Bunzl plc

Hello everyone and thank you for joining us for the Bonzo results for half year ending 30th of June 2026. My name is Chach and I'll be coordinating your call today. After the presentation there'll be a Q&A session. To register to ask a question please press star followed by one on your telephone keypad and if you change your mind please press star followed by two. I'd now like to hand over to Frank to begin. Please go ahead.

Good morning and welcome to Bonzel's 2026 first half results presentation. I appreciate you joining us today. I will start by summarizing our performance over the period. Following this, Richard Howes, our Chief Financial Officer, will take you through our financial results, capital allocation and outlook for 2026. After that, I will return to provide an update on North American distribution and continental Europe, as well as discuss why Bunzl is well positioned for continued long-term growth. I am pleased to be presenting a good set of results today, with the actions we have taken over the last 18 months delivering a much improved performance and supported by the business ability to respond effectively in an inflationary environment. Over the first half, volume growth was particularly encouraging with growth delivered in all business areas but led by growth in our North America distribution business. The stabilization and recovery of the distribution business follows from actions taken to restore responsiveness, agility and high service levels. While there is still work to do, these are having a positive effect. I'm also pleased with how our businesses globally have successfully navigated product and operating cost increases resulting from the geopolitical environment. This agility is core to Bansal's fundamental resilience. Furthermore, Bansal's strong and annual cash generation continues to support attractive capital allocation opportunities. While we have an active pipeline of bolt-on acquisitions and deal momentum is building, our improved performance, alongside the level of excess cash we see, allows us to announce a £500 million share buyback today, while maintaining headroom for acquisitions. Overall, Bansal's performance over the first half is a testament to both the strength of the business model and the dedication of our people who have been able to deliver good growth in what remains a challenging external backdrop. I believe Bansal can now deliver on the attributes it has long been known for, attractive compounding growth and resilience, and I expect 2026 to be the foundation for future profit growth. Turning to the financial highlights over the period. Revenue growth at constant currency was 4.1% in the first half, driven by underlying revenue growth of 3.2%. Pleasingly, we have now delivered five consecutive quarters of underlying revenue growth. Operating margin increased by 30 basis points to 7.3%. Whilst this is largely driven by the net impact of inflation in the second quarter, much of which is temporary in nature, we have also benefited from the annualization of initial NISBIT synergies, the stabilization of our distribution business, and have delivered results despite some increased variable operating costs. Adjusted operating profit growth was 8% year-on-year. Bonsall's performance in the first half has led to an upgrade of our 2026 outlook. We now expect broadly flat operating margins year on year and modest growth in adjusted operating profit. Pre-cash flow rose by 6% with cash conversion of 90% and leverage was 1.8x which is below our target range. We have announced an interim dividend which is 3% higher than the prior period and completed two acquisitions year to date. With deal momentum building, we continue to expect higher annual acquisitions spent in 2026 compared to 2025. And lastly, as I have already mentioned, we have announced a new share buyback in line with our capital allocation policy. Importantly, this maintains significant headroom for continued bolt-on acquisitions, which remain our priority given the strong returns they achieve. With that, I will hand over to Richard.

Thank you, Frank, and good morning, everyone. As usual, my comments are at consensus exchange rates and less otherwise stated. In addition, within our results, you will see adjustments for refunds we received related to US IEPA tariffs paid in 2025. While the position will become clearer in the second half, our view is that this cash will be paid back to customers. In accordance with accounting standards, this reduced our statutory reported revenue by 1.2%, effectively offsetting an implied revenue benefit in prior periods. A corresponding reduction in cost of sales means there is no impact to adjusted operating profit, and throughout, we state operating margin and gross margins excluding this impact. Starting with revenue. Group revenue increased by 4.1% in the first half of 2026, excluding the tariff refund. We delivered underlying revenue growth of 3.2% with approximately two thirds of this being driven by volume growth and one third from selling price increases. We saw growth in all business areas led by North America. Both volume growth and inflation accelerated in the second quarter, driving total underlying revenue growth of 4.3% in Q2 compared to 2% in Q1. Acquisitions net of disposals and the hyperinflation impact contributed 0.9% to revenue growth. U.S. tariff refunds impacted revenue by 1.2%. Now turning to the income statement. Gross margin was 29.4% compared to 28.8% in the prior period, driven by the profit impact from turning inventory in an inflationary environment as well as currency. Much of the inventory impact is expected to be temporary in nature. Gross margin expanded in all of our business areas except for North America, which saw a moderate decline driven by business mix. Operating cost growth over the period included the impact of fuel and freight inflation and some meaningful variable costs linked to improved profit performance, particularly in North America. Overall, the operating cost to sales ratio increased from 21.8% to 22% at actual currency. Adjusted operating profit for the year was £441 million, an increase of 8% on the prior year. Operating margin was 7.3% compared to 7% in the prior period. This was largely driven by the net impact of inflation, as well as the annualisation of NISBIT synergies. Moving down the P&L, adjusted net finance expense of £60 million and a tax rate of 26% are both consistent with our four-year guidance. Adjusted earnings per share increased by 11% over the period, further supported by the timing of share buybacks in 2025. After a few years of deflation and market price normalizations, we thought it would be helpful to provide some color on the inflation trends we are seeing. We started to put through price increases in certain product categories like disposable gloves in the second quarter as product costs increased due to the geopolitical backdrop. The impact of higher selling prices in the second quarter benefited our top line but also our operating margin given the positive impact of selling through previously purchased inventory at lower cost. The cost of plastics which accounts for around 30% of our purchases has increased meaningfully and drives the overall impact seen to date. However, we are already starting to see selling prices reduced from peak prices in certain categories and are expecting to see more in Q3. Paper accounts for another 25% of our purchases, but we saw limited change in pulp and paper prices in the first half. When it comes to operating costs, wages and property cost inflation have been at more typical levels across our businesses. However, we have seen increased fuel and freight costs, some of which has been passed on through surcharges. As usual, we'll continue to look to offset operating cost inflation through ongoing efficiencies where possible. Turning now to the business areas. In North America, we saw underlying revenue growth of 4.6% supported by both volume and inflation, although the inflation benefit was partially offset by reduction in US tariff rates. Revenue growth was led by recovery in our distribution business, which saw strong growth driven by new business wins in Q4 2025. Encouragingly, we also saw good growth in our food service redistribution business, supported by both volume and inflation. Strong growth in our safety businesses was largely supported by inflation. Operating profits were flat as the net benefits of higher inflation were offset by business mix, particularly the growth in lower margin grocery, as well as higher variable costs relating to the improved profit performance. And there were continued end market challenges in our retail, Mexico and convenience store businesses. Nonetheless, margins did increase in our distribution business. Return on average operating capital declined, with the stronger profit performance in the second half of 2024 supportive of the prior year metric, and with an investment in working capital. In continental Europe, underlying revenue growth was just over 2% and accelerated through the period, driven by improved volumes across most countries and higher selling prices, which also supported a strong increase in gross margin. Inflation was most prevalent in Turkey, where we sell disposable gloves, as well as in some of our online businesses and in Spain. Spain saw very strong revenue growth, also supported by acquisitions, and the performance within our online businesses continued to improve. France delivered some volume growth, which was partially offset by selling price deflation, which has been moderating. Our largest business in cleaning and hygiene completed its warehouse consolidations, offsetting operating cost inflation to drive a strong improvement in operating profit. The increase in operating margin was driven by the positive net inflation impact. Higher working capital offset the business area's higher margin, resulting in a broadly stable return on average operating capital. The UK and Ireland delivered slight underlying revenue growth, mostly driven by volume with price increases only seen towards the end of the second quarter. Both gross margin and operating margins were higher in the period. Growth was driven by food service, cleaning hygiene and our businesses in Ireland, with a partial offset from a decline in safety due to the completion of some larger infrastructure projects. Adjusted operating profit increased 9% and strong operating margin expansion was driven by the annualisation of Nisbet synergies and a one-off property-related gain, despite overhead inflation. The increase in operating margin also translated into a strong increase in the UK and Ireland's return on average operating capital. Then finally, in the rest of the world, acquisitions were the main driver of a 5% increase in constant currency revenues, with underlying revenue also contributing almost 2%. Underlying revenue growth was driven by Asia Pacific, particularly our healthcare businesses, although within this, our operations in New Zealand have been impacted by reduced public healthcare spending. While Brazil benefited from inflation in certain categories, which supported moderating deflation overall, there was more limited inflation impact in Asia Pacific. The rest of the world's operating profit grew by just over 15% as gross and operating margins increased strongly, particularly in Brazil. This offset a healthcare-related margin decline in Asia Pacific. The higher adjusted operating profit drove an increase in return on average operating capital. This slide provides an overview of our performance across sectors in the first half. Overall, we delivered modest organic revenue growth across safety, cleaning, hygiene, and healthcare, driven by strong growth across our Asia-Pacific healthcare businesses, as well as higher inflation in North America. Growth in food service and grocery were both driven by the strong performance of our North American distribution business, Within distribution, groceries saw strong volume growth driven by new customer wins in the second half of 2025, as well as good growth at some of its largest grocery customers. Moving on to cashflow. We generated 328 billion pounds of free cashflow in the period, which includes an inflow of 71 million pounds related to tariff refunds. Excluding this inflow, cash conversion was 90%, slightly lower than usual due to an investment in working capital, but in line with our target. And free cash flow increased 5.6% year on year, driven by higher adjusted operating profit and lower net interest paid. Inclusive of the tariff refund, Total cash generation prior to acquisitions, disposals and share buybacks was £268 million. £26 million was spent on net acquisitions resulting in a net cash inflow of £242 million. Turning to the balance sheet and actual exchange rates with comparisons made to the position at the end of 2025. Working capital was largely unchanged overall, with an increase in payables, which includes the US tariff refunds, partially offset by an increase in receivables and slightly higher inventory. Deferred consideration relating to acquisitions decreased by £12 million to £213 million, driven by earn-out payments related to previous acquisitions. There was an increase of £164 million in other net liabilities, which primarily relates to our final dividend, which was paid in July. Our adjusted net debt to EBITDA was 1.8 times, excluding the cash inflow related to the tariff refund. Over the medium term, we aim, on average, to manage leverage within our target range of 2 to 2.5 times adjusted net debt to EBITDA. Before the pandemic, we consistently operated within this range. Returns were slightly higher in the first half, driven by a higher operating margin, with return on invested capital of 13.3% and a return on average operating capital of 38%. Our capital allocation priorities remain unchanged. to invest in the business to support organic growth and operational efficiencies, to pay a progressive dividend, to invest in value-accretive bolt-on acquisitions, and finally, to distribute excess cash. In the 21 years up to and including the first half of 2026, Bunzler has returned £2.7 billion through dividends, committed £6.2 billion in acquisitions and returned £450 million through share buybacks. When we are deciding where to deploy capital, we have a strong focus on the return on invested capital and the relative value creation of different opportunities. As a result, we have a strong preference to prioritise capital to invest in our own business and in Bolton acquisitions. Acquisitions represent a significant opportunity for Bunzl, as we operate in large and fragmented markets, and we have a very strong track record of consolidating the market. Of the 77 announced acquisitions between 2020 and 2025, 74 were Bolton acquisitions, where committed spend per deal averaged around £25 million. Over this period, we spent an average of £300 million per annum on Boltons. The average multiple that we have paid for these businesses has been consistently around eight times our product profit. Recent deals have demonstrated a strong two-year return on invested capital of 13.3%, comfortably ahead of our project WAC. We have over 1,300 potential acquisition targets identified across countries and customer end markets, but the timing of deals can be uncertain. Periods of lower acquisition spend are not unusual and annual spend varies. In 2019, we spent just over £100 million on Bolton acquisitions, whilst in 2023, we spent nearly £500 million. Our pipeline is active and we continue to expect committed spend to be more in 2026 than 2025. With current leverage of 1.8 times and strong annual cash flow, we have significant headroom. This is supported by the fact we have spent less than £150 million on acquisitions over the last 20 months, compared to a typical spend of around £600 million over a two-year period. On this high-level illustration, we have headroom of 0.1521 times net debt to EBITDA, Every £100 million allocated to Bolton acquisitions initially impacts leverage by a little under 0.1 times. We therefore have a level of excess cash that supports a £500 million share buyback over the next 12 months without compromising our pursuit of Bolton acquisitions and the increasing acquisition momentum we are seeing. As part of our capital allocation framework, we commit to a progressive dividend policy and have delivered dividend per share CAGR of circa 9% since 1992. Today, we have announced an increase of 3% in our interim dividend. Our expected dividend cover for 2026 is 2.4 times in line with last year. Looking ahead to the full year, we upgrade our 2026 guidance. We continue to expect revenue growth at constant exchange rates, excluding US tariff refunds, to be driven by modest underlying growth, supported by some inflation alongside a small benefit from acquisitions. We now expect group operating margin to be broadly flat year on year. Thank you very much. Within this, there are a few things to remember when considering our expectations for the second half. Comparatives get tougher. You will remember that we had significant business wins towards the end of last year, which will annualise. We are already starting to see some selling price normalisation, with this expected to be a margin drag for the group. Gross margin peaked in June, with July already declining from that level. and with price reductions in certain categories building since July. In addition, the second half will also continue to be impacted by an increase in variable operating costs linked to improved profit performance. Tax guidance is unchanged at 26% while net interest is expected to be between 125 and 130 million pounds. I will now hand back to Frank to take you through our business update.