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REG - Bunzl PLC - Final Results - Part 2
Released: 22/02/2010 - Part 2: For the preceeding part double click [ID:nRSV4320Ha]
interim dividends payable as an outstanding
creditor based on the constructive obligations created by the announcement
of such dividends by the Board. Accordingly the interim dividend declared
in August and paid in January of the following year is no longer recognised
as a liability at 31 December and is now accounted for when paid. The
comparative balance sheet at 31 December 2008 has been restated, resulting
in an increase in net assets as at that date of £20.6m. This change has
no impact on the reported cash flow or the income statement for the year
ended 31 December 2008.
2. Segment analysis
North UK & Continental Rest of
America Ireland Europe the
World
Corporate Total
Year ended 31 £m £m £m £m £m £m
December 2009
Revenue 2,454.1 1,068.4 910.2 216.0 4,648.7
Operating
profit/(loss)
before
intangible
amortisation 155.3 57.8 81.7 17.0 (16.1) 295.7
Intangible (7.3) (7.9) (23.2) (3.4) - (41.8)
amortisation
Operating 148.0 49.9 58.5 13.6 (16.1) 253.9
profit/(loss)
Finance income 16.8
Finance cost (54.7)
Profit before 216.0
income tax
Profit before
income tax and
intangible
amortisation
257.8
Income tax (67.1)
Profit for the 148.9
year
North UK & Continental Rest of
America Europe the
World
Ireland Corporate Total
Year ended 31 £m £m £m £m £m £m
December 2008
Revenue 2,055.1 1,100.0 822.8 199.4 4,177.3
Operating
profit/(loss)
before
intangible
amortisation 134.0 78.0 67.2 17.6 (16.3) 280.5
Intangible (6.3) (7.3) (19.6) (2.8) - (36.0)
amortisation
Operating 127.7 70.7 47.6 14.8 (16.3) 244.5
profit/(loss)
Finance income 27.6
Finance cost (65.2)
Profit before 206.9
income tax
Profit before
income tax and
intangible
amortisation
242.9
Income tax (64.7)
Profit for the 142.2
year
3. Finance income/(cost)
2009 2008
£m £m
Deposits 0.9 1.2
Interest income from foreign exchange contracts 0.8 5.4
Expected return on pension scheme assets 14.7 17.1
Other finance income 0.4 3.9
16.8 27.6
Finance income
**************
Loans and overdrafts (36.1) (43.4)
Interest expense from foreign exchange contracts (2.4) (5.5)
Interest charge on pension scheme liabilities (15.2) (14.2)
Fair value gain/(loss) on US dollar bonds in a hedge 8.7 (36.6)
relationship
Fair value (loss)/gain on interest rate swaps in a hedge (8.7) 36.6
relationship
Foreign exchange (loss)/gain on intercompany funding (31.9) 79.5
Foreign exchange gain/(loss) on external debt not in a hedge 32.7 (80.2)
relationship
Other finance expense (1.8) (1.4)
(54.7) (65.2)
Finance cost
************
The foreign exchange (loss)/gain on intercompany funding arises as a result
of foreign currency intercompany loans and deposits. This is substantially
matched by external debt to minimise this foreign currency exposure in the
income statement.
4. Income tax
A tax charge of 30.5% (2008: 30.8%) on the profit on underlying operations
excluding the impact of intangible amortisation of £41.8m (2008: £36.0m)
and the related deferred tax of £11.6m (2008: £10.0m), has been
provided. Including the impact of intangible amortisation and related
deferred tax, the overall rate is 31.1% (2008: 31.3%).
5. Dividends
************
2009 2008
£m £m
2007 interim 18.6
2007 final 41.3
2008 interim 20.6
2008 final 45.3
Total 65.9 59.9
Total dividends per share for the year to which they relate are:
Per share
2009 2008
Interim 6.65p 6.45p
Final 14.90p 14.15p
Total 21.55p 20.60p
The 2009 interim dividend of 6.65p per share was paid on 4 January 2010 and
comprised £20.2m of cash and £1.2m of scrip shares.
The 2009 final dividend of 14.9p per share will be paid on 1 July 2010 to
shareholders on the register at the close of business on 7 May 2010.
6. Earnings per share
2009 2008
£m £m
Profit for the year 148.9 142.2
Adjustment 30.2 26.0
Adjusted profit* 179.1 168.2
Basic weighted average ordinary shares in issue (million) 320.5 319.4
Dilutive effect of employee share plans (million) 0.9 1.2
Diluted weighted average ordinary shares (million) 321.4 320.6
Basic earnings per share 46.4p 44.5p
Adjustment 9.5p 8.2p
Adjusted earnings per share* 55.9p 52.7p
Diluted basic earnings per share 46.3p 44.4p
Adjustment 9.4p 8.1p
Adjusted diluted earnings per share* 55.7p 52.5p
* Adjusted profit, adjusted earnings per share and adjusted diluted earnings
per share exclude the charge for intangible amortisation and the related
deferred tax. This adjustment removes a non-cash charge which is not taken
into account by management when assessing the underlying performance of the
businesses.
7. Intangible assets
2009 2008
Goodwill £m £m
Beginning of year 785.9 606.6
Acquisitions 0.4 62.3
Deferred consideration (2.1) -
Currency translation (34.8) 117.0
End of year 749.4 785.9
2009 2008
Customer relationships £m £m
Cost
Beginning of year 646.7 452.0
Acquisitions 3.3 68.2
Currency translation (39.1) 126.5
End of year 610.9 646.7
Amortisation
Beginning of year 131.3 68.3
Charge in year 41.8 36.0
Currency translation (9.4) 27.0
End of year 163.7 131.3
Net book value at 31 December 447.2 515.4
Total net book value of intangible assets at 31 December 1,196.6 1,301.3
Both goodwill and customer relationships have been acquired as part of
business combinations. Customer relationships are amortised over their
estimated useful lives which range from 10 to 19 years.
8. Cash and cash equivalents and net debt
*2009* 2008
*£m* £m
Cash at bank and in hand *47.2* 60.4
Short term deposits repayable in less than three months *10.7* 5.2
Cash and deposits *57.9* 65.6
Bank overdrafts *(14.9)* (8.1)
*Cash and cash equivalents * *43.0* 57.5
* * * *
Current liabilities *(7.7)* (57.6)
Non-current liabilities *(780.3)* (919.7)
Derivative assets - fair value of interest rate swaps *28.2* 49.1
hedging fixed interest rate borrowings
*Interest bearing loans & borrowings* *(759.8)* (928.2)
*Net debt* *(716.8)* (870.7)
* *
*2009* 2008
*Movement in net debt* *£m* £m
Beginning of year *(870.7)* (667.6)
Net cash inflow/(outflow) *126.3* (34.2)
Realised losses on foreign exchange contracts *(7.3)* (62.5)
Currency translation *34.9* (106.4)
*End of year* *(716.8)* (870.7)
9. Contingent liabilities
2009 2008
£m £m
Bank guarantees 0.7 0.1
10. Related party disclosures
The Group has identified the directors of the Company, the Group pension
schemes and its key management as related parties for the purpose of IAS 24
'Related Party Disclosures'. There have been no transactions with those
related parties during the year ended 31 December 2009 that have materially
affected the financial position or performance of the Group during this
period. All transactions with subsidiaries are eliminated on
consolidation.
11. Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a
material impact on the Group's business, financial condition or results of
operations. The Group has specific policies and procedures which are
designed to identify, evaluate, manage and mitigate business risk. The
principal risks and uncertainties faced by the Group and the steps taken by
the Group to mitigate such risks and uncertainties include the following:
Economic environment - The Group's business is partially dependent on
general economic conditions in the US, the UK, France and other important
markets. A significant deterioration in these conditions could have an
adverse effect on the Group's business and results of operations.
The Group's operations and its customer base are diverse, with a variable
and flexible cost base, and many of the sectors in which it competes are
traditionally, by their nature, relatively resilient to economic downturns.
Competitive pressures - The Group operates in highly competitive markets and
faces competition from international companies as well as national, regional
and local companies in the countries in which it operates. Increased
competition and unanticipated actions by competitors or customers could lead
to an adverse effect on results and hinder the Group's growth potential.
The Group seeks to remain competitive by maintaining high service levels and
close contacts with its customers to ensure that their needs and demands are
being met satisfactorily, developing a national presence in the markets in
which the Group operates and maintaining strong relationships with a variety
of different suppliers thereby enabling the Group to offer a broad range of
products to its customers.
Product price changes - The purchase price and availability of products
distributed by the Group can fluctuate from time to time, thereby
potentially affecting the results of operations. Adverse economic
conditions resulting in a period of commodity price deflation and increased
levels of imported products may lead to reductions in the price and value of
the Group's products. If this were to occur, the Group's revenue and, as a
result, its profits, could be reduced and the value of inventory held in
stock may not be fully recoverable.
The Group endeavours, whenever possible, to pass on price increases from its
suppliers to its customers and to source its products from a number of
different suppliers so that it is not dependent on any one source of supply
for any particular product. Increased focus on the Group's own import
programmes and brands, together with the reinforcement of Bunzl's service
and product offering to customers, helps to minimise the impact of price
deflation.
The Group mitigates against the risk of holding overvalued inventory in a
deflationary environment by managing stock levels efficiently and ensuring
they are kept to a minimum.
Foreign exchange - The majority of the Group's sales are made and income is
earned in US dollars, euros and other foreign currencies. As a result,
movements in exchange rates may have a material translation impact on the
Group's reported results.
Bunzl believes that the benefits of its geographical spread outweigh the
associated risks.
Bunzl may also be subject to transaction exposures where products are
purchased in one currency and sold in another and movements in exchange
rates may also adversely affect the value of the Group's net assets.
The majority of the Group's transactions are carried out in the functional
currency of the Group's operations. As a result, transaction exposures are
usually limited and exchange rate fluctuations have minimal effect on the
quality of earnings unless there is a sudden and significant adverse
movement of a foreign currency in which products are purchased which may
lead to a delay in passing on to customers the resulting price increases.
Acquisitions - A significant portion of the Group's historical growth has
been achieved through the acquisition of businesses and the Group's growth
strategy includes additional acquisitions. Although the Group operates in
a number of fragmented markets which provide future acquisition
opportunities, there can be no assurance that the Group will be able to make
acquisitions in the future or that any acquisitions made will be successful.
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 continually reviews
acquisition targets and has established processes and procedures with regard
to detailed pre-acquisition due diligence and post-acquisition integration.
Financial liquidity and debt covenants - The Group needs continuous access
to funding in order to meet its trading obligations, to support investment
in organic growth and to make acquisitions when appropriate opportunities
arise. There is a risk that Bunzl may be unable to obtain the necessary
funds when required or that such funds will only be available on
unfavourable terms.
The Group arranges a mixture of borrowings from different sources and
continually monitors net debt and forecast cash flows to ensure that it will
be able to meet its financial obligations as they fall due and that
sufficient facilities are in place to meet the Group's requirements in the
short, medium and long term.
The Group's borrowing facilities include a requirement to comply with
certain specified covenants in relation to the level of net debt and
interest cover. A breach of these covenants could result in a significant
proportion of the Group's borrowings becoming repayable immediately.
Compliance with the Group's biannual debt covenants is monitored on a
monthly basis based on the management accounts. Sensitivity analyses using
various scenarios are applied to forecasts to assess their impact on
covenants.
Business continuity - The Group would be affected if there was a significant
failure of its major distribution facilities or information systems.
The Group seeks to reduce this risk through the use of multi-site facilities
with products stocked in more than one location and the adoption of detailed
back up plans which are periodically tested and which would be implemented
in the event of any such failure.
Laws and regulations - The international nature of the Group's operations
exposes it to potential claims as the Group is subject to a broad range of
laws and regulations in each of the jurisdictions in which it operates.
Although the Group does not operate in particularly litigious market
sectors, it has in place processes to report, manage and mitigate against
third party litigation using external advisers where necessary.
In addition the Group faces potential claims from customers in relation to
the supply of defective products or breaches of their contractual
arrangements. The sourcing of products from lower cost countries increases
the risk of the Group being unable to recover any potential losses relating
thereto from the relevant supplier.
The use of reputable suppliers and internal quality assurance and quality
control procedures reduce the risks associated with defective products.
12. Forward-looking statements
This announcement 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.
13. Responsibility statements
The Annual Review and Summary Financial Statement and the Directors' Report
and Accounts comply with the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority in respect of the requirement to
produce an annual financial report.
We confirm on behalf of the Board that to the best of our knowledge:
· the Group and parent company financial statements have been
prepared in accordance with the applicable set of accounting standards and
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
· the Annual Review and Summary Financial Statement and the
Directors' Report and Accounts include a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
On behalf of the Board
Michael Roney Brian May
Chief Executive Finance
Director
22 February 2010
This information is provided by RNS
The company news service from the London Stock Exchange
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