit from applicable insurance protection.
178
178
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
Derivative financial assets
Derivative financial liabilities
2020
2019
Derivative financial assets
Derivative financial liabilities
16 Provisions
Current
Non-current
15 Risk management and financial instruments continued
Offsetting of financial assets and liabilities
netting agreements.
The following table sets out the Group’s derivative financial assets and liabilities that are subject to counterparty offsetting or master
Gross
Net amounts
amounts
offset in the
recognised
in the
Amounts not
offset in the
amounts
balance sheet
balance sheet
balance sheet
amounts
Gross
£m
29.6
(24.4)
14.9
(7.7)
£m
–
–
–
–
£m
29.6
(24.4)
14.9
(7.7)
£m
(19.4)
19.4
(1.9)
1.9
2020
£m
8.5
55.7
64.2
Net
£m
10.2
(5.0)
13.0
(5.8)
2019
£m
6.5
33.9
40.4
2019
Total
£m
47.4
1.7
1.4
(8.6)
(1.5)
40.4
Beginning of year
Charge
Acquisitions
Utilised or released
Currency translation
End of year
Properties
withdrawal
MEPP
£m
–
16.4
–
–
(1.1)
15.3
£m
18.7
5.9
1.0
(1.7)
0.4
24.3
Other
£m
21.7
2.6
3.4
(2.5)
(0.6)
24.6
Properties
withdrawal
MEPP
£m
2020
Total
£m
40.4
24.9
4.4
(4.2)
(1.3)
64.2
£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
–
–
–
–
–
–
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.
The MEPP withdrawal provision relates to the withdrawal liability on multi-employer pension plans in North America. See Note 22 for
further details.
Group companies are, from time to time, subject to certain claims and litigation incidental to their operations and arising in the ordinary
course of business including, but not limited to, those relating to the products and services that they supply, contractual and commercial
disputes, environmental claims and employment related disputes. Other provisions include management’s best estimate of the liabilities for
such claims and litigation at the balance sheet date, determined by reference to known factors and past experience of similar items. Provision
is made if, on the basis of current information and professional advice, liabilities are considered likely to arise. Management expects these
matters to be settled within the next one to five years. While any dispute has an element of uncertainty, management does not expect that the
actual outcome of any such claims and litigation, either individually or in the aggregate, will be materially different to the amounts provided.
In the case of unfavourable outcomes, the Group may benefit from applicable insurance protection.
17 Deferred tax
Property, plant and equipment
Defined benefit pension schemes
Goodwill and customer relationships
Share based payments
Leases
Provisions and accruals
Inventories
Other
Deferred tax asset/(liability)
Set-off of tax
Net deferred tax asset/(liability)
Asset
£m
1.2
11.4
3.2
7.1
7.1
33.2
10.5
10.7
84.4
(81.9)
2.5
Liability
£m
(10.6)
(0.1)
(160.4)
–
(0.1)
(2.0)
(10.4)
(3.4)
(187.0)
81.9
(105.1)
2020
Net
£m
(9.4)
11.3
(157.2)
7.1
7.0
31.2
0.1
7.3
(102.6)
–
(102.6)
Asset
£m
1.2
7.6
3.9
5.4
7.4
25.3
7.0
8.7
66.5
(62.8)
3.7
Liability
£m
(10.8)
(1.9)
(166.5)
–
–
(0.5)
(8.6)
(2.0)
(190.3)
62.8
(127.5)
2019
Net
£m
(9.6)
5.7
(162.6)
5.4
7.4
24.8
(1.6)
6.7
(123.8)
–
(123.8)
Except as noted below, deferred tax is calculated in full on temporary differences under the liability method using the tax rate of the country
of operation.
The Company is able to control the dividend policy of its subsidiaries and, therefore, the timing of the remittance of the undistributed
earnings of overseas subsidiaries. In general, the Company has determined either that such earnings will not be distributed in the
foreseeable future or, where there are plans to remit those earnings, no tax liability is expected to arise except for a liability of £0.6m which
has been provided for.
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 £6.2m
(2019: £14.6m).
No deferred tax has been recognised in respect of unutilised capital losses of £94.6m (2019: £94.7m) 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
2020
£m
123.8
–
123.8
6.6
(22.9)
(4.3)
0.9
(1.5)
102.6
2019
£m
149.7
(7.6)
142.1
1.2
(10.9)
(2.5)
0.3
(6.4)
123.8
178
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
179
179
Financial statements
Notes continued
18 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
2020
£m
108.3
2019
£m
108.3
2020
2019
336,792,607 336,425,304
367,303
336,998,961 336,792,607
206,354
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 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 (2019: £500) per month (or the equivalent value in other
currencies under the International Sharesave Plan) or €500 (2019: €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.
As at 31 December 2020 the trust held 3,006,186 (2019: 3,383,452) shares, upon which dividends have been waived, with an aggregate
nominal value of £1.0m (2019: £1.1m) and market value of £73.4m (2019: £69.9m).
180
180
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
18 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
2020
£m
108.3
2019
£m
108.3
2020
2019
336,792,607 336,425,304
206,354
367,303
336,998,961 336,792,607
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 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 (2019: £500) per month (or the equivalent value in other
currencies under the International Sharesave Plan) or €500 (2019: €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.
As at 31 December 2020 the trust held 3,006,186 (2019: 3,383,452) shares, upon which dividends have been waived, with an aggregate
nominal value of £1.0m (2019: £1.1m) and market value of £73.4m (2019: £69.9m).
18 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 (£)
2020
10.03.20–30.10.20
15.55–25.21
nil–23.92
3,418,392
3–5.2
18–24
3.0–10
3.0–6.7
0.0–0.2
2.1–3.3
1.34–22.34
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
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 £24.29
(2019: £23.76). The total charge for the year relating to share based payments was £14.9m (2019: £13.5m). After tax the total charge was
£11.2m (2019: £13.5m).
Details of share options and awards which have been granted and exercised, those which have lapsed during 2020 and those outstanding
and available to exercise at 31 December 2020, 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 01.01.2020
Number
Number
Grants/
awards
2020
Price (£)
Exercises
2020
Price (£)
Lapses*
2020
Number
Number
Number
Options
outstanding
at 31.12.20
Price (£)
Options
available
to exercise
at 31.12.20
Number
675,527
238,761
15.28
101,349 15.28-19.16
163,411
649,528 15.28–19.16
9,816
15.28
15.28
91,392
9,518
266,497
42,309
1,119,025
4,441
41,099 15.64-19.16
2,594 15.64-18.68
556,690 6.77-15.66
nil
9,781,485 2,442,954 18.40-23.92 1,553,494 16.38-24.01
nil
1,281,682
4,441
nil
635,767
13,170,966 3,418,392
191,722
2,451,389
49,297
9,878
267,493 15.28-19.16
39,355 15.28-19.16
8.13-15.66
nil
562,335
–
182
562,335
556,879 10,114,066 16.38-24.41 3,377,098
51,662
246,637
4,001,093
1,479,090
1,026,102 13,111,867
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 2020, the weighted average fair values and the weighted average remaining contractual lives
(being the time period from 31 December 2020 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 (£)
3.92
4.14
4.44
2.78
13.14
Weighted average
remaining
contractual life
(years)
2.06
1.77
1.55
7.40
4.61
The outstanding share options and performance share awards are exercisable at various dates up to September 2030.
180
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
181
181
Financial statements
Notes continued
19 Dividends
2018 interim
2018 final
2019 interim
2019 additional interim*
Total
Total dividends per share for the year to which they relate are:
Interim
Final*
Total
2020
£m
51.7
119.8
171.5
2020
15.8p
38.3p
54.1p
2019
£m
50.7
116.6
167.3
Per share
2019
15.5p
35.8p
51.3p
The 2020 interim dividend of 15.8p per share was paid on 7 January 2021 and comprised £52.8m of cash. The 2020 final dividend of 38.3p
per share will be paid on 1 July 2021 to shareholders on the register at the close of business on 21 May 2021. The 2020 final dividend will
comprise approximately £128m of cash.
* The 2019 final dividend of 35.8p per share recommended by the Board of directors of the Company in the 2019 Annual results announcement on 24 February 2020 was
subsequently not proposed at the Annual General Meeting on 15 April 2020 as a result of the heightened uncertainty created by the Covid-19 pandemic. As a result of the better than
expected trading performance during the first half of the year, the Board of directors of the Company decided to reinstate the final dividend for the year ended 31 December 2019 at
the same level as originally proposed (35.8p per share) as an additional interim dividend for the year ended 31 December 2019. This was paid on 16 November 2020 and comprised
£119.8m of cash.
20 Contingent liabilities
Bank guarantees
2020
£m
1.3
2019
£m
2.2
In addition see Note 7 on page 165 for details of the separate contingent liability relating to the Commission’s decision that part of the UK’s
tax regime is contrary to European State aid provisions.
21 Directors’ ordinary share interests
The interests of the directors, and their connected persons, in the share capital of the Company at 31 December were:
Peter Ventress
Frank van Zanten
Richard Howes
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vinodka Murria*
Maria Fernanda Mejía◊
2020
2,608
122,428
8,363
3,000
4,000
–
–
–
140,399
2019
–
104,438
–
3,000
4,000
–
–
–
111,438
* Vinodka Murria was appointed as a director of the Company on 1 June 2020.
◊ Maria Fernanda Mejía was appointed as a director of the Company on 23 December 2020.
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 2020 and 1 March 2021.
182
182
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
19 Dividends
2018 interim
2018 final
2019 interim
2019 additional interim*
Total
Interim
Final*
Total
£119.8m of cash.
20 Contingent liabilities
Bank guarantees
Peter Ventress
Frank van Zanten
Richard Howes
Vanda Murray
Lloyd Pitchford
Stephan Nanninga
Vinodka Murria*
Maria Fernanda Mejía◊
Total dividends per share for the year to which they relate are:
The 2020 interim dividend of 15.8p per share was paid on 7 January 2021 and comprised £52.8m of cash. The 2020 final dividend of 38.3p
per share will be paid on 1 July 2021 to shareholders on the register at the close of business on 21 May 2021. The 2020 final dividend will
comprise approximately £128m of cash.
* The 2019 final dividend of 35.8p per share recommended by the Board of directors of the Company in the 2019 Annual results announcement on 24 February 2020 was
subsequently not proposed at the Annual General Meeting on 15 April 2020 as a result of the heightened uncertainty created by the Covid-19 pandemic. As a result of the better than
expected trading performance during the first half of the year, the Board of directors of the Company decided to reinstate the final dividend for the year ended 31 December 2019 at
the same level as originally proposed (35.8p per share) as an additional interim dividend for the year ended 31 December 2019. This was paid on 16 November 2020 and comprised
In addition see Note 7 on page 165 for details of the separate contingent liability relating to the Commission’s decision that part of the UK’s
tax regime is contrary to European State aid provisions.
21 Directors’ ordinary share interests
The interests of the directors, and their connected persons, in the share capital of the Company at 31 December were:
2020
£m
51.7
119.8
171.5
2020
15.8p
38.3p
54.1p
2019
£m
50.7
116.6
167.3
Per share
2019
15.5p
35.8p
51.3p
2020
£m
1.3
2019
£m
2.2
122,428
104,438
2020
2,608
8,363
3,000
4,000
–
–
–
2019
3,000
4,000
–
–
–
–
–
140,399
111,438
* Vinodka Murria was appointed as a director of the Company on 1 June 2020.
◊ Maria Fernanda Mejía was appointed as a director of the Company on 23 December 2020.
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 2020 and 1 March 2021.
22 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 2020 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 2020 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 2020 and showed that there was a required annual contribution of $7.1m. In 2021, the Group plans to contribute
$8.0m for the 2020 plan year to cover prudently this required contribution and anticipate future funding needs. In 2020, the Group also paid
a contribution of $8.0m for the 2019 plan year. The annual review as at 1 January 2021 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.
182
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Bunzl plc Annual Report 2020
183
183
Financial statements
Notes continued
22 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
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 on defined benefit pension schemes
2020
£m
22.0
6.2
28.2
0.4
28.6
(0.3)
1.0
29.3
2020
£m
57.9
2.0
(77.4)
1.3
(16.2)
The cumulative amount of net actuarial losses arising since 1 January 2004 recognised in the statement of comprehensive income at
31 December 2020 was £116.0m (2019: £99.8m).
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)
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation rate
2020
3.4%
2.4%
1.4%
2.4%
2019
3.4%
2.2%
2.1%
2.2%
UK
2018
3.6%
2.2%
2.9%
2.2%
2020
3.0%
–
2.3%
2.3%
2020
22.0
23.4
21.4
2019
3.0%
–
3.1%
2.3%
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
US
2018
3.0%
–
4.2%
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.
184
184
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
22 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.
22 Retirement benefits continued
The (increase)/decrease that would arise on the overall net pension deficit as at 31 December 2020 as a result of reasonably possible
changes to key assumptions was:
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.
UK
US
Impact of change
in longevity
–1 year
£m
16.5
4.9
+1 year
£m
(16.2)
(4.8)
Impact of change
in inflation rate
–0.25%
£m
10.8
0.1
+0.25%
£m
(11.6)
(0.1)
Impact of change
in discount rate
–0.25%
£m
(21.9)
(4.5)
+0.25%
£m
20.5
4.3
The market value of pension scheme assets and the present value of retirement benefit obligations at 31 December were:
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
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 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 2020 was £116.0m (2019: £99.8m).
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)
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation rate
2020
3.4%
2.4%
1.4%
2.4%
2019
3.4%
2.2%
2.1%
2.2%
UK
2018
3.6%
2.2%
2.9%
2.2%
2020
3.0%
–
2.3%
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.
UK
US
184
2020
£m
22.0
6.2
28.2
0.4
28.6
(0.3)
1.0
29.3
2020
£m
57.9
2.0
(77.4)
1.3
(16.2)
2020
22.0
23.4
21.4
2019
3.0%
–
3.1%
2.3%
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
US
2018
3.0%
–
4.2%
2.3%
2020
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
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
UK
£m
143.3
293.9
1.1
438.3
(437.9)
–
(437.9)
–
0.4
0.4
(0.1)
0.3
UK
£m
129.9
259.6
0.5
390.0
(379.2)
–
(379.2)
–
10.8
10.8
(1.9)
8.9
US
£m
58.0
54.0
13.7
125.7
(142.9)
(11.6)
(154.5)
(28.8)
–
(28.8)
6.8
(22.0)
US
£m
57.2
50.9
13.4
121.5
(140.2)
(11.9)
(152.1)
(30.6)
–
(30.6)
3.1
(27.5)
Of the pension scheme assets, £566.6m (2019: £512.3m) are valued based on a quoted market prices.
Movement in net deficit
Beginning of year
Current service cost
Past service cost
Contributions
Net interest expense
Actuarial loss
Currency translation
End of year
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Other
£m
4.1
8.6
15.6
28.3
(31.1)
(13.6)
(44.7)
(16.4)
–
(16.4)
4.6
(11.8)
Other
£m
5.8
6.0
13.3
25.1
(28.9)
(12.4)
(41.3)
(16.2)
–
(16.2)
4.5
(11.7)
2020
£m
(36.0)
(6.2)
(0.4)
14.6
(0.7)
(16.2)
0.1
(44.8)
Total
£m
205.4
356.5
30.4
592.3
(611.9)
(25.2)
(637.1)
(45.2)
0.4
(44.8)
11.3
(33.5)
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)
2019
£m
(38.5)
(5.2)
–
14.9
(1.1)
(8.3)
2.2
(36.0)
185
185
Financial statements
Notes continued
22 Retirement benefits continued
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
Benefits paid
Currency translation
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Interest income
Actuarial gain
Contributions by employer
Contributions by employees
Benefits paid
Currency translation
End of year
2020
£m
572.6
6.2
0.4
12.9
0.6
74.1
(26.1)
(3.6)
637.1
2020
£m
536.6
12.2
57.9
14.6
0.6
(26.1)
(3.5)
592.3
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
The actual return on pension scheme assets was a gain of £70.1m (2019: gain of £83.6m).
The Group expects to pay approximately £15.3m in contributions to the defined benefit pension schemes in the year ending
31 December 2021 (expected as at 31 December 2019 for the year ending 31 December 2020: £15.3m) including £7.0m for the UK
(expected as at 31 December 2019 for the year ending 31 December 2020: £7.0m).
The weighted average duration of the defined benefit pension scheme liabilities at 31 December 2020 was approximately 19.4 years
(2019: 19.1 years) for the UK and 11.7 years (2019: 11.7 years) for the US.
The total defined benefit pension scheme liabilities are divided between active members (£206.8m (2019: (£193.0m)), deferred members
(£204.2m (2019: £174.9m)) and pensioners (£226.1m (2019: £204.7m)).
Multi-employer pension plans
The Group participates in six multi-employer pensions plans (‘MEPPs’) in North America. Although these plans are defined benefit plans the
Group does not have sufficient information to account for them as defined benefit plans and, therefore, in accordance with IAS 19, accounts
for them as defined contribution plans.
For MEPPs, US law requires payment of a withdrawal liability when employers cease contributing to underfunded MEPPs. The liability
for withdrawal payments is shared by all members of the group of companies in any particular plan and solvent entities must cover the
unfunded liabilities of employers who are unable to pay due to insolvency or bankruptcy. On withdrawal from a plan, an employer’s
withdrawal liability amount is calculated by reference to the employer’s proportionate share of the MEPP’s unfunded vested benefits based
on the employer’s share of all contributions made to the plan over the previous 10 years.
During the year the Group reviewed its exposure to the six MEPPs in which it participated and determined that it was in its best interests to
serve notice to withdraw from three of the plans due to their critical funding status. The Group served notice to withdraw from these three
plans during the year and in so doing became liable to pay withdrawal liabilities for these plans. In accordance with IAS 37, ‘Provisions,
Contingent Liabilities and Contingent Assets’, an estimated withdrawal liability for these three plans of $21.0m (£16.4m) was recognised
during the year in non-recurring pensions scheme charges, with a provision carried forward of £15.3m as at 31 December 2020, as shown
in Note 16.
The Group continues to participate in the other three MEPPs and continues to account for these as defined contribution plans with the
combined ongoing annual contributions for the three plans in 2021 expected to be no more than £2m per annum.
Guaranteed minimum pension equalisation on transfer values
During the year the Group has recognised a charge of £0.4m in non-recurring pensions scheme charges relating to the equalisation of
guaranteed minimum pension (‘GMP’) between male and female members on historical transfer values out of the Group’s UK defined
benefit pension schemes following the outcome of the High Court judgment in November 2020 in the Lloyds Banking Group Trustees case.
186
186
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
22 Retirement benefits continued
Changes in the present value of defined benefit pension scheme liabilities
Changes in the fair value of defined benefit pension scheme assets
Notes continued
Contributions by employees
Beginning of year
Current service cost
Past service cost
Interest expense
Actuarial loss
Benefits paid
Currency translation
End of year
Beginning of year
Interest income
Actuarial gain
Contributions by employer
Contributions by employees
Benefits paid
Currency translation
End of year
2020
£m
572.6
6.2
0.4
12.9
0.6
74.1
(26.1)
(3.6)
637.1
2020
£m
536.6
12.2
57.9
14.6
0.6
(26.1)
(3.5)
592.3
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
The actual return on pension scheme assets was a gain of £70.1m (2019: gain of £83.6m).
The Group expects to pay approximately £15.3m in contributions to the defined benefit pension schemes in the year ending
31 December 2021 (expected as at 31 December 2019 for the year ending 31 December 2020: £15.3m) including £7.0m for the UK
(expected as at 31 December 2019 for the year ending 31 December 2020: £7.0m).
The weighted average duration of the defined benefit pension scheme liabilities at 31 December 2020 was approximately 19.4 years
(2019: 19.1 years) for the UK and 11.7 years (2019: 11.7 years) for the US.
The total defined benefit pension scheme liabilities are divided between active members (£206.8m (2019: (£193.0m)), deferred members
(£204.2m (2019: £174.9m)) and pensioners (£226.1m (2019: £204.7m)).
Multi-employer pension plans
for them as defined contribution plans.
The Group participates in six multi-employer pensions plans (‘MEPPs’) in North America. Although these plans are defined benefit plans the
Group does not have sufficient information to account for them as defined benefit plans and, therefore, in accordance with IAS 19, accounts
For MEPPs, US law requires payment of a withdrawal liability when employers cease contributing to underfunded MEPPs. The liability
for withdrawal payments is shared by all members of the group of companies in any particular plan and solvent entities must cover the
unfunded liabilities of employers who are unable to pay due to insolvency or bankruptcy. On withdrawal from a plan, an employer’s
withdrawal liability amount is calculated by reference to the employer’s proportionate share of the MEPP’s unfunded vested benefits based
on the employer’s share of all contributions made to the plan over the previous 10 years.
During the year the Group reviewed its exposure to the six MEPPs in which it participated and determined that it was in its best interests to
serve notice to withdraw from three of the plans due to their critical funding status. The Group served notice to withdraw from these three
plans during the year and in so doing became liable to pay withdrawal liabilities for these plans. In accordance with IAS 37, ‘Provisions,
Contingent Liabilities and Contingent Assets’, an estimated withdrawal liability for these three plans of $21.0m (£16.4m) was recognised
during the year in non-recurring pensions scheme charges, with a provision carried forward of £15.3m as at 31 December 2020, as shown
in Note 16.
The Group continues to participate in the other three MEPPs and continues to account for these as defined contribution plans with the
combined ongoing annual contributions for the three plans in 2021 expected to be no more than £2m per annum.
Guaranteed minimum pension equalisation on transfer values
During the year the Group has recognised a charge of £0.4m in non-recurring pensions scheme charges relating to the equalisation of
guaranteed minimum pension (‘GMP’) between male and female members on historical transfer values out of the Group’s UK defined
benefit pension schemes following the outcome of the High Court judgment in November 2020 in the Lloyds Banking Group Trustees case.
23 Directors and employees
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
MEPP withdrawal liability charge
2020
7,618
5,151
3,671
3,348
19,788
65
19,853
Closing
2019
6,699
5,033
3,834
3,226
18,792
65
18,857
2020
7,078
5,042
3,808
3,248
19,176
63
19,239
2020
£m
801.2
90.8
28.2
14.9
935.1
0.4
16.4
951.9
Average
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
In addition to the above, acquisition related items for the year ended 31 December 2020 include deferred consideration payments of £13.2m
(2019: £13.3m) relating to the retention of former owners of businesses acquired.
Key management remuneration
Salaries and short term employee benefits
Share based payments
Retirement benefits
2020
£m
7.1
2.5
0.7
10.3
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
2020
£m
0.7
1.7
1.3
3.7
2019
£m
6.4
2.0
0.9
9.3
2019
£m
0.7
1.9
1.2
3.8
More detailed information concerning directors’ emoluments and long term incentives is set out in the Directors’ remuneration report.
The aggregate amount of gains made by directors on the exercise of share options during the year was £0.1m (2019: £0.4m). The aggregate
market value of performance share awards exercised by directors under long term incentive schemes during the year was £0.8m
(2019: £0.7m). The aggregate market value of share awards exercised by directors under the DASBS was £0.2m (2019: £0.4m).
186
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
187
187
Financial statements
Notes continued
24 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.
Movement in lease liabilities
Beginning of year
Lease liabilities on transition to IFRS 16
Acquisitions (Note 26)
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
2020
£m
480.0
–
35.2
100.1
22.5
(159.6)
24.2
(4.9)
497.5
129.1
368.4
497.5
2019
£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 2020, the Group had £8.6m (2019: £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 2020. In relation to leases which are included in lease liabilities, there
are potential further future cash flows of £26.5m (2019: £46.2m) if termination options are not exercised and extension options are exercised.
The cash outflow for low value and short term leases was £8.0m for the year ended 31 December 2020 (2019: £7.1m).
25 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
2020
£m
944.3
(514.6)
429.7
(79.9)
(1,615.2)
10.4
(1,255.0)
(497.5)
(1,752.5)
2019
£m
610.5
(469.7)
140.8
(83.7)
(1,314.2)
10.1
(1,247.0)
(480.0)
(1,727.0)
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
2020
£m
475.3
(45.6)
429.7
2019
£m
180.6
(39.8)
140.8
188
188
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes continued
24 Lease liabilities
varying terms and renewal rights.
Movement in lease liabilities
Beginning of year
Lease liabilities on transition to IFRS 16
Acquisitions (Note 26)
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
2020
£m
480.0
–
35.2
100.1
22.5
(159.6)
24.2
(4.9)
497.5
129.1
368.4
497.5
2019
£m
–
498.3
6.5
105.2
23.3
(151.6)
14.4
(16.1)
480.0
121.8
358.2
480.0
2020
£m
944.3
(514.6)
429.7
(79.9)
10.4
(1,255.0)
(497.5)
(1,752.5)
2019
£m
610.5
(469.7)
140.8
(83.7)
10.1
(1,247.0)
(480.0)
(1,727.0)
(1,615.2)
(1,314.2)
2020
£m
475.3
(45.6)
429.7
2019
£m
180.6
(39.8)
140.8
As at 31 December 2020, the Group had £8.6m (2019: £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 2020. In relation to leases which are included in lease liabilities, there
are potential further future cash flows of £26.5m (2019: £46.2m) if termination options are not exercised and extension options are exercised.
The cash outflow for low value and short term leases was £8.0m for the year ended 31 December 2020 (2019: £7.1m).
25 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:
The Group leases certain property, plant, equipment and vehicles under non-cancellable operating lease agreements. These leases have
25 Cash and cash equivalents and net debt continued
Movement in net debt
2020
Beginning of year excluding lease liabilities
Net cash inflow
Realised losses on foreign exchange contracts
Currency translation
End of year excluding lease liabilities
Lease liabilities
End of year including lease liabilities
2019
Beginning of year excluding lease liabilities
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
Net debt
£m
(1,247.0)
14.1
(37.1)
15.0
(1,255.0)
(497.5)
(1,752.5)
Net debt
£m
(1,386.5)
99.1
13.6
26.8
(1,247.0)
(480.0)
(1,727.0)
Cash and cash
equivalents
£m
140.8
288.0
–
0.9
429.7
–
429.7
Cash and cash
equivalents
£m
144.2
14.5
–
(17.9)
140.8
–
140.8
Other
components
£m
(1,387.8)
(273.9)
(37.1)
14.1
(1,684.7)
(497.5)
(2,182.2)
Other
components
£m
(1,530.7)
84.6
13.6
44.7
(1,387.8)
(480.0)
(1,867.8)
The net cash outflow of £273.9m (2019: inflow of £84.6m) on other components of net debt comprises an increase in borrowings of £444.5m
(2019: £75.5m), a repayment of borrowings of £133.5m (2019: £173.7m) and the impact of a realised loss of £37.1m on foreign exchange
contracts (2019: gain of £13.6m).
26 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. A key 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’ as revised. 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 2020 relating to
acquisitions completed in 2019. At 31 December 2020 the allocation period for all acquisitions completed since 1 January 2020 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. Adjustments are made to the value of assets
acquired to reflect more accurately the estimated realisable or settlement value. Similarly, adjustments are made to acquired liabilities to
record onerous commitments or other commitments existing at the acquisition date but not recognised by the acquiree. Adjustments are
also 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. 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 and announced 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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189
189
Financial statements
Notes continued
26 Acquisitions continued
2020
Summary details of the businesses acquired during the year ended 31 December 2020 are shown in the table below:
Business
Joshen Paper & Packaging
Medcorp
Bodyguard Workwear
MCR Safety
Abco Kovex◊
ICM†
SP Equipamentos
Snelling
Other
Acquisitions agreed and completed in the current year
Sector
Grocery
Healthcare
Safety
Safety
Other
Safety
Safety
Cleaning & Hygiene
Country
US
Brazil
UK
US
Ireland
Denmark
Brazil
Canada
Acquisition of 80% of share capital.
† Acquisition of 78.9% of share capital.
Acquisition date
2020
6 January
31 January
28 February
1 September
30 September
30 October
30 November
7 December
Annualised
revenue
£m
254.9
9.4
7.6
206.7
20.3
49.5
23.9
27.2
2.3
601.8
The acquisition of MCR Safety is considered to be individually significant due to its impact on intangible assets. The acquisition is
therefore separately disclosed in the table below. Although the Joshen Paper & Packaging acquisition represents approximately 42% of the
annualised revenue acquired during the year, it is a lower than average margin business and as a result accounts for only 11% of the total
cash outflow in respect of acquisitions. In 2019 there were no individually significant acquisitions. A summary of the effect of acquisitions in
2020 and 2019 is shown below:
Customer relationships
Brands
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 at prior year end but completed in the current year
Total committed spend in respect of acquisitions agreed in the current year
MCR Safety
£m
104.5
13.7
6.5
18.0
62.0
35.0
(20.2)
7.4
(0.2)
(18.0)
(0.1)
208.6
71.8
280.4
245.2
35.2
280.4
1.4
(7.4)
2.1
276.5
–
276.5
Other
£m
67.7
–
4.1
17.2
40.2
54.6
(44.0)
1.5
(4.2)
(17.2)
(9.8)
110.1
37.0
147.1
122.7
24.4
147.1
17.7
(1.5)
5.2
168.5
–
168.5
2020
Total
£m
172.2
13.7
10.6
35.2
102.2
89.6
(64.2)
8.9
(4.4)
(35.2)
(9.9)
318.7
108.8
427.5
367.9
59.6
427.5
19.1
(8.9)
7.3
445.0
–
445.0
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
190
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Notes continued
26 Acquisitions continued
2020
Joshen Paper & Packaging
Business
Medcorp
Bodyguard Workwear
MCR Safety
Abco Kovex◊
ICM†
SP Equipamentos
Snelling
Other
Summary details of the businesses acquired during the year ended 31 December 2020 are shown in the table below:
Sector
Grocery
Healthcare
Safety
Safety
Other
Safety
Safety
Country
US
Brazil
UK
US
Ireland
Denmark
Brazil
Cleaning & Hygiene
Canada
Acquisition date
2020
6 January
31 January
28 February
1 September
30 September
30 October
30 November
7 December
Annualised
revenue
£m
254.9
9.4
7.6
206.7
20.3
49.5
23.9
27.2
2.3
601.8
Acquisitions agreed and completed in the current year
Acquisition of 80% of share capital.
† Acquisition of 78.9% of share capital.
The acquisition of MCR Safety is considered to be individually significant due to its impact on intangible assets. The acquisition is
therefore separately disclosed in the table below. Although the Joshen Paper & Packaging acquisition represents approximately 42% of the
annualised revenue acquired during the year, it is a lower than average margin business and as a result accounts for only 11% of the total
cash outflow in respect of acquisitions. In 2019 there were no individually significant acquisitions. A summary of the effect of acquisitions in
2020 and 2019 is shown below:
Property, plant and equipment and software
Customer relationships
Brands
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
MCR Safety
£m
104.5
13.7
6.5
18.0
62.0
35.0
(20.2)
7.4
(0.2)
(18.0)
(0.1)
208.6
71.8
280.4
245.2
35.2
280.4
1.4
(7.4)
2.1
Other
£m
67.7
–
4.1
17.2
40.2
54.6
(44.0)
1.5
(4.2)
(17.2)
(9.8)
110.1
37.0
147.1
122.7
24.4
147.1
17.7
(1.5)
5.2
2020
Total
£m
172.2
13.7
10.6
35.2
102.2
89.6
(64.2)
8.9
(4.4)
(35.2)
(9.9)
318.7
108.8
427.5
367.9
59.6
427.5
19.1
(8.9)
7.3
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
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
276.5
168.5
445.0
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
276.5
168.5
445.0
26 Acquisitions continued
The net cash outflow in the year in respect of acquisitions comprised:
Cash consideration
Net cash acquired
Deferred consideration payments
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
MCR Safety
£m
245.2
(7.4)
–
237.8
1.3
–
239.1
Other
£m
122.7
(1.5)
4.2
125.4
5.8
17.2
148.4
2020
Total
£m
367.9
(8.9)
4.2
363.2
7.1
17.2
387.5
2019
£m
138.6
(1.1)
6.1
143.6
3.8
15.4
162.8
Acquisitions completed in the year ended 31 December 2020 contributed £356.0m (2019: £109.0m) to the Group’s revenue and £22.5m
(2019: £14.5m) to the Group’s adjusted operating profit for the year ended 31 December 2020.
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
2020
£m
601.8
50.0
2019
£m
136.7
17.0
The total amount of goodwill expected to be deductible for tax purposes in relation to acquisitions completed during the year is £78.6m
(2019: £29.8m).
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 2019
Volk do Brasil*
Acquisitions agreed in 2019
* 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
Annualised
revenue
£m
40.1
73.4
3.1
20.1
136.7
(40.1)
96.6
190
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191
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Financial statements
Notes continued
27 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
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
2020
£m
134.8
36.9
171.7
2020
£m
14.9
4.7
(8.4)
2.0
13.2
2020
£m
(192.5)
(81.0)
278.5
5.0
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
28 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. Details of the relevant relationships with these related parties are disclosed in
the Directors’ remuneration report, Note 22 and Note 23 respectively. All transactions with subsidiaries are eliminated on consolidation.
192
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Bunzl plc Annual Report 2020
27 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
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
28 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. Details of the relevant relationships with these related parties are disclosed in
the Directors’ remuneration report, Note 22 and Note 23 respectively. All transactions with subsidiaries are eliminated on consolidation.
2020
£m
134.8
36.9
171.7
2020
£m
14.9
4.7
(8.4)
2.0
13.2
2020
£m
(192.5)
(81.0)
278.5
5.0
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
COMPANY BALANCE SHEET
at 31 December 2020
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
2020
£m
0.4
0.7
1.1
718.4
720.6
1.8
0.4
837.9
647.7
0.2
1,488.0
(98.1)
–
(0.7)
1,389.2
2,109.8
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
(1.6)
(0.2)
(1.7)
(0.9)
2,108.0
2,010.1
108.3
187.7
5.6
16.1
1,790.3
2,108.0
108.3
184.0
5.6
16.1
1,696.1
2,010.1
Approved by the Board of directors of Bunzl plc (Company registration number 358948) on 1 March 2021 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 195 to 200 form part of these financial statements.
† Profit and loss account includes a net profit after tax for the year of £268.1m (2019: £35.0m). 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.
192
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193
193
Financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
At 1 January 2020
Profit for the year
Other comprehensive income
Contributions to pension scheme
by participating subsidiaries
Actuarial loss on defined benefit
pension scheme
Income tax credit on other
comprehensive income
Total comprehensive income
2019 interim dividend
2019 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2020
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
Share
capital
£m
108.3
Share
premium
£m
184.0
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Profit and loss account
Retained
Own
earnings
shares
£m
£m
1,766.0
(69.9)
Total
shareholders’
funds
£m
2,010.1
268.1
268.1
4.5
4.5
(14.9)
(14.9)
2.0
259.7
(51.7)
(119.8)
(5.9)
15.4
1,863.7
2.0
259.7
(51.7)
(119.8)
3.7
(9.4)
–
15.4
2,108.0
–
3.7
(9.4)
5.9
108.3
187.7
5.6
16.1
(73.4)
Share
capital
£m
108.1
Share
premium
£m
178.5
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
108.1
178.5
5.6
16.1
Profit and loss account
Retained
Own
earnings
shares
£m
£m
1,903.5
(63.9)
(0.3)
1,903.2
35.0
(63.9)
Total
shareholders’
funds
£m
2,147.9
(0.3)
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)
194
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 31 December 2020
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. There are no new standards, amendments or
interpretations that are applicable to the Company for the year ended 31 December 2020. 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:
108.3
187.7
5.6
16.1
(73.4)
1,863.7
2,108.0
• certain disclosures required by IFRS 2 ‘Share Based Payments’ in respect of Group settled share based payments; and
Profit and loss account
• certain disclosures required by IFRS 13 ‘Fair Value Measurement’ and disclosures required by IFRS 7 ‘Financial Instruments:
Disclosures’.
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 151 to 157 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 2020 are disclosed in the Related undertakings Note in the Shareholder information section on pages 212 to 217.
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 18
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.
Share
capital
£m
108.3
Share
premium
£m
184.0
Other
reserves
£m
5.6
Capital
redemption
reserve
£m
16.1
Own
shares
£m
(69.9)
Profit and loss account
Retained
earnings
£m
1,766.0
268.1
shareholders’
Total
funds
£m
2,010.1
268.1
At 1 January 2020
Profit for the year
Other comprehensive income
Contributions to pension scheme
by participating subsidiaries
Actuarial loss on defined benefit
pension scheme
Income tax credit on other
comprehensive income
Total comprehensive income
2019 interim dividend
2019 final dividend
Issue of share capital
Employee trust shares
Movement on own share reserves
Share based payments
At 31 December 2020
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
–
3.7
Share
capital
£m
108.1
Share
premium
£m
178.5
Capital
redemption
reserve
£m
16.1
Other
reserves
£m
5.6
5.6
Restated equity at 1 January 2019
108.1
178.5
16.1
(63.9)
1,903.2
4.5
4.5
(14.9)
(14.9)
2.0
259.7
(51.7)
(119.8)
(5.9)
15.4
Retained
earnings
£m
1,903.5
(0.3)
35.0
4.5
2.2
(0.4)
41.3
(50.7)
(24.4)
13.2
2.0
259.7
(51.7)
(119.8)
3.7
(9.4)
–
15.4
shareholders’
Total
funds
£m
2,147.9
(0.3)
2,147.6
35.0
4.5
2.2
(0.4)
41.3
(50.7)
5.7
(30.4)
–
13.2
(116.6)
(116.6)
(9.4)
5.9
Own
shares
£m
(63.9)
(30.4)
24.4
0.2
5.5
108.3
184.0
5.6
16.1
(69.9)
1,766.0
2,010.1
194
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Bunzl plc Annual Report 2020
195
195
Financial 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 (2019: 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 2020, the
only source of estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year is the measurement of the defined benefit pension scheme liability which is explained in Note 2u to
the consolidated financial statements.
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 2020
Net book value at 31 December 2019
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
–
–
1.4
0.3
–
1.7
1.2
–
0.1
1.3
0.4
0.2
1.5
0.3
–
1.8
1.3
–
0.1
1.4
0.4
0.2
1.9
0.2
–
2.1
0.8
–
0.2
1.0
1.1
1.1
196
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
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 (2019: 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 2020, the
only source of estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year is the measurement of the defined benefit pension scheme liability which is explained in Note 2u to
the consolidated financial statements.
3 Property, plant and equipment and intangible assets
Short
leasehold
improvement
Fixtures,
fittings and
equipment
£m
Total
tangible
assets
£m
Total
intangible
assets
£m
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 2020
Net book value at 31 December 2019
£m
0.1
–
–
0.1
0.1
0.1
–
–
–
–
1.4
0.3
–
1.7
1.2
–
0.1
1.3
0.4
0.2
1.5
0.3
–
1.8
1.3
–
0.1
1.4
0.4
0.2
1.9
0.2
–
2.1
0.8
–
0.2
1.0
1.1
1.1
4 Right-of-use assets: Property
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 2019
Impact of transition to IFRS 16
Recognised in profit or loss
Recognised in other comprehensive income or directly in equity
31 December 2019/1 January 2020
Recognised in profit or loss
Recognised in other comprehensive income or directly in equity
31 December 2020
Defined benefit
pension scheme
£m
(0.6)
–
(0.9)
(0.4)
(1.9)
(0.2)
2.0
(0.1)
Share based
payments
£m
1.5
–
–
(0.3)
1.2
–
0.5
1.7
No deferred tax asset has been recognised in respect of unutilised capital losses of £68.5m (2019: £68.5m).
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
2020
£m
1.2
–
(0.5)
0.7
2020
£m
710.3
11.4
721.7
2019
£m
–
1.7
(0.5)
1.2
2019
£m
699.2
11.1
710.3
3.3
3.3
718.4
707.0
Net deferred
tax asset/
(liability)
£m
1.0
0.1
(0.9)
(0.7)
(0.5)
(0.2)
2.5
1.8
2019
£m
568.7
3.2
571.9
Other
£m
0.1
0.1
–
–
0.2
–
–
0.2
2020
£m
644.5
3.2
647.7
837.9
837.9
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.
196
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197
197
Financial 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
2020
£m
0.7
82.1
0.3
0.5
14.5
98.1
2020
£m
1.7
(0.1)
1.6
The provisions relate to properties, where amounts are held against liabilities for repairs and dilapidations, and other claims.
10 Lease liabilities
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
2020
£m
(1.6)
–
(0.1)
0.8
(0.9)
(0.7)
(0.2)
(0.9)
2019
£m
1.2
82.5
0.3
21.0
11.9
116.9
2019
£m
1.7
–
1.7
2019
£m
–
(2.3)
(0.1)
0.8
(1.6)
(0.7)
(0.9)
(1.6)
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 22 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
2020
£m
2.2
0.4
(0.3)
(1.2)
1.1
2019
£m
2.0
–
(0.2)
(1.3)
0.5
198
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Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Notes to the Company financial statements continued
8 Creditors: amounts falling due within one year
11 Retirement benefits continued
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
10 Lease liabilities
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
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 22 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
2020
£m
0.7
82.1
0.3
0.5
14.5
98.1
2020
£m
1.7
(0.1)
1.6
2020
£m
(1.6)
–
(0.1)
0.8
(0.9)
(0.7)
(0.2)
(0.9)
2020
£m
2.2
0.4
(0.3)
(1.2)
1.1
2019
£m
1.2
82.5
0.3
21.0
11.9
116.9
2019
£m
1.7
–
1.7
2019
£m
–
(2.3)
(0.1)
0.8
(1.6)
(0.7)
(0.9)
(1.6)
2019
£m
2.0
–
(0.2)
(1.3)
0.5
Amounts recognised in other comprehensive income
Actual return less expected return on pension scheme assets
Experience gain on pension scheme liabilities
Impact of changes in assumptions relating to the present value of pension scheme liabilities
Actuarial (loss)/gain on defined benefit pension scheme
Contributions paid by participating subsidiaries not linked to service
Total (charge)/credit to other comprehensive income
Movement in defined benefit pension scheme surplus/(deficit)
Beginning of year
Current service cost
Past service cost
Contributions
Net interest income
Actuarial (loss)/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
Benefits paid
End of year
Changes in the fair value of defined benefit pension scheme assets
Beginning of year
Interest income
Actuarial gain
Contributions by the Company
Contributions by participating subsidiaries
Contributions by employees
Benefits paid
End of year
2020
£m
44.6
–
(59.5)
(14.9)
4.5
(10.4)
2020
£m
10.8
(2.2)
(0.4)
6.8
0.3
(14.9)
0.4
2020
£m
379.2
2.2
0.4
7.9
0.5
59.5
(11.8)
437.9
2020
£m
390.0
8.2
44.6
1.1
5.7
0.5
(11.8)
438.3
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
The actual return on pension scheme assets was a gain of £52.8m (2019: gain of £62.3m). The market value of scheme assets and the
present value of retirement benefit obligations at 31 December are detailed in Note 22 to the consolidated financial statements. The total
defined benefit pension liability is divided between active members (£102.9m (2019: £86.2m)), deferred members (£172.9m (2019: £147.8m))
and pensioners (£162.1m (2019: £145.2m)).
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
2020
£m
108.3
2019
£m
108.3
2020
2019
336,792,607 336,425,304
367,303
336,998,961 336,792,607
206,354
198
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
199
199
Financial statements
Notes to the Company financial statements continued
13 Reserves
The capital redemption reserve of £16.1m (2019: £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 £73.4m (2019: £69.9m) 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 18 to the consolidated financial statements.
The dividends paid and declared in the current and prior year are detailed in Note 19 to the consolidated financial statements.
14 Contingent liabilities
Borrowings by subsidiary undertakings totalling £1,661.3m (2019: £1,375.1m) 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 (2019: 53) and the aggregate
employee costs relating to these persons were:
Wages and salaries
Social security costs
Share based payments
Pension costs
2020
£m
11.0
1.8
2.3
0.8
15.9
2019
£m
9.2
1.4
1.1
1.0
12.7
Conditional awards of executive share options and performance shares are granted to executive directors and other senior employees of the
Company. Employees of the Company can also participate in the Company’s Sharesave Scheme. Further information on the Company’s
share plans is disclosed in Note 18 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 22 and Note 23 to the consolidated financial statements and
the Related undertakings Note in the Shareholder information section on pages 212 to 217.
200
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Bunzl plc Annual Report 2020
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 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
position and performance, business model and strategy.
Each of the directors, whose names and functions are set out on
pages 92 and 93 of the Annual Report, confirm that, to the best of
their knowledge:
• the Group financial statements, which have been prepared in
accordance with IASs in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and IFRSs issued by IASB,
give a true and fair view of the assets, liabilities, financial position
and profit of the Group;
• the Company financial statements, which have been prepared
in accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets,
liabilities, financial position and profit of the Company; 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
1 March 2021
Richard Howes
Chief Financial Officer
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
Accounting Standards (‘IASs’) in conformity with the requirements
of the Companies Act 2006. Additionally, the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules require
the directors to prepare the Group financial statements in accordance
with International Financial Reporting Standards (‘IFRSs’) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and the 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, 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 for the Group and the Company, IASs in
conformity with the requirements of the Companies Act 2006
and, for the Group, IFRSs adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union and IFRSs
issued by the 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 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.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s 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.
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.
Bunzl plc Annual Report 2020
201
Financial statements INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF BUNZL PLC
Report on the audit of the financial statements
Opinion
In our opinion:
• Bunzl plc’s Group financial statements and Company financial statements (the ‘financial statements’) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31 December 2020 and of the Group’s profit and the Group’s cash flows for the year
then ended;
• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
• 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.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and Company balance
sheets as at 31 December 2020; 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 international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union
As explained in note 1 to the Group financial statements, the Group, in addition to applying international accounting standards in conformity
with the requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Separate opinion in relation to international financial reporting standards as issued by the International Accounting
Standards Board
As explained in note 1 to the financial statements, the Group, in addition to applying international accounting standards in conformity with
the requirements of Companies Act 2006, has also applied international financial reporting standards as issued by the International
Accounting Standards Board.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards as
issued by the International Accounting Standards Board.
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.
Other than those disclosed in note 5 to the financial statements, we have provided no non-audit services to the Group in the period under audit.
202
Bunzl plc Annual Report 2020
Our audit approach
Overview
Audit scope
• We performed full scope audits and other procedures of the financial information of 80 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 consolidation, taxation, pensions,
business combinations and the impairment of goodwill and intangible assets, were performed by the Group audit
team centrally.
Key audit matters
• Carrying value of goodwill and other intangible assets (Group)
• Provisions for corporate tax exposures (Group)
• Accounting for business combinations (Group)
• Valuation of defined benefit pension schemes (Group and Company)
• Valuation of inventory provisions and expected credit loss provisions against trade receivables (Group)
• Covid-19 (Group and Company)
Materiality
• Overall Group materiality: £30 million (2019: £29 million) based on 5% of adjusted profit before tax.
• Overall Company materiality: £20 million (2019: £20 million) based on 1% of net assets.
• Performance materiality: £22.5 million (Group) and £15 million (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is
detailed below.
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 financial statements. We also considered those laws and regulations that have a direct
impact on the preparation of the financial statements such as the Companies Act 2006. 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 the potential posting of 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:
• Enquiry of management, those charged with governance and the entity’s in-house legal team around actual and potential litigation and
claims.
• Reviewing minutes of meetings of those charged with governance including the Board, Audit committee and Executive committee.
• Reviewing internal audit reports.
• Assessment of matters reported on the Group’s whistleblowing helpline.
• Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness,
testing accounting estimates (because of the risk of management bias), and evaluating the business rationale of significant transactions
outside the normal course of business.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and transactions reflected in the financial statements. 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.
Bunzl plc Annual Report 2020
203
Financial statements Independent auditors’ report to the members of Bunzl plc continued
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.
Valuation of inventory and expected credit loss provisions against trade receivables and Covid-19 are new key audit matters this year.
Completeness and accuracy of lease liabilities and right-of-use assets, which was a key audit matter last year, is no longer included because
of this risk being specific to the implementation of a new accounting standard in 2019. Otherwise, the key audit matters below are consistent
with last year.
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and other
intangible assets (Group)
Refer to page 111 (Audit Committee report),
page 156 (Accounting policies) and pages 168
and 169 (Note 11).
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 discount rate used by management.
The Group has material goodwill balances of
£1,494.6m (2019: £1,403.6m) and customer
relationships intangible assets of £912.7m
(2019: £864.9m) 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 7 individual
CGUs (and 11 previous 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
circumstances where a triggering event on customer
relationships intangible assets occurred during the
year and where a further impairment assessment
was performed by management.
Management’s impairment assessments involve
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
influenced by economic factors and trading
conditions specific to individual businesses.
We evaluated the reasonableness of the directors’ cash flow forecasts by
comparing the assumptions made to board approved budgets, historical
performance and external economic data.
In particular:
• We determined that long-term growth rates are generally consistent when
compared to third party nominal GDP rates;
• We compared short term forecast growth rates to recent performance history
and considered them to be acceptable;
• 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;
• We obtained evidence to assess historical accuracy in management’s
forecasting process; and
• We also evaluated management’s triggering event assessment regarding
customer relationships intangible assets.
Management concluded that there is an impairment charge of £9.1m relating to the
customer relationships intangible assets and a further £12.1m relating to goodwill
in China.
We concur with this assessment.
Based on our 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.
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Bunzl plc Annual Report 2020
Key audit matter
How our audit addressed the key audit matter
Provisions for corporate tax exposures (Group)
Refer to page 112 (Audit Committee report), page 157
(Accounting policies) and page 165 (Note 7).
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.
In particular, we focused on the impact of changes in
local tax regulations and ongoing inspections by local
tax authorities and international bodies, which could
materially impact the amounts recorded in the Group
financial statements. This included evaluating the
impact of the European Commission’s State aid
investigation.
Accounting for business combinations (Group)
Refer to page 111 (Audit Committee report), page 156
(Accounting policies) and pages 189 to 191 (Note 26).
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. Our procedures in the
year focussed on the MCR Safety acquisition given
this was the most material acquisition in the year.
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.
We evaluated the consistency of management’s approach to identifying triggering
events to reassess or record a provision for an exposure.
We also evaluated the consistency of management’s approach to establishing or
changing prior provision estimates and validated that changes in provisions
established in previous periods reflected a change in facts and circumstances.
These procedures assisted in our corroboration of management’s assessment
of potential tax exposures, the provisions recorded 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 7 to the
financial statements. Based on the procedures performed, we noted no material
issues arising from our work.
Management relies on external valuation specialists for larger acquisitions to
value significant intangibles acquired in business combinations. Where
management has relied on such specialists, with the support of our own valuation
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 relationships assets for the more significant acquisitions;
• 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 supported by historical data;
and
• We also evaluated the consideration paid or payable in respect of acquisitions.
We did this by reading the acquisition contracts, vouching the consideration
paid to cash outflows and testing the calculation of the deferred consideration
by reference to the contract terms.
Based on the procedures performed, we noted no material issues arising from
our work.
Bunzl plc Annual Report 2020
205
Financial statements
Independent auditors’ report to the members of Bunzl plc continued
Key audit matter
How our audit addressed the key audit matter
Valuation of defined benefit pension schemes (Group and Company)
Refer to page 111 (Audit Committee report), page 156
(Accounting policies) and pages 183 to 186 (Note 22).
The Group has defined benefit pension schemes
(with material schemes in the US and the UK) with a
combined net deficit of £44.8m. The gross assets and
liabilities in the UK and US schemes are significant 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 net surplus or deficit.
Valuation of inventory provisions and
expected credit loss provisions against trade
receivables (Group)
Refer to page 112 (Audit Committee report), page 156
(Accounting policies) and pages 169 and 170 (Note 12
and 13). The Covid-19 pandemic has significantly
increased the risk of loss on trade receivables and
inventory particularly in the foodservice and retail
businesses that have been impacted more heavily by
the pandemic.
The Group has seen an increase in slow moving
inventory as a result of Covid-19 and the associated
government measures which have reduced demand
in a number of market sectors.
We focused on this area because of the level of
estimation and judgement that is necessary in
determining the provisions required.
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 were appropriate and that 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 2020.
In each case we considered the assumptions made by management to be
reasonable in light of the available evidence. We performed procedures to satisfy
ourselves over the completeness and accuracy of the employee data used in
the calculation.
We have confirmed the pension asset valuations with third parties and
independently assessed the valuation of a sample of these assets.
We also obtained and assessed third party service organisation control reports
where these were needed to support the valuation of more complex investments.
We assessed the basis for the inventory provisions, the consistency of provisioning
in line with the Group’s policy and the reasonableness of the overall provisioning
in light of the impact of Covid-19. We did this through the following procedures:
• We tested the completeness and the accuracy of the ageing of the reports used to
calculate the provisions.
• We tested that the calculation of provisions had been performed in accordance
with the Group policy.
• We understood management’s process for identifying specific inventory
requiring a provision and recalculated the provisions against this inventory
using latest market prices and volume data.
• We tested the net realisable value of a sample of inventory items to ensure that
the listing of inventory requiring a provision identified was complete.
We obtained an understanding of management’s process in estimating the
expected credit loss provision and the respective judgements. We considered the
appropriateness of management’s judgements in relation to these calculations by
performing the following procedures:
• reviewing the ageing categorisation of debtor balances;
• assessing historical credit loss experience;
• understanding and assessing the insolvencies in the period; and
• consideration of forward-looking factors by assessing management’s risk
categorisation of customers in the food service and retail sectors.
We 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 that the provisions reflect
management’s current best estimate of the expected economic outflows.
We also considered the appropriateness of the related disclosures in the financial
statements.
Based on the procedures performed, we noted no material issues arising from
our work.
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Bunzl plc Annual Report 2020
Key audit matter
Covid-19 (Group and Company)
The Covid-19 pandemic has had a varied impact on
the differing sectors and regions in the Group. The
performance of the retail and foodservice sectors were
more heavily impacted. As a result, the Covid-19
pandemic introduced increased estimation
uncertainty in the following areas:
How our audit addressed the key audit matter
In response to the key areas impacted by the Covid-19 pandemic, we have
performed the following procedures:
• Refer to our key audit matter called ‘Carrying value of goodwill and other
intangible assets’ for details on procedures performed over the impairment of
goodwill and other intangible assets.
• Impairment of goodwill and customer lists
• Expected credit loss provisions against trade
• Refer to our key audit matter called ‘Valuation of inventory and expected credit
loss provisions against trade receivables’ for details on procedures performed
over expected credit loss provisions against trade receivables.
receivables
• Inventory provisioning
In addition, management’s way of working, including
the operation of controls, has been impacted by
Covid-19 as a result of a large number of employees
working remotely and using technology enabled
working practices.
Our own ways of working have also changed which
has meant virtual review meetings, electronic review
processes (instead of hardcopy reviews) and some
inventory counts being performed using virtual
technology tools.
We considered the appropriateness of management’s disclosures in its financial
statements of the impact of the current environment and the increased uncertainty
on its accounting estimates and found these to be adequate.
Based on the work performed at a Group level and by our component teams we did
not identify any evidence of a material deterioration in the control environment.
All of our oversight procedures were undertaken remotely using video
conferencing and remote workpaper reviews to satisfy ourselves as to the
sufficiency of audit work performed at the significant and material components.
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 the UK, France and Australia for which a full scope audit of their financial information has been performed.
In order to satisfy the request of the Audit Committee and management, we performed full scope audits and other procedures on a further
74 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 conducted
conference calls with component teams. For our financially significant component, North America, oversight procedures included regular
communication with the component team, reviewing their working papers, and attending the clearance meeting. Specific audit procedures
over central functions and areas of significant judgement, including consolidation, taxation, pensions, business combinations and the
impairment of goodwill and other intangible assets, were performed by the Group audit team centrally.
Bunzl plc Annual Report 2020
207
Financial statements Independent auditors’ report to the members of Bunzl plc continued
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
£30 million (2019: £29 million).
£20 million (2019: £20 million).
Financial statements – Group
Financial statements – Company
How we
determined it
Rationale for
benchmark applied
Based on 5% of adjusted profit before tax
Based on 1% of net assets
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 £23.4 million. Certain components were audited to a local statutory audit materiality that
was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% of overall materiality, amounting to £22.5 million for the Group financial statements and £15 million
for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1.5 million (Group audit)
(2019: £1.5 million) and £1.5 million (company audit) (2019: £1.5 million) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of
accounting included:
• We assessed the appropriateness of the cash flow forecasts in the context of the Group’s 2020 financial position and evaluated the directors’
downside sensitivities against these forecasts
• We evaluated the key assumptions in the forecasts and considered whether these were supported by the evidence we obtained
• We examined the headroom under the base case cash flow forecasts, as well as the directors’ and our own sensitised cases, and evaluated
whether the directors’ conclusion that headroom remained in all events was supported by the evidence we obtained
• We considered the impact of Covid-19 and Brexit including whether this was appropriately reflected in the going concern model
• We obtained the Group’s covenant calculations and reperformed the calculation including applying sensitivities to assess the potential
impact of downside sensitivities on covenant compliance.
• We also reviewed the disclosures provided relating to the going concern basis of preparation and found that these provided an explanation
of the directors’ assessment that was consistent with the evidence we obtained.
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Bunzl plc Annual Report 2020
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the Company’s
ability to continue as a going concern.
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this 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 our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
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 2020 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
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.
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.
Bunzl plc Annual Report 2020
209
Financial statements Independent auditors’ report to the members of Bunzl plc continued
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit and we have nothing material
to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and why the
period is appropriate; and
• The directors’ statement as to whether 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 period of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment
with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when 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.
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, 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.
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Bunzl plc Annual Report 2020
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.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
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 obtained 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 7 years, covering the
years ended 31 December 2014 to 31 December 2020.
Neil Grimes (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
1 March 2021
Bunzl plc Annual Report 2020
211
Financial statements SHAREHOLDER INFORMATION
Related undertakings as at 31 December 2020
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 2020 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 215 to 217. 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 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
MCR Safety de Brasil Distribuiacao de Equipamentos
Medcorp Hospitalar Ltda
SP Equipamentos de Proteção ao trabalho e
MRO Ltda.
VCH – Importadora, Exportadora e Distribuição
de Produtos Ltda.
Canada
8948399 Canada Inc. d/b/a Sur-Seal Packaging(iii)
Bunzl Canada, Inc.
Snelling Paper & Sanitation Ltd.(iii)
Registered
office address
1
6
5
4
6
3
6
2
5
4
6
4
5
6
4
7
7
8
12
10
11
9
17
22
16
18
20
21
19
13
14
15
23
24
23
Subsidiary
undertakings
Chile
B2B Web Distribuicao de Produtos Chile SpA
Bunzl Chile Holdings SpA
DPS Chile Comercial Limitada
Tecno Boga Comercial Limitada
Vicsa Safety Comercial Limitada
China
Beijing HSESF Safety Technology Co., Ltd.
Bunzl Trading (Shanghai) Limited
Diversified Distribution Systems Trading
(Shanghai) Ltd.
Keenpac (Shenzhen) Trading Company Limited
MCR Safety Foshan South Co., Ltd.
MCR Safety Hangzhou Co., Ltd.
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
B2B Web Distribuição De Produtos Colombia
Spa S.A.S
Importadores Y Exportadores Solmaq SAS
MCR Safety 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
ICM A/S (78.9%)
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
Registered
office address
25
25
27
26
25
33
30
37
39
38
40
32
29
28
36
31
41
35
42
42
43
44
46
45
47
47
47
48
49
50
51
65
80
79
76
67
66
76
212
Bunzl plc Annual Report 2020
Subsidiary
undertakings
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-Adage SAS
Groupe Pierre Le Goff Bourgogne Franche-Comte
SAS
Groupe Pierre Le Goff Grand Ouest SAS
Groupe Pierre Le Goff Méditerranée SAS
Groupe Pierre Le Goff 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
PLG Grand-Nord 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 Healthcare GmbH
Bunzl Healthcare Holding GmbH(iii)
Bunzl Holding GmbH(iii)
Bunzl Verpackungen GmbH
Majestic GmbH
PKA Klöcker Gmbh(iii)
Protemo GmbH
Hong Kong
Bunzl Asia Limited(iii)
DDS of Hong Kong Limited
Keenpac Asia Limited
MCR Safety Asia Company Limited
Hungary
Bunzl CEE Kft
Bunzl Magyarország Kft.
Ireland
Abco Kovex Limited (80%)
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
Thomas McLaughlin (Ireland) Limited
Yorse Ireland Unlimited Company
Registered
office address
68
56
63
61
75
52
59
73
77
62
70
69
54
58
72
55
60
64
78
71
77
57
52
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53
74
84
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82
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88
91
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92
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92
92
92
92
92
Subsidiary
undertakings
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 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.
CRM de las Americas, S.A. 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)
Shelby Manufacturing De Mexico, S.A. DE C.V.
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.
MCR Safety Europe B.V.
QS Nederland B.V. (85%)
Worldpack Trading B.V.
New Zealand
Bunzl Outsourcing Services NZ Limited
Corded Strap (NZ) Limited
Fire Rescue Safety New Zealand Limited (80%)
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 Romania SRL
Singapore
LSH Industrial Solutions Pte. Ltd
Slovakia
Eurobal, spol. s.r.o.
Registered
office address
93
94
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96
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105
103
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100
107
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Bunzl plc Annual Report 2020
213
Financial statements Shareholder information continued
Related undertakings continued
Subsidiary
undertakings
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
Weita AG
Weita Holding AG
Weita Service 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
Abco Kovex (N.I.) Limited (80%)
Abco Kovex (UK) Limited (80%)
Aggora (Technical) Limited(iii)
Aggora Group Ltd(iii)
Aggora Limited
Aggora Projects Ltd(iii)
Bodyguard Workwear Limited
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
Catered 4 Limited
Classic Bag Company Holdings Limited
Continental Chef Supplies Limited
Dialene Limited
GrowModule 365 Limited
Guardsman Limited
Henares Limited(i)
Registered
office address
131
132
136
137
137
131
133
134
135
130
140
141
140
139
139
138
142
144
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148
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148
148
148
148
148
148
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148
148
148
148
148
148
148
148
148
148
148
148
Subsidiary
undertakings
Howper 800 Limited(iii)
Kingsbury Packaging (Limavady) Ltd
Lee Brothers Bilston Limited
Lightning Packaging Supplies Limited
London Bio Packaging Limited
Packaging 2 Buy Limited
Parmelee Limited
Portabottle Limited
Portabrands Limited
Selectuser Limited(ii)
Spectrum Hygiene Limited(iii)
The Classic Printed Bag Company Limited
The Porta Group Limited
Tornado Gloves Limited
Tornado Holdings 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
Registered
office address
148
146
148
148
148
148
147
148
148
148
148
148
148
147
147
148
148
148
148
148
148
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162
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150
162
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149
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149
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153
149
162
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149
162
154
149
149
149
151
162
149
149
156
161
162
214
Bunzl plc Annual Report 2020
Subsidiary
undertakings
Hi-Valu, LLC
International Sourcing Company Inc.(iii)
John Tillman Company
Joshen Paper & Packaging Co.(iii)
Keenpac, LLC
Keepsafe, LLC
Liberty Glove & Safety, LLC
M.L. Kishigo Manufacturing Company, LLC
Masteragents LLC
MCR Holdings, Inc.
Papercraft Southwest, LLC
Prime Source, LLC
R3 Safety, LLC
R3, LLC
Revco Industries, Inc.(iii)
Right Choice Distribution, LLC
SAS Safety Corporation
Shelby Group International, Inc.(iii)
Steiner Industries, Inc.
TSN East, LLC
TSN West, LLC
U.S. Glove Co., Inc.
Uruguay
Steelpro Safety S.A.
Registered
office address
162
157
149
159
162
159
149
154
162
157
149
162
162
160
156
162
149
157
163
162
162
158
List of registered office addresses
Registered office 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
Av. Fagundes de Oliveira 538, Warehouse A5, Piraporinha,
Cidade de diadema, CEP, 09950-300, Brazil
Avenida do Cursino, 3.365 SL/06, Saúde, City of São Paulo,
CEP, 04133-300, Brazil
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
Rua Cardeal Arcoverde, 2365, Andar 5, Conjunto 51,
164
Pinheiros, CEP 05407-003, Brazil
Other shareholdings
Viner-Pack Gyarto Kereskedelmi Es Szolgaltato
Korlatolt Felelossegu Tarsasag(iii) (20%)
MCR Hanvo Safety Products (Nantong) Co., Ltd.
(20%)
Registered
office address
90
34
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.
Rua Crepusculo, No 58 Bairro California, City of Belo
Horizonte, Minas Gerais, CEP 30855-435, Brazil
Rua Dr. Guilherme Bannitz, No. 126, 2nd floor, sets 21 and 22,
District of Itaim Bibi, City of São Paulo, State of São Paulo,
04532-060, Brazil
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
Rua Padre Damaso, 173 – Fundos, Centro, City of Osasco,
CEP 06016-010, Brazil
Dentons Canada LLP, 2500-10220 103 Ave NW, Edmonton,
Alberta T5J OK4, Canada
Parlee McLaws LLP, 3300 TD Canada Trust Tower, 421-7th
Avenue, SW, Calgary AB T2P 4K9, 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
Bunzl plc Annual Report 2020
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215
Financial statements Shareholder information continued
List of registered office addresses continued
Registered office address
No.128 Jinshajiang Road, Rudong Economic Development
Key
Registered office address
Parc d'activité Des Lacs, 22 rue Saint Exupéry, 33 290
Key
Zone, Jiangsu, 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
Room 908, Building 16, Zone 2, International Chuangzhi
Park, No.8 Gangkou Road, Guicheng Street, Nanhai District,
Foshan, Guangdong, China
Room 912, Central Business Tower, 88 Fuhua 1st Road,
Futian, Shenzhen, China
Room A39, Floor 6, Building 2, Dongfang MAO Business
Center, Xiacheng District, Hangzhou, Zhejiang, 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
CR 71 No 94 – 23 AP, 1134 TO 9, 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
Kærvej 25, DK-2970 Hørsholm, 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
130-136 rue Victor Hugo, 92300 Levallois-Perret, France
191-195 Avenue Charles de Gaulle, 92200 Neuilly-sur-Seine,
Paris, 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
La Fregate, 9 avenue Jacques Cartier, 44800, Saint-Herblain,
France
Lieudit la Trentaine, 77690, La Genevraye, France
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68
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 de la Teillais, 35740, Pacé, France
Rue Nungesser et Coli d2A Nantes Atlantique, 44860 Saint-
Aignan de Grand Lieu, France
Rue Pierre Pascal Fauvelle, 66000 Perpignan, France
ZI Maison Dieu RN 74, 21220 Fixin, France
Zone Artisanale Maritime du Bassin de Thau, Route de Séte,
34540 Ballaruc Les Bains, France
Elbestraße 1-3, 45768 Marl, Germany
Friedrichstrasse 2, 40699 Erkrath, Germany
Kitzingstr. 15-19, 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 26, 22/F, Metro Centre II, Lam Hing St., Kowloon Bay,
Kowloon, Hong Kong
Unit 3-4 18F Tower 6, China Hong Kong City, Tsim Sha Tsui,
Kowloon, Hong Kong
2336 Dunavarsány, 071/33 hrsz, 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
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
Av. del sauce número 1600, Col. La angostura, City of San
Luis Potosí, S.L.P, 78117, 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, 4500 Guadalajara, Jalisco, Mexico
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 A,
C.P. 45221 Zapopan, Jalisco, Mexico
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Bunzl plc Annual Report 2020
Registered office address
Carretera Corredor Tijuana Rosarito 2000 Exterior 15202.,
Interior Mt3 A, Colonia Zona Cerril General, Tijuana, Baja
California, Mexico
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
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
Keizersgracht 241, 1016EA, Amsterdam, 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
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108
109
110
111
112
113
114
115
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117
118
119
120
121
122
123
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127
128
129
130
131
132
Cartagena, Murcia, poligono industrial Cabezo Beaza,
Avenida Bruselas, 30353, esquina calle Amsterdam, parcela
R 100, Spain
133
Cartagena, Murcia, poligono industrial Cabezo Beaza,
Avenida Luxemburgo, calle Artes y Oficios, nave B-3, Spain
134
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
Güterstrasse, 4313 Möhlin, Switzerland
135
136
137
138
Registered office address
Nordring 2, 4147 Aesch, Switzerland
Oberebenestrasse 53, CH-5620 Bremgarten, Switzerland
Route des Jeunes 5D, c/o Télios SA, 1227 Les Acacias,
Genève, Switzerland
Akçaburgaz Mahallesi, 3137. Sokak, No.19, Esenyurt,
Istanbul, Turkey
Akçaburgaz Mahallesi, 3137. Sokak, No.19, K. 1, Esenyurt,
Istanbul, Turkey
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
Middlemore Lane West, Aldridge, Walsall, WS9 8BG,
United Kingdom
York House, 45 Seymour Street, London, W1H 7JT,
United Kingdom
Corporation Service Company, 100 Shockoe Slip, 2nd Floor,
Richmond VA 23219, United States
Corporation Service Company, 10300 Greenbriar Place,
Oklahoma City OK 73159, United States
Corporation Service Company, 15 West South Temple, Suite
600, Salt Lake City UT 84101, United States
Corporation Service Company, 211 E. 7th Street, Suite 620,
Austin TX 78701, United States
Corporation Service Company, 2345 Rice Street, Suite 230,
Roseville MN 55113, United States
Corporation Service Company, 251 Little Falls Drive,
Wilmington DE 19808, United States
Corporation Service Company, 2595 Interstate Drive, Suite
103, Harrisburg PA 17710, United States
Corporation Service Company, 2710 Gateway Oaks Drive,
Suite 150N, Sacramento CA 95833-3505, United States
Corporation Service Company, 2908 Poston Avenue, Nashville
TN 37203-1312, United States
Corporation Service Company, 300 Deschutes Way SW,
Suite 304, Turnwater WA 98501, United States
Corporation Service Company, 50 West Broad Street,
Suite 1330, Columbus OH 43215, United States
Corporation Service Company, 505 5th Street, Suite 729,
Des Moines IA 50309, United States
Corporation Service Company, 80 State Street, Albany NY
12207-2543, United States
CSC-Lawyers Incorporating Service Company, 221 Bolivar
Street, Jefferson City MO 65101, United States
Illinois Corporation Service Company, 801 Adlai Stevenson
Drive, Springfield IL 62703-4261, United States
César Cortinas 2037, Montevideo, Uruguay
Key
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158
159
160
161
162
163
164
Bunzl plc Annual Report 2020
217
Financial statements Shareholder information continued
Financial calendar
Annual General Meeting
Results for the half year to 30 June 2021
Results for the year to 31 December 2021
Annual Report circulated
2021
21 April
31 August
2022
February
March
Dividend payments are normally made on these dates or the
following working day:
Ordinary shares (final)
Ordinary shares (interim)
1 July
2 January
Analysis of ordinary shareholders
At 31 December 2020 the Company had 4,923 (2019: 5,058)
registered shareholders who held 337.0 million (2019: 336.8 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
4,199
448
181
47
48
4,923
% of issued
share capital
2
4
12
10
72
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 in eligible countries to use the whole of their cash
dividend to buy additional shares in the Company, thereby
increasing their shareholding.
Shareholders can check their eligibility in the terms and conditions
and 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
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.
218
Bunzl plc Annual Report 2020
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
Suzanne Jefferies
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 2020
219
Financial 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
IFRS
2020
£m
10,111.1
618.5
10.4
(73.2)
–
555.7
(125.7)
2019
£m
9,326.7
528.4
12.4
(87.5)
–
453.3
(104.1)
2019◊
£m
9,326.7
506.0
12.4
(64.2)
–
454.2
(104.3)
equity holders
430.0
349.2
349.9
Basic earnings per share
128.8p
104.8p
105.0p
Alternative performance measures†
Adjusted operating profit
Adjusted profit before income tax
Adjusted profit for the year
Adjusted earnings per share
778.4
715.6
550.5
164.9p
653.3
578.2
440.6
132.2p
630.9
579.1
441.3
132.4p
IAS 17
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
◊ Following the adoption of IFRS 16 ‘Leases’ with effect from 1 January 2019, because the Group adopted the accounting standard using the modified retrospective approach to transition and accordingly did
not restate prior periods, the results for the years ended 31 December 2020 and 31 December 2019 are not directly comparable with those reported in the prior years under the previous applicable accounting
standard, IAS 17 ‘Leases’. However to provide a meaningful comparative on adoption of IFRS 16, the results for the year ended 31 December 2019 were also presented under IAS 17 at the time the results
were published.
† See Note 3 on page 158 for further details of the alternative performance measures.
220
220
Bunzl plc Annual Report 2020
Bunzl plc Annual Report 2020
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York House
45 Seymour Street
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