Chief Executive's review

The hotel, restaurant and catering (horeca) business had a strong year as we benefited from the operational restructuring undertaken, and the new business won, in 2006. We renewed our largest customer contract and broadened the range that we supply to a leading restaurant chain. Our ability to provide national accounts with both catering disposables and catering equipment enabled us to win new customers in the hotel, restaurant and pub sectors. At a regional level we reorganised the salesforce in order to be more responsive to local customers. During the year we piloted new vehicle routing and loading software and have started the roll out to all branches which will help us to improve our fuel and vehicle efficiency.

Our retail supplies business had another successful year. We renewed our second largest customer contract and also won new business with a major supermarket chain. Following the opening of the Manchester warehouse extension in the second half of 2006, we reviewed the warehouse layout and procedures and have implemented a number of productivity improvements within the operation. We also benefited from the full annual impact of Keenpac, which we acquired in December 2006 and provides us with expertise in the paper bag and luxury packaging sectors. The business has traded in line with expectations with new business won from leading supermarket and luxury brand customers.

The cleaning and safety business continued to deliver growth. Greenham successfully retained a large government sector contract that demonstrated the ability of Bunzl to provide a consolidated delivery of a broad range of products. We also added new customers in the construction and utilities markets. The cleaning and hygiene business extended contracts with two national contract cleaners and introduced a new own label chemical range which has been accredited with the EU Eco-label. We successfully rolled out a new computer system into the cleaning and hygiene business and created a new website that has generated encouraging levels of internet sales.

Our vending business grew significantly in scale with the acquisition in August of Coffee Point. This has made us the market leader in the UK hot beverage vending market. The integration is ongoing with trading in line with our plan and we have already combined the salesforces and merged a number of the branches where overlaps existed. We are implementing a new computer system that will result in additional efficiencies.

In Ireland, our existing businesses performed well with growth in the horeca, cleaning and safety and retail businesses. The acquisition of Irish Merchants in October increases our overall scale in Ireland and strengthens our position in the horeca, healthcare and retail sectors. Its product range and focus on customer service fit well with our existing operations and we expect to gain economies of scale and purchasing benefits in 2008. In December we acquired Rafferty, a distributor of guest amenity products to hotels throughout Ireland.

Our healthcare business grew significantly due principally to the first full year impact of Southern Syringe, the healthcare consumables business acquired in 2006. Southern Syringe has progressed ahead of plan as we reviewed existing contracts and implemented our operational procedures, resulting in improved operating margins, and we believe that we now have a solid base from which to grow this business. The Shermond business won new contracts for its nitrile gloves and retained its position on the NHS contract for gloves.In December we announced the acquisition of Care Shop, a leading distributor to the independent care and nursing homes sector, which provides us with a strong platform to develop our offering into this part of the healthcare market.