BUNZL – Bunzl plc: annual results for 2022 – Bunzl

Bunzl plc, the specialist international distribution and services Group, today publishes its annual results for the year ended 31 December 2022.

Highlights include: 

• Very strong performance with revenue growth of 9.8% at constant exchange rates, driven by product cost inflation, volume recovery in the first half and growth from acquisitions 
• Adjusted operating profit* increase of 11.1% at constant exchange rates, with slightly higher operating margin year-onyear; reported operating profit up 12.6% 
• Adjusted earnings per share* up 7.0% at constant exchange rates; reported basic earnings per share up 6.8% 
• Strong free cash flow* generation; cash conversion of 107% supported by working capital improvement 
• 30th consecutive year of annual dividend growth; total dividend per share growth of 10.0% 
• 12 acquisitions agreed over 2022, with a total committed spend of £322 million; two additional acquisitions announced today 
• Net debt to EBITDA*† of 1.2 times provides substantial headroom for further acquisitions; robust return on invested capital* of 15.0% 
• 2023 outlook unchanged

* Alternative performance measure (see Note 2).

◊ Growth at constant exchange rates is calculated by comparing the 2022 results to the 2021 results retranslated at the average exchange rates used for 2022.

† At average exchange rates and based on historical accounting standards, in accordance with the Group’s external debt covenants.

∆ The Board is recommending a 2022 final dividend of 45.4p per share. Including the 2022 interim dividend per share of 17.3p the total dividend per share of 62.7p represents a 10.0% increase compared to the 2021 total dividend per share.

Commenting on today’s results, Frank van Zanten, Chief Executive Officer of Bunzl, said:

“I am truly proud that Bunzl has delivered another excellent year, with strong profit growth and an increase in dividend per share for the 30th consecutive year, a track record that demonstrates the resilience and diversity of our business and its ability to consistently deliver growth. This would not be possible without the continued hard work and dedication of Bunzl’s teams around the world, who have successfully managed both global supply chain disruption and inflation, allowing us to end 2022 with adjusted operating profit 37% higher than in 2019 at constant exchange rates, with the Group’s diversification also supportive to the resilience of performance over this period. We have made further strategic progress, increasing the percentage of digital customer orders, and further supporting customers with the transition towards products that are better suited to the circular economy. We agreed to acquire 12 businesses in 2022, ending the year with substantial headroom for further self-funded acquisitions and an active pipeline, with two additional acquisitions announced today.”

2022 performance highlights:

• Group underlying revenue growth of 6.6% reflected the very strong growth in the base business, driven by product cost inflation and supported by volume recovery in the first half, which more than offset the expected decline in Covid-19 related sales
• A reversion to a more typical level of Covid-19 related sales which is substantially lower than at the peak of the pandemic
• Growth of the foodservice, retail and grocery sectors was particularly supported by significant product cost inflation
• The cleaning & hygiene, safety and healthcare sectors were impacted by the year-on-year decline in Covid-19 related sales, but underlying revenues of these sectors combined remain ahead of the comparable period in 2019
• In addition to underlying revenue growth, Group revenues were further supported by 3.1% growth from the incremental impact of acquisitions⌂

Business area highlights:

North America (61% of revenue and 56% of adjusted operating profit*† ) 

• Good underlying revenue growth, driven by substantial product cost inflation in the base business, particularly in grocery, foodservice and retail. Expected Covid-19 related sales decline was a headwind to underlying growth
• High operating cost inflation was driven by fuel and freight costs. Whilst wage rates, which rose significantly in 2021, remained high, their year-on-year impact on operating costs reduced through the year
• Overall, the impact of revenue and margin growth attributable to product cost inflation more than offset operating cost inflation in 2022. Operating margin increased from 6.5% to 6.9%

Continental Europe (18% of revenue and 21% of adjusted operating profit*†) 

• Underlying revenue grew strongly, driven by product cost inflation and a recovery in base business volumes which was attributable to the relaxation of the Covid-19 related restrictions that had impacted the comparable prior year period. Expected Covid-19 related sales decline was a headwind within underlying growth
• Operating margin decline was largely driven by the introduction of hyperinflation accounting in Turkey in 2022, as well as the decline in Covid-19 related sales

UK & Ireland (12% of revenue and 11% of adjusted operating profit*†) 

• Underlying revenue grew very strongly, driven by product cost inflation as well as continued recovery in the base business, although partially offset by an expected decline in Covid-19 related sales
• The strong improvement in the base business drove a meaningful improvement in operating margin

Rest of the World (9% of revenue and 12% of adjusted operating profit*†) 

• Underlying revenue grew strongly in Asia Pacific, supported by inflation driven growth in the base business, as well as larger Covid-19 related orders
• In Latin America underlying revenue, operating profit and margin were strongly impacted by the reduction in high margin Covid-19 related sales, although all remain significantly higher than in the comparable 2019 period

2022 strategic progress 

• 12 acquisitions signed during 2022 across multiple sectors and geographies, highlighting the breadth of opportunity $
• Strong capital discipline and portfolio optimisation demonstrated through the disposal of our UK healthcare business
• 15 warehouse relocations and consolidations over the year to drive continued operating efficiencies
• Further support provided to customers looking to transition to packaging which is better suited to the circular economy, with 53% of Bunzl’s packaging∆ sales made from alternative materials. Science Based Targets initiative (SBTi) approval also received for Bunzl’s carbon emissions reduction targets, which include Scope 3 emissions
• We processed 69% of orders digitally compared to 67% in 2021, supporting customer retention and enhancing operational efficiency

* Alternative performance measure which excludes charges for customer relationships, brands and technology amortisation, acquisition related items, nonrecurring 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 2022 results to the results for 2021 retranslated at the average exchange rates used for 2022.

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 (including, masks, sanitisers, disposable gloves, disinfectants, coveralls, disposable wipes, face shields and eye protection).

⌂ In addition to underlying revenue growth of 6.6% and acquisition growth of 3.1%, growth at constant exchange benefited from an additional 0.2% related to the impact of growth in excess of 26% per annum in hyperinflationary economies, largely attributable to Turkey, and was impacted negatively by 0.1% due to a disposal made in 2022.

† Based on adjusted operating profit and before corporate costs (see Note 3).

∆ Packaging refers to packaging and other products within the foodservice, grocery and retail sectors which are facing legislation or consumer pressure. We continue to exercise judgement to allocate the sales in 2022 to non-packaging products and the four packaging categories, which are taken at a point in time in the context of rapidly changing legislation and changes in product composition across a vast range of products.

Source
Bunzl