29 August 2023
HALF YEARLY FINANCIAL REPORT FOR SIX MONTHS ENDED 30 JUNE 2023
Bunzl plc, the specialist international distribution and services Group, today publishes its half yearly financial report for the six months ended 30 June 2023.
| Financial results | H1 23 | H1 22 | Growth asreported | Growthat constantexchange◊ |
| Revenue | £5,906.8m | £5,650.8m | 4.5% | 0.6% |
| Adjusted operating profit* | £438.3m | £411.4m | 6.5% | 2.5% |
| Adjusted profit before income tax* | £395.6m | £380.5m | 4.0% | (0.8)% |
| Adjusted earnings per share* | 88.3p | 85.7p | 3.0% | (1.7)% |
| Interim dividend | 18.2p | 17.3p | 5.2% | |
| Statutory results | ||||
| Operating profit | £359.8m | £327.5m | 9.9% | |
| Profit before income tax | £317.1m | £296.6m | 6.9% | |
| Basic earnings per share | 70.8p | 66.2p | 6.9% |
Highlightsinclude:
| ● | Revenue grew by 0.6% at constant exchange rates, and grew by 2.4% excluding the UK healthcare disposal≠ |
| ● | Adjusted operating profit* increased by 2.5% at constant exchange rates, with growth of 4.1% excluding the UK healthcare disposal≠; reported operating profit increased by 9.9% |
| ● | Operating margin increased from 7.3% to 7.4% |
| ● | Adjusted earnings per share* declined by 1.7% at constant exchange rates, and grew by 0.2% excluding the UK healthcare disposal≠, due to an expected increase in net finance expense and tax rate; reported basic earnings per share rose 6.9% |
| ● | Free cash flow* grew by 21% at actual exchange rates to £286.3 million; supported by a substantial reduction in inventory |
| ● | Interim dividend per share grew by 5.2%, extending 30 consecutive years of annual dividend growth |
| ● | 12 acquisitions announced August year-to-date, including two announced today, with a total committed spend of more than £350 million; our pipeline remains active |
| ● | Net debt to EBITDA*† of 1.1 times providing substantial headroom for acquisitions; resilient return on invested capital* of 14.9% compared to 13.6% at the end of 2019, prior to the pandemic |
| ● | 2023 outlook: adjusted operating profit guidance upgraded, driven by a meaningful increase in operating margin expectations |
Commenting on today’s results, Frank van Zanten, Chief Executive Officer of Bunzl, said:
“I am pleased with our first half performance, with good adjusted operating profit growth and an operating margin significantly ahead of that achieved prior to the comparable period of 2019. The Group’s performance continues to be supported by the strength of our customer focused value proposition, including our sustainability expertise and range of innovative products and solutions, and the continued success of our acquisition strategy. We have an active pipeline of attractive opportunities, and I am delighted to announce two additional acquisitions today, including our first acquisition in Poland, meaning Bunzl will operate from 32 countries upon completion. As a result of our successes over the period, we are upgrading our 2023 adjusted operating profit guidance, supported by a meaningful increase in our operating margin expectations. I remain confident in Bunzl’s medium-term growth opportunities which are underpinned by our differentiated value-added proposition and a strong balance sheet to support significant consolidation opportunities.”
* Alternative performance measure (see Note 2).
◊ Growth at constant exchange rates is calculated by comparing the H1 23 results to the H1 22 results retranslated at the average exchange rates used for H1 23.
† At average exchange rates and based on historical accounting standards, in accordance with the Group’s external debt covenants.
≠ The Group disposed of its UK healthcare business in December 2022.
H1 23 performance highlights:
| Underlying revenue growth*ⱡ contribution | H1 23 | Underlying revenue growth*ⱡ by sector | H1 23 | |
| Base business♯ | 1.6% | Foodservice and Retail | (4)% | |
| Covid-19 related orders | (2.0)% | Cleaning & Hygiene, Safety and Healthcare | 2% | |
| Group total | (0.4)% | Grocery and other | 2% |
| ● | Group underlying revenue*ⱡ declined by 0.4% with growth in the base business, which benefited underlying revenue growth by 1.6%, offset by a 2.0% negative impact from the expected decline in Covid-19 related sales, with much of this occurring in the first quarter of the year |
| ● | Base business growth was impacted by a reducing benefit from inflation, as well as wider post-pandemic related normalisation trends which drove some volume weakness in the North American foodservice sector |
| ● | Operating margin increased as a result of margin management initiatives, inclusive of an increase in own brands. Furthermore, the impact of operating cost inflation reduced and was moderate over the period |
| ● | Group revenues were supported by 2.8% growth from the incremental impact of acquisitions, partially offset by the 1.8% negative impact to revenue from the UK healthcare disposal in December 2022 |
Business area highlights:
| Revenue (£m)H1 23 H1 22 | Growth at constant | Underlying revenue | Operating profit*(£m) | Growth at constant | Operating margin* | ||||
| exchange*◊ | growth*ⱡ | H1 23 | H1 22 | exchange*◊ | H1 23 | H1 22 | |||
| North America | 3,514.4 | 3,435.9 | (2.9)% | (3.1)% | 245.6 | 231.5 | 0.4% | 7.0% | 6.7% |
| Continental Europe | 1,179.1 | 1,026.1 | 12.4% | 3.7% | 106.8 | 97.7 | 7.8% | 9.1% | 9.5% |
| UK & Ireland | 663.8 | 687.1 | (3.7)% | 11.6% | 44.7 | 40.6 | 9.6% | 6.7% | 5.9% |
| Rest of the World | 549.5 | 501.7 | 7.6% | (4.1)% | 57.1 | 53.9 | 2.7% | 10.4% | 10.7% |
North America (60% of revenue and 54% of adjusted operating profit*†)
| ● | Underlying revenue decline driven by wider post-pandemic related normalisation trends, which resulted in some volume weakness in the foodservice sector, and moderating product cost inflation benefit over the period |
| ● | Strong operating margin increase supported by margin management, including further expansion of own brands |
| ● | Limited operating cost inflation driven by a meaningful reduction in freight costs and wage growth that was closer to more typical historical levels |
Continental Europe (20% of revenue and 23% of adjusted operating profit*†)
| ● | Good underlying revenue growth driven by the benefit of product cost inflation, and despite the impact of the reduction in Covid-19 related sales, particularly in Q1 |
| ● | Weakening volumes in Continental Europe with trading impacted in France by reduced public sector activity |
| ● | Operating margin decline driven by hyperinflation accounting in the Turkish businesses, the decline in Covid-19 related orders and an impact from the sector mix |
UK & Ireland (11% of revenue and 10% of adjusted operating profit*†)
| ● | Strong underlying revenue growth driven by product cost inflation, alongside continued recovery in certain markets, in particular foodservice, cleaning & hygiene and safety |
| ● | Very strong operating margin increase supported by underlying sales growth and increased own brand penetration |
| ● | Excluding the impact of the UK healthcare disposal, adjusted operating profit increased by 31% |
Rest of the World (9% of revenue and 13% of adjusted operating profit*†)
| ● | Underlying revenue decline driven by further Covid-19 related product sales normalisation, largely in Asia Pacific, due to the non-repeat of some larger orders that were fulfilled in the prior year |
| ● | Latin America business impacted by lower selling prices resulting from reduced inbound freight costs and currency movements |
| ● | Overall, operating margin decrease reflective of the reduction in Covid-19 related sales; operating margin remains well ahead of pre-pandemic levels in 2019 |
Strategic progress:
| ● | First half operating margin growth supported by margin management initiatives, including increasing penetration of own brand |
| ● | 12 acquisitions signed August year-to-date, including our first entry into Poland, highlighting the breadth of Bunzl’s opportunity; Bunzl will operate, upon completion, in 32 countries globally |
| ● | A continued focus on warehouse optimisation, with 12 warehouse relocations and consolidations in the first half of the year. In addition, further investments into digital solutions and automation continue to improve the efficiency of our operations |
| ● | Processed 71% of orders digitally compared to 68% in the first half of 2022, supporting customer retention and enhancing operational efficiency |
* Alternative performance measure that excludes charges for customer relationships, brands and technology 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 are removed in calculating the profitability measures by which management assesses the performance of the Group. Further details of these alternative performance measures are set out in Note 2. Unless otherwise stated operating margin in this review refers to adjusted operating profit as a percentage of revenue.
◊ Growth at constant exchange rates is calculated by comparing the H1 23 results to the results for H1 22 retranslated at the average exchange rates used for H1 23.
ⱡ Underlying revenue is a measure of revenue over comparative periods at constant exchange rates, excluding the incremental impact of acquisitions and disposals and adjusted for differences in trading days between periods as well as for growth delivered in excess of 26% per annum in hyperinflationary economies.
♯ Base business defined as underlying revenue excluding the top Covid-19 related products.
† Based on adjusted operating profit and before corporate costs (see Note 3).